The Guardian view on Adam Smith: he deserves rescuing from the free-market myth | Editorial

"Milton Friedman, a Nobel laureate, recruited Smith as the patron saint of neoliberal economics in his 1980 book and television series Free to Choose a manifesto that anticipated Reaganism in the US. He reduced Smith to two claims: that a voluntary exchange benefits both parties and that self-interest is led by an invisible hand that unintentionally promotes the public interest."

"In fact, Smith used the phrase invisible hand only once in The Wealth of Nations, to describe whether merchants invest their capital at home or abroad and not, as Friedman claimed, as a general theory of markets. Smith was a nuanced thinker. Many academics, most notably the Nobel laureate Amartya Sen, have suggested that the figure invoked by free-market apostles is little more than caricature."

"Smith's first work, The Theory of Moral Sentiments, opens with a clear rebuttal of self-seeking behaviour: How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others though he derives nothing from it except the pleasure of seeing it."

"But this was an incomplete picture, as Smith clearly thought economic life depended on social justice and institutions. The Scottish philoso[pher understood that wealth generation required more than individual enterprise alone, incorporating moral considerations and institutional frameworks essential to economic functioning.]"

Adam Smith published The Wealth of Nations 250 years ago, establishing economics as a discipline. While the 1976 bicentenary positioned him as the father of free-market economics, this characterization misrepresents his actual thinking. Milton Friedman and neoliberal economists reduced Smith to two claims: voluntary exchange benefits both parties and self-interest promotes public good through an invisible hand. However, Smith used the invisible hand phrase only once in The Wealth of Nations, not as a general market theory. Smith was a nuanced thinker whose first work, The Theory of Moral Sentiments, explicitly rejected pure self-seeking behavior. While Margaret Thatcher correctly noted that wealth comes from individual enterprise rather than government, this remains incomplete, as Smith believed economic life fundamentally depended on social justice and institutions.

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