Adam Smith’s Incredible Prophecy Comes True!
“Adam Smith was a radical and revolutionary in his time — just as those of us who preach laissez faire are in our time.” — Milton Friedman
“The Wealth of Nations is the most important book ever written about capitalism and its moral ramifications. It was intended to make men better, not just better off.” — Jerry Z. Muller
Today is the official publication date of Adam Smith’s The Wealth of Nations, released to the public on March 9, in the miracle year 1776. It was the economic shot heard around the world.
This year, free-market economists and freedom organizations are celebrating Adam Smith’s 300th birthday. He was born in 1723. I will be giving a series of lectures on the genius of Adam Smith and a response to his critics here in the United States, Scotland and England (see upcoming appearances below).
Today on the Tom Woods Show!
Today, I was interviewed on the Tom Woods Show about the genius of Adam Smith, and why I made him the hero of my book, “The Making of Modern Economics.” Listen to our lively discussion and debate here.
Just as Thomas Jefferson wrote a Declaration of Independence that changed the political landscape, so to was Adam Smith’s book a Declaration of Economic Independence.
Why Adam Smith is Important
Adam Smith (1723-1790), the 18th-century Scottish philosopher, is consider the father of free-market capitalism. He put together the classical model of economics: free trade, limited government, the virtue of thrift, balanced budgets and sound money.
Ludwig von Mises and Milton Friedman often disagreed on various topics, but they both agreed that The Wealth of Nations was a great book that not only made people better off, but made them better citizens.
The graph below says it all. Before The Wealth of Nations was published, life was “nasty, brutish and short,” to quote Thomas Hobbes. There was very little progress.
But as the world gradually adopted Adam Smith’s model of free trade, low taxes, deregulation and sound money (supply-side economics), the world flourished like never before.
Adam Smith’s Prophecy Comes True
In fact, Adam Smith actually prophesied that his “system of natural liberty” would lead to “universal opulence.” As early as 1755, he predicted that his model would transform “the lowest barbarism into the highest degree of opulence.” Indeed, he was proven right.
Of note in particular, the Industrial Revolution actually started in earnest the same week as The Wealth of Nations was published. The first profitable steam engine by James Watt was announced on March 8, 1776. As Michael Bolton, his financier, put it, “What we have here is what everyone wants — power!”
Why was the Adam Smith Model so Successful?
Adam Smith’s book was primarily focused on how nations could succeed.
First and foremost was his “very violent attack” upon state intervention in the economy in the 18th century, which he called mercantilism. Wesley Mitchell, professor at Columbia University, noted that the government was wickedly engaged in a “series of ingenious regulations concerning the terms on which goods might be imported from abroad or exported… a very elaborate and detailed tariff policy… the government should definitely encourage certain lines of manufacture by direct grants of bounties or monopoly privileges… the government should determine the conditions for entrance to every trade… it should adopt sufficient apprenticeship rules… the government should lay down the terms of admission to any occupation… the government should regulate or supervise the wages that were obtained. And so, for almost the whole of economic life; that the government should have a detailed economic policy which requires active intervention in the affairs of the community in a thousand and one ways…”
If mercantilism was a bad policy that led to little or no growth, what was the alternative? You can’t get rid of a bad idea until you come up with a better one.
Adam Smith came up with a way to achieve real prosperity for all: Give people their freedom! He called it his “system of natural liberty,” the freedom to do what one wishes without interference from the state. It meant the free movement of labor, capital, money and goods. Let the people decide on their own what to do. His policies included cutting taxes, deregulating the economy and adopting free trade.
According to Wesley Mitchell, Smith came to the conclusion “that the wealth of nations will increase most rapidly if every person is allowed the fullest opportunity to decide for his own individual self what is the best way to use his labor and whatever capital he possesses. In other words, the best policy for governments… is to interfere as little as possible with the occupations and investments of its citizens.”
Smith’s main thesis is what the French called “laissez faire,” meaning “let me alone,” which he learned by spending several years in France. Of course, Adam Smith called his model “the system of natural liberty.”
My Book Makes Adam Smith the Hero
For those reasons, I made Adam Smith and his “system of natural liberty” the hero of my book, “The Making of Modern Economics,” now in its 4th edition published by Routledge. Every economist is judged by whether they sought to improve upon the House that Adam Smith Built (French laissez-faire, Austrian, Chicago and Supply-Side schools) or wanted to tear it down and build their own new model (Marxists, Keynesians, socialists). I have chapters on each school of thought.
Surprise, surprise! It turned out that my publication date for the first edition of “The Making of Modern Economics” was March 9, 2001 — the same publication date as The Wealth of Nations (March 9, 1776). An inspired coincidence!
John Mackey, former CEO of Whole Foods Markets, says, “Skousen’s book is fun to read on every page. I have read it three times. I love this book and have recommended to dozens of my friends.”
And Richard Rahn states, “Mark Skousen has produced the single best book on virtually all of those who have had a significant impact in economics. It’s a delight to read cover to cover.”
To find out what’s in each chapter, go here.
Routledge and Amazon charge over $50 for my book, “The Making of Modern Economics.” But I offer a major discount — only $35 — at my website, www.skousenbooks.com. If you order a copy this week, I will autograph each copy and date it March 9, 2023, and mail it for no additional charge if mailed inside the US.
Upcoming Celebrations of Adam Smith’s Tercentenary
This year, free-market economists and freedom organizations are celebrating Adam Smith’s 300th birthday. We plan to have a big celebration at www.freedomfest.com this July 12-15 in Memphis. In addition, I will be speaking at the following locations:
Athenaeum, Claremont McKenna College, April 4: https://www.cmc.edu/athenaeum/events/20230404 Topic: “The Father of Free-Market Capitalism Turns 300: How Much of Adam Smith’s Hand is Still Visible?”
Panmure House, Edinburgh, Scotland, June 5: I will be speaking on “The Genius of Adam Smith” on Adam Smith’s birthday: https://www.panmurehouse.org/get-involved/what-s-on/ I will also be commenting on my copy of the first edition of “The Wealth of Nations,” on loan at the Panmure House.
Adam Smith Institute, London, June 6 (D Day): I will be speaking at 7:00 PM on “Who’s Winning the Battle of Ideas: Adam Smith, Marx or Keynes?”. See www.adamsmith.org for details.
Institute for Economic Affairs, London, June 7: I will be speaking on Adam Smith at a lunch at IEA headquarters. https://iea.org.uk/events-forthcoming/
Glasgow University, Scotland, June 8: I will be joining a panel to discuss Adam Smith and his critics. See https://www.gla.ac.uk/explore/adamsmith300/events/tercentenaryweek/
Special Announcement: ‘Twin Towers of Finance’
Announcing a Global Financial Summit Special, Exclusive to FreedomFest attendees only:
“THE TWIN TOWERS OF FINANCE” will address the Global Financial Summit at FreedomFest, July 12-15, 2023, in Memphis, Tennessee.
My gift to you: The first 200 subscribers who sign up for FreedomFest will receive autographed copies of both their latest editions at no extra charge! A real keepsake.
I am thrilled to announce that “The Twin Towers of Finance” will speak on “The Most Important Lesson I’ve Learned After 50 Years 0n Wall Street: What Works and What Doesn’t.” They spoke at FreedomFest at the beginning of the financial crisis in 2008, and now they have returned for an encore appearance that you won’t want to miss.
I consider these two professors THE pioneers in finance: Jeremy Siegel, the Wizard of Wharton and author of the classic “Stocks for the Long Run,” and Burt Malkiel, Princeton economist and author of the classic “A Random Walk Down Wall Street.” Both have just released their latest editions. I will be interviewing these two legends on the following topics:
–The last time you both spoke at FreedomFest was in 2008. Are we headed for another financial crisis and bear market, or is that behind us? Are you bullish or bearish about the future of America?
–Both of you have written classics in finance: Prof. Malkiel, “A Random Walk Down Wall Street” starting in 1973… and Prof. Siegel, “Stocks for the Long Run,” since 1992. Have either of you changed your mind about your basic thesis, and what’s new in your latest editions?
–Is there a single “best technique” to achieve financial success, and what is the greatest danger to one’s portfolio?
–Based on your long experiences, what works and what doesn’t on Wall Street? What’s your opinion of the rare people on Wall Street who beat the market?
And last but not least:
–You both have had a long career of 50 years or more in the highest echelons of Wall Street. What is the most important lesson you have learned in investing?
Special Bonus!
Send me your question to ask our two guests, and I will incorporate them into the interview. Send your question to mskousen@chapman.edu.
Register Today and Get $50 Off
Register Today and Get $50 Off the “Early Bird” Discount (ends March 30)
To reserve your spot, register at https://freedomfest.swoogo.com/memphis2023. Use code EAGLE50 to get $50 off the registration fee. Or call Hayley at 1-855-850-3733, ext. 201.
The first 200 subscribers who sign up for FreedomFest will receive autographed copies of both Jeremy Siegel and Burt Malkiel’s latest editions at no extra charge!
Note: If you have already signed up for this year’s big show, email me at mskousen@chapman.edu, and I’ll add you to the list to get both books at FreedomFest. You must be in attendance to receive your two autographed copies.
P.S.: I am putting together the best group of financial experts for this year’s big show, including Louis Navellier, Alexander Green, Steve Forbes, David Bahnsen, Jeffrey Hirsch, Addison Wiggins, Van Simmons and Dave Phillips. Our Eagle editors Jim Woods, George Gilder, Roger Michalski and Paul Dykewicz will also be there.
Steve Forbes says it best, “FreedomFest is my favorite conference. I attend all three days. I wouldn’t miss it.”
You Blew It!
Who Betrayed Adam Smith?
“By the late twentieth century, Adam Smith’s ideas would become fully adopted by libertarians and free-market conservatives… a moral framework that is the ‘self-centered hedonism’ of capitalism.” — Kim Phillips-Fein, “The Betrayal of Adam Smith,” The New Republic (2023)
Not everyone agrees with me about Adam Smith being a hero of free markets. In fact, many big-government statists are convinced that we free-market advocates stole Adam Smith’s model away from them and converted his book into a free-market straightjacket.
Indeed, that is exactly what has happened in a recent article in The New Republic, that claims we somehow stole the real Adam Smith for our purposes: https://newrepublic.com/article/170242/betrayal-adam-smith
The author chastises Milton Friedman for creating a one-dimensional caricature of Adam Smith as a laissez faire advocate, and suggests instead that Adam Smith was really a social democrat who was no fan of “capitalism.”
This is a grave misreading of Smith. The true picture is what Smith himself said was “my very violent attack upon the whole commercial system of Great Britain,” by that he meant “crony” capitalism, businessmen and merchants taking advantage of the power of the state — not free-market capitalism, of which he was a big defender.
Wesley Mitchell’s Great Breakthrough on Adam Smith
Recently, I read Wesley C. Mitchell’s 80-page commentary on Adam Smith from his lecture notes that he gave in 1934 during the depths of the Great Depression. (I thank Lanny Ebenstein, who teaches at UC Santa Barbara, for sending me a copy.) It is truly shocking. According to Mitchell, Adam Smith was NOT ambivalent about laissez faire at all. It was his overarching theme through the book, and even earlier in his writings and teaching.
According to Mitchell, Smith’s main thesis is “laissez faire,” which he learned over the years and based on his heritage: “There was a Scotsman inside every man.” The Scotsman is famous for pursing his self-interest, “a person who was intent primarily upon pushing his own fortunes and who possessed a high degree of shrewdness in deciding what he could do best.”
Mitchell adds, “You see how bold and sweeping that argument is from Adam Smith’s eyes; everybody quite obviously is pursuing his own interest; it is evident, in his own local situation, [that he] is a better judge of where his economic interest lies than any statesman could be. Therefore, the individual will get on best if he is left alone by the government… This is the great argument for laissez faire.” (p. 19)
Bear in mind that Mitchell, professor extraordinaire at Columbia University until his death in 1948, was known as “the man with no theory,” who strongly advocated an economic science that is objective and non-political. He is famous for creating the National Bureau of Economic Research (NBER). See p. 245-248 of my “The Making of Modern Economics” (Routledge, 4th ed.). He said his “star pupil” was none other than Thorstein Veblen! But guess what? He wrote the most positive review of Adam Smith’s advocacy of laissez faire I’ve ever read.
Good investing, AEIOU,
Mark Skousen
