Adam Smith Wasn’t A Capitalist

Why Adam Smith is thought to be the original “greed is good” guy

In an episode of the podcast Planet Money , titled Adam Smith and the Not So Invisible Hand, host Adam Davidson had his “mind blown” to learn that Adam Smith was not the poster child for free market capitalism that he had been led to believe.

It should be shocking to hear someone who professes to be educated in economics to reveal such a complete misunderstanding of a world famous and widely cited figure in the history of economic theory. Except that the misunderstanding is so widespread that it is actually the standard perception.

Adam Smith is so huge that even people not that familiar with economics have heard of him. He’s often thought of as the father of capitalism. The term “capitalism” wasn’t in use in Smith’s time, but his idea of the “invisible hand” is such a natural precursor to modern ideas of free market economies that he is seen as having been ahead of his time.

Except, of course, that he wasn’t the cheerleader for laissez-fair capitalism that he is made out to be. The interviewee, Amartya Sen, author of The Idea of Justice, does a better job than I could of what Adam Smith really meant by “the invisible hand”, so I’ll leave it to him to dispel illusions for those who are interested.