The 250th anniversary of Adam Smith's "The Wealth of Nations"

There is an irony that 1776 is the year of both the founding of the U.S. and the publication of Adam Smith's The Wealth of Nations. Few people pay any attention to the latter. Smith is mostly worshipped by anti-government conservatives and disliked by liberals who find more confidence in the collective exercise of government powers. The Wealth of Nations was and remains widely influential.

Smith said that when each individual seeks his/own best interests, there is a benefit to society at large they may be unaware of. The benefit is the production and distribution of food, goods and services is organized and carried out. Smith recognized to some extent businesses seeking their interests might form monopolies that exercise power over working people. He was naive about costs businesses could avoid paying, like damage to water, air and soil. 

A hundred years, later Karl Marx published an equally powerful book about economics, Das Capital. Marx said we could not trust businesses to organize and run things because their self-interest will lead them to exploit working people. They will destroy each other he said. Working people should take over nations and run them. Like Smith, however, Marx left out something big. It was that working people, or those in government representing them, may use their self-interest in ways that are harmful to society just as "capitalists" would do.   

The ideas of both Smith and Marx have been put into practice. Both sets of ideas helped solve problems at various times in history. Yet, both had problems embedded that showed they don't work well everywhere at all times. Smith did not recognize the damage done by the self-interest motive when costs, like environmental damage, are not forced by government back onto those doing the pollution. Marx's idea there should not be rich and poor was tried in Europe. Equal incomes in England led to a shortage of people working in coal mines. Salaries there had to be raised.

Perhaps we have learned two things from the books of Smith and Marx. First, there needs to be some government regulation in order for capitalism to work. Second, too much regulation reduces the power of individuals to find new ways of conducting business. Individuals seeking their own best interests do serve the common good.