Adam Smith Versus the Libertarians

May 16, 2011 by
Filed under: Car Stop 

Many libertarians think their founder was Adam Smith. In reality, it was Dr. Pangloss. So long as something is a free market outcome, it is for the best in this best of all possible worlds. That is true, according to libertarian ideology, even if it kills us.

Those libertarians who see Adam Smith’s “invisible hand” as an automatic mechanism, one that functions regardless of any other circumstances (so long as government stays out of it), misread Smith. He knew that all aspects of society, including the economy, are dependent on sound morals. In his own view, his most important book was not The Wealth of Nations but A Theory of Moral Sentiments. The amoralism of many libertarians not only separates them from conservatives, it separates them from Adam Smith as well.

Libertarian ideology also departs from Adam Smith when it comes to infrastructure, including transportation and government’s role in providing it. Libertarians demand that everything be left to the free market. Smith, in The Wealth of Nations, wrote:

According to the system of natural liberty, the sovereign has only three duties to attend to . . . First, the duty of protecting the society from violence and invasion . . . secondly, the duty of protecting, as far as possible, every member of society from the injustice or oppression of every other member of it . . . and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit would never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.

That is a pretty good definition of infrastructure, including transportation infrastructure. In fact, Adam Smith goes on to discuss transportation infrastructure at some length. In his day, that meant roads, canals, and bridges.

In America, canals in particular, represented Smith’s view. Most were built with at least partial government funding. Other than the Erie Canal, few made a profit. But most of them repaid their state investors many times over. I often ride my bike on the towpath of the Ohio and Erie Canal. When it opened, the price a farmer received for a barrel of flour in the area the canal served went from 50¢ to five dollars. The cost of transport fell so much that his flour could now be shipped cheaply to New York or Europe, where it commanded a far higher price than it did locally. Cleveland grew from a village into a city. The loss the state absorbed for building and operating the canal was more than repaid.

Adam Smith departed this world before the first train arrived. But it is not unreasonable to think that he might have seen passenger trains and public transportation as part of the public works the government should undertake. Smith did want those public works to pay for their own upkeep as much as possible. Again, in The Wealth of Nations, he wrote:

The greater part of such public works may easily be so managed as to afford a particular revenue for defraying their own expenses, without bringing any burden upon the general revenue of the society.

Conservatives agree with that, so long as the demand is made equally of all competitors. The libertarian transit critics like to apply it to trains and transit but not highways, which “particular revenues” at present cover just under 52% of their expenses.

And while many libertarians demand that all infrastructure be privatized, Smith wrote:

The tolls for the maintenance of a high road cannot with any safety be made the property of private persons.

In short, Adam Smith’s views accord more closely with those of conservatives than of libertarians. He saw society’s morals and culture as more important than a free market. He believed government had a role to play in providing infrastructure, without which commerce cannot flourish. And he thought some of that infrastructure would have to be owned by government. Conservatives views all, not ideological cant.

Comments

10 Responses to “Adam Smith Versus the Libertarians”

  1. Mike MacLeod says:

    I was one of the founders of the California Libertarian party in 1972, and one of the first to leave it shortly thereafter. Consorting with other big-L Libertarians was enough to break me of the illusion that the government was the source of all my problems, and I saw in the Ed Clarks and Ed Cranes corporate mannequins with “Libertarian” labels rather than “Republican” labels sewn into their suit jackets.

    Unfortunately, Libertarians make the same error Marxists do in reducing all human activity to economy. From this perspective, the brittleness, amorality, and mental rigidity of some are not surprising.

    I would pay anything to be the young boy of 60 summers ago on my grandmother’s Idaho farm, lying on my back by the irrigation canal with my hot feet quenched by its icy water, while above me billowing clouds sailed the sky East toward the Rockies.

    It takes the priceless to reveal the tyranny of price.

  2. Louis A. Jamail, Jr. says:

    Americans should also be appalled that after their tax money went to build those highways the highways would then be turned over to foreign entities and operated as toll roads. However, this idea keeps poping up in Texas even when Texans overwelmingly reject it. Why should high gas prices and toll roads be preferable to trains whether publicly or privately funded?

  3. Zac in Virginia says:

    It’s seemed to me for a while that people would have called Marx a libertarian too if he’d been less outspoken about his criticisms of capitalism.
    The problem that keeps cropping up with misreadings of Smith is that Smith was describing how capitalism functioned, but somehow folks took that to mean that he was a supporter of it.
    Even Marx acknowledged the productive capacity unleashed by capitalism, in comparison to feudalism! But acknowledgment of fact does not make one a booster for the cause, obviously.

    Nice Pangloss reference, by the way. Around my college campus, some of us left-wingers have taken to referring to libertarians as “proprietarians”, given that their economic arguments boil down to an even more Panglossian, almost fatalistic perspective: “Whoever is already wealthy, clearly deserves it. Whoever is poor, deserves it!”

  4. rick says:

    Thanks for the reality-check and history lesson on Adam Smith … unfortunately mere facts won’t change the mindset of those who worship the Free Market as God.

    On a more practical note, public transport infrastructure suffers from a “chicken-and-egg” problem. To build public support for expensive, large-scale, long-distance public transport, what about fertilizing some “eggs” that are quick, cheap, and local — in the form of tiny electric rental cars available at major urban nodes?

    Taxi drivers would object, but they’re not a very strong lobby in most areas.

  5. JH says:

    Just as long as it’s funded through voluntary donations and not theft. fine by me…

  6. Michael Hardesty says:

    Ayn Rand is the Father of the libertarian, not Adam Smith.
    The initiation of physical force is never justified.
    It doesn’t matter how much you love the canals.
    The limited government Democratic Party of the 19th century disdained the whole corrupt Hamilton-Clay-Lincoln program of favorite pull peddlers and corrupt grants.
    The most corrupt railroads were the ones given the grants, the bigger the grant the more corrupt the business receiving it.

    An ideology is merely a consistent philosophy, for right or wrong.
    Conservatives have never repealed the warfare-welfare because they have no ideology or coherent philosophy. DOT needs to be abolished and unless mass transit can pay for itself it deserves to die.
    People like cars because they can determine where they want to go, not government owned transit with hordes of ghetto thugs on board.

  7. Steve says:

    You must be talking to uneducated people who merely fantasize that they are libertarians, because real libertarians most certainly don’t think their “founder” is Adam Smith.

  8. D. Winter says:

    The above condescending, “Libertarians think this”, and “Libertarians apply that” article is tedious. It might just be lazy unresearched writing like my $ .02 here. Officially, there are 18 different schools of libertarian thought, however, the hip readers of Amconmag will already know there are as many different positions for libertarians as there are libertarians.

    Years ago, Bob Greene from the Chicago Tribune did an informal study about the costs surrounding mass transit systems, spreading out over several of his regular columns.

    The CTA had a huge amount of money tied up in rolling stock, buildings, pensions and payrolls, etc. In order to help the readership comprehend the size of the CTA investment he warranted that every single daily rider could be bought a new Mercedes Benz automobile with comprehensive insurance and enough money left over to give each each new owner $5000 in gas.

    I think you’d find taxi vouchers, loaners and jitneys far more economical for the less fortunate than any bus barn wet dream of Mao Tse Tung. And many of them would go from “A”(where you are) to “B”(where you want to go) instead of the “C” to “D”, which is not really where you are to not really where you want to go.

  9. Ralph says:

    Thanks for the article. Regrettably Smith ignored or was unaware of working private infrastructure systems of his time. For info on people using voluntary Libertarian tools on similar and other issues, please see http://www.Libertarian-International.org , the non-partisan Libertarian International Organization.

  10. unger says:

    Just what does morality have to do with economic infrastructure? Why should the fact that Smith was right and (many) libertarians are wrong about morality mean that the same is true about economics?

    Smith insists that infrastructure investment can’t be ‘profitable’ for a ‘small number of individuals’, but that it will repay a larger group of them. Why should this be so? What makes one number ‘small’ and another not? And why should one accept Smith’s insistence at face value, against everything written in the subsequent 200 years to the contrary – quite including sound empirical counterexamples to all the classic examples of ‘public goods’?

    Shouldn’t pooh-pooh ‘ideological cant’ in an essay that’s very long on cant and very short on everything else save appeals to dubious authority and poorly-outlined (read: not outlined at all) distinctions the precision of which is of the utmost importance to your case.

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