Adam Smith believes that people are the only ones who can really know the situation in which they find themselves and the value they assign to the goods that belong to them and to other people. They also know best what actions are most appropriate to improve their lot and the people they love. A person gives up what he values ​​less, given the circumstances, in order to gain what he considers more valuable. He derives some benefit from the exchange and is incentivized to produce the goods that someone wants because the exchange is the means by which he obtains from his partner the goods he wants.

The situation described above is possible due to the existence of a set of moral and legal institutions that govern the actions of each person. First, these institutions are based on the principle that a person has the right to life, that he freely sets his goals and freely decides on the best means of achieving them. Secondly, the mentioned institutions are based on the principle according to which human relations are born in conditions of free association and voluntary exchange. In other words, institutions prevent individuals both morally and legally from killing, stealing, or deceiving their fellow man in order to obtain desired goods.

Within this institutional, moral, and legal framework, there is only one solution for people who, for various reasons, cannot produce all the goods they need. They must use their natural abilities, skills and knowledge to find a place in the social system of the division of labor that will enable them to specialize in the production and sale of goods that are in sufficient demand among other people so that they receive through them the means of exchange to buy for themselves what they want.

The fact that the exchange is voluntary and therefore requires the consent of the parties means that any other person can do the same and try in turn to take a place in the market. This is what Smith means when he states, in explaining the system of natural liberty, that every man is free to use his labor and capital in competition with others.

This means that the personal interest of each person is directed to the constant effort to produce high-quality, new and cheap goods, as well as to win new customers. Hence, self-interest and non-violent institutional structure act as driving forces for the improvement of the general welfare of mankind, since the economic success and standard of living of one person is linked to the improvement of the standard of living of others.

Adam Smith never said that society, its ethics and institutions are the product of planning or governmental conception. He belonged to a group of Scottish thinkers of the 18th century who emphasized the evolutionary and “spontaneous” development of the social order. For them, an important factor in improving the material condition of mankind is the system of division of labor, according to which each person seeks to specialize in what he can do better than others, and from which an interdependent system of national and world is born. trade.

The division of labor, like language, traditions, morals, rules of conduct, and a host of other social institutions, was not created by political decrees or governments. They appeared at the dawn of human civilization, when people discovered the advantages of producing goods in greater quantities than they could use themselves, because they found that other people were willing to receive some of these surplus products in exchange for their own goods, which they in turn , offers them in exchange.

The general conclusion is that it is in each person’s self-interest to use their labor, resources, and capital in the most efficient way. Thus, each individual realizes not only his own interests, but also the interests of all those whom he tries to satisfy and serve in the market, because in order to achieve his goals, he directs his efforts to what he considers to be most useful to his fellows.

Smith did not see any positive results from exchanges that take place under conditions where people deliberately pursue the satisfaction of “common interests.” He points out that people know their own situation and opportunities better than the holders of political power, who usually know nothing or very little about the people they govern. In other words, Smith warns against the dangers of government control, organization and management of economic activity in the country. Those who most often find themselves in the positions of legislators and planners are the most arrogant and self-confident individuals who do not hesitate to impose their projects on the rest of society; they think they know what needs to be done and that their “plan” is better than letting people make free decisions about their own lives and interactions with other people. In A Theory of Moral Sentiments, Smith calls this social engineer or central planner the “system man.”

What is striking about Adam Smith’s criticism of government trade restrictions in the form of tariffs and import bans is his warning of the dangers of authoritarian and intrusive government. No one produces for himself, he says, what can be bought cheaper from others. He pays by specializing in activities in which he has a greater commercial advantage than his competitors. And this applies both to every resident of the country and to all citizens of this country. All that is necessary is that individuals should themselves pursue their own interests: production and prosperity will take place in the spheres and forms most beneficial to all members of society, whose economic activity is governed by supply and demand, internal or external.

However, Adam Smith is not very optimistic about the possibility that his arguments for economic freedom and his criticism of government intervention will provoke the reforms necessary to create a free society. He believes there are two forces that make this possibility unlikely: “societal prejudice” and “interest group power.”

By “public bias,” Smith means the difficulty for the average citizen to follow the reasoning of an economist who scientifically analyzes how the market works without government intervention. As a result, it is difficult, if not impossible, for the average person to understand that government restrictions and regulations only hinder the economic prosperity and general improvement in human living conditions that freedom makes possible.

“Interest group power” refers to the various social categories, more or less organized, that live off various favors and privileges obtained from the government to the detriment of the majority of the population. They do everything possible to prevent the reduction or abolition of these privileges and advantages, and in every way they try to increase them to the detriment of competitors or taxpayers. Criticism of government intervention, questioning of national monopolies, subsidies, tariffs, etc. is often condemned and presented as a real danger to the nation by those who would lose their privileges in the case of a free and open market society.

Despite Adam Smith’s pessimism, less than a generation after his death, his concept of natural liberty was widely accepted in Britain and the United States. Other countries have gone in the same direction, although not so decisively and far. This does not mean that freedom of economic activity has won everywhere in the world. –

Read the rest of the article and comment on Contributors.ro