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Is Adam Smith the Father of Free Market Economics?
Adam Smith is generally viewed as a free market economist.
From your history textbooks to the typical think pieces in the Wall Street Journal, Smith is often propped up as the avatar of free market thought
However, contrarian historian Murray Rothbard had a much more controversial perspective on Smith.
In his book, An Austrian Perspective on the History of Economic Thought, Rothbard knocked Smith down a peg and argued that the Franco-Irish economist Richard Cantillon was the founding father of modern economics.
For those unacquainted with Cantillon, he is famous for observing the phenomenon of the Crown and moneyed elites disproportionately benefiting from inflation — better known as the Cantillon Effect.
According to the Cantillon Effect, the uneven expansion in the money supply benefits those closest to the money—the ruling class, politically connected corporations, and big banks. These institutions could buy financial assets on the cheap and relax as their prices invariably rise.
Back to Smith. Smith’s observations on the division of labor were 100% spot-on, which Rothbard recognized. However, Rothbard raised some troubling points about Smith in his book. Namely, Smith’s support for the following interventionist measures:
- Government coining
- Public works
- Regulation of bank paper
- Government control of post offices
- Registration of mortgages
- Restrictions on corn exports
On top of that, Smith held a faulty theory of value that in many respects influenced Karl Marx’s infamous Labor Theory of Value.
With all of this in mind, could Adam Smith be considered a paragon of free market thought?
In our latest episode of the Human Action Podcast, Mises Institute President Jeff Deist sits down with Economics for Entrepreneurs podcast host Hunter Hastings and Mises Research Fellow Jonathan Newman to discuss Adam Smith’s contributions to laissez-faire thought.
Did Rothbard go overboard in criticizing Adam Smith or did he raise valid points about the Scottish economist?
Tune in to Human Action Podcast to get a nuanced perspective on Adam Smith and his free market bona fides or lack thereof.
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Jeff Deist, Hunter Hastings, and Jonathan Newman on Rothbard and Adam Smith
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In Liberty,
Human Action Podcast Team
P.S., Adam Smith is often regarded as the father of modern economics and is generally portrayed as a free-market economist.
Economic historians like Murray Rothbard have disputed such claims and even believe that Smith’s contributions are perhaps a tad overrated.
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