7 - Adam Smith and the Morality of Political Economy

Summary

In Adam Smith’s Wealth of Nations, prescriptive and descriptive analysis are intertwined. While incentives analysis is strictly descriptive, the motivation of the analysis is prescriptive as are the motivations for its prescriptions. For Smith, wealth tends to promote justice; it also tends to be a consequence of justice. Poverty tends to create injustices instead, and to be a consequence of injustice. Understanding how to increase the wealth of a nation is thus understanding how to increase its justice. The perverse incentives of special interests are destructive forces of both wealth and justice. Smith called Wealth of Nations a violent attack against the British commercial system because, in the interpretation offered here, the entire apparatus of the British Empire was the result of those perverse incentives of special interest groups that not only generated inefficient monopolies but also, and especially, generated gross injustices for the weakest members of society.