Although Adam Smith has a popularized reputation as a staunch advocate of laissez-faire, this reputation does not reflect his own views. Smith believes that while self-interested individuals should be able to freely carry out economic transactions within a society, limited government intervention is also necessary in ensuring the individuals are pursuing the best of their interests without causing externalities to others.
I. Introduction
Although Adam Smith has a popularized reputation as a staunch advocate of laissez-faire, this reputation does not reflect Smith’s own views. In his famous book “The Wealth of Nations”, Smith argues that government should limit its intervention in society because self-interested individuals led by the “invisible hand” can coordinate themselves (Wealth of Nations, p.456, Mueller 2014, p.2). Smith also argues “for the ‘obvious and simple system of natural liberty’ and ‘the inviolable sacred right of property’ (Wealth of Nations, p.687, p.138)” (Mueller 2014, p.2). However Smith then …show more content…
When economic order is left to its natural course, there will be serious conflicts between private interests and interests of the general public. For example, business owners and workers tend to have conflict of interest with respect to wages. Due to weakness in bargaining power of the workers, the business owners tend to have advantage in any disputes between the two parties. Without proper government intervention, the business owners that have greater bargaining power will simply under pay the workers. As a result the workers will lose the motivation to work hard and eventually the productivity of the society will decline. Smith’s presumption of liberty is also countered by Muller (2014) as he points out that although Smith strong favours liberty, he was willing to accept government intervention “that met his high burden of proof on a case by case
I. Introduction
Although Adam Smith has a popularized reputation as a staunch advocate of laissez-faire, this reputation does not reflect Smith’s own views. In his famous book “The Wealth of Nations”, Smith argues that government should limit its intervention in society because self-interested individuals led by the “invisible hand” can coordinate themselves (Wealth of Nations, p.456, Mueller 2014, p.2). Smith also argues “for the ‘obvious and simple system of natural liberty’ and ‘the inviolable sacred right of property’ (Wealth of Nations, p.687, p.138)” (Mueller 2014, p.2). However Smith then …show more content…
When economic order is left to its natural course, there will be serious conflicts between private interests and interests of the general public. For example, business owners and workers tend to have conflict of interest with respect to wages. Due to weakness in bargaining power of the workers, the business owners tend to have advantage in any disputes between the two parties. Without proper government intervention, the business owners that have greater bargaining power will simply under pay the workers. As a result the workers will lose the motivation to work hard and eventually the productivity of the society will decline. Smith’s presumption of liberty is also countered by Muller (2014) as he points out that although Smith strong favours liberty, he was willing to accept government intervention “that met his high burden of proof on a case by case