Adam Smith and the morality of political economy: a public choice reading

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 results of those perverse incentives of special interests groups that not only generated inefficient monopolies, but also, and especially, generated gross injustices for the weakest members of society.
For Adam Smith, wealth tends to promote justice; it also tends to be a consequence of justice. Poverty tends to create injustice and be a consequence of injustice. The first section of the article analyzes the traditional interpretation of “The Wealth of Nations” as, among other things, a treatise on the inefficiency of monopolies in particular, and the mercantilist system in general. It is shown that Smith analyzed manifestations of lobbying and nepotism, largely from the standpoint that is currently accepted in public choice theory. The second section emphasizes that the idea of justice precedes the consideration of economic phenomena from the standpoint of efficiency. Thus, Smith’s condemnation of the various consequences of the dominance of special interest groups in certain spheres of social and economic life, often manifested in an increase in human suffering and poverty, is based on the normative moral attitude of the inadmissibility of violating freedom and the principles of distributive justice. The third section is devoted to a generalization of Smith’s criticism of systems that are both inefficient and unfair. The perverse incentives of special interests are destructive of both wealth and justice. Smith called “The Wealth of Nations” a vicious attack on the British commercial system because, in the interpretation offered here, the entire apparatus of the British Empire was the result of these perverse incentives of special interests, which not only produced inefficient monopolies but also produced gross injustices for the weakest members of society. The key thesis the article makes is that understanding how to increase a nation’s wealth also means understanding how to promote justice.

1. Smith, A. (2007). An Inquiry into the Nature and Causes of the Wealth of Nations. M.: Eksmo.