The genius of Adam Smith

Mark Skousen

No 147, IEA Discussion Papers from Institute of Economic Affairs (IEA)

Abstract: * In the Wealth of Nations, Adam Smith argues that individuals pursuing their own self-interest can promote the public good when channelled through his 'system of natural liberty.' * Smith's 'system of natural liberty' depends on three pillars - maximum individual liberty, tempered by justice (rule of law) and robust competition. * Competition acts as a moral regulator by disciplining greed and channelling self-interest into socially beneficial outcomes. * Smith strongly opposed mercantilism and governmentgranted monopolies, arguing that economic freedom and free trade generate greater prosperity. * Modern evidence, such as the Economic Freedom Index, supports Smith's prediction that societies with greater economic liberty achieve faster growth and higher living standards. * The Scottish philosopher's model achieves a hat trick: maximum liberty, individual improvement, and public benefit, all at the same time.

Date: 2026
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