In the preceding celebrated passage from An Inquiry into the Nature and Causes of the Wealth of Nations Adam Smith gave classical expression to a thesis that continues to be of the deepest significance for both social scientific and philosophical inquiry. We seem to be presented with the statement of a paradoxical situation that is, nevertheless, of beneficent promise. From the perspective of the history of philosophy, we would have been led to expect various principles and arguments defending a moral point of view that is unique, impersonal, and takes precedence over claims of self-interest which often conflict with the imperatives of morality. However, from the perspective of this eighteenth century moral philosopher turned social scientist, as far as the domain of economic activity within a competitive market is concerned, the traditional understanding of friction between the pursuit of self-interest and the establishment of an ethically defensible common good could be seen to be scientifically naïve. If each economic agent is left free to act in a solely self-regarding fashion to maximise the satisfaction of his own interests within a perfectly competitive economy, then, according to verifiable empirical laws, an aggregate outcome will obtain that is beneficial to all. Though such a consequence not be part of the intentions of either individual agents or state planning, nevertheless, the market forces of a perfectly competitive system will lead participants, as if by an “invisible hand,” to a coherent economic order of mutual advantage. Not surprisingly, classical political economy emphasizes that such a competitive market is also a free market, in Smith’s conception a “simple system of natural liberty.” In fundamental terms, individual liberty is seen as the instrument of social harmony: even though individual producers and consumers interact only through voluntary exchange, a communal end-state is secured that exhibits an accordance of each with all.
KeywordsCompetitive Market Distributive Justice Individual Liberty Moral Justice General Equilibrium Theory
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