Barton Swaim reviews Glory M. Liu's book on Adam Smith

See ‘Adam Smith’s America’ Review: Wealth of a Nation. Excerpts:

"And yet the idea of Adam Smith as a proto-capitalist won’t go away. It is, Glory Liu contends in “Adam Smith’s America,” a false understanding of Smith propounded by figures associated with the University of Chicago Department of Economics, particularly Friedrich Hayek, George Stigler and Milton Friedman. The “complexity and pluralism” of older interpretations of Smith, Ms. Liu writes, have been “overshadowed by the influence of the so-called Chicago School’s distillation of Smith’s ideas into a popular and powerful myth: that rational self-interest is the only valid premise for the analysis of human behavior, and that only the invisible hand of the market, not the heavy hand of government, could guarantee personal and political freedom.”

A “distillation” turned into a “myth”—those are strong words. In the same paragraph Ms. Liu, a lecturer in social studies at Harvard, calls the myth “a deliberate construction.” That sounds close to a fabrication, or lie. But she quickly backs away from that suggestion by saying she is “less interested in providing a definitive account of what Smith originally intended or meant than . . . in elucidating the demands that his readers have brought to his works and how that colored the lessons they have extracted from them.” I am not sure what that means, but I gather from it that Ms. Liu knows she doesn’t have the goods to claim that the Chicago School got any part of Adam Smith wrong.

The book bears the subtitle “How a Scottish Philosopher Became an Icon of American Capitalism,” but you don’t get to the bit where Smith becomes the capitalistic icon until the penultimate chapter. What lies in the middle is basically a history of Adam Smith’s reception in Europe and America. As a work of history the book has its virtues. I had not appreciated how influential “Wealth of Nations” was on the American Founders—Thomas Jefferson read it with care; Alexander Hamilton did likewise but forcefully disagreed with parts of it; John Adams owned two copies, one in French translation. 

But a curious thing happens when Ms. Liu gets to the Chicago School. We learn that a pair of earlier Chicago School economists—Frank Knight and Jacob Viner, who taught and wrote mainly from the 1920s to the ’40s—faulted Smith for failing to grasp the function of prices in a free economy. This would seem to contradict Ms. Liu’s thesis that the Chicago economists falsely turned Adam Smith into a free-market hero: Knight and Viner were pointing out that Smith didn’t grasp an essential reality of markets. Yet somehow, according to Ms. Liu’s analysis, they were wrong to do so. “By framing Smith’s contribution and legacy in the pure, objective language of economics,” she writes, “his Chicago exponents constructed the social-scientific bases of their political outlook which privileged free enterprise over central planning, and market rationality over moral reasoning.”

Forgive me, but Smith, for all his greatness as an economist, was wrong about value and pricing. To say so isn’t to “privilege” free enterprise over central planning but to state what is the case. You get the feeling that no one, according to Ms. Liu, can write accurately about any one thing in Adam Smith’s oeuvre without also, at the same time, considering every other thing he ever wrote and so smothering any potential insight with a thousand qualifications. 

This high-minded disapproval becomes absurd when Ms. Liu gets to Hayek, Stigler and Friedman. These scholars, concerned as they were about the advance of collectivism over much of the globe, emphasized Smith’s perception that the self-interest of merchants tends to promote the interests of society as a whole. Alas, says Ms. Liu, this “often entailed a flattening of Smith’s ideas in ways that smoothed over, or altogether obscured, the complexities, tensions, and other problematic aspects characteristic of earlier readings of Smith.” Thus did the Chicagoans give us “an invented Smithian tradition” bereft of complexities and tensions.

For all the talk of obscuring complexities and inventing traditions, one looks in vain in Ms. Liu’s treatment for any instance of Hayek, Stigler or Friedman misunderstanding or distorting a passage or idea in Smith’s writing. “Though Hayek’s readings of Smith may have been opportunistic,” Ms. Liu writes after quoting a passage from the Austrian economist’s lecture on Smith, “they were not inaccurate.” As for Stigler, the consequence of his work on Smith “was that certain aspects of Smith’s ideas were amplified and glorified, while others deemed irrelevant or unsatisfactory.” Oh, no!

Ms. Liu’s complaint seems to be that Hayek, Stigler and especially Friedman were, for lack of a less pretentious term, intellectuals. Friedman “mastered the art of distilling and repackaging abstract and complex academic theories into more palatable, usable language for a wider audience.” That phrase “mastered the art” sounds vaguely sinister, but this is a description of what intellectuals do. 

We reach the point of comedy when Ms. Liu quotes the socialist agitator Michael Harrington’s criticism of Friedman’s use of the invisible-hand metaphor. “The problem with Friedman’s version of the invisible hand as a right-wing political agenda,” she concludes, “was not that it was a complete misinterpretation of Smith’s text.” (That word “complete” is sly.) “The problem, as Michael Harrington put it, was that it was ‘essentially a mythic, non-historical presentation of an abstract solution taken out of time which does not look to the tremendous evolution of capitalist society.’ ” This is preposterous. If we were to take Harrington’s complaint seriously, we would never again draw on an old book to illuminate a modern problem. 

Free marketeers haven’t won many arguments lately, but they have won the argument over Adam Smith. No number of academic monographs and journal articles will persuade the ordinary reader that he doesn’t understand the defense of free enterprise and free trade in “Wealth of Nations” until he has first made his way through “The Theory of Moral Sentiments.” If Ms. Liu and her likeminded academic peers think I’m wrong about that, they’ll need to master the dark art of intellectual debate."