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Understanding Adam Smith - Government + Pursuit of Happiness

This is the 6th of an eight-part series designed to explain several important aspects of Adam Smith’s writing, or at least correct widespread misconceptions regarding those writings. You can pick up the start of this series here.

As a society we don’t tend to connect and discuss the concepts of “value of government” and “happiness of the people.” Adam Smith, however, saw and made that connection. You’ll likely be surprised by what he wrote and its implication for doing capitalism the way he envisioned, so let’s jump right into the deep end. The water’s fine; blue ocean fine.

You remember how the second line of the United States Declaration of Independence begins:

WE hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness – That to secure these Rights, Governments are instituted among Men, deriving their just Powers from the Consent of the Governed ….

Pictured below is a working draft of that hollowed sentence.

Image Credit Library of Congress

Here's a fun fact as you think about how or why the right of the “Pursuit of Happiness” is included in the same sentence with the mechanism of “Governments are instituted.” Adam Smith’s first world-wide best-selling book, The Theory of Moral Sentiments (Moral Sentiments) originally published in 1759, paired the role of government with the happiness of the people. Moral Sentiments, published a solid 17 years ahead of the founding of the United States of America, appears to have been well-known to our Founders.

So, some 250 years later, why has our society stepped back from the ideals of Smith and America’s Founders? Why doesn't our society tend to connect concepts like value of government and happiness of the people? [Quick sidebar: We at Better Capitalism aren't engaging the likewise aged observation that it's the work of the people to pursuit our happiness (of course it is), or flipside red-herring whether it's the job of the government to provide us our happiness (of course it isn't). We're engaging our Founders insight that a role of our government is to set the political structure and environment - metaphorically the waters we swim in - that enable the people to execute on our collective right to pursue happiness. The happiness of the people is not a metric by which we measure our government, but no reason it can't be. Thanks for taking the sidebar with us. Now back to the question.]

We remember our high school social studies teachers as the first to introduce us to the concept of laissez-faire government, especially regarding the marketplace. You know the concept: “An economic doctrine that opposes government regulation of or interference in commerce beyond the minimum necessary for a free-enterprise system to operate according to its own economic laws.” (The Free Dictionary) College and law school business professors followed suit, even doubling down as many explained it as Adam Smith’s vision of capitalism and the meaning of his “invisible hand” phrase.

What does Smith actually say about the role of government? In relatively few words given his style, Smith writes in Moral Sentiments:

The perfection of police, the extension of trade and manufacturers, are noble and magnificent objects. The contemplation of them pleases us, and we are interested in whatever can tend to advance them. They make part of the great system of government, and the wheels of the political machine seem to move with more harmony and ease by means of them. We take pleasure in beholding the perfection of so beautiful and grand a system, and we are uneasy till we remove any obstruction that can in the least disturb or encumber the regularity of its motions. All constitutions of government, however, are valued only in proportion as they tend to promote the happiness of those who live under them. This is their sole use and end. (Emphasis ours.) (Part IV, Chapter I, Paragraph 11.)

Smith did not advocate for laissez-faire government. In fact, he never used that phrase in Moral Sentiments or Wealth of Nations. Just the opposite. In his own words, Smith sees the need and benefit of well-formed, functioning, and active governments. Notice that Smith refers to government functions as “noble” and “magnificent” and government as a “great system” that supports harmony and ease in politics. Politics refers to the administration of internal and external affairs on behalf of a body of people, not merely allegiance to a particular ideology or partisanship as it’s typically (mis)understood today.

What of those people, deeply ingrained in their training or ideology, who believe that a government should not interfere with the marketplace (except, of course, to protect their own property and wealth)? Or that a smaller government is always a better government? Or that an unregulated market knows better than a just and fair government? Worse and more dangerously, what of those who work to undermine a government structured to protect the unalienable rights of life, liberty, and the pursuit of happiness?

These are people who are deadly misinformed and misguided, and with this new information need to change their understanding and thinking about the role of government. This observation isn’t a personal attack on anyone, just like a doctor diagnosing cancer isn’t a personal attack on a patient. But with that kind of diagnosis the patient has some decisions to make. What does that change in understanding and thinking look like? We introduce that in the next post and look forward to you joining us there.

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