Adam Smith on Education Funding

education public goods just sentiments education funding

Scott Drylie for AdamSmithWorks

Many say that Adam Smith unequivocally endorsed government funding of schooling. Drylie says they are wrong.

"Smith would certainly approve of the broad public attention to education and the tendency toward local decision making, but still disapprove of the permanent and focal placement of government in this critical aspect of our lives."

December 27, 2023
In the Wealth of Nations (WN), Adam Smith dedicates a long chapter to examining the merits of government expenses. In that chapter he includes an article which has attracted considerable attention: “Of the Expence of the Institutions for the Education of Youth.” This article is the primary place in which he addresses the education of youth—those years from elementary through college and university (the latter starting several years earlier than they do today).
Since the Progressive Era, most who have written about Smith’s article have concluded that although he favored leaving colleges and universities to the market, he advocated tax-funded, state-run education for the earlier years, mainly to ensure the education of the poor.
I read Smith’s thinking on schooling for the poor as more in line with his presumption of liberty in public policy. The evidence in support of a state interpretation is much less conclusive than commonly assumed, and the evidence for private and charity solutions is regularly overlooked. In the following, I trace the elements of the article which support my reading. For details and bibliography, I refer readers to research that pushes back against the pro-governmentalization reading (EG. West 1964; 1980 1990; 1994; Drylie 2016; 2020; 2021; Otteson 2023).
Who is “the publick?”
Smith observed that the poor could not afford the basics of education, and he felt deeply that they and civil society suffered. He thus writes:
The publick can facilitate this acquisition [of the most essential parts of education] by establishing in every parish or district a little school, where children may be taught for a reward so moderate, that even a common labourer may afford it; the master being partly, but not wholly paid by the publick; because if he was wholly, or even principally paid by it, he would soon learn to neglect his business. (WN 785.55)
Smith undeniably calls for some sort of action in the article, but this passage cannot carry the weight that has regularly been placed upon it to establish Smith as a public education advocate (nor can any other). Smith does not prescribe an action—only stating what his agents “can” do. He also does not clearly specify who those agents might be—naming them as “the publick,” which at the time was defined as “the people” (Ash, 1775) or “the body of mankind, or of a state or nation” (Johnson, 1768). While there has been little hesitation in scholarship reading the publick here as the state, in Smith’s writing, the publick operates through either political mechanisms or voluntary structures of civil society. And in this case, both options, political and voluntary, do actually follow the above passage. He gives as examples of public action both a government-centered model (the Scottish parish system) and a voluntary association model (the charity system commonly associated with England). Smith is very likely merely positing options.
It would be wrong to infer an endorsement of governmentalization. Throughout the eighteenth century, many writers made observations about the poor similar to Smith’s, wrote with similar sentiments, and made calls for action using similar language. Yet time and again what they sought was simply greater public spirit and public action, including better treatment of charities by government. No writer, to my knowledge, channeled a narrative of the troubles of the poor toward an end goal of financial support from government except for John Brown (to be discussed). Voluntary action seemed right for the task. Patience, not urgency, characterized the discourse. Neither “market failure” nor charity failure was conveyed.
It would have been out of sorts with this “Age of Benevolence” for Smith to wish to displace voluntary provision with state provision. He would have had to do some of the following: reject the voluntary charity movement as incapable, corrupt, or misdirected; quell the extant anxieties about the ideological influences of the state in education; dismiss the criticisms that the partially tax-based Scottish parish system was inept and corrupt; and disassociate public education from the much-maligned prior venture of the state into welfare (i.e., the Poor Laws). The future advocates for the state would feel compelled to make such arguments. Smith makes none.
Smith’s final words on education
Beyond the historical context, Smith’s official summary judgment of the issue of education funding poses problems for the standard readings which place government in the primary financial role. The judgment comes in a paragraph after the article, in the summary section called “The Conclusion of the Chapter.” It jointly addresses the article on youth education and the article that follows on instruction for people of all ages, notably by religious institutions.
The paragraph consists of but two sentences. The first sentence is:
The expence of the institutions for education and religious instruction, is likewise, no doubt, beneficial to the whole society, and may, therefore, without injustice, be defrayed by the general contribution of the whole society.
The second sentence is:
This expence, however, might perhaps with equal propriety, and even with some advantage, be defrayed altogether by those who receive the immediate benefit of such education and instruction, or by the voluntary contribution of those who think they have occasion for either the one or the other. (WN 815.5)
The first sentence acknowledges that it might be proper for government to collect taxes for education. The second sentence, however, indicates that payments, which come “altogether” from students and charity, may demonstrate “equal propriety, and even some advantage.” (“Voluntary contribution” was the definitive phrase for donation.) Thus, in the end, Smith points out that a more advantageous approach may be for government to not allocate a single cent of tax money toward education.
This final judgment has scarcely been acknowledged in scholarship, and worse, the inconvenient sentence has regularly been concealed (Drylie, 2020). These final words, however, are a fair representation of the drift of the entire article about the education of youth—one which entertains a role for government but primarily informs us of what these “advantages” of private and voluntary affairs tend to be.
Smith’s hypothesis and evidence on endowments
To begin the analysis, a word on the structure of Smith’s argument is necessary. Many have noted that Smith discusses (in order) endowments, universities, ancient civilization, and the poor. But the function of this ordering is almost completely overlooked. The discussion of endowments offers a rigorous test of Smith’s hypothesis concerning the incentive problems that attend publicly provided education. The discussion of universities defends his findings against casual dismissal. And the discussion of antiquity offers validation of his method of analysis. These earlier sections build an increasingly impervious criticism of government involvement. Attending to their function properly frames the fourth section about the poor.
The article begins by Smith establishing that private, voluntary action is the natural and proper course for education. Should one doubt it, Smith says, there is an alternative to evaluate: the “endowment” (as state-assured funding would similarly constitute). Smith proceeds to evaluate this alternative, and he offers a hypothesis: “The endowments of schools and colleges have necessarily diminished more or less the necessity of application in the teachers” (WN 760.5). Guaranteed salaries and their related protections, which flow from large endowments, diminish the incentive to serve students.
The pro-governmentalization interpretation has regularly claimed that the ensuing demonstration of the failing of endowments is confined to colleges and universities. Yet such scholars give—and can give—no evidence of Smith confining his criticism. The evidence runs to the contrary. First, Smith bases his hypothesis on a human tendency that applies to “every profession,” and which by logical extension would include every sort of teaching profession (WN 759.4).
Second, Smith finds evidence across a wide spectrum of cases. Smith’s evidence includes rich and poor universities, endowed grammar schools (what he calls “publick”), domestic tutors (what he calls “private”), unendowed schools for fencing, dancing and riding, and eventually also unendowed schools for young women. It is a matter of fact, then, to say that Smith examines both universities and non-universities. While universities receive the most criticism, they do so—in line with his hypothesis—because they have the largest endowments.
The case study of colleges and universities: outcomes v. intentions
The next section of the article picks up in paragraph 18, when Smith allows a counterargument to be voiced: “The parts of education which are commonly taught in universities, it may, perhaps, be said, are not very well taught. But had it not been for those institutions they would not have been taught at all” (WN 765.18, emphasis mine). In other words, something is better than nothing.
What follows is typically treated simply as an historical critique of universities. But it is also a critique of the above counterargument. Throughout, he makes clear that damage done to curricula is damage done to society at large. And the damage is pronounced. Something can be worse than nothing, much worse. He ends by pointing out the ironies of blind support for endowments. The better we endow universities, the worse they become (WN 772.34). And the worse they become, the more likely parents are to send their youth abroad which ends up ruining the character of youth even more (WN 773. 36). At least rhetorically, Smith appears willing to accept that the absence of universities would be better than this sort of something. Using the salient example of universities (which his audience worried about and had experience with), Smith creates a hard-hitting morality tale regarding naïve optimism.
A broader search for ancient examples: science v. testimony
In paragraph 38, Smith turns to the historical record of ancient civilizations to further test his theory. It is arguably a necessary turn. There was a tendency among potential readers to seek wisdom in the governance of ancient civilizations and to trust the histories as a source of truth over the more modern systematic (scientific) method which Smith was demonstrating.
Smith therefore examines the famous histories regarding gymnastics, music, a basic liberal education, philosophy and rhetoric, and law. In every case, he goes against the ancient historians and expends effort denying that the state had any positive and significant impact through funding. Then Smith goes further. He highlights the fallibility of historical narratives as a method. He asserts that the ancient historians erred because they were “predisposed” to celebrate ancient legislatures. He refuses their methods outright (WN 779.45).
The heart of this section occurs in a passage referencing Montesquieu. Smith writes,
Notwithstanding, therefore, the very respectable authority of Plato, Aristotle, and Polybius, and notwithstanding the very ingenious reasons by which Mr. Montesquieu endeavors to support that authority, it seems probable that the musical education of the Greeks had no great effect in mending their morals, since, without any such education, those of the Romans were upon the whole superior. (WN 775-776.40)
Smith exclusively uses the term “ingenious” in WN with irony when applied to traditional authorities (Drylie 2023). This case is no exception.
Smith is rejecting Montesquieu’s method of turning to these authorities for policy wisdom, and by extension he is rejecting what Montesquieu takes from them—faith in governmentalization of education (in The Spirit of the Laws, 1748). Montesquieu is a figure lost in modern historiographies of education, but in Smith’s time he had provoked a heated (and frequently referenced) proxy debate specific to Britain. It was a debate between best-selling moralist John Brown who embraced Montesquieu’s idea and prominent figure Joseph Priestley who opposed Brown (Brown 1765; Priestley 1765). This fleeting reference to Montesquieu—missed in modern scholarship to my knowledge—places Smith in the focal debate of his age, alongside Priestley as an opponent of governmentalization.
Paragraph 45 (the longest in the article) is the rightful conclusion of Smith’s view of ancient civilization and of his overall position. Here he writes conclusively, “The demand for such instruction produced, what it always produces, the talent for giving it; and the emulation which an unrestrained competition never fails to excite, appears to have brought the talent to a very high degree of perfection” (emphasis mine). Demand begets supply; voluntary forces will over time provide; patience has merit over urgency. This sentence—which has all the natural harmony of the invisible hand in action—is the most absolute statement in an article that is otherwise carefully probabilistic. The market for education basically works like that for other goods.
His coda is a sequence of three ironies which again address the “something is better than nothing” sentiment: 1) Endowments not only corrupt schools, but also destroy private markets and thus the options for escaping endowed schools (WN 780.45); 2) if there were no endowed institutions, we would not have so many people foolish of everything practical and moral (WN 780.46); and 3) women, prohibited entry to such endowed schools, have been spared (WN 781.47). There can be no doubt where Smith stands regarding endowments and government funding of education.
Smith provides empirical evidence against state funding, rebukes lazy thoughts to the effect of “It can’t hurt to try,” rejects ancient writers who were predisposed to give the state credit, and takes sides in a fresh new debate, with Priestley against Montesquieu. The great strength of Smith’s argument, however, leaves a riddle: Why would Smith not more forcefully reject governmentalization in schooling when it came to the poor?
The answer, to his credit, likely lies in him remaining true to his scientific approach. His hypothesis and results do not entirely preclude participation by government. Damage just moves “more or less” in proportion to the government’s part (WN 759.4; 760.5, 760.6; 762.10; 780.45). Thus, a small government contribution would only do small damage to quality, utility, and the ability of charity markets as well as private ventures (of which there were many) to thrive. Small damage may be outweighed by the public and private good.
Still, the necessary smallness—and smallness does permeate his discussion of options—impacts how we should discuss this article. Government funding would in practice almost certainly merely supplement charity, not replace it (nor the fees, which he in any case insisted upon). The Scottish system had (by intention and in practice) served only such a supplemental role. And future reformers would continue to imagine building around, rather than replacing, charity. Thus, while Smith opens the door to government, it seems fair to think that he limits consideration to a tripartite tax-charity-fee model.
Nonetheless, in the end we must recognize that this tax-charity-fee model bears little resemblance to the modern public education system of today. Moreover, we must recognize that Smith expressly doubted even this limited, supplemental role for government in his final words on the topic—words which most scholars have elided.
My work has sought to encourage a sober reading of the article, rooted in what I have called the missing historiography of education (Drylie 2016, 2021). Aside from applications in the history of thought, this reading informs the question of how his views would translate to policy analysis today. One may be apt to suspect he would never place as much faith in charity and markets today. But Smith’s article has the aperture in it which he could expand to see what would happen with increasing governmentalization. I venture to say that Smith would certainly approve of the broad public attention to education and the tendency toward local decision making, but still disapprove of the permanent and focal placement of government in this critical aspect of our lives.

Scott Drylie is an Assistant Professor of Economics, Cost Analysis, and Acquisition Management at the Air Force Institute of Technology in Dayton, Ohio. He earned his Ph.D. in Economics from George Mason University and holds an M.Ed. in Secondary Education. The views expressed in this paper are those of the author and do not reflect the official policy or position of the U.S. Air Force, the Department of Defense, or the U.S. government.

This essay is part of the AdamSmithWorks series Just Sentiments curated by Daniel B. Klein and Erik Matson. New essays will be published on the fourth Wednesday of the month. You can read more about the series in this Speaking of Smith post, "Just Sentiments- Welcome!". Klein and Matson lead the Adam Smith Program in the Department of Economics at George Mason University, in association with the Mercatus Center. In the program, they study big ideas in jurisprudence, politics, ethics, and economics as they were pursued during the original arc of liberalism, especially in the 18th century in Britain.

Ash, John. 1775. A New and Complete Dictionary of the English Language. London: Edwin and Charles Dilly.
Bailey, Nathan. 1753. An Universal Etymology of English Dictionary. London: R. Ware.
Drylie, Scott. 2016. Interpreting Adam Smith’s Views on the Education of the Poor in the Age of Benevolence. Dissertation, George Mason University.
Drylie, Scott. 2020. Professional Scholarship from 1893 to 2020 on Adam Smith’s Views on Schooling Funding: A Heterodox Examination. Econ Journal Watch 17(2): 350-391.
Drylie, Scott. 2021. Adam Smith on schooling: A classical liberal rereading. Journal of Economic Behavior and Organization 184: 748-770.
Drylie, Scott. 2023. Smith at 300: Men of Blessed and Beguiling Ingenuity. Journal of the History of Economic Thought 45(2): 226-228.
Johnson, Samuel. 1768. A Dictionary of the English Language. Dublin: W.G. Jones.
Otteson, James R. 2023. Adam Smith on Public Provision of Education. Journal of the History of Economic Thought 45(2), 229-248.
Smith, A. 1981 [1789]. An Inquiry into the Nature and Causes of the Wealth of Nations. Indianapolis: Liberty Fund.
West, E.G. 1964. Private versus Public Education: A Classical Economic Dispute. Journal of Political Economy 72(5): 465–475.
West, E. G. 1980. Review of Adam Smith’s Politics: An Essay in Historiographic Revision by Donald Winch. Southern Economic Journal 46(3): 997–999.
West, E.G. 1990. Adam Smith and Modern Economics: From market behavior to public choice. Aldershot: Edward Elgar.
West, E.G. 1994. Interview with Adam Smith. The Region. Retrieved from: