1776 and All That: Thomas Jefferson on Adam Smith [1]

by Hans L. Eicholz for AdamSmithWorks

Smith in America

A small industry within the history of economic thought continues to churn through the historical record in search of direct links between European ideas in political economy and the American Revolution and Founding. The attraction is understandable. Of particular interest is the alluring prospect of Adam Smith’s influence on the Founders. Put simply, if it was not so, it should have been.

In the eighteenth century, Americans had already established the reputation for valuing freedom and individual initiative. Even their Puritan forebears were adventurous sorts, moving ever further into the wilderness in search of better prospects. And Americans were always at the forefront of some commercial enterprise. A connection with Smith just seems so natural. [2] And what could be better than finding a connection between Smith and the writer who first put pen to paper to articulate the synthesis of ideas that announced America’s entry onto the world stage of independent nations? Both the Declaration and The Wealth of Nations, after all, made their appearance in 1776. 

But here, as in so many other things, one has to be cautious. The colonists had been trading and associating long before most of the grander theories of the Old World had been formulated. Indeed, John Locke himself would look to America when illustrating the idea of a state of nature and the role of compacts and contracts in the formation of society. “In the beginning,” he wrote, “all the world was America.” 

And Adam Smith too, when looking to demonstrate the benefits of free trade and the costs of regulations and restrictions, turned to the experiences of Europe’s American colonies. And so, in the larger scheme of things, it is not so much that the ideas of the Old World made America, but that the American experience had exerted a profound influence on the ideas of the Old World.

Still, it would be equally wrong to assume that Americans were unaware of  or unappreciative of European intellectual developments. Far from it. Those who could, and there were many, readily digested the writings of the most prominent thinkers and did not hesitate to use their works to give greater meaning and significance to American notions, especially ideas about liberty. Hume, Locke, Montesquieu, and even Smith were very important in this regard. So what can be said of Smith’s influence on the draftsman of the Declaration? 

Smith on Self-Government and Order

Yes, Jefferson had read Smith, but before 1776, he could only have read The Theory of Moral Sentiments, and he read it for much the same reason he read all the other Scottish theorists of his day: Because each, in his own way, had illuminated reasons for confidence in the ability of individuals to exercise personal and political self-government. In other words, each had argued that by either convention (e.g. Hume) or nature (e.g. Kames), human beings were apt to use their individual liberty in ways that promoted a prosperous and orderly society, uncoerced by princes or prelates.

Smith’s whole point about moral sentiments can thus be arrayed alongside similar notions propounded by Hume or Kames. Each had sought to explain some fundamental aspect of an unplanned orderliness to human association. Moral sentiments were useful for explaining the basic motivations that prompted the more intimate associations of family and community. Smith would go on, in The Wealth of Nations, to seek the roots of orderliness in the more extended and attenuated commercial relations among merchants and traders. Yet, even here, he was not entirely original.

Before 1776, one could find the idea of orderliness in economic affairs in a great number of tracts (e.g. Mandeville). Hume’s essays, which appear in Jefferson’s list of recommended readings to Robert Skipwith on August 3, 1771, contained just such an argument in his essay “On Commerce.” 

And it was not such an unusual idea even among those who were generally styled “Mercantilists” (Appleby 1978, pp. 158-198). In many ways, Smith was simply synthesizing positions that had been around for almost two centuries (Clarke 2003, pp. 1-8). More importantly for explaining similarities in sentiments between Jefferson and Smith would be to look at their common roots. Jefferson, in fact, had been influenced by some of the very sources that had informed Smith. Of particular interest here are the French Physiocrats. 

This line of thought privileged agriculture as the source of wealth  but was in every other respect just as deeply devoted to free markets and individual liberty. Jefferson was not only familiar with the Physiocrats’ works, but was a personal friend of one of their leading thinkers, Pierre S. Dupont de Nemour. Some historians have questioned the degree to which Smith borrowed from the Physiocrats, but he certainly had traveled among them and was clearly aware of their arguments. (A nice overview of the subject can be found in Young 2002, pp. 7-28) And so we find the intellectual ground well prepared for a favorable reception by Jefferson of the major arguments contained in The Wealth of Nations.

Jefferson’s first copy of the text was acquired while he was in France in 1785. It is possible that he had read portions of it earlier, but specific references and citations do not appear until after this time. A very early reference to Smith by Jefferson in a letter to his son-in-law, Thomas Mann Randolph (May 30, 1790) notes that “In political economy I think Smith’s Wealth of Nations the best book extant.” From later correspondence, however, the size and scope of the work evidently made a strong impression on Jefferson, suggesting that it had taken him time to fully work through its contents. But the signs of its influence become steadily clearer.

Reading Smith's Very Big Book

For most readers of The Wealth of Nations, then and now, the most difficult hurdle to overcome is his steady, even tedious consideration of all of the many possible sides animaginable of an issue in his day. 

Indeed, Jefferson commented on this aspect in a short note to a close political friend, Joseph Cabell, on January 31, 1814, referencing “the tedious pages of Smith.” Smith’s tendency towards judiciousness in the extreme, has left The Wealth of Nations vulnerable to criticism along two opposing interpretive lines, and these need to be dealt with up front if we are to achieve a right understanding of the text in historical context and of Jefferson’s use of Smith in particular.

On the one hand, it is frequently heard among the more doctrinaire proponents of laissez-faire that Smith was hopelessly inconsistent and too frequently disallowed in one paragraph what he would permit in another (see for example, Rothbard 1995, 435-474). A prime example of such inconsistency is often charged against his ideas on value which appear subjective where matters of price are concerned, but objective where decisions about labor are discussed. 

On the other hand, among those seeking a more active role for government in the present day, Smith’s exceptions are frequently strung together to assert that he supported a very visible and even powerful political hand guiding government commercial policy (An overview of these tendencies can be found in Martin 2011, 110-125). Here, much is made of Smith’s reference to a national bank as a great engine of state, or his praise of the Navigation Acts as essential components of national defense. Both views reinforce each other, but neither is quite correct.

Simply put, what Smith really contended for was a fuller consideration of costs in the formation of policy. He was in fact an expositor of what is today best understood as the idea of opportunity costs. In his focus on policy he probably was not so different from the mercantilists who had preceded him. But in the degree to which he had subjected their assertions to minute examination of the conceivable advantages and disadvantage--that is to say, of their costs--he had advanced the field of political economy well beyond its earlier articulations. 

In this context, that Smith had not fully worked out a consistent theory of value is quite beside the point. His real insight was that each of us values the expenditure of our time and that this must be taken into account when we decide how to allocate our labors.

Here was the major advance over previous treatments. In fact, because of the way Smith articulated the problem of costs, it became possible for David Ricardo to conceptualize the hugely important idea of comparative advantage. This is the solid ground on which choice is ultimately to be considered. That Ricardo would also claim that labor was the objective measure of all value was perhaps an unfortunate inference made possible by Smith’s initial coining of the term, but this only underscores the difficulties inherent in all textual interpretation. It takes nothing away from Smith’s real substantive contribution.

Jefferson reading Smith

And here we return to what Jefferson saw in Smith. 

Smith’s core insight in favor of self-government is hard to miss when we approach his work with a determination to set aside, as best we may, presentist political considerations. From Smith’s vantage point in 1776, a full and proper consideration of costs would tend to confirm the case for a very light hand in the arts of governance. Neither anarchist nor absolutist, Smith evaluated the exceptions to nonintervention along the same exhaustive lines, comparing the costs of developing a navy against the benefits of not doing so within the context of England as a maritime country. 

Interestingly, after 1785, Jefferson’s ideas would closely parallel Smith’s along these very same ideas. In his Report on Foreign Commerce delivered to Congress as part of his obligation as Washington’s Secretary of State in 1793, Jefferson stated his endorsement of the ideal of free trade with all the world, but like Smith he qualified his support on the basis of national defense. 

At a time when the imposition of restrictions on trade included the outright interdiction of shipping, the seizure of sailors, and even the impounding, if not the sinking of ships, it seemed sensible to Jefferson that “defensive and protecting measures become necessary on the part of the nation whose marine resources are thus invaded, or it will be disarmed of its defence [sic.].” 

Similarly, Smith insisted that because “The defence [sic.] of Great Britain” depended so “very much upon the number of its sailors and shipping” the act of navigation “very properly endeavors to give the sailors and shipping of Great Britain the monopoly of the trade of their own country.” He then concluded that because defense was “of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England.” Jefferson would remark of navigation that, “As a branch of industry, it (shipping) is valuable, but as a resource of defence [sic.], essential.”

Of course, Jefferson might well have derived such sentiments from any number of other sources. Even the well-known mercantilist, Sir James Stuart had said similar things, and he too appears on Jefferson’s 1771 list, five years before Smith had published his second great work. Yet there is also more direct evidence for Jefferson’s reading of The Wealth of Nations, a bit later.

Reading Smith and Others

What comes through clearly in Jefferson’s various letters and comments, however, is a steady digestion of Smith’s text over time. Here we encounter Jefferson studying and comparing The Wealth of Nations with other texts in political economy. What we see is a concern that economic relations be understood in connection with individual self-government. 

The Wealth of Nations remains throughout Jefferson’s letters a seminal text, but one that is gradually superseded by ever more refined and succinct statements of its essential principle: the unintended orderly relations of voluntary exchange. In his letter to the great French economist Jean Baptiste Say, of February 1, 1804, Jefferson examines Say’s Political Economy in light of Malthus’s recent work on the same, “in which some of the opinions of Adam Smith, as well as of the economists, are ably examined.”

Then, a few years later, on June 14, 1807, we discover Jefferson advising a young John Norvell from Kentucky that “If your views of political inquiry go further, to the subjects of money & commerce, Smith’s Wealth of Nations is the best book to be read, unless Say’s Political Economy can be had, which treats of the same subject on the same principles, but in a shorter compass & more lucid manner. But I believe this work has not been translated into our language.”

Next is a series of letters in 1813 to John Wayles Eppes, a relative of Jefferson’s wife Martha, in which Jefferson made extensive use of Smith’s passages on money and banking to excoriate the ideas of paper money financing and public debt that had been in vogue since Hamilton’s day. Here Jefferson would make an important correction of certain interpretations of Smith, noting that he had really favored a stable currency, and not paper for papers sake:

The only advantage which Smith proposes by substituting paper in the room of gold and silver money. . . is ‘to replace an expensive instrument with one much less costly, and sometimes equally convenient’; that is to say. . . ‘to allow the gold and silver to be sent abroad and converted into foreign goods,’ and to substitute paper as being a cheaper measure. But this makes no addition to the stock or capital of the nation. The coin sent out was worth as much, while in the country, as the goods imported and taking its place. It is only, then, a change of form in a part of the national capital, from that of gold and silver to other goods. (November 6, 1813)

His final verdict, however, was not reached until he took up the task of assisting in the translation of another French economist: Destutt De Tracy. Writing to that other great pillar of American Independence, John Adams, on October 14, 1816, Jefferson observed that Tracy’s political economy had succinctly framed all the principles of the subject “with the severity of Euclid, and like him, without ever using a superfluous word.”

In a prospectus for the translated work which came out in 1817, Jefferson went on to situate Smith in the broader conversation of the day. The citation provides a nice concluding summation of the influence of both The Wealth of Nations but also of political economy in general in Jefferson’s thinking:

Adam Smith, first in England, published a rational and systematic work on Political Economy; adopting generally the ground of the Economists, but differing on the subject before specified. The system being novel, much argument and detail seemed then necessary to establish principles which now are assented to as soon as proposed. Hence his book admitted to be able, and of the first degree of merit, has yet been considered as prolix and tedious.

In France, John Baptist Say has the merit of producing a very superior work on the subject of Political Economy. His arrangement is luminous, ideas clear, style perspicuous, and the whole subject brought within half the volume of Smith’s work; add to this, considerable advances in correctness, and extension of principles.

The work of Senator Tracy, now announced, comes forward with all the lights of his predecessors in the science, and with the advantages of further experience, more discussion and greater maturity of subject. It is certainly distinguished by important traits; a cogency of logic which has never been exceeded in any work, a rigorous enchainment of ideas, and constant recurrence to it, to keep it in the reader’s view, a fearless pursuit of truth, whithersoever it leads, and a diction so correct, that not a word can be changed but for the worse; and, as happens in other cases, that the more a subject is understood, the more briefly it may be explained, he has reduced, not indeed all the details, but all the elements and the system of principles, within the compass of an 8 vo. of about 400 pages... (See https://oll.libertyfund.org/titles/a-treatise-on-political-economy-lf-ed)

[1]  Correspondence cited herein may be found online at the National Archives at https://founders.archives.gov/

[2] The best study of Smith’s influence situates him within the broader milieu of ideas available to Americans of the revolutionary and early republican periods. Unfortunately, it remains unpublished: Richard B. Vernier, “Political Economy and Political Ideology: The Public Debt in Eighteenth-Century Britain and America,” Oxford University D.Phil., 1993.

Appleby, Joyce, Economic Thought and Ideology in Seventeenth-Century England (Princeton 1978).

Clark, Henry C., Commerce, Culture, and Liberty: Readings on Capitalism Before Adam Smith (Indianapolis, 2003)

Martin, Christopher, “Adam Smith and Liberal Economics: Reading the Minimum Wage Debate of 1795-96,” Econ. Journal Watch, 8,2 (May 2011) 110-125.

Rothbard, Murray N., Economic Thought Before Adam Smith (Auburn Al 1995). 

Young, Jeffrey T., “Adam Smith and the Physiocrats,” History of Economic Ideas,10, 3 (2002), pp. 7-28.