Adam Smith’s Book on Jurisprudence: An Appreciation of The Wealth of Nations
This year marks the 250th anniversary of the publication of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations. The Wealth of Nations was literally world-changing. It was one of the first systematic explorations of what we now call economics, and the breadth of the work is global.
Smith discusses events from Great Britain, America, Europe, Africa, China, and India, and ties them all together in a narrative to explain why some nations are wealthy while others are poor. The lessons discussed in the book would be applied by people and governments over the next centuries as the world entered a period of unprecedented growth and prosperity. The best-known sections of the Wealth of Nations are his discussions on the division of labor, the invisible hand, and his refutation of the mercantile system (Books I and IV, respectively).
The Wealth of Nations is rightfully celebrated for its economic insight. However, that is not the only contribution of the work. It is also a work of jurisprudence. In Smith’s first book, The Theory of Moral Sentiments, he ended by promising a work on jurisprudence:
the general principles of law and government, and of the different revolutions they have undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns police, revenue, and arms, and whatever else is the object of law.
Smith considered The Wealth of Nations a partial fulfillment of that goal, although some elements were left out and unable to be completed due to his other work (see the Advertisement for the 6th Edition of The Theory of Moral Sentiments). As we approach this anniversary, I wish to celebrate the jurisprudential character of The Wealth of Nations.
Smith conducts his analysis “under the shadow of the law.” That is, the law affects behavior and outcomes even if there is no direct contact with the legal system. The law does not order (a verb) people about, but rather it provides an order (a noun) which influences behavior. Consequently, law has a significant place in The Wealth of Nations. Smith cites and discusses 269 unique statues and acts and their impact. For example, he offers an in-depth discussion of taxation, drawing on current statues in England, and comparing the results to the tax regimes in other countries. He shows how the different regimes influence the wealth of their citizens and may be unfair to different classes of people.
This leads us to another part of Smith’s jurisprudence, namely the “prudence” part. Dugald Stewart’s biography of Adam Smith quotes from a lost 1755 manuscript where Smith says:
Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.
Smith charges governments that attempt to do more, either by directing or arresting economic activity with being “unnatural,” “oppressive,” and “tyrannical.” The manuscript predates The Wealth of Nations by many years and one objective of The Wealth of Nations is to elaborate on this early point: what does “easy taxes and a tolerable administration of justice” mean? The answers are spread throughout The Wealth of Nations, but are most concentrated in Book V.
Book V deals with the proper performance of the duties of the sovereign and the proper way to raise revenue for the sovereign (taxes). “Easy taxes” concerns not just the tax level, but also how the taxes are collected, and which taxes should be borne by which kind of citizen. The sovereign should act in a prudent and proper manner. Even if the objective of the sovereign is just and proper, if the means to accomplish it are improper, the sovereign could harm the people he wishes to help.
Taxes, for example, should follow four maxims:
- Each should pay taxes in relation to their respective abilities and their respective benefits under the state;
- Taxes should be certain and not arbitrary;
- Every tax should be levied at a time in which it is convenient for the payer to pay;
- Every tax should be structured to take out of the pockets of people as little as possible
While these maxims are economic in nature, they also focus on the proper role of government.
I have written in the past on the presumption of liberty in Adam Smith. His jurisprudence throughout The Wealth of Nations brings that presumption to the fore. Even though the government may violate “the natural system of liberty,” even though there are justifications for the government to interfere in the private lives of its citizens, Smithian jurisprudence demands these justifications be supported and not invoked willy-nilly. Smith does not believe that there are mechanistic decision-rules for government; he does not believe that if conditions X, Y, and Z are met, then government should do B. How appropriate an intervention is matters just as much as whether the intervention may produce a desirable outcome.
Much more can be written on this topic, and indeed much more has (see the AdamSmithWorks guide here). But it feels prudent to end this short appreciation here. The Wealth of Nations is a work of jurisprudence as much as it is one of economics. Discussions of Smith’s economics that fail to take his jurisprudence into account will always be incomplete.
Even more to read and learn from:
Register for our upcoming VRG on The Wealth of Nations!
Enrique Guerra-Pujol’s plea to Adam Smith Scholars using Lectures on Jurisprudence
Clark Neily’s A Modern Lawyer and Smith’s Lectures on Jurisprudence
Paolo Silvestri and Benoît Walraevens’ Smith’s Dreams: Economic and Political Liberties in a Good Polity
Enrique Guerra-Pujol’s plea to Adam Smith Scholars using Lectures on Jurisprudence
Clark Neily’s A Modern Lawyer and Smith’s Lectures on Jurisprudence
Paolo Silvestri and Benoît Walraevens’ Smith’s Dreams: Economic and Political Liberties in a Good Polity