Hostname: page-component-cc8bf7c57-ksm4s Total loading time: 0 Render date: 2024-12-11T19:00:13.048Z Has data issue: false hasContentIssue false
  • English
  • Français

The Equalizing Hand: Why Adam Smith Thought the Market Should Produce Wealth Without Steep Inequality

Published online by Cambridge University Press:  10 December 2013

Deborah Boucoyannis
Deborah Boucoyannis*
Affiliation:
University of Virginia
Get access Rights & Permissions [Opens in a new window]

Abstract

That the market economy inevitably leads to inequality is widely accepted today, with disagreement confined to the desirability of redistributive action, its extent, and the role of government in the process. The canonical text of liberal political economy, Adam Smith's Wealth of Nations, is assumed even in the most progressive interpretations to accept inequality, rationalized as the inevitable trade-off for increasing prosperity compared to less developed but more equal economies. I argue instead that Smith's system, if fully implemented, would not allow steep inequalities to arise. In Smith, profits should be low and labor wages high, legislation in favor of the worker is “always just and equitable,” land should be distributed widely and evenly, inheritance laws liberalized, taxation can be high if it is equitable, and the science of the legislator is necessary to put the system in motion and keep it aligned. Market economies are made in Smith's system. Political theorists and economists have highlighted some of these points, but the counterfactual “what would the distribution of wealth be if all the building blocks were ever in place?” has not been posed. Doing so encourages us to question why steep inequality is accepted as a fact, instead of a pathology that the market economy was not supposed to generate in the first place.

Type
Research Article
Information
Perspectives on Politics , Volume 11 , Issue 4 , December 2013 , pp. 1051 - 1070
Copyright
Copyright © American Political Science Association 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu, Daron, and Robinson, James A.. 2005. Economic Origins of Dictatorship and Democracy: Economic and Political Origins. Cambridge: Cambridge University Press.Google Scholar
Acemoglu, Daron, and Robinson, James A.. 2012. Why Nations Fail: The Origins of Power, Prosperity and Poverty. New York: Crown Business.Google Scholar
Acemoglu, Daron, Robinson, James A., and Verdier, Thierry. 2012. “Can't We All Be More Like Scandinavians? Asymmetric Growth and Institutions in an Interdependent World.” MIT Department of Economics Working Paper No. 12–22.Google Scholar
Akerlof, George A., and Yellen, Janet L., eds. 1986. Efficiency Wage Models of the Labor Market. Cambridge: Cambridge University Press.Google Scholar
Alesina, Alberto, and Rodrik, Dani. 1994. “Distributive Politics and Economic Growth.” Quarterly Journal of Economics 109(2): 465–90.Google Scholar
Allen, Robert C. 2001. “The Great Divergence in European Wages and Prices from the Middle Ages to the First World War.” Explorations in Economic History 38(4): 411–47.Google Scholar
Baker, Dean. 2013. “Capitalism, Steven Pearlstein, and Morality.” In Beat the Press (http://www.cepr.net/index.php/blogs/beat-the-press/capitalism-steven-pearlstein-and-morality), accessed April 10, 2013.Google Scholar
Bartels, Larry M. 2005. “Homer Gets a Tax Cut: Inequality and Public Policy in the American Mind.” Perspectives on Politics 3(1): 15–31.Google Scholar
Bartels, Larry M. 2008. Unequal Democracy: The Political Economy of the New Gilded Age. Princeton, NJ: Princeton University Press.Google Scholar
Bates, Robert H. 2005. Beyond the Miracle of the Market: The Political Economy of Agrarian Development in Kenya. New ed.Cambridge: Cambridge University Press.Google Scholar
Bates, Robert H. 2008. When Things Fell Apart: State Failure in Late-Century Africa. New York: Cambridge University Press.Google Scholar
Bates, Robert H. 2010. Prosperity and Violence: The Political Economy of Development. 2nd ed. New York: W.W. Norton.Google Scholar
Becker, Gary S., and Tomes, Nigel. 1986. “Human Capital and the Rise and Fall of Families.” Journal of Labor Economics 4(3): S1–S39.Google Scholar
Blank, Rebecca M. 2008. “Why the United States Needs an Improved Measure of Poverty.” Testimony to the Subcommittee on Income Security and Family Support House Ways and Means Committee.Google Scholar
Blyth, Mark. 2013. Austerity: The History of a Dangerous Idea. Oxford: Oxford University Press.Google Scholar
Boix, Carles. 2003. Democracy and Redistribution. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Bowles, Samuel, and Gintis, Herbert. 2002. “The Inheritance of Inequality.” Journal of Economic Perspectives 16(3): 3–30.Google Scholar
Cahill, K. 2001. Who Owns Britain. Edinburgh: Canongate.Google Scholar
Card, David E., and Krueger, Alan B.. 1995. Myth and Measurement: The New Economics of the Minimum Wage. Princeton, NJ: Princeton University Press.Google Scholar
Citro, Constance F., and Michael, Robert T., eds. 1995. Measuring Poverty: A New Approach. Washington, DC: National Academy Press.Google Scholar
Cropsey, Joseph. 1957. Polity and Economy: An Interpretation of the Principles of Adam Smith. The Hague: M. Nijhoff.Google Scholar
de Vries, Jan, and van der Woude, A. M.. 1997. The First Modern Economy: Success, Failure, and Perseverance of the Dutch Economy, 1500–1815. Cambridge: Cambridge University Press.Google Scholar
Fleischacker, Samuel. 2002. “Adam Smith's Reception among the American Founders, 1776–1790.” William and Mary Quarterly 59(4): 897–924.Google Scholar
Fleischacker, Samuel. 2004. On Adam Smith's Wealth of Nations: A Philosophical Companion. Princeton, NJ: Princeton University Press.Google Scholar
Forman-Barzilai, Fonna. 2010. Adam Smith and the Circles of Sympathy: Cosmopolitanism and Moral Theory. Cambridge: Cambridge University Press.Google Scholar
Frazer, M.L. 2010. The Enlightenment of Sympathy: Justice and the Moral Sentiments in the Eighteenth Century and Today. Oxford: Oxford University Press.Google Scholar
Friedman, Milton, and Friedman, Rose D.. 1990. Free to Choose: A Personal Statement. San Diego: Harcourt Brace Jovanovich.Google Scholar
Galbraith, James K. 2000. Created Unequal: The Crisis in American Pay. Chicago: University of Chicago Press.Google Scholar
Galbraith, James K. 2012. Inequality and Instability: A Study of the World Economy Just before the Great Crisis. New York: Oxford University Press.Google Scholar
Gelman, Andrew. 2008. Red State, Blue State, Rich State, Poor State: Why Americans Vote the Way They Do. Princeton, NJ: Princeton University Press.Google Scholar
Haakonssen, Knud. 1981. The Science of a Legislator: The Natural Jurisprudence of David Hume and Adam Smith. Cambridge: Cambridge University Press.Google Scholar
Haakonssen, Knud, ed. 1998. Adam Smith. Aldershot Hants, England: Ashgate.Google Scholar
Hacker, Jacob S. 2011. “The Institutional Foundations of Middle-Class Democracy.” In Priorities for a New Political Economy: Memos to the Left. London: Policy Network.Google Scholar
Hacker, Jacob S., and Pierson, Paul. 2005. Off Center: The Republican Revolution and the Erosion of American Democracy. New Haven, CT: Yale University Press.Google Scholar
Hacker, Jacob S., and Pierson, Paul. 2010. Winner-Take-All Politics: How Washington Made the Rich Richer-and Turned Its Back on the Middle Class. New York: Simon & Schustser.Google Scholar
Hartzell, Caroline. 2010. “The State and Violence.” Perspectives on Politics 8(1): 289–91.Google Scholar
Heldman, Dan C., Bennett, James T., and Johnson, Manuel H.. 1981. Deregulating Labor Relations. Dallas, TX: Fisher Institute.Google Scholar
Hicks, John. 1932. The Theory of Wages. London: Macmillan.Google Scholar
Hochschild, Jennifer L. 1981. What's Fair? American Beliefs about Distributive Justice. Cambridge: Harvard University Press.Google Scholar
Holmes, Stephen. 1995. Passions and Constraint: On the Theory of Liberal Democracy. Chicago: University of Chicago Press.Google Scholar
Holmes, Stephen, and Sunstein, Cass R.. 1999. The Cost of Rights: Why Liberty Depends on Taxes. New York: W.W. Norton.Google Scholar
Hont, Istvan, and Ignatieff, Michael. 1983. “Needs and Justice in The Wealth of Nations: An Introductory Essay.” In Wealth and Virtue: The Shaping of Political Economy in the Scottish Enlightenment, ed. Hont, I. and Ignatieff, M.. Cambridge: Cambridge University Press.Google Scholar
Judis, John B. 2013. “Paul Krugman vs. Joseph Stiglitz: How Income Inequality Could Be Slowing Our Recovery from the Great Recession.” New Republic, January 30.Google Scholar
Kalyvas, Andreas, and Katznelson, Ira. 2001. “The Rhetoric of the Market: Adam Smith on Recognition, Speech and Exchange.” Review of Politics 63(3): 549–79.Google Scholar
Kenworthy, Lane. 2004. Egalitarian Capitalism: Jobs, Incomes, and Growth in Affluent Countries. New York: Russell Sage Foundation.Google Scholar
Kenworthy, Lane. 2012. “Will Everyone Be Worse Off If the United States Turns Social Democratic?” In Consider the Evidence. (http://lanekenworthy.net/2012/09/29/will-everyone-be-worse-off-if-the-united-states-turns-social-democratic/), accessed December 12, 2012.Google Scholar
Kenworthy, Lane, and Pontusson, Jonas. 2005. “Rising Inequality and the Politics of Redistribution in Affluent Countries.” Perspectives on Politics 3(3): 449–71.Google Scholar
Krugman, Paul R., and Wells, Robin. 2009. Microeconomics. 2d ed. New York: Worth Publishers.Google Scholar
Levi, Margaret. 2013. “Can Nations Succeed?” Perspectives on Politics 11(1): 187–92.Google Scholar
Levy, David, and Peart, Sandra. 2003. “An Inquiry into the Causes Which Affect the Happiness of Nations: The Comfort of the Lower Orders.” (http://www.econlib.org/library/Columns/LevyPeartwealth.html), accessed February 15, 2013.Google Scholar
Maddison, Angus. 2001. The World Economy: A Millennial Perspective. Paris: Organisation for Economic Co-operation and Development.Google Scholar
Malthus, T. R. 1826. An Essay on the Principle of Population. 6th ed. 2 vols. London: J. Murray.Google Scholar
Mandeville, Bernard. 1924 [1714]. “An Essay on Charity, and Charity-Schools.” In Fable of the Bees: Or, Private Vices, Publick Benefits, ed. Kaye, F. B.. Oxford: Clarendon Press.Google Scholar
Mankiw, N. Gregory. 2009. Principles of Economics. 5th ed. Mason, OH: South-Western Cengage Learning.Google Scholar
Martin, Isaac William, Mehrotra, Ajay K., and Prasad, Monica, eds. 2009. The New Fiscal Sociology: Taxation in Comparative and Historical Perspective. Cambridge: Cambridge University Press.Google Scholar
Martin, Lisa L. 2013. “Polanyi's Revenge.” Perspectives on Politics 11(1): 177–86.Google Scholar
Marx, Karl. 1906. Capital: A Critique of Political Economy, ed. Engels, F. and Untermann, E.. Chicago: C.H. Kerr & Co.Google Scholar
Mathias, Peter, and O'Brien, Patrick. 1976. “Taxation in Britain and France, 1715–1810: A Comparison of the Social and Economic Incidence of Taxes collected for the Central Governments.” Journal of European Economic History 5: 601–50.Google Scholar
McCarty, Nolan M., Poole, Keith T., and Rosenthal, Howard. 2006. Polarized America: The Dance of Ideology and Unequal Riches. Cambridge: MIT Press.Google Scholar
Mehta, Pratap B. 2006. “Self-Interest and Other Interests.” In The Cambridge Companion to Adam Smith, ed. Haakonssen, K.. Cambridge: Cambridge University Press.Google Scholar
Milanovic, Branko. 2005. Worlds Apart: Measuring International and Global Inequality. Princeton, NJ: Princeton University Press.Google Scholar
Mill, John Stuart. 1909. Principles of Political Economy, with Some of Their Applications to Social Philosophy. 7th ed. London: Longmans, Green, and Co.Google Scholar
Montes, L. 2004. Adam Smith in Context : A Critical Reassessment of Some Central Components of His Thought. New York: Palgrave Macmillan.Google Scholar
Moran, Beverly. 2009. “Adam Smith and the Search for an Ideal Tax System.” In The New Fiscal Sociology: Taxation in Comparative and Historical Perspective, ed. Martin, I. W., Mehrotra, A. K. and Prasad, M.. Cambridge: Cambridge University Press.Google Scholar
Muthu, Sankar. 2008. “Adam Smith's Critique of International Trading Companies.” Political Theory 36(2): 185–212.Google Scholar
Naples, Michele I., and Aslanbeigui, Nahid. 1996. “What Does Determine the Profit Rate? The Neoclassical Theories Presented in Introductory Textbooks.” Cambridge Journal of Economics 20(1): 53–71.Google Scholar
National Election Studies. 2002. “The 2002 National Election Study [dataset].” Ann Arbor, MI: University of Michigan, Center for Political Studies. (http://www.umich.edu/~nes), accessed December 12, 2012.Google Scholar
Neumark, David, and Wascher, William. 2000. “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment.” American Economic Review 90(5): 1362–96.Google Scholar
Newman, Katherine S., and O'Brien, Rourke L.. 2011. Taxing the Poor: Doing Damage to the Truly Disadvantaged. Berkeley: University of California Press.Google Scholar
Norris, Floyd. 2011. “For Business, Golden Days; For Workers, the Dross.” New York Times, November 25.Google Scholar
North, Douglass Cecil, Wallis, John Joseph, and Weingast, Barry R.. 2009. Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History. Cambridge: Cambridge University Press.Google Scholar
Noss, Amanda. 2012. “Household Income for States: 2010 and 2011.” U.S. Census Bureau.Google Scholar
O'Neill, Martin. 2012. “Predistribution: An Unsnappy Name for an Inspiring Idea.” The Guardian, 12 September.Google Scholar
OECD. 2011. “Poverty.” In Society at a Glance 2011: OECD Social Indicators. Paris: OECD Publishing.Google Scholar
Okun, Arthur M. 1975. Equality and Efficiency, the Big Tradeoff. Washington, DC: The Brookings Institution.Google Scholar
Olson, Mancur. 2000. Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships. New York: Basic Books.Google Scholar
Pack, S.J. 2010. Capitalism as a Moral System : Adam Smith's Critique of the Free Market Economy. Cheltenham, UK: Edward Elgar.Google Scholar
Page, Benjamin I., and Jacobs, Lawrence R.. 2009. Class War? What Americans Really Think about Economic Inequality. Chicago: The University of Chicago Press.Google Scholar
Paine, Thomas. 1797. Agrarian Justice. London: J. Adlard and J. Parsons.Google Scholar
Peart, S., and Levy, D.M.. 2008. The Street Porter and the Philosopher : Conversations on Analytical Egalitarianism. Ann Arbor: University of Michigan Press.Google Scholar
Persson, Torsten, and Tabellini, Guido. 1994. “Is Inequality Harmful for Growth?” American Economic Review 84(3): 600–21.Google Scholar
Polanyi, Karl. 1944. The Great Transformation. New York: Farrar & Rinehart.Google Scholar
Pontusson, Jonas. 2011. “Class Politics, American-Style.” Perspectives on Politics 9(3): 654–58.Google Scholar
Raff, Daniel M. G., and Summers, Lawrence H.. 1987. “Did Henry Ford Pay Efficiency Wages?” Journal of Labor Economics 5(4): S57–S86.Google Scholar
Rampell, Catherine. 2010. “Corporate Profits Were the Highest on Record Last Quarter.” New York Times, November 24.Google Scholar
Rawls, John. 1971. A Theory of Justice. Cambridge: Harvard University Press.Google Scholar
Rector, Robert, and Sheffield, Rachel. 10/17/2011. Air Conditioning, Cable TV, and an Xbox: What Is Poverty in the United States Today? The Heritage Foundation. (http://www.heritage.org/research/reports/2011/07/what-is-poverty), accessed October 17, 2012.Google Scholar
Ricardo, David. 1817. On the Principles of Political Economy and Taxation. 3d ed. London: J. Murray.Google Scholar
Rosenberg, Nathan. 1974. “Adam Smith on Profits—Paradox Lost and Regained.” Journal of Political Economy 82(6): 1177–90.Google Scholar
Rothschild, Emma. 1992. “Adam Smith and Conservative Economics.” Economic History Review 45(1): 74–96.Google Scholar
Rothschild, Emma. 1994. “Adam Smith and the Invisible Hand.” American Economic Review 84(2): 319–22.Google Scholar
Rothschild, Emma. 2001. Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment. Cambridge, MA: Harvard University Press.Google Scholar
Rothschild, Emma, and Sen, Amartya. 2006. “Adam Smith's Economics.” In The Cambridge Companion to Adam Smith, ed. Haakonssen, K.. Cambridge: Cambridge University Press.Google Scholar
Schliesser, E. 2008. “The Measure of Real Price: Adam Smith's Science of Equity.” In The Street Porter and the Philosopher: Conversations on Analytical Egalitarianism, ed. Peart, S. and Levy, D. M.. Ann Arbor, MI: University of Michigan Press.Google Scholar
Schlozman, Kay Lehman, and Tierney, John T.. 1986. Organized Interests and American Democracy. New York: Harper & Row.Google Scholar
Schmitt, John. 2013. “Why Does the Minimum Wage Have No Discernible Effect on Employment?”. Washington, DC: Center for Economic and Policy Research.Google Scholar
Seager, Ashley. 2007. “A Land Tax Is 200 Years Overdue: A Levy on What Lies Beneath Our Overpriced Houses Could Reduce Society's Inequalities.” The Guardian, January 8.Google Scholar
Sen, Amartya. 1999. Development as Freedom. New York: Oxford University Press.Google Scholar
Shiller, Robert J. 2000. Irrational Exuberance. Princeton, NJ: Princeton University Press.Google Scholar
Simpson, A. W. B. 1986. A History of the Land Law. 2d ed. Oxford: Clarendon Press.Google Scholar
Skinner, Andrew S., and Wilson, Thomas, eds. 1975. Essays on Adam Smith. Oxford: Clarendon Press.Google Scholar
Smith, Adam. 1976a [1759] The Theory of Moral Sentiments, ed. Macfie, A.L. and Raphael, D.D.. Oxford: Oxford University Press.Google Scholar
Smith, Adam. 1976b [1776] An Inquiry into the Nature and Causes of the Wealth of Nations, ed. Campbell, R.H., Skinner, A.S., and Todd, W.B.. Oxford: Oxford University Press.Google Scholar
Smith, Adam. 1978a [1762]. “Early Draft of Part of the Wealth of Nations.” In Lectures on Jurisprudence. Oxford: Oxford University Press.Google Scholar
Smith, Adam. 1978b [1762]. Lectures on Jurisprudence, ed. Meek, R.L., Raphael, D.D., and Stein, P.. Oxford: Oxford University Press.Google Scholar
Stepan, Alfred, and Linz, Juan J.. 2011. “Comparative Perspectives on Inequality and the Quality of Democracy in the United States.” Perspectives on Politics 9(4): 841–56.Google Scholar
Stigler, George J. 1946. “The Economics of Minimum Wage Legislation.” American Economic Review 36(3): 358–65.Google Scholar
Stiglitz, Joseph E. 2012. The Price of Inequality: How Today's Divided Society Endangers Our Future. New York: W.W. Norton & Co.Google Scholar
Temple, William. 1673. Observations upon the United Provinces of the Netherlands. London: A. Maxwell for Sa. Gellibrand.Google Scholar
Thirsk, Joan. 1990. Chapters from the Agrarian History of England and Wales, 1500–1750. Cambridge: Cambridge University Press.Google Scholar
van Zanden, Jan Luiten. 1995. “Tracing the Beginning of the Kuznets Curve: Western Europe during the Early Modern Period.” Economic History Review 48(4): 643–64.Google Scholar
Viner, Jacob. 1927. “Adam Smith and Laissez Faire.” Journal of Political Economy 35(2): 98–232.Google Scholar
Von Mises, Ludwig. 1996. Human Action: A Treatise on Economics. 4th ed. San Francisco: Fox & Wilkes.Google Scholar
Winch, Donald. 1978. Adam Smith's Politics: An Essay in Historiographic Revision. Cambridge: Cambridge University Press.Google Scholar
Winch, Donald. 1985. “The Burke-Smith Problem and Late Eighteenth-Century Political and Economic Thought.” Historical Journal 28(1): 231–47.Google Scholar
Winch, Donald. 1996. Riches and Poverty: An Intellectual History of Political Economy in Britain, 1750–1834. Cambridge: Cambridge University Press.Google Scholar
World Bank. 1994. Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth. New York: Oxford University Press.Google Scholar
Young, Arthur. 1771. Farmer's Tour through the East of England … to Enquire into the State of Agriculture,Etc. London: W. Strahan.Google Scholar