Adam Smith, Ayn Rand, and the Philosophic Foundation for Freedom

By Jon Hersey

Adam Smith (1723–1790) and Ayn Rand (1905–1982) are widely considered to offer merely different flavors of pro-capitalist thought. Although Smith never used the word “capitalism” (which was only popularized in the 19th century by the system’s socialist critics), he is commonly referred to as “the father of capitalism.” Rand called herself a “radical for capitalism” and has also been nicknamed “the goddess of the market.”

It seems reasonable, then, to expect them to share a large amount of common ground. But, although there is some, it turns out that their differences are greater—and far more consequential—than their similarities. Examining these similarities and differences gives us a clearer picture of both thinkers, the respective roles of their ideas in shaping history, and what each brings to the table for those promoting freedom and flourishing today. Toward that end, let’s look at five areas of their thought, going from least to most fundamental (and from most to least similar).

First, a few words about something that sets them apart from virtually all others in the free-market tradition: Both were philosophers who offered comprehensive views on ethics, a field each regarded as more fundamental and thus, more important than economics.

Most people think of Adam Smith as the author of The Wealth of Nations, which, among other things, was perhaps the first extensive attack on government intervention in trade ever published. But Smith’s main claim to fame during much of his life was, in fact, his first book, published when he was just thirty-five, his Theory of Moral Sentiments. Smith considered it his better and more important work. Although The Wealth of Nations became influential in Smith’s own lifetime, his Theory of Moral Sentiments was practically an overnight success. Smith’s closest friend, David Hume, teased him that “your Book has been very unfortunate: For the Public seem disposed to applaud it extremely. It was looked for by the foolish People with some Impatience; and the Mob of Literati are beginning already to be very loud in its Praises.”¹

On the strength of this first book, Smith was invited to travel Europe tutoring the sons of a wealthy patron, thus luring him from his post as the chair of moral philosophy at the University of Glasgow, perhaps the most prestigious academic position in Scotland at the time. And not for another seventeen years, long after the Theory of Moral Sentiments had cemented Smith’s name in the pantheon of Scottish Enlightenment thinkers, would he publish his dense, prolix, minutely detailed Wealth of Nations. It probably would come as a surprise to Smith, then, that he’s more remembered for the latter work today and that his moral writings are largely ignored.

It is harder to make the same mistake regarding Rand (though, that doesn’t stop some from making it). Not only did she write much more recently, but she communicated her politico-economic ideas in epic works of romantic literature that concretely demonstrate the importance of moral values in man’s life. She also clearly and persistently articulated her view that politics and economics are downstream from and dependent on ethics, among other branches of philosophy, stating, for instance:

Objectivism [Rand’s philosophy] is a philosophical movement; since politics is a branch of philosophy, Objectivism advocates certain political principles—specifically, those of laissez-faire capitalism—as the consequence and the ultimate practical application of its fundamental philosophical principles. It does not regard politics as a separate or primary goal, that is: as a goal that can be achieved without a wider ideological context. Politics is based on three other philosophical disciplines: metaphysics, epistemology and ethics—on a theory of man’s nature and of man’s relationship to existence. It is only on such a base that one can formulate a consistent political theory and achieve it in practice. . . . Objectivists are not “conservatives.” We are radicals for capitalism; we are fighting for that philosophical base which capitalism did not have and without which it was doomed to perish.²

These are nearly the first words on the first page of Rand’s Capitalism: The Unknown Ideal, the title itself indicating a moral view of capitalism for which the rest of the book serves as an extended argument and demonstration. “There is a fundamental difference between our Objectivist approach and that of capitalism’s classical defenders and modern apologists,” she went on to say. “With very few exceptions, they are responsible—by default—for capitalism’s destruction. The default consisted of their inability or unwillingness to fight the battle where it had to be fought: on moral-philosophical grounds.”³ In this respect—as moral philosophers first, advocates of free-trade second—Smith and Rand serve as interesting and important bookends for the two centuries of free-market thought between them. Let’s tease out their similarities and differences, looking at five areas of their thought: human progress, government, economics, industriousness, and morality.

Human Progress

Smith was born in 1723 in the small port town of Kirkcaldy, Scotland. He spent most of his life in Britain, where he witnessed the very beginnings of the Industrial Revolution, a fount of human progress.

In Kirkcaldy, he attended one of Scotland’s best secondary schools and, at fourteen, enrolled at the University of Glasgow. He studied under the eminent moral philosopher Francis Hutcheson, who introduced Smith to the ideas of David Hume. Hume, twelve years Smith’s senior, became a hero to Smith, and later, his mentor and friend. While at Glasgow, Smith won a scholarship to Oxford. Once there, he realized that most of the professors had “given up altogether even the pretence of teaching.”⁴ But he was self-motivated and essentially devised his own course of study, pushing himself so hard that, at one point, he suffered a nervous breakdown.

In the late 1740s, he gave a series of public lectures in Edinburgh, which helped earn him a position as the chair of logic at the University of Glasgow in 1751. The following year, when Hutcheson’s successor vacated the chair of moral philosophy, Smith took up his old professor’s post. That same year, Hume, whom Smith had befriended during his time lecturing in Edinburgh, published his Political Discourses, anticipating many of the political and economic arguments for which Smith would later become known.

At Glasgow, Smith worked alongside James Watt, perhaps the most important inventor of the age. Watt would later improve Thomas Newcomen’s 1712 steam engine, and the Watt steam engine would become the motive power for the Industrial Revolution.

Smith published his first book, The Theory of Moral Sentiments, in 1759, earning him wide acclaim. In 1763, he was offered a generous salary and a lifelong pension to travel Europe as the tutor of the young Duke of Buccleuch. They spent about two-and-a-half years traveling the Continent, giving Smith the opportunity to meet many prominent philosophes and économistes, especially in Paris and Geneva. Their conversations stoked Smith’s work on his Wealth of Nations, the ideas for which he’d been developing at least since his earliest days teaching at Glasgow. After his travels, Smith returned to Kirkcaldy, then moved to London in 1773, where he finished the Wealth of Nations and oversaw its printing. The massive, finely detailed work further elevated his reputation as a leading light of the Scottish Enlightenment. On its merits, he was appointed a customs officer (the post was intended as a sinecure, but Smith reportedly took the job quite seriously) in Edinburgh, where he lived for the rest of his life, revising new editions of both of his books until his death in 1790.

Not only did Smith witness the birth of the Industrial Revolution but, as an avid student of history, he saw these developments against the grand arc of human progress. His Wealth of Nations describes four stages of societal/economic development: (1) the Age of Hunters; (2) the Age of Shepherds; (3) the Age of Agriculture; (4) the Age of Commerce. Like much in Smith’s writing, this schema wasn’t completely novel. At least as far back as Aristotle’s Politics, thinkers had been cataloging societal change via similar stages—but not everyone considered those successive stages as positive developments.

In 1749, the Académie de Dijon in France held an essay contest on the question of “whether the reestablishment of the sciences and the arts contributed to purifying morals,” and a monsieur Jean-Jacques Rousseau argued fervently that, far from improving human life, scientific and artistic progress poisons the pursuit of happiness. This contest-winning essay presaged his 1755 Discourse on Inequality, which argued (1) that the division of labor engendered by commercial society degrades people’s minds and abilities, (2) that the socializing effect of commerce makes them slavishly dependent on the opinions of others, and (3) that this dependence—along with the continuous churn of new luxuries—locks people into a perpetual rat race, forever trying (as we say today) to “keep up with the Joneses” and thus never achieving true happiness.⁵

Rousseau’s regressive views have deeply impacted many thinkers throughout history, including Immanuel Kant, Karl Marx, and the American Transcendentalists.⁶ What few people realize, though, is just how significantly Rousseau’s ideas impacted Smith.⁷ In a 1755 contribution to the Edinburgh Review, Smith translated long passages of Rousseau’s Discourse on Inequality. Although he never mentions Rousseau by name in either of his two books, Smith spent ample space in each of them elaborating Rousseau’s critiques of commercial society—and largely agreeing with them.

For instance, in The Wealth of Nations, Smith said that the defining feature of commercial society is the division of labor, describing its effects as follows:

In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him, not only incapable of relishing or bearing a part in any rational conversation, but of conceiving of any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country, he is altogether incapable of judging. . . . It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance, in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues.⁸

The philosopher Charles Griswold wrote that “perhaps no philosopher, with the possible exception of Marx, has described the human costs of the division of labor more bluntly and harshly than has Smith.”⁹

Despite this and other reservations (which we’ll examine later), Smith concluded that commercial society is a great improvement over all earlier stages. This was in large part because, even though Smith held that the pursuit of “trinkets and baubles” posed new threats to man’s moral development, commercial society vastly improved man’s material conditions.¹⁰ He observed that the common day laborers in Britain enjoyed affluence and luxury far surpassing those of the rulers of more primitive civilizations. They had woolen coats, linen shirts, shoes, beds, cutlery, dishware, bread, beer, and windows of glass that “lets in the heat and the light, and keeps out the wind and the rain.”¹¹

In fact, commercial society makes us so much wealthier, said Smith, that we can afford to at least partially subsidize basic schooling for those destined to become laborers, and we can thereby prevent much of the mental and moral deterioration caused by the division of labor. He wrote,

the public can facilitate, can encourage, and can even impose upon almost the whole body of the people, the necessity of acquiring 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.¹²

We’ll return to this later, along with Smith’s responses to Rousseau’s other criticisms of commercial society. Suffice it to say for now that Smith gave two cheers for mankind’s material progress; human progress is a mixed blessing, but it is more good than bad.

Ayn Rand was born in St. Petersburg, Russia, 115 years after Smith died. Her family was upper middle class; and, like Smith, Rand was well-educated. But, after the Soviets came to power in 1917, she witnessed the country descend into poverty and oppression. Communists took control of the economy, assuming the prerogative to dispose of the individual’s life and property at their discretion, for “the good of the proletariat.” Businesses were seized from “bourgeois” owners, including Rand’s father, who owned a pharmacy.¹³

She then witnessed, firsthand, mankind’s material progress being undone. As productive activity was repressed, living conditions became unspeakably awful. Anything beyond the most basic commodities was impossible to find or unaffordable for the great majority of people—and even those basics were difficult to get. Ration cards were given to students and Communist Party members. Rand got one while studying history at Petrograd State University. Every week, she would stand in long lines, waiting to collect whatever the co-ops happened to be handing out. Her family, like many, lived at the level of bare subsistence, often surviving on millet, a seeded grass that most of us have only ever seen in bird food. Rand’s mother later recalled that they ate “cakes made of potato peelings, which to our hungry stomachs had seemed more delicious than the nectar of the Olympic gods.”¹⁴

Perhaps the greatest indignities stemmed from the housing situation. As demand for urban housing grew, and buildings became unsafe due to lack of maintenance, the Communist regime passed the Domicile Norm, which dictated the amount of living space allowed per person. Government planners split up houses and apartments, assigning tenants and ordering owners to move into smaller and smaller portions of their own homes—essentially treating private residences as state-run dormitories. Not only were entire families forced to share a single kitchen and bathroom, but they often had to share these with complete strangers, a source of constant tension.¹⁵ And just a few years earlier, Rand and her family had enjoyed relative affluence.

But no contrast could have been more illustrative than that between the nation of her birth and the one she escaped to in 1926: the United States of America. In America, the individual’s right to his own life was recognized and largely protected—and this freedom had made possible an incredible standard of living. Rand wept when she saw New York City’s skyscrapers from the ship that brought her over—symbols of prosperity and progress, of ability unleashed and allowed to achieve greatness.¹⁶

For the rest of her life, Rand consistently celebrated human progress and the people who make it possible, from the lowliest janitors to the highest-paid CEOs. And contrary to Rousseau and Smith, she held that a man’s approach to his work—whether stagnant stupor or ever-growing curiosity and ability—is his choice. Not only does commercial society not, of itself, stupefy or retard man’s mind, but it incentivizes him to achieve his highest potential, both mentally and morally (she regarded these as aspects of one and the same thing). She wrote:

Capitalism demands the best of every man—his rationality—and rewards him accordingly. It leaves every man free to choose the work he likes, to specialize in it, to trade his product for the products of others, and to go as far on the road of achievement as his ability and ambition will carry him.¹⁷

Rand’s 1957 magnum opus Atlas Shrugged dramatized this not only regarding titans of industry, but also those working what we might consider more mundane jobs. In the first chapter, we see a sympathetic character walking down a boulevard in New York City:

Eddie Willers shifted his glance down to the street, to a vegetable pushcart at the stoop of a brownstone house. He saw a pile of bright gold carrots and the fresh green of onions. He saw a clean white curtain blowing at an open window. He saw a bus turning a corner, expertly steered. He wondered why he felt reassured. . . . When he came to Fifth Avenue, he kept his eyes on the windows of the stores he passed. There was nothing he needed or wished to buy; but he liked to see the display of goods, any goods, objects made by men, to be used by men. He enjoyed the sight of a prosperous street.¹⁸

Rand explained in her essay “The Objectivist Ethics”:

Productive work is the road of man’s unlimited achievement and calls upon the highest attributes of his character: his creative ability, his ambitiousness, his self-assertiveness, his refusal to bear uncontested disasters, his dedication to the goal of reshaping the earth in the image of his values. “Productive work” does not mean the unfocused performance of the motions of some job. It means the consciously chosen pursuit of a productive career, in any line of rational endeavor, great or modest, on any level of ability. It is not the degree of a man’s ability nor the scale of his work that is ethically relevant here, but the fullest and most purposeful use of his mind.¹⁹

So, whereas Smith regarded mankind’s material progress as tainted for some of the same reasons Rousseau had, Rand regarded it as an unalloyed good. Indeed, she held that the price of material progress is mental and moral progress, that you can’t get material progress without mental progress leading the way, and that the innovators incentivize and enable those with whom they work and deal to improve themselves as well.

Government

Despite their differences, both Smith and Rand applauded industrial progress, and they agreed that it was largely dependent on having in place a properly structured government. Without the right government, they held, achieving such progress ranges from vastly more difficult to essentially impossible.

In Smith’s four-stage theory of history, he claimed it was likely that most hunter-based societies had strongman rulers. But governments arose with the advent of property—animals in shepherding societies and land in agricultural ones—as a means for property owners to protect themselves from thieves. As society became more commercial and complex, however, those holding the reins of power did not limit government solely to protecting property. According to Smith, merchants and manufacturers exhibited a “wretched spirit of monopoly.” With “clamorous complaint[s]” and “interested sophistry,” they confused or pressured governments into passing policies that lined their pockets and shielded them from competition at the expense of everyone else. They had increased their political power in England to the point that, “like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature.”²⁰

Smith characterized his Wealth of Nations as a “very violent attack . . . upon the whole commercial system of Great Britain”—meaning the system of mercantilism, protectionism, and cronyism.²¹ As was common throughout Europe, the government’s mercantilist policies regulated trade to increase exports and decrease imports. The goal was to accumulate gold, thereby enriching Britain at the expense of other countries—or at the expense of its own colonies abroad. These policies also sought to shield domestic producers from foreign competition. The result was what we now call a “trade war”—the blunt instruments of which are duties and tariffs, which ultimately harmed everyone.

Smith also remonstrated against the “corporation spirit” that led those in various trades to vie for apprenticeship laws and government-granted monopolies aimed at curtailing or eliminating competition.²² And he showed how settlement laws, which kept men from freely moving to and working in different regions of the country, stultified progress for all. Such regulations violated a man’s “sacred and inviolable” property in himself and obstructed the system of “natural liberty and justice.”²³

However, we are mistaken if we take this to mean that Smith always unambiguously argued for principled limits on government. We’ve already seen otherwise to some extent in Smith’s views on government-subsidized education for the poor. Smith was so sickened by the power that merchants and manufacturers had attained over government (perhaps worse in the Britain of Smith’s day than in the America of Rand’s) that he concluded, “Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters. When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.”²⁴

He also advocated higher taxes on luxury carriages so that “the indolence and vanity of the rich is made to contribute . . . to the relief of the poor.”²⁵ And he proposed “a tax upon house-rents” because it “would in general fall heaviest upon the rich.” He explained: “It is not very unreasonable that the rich should be made to contribute to the publick expence, not only in proportion to their revenue, but something more than in that proportion.”²⁶ It’s legitimate for government to do such things, Smith argued, because “All constitutions of government . . . 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.”²⁷ Thus, if a government measure would “promote the happiness” of most citizens living under it, the government should proceed (an idea that the British Utilitarians picked up in the 19th century).

Therefore, it should not be surprising that Smith scholars increasingly have argued (in books published by major academic presses) that Smith may have supported all manner of government redistributive programs in favor of the poor. “It is impossible to say exactly what measures Smith would advocate taking to combat poverty today,” writes Syracuse University Professor Dennis Rasmussen, “but the pragmatic character of his approach suggests that he would be open to almost any possibility, including redistribution, social welfare measures, ‘living wage’ laws, and so on.”²⁸ He adds,

Of course, he would want to aid the poor in the most effective and efficient way possible and would likely want to minimize the degree to which free trade is hampered, but to suggest that he would rigidly adhere to a doctrine of free trade even at the cost of condemning the poor to a life of dependence and insecurity is to radically misunderstand the nature of his thought.²⁹

Scholars may debate whether this is a fair interpretation of Smith, but the fact remains that what Smith wrote left such matters open to debate. Not so in the case of Rand. Granted, Rand had the benefit of living in a world entirely transformed by the life-serving work of businessmen, and she knew that early America had been largely free of the cronyism endemic to Britain in Smith’s day.

Rand agreed that it is reprehensible when merchants and manufacturers wield government power to stifle competitors and employees, but so is it when employees or anyone else uses such power against merchants and manufacturers (something Smith had virtually no experience of). Both are violations of individual rights. An article at Libertarianism.org, titled “Adam Smith vs. Ayn Rand on Justifying the Free Society,” points out that Smith did not base his views of government on the principle of rights. It states:

Rand pursues her political economy on the basis of an a priori construction of rights that she claims follows from reason . . . ; Smith, by contrast, pursues his political economy principally on the basis of induction over empirical observation guided by its coincidence with a moral vision he finds attractive.³⁰

We’ll address the “moral vision” Smith found “attractive,” and the means by which he argued for it, later. For now, let’s focus on this author’s characterization of Rand’s view of rights. It’s true that Rand based her view for the role of government on the principle of individual rights, but was this an “a priori construction”? A priori means “derived by reasoning from self-evident propositions,” meaning that Rand supposedly did not, as Smith did, reason “on the basis of induction over empirical observation”—that is, did not reason based on evidence.

Now, it’s certainly true that rights are not physical things that we can observe. Rights are principles, akin, in that respect, to the principles of physics or biology. Think for a minute of Newton’s first law of motion: A body remains at rest, or in motion at a constant speed in a straight line, unless acted upon by a force. This is a principle—an abstract generalization about how the world works—derived by observation and logic. No one can look out at the world and see Newton’s first law of motion; nonetheless, everyone can see the evidence that gives rise to it.

Rand held that we can likewise use observation and logic to arrive at the principle of individual rights. She pointed out that, unlike other animals, man lives by using his mind. Man must act on his reasoning to create the values on which human life depends. That could be as simple as tracking prey, using dried leaves to start a fire, building a hut, or discerning edible berries from poisonous ones. Or it could be as complex as inventing antibiotics, building a gasoline engine, organizing a multinational supply chain, or providing psychological therapy. To create such values and thus live as human beings, people must be free to think and act on their rational judgment—their basic means of living. The evidence of Rand’s experience—first in Soviet Russia, then in the United States—made this vividly clear. The facts of man’s nature require that he act on his judgment to survive and thrive, and the principle of individual rights identifies this causal relation, just as principles of physics identify causal relations in that field. This is why Rand wrote in Atlas Shrugged:

The source of man’s rights is not divine law or congressional law, but the law of identity. A is A—and Man is Man. Rights are conditions of existence required by man’s nature for his proper survival. If man is to live on earth, it is right for him to use his mind, it is right to act on his own free judgment, it is right to work for his values and to keep the product of his work. If life on earth is his purpose, he has a right to live as a rational being: nature forbids him the irrational. Any group, any gang, any nation that attempts to negate man’s rights, is wrong, which means: is evil, which means: is anti-life.³¹

This is just an indication of how Rand derived and demonstrated the principle of individual rights. Those interested in learning more should start by reading her essays “The Objectivist Ethics” and “Man’s Rights.” But even this little is enough to evaluate the claim that Rand’s politico-economic views were based on an “a priori construction of rights”: It’s simply false.

Armed with the principle of individual rights, Rand distinguished between cronies who use political power to wrest money and goods from their rightful owners and true capitalists who—with the help of voluntary, paid employees—create goods and services that enable people to live and thrive. The former are the villains of Atlas Shrugged; the latter are its heroes. She showed that the root problem was that some people were allowed to use government power to violate the rights of others.

A truly capitalist society—based on the principle that all people have equal rights and none may violate the rights of others—bars cronies, lobbyists, and bureaucrats from using government force to exploit people. Just as important, it bars majorities from violating the rights of minorities, whether companies or rich individuals. This, Thomas Jefferson said, is “the sum of good government”—“a wise & frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, & shall not take from the mouth of labor the bread it has earned.”³²

But the more power bureaucrats have to intervene in people’s lives and violate their rights, the more people will lobby government to protect themselves or attain unearned wealth. Government power—not commercial society, entrepreneurs, or the profit motive—drives exploitation.

So, whereas Smith largely condemned businessmen as cronies and con artists, Rand made an important distinction. True capitalists win when their customers win. And the society that leaves people free to create life-serving values and cultivate win-win relationships—a capitalist society—requires that every individual’s right to life, liberty, and the pursuit of happiness be protected. This and this alone is a stable basis for human progress. And not only is it practical, but it’s profoundly moral. Rand wrote:

The most profoundly revolutionary achievement of the United States of America was the subordination of society to moral law. The principle of man’s individual rights represented the extension of morality into the social system—as a limitation on the power of the state, as man’s protection against the brute force of the collective, as the subordination of might to right. The United States was the first moral society in history. All previous systems had regarded man as a sacrificial means to the ends of others, and society as an end in itself. The United States regarded man as an end in himself, and society as a means to the peaceful, orderly, voluntary co-existence of individuals. All previous systems had held that man’s life belongs to society, that society can dispose of him in any way it pleases, and that any freedom he enjoys is his only by favor, by the permission of society, which may be revoked at any time. The United States held that man’s life is his by right (which means: by moral principle and by his nature), that a right is the property of an individual, that society as such has no rights, and that the only moral purpose of a government is the protection of individual rights.³³

So, whereas Rand’s view of the role of government derives from her notion of the principle of individual rights, Smith promoted a “system of natural liberty” on economic grounds—sometimes proposing government measures that Rand and other pro-freedom thinkers saw as violations of rights.

Economics

In The Wealth of Nations, Adam Smith essentially invented the science of economics. Prior to its publication, people, of course, had promoted certain economic views: Mercantilists held that a nation’s wealth equaled its stores of precious metals, and physiocrats gave the same pride of place to a nation’s agriculture or agricultural lands. But The Wealth of Nations was the first work to provide clear causal—and largely accurate—explanations of how and why commerce works. Over hundreds of pages, it laid out a consistent, coherent understanding of economics, from the mechanics of individual transactions on up to those of international trade, showing why both mercantilists and physiocrats were wrong.

As such, Smith’s ideas became the foundation for virtually all who followed in the field, and it’s rare today, even for those opposed to Smith’s free-market prescriptions, not to accept most of his starting points and many of his conclusions. These ideas are now widely known and accepted as true (even if not widely and consistently practiced), so I’ll outline them only briefly.³⁴

Smith showed that a nation’s wealth is equivalent neither to its stores of precious metals nor to its agricultural lands but to all the goods and services produced there, what we now call “gross domestic product.” Productive capacity increases with increased division of labor; the more people divide work and enable specialization, the more efficient and innovative producers become. All else being equal, a workman who paves driveways forty hours per week will become more proficient at it than one who does it twenty hours each week and works the other twenty roofing houses. As the saying goes, a jack-of-all-trades is a master of none.

However, the extent to which labor can be divided—the extent to which it’s feasible for people to specialize and the narrowness of that specialization—depends on the market for that good or service. For example, it’s not feasible that an 18th-century resident of a Tennessee village could support himself solely as a guitar luthier because there was not enough demand then and there for guitars. Nor is it likely he could support himself as a musical instrument manufacturer more generally, because even the combined demand for instruments probably still would not be enough to keep him gainfully employed. Today, by contrast, Nashville alone has dozens (perhaps hundreds) of luthiers and guitar manufacturers, the largest of which divide just the building process (never mind hiring, marketing, and all the rest) into a dozen or more highly specialized jobs. This division of labor massively increases productivity; whereas a luthier working alone might build only one guitar a month, the largest manufacturers build five hundred or more per day (ten thousand-plus per month). The greater profits of the latter enable greater investments to boost productive capacity even further. This “capital accumulation,” said Smith, determines the future of a nation’s wealth.

He also pointed out that the free-market system is self-regulating. If demand for a product or service increases, so will the profitability of supplying it, encouraging more people to enter that field. But if so many enter that supply exceeds demand, profitability will drop, disincentivizing further investment and perhaps encouraging some to leave for other, more profitable fields. All of this happens via the disparate decisions and actions of market participants (a fact now commonly referred to as “spontaneous order”).³⁵ Each pursues what he regards as best promoting his self-interest, but the net result is an economic engine that benefits everyone.

This last point is worth emphasizing. Free trade is win-win (Rand agreed; see the discussion of “the trader principle” below). People pursue their own interests and, as if by an “invisible hand,” their self-regarding actions are transmuted into productive activities that, directly or indirectly, benefit others.

But, Smith added, by interfering with the inner workings of the marketplace, governments can cause this economic engine to sputter and even stall (Rand dramatized this in Atlas Shrugged). Suppose, for instance, that governments prohibit anyone to become an athletic trainer without first acquiring a four-year degree, taking an exam, and paying hundreds of dollars in fees to obtain a license (as is the case in forty-nine U.S. states). If demand for athletic trainers spikes (perhaps, after months or more of lockdowns keeping people cooped up in their homes), those who are capable but unlicensed are barred from stepping in to help meet that demand, as they otherwise would. If they decide to jump through the hoops that governments set, the market will have changed substantially by the time they’ve finished the four-year education that supposedly is necessary to be competent in the field, and perhaps not in their favor. In the meantime, while demand remains higher than supply, licensed trainers can raise their prices. Unable or unwilling to pay premium prices, many who want athletic training simply will go without, and those who are able and willing to pay will pay more.

Now, multiply these forced inefficiencies across hundreds of occupations for millions of people. A study conducted by the Institute for Justice reports that in Hawaii, 64 of 102 “lower income occupations” require licensing. These occupations include, for instance, cabinetmaker, cement finishing contractor, drywall installer, floor sander, HVAC contractor, paving contractor, tree trimmer, and door repair contractor. On average, a person pursuing one of these licenses loses 972 days of production during the process of meeting the requirements. In Nevada and California, seventy-five of these lower income jobs require licensing.³⁶

Surveying similar regulations limiting the number of people who could enter specific fields and/or imposing qualification requirements, Smith argued that they were counterproductive. Although many such labor restrictions are passed for the supposed good of customers, businesses already are incentivized to satisfy customers or go belly up. All such restrictions really accomplish, economically speaking, is to decrease the availability of certain goods and services, increasing costs, and securing market incumbents against the sort of competition that would lead to increased quality and customer satisfaction.

So, these and other trade restrictions, such as tariffs aimed at protecting domestic trade, ought to be eliminated, Smith argued—all points with which Rand would have heartily agreed. Given the affinity between this policy agenda and that of modern-day proponents of free markets, many take Smith to be an advocate of laissez-faire (unrestricted) capitalism. In his excellent primer on Smith’s life and ideas, though, Adam Smith Institute founder Eamonn Butler points out the flaw in this thinking. Among other things, Smith argues that there is (as we’ve seen) “a role for the government in providing public works and promoting education,” issues on which Smith’s “analysis and prescriptions seem inconsistent with his general analysis,” writes Butler. He concludes that Smith “is critical of government and officialdom, but is no champion of laissez-faire.”³⁷

“Too many of today’s self-proclaimed ‘Smithians’ choose to remember the Smith who argued against many forms of government intervention in the economy,” writes Rasmussen, and “too many forget the Smith who railed against poverty and the selfish greed of the rich and powerful.”³⁸ Smith did repeatedly detest “the mean rapacity, the monopolizing spirit of merchants and manufacturers.”³⁹ And key to understanding both his seemingly inconsistent views on government and his evaluation of the great bulk of businessmen is understanding his view of economic value, which stemmed from a misconception that Rand identified and repudiated.

Smith distinguished between “value in use” and “value in exchange.” He observed that, although diamonds have relatively low use value (or did at least before they were incorporated into drilling, dentistry, and hi-fi audio equipment), their exchange value is exceedingly high. On the other hand, water has vital, life-sustaining use value but almost no exchange value: “Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.”⁴⁰ Thus, he said, a thing’s use value does not determine its price or exchange value.

So, what does? To answer this, Smith looked to the components that go into production: namely, labor, land, and capital. Of these, he concluded that labor is most fundamental, because the original purchase price of all goods is labor. “It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value” to those who want to use or exchange it “is precisely equal to the quantity of labour which it can enable them to purchase or command.” Therefore, “the value of any commodity,” said Smith, “is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities.”⁴¹

But if labor is the ultimate source of all value, why is it that the laborers are so poor, and the merchants and factory owners are so rich? Smith opened his chapter “Of the Wages of Labour” by stating, “In that original state of things, which precedes both the appropriation of land and the accumulation of stock, the whole produce of labour belongs to the labourer. He has neither landlord nor master to share with him.” However, as soon as landlords acquired private property, they demanded a share of the produce raised on their land, which made “the first deduction from the produce of the labour.” Many of these laborers, Smith tells us, had not accumulated enough tools to get them started on working the land, nor did they have enough food to sustain them until their crops could be harvested. These things were “generally advanced to them from the stock of a master, the farmer who employs [them],” said Smith. In recompense, the master/farmer would take “a second deduction from the produce of the labour which is employed upon land”—these being the original profits of the capitalist.⁴²

So, in Smith’s view, neither the landlord nor the capitalist serves any real productive function. The ultimate source of all value is labor. Yet, in commercial society, Smith wrote in an early draft of the Wealth of Nations, “Those who labour most get least.” And in his lectures on jurisprudence, he said that “the labour and time of the poor is in civilized countries sacrificed to . . . maintaining the rich in ease and luxury.” “The poor labourer,” he wrote, “bears, as it were, upon his shoulders the whole fabric of society,” yet he “seems himself to be pressed down below the ground by the weight, and to be buried out of sight in the lowest foundations of the building.” Indeed, he says, “it may very justly be said that the people who cloath the whole world are in rags themselves.”⁴³ No wonder, then, that Smith viewed businessmen, by and large, as “an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”⁴⁴

“It was a tremendous advance on the part of Adam Smith to throw aside all the limitations which mark wealth-producing activity and to define it as labour,” reflected Karl Marx. “Along with the universal character of wealth-creating activity we now have the universal character of the object defined as wealth,” which, he said, was “objectified labour”—meaning labor turned into objects that can be bought and sold.⁴⁵

This view—that labor is the ultimate source of all value—is called the “labor theory of value”; and Marx, who picked it up from Smith and other classical economists, based his entire economic theory on it. If all value derives from labor, then the capitalists, who (supposedly) do not labor, profit off the backs of laborers by alienating them from a portion of the value that they create.

However, as generations of economists have since shown, the labor theory of value is entirely wrong. Labor is not the fundamental cause of value creation. If it were, then digging a hole would create value, regardless of whether it was useful—and even if it was a danger—because it required labor. And it would be more valuable if it were dug with a spoon rather than a shovel, as it would require more labor. The error in Smith’s (and Marx’s) labor theory of value involves what Rand called the notion of “intrinsic value.” It treats labor as having value in and of itself—regardless of how it is directed or whether it even serves a human purpose. She countered the intrinsic theory of value with what she called the objective theory of value:

The objective theory holds that the good is neither an attribute of “things in themselves” nor of man’s emotional states, but an evaluation of the facts of reality by man’s consciousness according to a rational standard of value. (Rational, in this context, means derived from the facts of reality and validated by a process of reason.) The objective theory holds that the good is an aspect of reality in relation to man—and that it must be discovered, not invented, by man. Fundamental to an objective theory of values is the question: Of value to whom and for what? An objective theory does not permit context-dropping or “concept-stealing”; it does not permit the separation of “value” from “purpose,” of the good from beneficiaries, and of man’s actions from reason.⁴⁶

In Rand’s view, Smith’s idea of “use value” leaves out of the equation answers to the questions “to whom, and for what?” Smith posits that labor gives rise to value by virtue of being labor. On Rand’s view, a thing is valuable only insofar as it serves some life-serving productive purpose, and its value can be gauged only by individuals in relation to their own specific goals and purposes.

Take a simple example: My neighbor cut down a tree because it was blocking the sun and he feared it might come down in a storm and damage his home. For a week or two after he had it cut down, I noticed that the logs were just sitting in his yard. When I asked him about it, he said he was waiting for the tree company to come back and haul them off. He didn’t have any use for the wood, and it wasn’t worth his effort to dispose of it himself. I have a fireplace at home as well as a fire pit in the backyard, so I asked if I could have the wood, and he said, “Go right ahead.” Given my values and purposes, the wood was valuable enough to warrant the effort of loading it into and out of my vehicle and chopping it up into usable pieces. My neighbor and I were considering the same wood, and using it as firewood would require similar amounts of labor (more for me, given that I had to transport it), but we came to different evaluations based on our different answers to the questions, “to whom, and for what?”

Suppose that instead of having been a common oak tree, it had been a rare Brazilian rosewood, which is prized for use in making furniture and musical instruments. In that case, local craftsmen and luthiers, given their purpose of crafting fine products from it, might have swooped in and bid up the price far beyond that of the mere effort of hauling it off. Brazilian rosewood would be far more valuable to them as raw material for their productions than it would be to me as firewood. This is true, despite the fact that collecting or crafting things from either wood requires essentially the same amount of labor.

The labor theory of value also ignores the crucial roles of intelligence and ability. In this example, note that discerning the qualities of different woods and determining how best to use them is a skill of its own. The renowned guitar manufacturer Paul Reed Smith knows as much about the tonal characteristics of different woods as perhaps anyone on Earth. His skill in selecting the right woods, aging them in the right ways, fashioning them together in precise forms and combinations, and organizing all of this into a repeatable manufacturing process has resulted in guitars that sound and play magnificently. And countless guitar players, given their goals of creating beautiful music, shell out thousands of dollars for PRS guitars. They do this not because they value the amount of labor that goes into the guitars but because they value the result—gorgeous, beautiful-sounding instruments. And if you took away the planning and expertise of Paul Reed Smith and left only the bare labor of the production process, the result would not be instruments that guitar players lust after, as many do PRS guitars.

Smith wrote that the profits of such capitalists are not merely “a different name for the wages of a particular sort of labour, the labour of inspection and direction” of their companies and employees. In fact, he said, their profits “bear no proportion to the quantity, the hardship, or the ingenuity of this supposed labour of inspection and direction.”⁴⁷

Rand said exactly the opposite. Indeed, in Atlas Shrugged, she dramatized what happens when the men of “inspection and direction” go on strike. One character explains the comparative value of these “men of the mind,” saying,

When you work in a modern factory, you are paid, not only for your labor, but for all the productive genius which has made that factory possible: for the work of the industrialist who built it, for the work of the investor who saved the money to risk on the untried and the new, for the work of the engineer who designed the machines of which you are pushing the levers, for the work of the inventor who created the product which you spend your time on making, for the work of the scientist who discovered the laws that went into the making of that product, for the work of the philosopher who taught men how to think.⁴⁸

In her essay “America’s Persecuted Minority: Big Business,” Rand wrote, “The American businessmen, as a class, have demonstrated the greatest productive genius and the most spectacular achievements ever recorded in the economic history of mankind.”⁴⁹ So, Rand’s objective theory of value led her to view the relative contributions of laborers and businessmen as the opposite of what Smith (and Marx) had said.

In sum, at the root of Smith’s economic views was what Rand called an “intrinsic theory of value,” the notion that labor has intrinsic value and that all value ultimately derives from the labor required to create a product or service. This is essentially the same “labor theory of value” that Marx would later champion in defense of socialism and Communism. Rand, on the other hand, upheld an “objective theory of value,” stressing that value judgments are context-dependent, requiring answers to the questions, “of value to whom, and for what?”—and that the mind, not muscle, is the fundamental driver of value creation. As we’ll see in more detail shortly, Rand held that man’s life is the standard of value, leading her to trumpet the life-serving power of the rational direction of businessmen—while also applauding all honest laborers in proportion to their more modest contributions to the process of value creation.

Industriousness

What motives drive people in a commercial or capitalist society? Recall Rousseau’s second and third criticisms of commercial society, with which Smith sympathized: (2) that the socializing effect of commerce makes people slavishly dependent on the opinions of others, and (3) that this dependence—along with the continuous churn of new luxuries—locks people into a perpetual rat race, forever trying to “keep up with the Joneses” and never achieving true happiness.

Smith held that the “desire of bettering our condition . . . comes with us from the womb, and never leaves us till we go into the grave.”⁵⁰ We are initially motivated to improve our condition, he says, by the natural desire to get things required for our survival and convenience. Yet, we quickly supply these wants but continue our labors in pursuit of something else.

Though it is in order to supply the necessities and conveniencies of the body, that the advantages of external fortune are originally recommended to us, yet we cannot live long in the world without perceiving that the respect of our equals, our credit and rank in the society we live in, depend very much upon the degree in which we possess, or are supposed to possess, those advantages. The desire of becoming the proper objects of this respect, of deserving and obtaining this credit and rank among our equals, is, perhaps, the strongest of all our desires, and our anxiety to obtain the advantages of fortune is accordingly much more excited and irritated by this desire, than by that of supplying all the necessities and conveniencies of the body, which are always very easily supplied.⁵¹

So, the force that supposedly impels us to work and accumulate more and more is our desire for other people’s respect. Smith continued:

The rich man glories in his riches, because he feels that they naturally draw upon him the attention of the world, and that mankind are disposed to go along with him in all those agreeable emotions with which the advantages of his situation so readily inspire him. At the thought of this, his heart seems to swell and dilate itself within him, and he is fonder of his wealth, upon this account, than for all the other advantages it procures him. The poor man, on the contrary, is ashamed of his poverty. He feels that it either places him out of the sight of mankind, or, that if they take any notice of him, they have, however, scarce any fellow-feeling with the misery and distress which he suffers. He is mortified upon both accounts, for though to be overlooked, and to be disapproved of, are things entirely different, yet as obscurity covers us from the daylight of honour and approbation, to feel that we are taken no notice of, necessarily damps the most agreeable hope, and disappoints the most ardent desire, of human nature. The poor man goes out and comes in unheeded, and when in the midst of a crowd is in the same obscurity as if shut up in his own hovel.⁵²

According to Smith, “the most ardent desire, of human nature” is to bask in “the daylight of honour and approbation, to feel that we are taken . . . notice of.” This, he held, is the ultimate explanation of human industry.

Rand’s view of industriousness or productive work could not be more opposite. She held that productive work is a fundamental requirement of human life—not because of how others see you, but because of your nature as the kind of being who lives by thinking and producing. In her words:

Productiveness is your acceptance of morality, your recognition of the fact that you choose to live—that productive work is the process by which man’s consciousness controls his existence, a constant process of acquiring knowledge and shaping matter to fit one’s purpose, of translating an idea into physical form, of remaking the earth in the image of one’s values.⁵³

And further: “Productive work is the central purpose of a rational man’s life, the central value that integrates and determines the hierarchy of all his other values. Reason is the source, the precondition of his productive work—pride is the result.”⁵⁴

Rand’s and Smith’s opposing views on productiveness derive from a deeper disagreement regarding the nature of morality.

Morality

Smith’s view of industriousness stemmed from his views on ethics more broadly, which have important precursors in the views of his University of Glasgow professor Francis Hutcheson and his longtime friend and mentor, David Hume.

In the realm of ethics, both Hutcheson and Hume opposed the view that morality is the province of reason, which is commonly called “moral rationalism.” Throughout history, many thinkers have argued that man’s moral conduct stems from his reasoning mind. Socrates questioned Athenians in his quest to rationally define moral concepts such as justice and virtue. Plato and, more profitably, Aristotle carried on that quest, the latter defining a moral philosophy upon rigorous examination of the qualities that lead most assuredly to a eudaimon—that is, flourishing—life.

Subsequently, Christian morality took center stage in much of the Western world, but even many Christians and others who have ascribed divine origins to morality nonetheless have argued that moral principles can be defined on the basis of reason. These include John Locke, who held that morality might be “amongst the sciences capable of demonstration,” that “measures of right and wrong” might be derived “from self-evident propositions, by necessary consequences, as incontestible as those in mathematics.”⁵⁵ They also include Smith’s successor as chair of moral philosophy at the University of Glasgow, Thomas Reid, who wrote:

We learn to observe the connexions of things, and the consequences of our actions; and, taking an extended view of our existence, present, and future, we correct our first notions of good and ill, and form the conception of what is good or ill upon the whole; which must be estimated, not from the present feeling, or from the present animal desire or aversion, but from a due consideration of its consequences, certain or probable, during the whole of our existence.⁵⁶

Hutcheson disagreed, arguing that human reason is too weak for God to have entrusted it with our moral ideas and conduct. Instead, he argued, God endowed us with a moral sense—similar to our senses of sight, hearing, and the rest—but by which we directly perceive the rightness or wrongness of actions.

Hume, an atheist, dispensed with the supernatural element of this account but likewise held that we don’t arrive at our ethical views by a process of reasoning. Reason, according to Hume, can’t motivate us to act one way or another, and actions do not “derive their merit from a conformity to reason, nor their blame from a contrariety to it,” so reason cannot be the source of our moral knowledge. Rather, when it comes to morality, Hume said, we rely first and foremost on moral sentiments, emotional responses by which we directly feel whether something is right or wrong, good or bad. “Morals excite passions, and produce or prevent actions,” he wrote. “Reason of itself is utterly impotent in this particular. The rules of morality, therefore, are not conclusions of reason.”⁵⁷ He continued:

Take any action allow’d to be vicious: Wilful murder, for instance. Examine it in all lights, and see if you can find that matter of fact, or real existence, which you call vice. In which-ever way you take it, you find only certain passions, motives, volitions, and thoughts. There is no other matter of fact in the case. The vice entirely escapes you, as long as you consider the object. You never can find it, till you turn your reflexion into your own breast, and find a sentiment of disapprobation, which arises in you, towards this action. Here is a matter of fact; but ’tis the object of feeling, not of reason. It lies in yourself, not in the object. So that when you pronounce any action or character to be vicious, you mean nothing, but that from the constitution of your nature you have a feeling or sentiment of blame from the contemplation of it.⁵⁸

When it comes to morality, reason is circumscribed, in Hume’s famous phrase, to serving as “the slave of the passions.” We can use it to ascertain relevant facts and explain our moral sentiments to others. But reason always follows along behind our emotions, providing tidy accounts of why our moral intuitions supposedly are justified. In his book The Righteous Mind, social psychologist Jonathan Haidt provides a helpful analogy for Hume’s view (which Haidt attempts to support with appeals to modern science), likening reason to a rider atop an elephant, the latter representing the “automatic processes, including emotion and intuition.”⁵⁹ Haidt writes:

Automatic processes run the human mind, just as they have been running animal minds for 500 million years. . . . When human beings evolved the capacity for language and reasoning at some point in the last million years, the brain did not rewire itself to hand over the reins to a new and inexperienced charioteer. Rather, the rider (language-based reasoning) evolved because it did something useful for the elephant. . . .

The rider acts as the spokesman for the elephant, even though it doesn’t necessarily know what the elephant is really thinking. The rider is skilled at fabricating post hoc explanations for whatever the elephant has just done, and it is good at finding reasons to justify whatever the elephant wants to do next. Once human beings developed language and began to use it to gossip about each other, it became extremely valuable for elephants to carry around on their backs a full-time public relations firm.⁶⁰

It’s important to understand these basics of Hume’s ethical views because Smith’s Theory of Moral Sentiments, as the book’s title suggests, is essentially an elaboration of those views with but a few points of departure. As Rasmussen writes, Smith “regarded Hume’s theory as the most accurate yet developed, but still a bit reductive or incomplete. He thus sought to correct and extend Hume’s views in order to provide a more comprehensive picture, one that would do full justice to the complexity of our moral lives.”⁶¹

In keeping with Hume’s approach, Smith was not so much engaged in moral philosophy as in what is now called moral and social psychology. His goal was not primarily to validate specific moral principles but to explain the motives that lead people to their particular beliefs about morality.

Smith was also mounting a counterattack against contentious views put forth by Bernard Mandeville in his book The Fable of the Bees: Private Vices, Publick Benefits. Mandeville argued that many of our supposedly moral qualities stem from self-regarding motives, inextricable defects of man’s fall from Eden. Yet, these vices, chiefly pride, fuel our ambitions, lead to industry, and thus are transmuted into innumerable “publick benefits.” To the extent that we do anything for others, we’re primarily seeking approval and our own longer-term benefit. Importantly, Mandeville argued that even more extreme vices are beneficial. As Phyllis Vandenberg and Abigail DeHart summarize, “without thieves there would be no locksmiths, without quarrels over property, no lawyers, and so on.”⁶² So, Mandeville said, those who value affluent societies should not remonstrate against vice but accept it as a necessary cost of having such societies.⁶³ For, “if Mankind could be cured of the Failings they are Naturally guilty of, they would cease to be capable of being rais’d into such vast, potent and polite Societies.”⁶⁴

Like most Scottish Enlightenment philosophers, Smith acknowledged a beneficial role for man’s natural self-regard, calling it prudence and writing that its principal object “is to teach him how to keep out of harm’s way.”⁶⁵ But Smith thought Mandeville’s account was oversimplified. In response, he stressed that man is not merely self-regarding; he’s also a social being. In the first sentence of the Moral Sentiments, Smith wrote, “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”⁶⁶

According to Smith, man’s most powerful motive relating to morality is to be liked and adored by others. In his words, “the chief part of human happiness arises from the consciousness of being beloved.”⁶⁷ And “Nothing pleases us more than to observe in other men a fellow-feeling with all the emotions of our own breast; nor are we ever so much shocked as by the appearance of the contrary.”⁶⁸ Thus, in Smith’s example, we are horrified if we tell a joke we think is funny and no one laughs. When people do laugh at a man’s joke, “the mirth of the company is highly agreeable to him, and he regards this correspondence of their sentiments with his own as the greatest applause.”⁶⁹

So, according to Smith, we are ever and always monitoring how others respond to us and adjusting our behavior accordingly, trying as best we can to remain likable in their eyes. Following Hume, Smith held that this process involves reason but is directed by emotions and, ultimately, by our faculty for relating to the emotions of others: “sympathy,” in Smith’s words—though what he describes is more akin to what we now call “empathy.”⁷⁰ Smith details how people use it to sense—and tune themselves to—the feelings and expectations of others, so that they can best achieve that harmony of “fellow-feeling” that supposedly is the “chief part of human happiness.”

For example, if a man’s mother dies, he may be deadened with grief, wanting to do nothing but cry. But, in the presence of company, a proper man will moderate his behavior in line with what he senses his company can empathize with. He will be stoic among those least familiar with him and his situation and thus least likely to empathize with him. Among closer friends and relatives—those most familiar with his context and likeliest to empathize—he will be less guarded.

Smith argued that empathy (or sympathy) with the emotions of others serves as the basis of moral evaluation:

When the original passions of the person principally concerned are in perfect concord with the sympathetic emotions of the spectator, they necessarily appear to this last just and proper, and suitable to their objects; and, on the contrary, when, upon bringing the case home to himself, he finds that they do not coincide with what he feels, they necessarily appear to him unjust and improper, and unsuitable to the causes which excite them. To approve of the passions of another, therefore, as suitable to their objects, is the same thing as to observe that we entirely sympathize with them; and not to approve of them as such, is the same thing as to observe that we do not entirely sympathize with them. . . . According as there is more or less disproportion between his sentiments and mine, I must incur a greater or less degree of his disapprobation: and upon all occasions his own sentiments are the standards and measures by which he judges of mine.⁷¹

In short, people are good to the extent that their sentiments or emotional responses to their circumstances align with our own when we put ourselves in their shoes, and bad to the extent that these emotional responses are misaligned. And given that no one feels as strongly about a situation as the person principally involved, the bulk of our moral work lies in “self-command”; that is, in throttling down our emotional responses to our own personal circumstances to better align with others. As Smith put it,

To see the emotions of their hearts, in every respect, beat time to his own, in the violent and disagreeable passions, constitutes his sole consolation. But he can only hope to obtain this by lowering his passion to that pitch, in which the spectators are capable of going along with him. He must flatten, if I may be allowed to say so, the sharpness of its natural tone, in order to reduce it to harmony and concord with the emotions of those who are about him.⁷²

So, Smith went on to say, “to feel much for others and little for ourselves, . . . to restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consists their whole grace and propriety.”⁷³ And whereas Rousseau thought commercial society made men slavishly dependent on the opinions of others, Smith held that this dependence is natural, beneficial, and exists in all stages of civilization.

With time and experience, we come to see patterns in our emotional responses and those of other people, said Smith. We learn “from experience, that all actions of a certain kind, or circumstanced in a certain manner, are approved or disapproved of.” A man who witnesses a murder immediately feels revulsion and observes that others usually do, too. Thus, based on his emotions and those he observes in others, the man “might afterwards form” a “general rule” upon “the detestation which he felt necessarily arise in his own breast.”⁷⁴ So moral principles are simply generalizations from emotions. In Haidt’s words, “intuitions come first, strategic reasoning second.”⁷⁵

Of course, none of this puts any sort of limits on what actions may qualify as moral. On this basis alone, morality is entirely relativistic and subjective, dependent solely on the general tenor of people’s emotional responses to this or that action or situation. If such were the case, then turning over Jews to SS officers in Nazi Germany would be moral, given its likely resonance with the emotional responses of the majority of one’s countrymen.

But Smith didn’t quite stop there. His answer to the problem of relativism was to say that our feelings themselves need to be tuned to harmonize with those that an “impartial spectator” would feel in response to the situation at hand.

To be the proper and approved object either of gratitude or resentment, can mean nothing but to be the object of that gratitude, and of that resentment, which naturally seems proper, and is approved of. But these, as well as all the other passions of human nature, seem proper and are approved of, when the heart of every impartial spectator entirely sympathizes with them, when every indifferent by-stander entirely enters into, and goes along with them.⁷⁶

Although Smith often referred to impartial spectators in the plural (which could be interpreted as referring to spectators actually existing), he didn’t name names or advise us to conduct polls on what the majority of these supposedly impartial spectators feel. Rather, “the supposed impartial spectator, . . . the great inmate of the breast” is simply a synonym for a refined form of “conscience,” the conscience of he who holds in view the whole picture, not just part of it (hence “impartial”). Rasmussen explains, “Smith agrees with Hume that right and wrong are established by the sentiments that we feel when we adopt the proper perspective, one that corrects for personal biases and misinformation.” According to Rasmussen, Smith held “that proper moral judgment requires adopting the standpoint of an impartial spectator, one who knows all of the relevant circumstances and who” can judge it fairly.⁷⁷ Or, as Jung Min Shin writes, Smith’s “impartial spectator” is “an imagined third party who allows an individual to objectively judge the ethical status of his or her actions.”⁷⁸

How do we reach this ideal of impartiality—of full-context and just evaluation—an ideal that so-called moral rationalists historically have contended depends on a great deal of reasoning? Smith says, “we must become the impartial spectators of our own character and conduct” by viewing them “with the eyes of other people, or as other people are likely to view them.”⁷⁹ To achieve this, we must play down our interests and amplify those of other people. After all, Smith says, “the natural preference which every man has for his own happiness above that of other people, is what no impartial spectator can go along with.”⁸⁰

Smith’s attempt to circumvent relativism and tie proper moral sentiments to impartiality thus boils down to: Pay attention to emotions; correct for your own inherent biases by giving greater weight to the emotions of other people; and use these emotions (and any post-hoc reasoning resulting from them) to cultivate an “impartial spectator” in one’s conscience, a sort of second self whose emotional faculty is properly tuned to provide just moral sentiments.

Rand likely would have regarded Smith’s Theory of Moral Sentiments as an accurate _de_scription of how many people do in fact live their lives—but definitely not as a valid _pre_scription for how they ought to live their lives. As with Rand’s view of industriousness, and for the same reasons, her view of morality is diametrically opposed to Smith’s. She asked, “Is ethics the province of whims: of personal emotions, social edicts and mystic revelations—or is it the province of reason?,” and she presented a comprehensive case for the latter.⁸¹ In fact, Rand offered what is perhaps history’s most thorough case for so-called moral rationalism (a moniker she no doubt would have rejected).⁸² Broadly, she held that morality derives from the facts of human nature, and that people must use reason to grasp those facts, identify their corollaries, and act accordingly. Let’s unpack this and see how it compares with Smith’s view.

Rand held that morality stems from the factual requirements of human life. We’re faced with a basic alternative: life or death. If we want to live and thrive, we need certain values—physical values such as food, water, shelter, and so on—and spiritual values (values of the mind) such as reason, purpose, knowledge (which enable us to create physical values), self-esteem, friendship, and romantic love. “The good” are those things that help us survive and thrive. “The bad” are those that stifle our ability to do so. As Rand put it in Atlas Shrugged, “All that which is proper to the life of a rational being is the good; all that which destroys it is the evil.”⁸³

Ethics (or morality) is a code of values to guide our choices and actions. The reason we need morality is to guide our choices and actions so that we can attain those values on which our lives and flourishing depend. We are not born with knowledge, and we don’t acquire it automatically. To acquire it, we must observe reality and think. We can’t distinguish food from poison without observation and thought. We can’t build the plainest of shelters, or even seek out a cave, without observation and thought. We can’t discern a friendly coworker from a sniping opportunist without observation and thought. And we certainly can’t invent electric lightbulbs or conduct triple bypass surgery without observation and thought. Unlike other animals, a human being lives by the work of his reasoning mind. Nothing is more important to his ability to survive and thrive than keeping his mind connected to reality via observation and rational thought. Because reason is man’s “survival instrument,” said Rand—because man’s life is the standard of value, and because everything required to sustain it depends on his use of reason—rationality is the highest, most primary, of virtues.

We might feel that skipping work to binge on pizza and Netflix is good for us, but feeling won’t make it so. We might feel that cocaine gives us superpowers, but reality will correct us. Each of us, said Rand, “has the power to suspend, evade, corrupt or subvert his perception of reality, but not the power to escape the existential and psychological disasters that follow.”⁸⁴

Given this emphasis on reason, it’s a common misconception that Rand spurned emotions as unimportant. This is not true. She held that emotions are our means of experiencing our values; without emotions, we couldn’t feel anything in response to achieving our values. Indeed, Rand held that a man’s own happiness—an emotional state achieved by moral action—is the moral purpose of an individual’s life. “By the grace of reality and the nature of life, man—every man—is an end in himself,” she wrote, “he exists for his own sake, and the achievement of his own happiness is his highest moral purpose.”⁸⁵

Emotions, however, don’t tell us anything about the nature of the world, including the nature of what is good or bad for us. Young children may feel terror at the prospect of going to the dentist, but this doesn’t change the fact that going is ultimately good for them. Being dumped by a girlfriend or boyfriend may feel terrible, but if that partner really was a bad fit, then it’s better to end it sooner rather than later. As Rand put it, “Emotions are not tools of cognition.”⁸⁶ Rather, they are “lightning-like estimates of the things around you, calculated according to your values.”⁸⁷ But your values are the product of your thinking, which may or may not correspond to reality. Rand wrote, “man chooses his values by a conscious process of thought—or accepts them by default, by subconscious associations, on faith, on someone’s authority, by some form of social osmosis or blind imitation.”⁸⁸

Smith advocated the latter: attempting to use emotions as tools of cognition to perform acts of social osmosis. Though, putatively, he aimed at impartiality and something akin to objectivity, what he counseled was subjectivity. Rand’s longtime student Leonard Peikoff wrote,

In metaphysics, “subjectivism” is the view that reality (the “object”) is dependent on human consciousness (the “subject”). In epistemology, as a result, subjectivists hold that a man need not concern himself with the facts of reality; instead, to arrive at knowledge or truth, he need merely turn his attention inward, consulting the appropriate contents of consciousness, the ones with the power to make reality conform to their dictates. According to the most widespread form of subjectivism, the elements which possess this power are feelings.

In essence, subjectivism is the doctrine that feelings are the creator of facts, and therefore men’s primary tool of cognition. If men feel it, declares the subjectivist, that makes it so.

The alternative to subjectivism is the advocacy of objectivity—an attitude which rests on the view that reality exists independent of human consciousness; that the role of the subject is not to create the object, but to perceive it; and that knowledge of reality can be acquired only by directing one’s attention outward to the facts.⁸⁹

Again, as social psychology, Smith’s Theory of Moral Sentiments is an unfortunately apt account of how many people live their lives, to their own detriment and that of others, as Rand detailed in her novel The Fountainhead. The impartiality of the impartial spectator—to the extent it means looking at all of the relevant facts and following where they lead—is a moral ideal, something we need not only for moral judgment but for surviving and thriving more broadly. But we can’t achieve this vital value by appealing to emotions, ours or someone else’s. As Rand would see it, what Smith was after with his “impartial spectator” metaphor was an effect without a cause: accurate judgment without judging or reasoning—only feeling.

She held that objectivity—toward which Smith apparently was groping with his concept of impartiality—requires rationality: keeping our minds tied to reality by an ongoing, effortful process of observing the world, identifying facts in conceptual terms, and integrating these into a noncontradictory understanding of reality. This includes investigating the ideas giving rise to our emotions and, if need be, correcting those ideas. Thankfully, we are not like riders on elephants—two separate entities, incapable of communicating—as Haidt says. Some people do act that way, rationalizing their behaviors and emotions and evading the work necessary to understand or correct them. But we can and must understand and correct our errant conclusions and resulting emotions if we want to think objectively and flourish.

And we alone can keep our minds connected to reality. No one else can think for us, Rand observed. People can and fortunately do share ideas and collaborate, but, she wrote,

The mind is an attribute of the individual. There is no such thing as a collective brain. There is no such thing as a collective thought. An agreement reached by a group of men is only a compromise or an average drawn upon many individual thoughts. It is a secondary consequence. The primary act—the process of reason—must be performed by each man alone. We can divide a meal among many men. We cannot digest it in a collective stomach. No man can use his lungs to breathe for another man. No man can use his brain to think for another.⁹⁰

When we attempt to outsource to others the vital task of thinking, we short-circuit our “survival instrument.” We disconnect our minds from reality and instead plug in to the minds of others, thus becoming “secondhanders,” as Rand put it. In The Fountainhead, she wrote that secondhanders “have no concern for facts, ideas, work. They’re concerned only with people. They don’t ask: ‘Is this true?’ They ask: ‘Is this what others think is true?’”⁹¹ And from Rand’s perspective, Smith’s moral sentiments theory is even worse than that. Morality and impartial judgment, he said, depend not on going by the thinking of other people, but by their emotions, while we “flatten” our own. Throughout her fiction, Rand portrayed this approach as futile.

“When you suspend your faculty of independent judgment,” she wrote, “you suspend consciousness. To stop consciousness is to stop life.”⁹² The individual can think only with his own mind and is, therefore, responsible for his own life, for making the most of it that he possibly can. Circling back to an earlier point, every person “exists for his own sake, and the achievement of his own happiness is his highest moral purpose.”⁹³ This requires thinking long-range about what will enable one to flourish, making rational plans, executing them, and pivoting when necessary. In other words, it requires what Rand called “rational self-interest,” or “rational selfishness,” or “rational egoism.”⁹⁴ This is far broader than Smith’s idea of prudence and much closer to the idea advocated by Smith’s successor, Reid, of “our good upon the whole,” which he said requires that “we extend our view both forward and backward” and employ reason to consider the entirety of our lives, choosing that which, given the full context of our knowledge, “makes a man more happy or more perfect.”⁹⁵

In her book The Virtue of Selfishness, Rand wrote, “The meaning ascribed in popular usage to the word ‘selfishness’ is not merely wrong: it represents a devastating intellectual ‘package-deal,’ which is responsible, more than any other single factor, for the arrested moral development of mankind.” This “package deal” combines the concept’s legitimate meaning—“concern with one’s own interests”—with the image of “a murderous brute who tramples over piles of corpses to achieve his own ends, who cares for no living being and pursues nothing but the gratification of the mindless whims of any immediate moment.”⁹⁶

Mandeville, whose work had far greater impact on Enlightenment-era debates about morality than most people now realize, helped to propagate this package deal, lumping long-term self-interest and (its derivative) pride in with actual vices, such as lying, cheating, and stealing. As we’ve seen, Smith attempted to counter him by saying, in effect, that yes, selfishness can be beneficial, but we’re not only selfish; we’re also—and more important—social, and this latter is what makes us moral. By contrast, Rand’s counter to all such thinkers is: Check your definition of selfishness. It means “concern with one’s own interests”—and the question of how to determine what is in one’s interests is a separate but important matter.⁹⁷ The chief error of thinkers such as Mandeville is what they regard as being in a person’s self-interest. Lying, cheating, stealing—none of these lead to a person’s long-term happiness and flourishing. Instead, they destroy his life; nothing could be less selfish.

The virtue of selfishness requires thinking long-range, being productive, and practicing what Rand called “the trader principle,” giving value for value in all our dealings with other people. She wrote in Atlas Shrugged:

A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. . . . Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtues, in payment for his own selfish pleasure, which he receives from men he can respect.⁹⁸

This sheds light on the element of truth in Smith’s opening line of the Theory of Moral Sentiments: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”⁹⁹ Rand recognized that other people are an enormous source not only of material values but of spiritual values: love, friendship, esteem, knowledge, entertainment—all those values pertaining to consciousness (as opposed to our physical bodies)—without which flourishing is impossible. It is not despite but because of a person’s rational self-interest that he cares about the happiness of those he values. “Concern for the welfare of those one loves is a rational part of one’s selfish interests,” wrote Rand. “If a man who is passionately in love with his wife spends a fortune to cure her of a dangerous illness, it would be absurd to claim that he does it as a ‘sacrifice’ for her sake, not his own, and that it makes no difference to him, personally and selfishly, whether she lives or dies.”¹⁰⁰ By contrast, it would be a sacrifice—“the surrender of a greater value for the sake of a lesser one or a non-value”—to blow that fortune gambling or give it away to needy strangers and let his wife die.¹⁰¹ This would be a betrayal of his rational self-interest and would make him immoral and miserable.

Likewise, it wasn’t a sacrifice for me to shovel my neighbor’s driveway when he was recovering from knee surgery. I value him, not only because he lets me borrow tools when I need them, but also because I enjoy our conversations, benefit from his advice, and respect him as a person. I don’t help him because I put his interests above my own (or his emotions, as Smith would counsel). I help him because it is in my interests. It is rationally selfish for me to do so. Nor is it a sacrifice when I hold a door for a stranger, hand the mother at the table next to mine the toy her infant just threw, yield the right-of-way to a driver trying to merge, or practice a million other common courtesies that don’t require giving up a greater value for a lesser one. Other human beings, unless and until they prove otherwise, represent an enormous potential value and so warrant a “generalized respect and good will,” wrote Rand. “A rational man does not forget that life is the source of all values and, as such, a common bond among living beings (as against inanimate matter), that other men are potentially able to achieve the same virtues as his own and thus be of enormous value to him.”¹⁰²

We’re now in a better position to understand the differences between Smith’s and Rand’s views on industriousness. Smith held that industriousness is (1) a symptom of the great rat race that is commercial society (Rousseau’s point) combined with (2) our natural and beneficial obsession with what others think of us (contra Rousseau).

Rand would no doubt have agreed that this is how many people approach work (see Peter Keating in The Fountainhead), but she would have considered it a dim view of humanity in general. As we’ve seen, she viewed productiveness as the application of reason to the problem of mankind’s survival. On her view, the primary reason people are industrious is not because they are secondhanders panting for the approval of others; rather, people are industrious because they grasp on some level that this is the price that life requires, and they gain self-esteem not through the admiration of others but by earning the admiration of themselves (_self-_esteem)—earned by proving to themselves that they are capable of dealing with life’s challenges and, in doing so, are worthy of happiness.

Smith’s view of the process by which we gain moral knowledge has a political implication as well, which is nonobvious but which Rand pointed out when criticizing similar views. If moral judgment requires going by the views—no, emotions—of others, then so does political judgment. Handing over one’s judgment to others leads logically to handing over one’s freedom at the political level. Liberty and independent judgment go hand in hand; those capable of judging for themselves are capable of directing their own lives. Those incapable of judging for themselves are incapable of directing their own lives; they require institutions binding them to the will of the community, state, nation, tribe, or other group (or so the argument goes). Secondhandedness leads to collectivism: the subjugation of the individual—his mind, judgment, values—to a group.¹⁰³ Seen this way, Smith’s moral views fundamentally undermine his broad political and economic aims. If moral judgment requires that we view the world “with the eyes of other people,” then we are unfit for a “system of natural liberty.”

Smith and Rand: Two Flavors of Pro-Capitalist Thought?

Let’s recap:

• Regarding human progress, Smith applauded it but thought it comes at great cost to man’s intellect and moral character; Rand championed industrial progress and held that it demands the best of every man, morally and thus intellectually.

• Regarding government, Smith argued forcefully against cronyism and interventionism but supported publicly subsidized education and other forms of wealth redistribution from the rich to the poor; Rand upheld the principle of individual rights, arguing that violating anyone’s rights, rich or poor, is immoral and destructive.

• Regarding economics, Smith held that all economic value stems from labor—a view that led to Marx’s exploitation theory; Rand upheld an objective theory of value, recognizing that value presupposes answers to the questions “of value to whom, and for what?,” and that the fundamental source of values is the human mind.

• Regarding industriousness, Smith held that people work hard mainly to obtain the admiration of others; Rand held that productiveness is the virtue of reshaping reality to meet one’s needs and desires, as determined by his independent judgment.

• Regarding morality, Smith held that we must go by emotions, especially those of other people; Rand held that morality derives from the factual requirements of human life and that we each must use our reasoning minds to understand these requirements, to chart a course that aligns with them, and to achieve our own genuine happiness.

It is, of course, anachronistic and unfair to Smith to ask whether he and Rand are merely different flavors of pro-capitalist thought. Rand likely could not have formulated her philosophy without the benefit of having lived after the Industrial Revolution, the overture of which Smith got only a faint impression. And perhaps Rand would never have had that advantage without the liberalization of trade that Smith’s ideas helped bring about. Yet Smith’s emotion-based ethics undermined his politico-economic views, and his labor theory of value fueled the fire of Marxism, which ultimately overtook Rand’s homeland.

Those who want to defend freedom and flourishing today can (and ought to) recognize the life-serving contributions of Adam Smith. But they can’t achieve their goals based on his ideas alone. Indeed, they must repudiate his dim view of reason and all its downstream consequences, and they must embrace the factual and logically consistent foundation of freedom, which Rand spelled out beautifully: “I am not primarily a defender of capitalism, but of egoism; and I am not primarily an advocate of egoism, but of reason. If one recognizes the supremacy of reason and applies it consistently, all the rest follows.”¹⁰⁴

1

Dennis C. Rasmussen, The Infidel and the Professor (Princeton, NJ: Princeton University Press, 2017), 106; see this book for details on their friendship.

2

Ayn Rand, introduction, in Capitalism: The Unknown Ideal (New York: Signet, 1967), vii.

3

Rand, introduction, viii.

4

Rasmussen, The Infidel and the Professor, 38.

5

These points are made by Dennis C. Rasmussen in his magnificent and detailed survey of the relation between Rousseau and Smith, The Problems and Promise of Commercial Society (University Park: Pennsylvania State University Press, 2008).

6

Albert Schinz, “French Origins of American Transcendentalism,” American Journal of Psychology 29, no. 1 (January 1918): 50–65, https://www.jstor.org/stable/1414105.

7

See Rasmussen, Problems and Promise of Commercial Society.

8

Adam Smith, The Wealth of Nations__and the Theory of Moral Sentiments (Copenhagen: Titan Read, 2015), 736.

9

Quoted in Rasmussen, Problems and Promise of Commercial Society, 74.

10

Smith, Wealth of Nations, 400.

11

Smith, Wealth of Nations, 15.

12

Smith, Wealth of Nations, 739.

13

Anne C. Heller, Ayn Rand and the World She Made (New York: Doubleday, 2009), 31.

14

Dina Schein Federman, “We the Living and the Rosenbaum Family Letters,” in Essays on Ayn Rand’s We the Living, 2nd ed. (Lanham, MD: Lexington, 2012), 70; see the rest of this essay for more details on the living conditions of Rand’s family.

15

Federman, “We the Living and the Rosenbaum Family Letters,” 67–70.

16

Heller, Ayn Rand and the World She Made, 53.

17

Ayn Rand, “For the New Intellectual,” in For the New Intellectual (New York: Signet, 1963), 21.

18

Ayn Rand, Atlas Shrugged (New York: Signet, 1957), 4.

19

Ayn Rand, “The Objectivist Ethics,” in The Virtue of Selfishness (New York: Signet, 1964), 29.

20

Smith, Wealth of Nations, 439, 444, 475, 450.

21

Adam Smith to Andreas Holt, October 1780, in “Scottish Thought and Letters in the Eighteenth Century,” University of Glasgow, https://www.gla.ac.uk/myglasgow/library/files/special/exhibns/scottish/adamsmith.html (accessed May 5, 2023).

22

Smith, Wealth of Nations, 124.

23

Smith, Wealth of Nations, 126, 146.

24

Smith, Wealth of Nations, 147.

25

Smith, Wealth of Nations, 679.

26

Smith, Wealth of Nations, 1180–81.

27

Smith, Wealth of Nations, 1509.

28

Rasmussen, Problems and Promise of Commercial Society, 172.

29

Rasmussen, Problems and Promise of Commercial Society, 172.

30

“Adam Smith vs. Ayn Rand on Justifying the Free Society,” Libertarianism.org, May 28, 2014, https://www.libertarianism.org/publications/essays/adam-smith-vs-ayn-rand-justifying-free-society. Although a full elaboration of Rand’s methodology is beyond the scope of this essay, it’s worth nothing the irony of this charge against Rand. Her philosophy of Objectivism explicitly aimed at resolving the conflicts between “those who claimed that man obtains his knowledge of the world by deducing it exclusively from concepts, which come from inside his head and are not derived from the perception of physical facts (the Rationalists)—and those who claimed that man obtains his knowledge from experience, which was held to mean: by direct perception of immediate facts, with no recourse to concepts (the Empiricists).” See Rand, “For the New Intellectual,” 27. Objectivism repudiates rationalism and particularly its chief modern proponent, Immanuel Kant.

31

Rand, Atlas Shrugged, 1061.

32

Thomas Jefferson, “First Inaugural Address,” The Papers of Thomas Jefferson, vol. 33 (Princeton, NJ: Princeton University Press, 2006), 148–52, https://jeffersonpapers.princeton.edu/selected-documents/first-inaugural-address-0.

33

Ayn Rand, “Man’s Rights,” in The Virtue of Selfishness (New York: Signet, 1964), 109.

34

This brevity should not be mistaken for a low evaluation of their importance. Even in Smith’s day, his economic views convinced Prime Minister William Pitt to begin liberalizing aspects of the British economy, and they’ve had tremendous positive impacts across the globe ever since, helping foment the Industrial Revolution.

35

“Spontaneous Order,” Online Library of Liberty, https://oll.libertyfund.org/collection/collection-spontaneous-order (accessed May 6, 2023).

36

“Ranking Burdens by State,” Institute for Justice, https://ij.org/report/license-to-work-3/ltw-state-profile/hawaii/; https://ij.org/report/license-to-work-3/report/results/ranking-burdens-by-state/ (accessed May 6, 2023).

37

Eamonn Butler, Adam Smith: A Primer (London: Institute for Economic Affairs, 2007), 63–64, 68, https://iea.org.uk/publications/research/adam-smith-a-primer.

38

Rasmussen, Problems and Promise of Commercial Society, 176.

39

Smith, Wealth of Nations, 475.

40

Smith, Wealth of Nations, 31.

41

Smith, Wealth of Nations, 33.

42

Smith, Wealth of Nations, 68–69.

43

Rasmussen, Problems and Promise of Commercial Society, 73.

44

Smith, Wealth of Nations, 259.

45

Karl Marx, Grundrisse, in Karl Marx: Selected Writings, ed. David McLellan, 2nd ed. (Oxford: Oxford University Press, 2000), 389.

46

Ayn Rand “What Is Capitalism?,” in Capitalism, 14.

47

Smith, Wealth of Nations, 51.

48

Rand, Atlas Shrugged, 1064.

49

Ayn Rand, “America’s Persecuted Minority: Big Business,” in Capitalism, 45.

50

Smith, Wealth of Nations, 328.

51

Smith, Wealth of Nations, 1540.

52

Smith, Wealth of Nations, 1358.

53

Rand, Atlas Shrugged, 1020.

54

Rand, “The Objectivist Ethics,” 27.

55

John Locke, An Essay Concerning Human Understanding (Lawrence, KS: Neeland Media, 2004), loc. 348.

56

Thomas Reid, Essays on the Active Powers of the Human Mind, in The Works of Thomas Reid, 3rd ed., ed. Sir William Hamilton (Edinburgh: Machlachlan and Stewart, 1852), 581.

57

David Hume, A Treatise of Human Nature (Lawrence, KS: Neeland Media, 2004), 290.

58

Hume, Treatise of Human Nature, 295.

59

Jonathan Haidt, The Righteous Mind: Why Good People Are Divided by Religion and Politics (New York: Vintage, 2013), 53.

60

Haidt, The Righteous Mind, 53–54.

61

Rasmussen, The Infidel and the Professor, 88.

62

Phyllis Vandenberg and Abigail DeHart, “Bernard Mandeville (1670–1733),” Internet Encyclopedia of Philosophy, https://iep.utm.edu/mandevil/ (accessed May 2, 2023).

63

In the preface to the The Fable of the Bees, Mandeville wrote that “the main Design of the Fable, (as it is briefly explain’d in the Moral) is to shew the Impossibility of enjoying all the most elegant Comforts of Life that are to be met with in an industrious, wealthy and powerful Nation, and at the same time be bless’d with all the Virtue and Innocence that can be wish’d for in a Golden Age; from thence to expose the Unreasonableness and Folly of those, that desirous of being an opulent and flourishing People, and wonderfully greedy after all the Benefits they can receive as such, are yet always murmuring at and exclaiming against those Vices and Inconveniences, that from the Beginning of the World to this present Day, have been inseparable from all Kingdoms and States that ever were fam’d for Strength, Riches, and Politeness, at the same time.” See Bernard Mandeville, The Fable of the Bees or Private Vices, Publick Benefits (Oxford: Clarendon Press, 1732), accessed at Online Library of Liberty, https://oll.libertyfund.org/title/kaye-the-fable-of-the-bees-or-private-vices-publick-benefits-vol-1.

64

Mandeville, The Fable of the Bees, preface.

65

Smith, Wealth of Nations, 1540.

66

Smith, Wealth of Nations, 1309.

67

Smith, Wealth of Nations, 1348.

68

Smith, Wealth of Nations, 1314.

69

Smith, Wealth of Nations, 1315.

70

Smith says, “Pity and compassion are words appropriated to signify our fellow-feeling with the sorrow of others. Sympathy, though, its meaning was, perhaps, originally the same, may now, however, without much impropriety, be made use of to denote our fellow-feeling with any passion whatever.” See Smith, Wealth of Nations, 1311.

71

Smith, Wealth of Nations, 1317.

72

Smith, Wealth of Nations, 1324.

73

Smith, Wealth of Nations, 1327.

74

Smith, Wealth of Nations, 1478.

75

Haidt, The Righteous Mind, 59.

76

Smith, Wealth of Nations, 1377.

77

Rasmussen, The Infidel and the Professor, 89.

78

Jung Min Shin, “Adam Smith's Impartial Spectator: His Reliance on Societal Values, Limits in Inspiring Altruism, and Application in Today's Context,” Vanderbilt Undergraduate Research Journal 10, (2015), https://doi.org/10.15695/vurj.v10i0.4016.

79

Smith, Wealth of Nations, 1430.

80

Smith, Wealth of Nations, 1391.

81

Rand, “The Objectivist Ethics,” 14.

82

In philosophy, “rationalism” historically has been used to refer to the view that the senses deceive us and that we can grasp truths only by reasoning in a vacuum, disconnected from the evidence of experience. Rand repudiated this view. See footnote 30 for more detail.

83

Rand, Atlas Shrugged, 1013.

84

Ayn Rand, “The Metaphysical versus the Man-Made,” in Philosophy: Who Needs It (New York: Signet, 1984), 36.

85

Rand, Atlas Shrugged, 1014.

86

Rand, “For the New Intellectual,” 55.

87

Ayn Rand, “Philosophy: Who Needs It,” in Philosophy: Who Needs It (New York: Signet, 1984), 7–8.

88

Rand, “The Objectivist Ethics,” 31.

89

Leonard Peikoff, The Ominous Parallels: The End of Freedom in America (New York: Meridian, 1993), 62.

90

Ayn Rand, The Fountainhead (New York: New American Library, 2016 [1943]), Kindle ed., loc. 14648.

91

Rand, The Fountainhead, loc. 13075.

92

Rand, The Fountainhead, loc. 13078.

93

Rand, Atlas Shrugged, 1014.

94

Ayn Rand, introduction, in The Virtue of Selfishness, centennial ed. (New York: Signet, 1964), xi.

95

Reid, Essays on the Active Powers of the Human Mind, 580.

96

Rand, introduction, vii.

97

Rand, introduction, vii.

98

Rand, Atlas Shrugged, 1022.

99

Smith, Wealth of Nations, 1309.

100

Ayn Rand, “The Ethics of Emergencies,” in The Virtue of Selfishness (New York: Signet, 1964), 51.

101

Rand, “The Ethics of Emergencies,” 50.

102

Rand, “The Ethics of Emergencies,” 53.

103

Both of Rand’s major novels, The Fountainhead and Atlas Shrugged, demonstrate this in detail.

104

Ayn Rand, “Brief Summary,” The Objectivist, September 1971, reprinted in The Objectivist, Volumes 5–10, 1966–1971 (Irvine, CA: Second Renaissance, 1990), 1089.