Do Some of Adam Smith's Most Ardent Disciples Know What He Says about Them?

Ben Stein has effectively exposed The Tattered Standard of Duty on Wall Street. When Gordon Gekko famously proclaimed in the 1987 film Wall Street, "Greed is good," many of us understood it as critical social commentary, but others apparently took that speech as words to live by. Moreover, they are wont to slander Adam Smith by claiming he justifies their greed and disregard for fiduciary duty. I rise to defend Adam Smith.

Adam Smith's point was that self interest in the economic sphere has socially beneficial collateral effects. He did not say there was a need to take the existing level of greed and "kick it up a notch." To the contrary, Smith thought the level of greed among capitalists was so high they could not be trusted. These are the last two sentences of Book I of Wealth of Nations:

"The proposal of any new law or regulation of commerce which comes from this order [profit takers], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but most suspicious attention. It comes from 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."

I nominate this for the bit of Adam Smith's advice that is least attended today by politicians and free market fundamentalists.

Update on Tuesday, November 18, 2008 at 06:26AM by Skeptic

Gavin Kennedy has the same view, supported with quotations from Moral Sentiments.  Thanks to Mark Thoma for the link.

Update on Saturday, December 19, 2009 at 07:15AM by Skeptic

Gavin Kennedy refutes at length Niall Ferguson in A Twisted Tale of Falsehoold About Adam Smith. For example, Kennedy rebuts Ferguson's assertion that Smith favored laissez faire policies (even though he never used the phrase in any of his writings): 

Smith always emphasised that the main enemy of competition was monopoly and the main legal protection of monopoly was particular (but not all!) government-sponsored state regulation, and illegal collusions among corporations. He commented that legislators and those who influenced them, giddy with the false arguments of mercantile political economy, used regulations to stymie competition, whether from other merchants (and would-be merchants) and their employees through collective action, plus, of course, legalised protectionism, tariffs and prohibitions.