This Is the Moment Adam Smith Has Been Waiting For

Mr. Furman, a contributing Opinion writer, was the chairman of the White House Council of Economic Advisers from 2013 to 2017.

For many Americans, the present economic circumstances feel uneasy, and the future feels worse. They direct their anxiety at other countries, which are supposedly taking advantage of us through trade, or at artificial intelligence, with its potential to upend jobs and concentrate power. Lawmakers respond by offering antitrust, industrial and trade policies. It is striking, then, that some of the clearest guidance for this moment comes from a book published 250 years ago today: “The Wealth of Nations,” by Adam Smith, who put optimism about people at the center of his economic philosophy.

Smith’s ideas are widely quoted but almost as widely misunderstood. Conservatives too often reduce them to a demand for laissez-faire above all, a warning to let the “invisible hand” of the market be the economy’s only guiding force. Liberals too often dismiss him as a highbrow spokesman for naked, antisocial greed. The truth in both cases is more interesting and more relevant to the complex issues we are navigating in the world today.

Smith’s radical idea was to show how ordinary people, pursuing ordinary lives, could steadily make societies richer, fairer and freer — if powerful institutions like governments, guilds or large businesses got out of their way.

Smith urged us to judge a nation not by the fortunes of its kings or nobility (today we might say our titans of technology and finance), but instead by whether it supplied people “with all the necessaries and conveniencies of life.” He insisted that prosperity had to be broadly shared: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

Smith, who was born in 1723, in Kirkcaldy, Scotland, drew on the work of various continental European philosophers. Unlike those thinkers, however, he derived his ideas less by deduction from first principles than by empirical observation of history and his contemporary world.

His most famous observation was about the elaborate division of labor at a pin factory. Workers were separated into 18 different tasks, including straightening the wire, making the pin head and packaging the finished product in paper. Output per worker increased by a factor of 240 relative to what a worker doing all those different jobs himself could accomplish. And productivity growth, Smith saw, was the moral core of economic progress, because it was what made higher living standards possible.

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