Remembering the second-most important achievement of 1776

Our nation will spend the next year celebrating the 250th anniversary of a major milestone in human history. Meanwhile, another milestone from the same year is likely to attract significantly less attention.

That’s a shame.

The anniversary generating thousands of headlines in the coming year, of course, involves the American Declaration of Independence of 1776. That document explained fundamental principles supporting the founding of the United States of America.

During the same year, one book helped change the way people around the globe viewed economic interactions.

Officially titled “An Inquiry Into the Nature and Causes of the Wealth of Nations,” Adam Smith’s 1776 masterpiece is known today largely by the title’s last four words.

This observer discussed Smith’s achievement in November 2007 with the American satirist and author PJ O’Rourke (1947-2022).

O’Rourke had recently published his own book about Smith’s classic. “It is a crucial … book about capitalism because it lays the moral foundations for a free market,” he told me. “And Smith is talking about the three necessary things that you have to have for economic progress, and they all have to do with individual freedom.”

“It is the division of labor, that is to say your right to pick and choose what you want to do for a living, … and trade, which is a very fundamental freedom here,” O’Rourke continued. “And everything he has to say about … his fundamental theory of free markets has to do with individual liberty and property rights, starting with our right to ourselves, our right to our own self-possession, our right to be free people.”

The discussion turned to a quote from O’Rourke’s book: “Smith began by asking two very large questions: how was wealth produced, and how was it distributed? Over the course of some 250 pages, he answers: Division of labor, and mind your own business.”

“Yes, exactly,” O’Rourke said, laughing. “Here is what he comes down to. And there is a lot of stuff. You have to realize the poor guy is inventing a science of economics.”

“He doesn’t have 200 years of the records of the price of gold from some reliable source to go on, so he has to go all over Europe and — pricing things in precious metals — give us each of the statistics and vet that statistic and show us how that statistic is comparable to the next statistic he gives us,” O’Rourke explained. “And so it is a huge job, and it is a huge bore to read, … but it was a necessary accomplishment because it is the beginning of real quantifiable analysis of economics.”

Most readers link Adam Smith to “the invisible hand,” an unseen force guiding the free-market process. O’Rourke downplayed the famous phrase.

“’Invisible hand’ is mentioned only three times in all of Smith’s writing, and once in a dismissive way, where he is talking about people’s instinctive understanding of physics,” O’Rourke explained.

“By ‘invisible hand,’ he means unintended consequences,” O’Rourke continued. “He doesn’t mean that if you just let capitalism do anything it wants that everybody will get rich and everything will be hunky-dory, which is the way the phrase is usually used.”

“Smith was a rather conservative, proscriptive person about economics,” O’Rourke added. “He believed firmly in free markets and in market freedoms, very firmly in those freedoms, but he also believed in rule of law, and he held rule of law to be absolutely the highest good of human governance. He said better, basically, … to be ruled by mediocre law than for there to be chaos. Better for the law to be imperfect than to live in a world where the mighty take what they want.”

Those of us celebrating other events of 1776 might be surprised to learn that Smith “didn’t have much use for the American colonists,” O’Rourke said. Smith didn’t support the colonies’ attempt to avoid British taxation. Yet “he also felt that we had every right to a say in Parliament.”

O’Rourke also highlighted the shortest section in Smith’s masterwork, “devoted to a kind of economic history of Europe, showing how the middle class essentially defeated feudalism.”

“Even if you aren’t interested in the technicalities of economics, but if you are interested in the history of human freedom, that one book in there is an absolutely fabulous book to read,” O’Rourke concluded.

Yes, we should commemorate the monumental achievements of the American Revolution during this special anniversary year. It would be “absolutely fabulous” if people get better acquainted with Adam Smith’s economic masterpiece as well.

Mitch Kokai is senior political analyst for the John Locke Foundation.