ABSTRACT
Published to mark the 250th anniversary of the publication of Adam Smith’s The Wealth of Nations, this IEA Discussion Paper by Mark Skousen argues that Smith’s central insight, that individuals pursuing their own self-interest can be channelled through a ‘system of natural liberty’ to promote the public good, remains one of the most consequential ideas in the history of economic thought. The paper contends that this system depends on three pillars: maximum individual liberty, tempered by justice through the rule of law, and robust competition, with competition acting as a moral check that disciplines self-interest and directs it toward socially beneficial outcomes. Drawing a parallel with Newtonian physics, Skousen presents Smith’s model of the market as an orderly, self-regulating mechanism capable of generating what Smith called universal prosperity, reaching even the poorest in society. The paper surveys Smith’s range as a thinker, his case for the division of labour as the engine of growth and productivity, his critique of mercantilism and protectionism as a precursor to free trade and globalisation, and his account of the unintended consequences of central planning, while noting that, like a foundational text subject to many readings, The Wealth of Nations has been claimed by multiple schools of economic thought. Citing the Economic Freedom Index and related modern evidence as broadly vindicating Smith’s predictions about the link between economic liberty and prosperity, the paper closes by arguing that Smith would view today’s high taxes, expansive regulation, and accommodation of special interests as a reversion to the mercantilist system he spent his career dismantling.
Skousen, Mark, The Genius of Adam Smith (March 9, 2026).
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