Adam Smith on markets, competition and violations of natural liberty

According to Adam Smith, markets and trade are, in principle, good things—provided there is competition and a regulatory framework that prevents ruthless selfishness, greed and rapacity from leading to socially harmful outcomes. But competition and market regulations are always in danger of being undermined and circumnavigated, giving way to monopolies that are very comfortable and highly profitable to monopolists and may spell great trouble for many people. In Smith’s view, political economy—as an important, and perhaps even the most important, part of a kind of master political science, encompassing the science of the legislator—has the task to fight superstition and false beliefs in matters of economic policy, to debunk opinions that present individual interests as promoting the general good and to propose changing regulatory frameworks for markets and institutions that help to ward off threats to the security of society as a whole and provide incentives such that self-seeking behaviour has also socially beneficial effects. The paper shows that the ideas of Adam Smith still may resonate and illuminate the problems of today and the theories that try to tackle them.