Adam Smith's Mistake: How a Moral Philosopher Invented Economics and Ended Morality

by Kenneth Lux

Adam Smith, with his book "The Wealth of Nations", in the late 18th century was one of the founders of economics as a discipline. His central theory concentrates on the value he places on self interest, arguing that it is not from the "benevolence" of others that we receive what we need but out of their regard for their own self interest. When each person pursues his or her own self-interest, society as a whole is led to a condition of benefit for all. The pure experiments in this approach, laissez-faire economics, was seen to fail in the industrial misery of Charles Dickens' England and in the United States in the financial scandals of the trusts and cartels and the economic booms and busts that eventually led to the Great Depression. Could Adam Smith have made a mistake, a mistake that still colours the core of modern life? This book argues that he did. Dr Lux argues that self-interest does not lead to a good society, but instead to social strife, ecological damage and abuse of power. Another principle must exist to moderate self-interest and it is one that goes by many names. Dr Lux argues that we have been mislead by economics into calling selfishness and greed a good thing. Instead this book argues that good only comes out of good. With the adequate recognition of this mistake we, as a society, will be able to move forward into a time where selfishness can no longer hide under a protective cover of economic justification.

Genres: Economics

240 pages, Paperback

First published October 31, 1990

Reviews

[Bruce]

This is one of my favorite books. While it isn't very popular, I think it should be. The premise is that Smith, in trying to solve one set of economic 'moral' problems for his day, actually created a larger set of moral dilemnas. Makes one think about the cause and effect of social change efforts. Causes one to ask introspectively "Am I doing this too?"

[Mark Isaak · Rating 5 out of 5]

Lux explains how Adam Smith's statement, in _Wealth of Nations_, that the butcher and baker keep us fed through their own self-interest was taken by economists ever since to mean that self-interest is a virtue, to the point that any help for the poor is considered bad for them and for the economy as a whole. His book examines Adam Smith's own views (Smith considered his _Theory of Moral Sentiments_ his more important work, and it spoke against the interpretation above), the history of economic ideals in England and the United States, the philosophical flaws of those ideas, a case study of a successful cooperative business (Mondragon Corporation), and, finally, relevant psychology and morals. Lux ultimately carries his thesis too far, saying that self-interest is immoral. (I would argue that it is a fact of human nature, which can function for good or ill.) But the book is important nonetheless for showing how economics has been on the wrong footing for centuries.

[MARC L'ESPERANCE · Rating 5 out of 5]

Very good exposure of the shallowness of Adam Smith's economic theory.

[Tina · Rating 5 out of 5]

In light of the number of years since my reading of this book, I'm hesitant to write a review. However, after reading a scathing review of it, written at the time of its publication and read by today, I will make this attempt.

This is book worth reading. It is about economics, but, more importantly, it is about human nature. Most importantly, it is about how the person who laid the founding stone of our free-market and current capitalist economy spent the better part of his life trying to pull that stone back out. We all now live under that mistaken stone.

[Craig Bolton]

Adam Smith's Mistake by Kenneth Lux (1990)