Adam Smith is often referred to as the father of free market economics due to the publication of his 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations. But many readers do not realize that Smith, by training, was a moral philosopher. In fact, his work in free market economics stems from his beliefs about morality.
In the opening chapter of The Wealth of Nations, Smith paints a picture of the abysmal realities facing individuals at the end of the 18th century. Smith writes, for example, that some nations “are so miserably poor, that, from mere want, they are frequently reduced, or, at least, think themselves reduced, to the necessity sometimes of directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts.” In other words, poverty was so great that some concluded that suicide or infanticide were their only options. Smith believed this situation was in itself a moral evil.
His work in economics was meant to address this ethical reality. Smith noticed that not all nations were in such dire straits. In The Wealth of Nations, therefore, he investigated why some nations had wealth and others did not. His findings laid the foundation for what today we call free market capitalism.
Economists have long recognized several common themes among nations that experience significant growth and high GDP per capita. These include the presence of competitive markets, limited regulation, low taxes, and a legal system that enforces its laws evenhandedly. The Frasier Institute in Canada and the Cato Institute work together to publish an annual report that measures how well each country in the world consistently implements these themes in its nation’s policies.
A quick perusal of the latest Economic Freedom of the World report shows that many of the countries that have the highest GDP per capita also score among the highest countries for economic freedom. Similarly, those countries that are most closed economically have the lowest GDP per capita. This data suggest that a nation’s policies on economics have the potential to encourage not only real economic growth but more importantly, moral goods that stem from that growth.
In an attempt to combat COVID-19, many countries (and smaller municipalities) are considering policies that “lock down” their economies. However, like all economic decisions, these choices have secondary effects. They not only stifle economic growth, they secondarily lower the standard of living for the nation’s citizens and, consequently, limit their access to medical services and shorten their life expectancy.
If Smith is correct and it is morally good when a nation establishes policies that raise the standard of living for the majority of its citizens, then surely it is morally dubious when a nation introduces policies that guarantee that this standard of living decreases. In short, lockdown policies are not just economic or medical. They are necessarily moral in nature.
John Tarwater is an associate professor of finance at Cedarville University with doctoral degrees in both finance and ethics.
