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John Yule is an actor who lives in Kirkcaldy, Scotland. If you watch a lot of British T.V. dramas, you may have seen him playing a doctor or a hotel manager; a police sergeant. But lately, he’s been moving away from acting.

John YULE: I’ve written two plays and I’m writing another one. 

One of those two plays is about Andrew Carnegie, who made his fortune in America but grew up nearby, in Dunfermline. The other play, called The Invisible Hand, is about Adam Smith, who’s often called the founder of modern economics. He grew up just down the street from where John Yule lives.

YULE: He’s from here, and I always thought there was a story in it, and Kirkcaldy doesn’t do enough to perpetuate the greatness of Adam Smith.

That is changing. Kirkcaldy is preparing to celebrate the 300th anniversary of Adam Smith’s birth. The church where he was baptized is being restored; there are plans for a museum and cultural center. John Yule doesn’t blame his neighbors for not caring enough about Adam Smith. He didn’t really care either — until he started working on his play.

YULE: Always aware of Adam Smith, but not entirely of his legend, of his contribution to economics, really, and to philosophy. I knew about it but, as most people you would find actually don’t know. They know about The Wealth of Nations. And they know that Margaret Thatcher, the enemy, always had a copy of The Wealth of Nations, the legend goes, in her handbag. So, I thought, Wow, that’s worth looking into. 

DUBNER: You say “the legend goes” that Thatcher carried Adam Smith around in her handbag. What do you think? 

YULE: What I think is that, yes, she did read some of Adam Smith. She didn’t read the first book, The Theory of Moral Sentiments, clearly. But she read the second one. And she did use that as an authority to promote her economic theories and activities and policies. And she caused so much misery in this country — not to everybody, but to a lot of people. 

As for John Yule calling Margaret Thatcher “the enemy” — we’re going to let that slide for now. It isn’t Thatcher’s legacy we’re debating here; it’s Adam Smith’s. Over the first two episodes of this series, we’ve spoken with economists, philosophers, political scientists, and others about Smith’s ideas and how they’ve been interpreted — and misinterpreted — over the years. So today on Freakonomics Radio, in the third and final episode of our series on the real Adam Smith, we want to know: what would a truly Smithian economy look like today?

Glory LIU: The kind of capitalism that we have now is not something Smith could have imagined. 

Eamonn BUTLER: Yes. I think we’ve moved on since the 18th Century, unfortunately. 

But have we moved on so much from the 18th Century?

Dennis RASMUSSEN: Most of the economic restrictions that he objects to, were, as he often puts it, extorted from the legislature by rich companies.  

Also: what kind of life lessons can Adam Smith still teach today?

LIU: “He is so infuriatingly balanced.” 

Our journey to find the real Adam Smith had to end sometime. Sadly, that’s today. But we’ll hold our tears ‘til the end.

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In Adam Smith’s day, the residents of Kirkcaldy mined coal and harvested salt; later, they made canvas and linoleum. Kirkcaldy was a thriving market town. Today, there are mostly service jobs, many of which don’t pay very well. John Yule has had 70 years to observe the shifts in the local economy.

YULE: My father had a business here, William Yule and Son, which was a well-established grocery business. So he was steeped in Kirkcaldy. He was from here. The Road Bridge changed everything.

The Road Bridge, which crosses the River Forth, was built in 1964. The bridge made it much easier to get from Edinburgh up into Fife, the county where Kirkcaldy is located.

YULE: My dad was really pushed out of business by the supermarkets coming into the town. Because they got over the bridge then, instead of having to go round, it was in their interest to open stores, Tesco to open stores here. So a small, substantial grocer who took stuff all over the county and local hotels, everything, he was just pushed out of the way.

DUBNER: What do you think Adam Smith would say to that story? 

YULE: I think he would think it was progress, because really things do always evolve and change, and you can’t hold back progress. I don’t like supermarkets. I think they’ve ruined so much of our communities. But nonetheless, that’s seen as progress. 

When Adam Smith was writing The Wealth of Nations in the mid-18th Century, it wasn’t supermarkets he was worried about. It was trading firms like the English East India Company, which grew so massive that it began acting like a sovereign, as Smith put it. Here’s a passage from The Wealth of Nations, read by John Yule:

READER: While they were traders only, they managed their trade successfully, and were able to pay from their profits a moderate dividend to the proprietors of their stock. Since they became sovereigns, with a revenue which, it is said, was originally more than three millions sterling, they have been obliged to beg extraordinary assistance of government in order to avoid immediate bankruptcy. 

Smith was concerned that companies like this were essentially too big to fail. Does that maybe ring a few bells? It does to this scholar:

Maha ATAL: I’m Maha Rafi Atal, and I’m a lecturer, or assistant professor, in global economy at the University of Glasgow. 

DUBNER: Okay. And “global economy” means what here? 

ATAL: I am a political scientist, but I study the economy. 

Atal is writing a book with the working title When Companies Rule: Corporate Power from the East India Company to Silicon Valley. There’s quite a bit of Adam Smith in it.

ATAL: So Smith appears in my book in two principal places. There’s a first chapter where I talk about the East India Company as a case. And then there’s a chapter that’s about Amazon as an employer and the way that it governs labor and exerts a lot of influence in the towns where it sets up its big labor operations. 

Let’s start with the East India Company. This takes us back to the early 17th Century.

ATAL: So there’s a first curve of globalization that is associated with the corporate period of imperialism, where European countries are giving a charter, a permit, a license to some investors who would like to create a company.

This new level of commerce was happening throughout Europe.

ATAL: So in England, we’re talking about the English East India Company, which was chartered by Queen Elizabeth in 1601. In the Netherlands, we’re talking about the Dutch East India Company. And then there are smaller ones that are chartered by the French and by the Portuguese. 

The English East India Company had a charter that allowed it to trade on the Indian subcontinent and in southeast Asia.

ATAL: And what the charter says is this company is the only English company that is going to be allowed to trade in these regions. So it’s a monopoly that protects it from other English merchants going out and trading there.  

DUBNER: So a protected monopoly, and what share of the revenues or profits would flow directly back to the crown under this agreement? 

ATAL: It’s a small amount. It’s taxed like ordinary taxation. The intention was to go and open a spice-trading business to compete with the Dutch, who were running a very lucrative spice trade. England is just really beginning to think about building an empire of its own. It’s beginning to feel like it has a strong navy, and it could be starting a life as a colonial power, but is not in a position to be running its own colonies as a government yet. And so she charters this company. 

As it turned out, the English East India Company did not confine itself to the spice trade — nor to East India! At its peak, which was around the mid-18th Century, when Adam Smith was writing the Wealth of Nations, the East India Company controlled — wait, do you want to take a guess? What share of global trade would you say this one company controlled at its peak?

ATAL: It controlled 50 percent of global trade at its peak, is what I can say. 

DUBNER: Okay, let me ask you this. Let’s imagine that there was a civil war of sorts, England against the East India Company. Who wins?

ATAL: The East India Company. Because it governed 100 million people at its peak, and at that time, the whole population of England was like 5 million people, maybe 8 million people, certainly less than 10 million people. 

Okay, how did a spice-trading company with a charter out of London come to govern 100 million people on the Indian subcontinent? Well, in 1765, after years of expansion (and war), the East India Company signed a treaty with India’s Mughal emperor that allowed the company to collect taxes from some of the richest parts of India — with a cut going to the emperor, of course. This taxing power made the East India Company the de facto sovereign over much of India — and provided funding to continue growing. Back in England, meanwhile, there had been a long period of civil war and then a merger with Scotland — all of which generated political chaos.

ATAL: And while that’s been happening, this other organization has grown up with its own currency, with its own ambassadors, with its own army, governing a population that is ten times the size of the country that it’s supposed to be representing. 

Not everyone was in favor of the East India Company’s reach. The politician and philosopher Edmund Burke, for instance, called it “a state in the guise of a merchant.”

ATAL: And Adam Smith becomes interested in the East India Company because during this period, there is a viral sensation in Britain of controversial pamphlets about the company that people would hand out at pubs and coffeehouses and read aloud to their friends. Some of them are written by company officials.

DUBNER: What are they? Are they propaganda, essentially? 

ATAL: Some of them are propaganda. They’re kind of that old thing, “what’s good for General Motors is good for America.” Some of them are then critical accounts that seem to be suggesting the East India Company is too powerful. But when you look, those are written by merchants who would love to be in the spice trade in India, but they can’t get in because it’s a locked monopoly. 

DUBNER: And in each of those cases, in the pro-East India Company pamphlets and the anti-East India Company pamphlets, are the connections of the authors well-known or are they a little bit of subterfuge propaganda? 

ATAL: Yeah, subterfuge propaganda.

DUBNER: Did they use their real names? 

ATAL: They would never use fake names, but sometimes they would just be signed by “a merchant.” And Smith becomes an enthusiastic reader of these pamphlets. 

Some of these pamphlets, Atal writes, “were written by … men who were at once company employees, theorists of economic policy, and occasional advisors to government committees crafting trade regulations.” If all this feels, let’s say, “cronyish” — or perhaps you prefer “sleazy” — it’s worth considering just how blurry the lines were between commerce, government, and the intelligentsia. The Enlightenment philosopher John Locke, for instance, who is revered today for his arguments about property rights, was also a shareholder of the Royal Africa Company, which dominated England’s trade in slaves. What about Adam Smith? He was repulsed by what he saw as the East India Company’s self-dealing. He found it, in Atal’s words, “politically oppressive and economically unproductive.” One incident in particular caught Adam Smith’s attention: a serious drought in Bengal, where the East India Company took grain from hungry peasants in order to feed the company’s own army.

ATAL: And between seven and 10 million people die in a year. Which is somewhere between a quarter and a third of the population of the province at the time. I mean, it’s a huge mass death event. And it’s such a big event that it’s covered in the papers in Britain. And the company does have to report about it in its company reports. Smith becomes very interested in how did this happen? How is this company mismanaging its rule?

Writing in The Wealth of Nations, Smith blamed the severity of the famine on the East India Company’s “improper regulations” and “injudicious restraints.” After the famine, the British government got more involved in the oversight of the company. But there was another colonial scandal brewing.

ATAL: It’s called the East India Company, but it gets itself involved in the American Revolution. 

DUBNER: Yeah, with tea.

ATAL: With tea!  

The East India Company, due to a combination of overreach, war, corruption, and the sheer cost of maintaining a huge army, had fallen into significant debt. So the British government tried to bail them out, with the Tea Act of 1773. This gave the company a monopoly on the sale of tea in the North American colonies. That tea would be subject to import taxes, which antagonized the colonists to the point that, as you likely know, some of them boarded ships in Boston Harbor and dumped the East India Company’s tea.

ATAL: And Smith, in his critique of the Bengal famine and what’s happening in India, says, look, part of the problem here is it can’t be regulated because it’s so big and it has all these independent relationships with Indian government officials that really should be part of British state diplomacy. And it has this internal conflict of interest between its commercial and political imperatives. This is going to lead to some form of state capture where the British government ends up doing things that are bad for Britain to help the company. So he’s concerned about the way in which the governance in the colonies will corrupt British government and society. 

DUBNER: Were there other British firms who were selling other things to the colonies? 

ATAL: Yes. That was a relatively free trade. And they announced that there was going to be a limited set of wholesale licenses. Only certain people are going to be approved to get them in the, you know, North American ports, in Boston and Charleston, so on. And only the East India Company is going to have this transatlantic shipping route. 

DUBNER: So in other words, there were vendors who had trading agreements or trading networks in place, and they were then suddenly excluded?

ATAL: They were then suddenly excluded, and then the wholesale licenses, we’re only going to give out a limited number of those. We’re going to cherry-pick our favorite people to give them to. This creates this huge political outcry, and it’s in the protest over those licenses that the tea is famously thrown overboard in Boston Harbor. 

DUBNER: So I have a big question. You have to pardon my ignorance here, but for someone who may think about Adam Smith today as a patron saint of free-market capitalism, it sounds like the East India Company was the embodiment of free-market capitalism, and it turned out to be a den of corruption and bloat and failure. So how can those two things be true? 

ATAL: Well, Smith would say that it’s not a particularly free-market entity because it’s able to achieve all of this commercial prowess because it has these special permits from the government that other firms don’t have. 

DUBNER: But don’t modern firms today get a version of a special permit from governments to operate as they do? Maybe not as monopolistically, but maybe not as unmonopolistically either.

ATAL: Yes.

DUBNER: And we shouldn’t say that the government creates a monopoly, but like who’s Facebook‘s rival, for instance? Who is Amazon’s rival? I ask you sincerely, for an answer. 

ATAL: Yeah. And well, I think that from Smith in particular, there’s a really strong critique of state capture and we should be, you know, concerned. So when I come back to Smith and thinking about Amazon, you know, listeners may remember that when Amazon was looking to open a second headquarters, it had many cities in the United States bidding to be the second headquarters. The cities, even before one was selected, had to sign nondisclosure agreements to not talk to the public about the fact that they were in contention or what the terms of those would be. That’s something that it extracts from a lot of cities where it has warehouses already. It’s something that Facebook has extracted from some of the cities where it has data hubs and processing facilities. So I think that we should be worried about these large companies who are large employers in the places where they set up operations. They’re often able to extract terms from local government that are not subject to public discussion and public consent in places that are ostensibly democracies.

By the 19th Century, the East India Company’s trading monopolies had been curtailed. After the Indian Rebellion of 1857, the company was nationalized and its activities wound down. It still exists, in a sense: in 2005, the Indian businessman Sanjiv Mehta bought the rights to the name, and he turned it into a consumer brand focused on luxury foods. So the East India Company survives as a name — but a name that represents something very different from what it meant in its lifetime. Which is a lot like someone else we know.

PROFESSOR: He would have been appalled by our brand of casino capitalism. 

Coming up after the break: can we talk about where Adam Smith would land on today’s political spectrum?

LIU: Oh, God, please no. 

I’m Stephen Dubner, this is Freakonomics Radio, we’ll be right back.

*      *      *

John Yule’s play The Invisible Hand tells the story of Adam Smith’s intellectual journey, his rise to fame — and his relationship with his mother. It imagines Smith in conversation with Voltaire in France, with his friend David Hume in Edinburgh — and there’s another character in it: a modern-day history professor who acts as something like the conscience of the playwright. Here is what the professor has to say about how Adam Smith might see today’s global economy.

PROFESSOR: He would have been appalled by our brand of casino capitalism. Had he been alive today, I think he would have urged economists to consider that the quality, not just the quantity, of economic growth is what really matters. He saw that wealth brought power. He valued the free market, but believed it was the responsibility of a civilized society to ensure that wealth should not be achieved at the expense of the rest of humanity. First and foremost, Adam Smith was a philosopher and a humanist before he was an economist.

How can it be that the man known as the founder of free-market capitalism is also a humanist whose sympathies lined up squarely against many of the natural results of capitalism? The political scientist Glory Liu, author of Adam Smith’s America, has spent a lot of time thinking about this contradiction.

LIU: This is one of my favorite lines about him by the intellectual historian Donald Winch: “He is so infuriatingly balanced.” 

DUBNER: Hmm. I love that. As well as “mesmerizingly mundane” — his life, at least, as you write. That’s another phrase I really love.  

LIU: And to be honest, there are parts of The Wealth of Nations that are mesmerizingly mundane. 

DUBNER: Most of us don’t read these texts as a scholar and try to divorce our personal politics. Most of us, when we read almost anything, it seems like we practice what psychologists call confirmation bias, right? “Oh, there’s evidence from Smith or whoever that proves that I was right.” Do you feel that someone who tends to be quite liberal or quite conservative, if they were actually to read all of Smith, which one would feel ultimately more supported, more at home, the leftist or the rightist? 

LIU: Oh, man. I’m going to cheat. They’re both going to feel just as supported. 

DUBNER: Can you just put this in an example? Imagine a young liberal college student reading the book and coming upon something that jibes with everything they believe and then something that really goes against it.

LIU: So for the recent Berkeley grad, “down with the Washington Consensus” young woman who happens upon the works of Adam Smith, she’s going to find a Smith who had a radical orientation towards the poor. She’s also going to find that Smith had a view of liberty that wasn’t just about the primacy of economic freedom. That said, for every reading of Smith, there’s another reading of Smith. For every sentence where it seems like Smith says, “This is bad,” there’s another sentence where you could go, “Well, maybe not.” 

DUBNER: Could you give me a few from each category? 

LIU: Okay. Slavery? Bad. Feudalism? Bad. I don’t want to be on the record for saying this, but like growth, overall economic growth, is good. 

DUBNER: Why would you not want to be on the record saying that? Doesn’t that seem like a fairly humane, logical argument? Like more people having access to, let’s say, food and electricity? I mean, it used to be pretty uncontroversial to say that.

LIU: I think because I’m worried about being taken out of context. He thinks growth is good. He thinks getting people out of poverty is good. He thinks high wages and low profits are good.  

DUBNER: I have to tell you, if Adam Smith were here today, I don’t think he’s going to be in the Republican Party in the United States, is he? 

LIU: Oh, God, please no. No, I don’t think so. 

DUBNER: But if we were to poll 1,000 Republican voters and 1,000 Democratic voters right now in the U.S., where would we get a higher share, you think, of people who say that they’re in favor of Adam Smith? 

LIU: If I just had to guess, I’d probably guess the Republican Party.

BUTLER: It’s difficult to know, because he was a Whig.

That is Eamonn Butler, from the Adam Smith Institute in London, which promotes conservative positions under Smith’s banner. In Smith’s day, Butler says:

BUTLER: The Tories were the more conservative people, and the Whigs were more like reformers. So he’d be a sort of liberal with a small “l” rather than a member of the Liberal Party. I don’t know that he’d be a member of any party, really. 

One point of contention — or at least confusion — over how to think about Adam Smith today is his frequent use of the phrase “self-interest.”

Craig SMITH: If you want to regard self-interest as the be-all and end-all of what Smith says of his analysis, that’s a mistake.

That is Craig Smith — no relation but he is an Adam Smith scholar at Glasgow University.

SMITH: But it’s also a mistake to say, oh, he wasn’t interested in self-interest, because he was. He knew that in certain circumstances, human beings pursued their own interests, and that had consequences that you could study as a social scientist. Other times they behaved benevolently. And that benevolence could be studied in the same way as a social scientist. So I think the association of Smith with economics has privileged that particular element in his analysis, which is more apparent in The Wealth of Nations. It’s in the Theory of Moral Sentiments, but it’s understood in a richer context in the Theory of Moral Sentiments

DUBNER: One thing we’ve learned here that surprised me was when we visited Smith’s hometown, Kirkcaldy, and saw that it’s not a — it was never a big city, but it was a market town and a harbor town and that there was a lot to be learned there about the way commerce actually worked. From the 21st Century, when we look back, we assume that these old economies were very primitive, but they weren’t at all primitive. They were complicated and complex. The scale was different, perhaps, but complicated and complex. 

SMITH: Yeah. 

DUBNER: So that has changed my understanding of how thoroughly Smith understood how economics actually worked on the ground. Knowing what you know, I’m curious to ask how you think he would assess the modern economy. 

SMITH: Well, that’s a good question. One of the things that’s interesting about Smith is just how much he anticipates things that he could see around about him beginning to happen, and that worried him about the way the economy was developing. Now obviously, he is doing that in an 18th-century setting. It is the beginnings of what would become the modern globalized world. But he was aware of the different factors that were impacting on this. He was aware that different economic actors had different and potentially contradictory interests, and that that was a threat that came from this kind of development. So Smith is — he’s often held up as being this person who celebrates the development of a modern economy. And yes, he is to a certain extent. He sees it as a wealthier, a more humane world than the world that had come before it. But he was also aware of the negative side of it. And so you find in Smith a set of warnings about things like cronyism, corporate corruption of politics, imperialism, exploitation of workers. 

DUBNER: That all sounds very familiar from the 21st century, yes?

SMITH: Yeah, it does. I mean, obviously, he didn’t have a crystal ball or anything like that, but he could see that those were the kind of issues that would come out of a commercial society. Smith understood that there was a central role for the government to play. He understood that there were limitations to be pushed on particular forms of economic activity that were necessary as he sought the proper operation of a commercial society. And that more nuanced, more pragmatic analysis is, I think, what is the takeaway from anybody who reads Smith. 

Ah yes, nuance! It is something we strive for on this program every week. I’m not saying we always get there, but it’s a goal. In this regard, Adam Smith is a good model for us. But there’s also an argument to be made that nuance is for the perpetually undecided, or the weak-of-heart. John Yule is not such a person. He had been trying to figure out what would be the topic of his third play. As it turns out, his second play, the one about Adam Smith, has set him on a clear path. He has come to think that Smith was either misunderstood or outright exploited by politicians and policy advisers in the U.K.

YULE: I felt the policies espoused by Thatcher and her Cabinet, her fellow politicians in the Conservative Party, were cruel, callous, and unnecessary. And they were creating a society which was selfish. And I think the apex of that is the behavior of the banks, which she helped to deregulate. The behavior of the banks — which is the subject of the third play, I’ve decided only yesterday — was the apex of utter selfishness, appalling behavior which allowed large sections of the population to suffer badly. And I think that is, if not unforgivable, at least deserves examination. 

DUBNER: Now, what would you say to, let’s say — we spoke with a fellow in London who runs the Adam Smith Institute, which has a very different perspective on these things. 

YULE: Yes. 

DUBNER: And in fact, the Adam Smith Institute was one of these think tanks that Thatcher actually consulted with, to use their wisdom. Now, he would argue that this deregulation that you just spoke of, and the privatization of many industries may have been painful in the short run. But that as appalling as it was, to use your word, what would be more appalling is to let the state grow and grow and grow and then crumble under its weight. And if you read history, we have seen states have done that. So what would you say to that critique.

YULE: I think part of the problem is our political system here in Great Britain, it’s too centralized. Everything is centralized to London. So you have what we’ve just been through, with three prime ministers in months, and the second one followed “trickle-down economics,” as she called it, and bankrupted the country, almost. There’s something in that which speaks about the approach of Adam Smith. And so I think there’s a middle course to be had. And I think if power is spread ‘round the country, we will perhaps not become an independent nation in Scotland, but a much happier one.

Coming up after the break: there is a brand-new Adam Smith institute taking root in the last house where Adam Smith lived.

Caroline HOWITT: We’re trying to pick up where he left off.

This is Freakonomics Radio, I’m Stephen Dubner — and I want to thank you for listening all year long to this show. Our numbers this year have been bonkers — more than 100 million downloads, with another 30 or 40 million for the other shows in the Freakonomics Radio Network: No Stupid Questions, People I (Mostly) Admire, and Freakonomics, M.D. So: I just want to thank you for listening. And if you feel like giving us a holiday present, it’s easy: just spread the word about this show to your friends, your family, whoever. That’s the best way to support the podcasts you like. You can also rate or review Freakonomics Radio in your podcast app.

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Having spent time in Kirkcaldy, Adam Smith’s hometown, and Glasgow, where he studied and taught for years, we headed to Edinburgh, the Scottish capital, where Smith lived the last years of his life.

Caroline HOWITT: So Panmure House is Smith’s final remaining home. 

That is Caroline Howitt, the program director of Panmure House.

HOWITT: It was in this 17th-century building that Smith completed the final editions of the two masterworks — The Theory of Moral Sentiments and, of course, The Wealth of Nations. He also transformed Panmure House into a vibrant meeting place for all the finest minds of the Scottish Enlightenment. They would come together to debate all the biggest issues of their day.

And how would Adam Smith have spent his days while living here?

HOWITT: I’m sure he’d have risen with the sun and done some work on his revisions to the Theory of Moral Sentiments and the Wealth of Nations before he put on his dress coat and wandered up Edinburgh’s beautiful Royal Mile, which I guess would have smelled a little different back then from how it does now.

Panmure House lies just off the Royal Mile, which is the main drag of Edinburgh’s Old Town. Edinburgh Castle lies at one end; Holyrood Palace at the other. In the middle, by the way, stands a bronze statue of Adam Smith. The real Smith, meanwhile, the late 18th-century Adam Smith, would have made his way from Panmure House —

HOWITT: All the way up the Mile to Customs House, where he would have spent anything between 8 to 10 hours, administrating heavily and very successfully by all accounts, before returning home in the evening to enjoy a meal prepared by his cousin and mother, I have no doubt, and then a bit more reading before bedtime. 

So in between his morning writing and his evening reading, Adam Smith — one of the most celebrated thinkers of his time — would spend eight to ten hours working at Customs House? This is true. For the last several years of his life, Smith worked as a senior official at the Scottish Customs Board; he was essentially an overseer of tax collection. I had been surprised to learn this, on two counts. First, why would Smith want a job at all if he didn’t need the income, which apparently he didn’t? Second, why would he want this job? Adam Smith, known today as a small-government, free-market fundamentalist, helping to run Scotland’s tax department? In Glasgow, I had asked the Smith scholar Craig Smith if this job wasn’t a curious choice?

SMITH: Yes and no. It’s a family tradition. His father was a customs officer. He obviously had a background and an interest in customs, given the work that he did on the empirical elements of The Wealth of Nations, so in many ways it made perfect sense. He was also interested in the way in which customs — excise and taxation — were deployed in the economy. It’s about how do you tax effectively to get the revenue you need to run the government, but at the same time, not tax in a way that discourages economic activity. 

I had talked to Eamonn Butler about this too, at the Adam Smith Institute in London. Just so you know, here is Butler’s position on tax in general.

BUTLER: Look, I’m in favor of cutting any tax of any size and at any time, in any amount, for any purpose. I think tax, it may be, uh, a necessary evil, but it’s still an evil. 

So isn’t it strange that Butler’s intellectual hero spent his final years as a tax collector?

BUTLER: I tend to agree. It was basically a job which most people — you just stayed at home. You didn’t do anything. You just took the money. But Smith actually turned up and, you know, Smith actually did the job and so he did all the boring admin stuff. But at the same time, he came up with proposals to say, “Well, look, you know, this tax is so complicated that you’re actually encouraging smuggling or you’re encouraging evasion. So why don’t we just simplify it?” And he came up with a lot of proposals on tax, which the incoming Prime Minister William Pitt actually took up and put into legislation.

This image of Adam Smith as a sharp thinker, perhaps the greatest economic mind of his era — you run across it again and again. Here, for instance, is the Smith scholar Dennis Rasmussen, from Syracuse University.

RASMUSSEN: Toward the end of his lifetime, there’s a famous story that features in virtually every account of Smith’s life, where he’s entering a room with William Pitt, the prime minister, and his top ministers, and they all rise to greet him. And he says, “Sit down, gentlemen,” and they say, “No, we will stand until you’re first seated, for we’re all your scholars,” meaning we’re all your students. Whether or not that’s true, I don’t know how faithfully they followed on Smith’s economic advice. But there is, you know, some evidence that he had quite a bit of impact even during his own lifetime.

So you get the sense that Smith’s later years in Edinburgh were good ones. There is a lot to be celebrated in Smith’s life, and memorialized. But Panmure House is aiming a bit higher than that. Today, it’s affiliated with Heriot-Watt University and Edinburgh Business School, who partnered to rescue the house in 2008 and restore it. The team at Panmure House aims to reintegrate the economic and the ethical sides of Adam Smith’s legacy, and they use the building to host Smith-inspired lectures and debates. Also, the occasional play: John Yule’s The Invisible Hand was put on here in 2018. But the Panmure mission is growing: they’re hiring a team of academic researchers to create a facility devoted to what Caroline Howitt calls “sustainable capitalism.”

HOWITT: We’re at the dawn of the fourth industrial revolution, with far more wealth, literacy, and opportunity than ever before. But this is also a time of real geopolitical instability, rising inequality, a completely unprecedented environmental crisis, and global economic turmoil as well.  

And how relevant can Adam Smith be there? Dennis Rasmussen again:

RASMUSSEN: I wrote an article a few years ago about Smith’s worries about economic inequality, and that’s not something that, again, I think many people would take to be a central part of Smith’s concerns. He wants everybody to be richer, but does he really care about inequality? I think he does. He worries about the ways that inequality inhibits sympathy, the ways that it’s hard for the rich to sympathize with the poor, and the ways that these things can undermine morality and even happiness.

HOWITT: The only things that are going to solve these problems are the open-minded inquiry, reasoned debate, and multidisciplinary collaboration that characterized Smith and the Scottish Enlightenment. This is definitely going to be the future of Adam Smith’s thinking, as it were. We’re trying to pick up where he left off. 

It’s an enticing thought, for sure, to not only keep Adam Smith current for the 21st Century, but also to reclaim him, to show that he was so much more than the cardboard-cutout image so many of us have, the free-market zealot who apparently thought some invisible hand would solve everything. One evening during our visit to Edinburgh, the playwright John Yule and I took a stroll through Panmure House along with a program executive named Blair Barrows.

BLAIR: Every event we do is kind of introducing people to Smith as a human because, they’re only — they see a statue of him and they see a plaque on the wall and they see a picture, but they don’t see that human element. 

DUBNER: But it’s not just statues and plaques, it’s that what he is thought to represent as a patron saint of a certain kind of free-market ideology is, in fact, the component of who he was, but just one that’s — 

YULE: Dare we say that is an American ideology. Not typical to America or of America, but by and large came from there. 

DUBNER: It’s come to this, has it John? It’s come to this —

YULE: Through the Chicago school of economics, among others. But the other side of that is that because Britain followed America in almost everything it did, particularly with money, and we’ve become so Americanized here that Madame Thatcher, as we said earlier, actually propagated the same stuff. You know, that right-wing ethos of, “that’s what Adam Smith was about.”

DUBNER: So to what degree would you say this project is meant to be a corrective to that Smith? Not just The Wealth of Nations Smith but the 1960s University of Chicago, 1970s and ’80s Britain, nationalizing, privatizing Adam Smith?

BLAIR: I wouldn’t use the word “corrective.” The project here is we’re trying to open up debate more. We’re trying to introduce people to Smith for them to develop their own ideas. So I wouldn’t say it’s a corrective. I would just say it’s building on a foundation of different ideas. 

DUBNER: Nice. John? Same question.

YULE: Well, because I am neither academic or any of these things, I can say what I want to say. And I would say that Great Britain bought lock, stock and almost barrel the American way. They really did. They went for it and became individualistic throughout the nation. And that has been to the detriment of many, many, things. I and I am not sure that there’s not now a movement led by Panmure House and others like them to — I think I would use the word “corrective.”

DUBNER: He’s correcting your lack of using “corrective.” 

The Smiths moved into Panmure House in 1778.

HOWITT: Margaret Smith, his beloved mother, lived with him here at Panmure House until she died in 1784, which was just six years before Smith himself passed away. 

SMITH: His mother was very, very religious and some people have suggested that part of the reason that Smith is so careful about what he says about religion was more in deference to her than it was to the Church. 

DUBNER: You know, I always wondered, what he would have written had she died earlier, or he died later. You think he would have broken loose a bit more?

SMITH: Some people have suggested that. And they have said that if you look at some of the changes made to the very final edition of T.M.S., The Theory of Moral Sentiments, after she had passed away, the — some of the passages might be interpreted as reducing the religious context. 

HOWITT: While he was able to make meaningful revisions to Theory of Moral Sentiments and Wealth of Nations during his time at Panmure, he was also unfortunately really busy with his day job, okay? So this prevented him from writing the third major work that he had planned. 

It’s unclear what this third major work might have been. Smith was known to have made notes for a book on the history of the arts and sciences; and another book on the history of law and government.

HOWITT: In fact, in 1790, on his deathbed, he had the two executors of his will, Joseph Black and James Hutton, come to Panmure House to burn all of the unfinished notes and papers that might have helped us piece together what would have been in that third major work. It is a real loss, actually, that we don’t have that text. And I have checked the cellar and the attic several — several times, and I’m afraid they really are gone. 

Adam Smith died at Panmure House in 1790, age 67. John Yule’s play, citing Smith scholarship, portrays him as somewhat frustrated toward the end of his life, that he hadn’t accomplished more. He was buried very close by, at Canongate Kirkyard. John Yule and I, having followed Smith’s footsteps all day and into the night, we went to pay our respects.

DUBNER: So, John, we’re entering what you call the kirkyard, what we’d call the cemetery or it’s just churchyard, but happens to be — a graveyard and it happens to be Halloween! Are you a believer? 

YULE: No, but I still feel slightly nervous because it is Halloween. 

DUBNER: And because you’re with Americans and you distrust us perhaps?

YULE: No! No, it’s the people of Edinburgh who are likely to leap out from behind the stones and ask for money. Trick or treat. It is quite spooky, isn’t it? It’s eerily quiet.

YULE: Up here. Adam Smith. This is where the great man lies. 

DUBNER: Oh. So he’s got a very special place in the cemetery here. 

YULE: He does. He really does. I like the grave, I think it suitable to the man. I think it fits his personality and I think it fits his world and his place in it. There’s a slight austerity about it, which I feel is appropriate, and that the influence of his mother must have rubbed off in some way, on him. I just feel that from that grave. It’s not fancy and it speaks to me of a serious person. A serious person, not somebody who wants to be known for baubles and beads, but for serious thoughts and words. 

DUBNER: And can we read what’s there?

YULE: Written on the footstone is: “The property which every man has in his own labor is the original foundation of all other property, so it is the most sacred and inviolable.” That’s really good. I wish I’d put that in the play. 

DUBNER: When you talk about how much the world was changing during Smith’s time and it was, it’s certainly changed quite a bit since his time, and as we stand here at his gravesite on Halloween in Edinburgh on the eve of the 300th anniversary of his birth, what do you think Adam Smith would say to you tonight? You, John Yule, who’s been writing and thinking about Adam Smith and about how Adam Smith saw the world, what do you think he would say to you? 

YULE: He’d say, “Finish that third play.” He’d keep on about it. He’d say,” Get it finished!” Because that concludes the journey that you’ve been on, which started, and still lives with The Theory of Moral Sentiments. And I know The Wealth of Nations is the most famous book but for me, as was said earlier, it’s The Theory of Moral Sentiments which is the guide.  

DUBNER: So if that’s your mission, as directed by Adam Smith, what are you wasting time talking to me here in the cemetery? You’ve got to get home and get to work, don’t you? 

YULE: You invited me, and we’ve had a very nice day and you gave me lunch. At the end of the day, I’m just a traveling player, and the thought of lunch is always appealing. And so now I’ll go back and do the play and be hungry tomorrow. 

And thus concludes our three-part search for the real Adam Smith. All my thanks to John Yule, along with his merry band of Smith historians from Kirkcaldy; thanks to all the Smith scholars and devotees who gave us their time and expertise; and thanks especially to you for listening. Again, if you’re willing to spread the word about Freakonomics Radio, that would be great. My biggest thanks here go to Zack Lapinski, who produced this series with great care and insight and humor, and who also proved to be an excellent traveling companion. And one more note of thanks to John Yule for lending his fine voice to the readings of Adam Smith — as well as for his companionship and for leading us to a very good haggis

*      *      *

Freakonomics Radio is produced by Stitcher and Renbud Radio. This episode was produced by Zack Lapinski, with help from Katherine Moncure, and mixed by Greg Rippin, with help from Jeremy Johnston. We had help in London from Rob Double, Alex Delasalle, and London Broadcast Studios; and help in Scotland from Josh Nixon and Upload Studios; thanks also to John Yule for reading Adam Smith. Our staff also includes Morgan Levey, Ryan Kelley, Alina Kulman, Rebecca Lee Douglas, Julie Kanfer, Eleanor Osborne, Jasmin Klinger, Daria Klenert, Emma Tyrrell, Lyric Bowditch, and Elsa Hernandez. The Freakonomics Radio Network’s executive team is Neal CarruthGabriel Roth, and Stephen Dubner. Our theme song is “Mr. Fortune,” by the Hitchhikers; all the other music was composed by Luis Guerra.

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  • Maha Rafi Atal, assistant professor in global economy at the University of Glasgow.
  • Eamonn Butler, co-founder and director of the Adam Smith Institute.
  • Caroline Howitt, program director of Panmure House.
  • Glory Liu, a political scientist and Adam Smith scholar at Harvard.
  • Craig Smith, Adam Smith Senior Lecturer in the Scottish Enlightenment at the University of Glasgow.
  • John Yule, Scottish actor and playwright.



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