ABSTRACT
It is dicult to overestimate the enduring inuence of Adam Smith’s The Wealth of Nations, which was rst published in England in 1776. In it Smith articulates assumptions about the relationship between human nature and the market that underlie not only the contemporary discipline of (mainstream) economics but all those approaches to the study of human beings-including so-called rational-choice theory in political science-that are based on essentially economic assumptions. By “economic assumptions” I mean the assumptions (a) that humans are motivated above all by individual gain, and (b) that they are suf-ciently rational to know how to maximize it. It follows from this “expectation that human beings behave in such a way as to achieve maximum [monetary] gains” that a market economy in which “all production is for sale on the market and . . . all incomes derive from such sales”1 will be considered both natural and inevitable. Living as we do in a capitalist market society, we tend to take this for granted: since individuals are, by nature, rationally-self interested-in more colloquial language, since they necessarily “look out for number one”—it follows that the only rational economic system is one in which the chief incentive for the production and distribution of goods and services is personal monetary gain. In short, many of us simply take it on faith that a market economy is, if not the only possible economy, the only one that will really ever work. is tacit assumption merely echoes what Adam Smith and his many followers-including, as we shall see, Milton Friedman and Friedrich Hayek, whose work we will encounter in the next two chapters-have explicitly argued, and celebrated, ever since 1776. Unfortunately for them it turns out that the celebration was, and is, premature: as Karl Polanyi, relying on the research of many twentiethcentury historians and anthropologists, persuasively points out, the assumption of the naturalness and therefore the inevitability of a market economy is simply and entirely wrong: “previous to our time no economy ever existed that . . . was controlled by markets.”2 But before I come to Polanyi, rst let me summarize the essentials of Adam Smith’s famous second chapter of his Wealth of Nations.
