ABSTRACT
The difficulties of the “system of natural liberty” led Smith to add to it a State of liberal conception capable of ensuring the optimality of the competitive economy, i.e.: i) guaranteeing a secure institutional framework for the optimal allocation of resources for exchangeable goods; ii) assuming the failures of the market, by the realization of public goods when the private costs of realization exceed the social costs. To this end, in addition to the regalian functions of Defense and Justice, Education is added. Here, Smith is confronted with a contradiction: the dehumanizing nature of the division of labor, its economic virtues (Book I) conflicting with the loss of civic virtues it provokes in individuals (Book V). Thus, Smith's proposals in terms of education are primarily ethical and moral, not economic, in line with civic humanism, where human freedom and fulfillment reside in participation in civic life. The chapter concludes with a description of the State's economic action: from public works and services to taxation and public debt (Book V) and banking regulation (Book II), which are analyzed from the angle of the restrictions on the exercise of natural freedom that are nonetheless necessary for its fulfillment.
