ABSTRACT

Adam Smith’s ground-breaking book The Wealth of Nations is widely believed to be the masterpiece behind the theory of the ‘invisible hand’ and the free market. According to Smith, the government should have little economic functions, at least in the sense that the sovereign of the state should be:

discharged from . . . the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to . . . first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and thirdly, the duty of erecting and maintaining certain publick works and certain publick institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain.