Since it is Adam Smith's birthday week, I wanted to take the time to address a very interesting comparison. Libertarian heroes Adam Smith and Ayn Rand had a very similar approach to fiscal governance: the government needs to stay out of the way. However, I want to use this post to highlight a major difference between these two great figures and display why Adam Smith had a better driving mechanism behind this philosophy of government.
Let me start by highlighting the basics of each of these thinkers. Adam Smith, often credited as the founder of the free market idea, is known most for his "invisible hand" theory. This says that government regulation was disfunctional and that the economy, if left alone, would regulate itself. In other words, the power of the consumers and natural regulations would provide proper oversight. Influential libertarian thinker Ludwig Von Mises also shared many of these thoughts.
Ayn Rand was one of the great objectivist thinkers. Her idea was basically that no one should do anything for the sake of anyone else, but rather that you are your own person. Her reasoning for less government regulation was that the regulations made it so that the person was looking out for the good of everyone and was therefore owned by society and not theirself. She did not however, provide any of her own rationality of how this philosophy would affect the population.
Both of these philosophies are, in my eyes, valid. I agree with Adam Smith that the markets regulate themselves if left alone. I also agree with Ayn Rand that each person should reject the idea of giving up their liberty or rights for the sake of the "greater good." However, when applied to economics, Ayn Rand did not dive deep enough into her theory. She explained why government regulations were wrong and immoral, but she did not give a real explanation as to what happens to the market once regulations are lifted. If you do not believe that government keeps companies running, and you do not believe that the market keeps companies running, then what happens?
Von Mises comes back into play now, as well. He wrote in his book that the companies are kept running because the market communicates with them through buying goods that they like (very similar to Adam Smith's theory). While I am cautious to criticize her private notes (of which she never intended to be published), she did write of the book that those ideas lended themselves too heavily to collectivism. Instead, she said that companies did not have to cater to customers because that would be giving yourself to the hands of consumers. The gap in this arguement is that companies must follow consumer advice or they would not stay in buisness.
Where I see Rand's difficulty here is that she gets too caught up in philosophical principals. She sees anything that has to do with the general population as handing yourself over to the "greater good." While I believe in the objectivist theory, I believe that one can still have relations with other people. As a buisness person, you can run a buisness free of regulation and independent of societal rule while still adjusting products to increase revenue. I would also argue that the adjustment of a product due to the market's will is still voluntary, while regulations are not.
In conclusion, I endorse both Adam Smith and Ayn Rand's philosophies of government. They both have strong positions on little government regulation and markets that are very free. However, digging deeper into their vision of an economy without regulations, Adam Smith has a more practical view of a successful free market system.
In liberty, Jared
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