Senators Christopher Coons (D‑DE) and Kevin Cramer (R‑ND) introduced a bill, the PROVE IT Act, on June 7, 2022, that lays the groundwork for a carbon tariff. A carbon tariff is a tax on imports based on their carbon intensity, a measure of carbon dioxide and other greenhouse gases (GHGs) per unit of activity (e.g. manufacturing). The PROVE IT requires the Secretary of Energy “to conduct a study and submit a report on the greenhouse gas emissions intensity of certain products produced in the United States and in certain foreign countries.” Presumably, this report would be used to compare the intensities of similar products produced in the United States and elsewhere, and then a carbon tariff would, theoretically at least, be used to tax imports from countries whose products have higher intensities to offset any economic benefits gained from producing in countries with fewer environmental restrictions.

However, carbon tariffs are not the only proposal for taxing imports based on their carbon intensity. For example, the European Union recently implemented a carbon border adjustment mechanism (CBAM), a device designed to “adjust” for the fact that companies headquartered in different countries face different levels of environmental regulation. The CBAM is also a tax on imports, but the “border adjustment” piece requires a domestic carbon tax to adjust (and a pure border adjustment should also include a rebate for exports). The U.S. does not have a federal carbon tax, so any “CBAM” implemented without one would simply be a carbon tariff.

Regardless of the name, there are several reasons to be highly skeptical of a consequential U.S. carbon tariff bill and to be worried that it would do more economic harm than environmental good. Here are three:

First and most obviously, a carbon tariff would impose significant new costs on American consumers, companies, and workers. For example, recent U.S. tariffs on more than $350 billion worth of imports have been found to cost Americans over $50 billion per year. The PROVE IT Act targets over $600 billion worth of imports, suggesting the cost of carbon tariffs could be even higher than the Trump-Biden tariffs. Import taxes hurt Americans by increasing prices, particularly those in the lowest income brackets, and U.S. companies’ competitiveness by raising their production costs or insulating protected firms from market competition. For example, President Trump’s imposition of tariffs on imported steel inflicted significant damage on steel-consuming U.S. companies (like nail manufacturers)—the new taxes cost their workers directly through layoffs and the companies became less competitive as they were forced to either share the costs with their customers by raising prices, reduce production, or decrease investment. As a result, the tariffs did little to “level the playing field,” instead the President surrendered home-field advantage and gave the edge to foreign competition, who faced no such taxes.

Second, the history of U.S. tariff policy raises serious concerns that a carbon tariff would not be administered in a sound and impartial manner. Instead, these tariffs would simply be a vehicle for rote protectionism. A prime example of such protectionism is the steel tariffs imposed or maintained under the Bush II, Trump, and Biden administrations, which had political motivations far exceeding any economic ones. At the same time, U.S. trade remedies (antidumping and countervailing duties (AD/​CVDs)) law utilizes a process to calculate dumping or subsidization of imports that “injures” domestic industry but can be “remedied” by imposing duties (tariffs). Similar calculations are likely to be used for carbon intensity. However, AD/​CVDs law is notorious for being strongly biased against imports and American consumers. Even worse, in reality, the law is used as a way to deliver protectionist rents to a handful of well-connected companies (including, again, steel).

Indeed, some already propose that the CVD law—the remedy for U.S. industry alleged to be injured by unfairly subsidized imports—could be used to impose carbon tariffs and thus avoid the need for new legislation. Doing so, however, would subject carbon tariffs to the same problems—regulatory capture, rent-seeking, etc.—that already afflict U.S. trade remedies proceedings, and worse, invite abuse in similar proceedings determining carbon tariffs. For example, one major problem with AD/CVDs law is the discretion they give to the government when data is missing: if the Commerce Department deems information provided by a foreign company during an investigation to be unreliable or insufficient during an AD/CVD investigation, the agency will use various methodologies to fill it in, inevitably resulting in import duties that unreasonably favor the U.S. companies who lobbied for relief. If Commerce followed similar procedures for carbon intensity, similarly biased results are sure to emerge. In other words, the U.S. government could easily make foreign businesses look like they emit more carbon or GHGs than they truly emit, resulting in high tariffs on foreign products in the name of climate change that really serves to protect American businesses from competition.

Thirdly, U.S. carbon tariffs would likely violate the World Trade Organization (WTO) non-discrimination rules, which state that WTO members must treat like imported products equally and give imports the same treatment as the same products made domestically. Many legal scholars argue that a border adjustment imposed uniformly on all imports and in concert with an equivalent carbon tax applied to domestically-produced goods/producers—similar to the EU’s CBAM—might not violate these WTO rules. However, the PROVE IT Act, if turned into carbon tariffs, would satisfy neither condition: the envisioned report applies to only certain countries, and the United States today has no federal carbon tax. Thus, many of the same trade experts who think the CBAM passes the WTO must think a U.S. carbon tariff would fail.

Finally, it is far from certain that carbon tariffs would provide significant climate benefits. The consensus on the efficacy of carbon taxation, including through a CBAM, to reduce carbon or GHG emissions is mixed. While economic theory supports that taxing an item would reduce emissions production, the likelihood of calculating the “right” price for emissions and appropriately administering it is low. Indeed, the level (country, industry, factory) at which a tax is applied could have the opposite effect by encouraging more carbon-intensive production and there are myriad other factors affecting carbon intensity; energy prices and subsidies (making production cheaper), to name a couple. Moreover, carbon and GHG emissions are not limited to the countries that tax them or the imports from countries chosen for a tariff.

Policymakers would do well to remember that freer trade promotes cleaner environments. Thus, a more effective solution to reducing emissions would be a multilateral commitment such as finalizing the WTO’s environmental goods agreement that reduces tariffs on environmental goods. Making it cheaper to adopt cleaner technologies will increase the availability of products to improve the environment and create a sustainable tree with branches ripe for new opportunities in the trade and environment nexus. Although reducing emissions should be a global effort, Congress and the Biden administration should do their part and breathe some (clean) air into the U.S.’s trade and climate policies by resisting the protectionist path which continually demonstrates the dirty business of rent-seeking and will do little for clean and renewable technologies innovation.

In the aftermath of Donald Trump’s efforts to remain in office notwithstanding the 2020 election, many lawyers who assisted him along the way are facing disciplinary and disbarment proceedings. New York and District of Columbia bar authorities suspended Rudolph Giuliani’s license to practice after finding him to have broken various rules, and former Justice Department lawyer Jeffrey Clark faces similar proceedings in D.C. Colorado bar authorities censured attorney Jenna Ellis saying that she violated a “duty of candor to the public” by repeatedly misrepresenting facts about the supposed election theft. And in proceedings that begin this week, California bar authorities are seeking to strip John Eastman of his license to practice over a course of conduct including, but not limited to, preparing a memo arguing that Vice President Mike Pence had the authority to block certification of the election. (Eastman’s lawyers have said the memo merely lays out scenarios and deny that it “proposes any particular course of action.”)

The various proceedings raise issues of wide interest, but I’d like to focus on an issue that may seem narrow. If, with Milton Friedman and many other liberty-minded writers, we take a skeptical view of occupational licensure as tending to do more harm than good, does it follow that we should also take a dim view of lawyer disbarment and discipline? After all, if clients should be free to choose the doctor they want, why should they not be free to choose a lawyer who may have displayed “moral turpitude,” lied to the public or courts, or behaved disloyally toward the Constitution or laws, to name some of the allegations in these cases? If a lawyer engages in some kind of misconduct that clearly merits punishment, such as submitting falsified documents, then – the argument might go — perhaps that punishment could be meted out by way of direct criminal prosecution.

There are many reasons, however, why such a critique may get ahead of itself.

To begin with, lawyers play multiple roles in society, and a correct analysis may not lead down the same path for all the roles. Some things lawyers do, such as drafting wills and advising on the state of the law, are relatively private and peaceful. When lawyers botch these roles, the consequences most often fall on the client. If we go along with Milton Friedman’s argument that a free marketplace would provide patients with adequate ways to avoid quack doctors, maybe by analogy we can go along with the idea that clients can steer clear of incompetent contract-drafting lawyers.

But lawyers also wield powers to initiate coercive legal process – powers that are in effect delegated by the state, and that have no real equivalent among dentists, barbers, or plumbers. When they use this set of powers, lawyers can compel you – a stranger who never chose to hire them — to attend court dates against your will, reveal your private secrets and thoughts against your will and under oath, and shoulder the costs of a defense that might drain you of every penny you own. Not surprisingly, many schemes of lawyer regulation (though not ours) recognize a distinction between lawyers with a primarily advisory role, who are less regulated, and lawyers who act in serious court proceedings, who are held to higher standards. (Britain’s solicitor-barrister distinction tracks a similar, though not quite identical, line based on “rights of audience.”)

As we have seen, the response to the problem of shoddy advisory and document-drafting lawyers will often take place under a rationale of own-client protection. But when lawyers misbehave in court, those they injure will very often be adversaries or actors in the court system itself. (The lawyer’s own client might be okay with the misconduct or even approve of it as a way to win.)

A related point is that while licensing in other occupations arises from powers of the legislative and executive branches of government, lawyer discipline springs historically from the courts’ inherent powers, powers that were jealously guarded by the common law courts. And while protection of consumer interests did figure into the picture – mishandling client funds remains a good way to lose a law license – the common law judges were particularly intent on excluding lawyers whose conduct might threaten the work of justice. It is true now, as it has probably been immemorially, that one of the surest ways to get the hammer of legal discipline to land on your head is to get caught lying to the judge.

There are yet more complications. In practice, courts tend to delegate a lot (too much?) of the disciplinary process to bar panels and other ostensibly independent actors, and much could be and has been said about the hazards of the resulting mystique of “self-regulation.” Still, the courts continue to play key roles in lawyer discipline. At the front end, judges disgusted at a lawyer’s conduct in court can flag it as suitable for discipline, as has happened repeatedly in the Trump election saga. And the supervision is more explicit at the back end when a relevant court (such as a state high court) serves as the final arbiter of whether to exclude a lawyer from practicing in the future before its judges.

The power of courts to regulate their own proceedings and participants, as they have done under centuries of common law, is one we tamper with at our peril.

The recent debt-ceiling deal put caps on discretionary spending for 2024 and 2025. But House conservatives want larger reforms and are seeking additional cuts in fiscal 2024 appropriations bills. House Appropriations Chair Kay Granger is right that “the debt ceiling bill set a ceiling, not a floor” for 2024 spending.

What should the GOP cut? One place to look is appropriations that are “unauthorized.” Federal discretionary programs are supposed to be authorized before appropriators spend, but authorizations have lapsed for many programs and Congress spends anyway. Romina Boccia argues that this rise in “zombie spending” reduces oversight and increases waste.

Consider the Economic Development Administration (EDA), which hands out hundreds of millions of dollars a year in subsidies to state and local governments and the private sector. EDA spending has soared from $264 million in 2019 to $1.53 billion in 2023, as shown in the figure. The EDA budget received a boost from recent legislation including the American Rescue Plan and CHIPS acts.

EDA spending authorization lapsed after 2008. The last serious attempt to reauthorize it was in 2011, which failed in the Senate by a 49 to 51 vote. Supporters at the time touted such things as, “For every dollar spent in EDA, $7 of private investment is attracted,” as Senator Barbara Boxer suggested. But opponent Senator Tom Coburn said that such claims were anecdotal and made up by the EDA and grantees themselves. He pointed to the lack of rigorous analysis of EDA spending and opined that the agency “has been used as a congressional slush fund to direct money to friends of Members of Congress.”

The EDA was created in 1965 and says its role is to “lead the federal economic development agenda.” The agency sprinkles grants widely to congressional districts across the nation in a vast range of activities. EDA leaders make lofty claims about jobs and investment that are not sufficiently challenged by members of Congress, who are eager to secure grants for their districts.

Cato has critiqued the EDA, and federal auditors have been skeptical about some of the agency’s claims. The Government Accountability Office testified that the EDA’s reliance on grantee estimates “may lead to inaccurate claims about program results.” Analysts have long noted the “gulf between promise and performance” at the EDA.

What sorts of things does the EDA fund? The following are some projects highlighted in EDA annual reports from 2018 to 2021 (see here) that fit into two categories: 1) projects that, if useful, should have been funded by the states, and 2) projects that, if useful, should have been funded by the private sector.

Should have been funded by the states:

• $8,350,057 to improve the International Parkway Bridge in Tracy, California (2021).
• $7,899,000 to make levee upgrades in Hamburg, Iowa (2020).
• $5 million to renovate the University of Texas Coastal Ocean Science building (2019).
• $1,975,800 to Delaware Technical and Community College for a skills training facility (2018).
• $3,806,761 for a new generator at the University of South Alabama (2021).

Should have been funded by the private sector:

• $2,546,760 to the Institute for Advanced Learning and Research to purchase equipment for training employees (2021).
• $10,214,022 for Leon County Research and Development Authority to build a business incubator in Tallahassee (2020).
• $7,872,090 to Blue Lake Rancheria, California, to build a local business incubator (2019).
• $2,030,000 to help Cedars-Sinai Biomanufacturing Center purchase equipment (2018).
• $1,996,160 to purchase equipment for training at the Fairbanks Pipeline Training Center Trust (2021).

The EDA does not have special skills for boosting economic growth that the states and private sector do not have. Federal funding of local industrial parks, incubators, equipment, and other items just adds bureaucracy. Taxpayers pay for the federal EDA bureaucracy of more than 300 employees, and then those folks impose rules and regulations on local partners, which further raises costs. To receive EDA funding, for example, regions must complete central-planning-style “Comprehensive Economic Development Strategies.”

The EDA often claims that it garners high returns on projects, but if true we would not need the agency because the states and private sector would eagerly fund such projects. In other cases, the EDA says that it is filling unmet needs. The head of EDA testified that “without the support and funding of EDA, many projects would struggle to attract necessary capital.” But maybe those projects struggle because they have poor management or are economic losers.

Another problem with EDA projects is that they can pit jurisdictions against one another in a zero-sum game. In his study of the EDA, David Bier says that the agency gave $2 million to Visalia, California, to expand an industrial park, but then that subsidy induced a medical equipment manufacturer to relocate hundreds of jobs from elsewhere within the state. In such cases, EDA subsidies create winners and losers and probably no net value.

The EDA is one of many programs that spread federal subsidies around the country for local development. But local areas needing development can reform their own taxes and regulations to spur entrepreneurship and private investment. Jurisdictions that create inviting climates for businesses and skilled workers can prosper without subsidies.

Federal funding of local projects is inefficient for many reasons, and it is not affordable given ongoing federal deficits of more than $1.5 trillion a year. Both the Reagan and Trump administrations proposed eliminating the EDA. House Republicans should take another shot at reform.

There’s a well-defined budget process that members of Congress are supposed to follow each year to debate how much the federal government will spend and how much money the government will collect in taxes or borrow from credit markets. That’s not happening. “Protecting America’s Economic Security,” the fiscal year 2024 budget plan introduced by Republican Study Committee chairman Kevin Hern (R‑OK) and its Budget and Spending Task Force chairman Ben Cline (R‑VA), proposes several reforms to revive and improve the federal budget process.

Here are five ideas in the RSC budget worth considering:

Adopt a Balanced Budget Amendment or Similar Statutory Spending Limits. “The RSC Budget supports the adoption of a federal Balanced Budget Amendment (BBA), and other long-term fiscal controls, to limit tax collection and balance the budget,” write the proposals’ authors. Taxpayers benefit from fiscal rules that bind legislators. Well-designed fiscal rules limit the propensity of government to expand and protect future taxpayers from harmful debt. The current approach of ever-expanding debt and growing deficit spending is highly unsustainable and unfair toward younger generations.

As detailed by my Cato colleague Chris Edwards, balanced budgets used to be the norm for more than 100 years of federal history. Not anymore: “From 1791 to 1930, federal politicians balanced the budget 68 percent of the years, but since 1931 they have balanced it only 13 percent of the years. Furthermore, deficits have become larger over time relative to the size of the economy.” To address rising spending and debt head-on, I am a fan of Kurt Couchman’s unified budget idea paired with a Swiss-style debt brake to establish and enforce rules toward sustainable federal budgeting.

Account for Interest Costs. “This budget would adopt Rep. Michael Cloud’s (R‑TX) bill, the Cost Estimates Improvement Act, to require the CBO to include the projected debt service costs in its legislative cost estimates,” write the RSC proposals’ authors. Including interest costs in legislative cost estimates would improve accuracy in congressional scorekeeping and should be a bipartisan priority. Cost estimates confront Congress with the fiscal impact of proposed legislation prior to the passage of a bill. Cost estimates also aid in the enforcement of budgetary rules and targets. With interest costs now making up one of the fastest-growing budget categories, it is especially important that Congress fully account for interest in legislative cost estimates.

Reform Emergency Spending. “The RSC Budget would… require legislation containing emergency spending to be accompanied by a statement explaining why an emergency designation is necessary and require a three-fifths majority vote to approve such legislation. Moreover, emergency funding should be timely and targeted. Thus, the RSC Budget would create a separate point of order against emergency spending legislation that would produce outlays beyond two fiscal years.” I commend the RSC for proposing to make it more difficult to abuse emergency spending to prop up other spending. The RSC should go a step further and require Congress to account and pay for emergency spending with lower discretionary spending limits and mandatory spending reductions in future years. I explain this emergency accounting concept in greater detail in my latest Cato policy brief, titled “A Better Budget Control Act.”

Stop Unauthorized Spending. In 2022 alone, Congress spent $461 billion on federal programs whose authorizations had expired. More than half of this spending went to programs that expired more than 10 years ago. Congress wastes money on myriad programs that aren’t even authorized. Unauthorized appropriations should be a prime target for cuts. Rep. Cathy McMorris Rodgers (R‑WA) champions legislation with the goal of ending unauthorized appropriations. The Unauthorized Spending Accountability Act (H.R.2056) would sunset unauthorized spending and create a commission to review all discretionary programs. The RSC budget endorses this approach.

Reveal Spending and Gimmicks in Appropriations. “The RSC Budget would require CBO [the Congressional Budget Office] to release a report estimating the fiscal impact of appropriations bills as well as information on changes in mandatory programs contained in appropriations bills, to each member of Congress and to the public,” write the proposals’ authors. Changes in mandatory programs are a recurring budget gimmick in congressional appropriations. Most CHIMPs provide no real savings. Instead, they facilitate increases in discretionary spending without running afoul of current spending limits. It’s a start for the RSC to require CBO to reveal the size and scope of CHIMPS to the public as Congress is debating appropriations bills. Even better would be prohibiting the use of fake savings to prop up discretionary spending.

A Costly Budget Process Failure

The so-called federal budget process has disintegrated over the years. Congress regularly misses key budget deadlines and fails to live up to its fiscal responsibilities. Case in point: neither the House nor Senate have introduced budget resolutions this year. As reported by Peter Cohn in CQ-Roll Call: “Lawmakers have adopted a budget resolution before the April 15 deadline just four times in four decades.”

The consequences of Congress’ failure to budget responsibly are severe. Congressional fiscal neglect results in a less effective, more expensive government that wastes taxpayer dollars, drag down economic growth, and burdens current and future generations with increasingly unsustainable debt. The RSC budget contains some worthwhile ideas to revive congressional budgeting and enhance accountability and transparency for taxpayers. Unless members of Congress are willing to push these proposals when up against action-forcing fiscal deadlines such as the debt limit or the end of the fiscal year, it’s unlikely that they’ll be adopted.

This article appeared on Substack on June 19, 2023

A common view attributes economic inequality to the evils of markets—greed, corruption, family connections, luck, and so on—rather than to differences in economic productivity.

Some wealth is no doubt “ill-gotten,” or at least not directly related to one’s own contribution to the economic pie.

Yet many differences in economic success result from government interventions that create winners and losers, and in arbitrary or even perverse ways.

Government licenses to become a lawyer, doctor, hair braider, plumber, or other professional raise the income of those who obtain these licenses, regardless of whether more talented.

Zoning regulation protects the wealth of those lucky enough to have bought land before such restrictions existed.

Much regulation, of all kinds, imposes substantial fixed costs. Larger firms more easily absorb these, while small firms face a greater barrier to entry. Regulation also creates the opportunity for less principled businesses to game the system, implying honest firms lose out.

When governments build schools, roads, hospitals, office buildings, military equipment, and other infrastructure, they contract out with private firms. Ideally government chooses the most efficient firm, but in practice cronyism and corruption play substantial roles.

Restrictive immigration policies prevent people in poor countries from earning substantially higher wages.

Medicare reimbursement rules reward less scrupulous health care providers, who manipulate billing codes to maximize their revenues.

Taxpayer-funded universities transfer wealth to families with more college-bound children.

Government protections for unions raise member wages but cause others to be underemployed. Minimum wage laws have similar effects.

Rent controls discourage construction of new housing, raising costs for those who fail to secure controlled apartments.

The corporate income tax penalizes not just shareholders but customers and employees, who are often less well off.

Progressive or complicated tax codes create lucrative incomes for the lawyers and accountants who help individuals and businesses avoid or evade these features.

I could go on, but you get the point!

The fact that government causes these arbitrary redistributions is not, by itself, reason to avoid all intervention. If a policy generates large benefits, any resulting mal-distribution might be a necessary evil.

In a few cases, moreover, redistribution is the flip side of a potentially beneficial effect. Patents and copyright create monopoly profits that incentivize innovative or creative activity, perhaps benefitting society overall.

Nevertheless, policy evaluations should recognize the scope for arbitrary redistribution as one negative side effect of interfering with free markets.

Likewise, any discussion of redistribution should recognize that government, rather than the free market, is often the bigger offender.

As headlines have gotten the attention of parents and policymakers, a new Surgeon General’s report has raised concerns about children’s and teens’ time on social media. Some states, including Utah, Arkansas, and California, have introduced bills that claim to “protect children,” but these bills would carry significant consequences for speech and privacy. Many parents and policymakers are wondering what could be done to help keep kids safer online without taking such a restrictive —and likely unconstitutional — approach.

The issue of keeping children and teens safe online is as unique as each individual child and family. The best answers for these concerns are not one-size-fits-all and thus will emerge from a variety of market and civil society forces that can respond to these unique needs. In my latest policy brief, I highlight some ways that policymakers who want to support parents and families navigating these questions could do so without the problems for speech, privacy, and parental choice.

Many great resources exist already, from parental controls to resources for having conversations about technology with children and teens, but parents are often unsure of what parental controls are available, how to have conversations with their children about technology, or where to look for guidance. Policymakers could help empower parents by collating existing resources or engaging in other educational opportunities so families can choose the right solutions for their concerns. These resources need not be developed by the government, as a wide array of both industry and civil society groups have already developed such resources.

Second, further research is needed to understand the underlying concerns around issues like teenage mental health and social media. It should not be presumed that technology is always to blame, and how technology can help with these same issues should also be explored. Not only should further research and conversations include scientific and social science research, but policymakers and trusted adults like parents, caregivers, and teachers should also ask children and teenagers why they prefer to spend time online and discuss the value they find in online communities.

Finally, many states already have a digital or computer literacy component in their curriculums. However, many of these curriculums and standards were developed before social media gained popularity. This year, Florida passed a law to include updated online safety and media literacy around social media in a way that allows schools and parents to be aware of and choose the curriculum. This flexible approach does not dictate to children and teenagers what choices they should make, but instead prepares them to both make responsible choices and understand the risks and benefits of using technology.

In short, it is understandable that many parents are concerned about what they hear about children, teenagers, and social media. It is not uncommon for these concerns to arise with technology or in popular culture. Similar concerns have played out over everything from the novel to video games.

Despite these concerns, many children and teens have found valuable online communities, educational opportunities, or new passions online. Rather than rushing to regulate or take away technology from teenagers, parents, and policymakers should look at the tools available to empower and educate all users on how to have a beneficial online experience.

We don’t know the day he was born, but Adam Smith was baptized on this date 300 years ago. Since then, the ideas of the man widely considered the father of modern economics have changed the world and remain as relevant as ever.

As a central figure of the Scottish enlightenment, Smith is best known for The Wealth of Nations, a work in which he challenged the world’s prevailing economic system. Smith opposed privileges imposed by law, including trade protectionism. He further called mercantilism—a doctrine that argued that to accumulate wealth, countries must export more than they import—“absurd.”

A keen observer of reality, Smith explained that “What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it off them with some part of the produce of our own industry, employed in a way in which we have some advantage.” For instance, Smith asserted that good wine could be produced in Scotland, but he calculated that its cost would be 30 times that of good wines that could be imported from other countries.

Smith took a dim view not just of protectionism, but most any attempt on the part of the authorities to direct the economy. The true origin of wealth is explained by a counterintuitive concept based on another of Smith’s observations: The pursuit of self-interest in the marketplace, not mere benevolence or a plan imposed by rulers, ultimately produces prosperity and improves the welfare of others.

But Smith, a professor of moral philosophy, understood that people are complex and not just materialistic.

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

So he wrote in his first book, The Theory of Moral Sentiments. According to Smith, empathy arises from interacting in society, which also makes people want to be loved and want to deserve it. Experience, not intellectual reasoning, gives rise to moral sentiments and attitudes such as benevolence.

How do we reconcile self-interest with sympathy for others? For Smith, there is no contradiction. In the free market, one can only act with the interests of others in mind since exchanges are voluntary.

As Smith tells us in his “Lectures on Jurisprudence,” such exchange is based on “the natural inclination everyone has to persuade.” He adds, “The offering of a shilling, which to us appears to have so plain and simple a meaning, is in reality offering an argument to persuade one to do so and so as it is for his interest.”

Smith believed justice is a pillar that is essential to the functioning of society. Where justice exists, even the impersonal exchanges of an ever-expanding marketplace are characterized by collaboration and respectful treatment of the other. These exchanges also encourage benevolence; according to Professor Smith, even a beggar who receives monetary charity ultimately depends on the market.

In his writings, Smith was concerned for the happiness of the poor, who at the time comprised almost the entire population of Scotland and the world. He opposed empires, slavery, and the mistreatment of indigenous people overseas. Since his death, as the world has liberalized, global poverty has plummeted, wealth has soared, empires have fallen, chattel slavery has been officially abolished, and human rights have been extended to a growing portion of the global population.

As long as humans celebrate moral and material progress, so should they celebrate Adam Smith.

Note: This article is based on a version that was originally published in El Comercio (Peru) on June 13, 2023.