Adam Smith on Markets and Justice

This paper discusses Adam Smith's views of social justice. It first describes Smith's optimistic view of markets, for example with regard to the absence of negative externalities, which implies that he considered certain normative problems to be the exception rather than the rule. Then, Smith's views on redistribution are discussed: although he is sympathetic to progressive taxation, his main focus remains on free markets, which can partly be explained by his distrust of politicians. If one takes a closer look as Smith's views of markets, however, it turns out that one of the reasons why he endorses them is their distributive features. He saw them as an antidote to the inequalities of the feudal age, offering all individuals an opportunity to work their way up to a decent standard of living and leading to more equality in the long run. Thus, Smith's account, while out-dated in certain ways, can serve as an inspiration for thinking about distributive justice not only as a question of redistributive taxation but also as a question of the institutional design of markets.