For there is more to Smith than just Capitalism or The Wealth of Nations. Just to provide some context on the taking of Smith out of context, consider what may be the one thing he is generally most remembered for today: the "invisible hand" of self-interest that guides the market and the economy.
Adam Smith, moral philosopher, recognized that there is a moral realm in human affairs, and that there is more to human life, government, and policy than just economics or pure self-interest.
So Adam Smith and his book have been transformed into mere two-dimensional figureheads for political and ideological purposes, sort of like the oversized posters and banners emblazoned with the likeness of Chairman Mao or various Middle Eastern dictators for state-sponsored political rallies. Adam Smith deserves better than that.
Here it's worth pointing out that although Wikipedia states outright that The Wealth of Nations was Smith's "magnum opus," and most of us living today would agree, because that book is what we remember Smith for, and most of us are unaware that he ever wrote anything else--Smith himself did not necessarily see things the same way.
Adam Smith was the 'forefather' of capitalist thinking. His assumption was that humans were self serving by nature but that as long as every individual were to seek the fulfillment of her/his own self interest, the material needs of the whole society would be met.
According to Deirdre McCloskey, Smith's system is a type of virtue ethics involving moral sympathy and approval. His system requires people to weigh moral virtues against social norms in the context of time and place. Taste, aesthetics, and moral sensibility are necessary for making good judgments on ethical questions.
On this approach, capitalism simply has no “ethics,” in terms of having moral foundations. Instead, it's a sort of remedial way of organising the economy, one that tries to save us from ourselves and from each other, without aspiring to any higher moral goal or justification.
Smith believed in taxing property, profits, business transactions, and wages. But these taxes should be as low as possible to meet the public needs of the country. He also thought they should not be arbitrary, uncertain, or unclear in the law.
Smith's ideas–the importance of free markets, assembly-line production methods, and gross domestic product (GDP)–formed the basis for theories of classical economics.
First, capitalism is moral because — unlike socialism — it respects individuals, their rights, and their pursuit of happiness. In fact, capitalism requires this respect for individuals and rights. This is why capitalism often is defined as a social system, not an economic system, which protects individual rights.
Ethical Capitalism seeks to build deep, trust-based relationships in the service of society as well as the bottom line. In other words, it is a business model with a "higher purpose." The benefits are real and long-lasting.
“Capitalism is not an ethical system; it can plausibly be said to have ethical by-products in certain circumstances, but so long as they are by-products, we have a problem about the basic motivation which can keep going not only the system of capitalist exchange but the institutions of public good in a society.”
invisible hand, metaphor, introduced by the 18th-century Scottish philosopher and economist Adam Smith, that characterizes the mechanisms through which beneficial social and economic outcomes may arise from the accumulated self-interested actions of individuals, none of whom intends to bring about such outcomes.
He supported basic education when many contemporaries only saw danger in teaching the poor. And he opposed slavery when it was accepted as good business. In sum, transcending even the trilogy of ethics, economics, and jurisprudence, Smith was a moral philosopher in the fullest meaning and sense of the term.
Richard Vedder, emeritus professor of economics at Ohio State, is writing a book on declining productivity in American universities. A précis was printed in the Wall Street Journal as “College Wouldn’t Cost So Much If Students and Faculty Worked Harder.”
Critics sometimes complain that Adam Smith’s economics were not very good. The labor theory of value has certainly not held up well in most circles, and Smith was flummoxed by the diamond-water paradox.