“There is no more important proposition for all kinds of historical research than . . . that anything in existence, having somehow come about, is continually reinterpreted anew, requisitioned anew, transformed and redirected to a new purpose by reinterpretation and adjustment, in the process of which earlier meanings and purposes are necessarily obscured or completely eliminated.”

Thus spoke Nietzsche, in his Genealogy of Morality (essay 2, pt. 12). Tracing the way in which thinkers and their books are interpreted, reinterpreted, and altered across time and space is the characteristic concern of the genre of reception history. Glory M. Liu's book falls squarely into that genre.

Let us depart from the normal pattern of book reviews, and as befits a journal in the history of economic ideas, get to the bottom line. If you are interested in the history of political economy, this is a book you will probably want to read. It is well written and well organized, and it teems with new research, which it combines with existing scholarship. If some of my comments are critical, it is only because the book's generally high level of reportage and analysis makes it worthwhile to call attention to some of its shortcomings.

Glory Liu is not much interested in what one might call the technical history of political economy, in the manner, say, of Mark Blaug or Samuel Hollander. Rather, the focus of her book is the ways in which Adam Smith has been interpreted in the United States and the role of his image in American culture—primarily academic culture—from Smith's day to ours. She wisely eschews pretentions to comprehensiveness, focusing instead on what she sees as key inflection points in the reception of Smith's works. She does indeed show that the ways in which Smith was used and interpreted changed over time. But alongside this theme, a careful reading of her results demonstrates a remarkable degree of continuity as well. In every period, from the colonial to the present, writers and teachers of political economy and related subjects seem to have agreed that The Wealth of Nations was a foundational text—and usually the foundational text—of the social scientific study of the economy. Yet in each period, Smith's admirers had reservations about the applicability of one or another of his concepts and policy preferences to present circumstances. And guided by diverse ideological or disciplinary concerns, they inevitably focused on some elements of Smith's oeuvre while ignoring others.

Smith's works, it seems, were always influential in America. From 1760 to 1800, both The Theory of Moral Sentiments and The Wealth of Nations were among the most popular works by Scottish authors, comparable to Montesquieu's Spirit of the Laws in their penetration (16). James Madison and Alexander Hamilton made use of ideas from The Wealth of Nations (often without citation), and Thomas Jefferson commended it as “the best book extant” (21) on political economy. It was the primary textbook for the first university course on political economy, taught at William & Mary in the mid-1780s, and it was still the primary text for such courses at the University of Virginia from 1825 to 1846 (20–21).

Through much of the nineteenth century, the focus on Smith related to debates about free international trade versus protectionism. Friedrich List criticized Smith as an advocate of “cosmopolitical economy,” too little concerned with the interests of the nation (81), as did his successors in what became known as the American System. Free traders, by contrast, both in the antebellum era and in the decades after the Civil War, continued to draw upon Smith's arguments for free trade. The debates were often dominated by regional or sectional interests. Southerners, including defenders of slavery, used the arguments in The Wealth of Nations to bolster their case for free trade, which favored the cotton economy, while abolitionists such as Charles Sumner cited Smith's condemnations of slavery in The Theory of Moral Sentiments.

The decades after the Civil War saw the increasing separation of economics as a discipline, distinct from political science on the one hand and moral philosophy on the other. Leading economists such as Frank Taussig at Harvard and Edwin Seligman at Columbia continued to regard Smith as “the greatest of all economists,” even as they treated some of his ideas as time bound and outdated (109, 162). More radical economists, such as Richard Ely, also admired Smith and sought to recast him as a forefather of a humanitarian and historicist economics that aligned with their own progressive, prolabor agenda (174).

Liu's account of the twentieth-century reception of Smith focuses on the Chicago school. The key figures of its earlier generation, Frank Knight and Jacob Viner, turned to Smith as part of their critique of socialist planning, yet they maintained a rounded view of Smith that did not portray him as antipathetic to government (202, 214). So too Friedrich Hayek, not a founder or precursor of the Chicago school but a kissing cousin. His reading of Smith, Liu notes, was “as a prophylactic against constructivist tendencies that carried hubristic assumptions about human knowledge and undermined individual liberty in their demands for social justice.” In a nuanced formulation she concludes that “though Hayek's readings of Smith may have been opportunistic, they were not inaccurate. He was careful to distance his interpretation of Smith from those he found to be reductive or dogmatic” (223).

In her discussion of Knight, as in some of her earlier discussions of professors of economics, she makes use of student notes on class lectures. In the case of some nineteenth-century figures, that can be illuminating. In the case of Knight, however, it is less so, for as she notes, his students testified that most of them did not understand much of what he was saying (202). Here is a case where archival sources may be less reliable than published ones.

Liu portrays the later generation of the Chicago school—here she has in mind Milton Friedman and George Stigler—as having transformed Smith into an icon of free-market, antigovernmental political economy. No doubt they did, and later generations of scholars (including this author) have cut their scholarly teeth demonstrating the one-sidedness of that interpretation. But in her discussion of these thinkers she tends to protest too much. She emphasizes, for example, that they treated Smith as a precursor of price theory, the central tenet of which was “that prices transmit information about what consumers want to buy and producers want to sell; prices also reveal the incentives on which people act” (201). What she fails to note (or acknowledge) is that Smith did articulate that theory, albeit in a somewhat different vocabulary. (See bk. 1, chap. 7 of The Wealth of Nations, “Of the Natural and Market Price of Commodities.”) So too in her discussion of the young Milton Friedman's economics paper in which he wrote that Smith's labor theory of value was not just wrong but useless for understanding an “acceptable theory” of value. Liu attributes this to Friedman's “scientific ahistoricism” (205). There are two problems here. Smith did not adhere to a labor theory of value (he presents it as a heuristic construct for understanding what exchange would be like in a very primitive economy, without capital or rents). And, more importantly, Friedman was simply right about the lack of explanatory utility of such a theory. The problem here is Liu's overly agnostic attitude, both about what Smith actually said (which was sometimes what Friedman or Stigler said that he said) and about the validity of some propositions across time.

This problem of writing about the history of interpretations of Smith's thought while maintaining an equal skepticism about every interpretation is also evident in Liu's discussion of the invisible hand—a key image employed by the Chicago school. She treats this as something of a novelty, though in fact the term was widely cited well before the Chicago scholars made it into a mantra. Yet she repeats the arguments of a number of scholars who have sought to downplay the significance of the concept in The Wealth of Nations (Warren J. Samuels, Gavin Kennedy, and others, notably Emma Rothschild, who dismissed it as a “mildly ironic joke” [241]).

What Smith actually wrote, in the course of a discussion about why an investor prefers to invest in domestic industries, was that

he generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By preferring the support of domestick to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. (bk. 4, chap. 2; emphases added)

Clearly the invisible hand is a metaphor for the unintended, socially positive consequences of individual action motivated by self-interest in a competitive market economy. Smith is clear that it does not apply in just this one case but in many others. And it is not that the pursuit of self-interest always leads to socially positive outcomes, or that individuals seeking to promote the public interest never do so. It is simply that frequently self-interest may lead to socially desirable outcomes. Arguably, The Wealth of Nations—and much of the subsequent history of economics—is an exploration of the conditions under which it does and does not. To be sure, Friedman tended to emphasize the situations in which it does, while he downplayed those in which it does not.

Liu, certainly a balanced and meticulous scholar, notes that the claim that the invisible hand is of minor significance in The Wealth of Nations is much contested. But by refusing to pass judgment on the relative accuracy of these various claims, she sometimes gives the impression that all is ideology. In short, Friedman and Stigler got some things right, both about what Smith intended and about elements of his thought that could be further expanded and refined.

Liu's penultimate discussion deals with the appropriation of Smith by neoconservatives, principally Irving Kristol and Gertrude Himmelfarb. In an essay of 1976, “Adam Smith and the Spirit of Capitalism,” Kristol presented a rather different conception of Smith than the libertarian one championed by Milton Friedman. Pointing to the significance of The Theory of Moral Sentiments (a text largely ignored by Friedman and Stigler), Kristol called attention to Smith's championing of the virtues of deferred gratification, praiseworthiness, and other moral qualities, which Kristol saw as a prerequisite for the thriving of a capitalist society. In the chapter on Smith in her book The Idea of Poverty (1985), Himmelfarb (not coincidentally Kristol's spouse) underscored the moral and analytic egalitarianism of Smith's work, a theme, Liu notes, that would become more dominant among Smith scholars in the decades that followed. The Kristols (and related intellectuals, such as James Q. Wilson) thus offered a counterlibertarian Smith, though remaining skeptical of government programs that purported to aid the poor.

In writing about Kristol and Himmelfarb, there is a gap between Liu's accurate recounting of their views, based on her reading of what they wrote, and the characterizations of neoconservatism that she draws from hostile secondary sources. Thus, in a footnote, she draws attention to a book that provides “an interesting discussion of neoconservatism as a form of white identity politics” (287n91). She also suggests that “superficial similarities to the neoconservative version of a Smithian moral economy are apparent in recent scholarship. This is not to suggest any influence from one to the other” (295). As someone motivated in part by the issues raised by Kristol and Himmelfarb to write a book that Liu cites as characteristic of the newer, more balanced view of Smith, I would be less quick to write off such influences. In the most recent phase of Smith's reception, scholars have placed ever-greater weight on The Theory of Moral Sentiments (and Smith's Lectures on Jurisprudence, published long after his death) and have tended to emphasize the egalitarian elements of his thought.

Liu concludes her wide-ranging examination of the history of Smith in America by reminding us that conceptions of Smith “are being continuously reshaped and reinvented by Smith's interpreters who bring their own set of beliefs and preoccupations to bear on his ideas” (301). That, as Nietzsche leads us to expect, is certainly the case. Her book is a convincing account of that ongoing history, a saga made possible by the multifaceted brilliance and range of the mind of Adam Smith.