Adam Smith was always against state intervention, no matter the area of responsibility that could correspond to the Government as a productive entity: a) true; b) false; d) none
The correct answer and explanation is:
Correct Answer: b) False
Explanation:
Adam Smith, widely regarded as the father of modern economics, was not always against state intervention. While he championed free markets and limited government, especially in terms of trade and commerce, he also recognized important roles for the state in areas where the market fails.
In his landmark work, “The Wealth of Nations” (1776), Smith outlined three core duties of the government:
- Defense: Protecting society from foreign invasion.
- Justice: Establishing a system of laws and enforcing contracts to protect individuals from injustice or oppression.
- Public Works and Institutions: Providing infrastructure and services (like roads, bridges, education, and other public goods) that are necessary but would not be adequately supplied by private enterprise due to lack of profit incentives.
Smith emphasized that the government should intervene when the benefits to society outweigh the costs, especially in areas involving public goods, education, monopolies, and externalities. For instance, he believed in state-sponsored education to promote a more informed and productive citizenry. He also warned against monopolies and collusion among businesses, advocating for regulatory oversight to preserve competition.
Moreover, Smith acknowledged that the invisible hand of the market is not infallible. In situations where individuals’ pursuit of self-interest harms public welfare, such as in the case of pollution or the exploitation of labor, some degree of regulation is justified.
Therefore, while Smith strongly supported economic liberty, he was not ideologically opposed to all forms of government intervention. He promoted a balanced approach, in which the state complements the market where necessary, especially to ensure justice, infrastructure, and social well-being.
In conclusion, it is false to say that Adam Smith was always against state intervention.