Adam Smith’s Support for Big Government: Evolution of his Views on Government from Lectures on Jurisprudence to The Wealth of Nations

Adam Smith has advocated laissez-faire: however, many of Smith’s interpreters have pointed out that Smith discusses several exceptions to laissez-faire. Most of the important exceptions are not in Lectures on Jurisprudence (LJ); rather, they first appear in The Wealth of Nations (WN). These references seem to reflect a conscious shift in Smith’s policy principle from laissez-faire with small government to state intervention under big government. To compare small government with big, i.e. laissez-faire with government intervention, we must historically distinguish between two types of government intervention. The older type predated laissez-faire and included feudal governments, absolute governments and mercantilism, whereas the newer type includes various primitive forms of modern social or welfare states.
　Smith’s primary purpose in LJ is to criticise the older type of big government. In WN, he criticises the older big government in Books I, III and IV and promotes a newer type of government intervention in Books II and V, particularly regarding three important fields. First, he proposes regulating banking and financial markets in Book II of WN. Second, in contrast to LJ, where he gave little attention to public works and institutions, he considers them among the government’s three major duties in Book V of WN. Third, Smith drastically changes his views on taxation. He argues that they should be as light as possible in LJ, but in Book V of WN, he insists on increasing land taxes and abolishing taxes on necessaries; he also recommends introducing progressive taxes and abolishing regressive ones to achieve income redistribution.
　This paper considers the shifts in Smith’s position from endorsing the laissez-faire role of government in LJ to promoting government intervention in WN, particularly regarding financial regulation, public works and institutions and taxation.

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