Adam Smith's "Tolerable Administration of Justice" and the Wealth of Nations
In the Wealth of Nations, Adam Smith argues that a country's national income depends on its labor productivity, which in turn hinges on the division of labor. But why are some countries able to take advantage of the division of labor and become rich, while others fail to do so and remain poor? Smith's answer, in an important but neglected theme of his work, is the security of property rights that enable individuals to "secure the fruits of their own labor" and allow the division of labor to occur. Countries that can establish a "tolerable administration of justice" to secure property rights and allow investment and exchange to take place will see economic progress take place. Smith's emphasis on a country's "institutions" in determining its relative income has been supported by recent empirical work on economic development.
I thank my colleague Meir Kohn for many helpful discussions, as well as Henry Clark and Dan Klein for useful comments. All references are to the Glasgow Edition of the Works and Correspondence of Adam Smith. WN = Wealth of Nations, TMS = Theory of Moral Sentiments, LJ = Lectures on Jurisprudence, LRBL = Lectures on Rhetoric and Belles Lettres, Corr = Correspondence, followed by the page number. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Douglas A. Irwin, 2020. "Adam Smith's “tolerable administration of justice” and the Wealth of Nations," Scottish Journal of Political Economy, vol 67(3), pages 231-247.