No-one is more widely quoted by people who have not read his work. Even people who have never visited a library, far less opened a copy of The Wealth of Nations, know that Adam Smith extolled the public benefit of individual selfishness, the necessity of maximally free markets, and excoriated the malign impact of government intervention in economic matters. They are familiar with his metaphor of ‘the invisible hand’ and know that it is ‘not from benevolence’ that the baker provides our daily bread. Smith provided inspiration for Margaret Thatcher and Ronald Reagan, and occupies a place as icon of economic liberalism. When Gordon Brown invited Alan Greenspan to Kirkcaldy, birthplace of Smith and a town in the then Chancellor’s constituency, Greenspan could suggest that the something in the air was not the smell of linoleum —which hung over that town for a century – but a contagious miasma of economic genius.

Those who know a little more of Smith know that he was also the author of The Theory of Moral Sentiments. In that work, the central characteristic of moral sensibility is ‘sympathy’; we must judge our own conduct as would an impartial spectator, and must acquire the ability ‘to see ourselves as others see us’. Nineteenth century German philosophers formulated ‘das Adam Smith problem’. How could the same man be author of a philosophical work in favour of altruism and an economic work in defence of individualism?

Faced, like Brown, with the Scottish variant of ‘das Adam Smith problem’ – how to reconcile the leftist tenor of Scottish politics with the rightist views of Scotland’s greatest economist – some have suggested that the real Adam Smith was to be found in The Theory of Moral Sentiments, not The Wealth of Nations.

In this remarkable and intensely readable book, Jesse Norman dispels ‘five myths’ about Adam Smith. Norman is a Conservative MP, and the very existence of the book, which draws on his background as a philosopher but also displays wide knowledge of economics and the history of the Enlightenment in eighteenth century Edinburgh, is rejoinder to those who fear that the intellectual has disappeared from politics, along with respect for facts and contact with reality.

‘Das Adam Smith problem’ is one such myth. While Smith’s thinking obviously developed over the near twenty years between Moral Sentiments and Wealth, there was no Damascene conversion in which the young idealist philosopher became the older sceptical economist. Smith’s moral philosophy was not as benign as the crass description suggests. And, more importantly, his economics was not as unforgiving as the crass description suggests. The greatest myth is that Wealth was a right wing tract, and that its author would have heard the noise of the trading floor as music in his ears and regarded the collateralised debt obligation as the epitome of human ingenuity.

The first and largest part of the book is devoted to an account of Smith in his life and times.

He numbered David Hume and Edmund Burke among his friends – Burke was the subject of an earlier biography by Norman, who makes a strong case for the essentially parallel development of their thought. And the Edinburgh of his day demonstrated an extraordinary display of intellectual firepower. But Smith was, it would seem, a misanthrope, who lived with his mother until she predeceased him by only six years. He engaged in no known romantic attachments and was the target of a recent book by a feminist economist entitled ‘Who Cooked Adam Smith’s Dinner?’

Smith was supported by earnings from his professorship at Glasgow – at a time when a university teacher’s earnings depended on fees collected directly from the students in the class. This contrasted with Oxford, where Smith had spent six unhappy years, and where, he observed, the dons had mostly given up even the pretence of teaching. (Norman is a Fellow of All Souls, which has never even offered the pretence.) Smith’s misanthropic scepticism extended widely – to business people (an order of men……who have generally an interest to deceive and even to oppress the public), to the rich (the chief enjoyment of riches consists in the parade of riches), to empire (a project altogether unfit for a nation of shopkeepers, but extremely fit for a nation whose government is influenced by shopkeepers), and to statistics (I have no great faith in political arithmetic). But Smith relinquished his professorship in 1763, and the writing of Wealth and the remainder of Smith’s career was financed directly and indirectly by the Duke of Buccleuch, who as a young man employed Smith as tutor and thereafter paid an annuity and obtained for Smith a position – no sinecure- as Commissioner of Customs.

The second part of Norman’s book summarises Smith’s thought. We rely on Smith for the clear formulation of two foundational ideas of economics – the division of labour and the associated mutually beneficial character of exchange.  Wealth begins with the productive pin factory, which  derived economies of scale and developed specialist capabilities, and the exchange of these capabilities made them sustainable. If one needs reassurance that economics is more than gut instinct, then the contrast between Trump’s naive view of trade and Smith’s more thoughtful one is sufficient reminder.

In short, modern humans – uniquely – are productive because they engage in cooperative activity. ‘It is inconceivable that you ever see two chimpanzees carrying a log together’, writes primatologist Michael Tomasello. Pigeons can fly and humans can’t, but humans can build Airbuses. And what is remarkable is that no human knows how to build an Airbus, but tens of thousands of people taken together, do. The division of labour has gone far beyond anything Smith could have imagined, and while praising Smith’s insights we need to remember, as Norman does perhaps insufficiently, that Smith was writing in a time when the Carron Iron Works, which opened in 1759, represented the cutting-edge of industrialisation. The reason UK GDP per head has risen fifteen fold since Smith wrote Wealth is not that we have become more individualistic but that we have become more cooperative.

Now the power of the metaphor of the invisible hand is the recognition that such coordination is emergent; it does not require a coordinator. The production of the Airbus requires a complex mixture of markets and hierarchies. No entrepreneur could go shopping to buy the parts for an Airbus, and no Big Boss could successfully direct his minions to make one. As Norman observes, the evolutionary processes which Darwin and Wallace would articulate a century later are present in embryonic form among the eighteenth century Scottish thinkers of which Smith was a distinguished member. And the Burkean conservatism to which Norman subscribes is based on a profound respect for the dimly understood processes of social and cultural evolution.

Which leads to the question with which Norman ends; ‘Why it Matters’. What does a thinker of pre-industrial society have to contribute to solving our twenty first century predicaments? Norman correctly observes that the centre-left and centre-right of politics both lack a coherent economic narrative today, and he argues that we can find relevant pointers to one in Smith. Norman emphasises that Smith was writing about a market economy, not what came to be called capitalism, and that there is a difference. Smith would not have enjoyed a visit to a trading floor. And he did understand that a successful market economy requires the legal social and economic infrastructure that only a strong state can provide. That strong state was only tolerable in an environment of pluralism and democracy sustained by wide mutual trust. And Smith identified many of the ways in which markets go wrong – through crony capitalism, in what we now call rent seeking, and in the commodification of too much of our social lives. Markets function well only when embedded in strong and supportive social institutions. There is no contradiction between Moral Sentiments and Wealth.