Adam Smith, Allyn Young, Amartya Sen and the Role of the State

Abstract This paper examines the views of Adam Smith, Allyn Young and Amartya Sen on the role of the state. Smith has been widely interpreted as advocating non-interference in economic matters with the state confining itself to three basic tasks of defence, justice and public works. However, this traditional view gives a misleading impression that Smith was a champion of laissez faire. We examine and develop Young’s contention that the main message from Wealth of Nations is not laissez faire but competition. Interpreted thus, a more active role for government is consistent with Smith. Young favoured neither laissez faire nor excessive intervention, but viewed the role of the state in the context of the stage of a society’s development. Amartya Sen’s stress on entitlements is also consistent with Smith’s stress on distributive justice and the Smith-Young emphasis on the public interest (or communal welfare). The more recent approaches to development such as political entanglement and complexity economics view the dichotomy of state versus market as false as both have to join hands in the coevolution of appropriate institutions to solve communal problems of economic life.