Tag: Public Policy

The Other 250th Anniversary: Adam Smith and the Discipline of Markets

Portrait of Adam Smith, Scottish economist and moral philosopher.

Adam Smith, author of The Wealth of Nations and The Theory of Moral Sentiments. Public domain image via Wikimedia Commons.

In 2026, Americans will celebrate the 250th anniversary of the Declaration of Independence. That anniversary deserves attention. But there is another 250th anniversary worth remembering: the publication of Adam Smith’s The Wealth of Nations in 1776.

The two anniversaries are not unrelated. The modern case for political liberty and the modern case for economic liberty developed in the same historical moment. Both reflected suspicion of concentrated power. Both challenged inherited systems of privilege. Both assumed that ordinary people should have more freedom to make decisions without permission from distant authorities.

That does not mean Adam Smith should be treated as a simple mascot for free-market politics. He was not that. Smith was a moral philosopher as well as an economist. He understood self-interest, but he also understood vanity, overconfidence, monopoly, privilege, collusion, and the human tendency to justify one’s own advantage as public virtue.

That is one reason Smith remains useful. He does not fit comfortably into modern slogans.

Smith respected markets because markets allow people to cooperate without central command. They allow millions of people, each with limited knowledge, to produce, exchange, save, invest, specialize, and adapt. Prices carry information. Competition disciplines producers. Voluntary exchange allows people to pursue their own plans while often creating value for others.

But Smith did not worship businessmen. He famously warned that people in the same trade rarely gather without the conversation ending in some effort to raise prices or conspire against the public. That is not a minor aside. It is central to Smith’s understanding of political economy. Business interests often seek protection from competition. They may ask government for tariffs, subsidies, licensing rules, monopoly privileges, regulatory barriers, or other arrangements that protect incumbents at public expense.

Smith defended competition, not collusion. He defended voluntary exchange, not monopoly. He defended commercial society, not crony capitalism.

Markets Deserve a Presumption, Not Worship

CIVPAC’s view is not that markets always work perfectly. They do not. Markets can be distorted by monopoly power, externalities, public goods, asymmetric information, fraud, and poorly designed rules. They can also produce outcomes that society may choose to modify for distributional reasons.

But markets deserve a presumption in their favor because they do several things government usually cannot do as well. They coordinate dispersed information. They reward production that others value. They allow decentralized choice. They permit experimentation. They create incentives for efficiency and innovation. They also limit concentrations of power by allowing people to work, buy, sell, invest, and organize without asking government to allocate every opportunity.

This is where Smith connects to Friedrich Hayek and Milton Friedman.

Hayek emphasized the knowledge problem. No central planner can possess all the local, changing, practical information embedded in prices, preferences, technology, costs, and circumstances. Markets are not merely a moral preference. They are information systems.

Friedman emphasized the relationship between economic freedom and political freedom. If government controls employment, capital, prices, production, education, housing, and access to opportunity, political liberty becomes fragile. A person who depends on the state for livelihood is less free to dissent from the state.

Those arguments can be overstated. Monopoly power can threaten liberty. Fraud can undermine consent. Pollution can impose costs on unwilling parties. Government is also necessary to enforce contracts, protect property, maintain courts, provide public goods, restrain violence, and preserve the rules under which markets function.

But the connection between markets and freedom is real. A society that weakens market institutions too casually should not be surprised when it also weakens individual independence.

Economics Is Not Conservative, but It Is Disciplined

Some people think economics is inherently conservative. That is not quite right.

Economics can support many policies associated with the left. Externalities can justify environmental regulation or carbon pricing. Public goods can justify national defense, basic research, infrastructure, and disease surveillance. Asymmetric information can justify rules in insurance, finance, medicine, food safety, and consumer markets. Monopoly power can justify antitrust and utility regulation. Diminishing marginal utility of income and wealth can support progressive taxation and redistribution.

Progressive policy does not have to be anti-economic. It can be stated in economic terms.

But economics imposes discipline. It asks uncomfortable questions of every political tendency. What is the market failure? How large is it? Is the proposed intervention likely to solve it? What incentives will the remedy create? Who pays? What happens at the margin? Are we correcting an efficiency problem, redistributing income, protecting liberty, or responding to a government-created distortion?

Nor is it enough to show that a market is imperfect. Markets are imperfect because human beings are imperfect. Governments are made of the same material. Public officials, regulators, legislators, voters, interest groups, and experts all have incomplete information and imperfect incentives.

A market imperfection therefore does not automatically justify government intervention. The relevant question is comparative: is the proposed intervention likely to improve the result after taking account of government error, political capture, administrative cost, incentive effects, and unintended consequences?

That places a real burden of proof on intervention. The burden is not impossible to meet. Pollution, monopoly power, fraud, public goods, and severe information failures may justify public action. Distributional objectives may justify redistribution. But the imperfection should be substantial enough, and the remedy plausible enough, to justify replacing one imperfect process with another.

The status quo is not presumed perfect. It is merely presumed to be the condition that must be improved upon, not just criticized.

The Difference Between Market Failure and Market Dislike

This distinction separates CIVPAC’s approach from democratic socialism and Marxism.

Marxist analysis often begins from the premise that capitalism itself is inherently exploitative. In that framework, market outcomes are suspect because they are market outcomes. The central issue is not whether there is a particular externality, monopoly, information failure, public good, or government distortion. The central issue is ownership, class power, and control over production.

Some democratic socialists hold a softer version of that view. Others are closer to ordinary social democrats who accept markets but want more redistribution and regulation. But the instinct is often similar: market outcomes require political correction because markets are assumed to reflect unequal power rather than legitimate exchange.

CIVPAC begins differently.

We begin with the presumption that markets are valuable institutions. They are not perfect. They are not sacred. But they are essential mechanisms for coordinating human activity, transmitting information, dispersing power, and preserving individual choice.

That presumption can be overcome. Government intervention may be justified. But the justification should be explicit. Is the problem monopoly power? An externality? A public good? Asymmetric information? A distributional objective? A threat to democratic institutions? A government rule that prevents the market from functioning properly?

If the answer is only “we do not like the outcome,” that may begin a moral or political conversation. It does not complete an economic argument.

Smith Was Suspicious of Business Too

Smith’s understanding of markets was more subtle than many modern arguments that invoke him.

He knew that merchants and manufacturers often prefer protection from competition. They may present their private interests as national interests. They may seek rules that raise prices, restrict entry, or shift risk to the public. The fact that a business asks for a policy does not mean the policy is pro-market. It may be anti-market.

This is one reason CIVPAC is skeptical of both anti-business populism and business-friendly corporatism.

The anti-business populist sees corporate power and assumes the solution is to punish or restrict business. The corporatist sees business success and assumes the public interest is served by helping incumbent firms. Smith warns against both mistakes.

A market economy requires competition, not merely private ownership. It requires open entry, not protection for insiders. It requires rules of fair dealing, not favoritism. When businesses seek subsidies, tariffs, regulatory barriers, licensing restrictions, or protection from competition, they are not defending free markets. They are often trying to escape them.

Overconfidence Is Also Part of the Human Condition

Smith also understood something modern behavioral economics later formalized: human beings are overconfident.

He wrote of the “over-weening conceit” many people have in their own abilities and the “absurd presumption” people often have in their own good fortune. That observation helps explain why risky professions can become overcrowded and why people take chances that look irrational from the outside.

This matters for policy. Markets involve error. People misjudge. Investors chase returns. Entrepreneurs fail. Consumers overpay. Voters misunderstand. Politicians overpromise. Experts overestimate what they know.

The fact that people make mistakes does not prove that government should make choices for them. Government officials are also human. They have their own incentives, blind spots, overconfidence, constituencies, and institutional biases. The question is not whether markets produce mistakes. They do. The question is whether a proposed intervention is likely to reduce error or merely move it into a political process with weaker feedback and fewer exit options.

Markets do not make people wise. But they create feedback. Losses, prices, competition, entry, exit, and consumer choice discipline error in ways political systems often resist.

Housing as an Example

Housing policy illustrates why language discipline matters.

It is easy to say that America has a “housing shortage” or that housing is “unaffordable.” Those phrases are familiar. They may point toward a real problem. But they can also smuggle in assumptions.

Housing has not literally disappeared. In high-demand communities, housing can still be bought or rented by households with enough income or wealth. The more precise problem is that, in many jurisdictions, housing prices and rents have risen faster than residents, buyers, employers, and local governments would have expected only a few years ago. Housing therefore requires a larger share of income or wealth than many households reasonably planned for.

That is a supply-constrained price problem.

In many places, state and local governments have restricted the ability of housing supply to respond to demand. Zoning rules, permitting delays, parking mandates, density limits, environmental-review processes, and neighborhood veto points prevent markets from adjusting normally. When quantity cannot adjust, prices do more of the work.

A democratic-socialist interpretation may begin with the idea that housing is too expensive because capitalism treats homes as commodities and allows profit-seeking actors to exploit need. A market-oriented institutional interpretation asks a different question: what is preventing supply from responding?

The answer is often government.

That does not mean no government should act. It means government should act on the actual distortion. If government rules are preventing homes from being built, the solution is to reform those rules. Demand subsidies or symbolic attacks on disfavored buyers may be politically satisfying, but they do not solve the underlying problem.

This is the Smith-Hayek-Friedman lesson in practice. Let prices convey information. Let markets respond. Do not let incumbent interests use government to prevent competition. Intervene where there is a real market failure or distributional objective, but do not mistake every disliked price signal for proof that markets have failed.

The CIVPAC Standard

The lesson of The Wealth of Nations is not that business should always win. It is not that government should never act. It is not that inequality is irrelevant or that markets are morally self-justifying.

The lesson is that prosperity and liberty require institutions that channel self-interest toward useful production, competition, innovation, and exchange. Those institutions include markets, but also courts, property rights, contract enforcement, stable money, public goods, antitrust where appropriate, and rules against fraud, coercion, and favoritism.

CIVPAC’s standard is therefore straightforward:

Before government intervenes in a market, identify the problem.

Is it a market failure? A public good? An externality? Monopoly power? Asymmetric information? A distributional objective? A government-created distortion? Does the proposed remedy address the actual problem? What incentives and unintended consequences will it create?

That is not a left-wing or right-wing checklist. It is a discipline.

Smith’s anniversary is worth celebrating because he helped teach the modern world that free exchange, specialization, and competition can produce enormous public benefit without central direction. It is also worth celebrating because Smith was wise enough not to confuse markets with merchants, capitalism with monopoly, or self-interest with virtue.

The country could use more of that wisdom.

At a time when both parties are tempted by populist villain-hunting, economic nationalism, industrial favoritism, and distrust of institutions, Adam Smith remains a useful corrective. He reminds us that markets are powerful not because business is noble, but because competition disciplines self-interest. He reminds us that government is necessary, but also easily captured. He reminds us that ordinary people know things planners do not. He reminds us that liberty depends not only on elections, but on the ability of people to make choices in their economic lives.

The 250th anniversary of the Declaration of Independence will rightly celebrate political liberty. The 250th anniversary of The Wealth of Nations should remind us that economic liberty is part of the same inheritance.

Both require institutions. Both require discipline. And both require skepticism toward concentrated power, whether it comes from government, business, or movements convinced that they alone know how society should be ordered.

Political Realism in Public Policy

Good public policy should be economically efficient, fair, respectful of personal freedom, and politically realistic.

That last phrase — politically realistic — is important. It is also easy to misuse.

Too often, people say a proposal is “not politically realistic” when what they really mean is, “I don’t like it, and I don’t want to explain why.” It becomes a substitute for argument. Worse, it can become a way of avoiding difficult tradeoffs.

That is not what political realism should mean.

Political realism does not mean surrendering to current public opinion. It does not mean splitting every issue down the middle. It does not mean that reformers should never advocate for ideas that are unpopular today. And it certainly does not mean that the most cautious, least offensive position is always the right one.

Political realism means asking whether a policy can attract enough durable public consent to be enacted, implemented, and sustained.

That is a higher standard than simply asking whether a policy sounds good to the people who already agree with it.

Abortion and the Limits of Absolutism

Abortion is a good example because the extremes are so visible.

A total ban on abortion, with no meaningful exceptions for rape, incest, threats to the life or health of the mother, or catastrophic fetal abnormalities, is not politically realistic in most of the country. It may satisfy a deeply committed pro-life minority, but it asks too much of voters who do not share that absolute moral framework.

At the other extreme, abortion on demand at any time in pregnancy, funded by the government, is also not politically realistic. It may satisfy a deeply committed pro-choice minority, but it asks too much of voters who believe the moral status of the fetus changes as pregnancy progresses.

Political realism does not tell us exactly where the law should be. It does tell us that a durable policy probably has to acknowledge competing moral claims. A society as large and diverse as ours cannot govern abortion well by pretending that only one side’s moral concerns exist.

That does not mean every compromise is good. Some compromises are incoherent. Some are cruel. Some are designed merely to survive the next election. But a policy that refuses to recognize the moral seriousness of the other side is unlikely to last.

What Is Unrealistic Can Change

Political realism also requires humility.

Some ideas that are unrealistic at one point in history become realistic later. Same-sex marriage is the obvious example. Gallup first measured U.S. support for legal same-sex marriage at 27% in 1996. Support reached majority level in 2011, and Gallup measured support at 60% in 2015, the year the Supreme Court decided Obergefell v. Hodges.

That history matters.

If political realism had meant simply accepting public opinion as it existed in 1996, same-sex marriage would have been dismissed as unrealistic and therefore not worth pursuing. But advocates changed minds. They made arguments. They told stories. They appealed to fairness, family stability, and equal dignity.

In other words, they did not ignore political reality. They changed it.

That is the difference between political realism and political cowardice.

A politically realistic reformer may say, “The country is not there yet.” But the next sentence should be, “What would it take to get there?” Not every unpopular idea deserves that effort. But some do.

Carbon Taxes and America’s Exceptional Difficulty

A carbon tax is another useful example.

Many serious people believe a carbon tax is good policy but politically unrealistic in the United States. They may be right, at least for now. American voters do not like visible taxes. Energy prices are politically explosive. Opponents can easily describe a carbon tax as an attack on ordinary households, rural communities, and working people.

But that does not mean carbon pricing is inherently unrealistic. Other democratic countries have adopted carbon taxes or carbon-pricing systems. The World Bank reports that jurisdictions representing a substantial majority of global GDP have adopted some form of carbon pricing, including carbon taxes, emissions trading systems, or both, and about 28% of global greenhouse-gas emissions are covered by a direct carbon price.

So the question is not whether a carbon tax can exist in a democracy. It can.

The question is whether it can be designed and explained in a way that enough Americans can accept.

That means revenue use matters. Protection for low-income households matters. Border adjustments matter. The effect on domestic industry matters, but not simply because domestic firms deserve protection from competition. The larger issue is that a carbon tax loses much of its effectiveness if carbon-intensive production simply moves overseas and the United States imports the same goods from countries with weaker environmental standards.

A carbon tax that simply raises energy prices and leaves voters to wonder where the money went is probably doomed. A carbon tax paired with transparent revenue use, protection for low-income households, and border adjustments that reduce carbon leakage may still be difficult — but it is not fantasy.

Political realism should force better design. It should not end the conversation.

Social Security and the Politics of Arithmetic

Social Security is a different kind of example.

Almost everyone who looks seriously at the federal budget knows that Social Security cannot remain unchanged forever. The arithmetic does not care about campaign slogans. Longer life expectancy, demographic change, and benefit promises eventually require some combination of higher revenues, benefit adjustments, retirement-age changes, or broader fiscal reform.

And yet almost every specific proposal is politically dangerous.

Raise the retirement age? You hurt people in physically demanding jobs.

Raise payroll taxes? You reduce take-home pay and increase labor costs.

Trim benefits for higher-income retirees? You weaken the link between contributions and benefits.

Borrow more? You push the problem onto younger taxpayers.

So politicians often do what politicians do best: avoid the issue while accusing the other side of secretly planning to destroy the program.

Political realism here does not mean doing nothing. It means recognizing that reform has to be gradual, transparent, and probably grandfathered. It means giving people time to adjust. It means refusing to pretend that there is a painless answer.

Sometimes political realism is not about finding a popular solution. It is about finding the least unfair way to admit reality.

Immigration Reform and Mutual Distrust

Immigration is another area where political realism gets abused.

There is probably a broad political deal available in theory: stronger border enforcement, a more rational legal immigration system, and humane treatment for some long-resident undocumented immigrants, especially those brought here as children.

But the deal repeatedly fails because neither side trusts the other.

Many conservatives believe legalization will happen but enforcement will never follow. Many progressives believe enforcement will become harsh and permanent while humane reforms are delayed or abandoned. Both sides have historical reasons for suspicion.

The distrust is made worse by the way both sides talk about demographics. Some on the right have embraced paranoid claims that Democratic elites are intentionally trying to “replace” existing voters through immigration. That rhetoric is dangerous and should be rejected. But some progressive and Democratic commentators have also treated demographic change as politically or morally encouraging, and Democratic strategists at times assumed that a more diverse electorate would naturally benefit their party. That is very different from a deliberate replacement plot, but it helps explain why some voters hear demographic language as threatening. In a diverse country, demographic change should not be treated as a partisan weapon. Immigration policy needs public consent, and public consent becomes much harder when one side sees immigration as cultural displacement and the other side appears too comfortable with that perception.

Political realism requires acknowledging that distrust.

It is not enough to say, “Comprehensive immigration reform polls well.” Lots of things poll well in the abstract. The real question is whether voters believe the government will actually enforce the parts they care about and protect the people they think deserve protection.

That means sequencing matters. Credibility matters. Administrative competence matters. The details are not details. They are the policy.

Housing Reform and the Local Veto

Housing policy shows another side of political realism.

Many people say they want affordable housing. Many of the same people oppose new housing near them.

That is not a minor obstacle. It is the obstacle.

A purely technocratic housing reformer can say, correctly, that restrictive zoning reduces supply and raises prices. But that does not make neighborhood opposition disappear. People worry about traffic, schools, parking, neighborhood character, property values, and simple change.

Some of those fears are exaggerated. Some are selfish. Some are real.

Political realism does not mean giving every homeowner a veto over new housing. That is how we got the problem. But it does mean recognizing that reform may need to be phased in, paired with infrastructure, handled partly at the state level, and framed around opportunity, property rights, and affordability rather than simply denouncing every opponent as a NIMBY.

Again, political realism should improve the policy. It should not be an excuse for paralysis.

Trade, Industrial Policy, and the Return of Hard Questions

Trade policy is another area where yesterday’s political realism may no longer be today’s.

A generation ago, the elite consensus in favor of free trade was very strong. It was not entirely wrong. Trade increases efficiency, lowers costs, expands markets, and raises living standards overall.

But the distributional effects were too often minimized. Some communities paid a very high price. Some workers were told, in effect, that the economy was better off even if they were not. That may be true in a narrow economic sense, but it is politically poisonous.

Trade also became the political face of economic disruption that was often driven at least as much by technology and automation. Factories did not just move overseas; they also became more productive, more automated, and less labor-intensive. Even if the United States had closed itself off from trade, many manufacturing jobs would probably still have disappeared. The timing and location of the losses might have been different, and trade clearly played a role in some communities, but the deeper force was not trade alone. It was the combination of global competition, technological change, automation, and changing consumer demand.

That distinction matters because blaming trade alone can lead to the wrong cure. If the real pressure is partly automation, then tariffs may raise costs without bringing back the world people remember.

Now the pendulum has swung toward protectionism and industrial policy. Some of that is understandable, especially given China, supply-chain fragility, and national-security concerns. But broad protectionism is not a serious answer either. It can raise costs, invite retaliation, protect inefficient firms, and reduce economic growth.

A politically realistic position has to hold more than one thought at a time.

We should defend the benefits of trade. We should take national-security vulnerabilities seriously. We should be cautious about industrial policy becoming a pork barrel. And we should stop pretending that workers harmed by trade, immigration, automation, or some combination of all three can be placated with empty retraining rhetoric.

That is not as satisfying as a slogan. But slogans are part of how we got here.

The Misuse of “Politically Unrealistic”

The phrase “politically unrealistic” can be useful. It can also be lazy.

It is useful when it forces people to ask hard questions:

Can this policy pass?
Can it survive the next election?
Can it be implemented competently?
Can voters understand it?
Can the losers be treated fairly?
Can the policy survive contact with interest groups, courts, bureaucracy, and the budget?

Those are serious questions.

But “politically unrealistic” becomes lazy when it is used to avoid argument.

I have heard people dismiss market-based climate policy as unrealistic when they really object to energy taxes. I have heard people dismiss entitlement reform as unrealistic when they really do not want to identify who should pay more or receive less. I have heard people dismiss immigration compromise as unrealistic when they really do not want compromise. I have heard people dismiss basic-income proposals as unrealistic when they really do not want to rethink the welfare state.

Sometimes “politically unrealistic” means “voters will never accept it.”

Sometimes it means “interest groups will kill it.”

Sometimes it means “I do not like it.”

Those are not the same argument.

What CIVPAC Means

When CIVPAC describes public policy as politically realistic, the point is not that politics should be reduced to polling.

The point is that governing requires consent.

A policy that cannot be explained cannot be sustained.
A policy that ignores obvious losers will create backlash.
A policy that depends on voters being fooled will eventually fail.
A policy that treats half the country as morally illegitimate is unlikely to produce stable government.

But political realism also requires courage.

It requires telling voters that some things cost money. It requires telling interest groups that they cannot have everything. It requires telling activists that intensity is not the same as majority support. It requires telling moderates that compromise is not always available, and telling reformers that good ideas still need political strategy.

Political realism is not an excuse to avoid hard arguments. It is a demand that we make them honestly.

That is the standard CIVPAC tries to apply.

CIVPAC will not always get the balance right. No one does. But the goal is to be clear about the tradeoffs, honest about the constraints, and open to changing our view when public opinion, evidence, or circumstances change.

“What is politically realistic?” should not be the end of the conversation.

It should be the beginning of a better one.