Poverty, Inequality, and the Role of Government: What Would Adam Smith Say?

This paper uses Smith's views on the distribution of income and poverty to support the argument that Smith's advocacy of laissez-faire was limited and historically specific. It discusses the relevance of these views in providing philosophical underpinning for modern social policy. Examination of Smith's ideas using the frameworks of several modern theoretical constructs, including Rawlsian justice, interdependent utility functions, countervailing power, and the theory of the second best, helps to make this link between eighteenth century thought and twentieth century policy analysis.