Common Sense Radio: Adam Smith, the Rule of Law, and the Foundations of Prosperity
Friday, October 1, 2026, on Common Sense Radio, with Bill Sayre, weekdays, 11 o’clock till Noon.
Art Woolf — economist, demographer, and author of the Substack entitled, Davis Dewey is Rich — joins Bill to consider some of the writing and thoughts of Tim Taylor and Barry Weingast on an important lesson we can learn from Adam Smith, who many consider the father of modern economics, and author of An Inquiry into the Nature and Causes of the Wealth of Nations. That is the role of the rule of law as an essential condition for markets to produce prosperity
Potential Questions and Issues
Smith describes a “feudal equilibrium”as a balance between the King, feudal lords, and the Townspeople. What were the limitations on the rights of those who worked the land? Is this why Smith called them “slaves?” What grand bargain evolved between the King and the Townspeople? What rights did the Townspeople eventually acquire, and solidify? To build city walls, start militias, and magistrates who protected individual rights. How did this give rise to the merchant class? How is it that the merchant class became wealthy through trade?
What happened to the disparity between life of the slaves, and lives of the Townspeople (or was it the Merchants?)? How did slaves working the land near the city walls acquire freedom? What was the difference in productivity between slave worked land, and freeholder land? (Did free men, not slaves, acquire land?)
Weingast describes the way balance of power, in the feudal equilibrium evolved.
“The trading towns of Northern Europe managed to escape the feudal equilibrium, creating liberty, the rule of law, and long-term economic growth—at least for the merchant elite. How did the towns make this escape? … Smith began with the townsmen as part of the feudal equilibrium. He reports that the king and the lords attacked these unfortunate souls without “pity or remorse.” Over time, however, the king and the townsmen came to see that they had a common enemy in the barons and lords. Indeed, the townsmen were the enemies of his enemies. The king and towns therefore could benefit from a political exchange in which the
towns gave the king taxes, fixed for all time, in exchange for various rights. These included the right to build walls around their cities and to create their own militias for security, to have their own magistrates and judicial systems, and to create their own laws and mechanisms to enforce them. These changes provided the critical political and legal infrastructure to support markets, allowing the towns to get rich over time.”
Weingast goes on to describe Smith’s description of the rule of law as an essential condition for creating prosperity and wealth. Individual liberties, with rights protected, fairly, and predictably, by the Courts? What can we learn from this that will help us today?
Indeed, in 1793, Dugald Stewart gave a eulogy for Smith [Stewart 1982 (1793)]. He reported a 1755 paper by Smith then in his possession (now lost), which said, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” To a neoclassical scholar of development, this sentence makes development sound formulaic. The reason, as I mention in the introduction, is that these economists assume the first and the third conditions when studying the developed world. But, as I suggest, Smith argued that creating these conditions is the task of development. To create a rule-of-law judicial system rather than a corrupt one based on bribery and privilege represents one of the central problems of modern development.
What can we learn from this to help us understand and address public policy issues today? For example, trade, terroism, war?
