The purpose of this paper is to argue that free market capitalism is neither efficient nor just. This is in spite of the claims made by its proponents who, utilizing Adam Smith's doctrine of invisible hand or the fundamental theorem of welfare economics, assume that it is efficient, just, smooth functioning, and self‐regulating.
The paper utilizes conceptual/theoretical research and arguments that have emerged in the literatures of public economics and welfare economics.
In addition to proving the above, the paper also finds that Adam Smith is actually a moral egalitarian, thus he could not have agreed with Nozick and Friedman regarding the nature of capitalism. To the extent that Smith supported free market capitalism, it was because he thought, in contrast to mercantilist policies, that free markets would lead to equity and justice.
The paper is an original/valuable contribution since it rescues Adam Smith from the extreme proponents of laissez‐faire capitalism who claim him.
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