One such article, originally posted in the Economist by C.W. on November 11, 2013, reappeared this month on my Facebook feed from 'The Economist'. Here's a segment of the article (which includes further reading suggestions) titled Economic History: Smith's word -
Economic history
Smith's word
Nov 1st 2013, 14:10 by C.W. | LONDON
ADAM SMITH is known as the father of economics. Most people think of him as the archetypal free-marketeer. But Smith is often misquoted. This post will give a few examples of how people have misinterpreted Smith’s ideas—and show what he really meant.
Smith sowed the seeds of his own problems. He tended to write pithy soundbites that left his ideas open to distortion. One of his best-known quips:
It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.
Journalists and economists frequently use this quotation. Most people think that Smith was advocating pure egoism. In fact, according to Athol Fitzgibbons, an economic historian, the reader can only understand the quotation within the context of the passage. And deeper analysis shows that Smith was making a subtle point, rather than advocating pure selfishness.
In the "Theory of Moral Sentiments", his second most famous book, Smith discusses the position of philosophers in society. He argues that it would be contradictory and unjust for them just to think about their self-interest. Instead philosophers needed to cultivate a sense of public duty in order to be any good at helping to solve the world’s most pressing problems. But butchers, brewers and bakers did not need such lofty aspirations—unlike philosophers, they could probably do their job well by acting selfishly. So according to Mr Fitzgibbons, when Smith mentions "their own interest", he is arguing that “not all occupations are pursued with the same low motive in mind”. Smith certainly did not intend to suggest that self-interest was the only driving force of human behaviour.
And other evidence suggests that Smith had a more complex view of human action than most people give him credit for. This quotation appears on the very first page of the "Theory of Moral Sentiments":
How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.
Smith voices similar opinions when he mentions the “invisible hand”. The metaphor is used today for the idea that selfish individuals, operating independently, will bring about the best possible outcome. But this is a misinterpretation of Smith. The phrase "invisible hand" is used only three times (here, here and here) in Smith’s works. And according to Emma Rothschild, an expert on 18th century economic thought, its use was “ironical on each of the three occasions".
So much for selfishness. Smith’s ideas of the division of labour were .... (click here to continue reading-- http://www.economist.com/node/21589054/print )