45 Journal of Markets & Morality Volume 23, Number 1 (2020): 45–59 Copyright © 2020 Carden / Caskey / Marshall Ethical Maturity and Economic Progress: Adam Smith’s Lesson Still Applies * Art Carden Associate Professor of Economics, Samford University Senior Fellow, American Institute for Economic Research Greg Caskey PhD Fellow, F. A. Hayek Program George Mason University Jennings Marshall Professor of Economics, Samford University As Vernon Smith argued, “markets economize on the need for virtue, but do not eliminate it.” The need for a virtuous, ethically mature citizenry is an important but often-overlooked theme in Adam Smith. Unethical business behavior creates a demand for government regulation ostensibly to fix the problem; however, evidence that government regulation reduces economic growth suggests that this does not so much solve the old problem as it creates new ones. Using what we know about “rational irrationality” and people’s views on government, we explain why unethical business behavior leads to a higher demand for government inter- vention and why that intervention is not likely to create a more ethically mature society. From Moral Sentiments to the Wealth of Nations Adam Smith, the father of modern economics, was a moral philosopher before he was an economist: The frst edition of his frst book, The Theory of Moral Sentiments (TMS), predates the frst edition of An Inquiry into the Nature and Causes of the Wealth of Nations (WN) by almost two decades—1759 versus 1776—and the sixth and fnal edition of TMS was published in 1790, the same year Smith died. Scholars highlighted what they thought was a tension between the Smith of TMS and the Smith of WN: Imaginatively called Das Adam Smith Problem, the supposed tension between the other-regardingness of TMS and the self-interestedness of WN has been a running theme in Smith scholarship. 1 The two are not in tension, however. As Jerry Evensky argues, ethical maturity among a citizenry, according to Smith, was at the foundation of his “obvious and