Jolted by the Great Depression of the 1930s, Thurman Arnold devised an anti-monopoly industrial policy for the United States Justice Department that breathed fresh life into a then-moribund Sherman Anti-Trust Act. Arnold’s jurisprudence built on Adam Smith’s discovery that market-making could promote national security and forestall civil unrest. Smith’s insights had informed the industrial policy of Alexander Hamilton, who laid the groundwork in the 1790s for the country’s economic development. Edward H. Levi brought Arnold’s pragmatic anti-monopolism to the University of Chicago. Here, ironically, Arnoldian jurisprudence would be transmogrified into the doctrinaire company-over-country market fundamentalism of the Chicago School of Economics. Today, writes Richard R. John, as we envision for the 21st century a new pro-market, pro-freedom, pro-national security industrial policy, it is worth recalling how U. S. economic development took the form that it did, why the Chicago School repudiated the enduring wisdom of Adam Smith, and what this portends for the world of today.

Henry Simons, the “Crown Prince” of the Chicago School and a professor in the economics department and the law school prior to World War...

Adam Smith’s theory of political economy did not begin with the isolated individual but rather the individual who operates to earn the respect of others. Wealth and freedom grew from these relationships and engaging with others to create a free society, or what 20th century philosopher Isaiah Berlin’s would call positive freedom. In the 1970s and ‘80s, the Chicago School abandoned this aspect of freedom in preference of the isolated individual, which in turn produced a weaker concept of freedom, morality, and society that has stifled the cultivation of all three in the United States, writes Maha Rafi Atal.

The connections between Adam Smith’s Wealth of Nations and Theory of Moral Sentiments reveal a much more complicated understanding of how markets work than developed in the common interpretation by the Chicago School of economics or that of its critics. Smith’s political economy based on commerce, sympathy, and competition produced social good but only when complemented and checked by other forces. When not checked, Smith worried about “factions” that produce bad outcomes, write Sandra J. Peart and David M. Levy.

The post-World War II Chicago School of Aaron Director and Milton Friedman reimagined a new (neo) liberalism that treated economic liberties and the free market as the greatest defense of political rights. The government, and democracy, were more often than not barriers to economic liberties. The United States continues to suffer from neoliberalism’s prescriptions, and addressing the concerns of today’s populist movements will mean rediscovering ideas of freedom that the Chicago School denigrated, writes Robert Van Horn.

The Chicago School is often associated with laissez-faire economics that reads into Adam Smith’s philosophy of political economy justifications for self-interest and prudential motivations. However, a careful history of the University of Chicago’s early Economics Department and School of Commerce and Administration reveals a more complicated understanding of how economics and business were to interact with one another and society. The early University of Chicago pursued a program that emphasized that laissez-faire economics and a concern for the public interest were not antagonists but perfectly compatible, writes David Mitch.