"This is not, however, a book on the history of of economic thought proper. It uses a historical perspective as a happy way to organize a complex set of ideas into a coherent and understandable story. It reflects much reading and teaching of particular texts in the history of economic thought, but I am far from an expert or a deep scholar of this extensive and demanding subject. In places I have ventured beyond the texts of the authors in question and pursued my own imaginative reconstructions of debates behind the debates, and the sometimes unconscious ground from which political economic knowledge arose. This is my own take on economics, and exploits the great figures in the history of political economy shamelessly for my own ends. Be warned.By the way, I read Albert Hirschman's The Passion and the Interests (Princton University Press, 1977) as arguing that Adam Smith brought about a simplification in how humans in society were viewed. I think Hirschman's argument is complementary to Foley's, but I need to read more of Foley's book to be convincing.
...what do I mean by 'Adam's Fallacy'? Adam Smith says many things in The Wealth of Nations that are not fallacious. For example, it is undoubtedly true that self-interest is a powerful motivating force for human beings (though far from being the only one). It is also true that harnessing the pursuit of self-interest through competitive capitalist markets can be (though it is not invariably) a powerful mechanism for fostering progressive technical change and producing material wealth. It would be far from correct to claim that all pursuit of self-interest through competitive markets is morally bad. By 'Adam's Fallacy' I mean something a little more subtle than those much-debated claims. For me the fallacy lies in the idea that it is possible to separate an economic sphere of life, in which the pursuit of self-interest is guided by objective lawas to a socially beneficent outcome, from the rest of social life, in which the pursuit of self-interest is morally problematic and has to be weighed against other ends. This separation of an economic sphere, with its presumed specific principles of organization, from the much messier, less determinate, and morally more problematic issues of politics, social conflict, and values, is the foundation of political economy and economics as an intellectual discipline. Thus to my mind Adam's Fallacy is the kernel of political economy and economics. A full understanding of the arguments of the great economists requires seeing them in the context of this dubious division. In fact, as I hope this book will demonstrate, political economy and economics is at its heart an attempt to come to terms with this dualistic view of social life.
...is it true that Adam Smith committed this fallacy? A better qualified scholar of Adam Smith could make this case textually on the basis of The Wealth of Nations more persuasively than I can, starting from Smith's discussion of self-love as a powerful motivator of human action (Book I, chapter 2), continuing with his characterization of frugal wealth-owners as public benefactors (Book II, chapter 3), and culminating in his famous invocation of the 'invisible hand' (Book IV, chapter 2). But I would argue that it is more to the point that everyone who reads The Wealth of Nations comes away believing that Smith presents the world through the lens of what I have called his fallacy. Smith is too clever and too wily to present the fallacy in its barest form; his political economic world of self-regulating competitive self-interest actually depends crucially on innumerable value-laden political contingencies and institutions. Smith's qualifications of the principle of laissez-faire, for example, wind up presenting a reasonably balanced view of the interaction of politics and the economy. But the premise of Smith's book is that it makes sense to start with the examination of purely economic principles that arise from the interaction of self-interested individuals in the context of competitive markets for privately owned commodities. As I try to show in this book, his successors' investigations and discoveries are already inherent in Smith's conception of the political economic problem." -- Foley (2006: xii-xiv)
One can only be disappointed in Brad DeLong's misrepresentation of Foley's thesis. (See also.)