Adam Smith, human betterment, and his erroneous indentification with self-interested human action

•The secondary literature on Adam Smith's wealth of nations (WN) overwhelmingly and erroneously interprets him as championing the principle that all human action is driven primarily by the individual's self-interest.•Smith on self-love versus following “own interest” in “own way” as motivating action in both the theory of moral sentiments and as applied in WN.•Mandeville's “pernicious” doctrine of greed “seems to take away altogether the distinction between vice and…virtue, and…is upon that account, wholly pernicious.”•If there is no propriety there is no property, and therefore no rule-of-law, that can properly restrain actions that violate the space and freedom of action of others.•“Capitalism”: an economy of involuntary taking? Or is it one of voluntary giving that one can receive?.•Moral sentiment is about rules that better human lives; but their validity is tested in the findings of behavioral psychology and economics.•For Smith trade is persuasion motivated by appealing to the self-love of another and is thus about the gains from serving others.•Smith's propositions on Beneficence, the good things humans do for each other, and Justice, limiting and disincentivizing the harmful things we do to each other, constitute the two pillars of society of which justice is the most critical if a civil order is to be achieved.•On extending market rules to political decision making: the compensation election in which binary choice referenda are selected by the highest sum of bids, assuring that the losers can be compensated in the amount of their losing bids. In this essay I discuss the proposition that Adam Smith has been widely misinterpreted as asserting in his second book, The Wealth of Nations, that emergent modern economies are driven by the strictly selfish motives of their human inhabitants. The propositions articulated in his first book, The Theory of Moral Sentiments, which offered a theory of society, extended seamlessly into his second book, and continued to be part of his theory of economy. In both works, he distinguished the universal state of being self-interested from actions taken in one's self-interest, and modeled people as creating and following rules of propriety that enabled them to better get along with their neighbors. This distinction explains why, in his second book, he refers to people following their “own interest” in their “own way” explicitly avoiding any suggestion that people pursued only their strictly selfish interests in the proc