Are liberties to own productive property and engage in voluntary exchange basic in Rawlsian terms? This is a key controversy between classical liberals, such as Gerald Gaus (2010) and John Tomasi (2012a), who affirm economic liberty to be an essential right within a public justificatory framework, and egalitarian liberals, such as Samuel Freeman (2001), John Rawls (1975, 1999), and Anna Stilz (2014), who do not. So far for their argument, classical liberals have relied on the wealth-generating properties of markets and the supposed greater personal autonomy that economic freedom permits. These arguments have not convinced Rawlsians, who suggest they do not show how economic liberty is necessary for developing citizens' moral powers. This article attempts to reconcile what Russell Hardin identifies as two distinct traditions that have so far resisted combination: political liberalism and economic liberalism (2003, 41).
My point of departure is that both sides in this debate currently rely on a shared neoclassical conception of economic activity. In doing so, they miss some insights from the classical political economy tradition that suggest that commerce exerts a critical influence on the moral character of society (Hirschman 1982). Although cognizant of the vices associated with business, scholars in this tradition recognize the often morally improving character of commercial institutions. Montesquieu claims that commerce encourages peace and curbs prejudice between nations (1777, 2:XX.2). Domestic commercial norms are a more mixed blessing, encouraging a sense of exact justice--that is, norms against predation but also against support and sympathy among friends. David Hume believes there to be an unbreakable link among "industry, knowledge, and humanity" (1994b) and argues that commerce among diverse nations can make everyone industrious and prosperous through mutual gains (1994a). Immanuel Kant describes commerce as how "peoples would be at first brought into peaceful relation with one another, and so come to an understanding and the enjoyment of friendly intercourse, even with their most distant neighbours" (1795, 149).
In this article, I focus on reconciling Adam Smith ( 1981,  1982), who makes an important contribution to this moral tradition, with Rawls. Rawls uses a proto-utilitarian representation of Hume and Smith as a foil for his contractarian account of justice as fairness (1999, 161). Contemporary scholars, including Eric Schliesser (2017), Deirdre McCloskey (2007), and Maria Pia Paganelli (2010, 2017), have recovered a more socially oriented interpretation of Smith that suggests he was more than a proto-utilitarian when it came to the social role of economic activity, making this an opportunity to address Rawls's characterization of Smith. Smith is a useful exponent in this context because of his greater optimism, compared to Hume, about the possibility of respecting social equality between persons (Levy and Peart 2004; Debes 2012). It is timely to explore these ideas as part of the discussion of basic institutions in a way that aligns with Rawls's method of "wide reflective equilibrium" where theoretical principles and moral judgments are refined with the support of background social theories (Daniels 1979).
With the recovery of this classical economic tradition in...