h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

While being the so called creator of modern day capitalism, Adam Smith would most likely be disgusted by the ruthless market of the form of capitaslism practiced in western europe and especially america. The purpose of the free market, Smith thought, was to produce free men. He also believed in freedom of CIRCUMSTANCE, not just opertunity as we are told in school. Unlike the communist manifesto, which was a purely economical work, the wealth of nations was a rather optimistic work that dealt with the ways a society can reach true freedom by expanding beyond mere survival. On the division of labor (which many people hold to be imperative to smiths philosophy) smith had this to say:

"In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilised society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it."
Adam Smith, Wealth of Nations, Bk. V, Ch.I, pt.III, Art.II

The problem with the wealth of nations is that very few people who talk about it have read past the first paragraph.

The first paragrapgh? I don't think most people have even read the entire sentence (note the use of the singular) in which Smith mentions the "invisible hand." Smith's discussion on the division of labor was far more important, both to Smith himself and to the rest of humanity, than the "invisible hand" that every pundit in the US always attributes to him. It's too bad that people these days are too lazy to read something that is actually important, and instead spend their time reading lousy novels and watching trashy TV.

Certainly, Samuel Fleishacker puts forward a strong reading to this affect in his very good book; A Third Concept of Freedom, Judgement in Kant and Adam Smith. Where he suggest that Smith adovacates a Liberal society which is conducive to endowing the populace with the education and life experience which would allow them to exercise informed judgement. A Theme which he realtes back to Aristotle's concept of "phronesis", a concept which has gained a certain amount of popularity, in the wake of Hans Georg Gadamer's Aristotilianism.
Of course, vast amounts of Smith's theory relies on presuppositions he makes in his ontology, which relate to his theism, and based on that the methodology he felt was approporiate to the social sciences, presuppositions which one may or may not feel, are valid. If your intrested in Smiths views on methodology in the social and practical sciences you should read his "History of Astronomy" in his collected works. The glasgow edition , Raphael and Macafie.
Needless to say, Smith was a very nuanced thinker in many, oft underapreciated ways, but there is also an increasing amount of very good literature on him (especially from a philosophical angle), equally there is a vast amount of uninformed literature from across many areas of scholarship. But if you're intreseted in a good general acount of "The theory of moral sentiments" D.D. Raphael's new book "The Impartial Spectator" is an excellant introuction into this area. Though Haaknossens introduction to his latest edition of the work (Cambridge text's in the history of Philosophy) is perhaps, slightly more informative on the role of "Sympathy".