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Smith's Lectures on Jurisprudence, originally delivered at Glasgow University in 1762-1763, presents his theory of the rules by which civil government ought to be directed. Building on his Theory of Moral Sentiments, Smith argues that the state must act as an impartial spectator, judging when an individual has been injured, Thus, regulations concerning trade, commerce, and production must be crafted so as to encourage rather than interfere with other productive capacities.
Buchanan et al. (Mon,) studied this question.