The famous Das Adam Smith Problem, which questions the consistency issue between The Theory of Moral Sentiments (TMS) and An Inquiry into the Nature and Causes of the Wealth of Nations (WN) is still relevant for anyone attracted to Smith scholarship. Although there is agreement that both works are consistent and, furthermore, parts of an incomplete system, it seems that the Problem continues to attract interest not only for its historical and philosophical appeal but also, perhaps, for its implications for the current economics and ethics debates. However, within the vast energies dedicated to the Problem, what has gone relatively unnoticed is the historical and intellectual context that gave rise to it in the last half of the nineteenth century and its implications for our understanding of sympathy. In this chapter it is argued that, well before the formation of the German Historical School, the economic hegemony of Great Britain may have played an important role in shaping the reception of Smith in Germany as the founder of the school of self-interest and laissez-faire. Then, after uncovering some sources and a possible reason for the emergence of Das Adam Smith Problem, a brief assessment of the current debate on the Problem follows. After Jacob Viner's seminal paper "Adam Smith and Laissez Faire" (1927), the Problem remained dormant for a while, but it soon became the subject of academic discussion. finally, Smith's concept of sympathy will be reassessed within what I would call the sympathetic process. states that there is an irreconcilable difference or inconsistency between TMS, with its sympathy-based concept of human nature, and WN, which is founded on an egoistic theory of self-interest. It is true that selfinterest is an important motive in both works, and it is also true that selfinterest is not always egoistic behavior, but it is intriguing that nowhere in WN does Smith refer to sympathy. Moreover, in WN mention of his four principal virtues (prudence, justice, benevolence, and self-command) is scant. One could simply explain that one book is about ethics and the other about political economy, but this does not dissipate the Problem. Yet, if this and other puzzles add to the relevance of the Problem, its nature must be combined with an interpretation of why and how it actually emerged. Although the German context during the first half of the nineteenth century is extremely complex in its political and social dimensions, I will try to show that the shaping of the Smith Problem can also be seen as the result of an intellectual context hostile to the British laissez-faire doctrine, which influenced not only some important predecessors of the German Historical School but also its foremost representatives. A year after the publication of WN in English, and a few months after the publication of the first volume of Johann Friedrich Schiller's German translation,2 the reviewer Johann Georg Heinrich Feder (1740- 1821), who taught at Göttingen, wrote in the Göttingische gelehrte Anzeigen (10 March 1777) that "Many of his propositions cannot be accepted as principles of universal policy; they are adapted only to a particular stage of industry, wealth, and civilization" (quoted in Cohn [1873] 2000, 64). This early assessment of WN reflects a view that was basically carried forward, with a few exceptions, for more than a hundred years. The Germans, whose nation was defined by its culture (Kulturnation) but not a state, had been seeking their own identity since well before unification in 1871. For example, the philosopher Johann Gottlieb fichte's (1762-1814) Reden an die deutsche Nation (Addresses to the German Nation, [1808] 1968), an important influence on the final unification of Germany, represents a clear indication of the cultural tension between German nationalism and "foreignness." This nationalistic spirit was, for example, clearly reflected in the fraternity of university students (Burschenschaften) founded in Jena in 1815. Furthermore, historical evidence suggests that this search for identity was combined with a strong German nationalism that was sometimes closer to chauvinism with racist overtones. In this nationalistic setting, Great Britain, in spite of its common history opposing Napoleon, was no exception. In addition, the achievement of a unified and centralized German empire occurred within an economic environment in which Great Britain had attained clear dominance in world manufacturing and trade. Under these circumstances, the industrializing process in Germany developed its own distinctive character (Milward and Saul 1977, 49-50), which was quite cautious compared to the more liberal British policies. Initially, Smith entered Germany through the universities, and of course the University of Göttingen, in Hanover, which was established in the English king's territories, was the place to study Smith and the breeding ground for followers of his ideas. Considering that the cameralists- who taught Cameralwissenschaft, named in allusion to the Kammer, in which the administrative political power of the states deliberated economic and political issues-held a nationalistic and protective viewpoint, it is not overly bold to assume that the dissemination of Smith's liberal views was generally seen by traditional academics and politicians as a threat to the status quo. Yet, if Smith's doctrines, aside from Göttingen, remained rather dormant in Germany just after WN's first German translation, Christian Garve's popular translation, published in two parts in 1792 and 1794, definitely revived an interest in Smith. August Ferdinand Lueder and Georg Sartorius both studied and taught at Göttingen, and were quite effective in spreading Smith's views. Lueder was not only influenced by Smith, but also by the ideas of the French Revolution.3 Therefore, it is not surprising that later authors such as Bruno Hildebrand, as we will soon see, conflated the ideals of the French Revolution with Smith's legacy. But Sartorius did not follow Smith's liberal views on commerce, as he was aware of the limits and dangers of laissez-faire, proposing the intervention of the state in different situations, a theme that pervaded a complex intellectual process that would reach some important exponents of the German Historical School. If in western Germany the influential University of Göttingen was crucial in the dissemination of Smith's doctrines, in the east it was the task of Christian Jacob Kraus,4 a fervent admirer of Smith who had spent a year at Göttingen and studied and later taught at the University of Königsberg. He referred to WN, declaring that "certainly since the times of the New Testament no writing has had more beneficial results than this will have" (quoted in Hasek [1925] 2002, 87). In addition, Adam Heinrich Müller (1779-1829), though acknowledging Smith as a most learned economist, saw him as a "one-sided" (einseitig) representative of English economic interests.5 Another earlier source of the tradition leading to the German Historical School's hostility toward British political economy is fichte, who in his Der Geschlossene Handelstaat: Ein Philosophischer Entwurf als Anhang zur Rechtslehre (The Closed Commercial State: A Philosophical Outline as an Appendix to Law, 1800), argued against laissez-faire policies. For this influential philosopher it was the duty of government not only to restrict and regulate foreign commerce but also to prohibit it. When Friedrich List (1789-1846) published his Das Nationale System der politischen Ökonomie (The National System of Political Economy) in 1841, both arguments were synthesized in a serious critique of what was later called Smithianismus. But one important underlying cause that motivated the latter is explicitly stated. It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith . . . and all his successors. (List [1841] 1904, 295) Not surprisingly, in this setting Smith became known as the founder of the materialistic Manchester School, which preached the gospel of individual interest and free competition, in clear opposition to the older, cameralistic tradition, which assumed that society and its members needed guidance. © 2008 by University of Michigan Press. 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