In a speech on Tuesday at the Economic Club of New York, SEC Chairman Paul Atkins marked the 250th anniversary of America with reflections on the confluence of Thomas Jefferson’s drafting of the Declaration of Independence and the writings of Adam Smith, who articulated the economic power of “the invisible hand.” Chairman Atkins notes:

Thomas Jefferson was no stranger to Adam Smith’s philosophy—he was, in fact, a student of it, evidenced by the well-worn copy of The Wealth of Nations contained in his library, from which he gleaned wisdom that he shared freely with friends and correspondents.

It is little wonder, then, that our founding documents, in many respects, reflect Smith’s central themes that were debated at the time: that government must not grow infinitely. That it should be sizeable enough to protect its people yet small enough not to shackle them. And that its purpose, above all, is to set them free to pursue their own prosperity—and in so doing, to propel the nation’s prosperity—to unleash what Smith immortalized as “the invisible hand.”

Yet the Founders understood that this principle, however true or trustworthy, was not self-preserving. They knew that concentrated power—whether lodged in a crown, in a parliament, or in a bureaucracy—would characteristically constrain it. So, they built a framework around it as light as prudence would permit.

Carefully constructed on the cornerstones of clear rights, coherent rules, and public authority granted and bounded by the people, our forebears’ framework amounted to more of a trellis than a cage—something along which prosperity could climb.

For two and a half centuries, that trellis, rightly tended, has liberated the invisible hand to lift a people—indeed, even an entire nation—and, in so doing, has built the most prosperous, innovative, and resilient capital markets in the world.

Tracing a history of economic prosperity from colonial times to the present, Chairman Atkins talked about the enduring quality of our financial markets and a regulatory system built on transparency that sought to strengthen the structure of free markets “so that risk-taking and capital formation could swiftly recover and safely rise.” He went on to contrast the successes of our free market system with the failings of communist and socialist systems, noting:

The founding vision of our nation—what our forebears fought for, and what our heroes have died for—was always to serve and safeguard risk-takers, not to second-guess or stifle them; to create the conditions for their flourishing, not to control them.

It is a vision that, as regulators, we must not treat as an historical artifact but must take as an archetype: our rules must be clear enough to guide but restrained enough not to suffocate—preserving the conditions in which the invisible hand can convert the pursuit of personal gain into the promotion of public good. And that is precisely the path that this SEC is charting today.

Turning to the SEC’s agenda, the Chairman reiterated his focus on returning to first principles, stating:

Too often of late, our regulatory approach has drifted from following the letter of the law predicated on the founding ideals that propelled a young republic to achieve such stunning success. Rules were fashioned to meet social and political goals rather than to preserve First Principles. Enforcement, meanwhile, became a de facto policy instrument. And disclosure obligations, designed to illuminate what is material to investors, were quietly redirected toward what regulators found merely interesting. And with respect to digital assets—the most consequential financial frontier of our time—uncertainty became the policy. Well, innovation did not wait. It simply left our shores. In a world in which telecommunications know no boundaries, Americans found these assets anyway, but without the standards of American laws.

After recounting regulatory initiatives that have been undertaken over the course of the past year, Chairman Atkins noted that the SEC intends to conduct a broader, thorough review of enforcement processes, which he indicates is something that has only occurred once before in the SEC’s history.

Dave’s Independence Day Musings: I am not sure if I am alone in this regard, but I feel somewhat guilty about not feeling as excited about America’s Semiquincentennial as I did when we celebrated the Bicentennial back in 1976. Part of this may be attributable to the fact that I was only eight years old when we celebrated our 200th birthday, which meant that I was highly susceptible to all of the hype and celebration that marked the big day. I distinctly remember that, as part of the bicentennial celebrations, our local equestrian center showcased a Conestoga wagon train to mark the occasion, so my friends and I were inspired to conduct our own parade consisting of hastily constructed Conestoga wagons that were pulled by my friends’ St. Bernard dog! It was good to be a kid in the 1970s. This time around, I don’t feel compelled to take part in any parades or watch any fireworks, but maybe I should just chalk that up to age and exhaustion rather than a lack of patriotism or enthusiasm. I hope you have an opportunity to celebrate Independence Day in any way that makes you happy!

– Dave Lynn