What did Adam Smith mean by a system of natural liberty?

In his seminal work, The Wealth of Nations, Adam Smith referred to what is now commonly known as laissez-faire capitalism as a "system of perfect liberty" or a "system of natural liberty."12

Smith envisioned this system as the final stage of commercial interdependence, characterized by free enterprise rather than government-constrained activity and market-determined wages rather than those set by guilds. Within this framework, an orderly society emerges through the interaction of human nature—specifically the drive for self-betterment—and intelligently designed institutions.1234

The system relies on competition as a protective mechanism that reconciles individual self-interest with the broader social good. By pitting one person's drive for improvement against another's, the competitive process ensures that prices gravitate toward their "natural" levels, which correspond to the costs of production. Ultimately, this system allows the invisible hand to regulate the economy, creating an underlying orderliness in the distribution of income among laborers, landlords, and manufacturers without the need for heavy-handed government intervention.34