Edinburgh, as a Glaswegian will always remind you, is a funny place. It grudges recognition even to its most famous sons and daughters. The capital is strewn with daft monuments - what was Sir Walter Scott's crime, exactly? - while remarkable souls get no shrift. It is Edinburgh's habit to sniff at genius.

Two examples. Some years back I wrote a book about Robert Louis Stevenson. During the course of the thing I wondered about the memorials, if any, that his city (and mine) had raised to the greatest prose writer this country ever scorned. One exists within the precincts of St Giles Cathedral, but you'd best carry a torch if you hope to see details.

The relief is based on a medallion created by Augustus St Gaudens. This shows the Louis of legend, afflicted and in bed, but still working. In the original, the inveterate puffer is holding a roll-up. In the version demanded by city fathers a tasteful "artistic" quill is substituted for the fag. Musn't offend the Almighty, Muriel.

I then discovered that there had been some debate over a public memorial for RLS. It got as far as the council. In a version of class war that was news to me, Labour's leader denounced the genius as a "syphilitic degenerate". Louis was sick for many reasons, but that wasn't one. If I say I am ambivalent about my home town, you might catch my drift. I've had my tea.

So here we are with Adam Smith. Even by Edinburgh's standards, a decent interval has passed since June 5, 1723, when a smart lad entered the world by way of Kirkcaldy. These days David Hume has his High Street statue - a fine piece, but if that's him, I'm Wittgenstein with a poker - yet only now does Smith get his due. Then his lump of 20-foot Sandy Stoddart stone. Which may, of course, be the problem: what is Smith's due, precisely?

The Prime Minister claims to be a fan. In point of fact, Gordon Brown could probably claim Smith as a post-mortem constituent. But would a close reading of An Inquiry into the Nature and Causes of the Wealth of Nations validate the private finance initiative? Does the Invisible Hand justify tinkering with 10p tax bands, or allow the debauching of the dollar by the Bush crew? If you follow the cartoon version, our Kirkcaldy boy all but said that greed is very good. True?

Ever since Thatcher, a discreet war has been going on over the Smith legacy. Two facts. First, we are no longer living in the eighteenth century. These days, Enlightenment is hard to come by. Secondly, Smith left us two legacies rather than a single sound-bite. In one sense, he saw the Gordon Gekkos of 21st century-life coming, and deplored their habits. In another, he gave them every excuse.

You can, in other words, choose your own Adam Smith. You can pick the writer who argued that the liberty of common men to trade freely is the foundation of civic society, or you can venerate "the market" as a brute fact of nature. You can choose the Smith of Wealth of Nations, or prefer the moralist of The Theory of Moral Sentiments. You will have some difficulty, though, in reconciling one with the other. Smith never managed it.

He didn't think much of his own stuff, either. It is recorded that the passing of a dedicated hypochondriac saw the burning - Joseph Black and James Hutton did the honours - of 16 entire volumes of Smith's writings. We still struggle with what he said, and with what he meant. He all but created the world in which we live. Yet he did not think he said much of importance.

James Buchan, in a remarkable book - Capital of the Mind: How Edinburgh Changed the World (no offence, Weegies) - catches Smith better than most. The philosopher "had social connections with wholesale merchants in Glasgow who were exploiting the colonial markets opened to Scots trade by the Union of Parliaments, but had almost nothing good to say about them or their company". No change there, then.

Smith was also ambivalent about reality. Concepts of what we know, and how we know it, and of how feelings interact with reason, were new. Smith, born in a Fife devastated by Union, wrote nicely about topiary, Italian verse and money, among other things. He was no economist, however. His knowledge of banking and finance would have earned him a minor position at Northern Rock on a slow Monday.

He cared - the Enlightenment never stooped to trivia - about liberty. What he would have made of a self-styled Adam Smith Institute, based in London but determined to stick up a statue this July 4 - nothing obvious ever eludes the dismal right - outside St Giles is another matter. Mr Stoddart has outed himself in the Spectator recently as a former egalitarian. Does no-one read, these days?

Is modern Edinburgh, a place dedicated to the movement of money, meanwhile capable of celebrating Smith? Are we still hung up on "proto-Thatcherism"? Or could we grasp Smith, finally, as a man who believed that self-interest must always have its limits? I once tried to wangle a biscuit firm's book award for Ian Simpson Ross for making that very suggestion.

My fellow jurors were unenthused. Still, the startling fact about the Ross biography (OUP, 1995), was this: it was the first full life to be written of Smith, in Scotland or anywhere else, in fully 100 years. It is one thing to know someone's faither. It is quite another matter to be petulant in your dedication to sheer ignorance and any genius in your midst.

Buchan reminds me, meanwhile, that "capitalism" was a word invented in and for the twentieth century. Werner Sombart: Kapitalismus, and all the ensuing Krunchy Kredit. Smith would have found the C-word baffling. "Frozen desire" - credit to Buchan for another exquisite metaphor - was the idea of money and labour he granted us when the phenomenon had scarcely begun to figure in the lives of working stiffs. What did Adam Smith do? He excused the price of petrol.

But he also, breathtakingly, exhibited a truth of genius: by describing a thing, you can make it possible.

Smith's work is, if it is anything, a warning against the lunacies of globalisation, PFI, bundled "debt obligations" and turbo-capitalism. He tells us - in better prose than anything Herr Marx mustered - that making a bob (as Ross wrote) "should not determine the nature of the loving relationships and dutiful obligations of family and civic life". You might call that the Visible Hand.

It is good, plainly, that Edinburgh and Scotland should celebrate one of its more interesting specimens. There is something amiss, nevertheless, when the capital of a living nation requires almost three centuries just to come to begin to terms with its intellectual back-story.

Adam Smith changed the world. Changing Scotland takes a while longer, apparently. The sad fact is that the capital is less intellectually alert these days than it was when Smith, Hume, Ferguson, Adam and Black were wading through its stinking middens. These days we do nice sculptures, but can't manage an intelligentsia. And we still don't know what Adam Smith was talking about.