BACK in MARCH 1976, I wrote - in celebration of the 200th anniversary of Adam Smith's "Wealth of Nations" - that the famous Scottish laisser-faire economist "is alive and well at the U.S. Treasury, where he operates under the pseudonym of William E. Simon."

Smith published the classic statement of the virtue of the captalist free market, or the virtue of the capitalist free market, or free enterprise system, in which "an invisible hand" - that is to say, the collective result of thousands of private decisions in the market - allocates resources and wealth better than could any group of government officials.

I was relying then on Secretary Simon's many speeches, statements, and congressional testimonies decrying the growth of government and warning that the United States was on the road to socialism.

Now Simon has published a book, based on his four years in Washington, called "A Time for Truth," extravagantly endorsed by today's high priests of extremist laissez-faire philosophy, Milton Friedman and Friedrich von Hayek. The book shows how far back down the road toward 1776 Simon actually goes. Simon is slightly to the right of Ronald Regan, and appears to accept less of a public enterprise role than did Smith himself.

He displays a bitterness and a contempt for Congress and many of his colleagues, who come off as stupid, badly informed, and conspiratorial against Bill Simon. For example, on one occasion, Ford chief of staff Donald Rumsfeld [WORD ILLEGIBLE] with an indignation based on everything but concern for principle."

As for the Republican Party, it is today "reduced to [WORD ILLEGIBLE] inconsistency by half a century of compromises on principle . . . Americans do not need a dime-store version of the 'New Despotism' in the Republican Party when in the Democratic Party they've got the real thing . . . Without (a counterintelligentsia) . . . it is destined to remain the Stupid Party and to die."

With Simon, it's all or nothing and that's the weakness of the man's thinking. Having survived his appointive role, the nation is likely to be spared Simon in elective role, despite his far-reaching ambitions. (He once explained to me that he wouldn't find it sufficiently challenging to run for the Senate from his home state of New Jersey. "I wouldn't want to be one of 100," Simon said.

IN THE SIMON CONCEPT, the "New Despotism" in the United States operates through "an economic police state" in Washington, linked with "a powerful new lobby that goes by the name of the public Interest movement." The goal of this evil cabal is "expending police powers of the state over American producers."

This anti-free-enterprise power structure, much of it triggered by FDR's New Deal, is symbolized by a new kind of egalitarian who "peddle(s)" not the equality referred to in the Constitution, but an anticapitalist variety "that seeks to deny . . . the crucial differences in character, effort, and ability . . . The more one achieves, the more one is punished; the less one achives, the more one is rewarded . . . (The) goal . . . is to level all men."

Simon cites liberal economist Arthur Okun's "Equality and Efficiency" as support for the thesis that economic and political freedom can't be separated. But he ignores Okun's caveat that "a shrinkage of the power of the state to microscopic size" isn't necessary or sufficient to protect individual liberties. Summed up Okun in the same book: "The market needs a place, and market needs to be kept in its place."

BUT TO BILL SIMONS simplistic mind, the choice always seems to be between extremes, Adam Smith and Leonid Brechnev. And that poses the issue in unacceptable terms. The fact is that a mixed economy is needed to protect the public interest in new and complex, internationally dependent economies.

Smith himself defined an area for public enterprise in "The Wealth of Nations" - public works and certain public institutions - which would benefit society, but are not sufficiently profitable for individuals to undertake.

Reasonable people can agree about the right mix of public and private responsibilities. But to argue, as Simon does, that the mix itself must be put aside in a "crusade" to go back to pure Adam Smith makes little sense. And to suggest that, as part of the crusade, business should seek to deny its funds to universities and to the media unless they assure "fair and accurate treatment of pro-capitalist ideas, values, and arguments" treads on dangerously authoritarian ground.

Bill Simon is behind the times. At least two centuries behind.