Love her or hate her, you can't deny that Ayn Rand, the 20th century's most bellicose/eloquent (select adjective based on political persuasion) defender of laissez-faire capitalism, is experiencing a revival.

Sales of her 50-year-old magnum opus, Atlas Shrugged, second only to the Bible in terms of influence according to some reader surveys, are soaring even more this year. Two major publishing houses have rushed to release new Rand biographies—by academics, no less—this fall. And there is nary a tea party protest that doesn't prominently splash banners alluding to John Galt, Atlas Shrugged's ubermensch hero.

The latest issue of Reason magazine, with which I am affiliated, has Rand on the cover with a headline proclaiming: "She's Back." GQ echoes the same thing with its own slant, "The Bitch is Back," not to mention a hilariously naughty picture depicting Rand in an S&M outfit standing astride her former devotee Alan Greenspan.

That over 25 years after her death, Rand's persona and ideas command so much attention is testimony to the abiding power of her ideas. Still the question remains, if she is so influential, why are we on the brink of socialized medicine today? Put another way, if Rand were alive, would she be reveling in the renewed attention she is receiving as a measure of her success? Or would she be tearing her hair out in despair at her failure to stop the advancing Big Government juggernaut?

The point is especially powerful if one considers the influence that some of the other great philosophical defenders of liberty have had in the past. John Locke set out to release the individual from the tyranny of religious authorities by enunciating the doctrine of the separation of church and state. Today, this doctrine is the cornerstone of every liberal democracy in the world. Likewise, Adam Smith penned his grand defense of free trade to beat back the mercantilist ideologies that held sway in 18th century Europe. Today, the cause of free trade—notwithstanding occasional bouts of protectionism—is gaining ground worldwide. But Rand's life-long crusade—defeating socialism—which appeared within grasp just two decades ago when the Soviet Union collapsed, now seems to have regressed to the 1930s, when FDR used the economic meltdown to massively intervene in private industry.

Rand's adherents blame this state of affairs on the faulty philosophical principles of society—especially on issues of morality. But replacing false ideas with true ones is precisely what transformative figures do, and certainly what Rand, who firmly believed in the power of reason and truth, was hoping to do. Surely, if she had witnessed the events of last year—the government bailout of banks, the takeover of auto companies, the looming socialization of health care—she'd be wondering where she went wrong. Or, to use her lingo, she'd be "checking her premises."

So where did she go wrong?

Rand's entire project involved liberating the individual from the yoke of collectivism and creating the social, moral and political conditions in which he could live a fully actualized life. Each individual's own happiness is his highest purpose, she said, and boldly declared selfishness to be a virtue—contrary to what various religious and non-religious (communist, fascist, communitarian) preachers of the ethics of self-sacrifice had been saying for ages.

For people like myself, laboring under the twin tyrannies of tradition and socialism when I first read Rand in my native India, this is heady, empowering stuff. It supplies you with the moral and intellectual ammunition to stand up to those claiming to own a piece of you—family, community and state—and take control of your own destiny.

But is self-actualization through productive work--the ultimate goal of this liberation for Rand—all there is to a happy life? Two centuries before Rand arrived on the scene, Adam Smith had already written The Wealth of Nations, a powerful treatise demonstrating why self-interest offers a more secure foundation for a rational society than a selfless dedication to the common good. But he also recognized in the very first sentence of the Theory of Moral Sentiments—his brilliantly nuanced, richly observed study of human morality—that: "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it."

Smith spent his whole life examining and reconciling both the self-interested and the "other-interested" side of human nature. Rand, on the other hand, effectively put these two sides at war—limiting her usefulness in the fight to stop the growth of government in the bargain.

Rand sought to provide an individualistic and moral defense of capitalism—not a practical and collectivist one. She understood better than anybody that by unleashing the productive potential of individuals, capitalism delivers untold social benefits. But these benefits weren't the primary reason to defend capitalism, she insisted. Rather, it is that capitalism frees individuals—especially those with exceptional abilities, the Howard Roarks and the John Galts—to reach their highest potential.

By grounding capitalism and economic liberties in the psychic needs of individuals as opposed to, say, GDP growth, Rand avoided the collectivist trap under which individual rights are dependent for their legitimacy on serving some broader social purpose. However, this great virtue of her approach turns into a great vice in the context of her broader message, which seems to regard anything beyond a perfunctory interest in the well-being of others as vaguely illicit.

Unlike Smith, Rand failed to fully recognize that though human beings are not constituted for self-sacrifice, they have an innate need to see others prosper. Hence, there is something crabbed and withholding in her writings, as if she is going out of her way on principle to avoid giving any assurance that everyone in fact would be better off under capitalism. Other libertarian theorists—Friedrich Hayek and Ludwig von Mises—avoided this flaw. But Rand regarded their defense of capitalism as insufficiently pure. And to the extent that it is Rand's—not their—case for capitalism that sticks in the popular imagination, it might enhance—not diminish—the allure of government over free market solutions to social issues such as health coverage for the uninsured.

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