No guide to Amsterdam is complete without a mention of tulips, canals and legalized pot and prostitution. In Russell Shorto's engaging new history of his adopted city, he, too, touches on these well-worn subjects.

But Shorto is more interested in exploring how a city of 800,000 souls — roughly the size of Columbus, Ohio — "has influenced the modern world to a degree that perhaps no other city has." He argues that it has done so because over the centuries, through a combination of collective action and self-seeking individualism, Amsterdam has come to embody the most cherished ideals of Western democratic society, including tolerance, diversity and civil rights.

When Shorto writes that Amsterdam may well be the birthplace of liberalism, he doesn't mean "liberal" in the sense that it's used in American political debate. He's referring to "a commitment to individual freedom and individual rights, and not just for oneself but for everyone." He means liberalism in its original sense of "free," from the Latin word liber....