Adam Smith is often identified
as the father of modern capitalism. While accurate to some extent, this
description is both overly simplistic and dangerously misleading. On the one
hand, it is true that very few individual books have had as much impact as his An
Inquiry into the Nature and Causes of the Wealth of Nations. His accounts
of the division of labor and free trade, self-interest in exchange, the limits
on government intervention, price, and the general structure of the market, all
signify the moment when economics transitions to the “modern.” On the other
hand, The Wealth of Nations, as it is most often called, is not a book
on economics. Its subject is “political
economy,” a much more
expansive mixture of philosophy, political science, history, economics,
anthropology, and sociology. The role of the free market and the laissez-faire
structures that support it are but two components of a larger theory of human
interaction and social history.
[Mnemotechnique] Smith was not an economist; he was a philosopher. His first
book, The Theory of Moral Sentiments, sought to describe the natural
principles that govern morality and the ways in which human beings come to know
them. How these two books fit together is both one of the most controversial
subjects in Smith scholarship and the key to understanding his arguments about
the market and human activity in general. Historically, this process is made
more difficult by the so-called “Adam Smith Problem,” a position put forth by
small numbers of committed scholars since the late nineteenth century that
Smith’s two books are incompatible. The argument suggests that Smith’s work on
ethics, which supposedly assumed altruistic human motivation, contradicts his
political economy, which allegedly assumed egoism. However, most contemporary
Smith scholars reject this claim as well as the description of Smith’s account
of human motivation it presupposes.
Smith
never uses the term “capitalism;” it does not enter into widespread use until
the late nineteenth century. Instead, he uses “commercial society,” a phrase
that emphasizes his belief that the economic is only one component of the human
condition. And while, for Smith, a nation’s economic “stage” helps
define its social and political structures, he is also clear that the moral
character of a people is the ultimate measure of their humanity. To investigate
Smith’s work, therefore, is to ask many of the great questions that we all
struggle with today, including those that emphasize the relationship of
morality and economics. Smith asks why individuals should be moral. He offers
models for how people should treat themselves and others. He argues that
scientific method can lead to moral discovery, and he presents a blueprint for
a just society that concerns itself with its least well-off members, not just
those with economic success. Adam Smith’s philosophy bears little resemblance
to the libertarian caricature put forth by proponents of laissez faire markets
who describe humans solely as homo economicus. For Smith, the market is a
mechanism of morality and social support.
Table of Contents
a.
Sympathy
1. Life and Influences
Adam Smith was born in June, 1723,
in Kirkcaldy, a port town on the eastern shore of Scotland; the exact date is
unknown. His father, the Comptroller and Collector of Customs, died while Smith’s
mother was pregnant but left the family with adequate resources for their
financial well being. Young Adam was educated in a local parish (district)
school. In 1737, at the age of thirteen he was sent to Glasgow College after
which he attended Baliol College at Oxford University. His positive experiences
at school in Kirkcaldy and at Glasgow, combined with his negative reaction to
the professors at Oxford, would remain a strong influence on his philosophy.
In particular, Smith held his
teacher Francis Hutcheson in high esteem. One of the early leaders of the
philosophical movement now called the Scottish Enlightenment, Hutcheson was a
proponent of moral sense theory, the position that human beings make moral
judgments using their sentiments rather than their “rational” capacities.
According to Hutcheson, a sense of unity among human beings allows for the
possibility of other-oriented actions even though individuals are often
motivated by self-interest. The moral sense, which is a form of benevolence,
elicits a feeling of approval in those witnessing moral acts. Hutcheson opposed
ethical egoism, the notion that individuals ought to be motivated by their own
interests ultimately, even when they cooperate with others on a common project.
The
term “moral sense” was first coined by Sir Anthony Ashley Cooper, Third Earl of Shaftesbury,
whose work Smith read and who became a focal point in the Scots’ discussion,
although he himself was not Scottish. Although Shaftesbury did not offer a
formal moral sense theory as Hutcheson did, he describes personal moral deliberation
as a “soliloquy,”
a process of self-division and self-examination similar in form to Hamlet’s
remarks on suicide. This model of moral reasoning plays an important
role in Smith’s books.
The Scottish Enlightenment philosophers, or the literati, as they
called themselves, were a close-knit group who socialized together and who
read, critiqued, and debated each other’s work. They met regularly in social
clubs (often at pubs) to discuss politics and philosophy. Shortly after
graduating from Oxford, Smith presented public lectures on moral philosophy in
Edinburgh, and then, with the assistance of the literati, he secured his first
position as the Chair of Logic at Glasgow University. His closest friendship in
the group—and probably his most important non-familial relationship throughout
his life—was with David Hume, an
older philosopher whose work Smith was chastised for reading while at Oxford.
Hume was believed to be an
atheist, and his work brought into question some of the core beliefs in moral
philosophy. In particular, and even more so than Hutcheson, Hume’s own version
of moral sense theory challenged the assumption that reason was the key human
faculty in moral behavior. He famously asserted that reason is and ought to be
slave to the passions, which means that even if the intellect can inform
individuals as to what is morally correct, agents will only act if their
sentiments incline them to do so. An old proverb tells us that you can lead a
horse to water but that you can’t make it drink. Hume analogously argues that
while you might be able to teach people what it means to be moral, only their
passions, not their rational capacities, can actually inspire them to be
ethical. This
position has roots in Aristotle‘s distinction between moral and
intellectual virtue.
Smith, while never explicitly
arguing for Hume’s position, nonetheless seems to assume much of it. And while
he does not offer a strict moral sense theory, he does adopt Hume’s assertion
that moral behavior is, at core, the human capacity of sympathy, the
faculty that, in Hume’s account, allows us to approve of others’ characters, to
“forget our own interest in our judgments,” and to consider those whom “we meet
with in society and conversation” who “are not placed in the same situation,
and have not the same interest with ourselves” (Hume: Treatise, book
3.3.3).
b. Smith’s Writings
Smith echoes these words
throughout A Theory of Moral Sentiments. In this book, he embraces Hume’s
conception of sympathy, but rejects his skepticism and adds, as we shall see, a
new theory of conscience to the mix. However, focusing on Hume’s observations
also allow us to see certain other themes that Smith shares with his Scottish
Enlightenment cohort: in particular, their commitment to empiricism. As with
most of the other Scottish philosophers, Hume and Smith held that knowledge is
acquired through the senses rather than through innate ideas, continuing the
legacy of John Locke more so than René Descartes. For Hume, this epistemology would bring into
question the connection between cause and effect—our senses, he argued, could
only tell us that certain events followed one another in time, but not that
they were causally related. For Smith, this meant a whole host of different
problems. He asks, for example, how a person can know another’s sentiments and
motivations, as well as how members can use the market to make “rational”
decisions about the propriety of their economic activity.
At the core of the Scottish project is the
attempt to articulate the laws governing human behavior. Smith and his contemporary Adam Ferguson are sometimes
credited with being the founders of sociology because they, along with the
other literati, believed that human activities were governed by discoverable
principles in the same way that Newton argued that motion was explainable
through principles. Newton, in fact, was a tremendous influence on the
Scots’ methodology. In an unpublished essay on the history of astronomy, Smith
writes that Newton’s system, had “gained the general and complete approbation
of mankind,” and that it ought to be considered “the greatest discovery that
ever was made by man.” What made it so important? Smith describes it as “the
discovery of an immense chain of the most important and sublime truths, all
closely connected together, by one capital fact, of the reality of which we
have daily experience” (EPS, Astronomy IV.76).
While Smith held the chair of
logic at Glasgow University, he lectured more on rhetoric than on traditional
Aristotelian forms of reasoning. There is a collection of student lecture notes
that recount Smith’s discussions of style, narrative, and moral propriety in
rhetorical contexts. These notes, in combination with his essay on astronomy,
offer an account of explanation that Smith himself regarded as essentially
Newtonian. According to Smith, a theory must first be believable; it
must soothe anxiety by avoiding any gaps in its account. Again, relying upon a
basically Aristotelian model, Smith tells us that the desire to learn, and the
theories that result, stems from a series of emotions: surprise at
events inspires anxieties that cause one to wonder about the process.
This leads to understanding and admiration of the acts and principles of
nature. By showing that the principles governing the heavens also govern the
Earth, Newton set a new standard for explanation. A theory must direct the mind
with its narrative in a way that both corresponds with experience and offers
theoretical accounts that enhance understanding and allow for prediction. The
account must fit together systematically without holes or missing information;
this last element—avoiding any gaps in the theory—is, perhaps, the most central
element for Smith, and this model of philosophical explanation unifies both his
moral theories and his political economy.
As a young philosopher, Smith
experimented with different topics, and there is a collection of writing
fragments to compliment his lecture notes and early essays. These include brief
explorations of “Ancient Logics,” metaphysics, the senses, physics, aesthetics,
the work of Jean-Jacque Rousseau, and other assorted topics. Smith’s Scottish
Enlightenment contemporaries shared an interest in all of these issues.
While the works offer a glimpse
into Smith’s meditations, they are by no means definitive; few of them were
ever authorized for publication. Smith was a meticulous writer and, in his own
words, “a slow a very slow workman, who do and undo everything I write at least
half a dozen of times before I can be tolerably pleased with it” (Corr.
311). As a result, he ordered sixteen volumes of unpublished writing burnt upon
his death because, presumably, he did not feel they were adequate for public
consumption. Smith scholars lament this loss because it obfuscates the
blueprint of his system, and there have been several attempts of late to
reconstruct the design of Smith’s corpus, again with the intent of arguing for
a particular relationship between his major works.
After holding the chair of
logic at Glasgow for only one year (1751–1752), Smith was appointed to the
Chair of Moral Philosophy, the position originally held by Hutcheson. He wrote The
Theory of Moral Sentiments, first published in 1759, while holding this
position and, presumably, while testing out many of his discussions in the
classroom. While he spoke very warmly of this period of his life, and while he
took a deep interest in teaching and mentoring young minds, Smith resigned in
1764 to tutor the Duke of Buccleuch and accompany him on his travels.
It was not uncommon for
professional teachers to accept positions as private tutors. The salary and
pensions were often lucrative, and it allowed more flexibility than a busy
lecturing schedule might afford. In Smith’s case, this position took him to France where he
spent two years engaged with the philosophes—a tight-knit group of
French philosophers analogous to Smith’s own literati—in conversations that
would make their way into The Wealth of Nations. How
influential the philosophes were in the creation of Smith’s political
economy is a matter of controversy. Some scholars suggest that Smith’s
attitudes were formed as a result of their persuasion while others suggest that
Smith’s ideas were solidified much earlier than his trip abroad. Whatever the
case, this shows that Smith’s interests were aligned, not just with the
Scottish philosophers, but with their European counterparts. Smith’s writing
was well-received in part because it was so timely. He was asking the deep
questions of the time; his answers would change the world.
After his travels, Smith
returned to his home town of Kirkcaldy to complete The Wealth of Nations.
It was first published in 1776 and was praised both by his friends and the
general public. In a letter written much later, he referred to it as the “very
violent attack I had made upon the whole commercial system of Great Britain” (Corr.
208). The Theory of Moral Sentiments went through six editions in Smith’s
lifetime, two of which contained major substantive changes and The Wealth of
Nations saw four different editions with more minor alterations. Smith
indicated that he thought The Theory of Moral Sentiments was a better
book, and his on-going attention to its details and adjustments to its theory
bear out, at least, that he was more committed to refining it. Eventually,
Smith moved to Edinburgh with his mother and was appointed commissioner of
customs in 1778; he did not publish anything substantive for the remainder of
his life. Adam Smith died on July 17, 1790.
After his death, The Wealth
of Nations continued to grow in stature and The Theory of Moral
Sentiments began to fade into the background. In the more than two
centuries since his death, his published work has been supplemented by the
discoveries of his early writing fragments, the student-authored lectures notes
on his course in rhetoric and belles-letters, student-authored lecture
notes on jurisprudence, and an early draft of part of The Wealth of
Nations, the date of which is estimated to be about 1763. The latter two
discoveries help shed light on the formulation of his most famous work and
supply fodder for both sides of the debate regarding the influence of the philosophes
on Smith’s political economy.
As stated above, Smith is sometimes
credited with being one of the progenitors of modern sociology, and his
lectures on rhetoric have also been called the blueprint for the invention of
the modern discipline of English; this largely has to do with their
influence on his student Hugh Blair, whose own lectures on rhetoric were
instrumental in the formation of that discipline. The Theory of Moral
Sentiments played an important role in 19th century sentimentalist
literature and was also cited by Mary Wollstonecraft to bolster her argument in
A Vindication of the Rights of Women: Smith’s moral theories experienced
a revival in the last quarter of the twentieth century. Secondary sources on
Smith flooded the marketplace and interest in Smith’s work as a whole has
reached an entirely new audience.
There are two noteworthy
characteristics of the latest wave of interest in Smith. The first is that
scholars are interested in how The Theory of Moral Sentiments and The
Wealth of Nations interconnect, not simply in his moral and economic
theories as distinct from one another. The second is that it is philosophers
and not economists who are primarily interested in Smith’s writings. They
therefore pay special attention to where Smith might fit in within the already
established philosophical canon: How does Smith’s work build on Hume’s? How
does it relate to that of his contemporary Immanuel Kant? (It is known that
Kant read The Theory of Moral Sentiments, for example.) To what extent
is a sentiment-based moral theory defensible? And, what can one learn about the
Scots and eighteenth-century philosophy in general from reading Smith in a
historical context? These are but a few of the questions with which Smith’s
readers now concern themselves.
2. The Theory of Moral
Sentiments
Hutcheson,
Hume, and Smith were unified by their opposition to arguments put forth by
Bernard Mandeville. A Dutch-born philosopher who relocated to England,
Mandeville argued that benevolence does no social good whatsoever. His book, The
Fable of the Bees: Private Vices, Public Benefits, tells the whole story.
Bad behavior has positive social impact. Without vice, we would have, for example,
no police, locksmiths, or other such professionals. Without indulgence, there
would be only minimal consumer spending. Virtue, on the other hand, he argued,
has no positive economic benefit and is therefore not to be encouraged.
But
Mandeville took this a step further, arguing, as did Thomas Hobbes,
that moral virtue derives from personal benefit, that humans are essentially
selfish, and that all people are in competition with one another. Hobbes was a
moral relativist, arguing that “good” is just a synonym for “that which
people desire.” Mandeville’s relativism, if it can be called that, is less
extreme. While he argues that virtue is the intentional act for the good of
others with the objective of achieving that good, he casts doubt on whether or
not anyone could actually achieve this standard. Smith seems to treat both
philosophers as if they argue for the same conclusion; both offer counterpoints
to Shaftesbury’s approach. Tellingly, Mandeville writes wistfully of
Shaftesbury’s positive accounts of human motivation, remarking they are “a high
Compliment to Human-kind,” adding, however, “what Pity it is that they are not
true” (Fable, I, 324).
Smith was so opposed to Hobbes’s
and Mandeville’s positions that the very first sentence of The Theory of
Moral Sentiments begins with their rejection:
However selfish 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
they derive nothing from it except the pleasure of seeing it. (TMS
I.i.1.1)
While it is often assumed that
people are selfish, Smith argues that experience suggests otherwise. People
derive pleasure from seeing the happiness of others because, by design, others
concern us. With this initial comment, Smith outlines the central themes of his
moral philosophy: human beings are social, we care about others and their
circumstances bring us pleasure or pain. It is only through our senses, through
“seeing,” that we acquire knowledge of their sentiments. Smith’s first sentence
associates egoism with supposition or presumption, but scientific “principles”
of human activity are associated with evidence: Newtonianism and empiricism in
action.
The Theory of
Moral Sentiments (TMS) is a beautifully written book, clear and
engaging. With few exceptions, the sentences are easy to follow, and it is
written in a lively manner that speaks of its rehearsal in the classroom. Smith
has a particular flair for examples, both literary and from day-to-day life,
and his use of “we” throughout brings the reader into direct dialogue with
Smith. The book feels like an accurate description of human emotions and
experience—there are times when it feels phenomenological, although
Smith would not have understood this word. He uses repetition to great benefit,
reminding his readers of the central points in his theories while he slowly
builds their complexity. At only 342 pages (all references are to the Glasgow
Editions of his work), the book encompasses a tremendous range of themes.
Disguised as a work of moral psychology—as a theory of moral sentiments
alone—it is also a book about social organization, identity construction,
normative standards, and the science of human behavior as a whole.
Smith tells us that the two
questions of moral philosophy are “Wherein does virtue consist?” and “By what
power or faculty in the mind is it, that this character, whatever it be, is
recommended to us?” (TMS VII.i.2) In other words, we are to ask what
goodness is and how we are to be good. The Theory of Moral Sentiments
follows this plan, although Smith tackles the second question first, focusing
on moral psychology long before he addresses the normative question of moral
standards. For Smith, the core of moral learning and deliberation—the key to
the development of identity itself—is social unity, and social unity is enabled
through sympathy.
The term “sympathy” is Hume’s,
but Smith’s friend gives little indication as to how it was supposed to work or
as to its limits. In contrast, Smith addresses the problem head on, devoting the
first sixty-six pages of TMS to illuminating its workings and most of
the next two hundred elaborating on its nuances. The last part of the book
(part VII, “Of Systems of Moral Philosophy”) is the most distanced from this
topic, addressing the history of ethics but, again, only for slightly less than
sixty pages. It is noteworthy that while modern writers almost always place the
“literature review” in the beginning of their books, Smith feels that a
historical discussion of ethics is only possible after the work on moral
psychology is complete. This is likely because Smith wanted to establish the
principles of human behavior first so that he could evaluate moral theory in
the light of what had been posited.
The Theory of Moral
Sentiments is, not surprisingly, both Aristotelian and Newtonian. It is
also Stoic in its account of
nature and self-command. The first sentence quoted above is a first principle—individuals
are not egoistic—and all the rest of the book follows from this assertion. And,
as with all first principles, while Smith “assumes” the possibility of
other-oriented behavior, the rest of the book both derives from its truth and
contributes to its believability. Smith’s examples, anecdotes, and
hypotheticals are all quite believable, and if one is to accept these as
accurate depictions of the human experience, then one must also accept his
starting point. Human beings care for others, and altruism, or beneficence as
he calls it, is possible.
What is sympathy, then? This
is a matter of controversy. Scholars have regarded it as a faculty, a power, a
process, and a feeling. What it is not, however, is a moral sense in the most
literal meaning of the term. Sympathy is not a sixth capacity that can be
grouped with the five senses. Smith, while influenced by Hutcheson, is openly
critical of his teacher. He argues that moral sense without judgment is
impossible (TMS VII.3.3.8-9), and sympathy is that which allows us to
make judgments about ourselves and others. Sympathy is the foundation for moral
deliberation, Smith argues, and Hutcheson’s system has no room for it.
For Smith, sympathy is more
akin to modern empathy, the ability to relate to someone else’s emotions
because we have experienced similar feelings. While contemporary “sympathy”
refers only to feeling bad for a person’s suffering, Smith uses it to denote “fellow-feeling
with any passion whatever” (TMS I.i.1.5). It is how a “spectator...
changes places in fancy with... the person principally concerned” (TMS
I.i.1.3-5).
In short, sympathy works as
follows: individuals witness the actions and reactions of others. When doing
so, this spectator attempts to enter into the situation he or she observes and imagines
what it is like to be the actor—the person being watched. (Smith uses actor
and agent interchangeably.) Then, the spectator imagines what he or she
would do as the actor. If the sentiments match up, if the imagined reaction is
analogous to the observed reaction, then the spectator sympathizes with the
original person. If the reactions are significantly different, then the
spectator does not sympathize with the person. In this context, then, sympathy
is a form of moral approval and lack of sympathy indicates disapproval.
Sympathy is rarely exact. Smith
is explicit that the imagined sentiments are always less intense than the
original, but they are nonetheless close enough to signify agreement. And, most
important, mutual sympathy is pleasurable. By nature’s design, people want to
share fellow-feeling with one another and will therefore temper their actions
so as to find common ground. This is further indication of the social nature of
human beings; for Smith, isolation and moral disagreement is to be avoided. It
is also the mechanism that moderates behavior. Behavior modulation is how
individuals learn to act with moral propriety and within social norms.
According to The Theory of Moral Sentiments, mutual sympathy is the
foundation for reward and punishment.
Smith is insistent, though,
that sympathy is not inspired by simply witnessing the emotions of others even
though it “may seem to be transfused from one man to another, instantaneously,
and antecedent to any knowledge of what excited them in the person principally
concerned” (TMS I.i.1.6). Rather, the spectator gathers information
about the cause of the emotions and about the person being watched. Only then
does he or she ask, given the particular situation and the facts of this
particular agent’s life, whether the sentiments are appropriate. As Smith
writes:
When I condole with you for the
loss of your only son, in order to enter into your grief I do not consider what
I, a person of such a character and profession, should suffer, if I had a son,
and if that son was unfortunately to die: but I consider what I should suffer
if I was really you, and I not only change circumstance with you, but I change
persons and characters. My grief, therefore, is entirely upon your own account,
and not in the least upon my own. (TMS VI.iii.I.4)
We can see here why the
imagination is so important to Smith. Only through this faculty can a person
enter into the perspective of another, and only through careful observation and
consideration can someone learn all the necessary information relevant to judge
moral action. We can also see why sympathy is, for Smith, not an egoistic
faculty:
In order to produce this
concord, as nature teaches the spectators to assume the circumstances of the
person principally concerned, so she teaches this last in some measure to
assume those of the spectators. As they are continually placing themselves in
his situation, and thence conceiving emotions similar to what he feels; so he
is as constantly placing himself in theirs, and thence conceiving some degree
of that coolness about his own fortune, with which he is sensible that they
will view it. As they are constantly considering what they themselves would
feel, if they actually were the sufferers, so he is as constantly led to
imagine in what manner he would be affected if he was only one of the
spectators of his own situation. As their sympathy makes them look at it, in
some measure, with his eyes, so his sympathy makes him look at it, in some
measure, with theirs, especially when in their presence and acting under their
observation: and as the reflected passion, which he thus conceives, is much
weaker than the original one, it necessarily abates the violence of what he
felt before he came into their presence, before he began to recollect in what
manner they would be affected by it, and to view his situation in this candid
and impartial light. (TMS I.i.4.8)
Contrary to the description put
forth by the Adam Smith Problem, sympathy cannot be either altruistic or
egoistic because the agents are too intertwined. One is constantly making the
leap from one point of view to another, and happiness and pleasure are
dependant on joint perspectives. Individuals are only moral, and they only find
their own happiness, from a shared standpoint. Egoism and altruism melt
together for Smith to become a more nuanced and more social type of motivation
that incorporates both self-interest and concern for others at the same
time.
Typical of Smith, the lengthy
paragraph cited above leads to at least two further qualifications. The first
is that, as Smith puts it, “we expect less sympathy from a common acquaintance
than from a friend... we expect still less sympathy from an assembly of
strangers” (TMS I.1.4.10). Because sympathy requires information about
events and people, the more distance we have from those around us, the more
difficult it is for us to sympathize with their more passionate emotions (and
vice versa). Thus, Smith argues, we are to be “more tranquil” in front of
acquaintances and strangers; it is unseemly to be openly emotional around those
who don’t know us. This will lead, eventually, to Smith’s discussion of duty in
part III—his account of why we act morally towards those with whom we have no
connection whatsoever.
The second qualification is
more complex and revolves around the last phrase in the paragraph: that one
must observe actions in a “candid and impartial light.” If movement toward
social norms were the only component to sympathy, Smith’s theory would be a
recipe for homogeneity alone. All sentiments would be modulated to an identical
pitch and society would thereafter condemn only difference. Smith recognizes,
therefore, that there must be instances in which individuals reject community
judgment. They do so via the creation of an imagined impartial spectator.
b. The Impartial Spectator
Using the imagination,
individuals who wish to judge their own actions create not just analogous
emotions but an entire imaginary person who acts as observer and judge:
When I endeavour to examine my
own conduct, when I endeavour to pass sentence upon it, and either to approve
or condemn it, it is evident that, in all such cases, I divide myself, as it
were, into two persons; and that I, the examiner and judge, represent a
different character from that other I, the person whose conduct is examined
into and judged of. The first is the spectator, whose sentiments with regard to
my own conduct I endeavour to enter into, by placing myself in his situation,
and by considering how it would appear to me, when seen from that particular
point of view. The second is the agent, the person whom I properly call myself,
and of whose conduct, under the character of a spectator, I was endeavouring to
form some opinion. The first is the judge; the second the person judged of. But
that the judge should, in every respect, be the same with the person judged of,
is as impossible, as that the cause should, in every respect, be the same with
the effect. (TMS III.1.6)
The impartial spectator is the
anthropomorphization of the calm and disinterested self that can be recovered
with self control and self reflection. In today’s world, someone might advise
us to “take a deep breath and step back” from a given situation in order to
reflect on our actions more dispassionately. Smith is suggesting the same,
although he is describing it in more detail and in conjunction with the larger
ethical theory that helps us find conclusions once we do so. Individuals who
wish to judge their own actions imaginatively split themselves into two
different people and use this bifurcation as a substitute for community
observation.
Here we see the legacy of
Shaftesbury’s soliloquy. An actor who wishes to gauge his or her own behavior
has to divide him or herself in the way that Shaftesbury describes, in the way
that Hamlet becomes both poet and philosopher. We are passionate about our own
actions, and self-deception, according to Smith, is “the source of half the
disorders of human life” (TMS III.4.6). Self-division gives individuals
the ability to see themselves candidly and impartially and leads us to better
self-knowledge. We strive to see ourselves the way others see us, but we do so
while retaining access to the privileged personal information that others might
not have. The community helps us see past our own biases, but when the
community is limited by its own institutionalized bias or simply by lack of
information, the impartial spectator can override this and allow an agent to
find propriety in the face of a deformed moral system. In the contemporary
world, racism and sexism are examples of insidious biases that prevent the
community from “seeing” pain and injustice. Smith too can be read as
recognizing these prejudices, although he would not have recognized either the
terms or the complicated discourses about them that have evolved since he wrote
two and a half centuries ago. For example, he cites slavery as an instance of
the injustice and ignorance of a community. He writes:
There is not a Negro from the
coast of Africa who does not, in this respect, possess a degree of magnanimity
which the soul of his sordid master is too often scarce capable of conceiving.
Fortune never exerted more cruelly her empire over mankind, than when she
subjected those nations of heroes to the refuse of the jails of Europe, to
wretches who possess the virtues neither of the countries which they come from,
nor of those which they go to, and whose levity, brutality, and baseness, so
justly expose them to the contempt of the vanquished. (TMS V.2.9)
Despite its corrective
potential, impartiality has its limits. Smith does not imagine the impartial
spectator to see from an Archimedean or God’s eye point of view. Because the
impartial spectator does not really exist—because it is created by an
individual person’s imagination—it is always subject to the limits of a person’s
knowledge. This means that judgment will always be imperfect and those moral
mistakes that are so profoundly interwoven into society or a person’s
experience are the hardest to overcome. Change is slow and society is far from
perfect. “Custom,” as he calls it, interferes with social judgment on both the
collective and the individual level. There are two points, according to Smith,
when we judge our own actions, before and after we act. As he writes, “Our
views are apt to be very partial in both cases; but they are apt to be most
partial when it is of most importance that they should be otherwise” (TMS
111.4.2). Neither of these points is independent of social influence.
Knowledge is imperfect and
individuals do the best they can. But all individuals are limited both by their
own experiences and the natural inadequacies of the human mind. Smith’s
suggestion, then, is to have faith in the unfolding of nature, and in the
principles that govern human activity—moral, social, economic, or otherwise.
With this in mind, however, he cautions people against choosing the beauty of
systems over the interest of people. Abstract philosophies and abstruse
religions are not to take precedent over the evidence provided by experience,
Smith argues. Additionally, social engineering is doomed to fail. Smith argues
that one cannot move people around the way one moves pieces on a chess board.
Each person has his or her “own principle of motion... different from that
which the legislature might choose to impress upon” them (TMS
VI.ii.2.18).
Smith’s caution against the
love of systems is a component of Smith’s argument for limited government: “Harmony
of minds,” Smith argues, is not possible without “free communication of
settlements and opinion,” or, as we would call it today, freedom of expression
(TMS VII.iv.27). It also offers a direct connection to Smith’s most
famous phrase “the invisible hand.” In The Theory of Moral Sentiments,
he uses the invisible hand to describe the conditions that allow for economic
justice. This natural aesthetic love of systems leads people to manipulate the
system of commerce, but this interferes with nature’s plan:
The
rich only select from the heap what is most precious and agreeable. They
consume little more than the poor, and in spite of their natural selfishness
and rapacity, though they mean only their own conveniency, though the sole end
which they propose from the labours of all the thousands whom they employ, be
the gratification of their own vain and insatiable desires, they divide with
the poor the produce of all their improvements. They are led by an
invisible hand to make nearly the same distribution of the necessaries of life,
which would have been made, had the earth been divided into equal portions
among all its inhabitants, and thus without intending it, without knowing it,
advance the interest of the society, and afford means to the multiplication of
the species. (TMS IV.1.10)
In this passage, Smith argues
that “the capacity of [the rich person’s] stomach bars no proportion to the
immensity of his desires, and will receive no more than that of the meanest
peasant” (TMS IV.1.10). Thus, because the rich only select “the best”
and because they can only consume so much, there ought to be enough resources
for everyone in the world, as if an invisible hand has divided the earth
equally amongst all its inhabitants.
As an economic argument, this
might have been more convincing in Smith’s time, before refrigeration, the
industrial revolution, modern banking practices, and mass accumulation of
capital; for a more thorough defense (from Smith’s point of view) see the
discussion of The Wealth of Nations. However, its relevance to the
history of economics is based upon his recognition of the role of unintended
consequences, the presumption that economic growth helps all members of the
society, and the recognition of the independence of the free market as a natural
force. At
present, we can focus on Smith’s warnings about the power of aesthetic
attraction. The Newtonian approach, Smith argues—the search for a coherent
narrative without gaps that addresses surprise, wonder, and admiration—can lead
people astray if they prioritize beauty over the evidence. This love of the
beautiful can also deform moral judgments because it causes the masses to
over-value the rich, to think the wealthy are happy with their “baubles and
trinkets,” and thus to pursue extreme wealth at the cost of moral goodness: “To
attain to this envied situation, the candidates for fortune too frequently
abandon the paths of virtue; for unhappily, the road which leads to the one and
that which leads to the other, lie sometimes in very opposite directions” (TMS
I.iii.8). Smith is very critical not only of the rich, but of the moral value
society places on them. Only their wealth makes them different, and this love
of wealth, and of beauty in general, can distort moral judgment and deform the
impartial spectator.
The impartial spectator is a
theory of conscience. It provides individuals with the opportunity to assent to
their own standards of judgment, which, hopefully, are in general agreement
with the standards of the society that houses them. Difference, as Smith
discusses in both of his books, is the product of education, economic class,
gender, what we would now call ethnic background, individual experience, and
natural abilities; but Smith argues that the last of these, natural abilities,
constitute the least of the factors. In his Lectures on Jurisprudence, for
example, he argues that there is no “original difference” between individuals
(LJ(A) vi.47-48), and in The Wealth of Nations, he writes that “The
difference of natural talents in different men is, in reality, much less than
we are aware of.... The difference between the most dissimilar characters,
between a philosopher and a street porter, for example, seems to arise not so
much from nature, as from habit, custom and education” (WN I.ii.4).
Society and education, hopefully, help to bridge these gaps, and help to
cultivate a unified community where people are encouraged to sympathize with
others.
Here is the overlap in Smith’s
two operative questions. First, one encounters his account of moral psychology.
(How does one come to know virtue?) Now one comes face to face with the
identification of moral standards themselves. (Of what does virtue consist?)
Smith may look like a relativist at times: individuals modulate their
sentiments to their community standards, and agreement of individual
imaginations may falsely seem to be the final arbiter of what is morally
appropriate behavior. With this in mind, there are certainly readers who will
argue that Smith, despite his rejection of Hobbes and Mandeville, ends up
offering no universally binding moral principles. This, however, forgets Smith’s
Newtonian approach: observation leads to the discovery of natural principles
that can be repeatedly tested and verified. Furthermore, many scholars argue
that Smith was strongly influenced by the classical Stoics. In addition to
inheriting their concern with the modulation of emotions and the repression of
emotions in public, he also likely thought that moral laws are written into
nature’s design in just the same way that Newton’s laws of motion are. As a
result, some Smith scholars (but certainly not all) argue that Smith is a moral realist, that sympathy is a
method of discovery rather than invention, and that what is to be discovered is
correct independent of the opinions of those who either know or are ignorant of
the rules.
Consistent with this
interpretation, Smith emphasizes what he terms the general rules of morality:
...they are ultimately founded
upon experience of what, in particular instances, our moral faculties, our
natural sense of merit and propriety, approve, or disapprove of. We do not
originally approve or condemn particular actions; because, upon examination,
they appear to be agreeable or inconsistent with a certain general rule. The
general rule, on the contrary, is formed, by finding from experience, that all
actions of a certain kind, or circumstanced in a certain manner, are approved
or disapproved of. To the man who first saw an inhuman murder, committed from
avarice, envy, or unjust resentment, and upon one too that loved and trusted
the murderer, who beheld the last agonies of the dying person, who heard him,
with his expiring breath, complain more of the perfidy and ingratitude of his
false friend, than of the violence which had been done to him, there could be
no occasion, in order to conceive how horrible such an action was, that he
should reflect, that one of the most sacred rules of conduct was what
prohibited the taking away the life of an innocent person, that this was a
plain violation of that rule, and consequently a very blamable action. His
detestation of this crime, it is evident, would arise instantaneously and
antecedent to his having formed to himself any such general rule. The general rule,
on the contrary, which he might afterwards form, would be founded upon the
detestation which he felt necessarily arise in his own breast, at the thought
of this, and every other particular action of the same kind. (TMS
III.4.8)
According to Smith, our
sentiments give rise to approval or condemnation of a moral act. These can be
modified over time with additional information. Eventually, though, spectators,
see patterns in the condemnation. They see, for example, that murder is always
wrong, and therefore derive a sense that this is a general rule. They begin,
then, to act on the principle rather than on the sentiment. They do not murder,
not simply because they detest murder, but because murder is wrong in itself.
This, again, is Aristotelian in that it recognizes the interaction between
intellectual and moral virtue. It also shares commonalities with the Kantian
deontology that became so influential several decades after the publication of TMS.
Like Kant, Smith’s agents begin to act on principle rather than emotion. Unlike
Kant, however, reason in itself does not justify or validate the principle,
experience does.
Smith does several things in
the last excerpt. First, he embraces the Newtonian process of scientific
experimentation and explanation. Moral rules are akin to the laws of physics;
they can be discovered. Second, Smith anticipates Karl Popper’s
twentieth-century claim that scientific truths are established through a
process of falsification: we cannot prove what is true, Popper argued. Instead,
we discover what is false and rule it out.
c. Virtues, Duty, and
Justice
Smith emphasizes a number of
virtues along with duty and justice. Self-command, he argues “is not only
itself a great virtue, but from it all the other virtues seem to derive their
principle lustre” (TMS VI.iii.11). This should not be surprising since,
for Smith, it is only through self-command that agents can modulate their
sentiments to the pitch required either by the community or the impartial
spectator. Self-command is necessary because “the disposition to anger, hatred,
envy, malice, [and] revenge... drive men from one another,” while “humanity,
kindness, natural affection, friendship, [and] esteem... tend to unite men in
society” (TMS VI.iii.15). One can see, then, the normative content of
Smith’s virtues—those sentiments that are to be cultivated and those that are
to be minimized. According to Smith, humans have a natural love for society and
can develop neither moral nor aesthetic standards in isolation.
Individuals have a natural
desire not only be to be loved, but to be worthy of love: “He desires not only
praise, but praiseworthiness,... he dreads not only blame, but blame-worthiness”
(TMS III.2.2). This speaks first to the power of the impartial spectator
who is a guide to worth when no spectators are around. It also speaks to Smith’s
conception of duty, in that it sets a standard of right action independent of
what communities set forth. Individuals “derive no satisfaction” from unworthy
praise (TMS III.2.5), and doing so is an indication of the perversion of
vanity than can be corrected by seeing ourselves the way others would, if they
knew the whole story.
It should not be surprising
that Smith addresses God amidst his discussion of duty:
The all-wise Author of Nature
has, in this manner, taught man to respect the sentiments and judgments of his
brethren; to be more or less pleased when they approve of his conduct, and to
be more or less hurt when they disapprove of it. He has made man, if I may say
so, the immediate judge of mankind; and has, in this respect, as in many
others, created him after his own image, and appointed him his vicegerent upon
earth, to superintend the behaviour of his brethren. They are taught by nature,
to acknowledge that power and jurisdiction which has thus been conferred upon
him, to be more or less humbled and mortified when they have incurred his
censure, and to be more or less elated when they have obtained his applause. (TMS
III.2.31)
Here Smith makes several
points. First, like many of the Scots, as well as Thomas Jefferson and many of
the American founders, Smith was a deist. While there is controversy amongst
scholars about the extent to which God is necessary to Smith’s theory, it is
likely that he believed that God designed the universe and its rules, and then
stepped back as it unfolded. Smith’s God is not an interventionist God and,
despite some readers suggesting the contrary, the invisible hand is not an
indication of God’s involvement in creation. It is, instead, just the unfolding
of sociological and economic principles. Second, because God is detached from
the system, Smith argues that human beings are God’s regents on earth. It is up
to them to be the judges of their own behavior. Individuals are necessarily
most concerned with themselves first, and are therefore best self-governed.
Only then can they judge others via the moral system Smith describes. While it
is true that, as Smith puts it, the general rules are “justly regarded as the
laws of the deity” (TMS III.v), this seems to be a point of motivation,
not of metaphysical assertion. If individuals understand the general rules as
stemming from God, then they will follow them with more certainty and
conviction. “The terrors of religion should thus enforce the natural sense of
duty” (TMS III.5.7), Smith writes, because it inspires people to follow
the general rules even if they are inclined not to do so, and because this
support makes religion compatible with social and political life. Religious
fanaticism, as Smith points out in The Wealth of Nations, is one of the
great causes of factionalism—the great enemy of political society.
For Smith, the most precise
virtue is justice. It is “the main pillar that upholds the whole edifice” of
society (TMS III.ii.4). It is, as he describes it, “a negative virtue”
and the minimal condition for participation in the community. Obeying the rules
of justice, therefore, result in little praise, but breaking them inspires
great condemnation:
There is, no doubt, a propriety
in the practice of justice, and it merits, upon that account, all the
approbation which is due to propriety. But as it does no real positive good, it
is entitled to very little gratitude. Mere justice is, upon most occasions, but
a negative virtue, and only hinders us from hurting our neighbour. The man who
barely abstains from violating either the person, or the estate, or the
reputation of his neighbours, has surely very little positive merit. He
fulfils, however, all the rules of what is peculiarly called justice, and does
every thing which his equals can with propriety force him to do, or which they
can punish him for not doing. We may often fulfil all the rules of justice by
sitting still and doing nothing. (TMS II.ii.1.9)
Smith’s account of justice
assumes that individual rights and safety are core concerns. He writes:
The most sacred laws of
justice, therefore, those whose violation seems to call loudest for vengeance
and punishment, are the laws which guard the life and person of our neighbour;
the next are those which guard his property and possessions; and last of all
come those which guard what are called his personal rights, or what is due to
him from the promises of others. (TMS II.ii.2.3)
His discussion of justice is
supplemented in The Wealth of Nations and would have likely been added
to in his proposed work on “the general principles of law and government” that
he never completed. His lectures on jurisprudence give one a hint as to what might
have been in that work, but one must assume that the manuscript was part of the
collection of works burnt upon his death. (It is not even known what was
actually destroyed, let alone what the works argued.) It is frustrating for
Smith’s readers to have such gaps in his theory, and Smith scholars have
debated the possible content of his other work and the way it relates to his
first book. It is clear, though, that The Theory of Moral Sentiments is
only one part of Smith’s larger system, and one truly understands it only in
light of his other writing. It is therefore necessary to switch the discussion
from his work on moral philosophy to his political economy. As will be evident,
this break is not a radical one. The two books are entirely compatible with one
another and reading one supplements reading the other; both contain moral
claims and both make assertions classified as political economy. While their
emphases are different much of the time—they are two different books after
all—their basic points are more than just harmonious. They depend upon one
another for justification.
3. An Inquiry into the
Nature and Causes of the Wealth of Nations
The Wealth of Nations (WN)
was published in March of 1776, four months before the signing of the American
Declaration of Independence. It is a much larger book than The Theory of Moral
Sentiments—not counting appendices and indices, it runs 947 pages. To the
first time reader, therefore, it may seem more daunting than Smith’s earlier
work, but in many ways, it is actually a simpler read. As he grew older, Smith’s
writing style became more efficient and less flowery, but his authorial voice
remained conversational. His terms are more strictly defined in WN than
in TMS, and he clearly identifies those positions he supports and
rejects. His economic discussions are not as layered as his comments on
morality, so the interpretive issues are often less complex. The logic of
the book is transparent: its organizational scheme is self-explanatory, and its
conclusions are meticulously supported with both philosophical argument and
economic data. There are many who challenge its assertions, of course, but
it is hard to deny that Smith’s positions in WN are defensible even if,
in the end, some may conclude that he is wrong.
The text is divided into five “books”
published in one, two, or three bound volumes depending on the edition. The
first books outline the importance of the division of labor and of
self-interest. The second discusses the role of stock and capital. The third
provides an historical account of the rise of wealth from primitive times up
until commercial society. The fourth discusses the economic growth that derives
from the interaction between urban and rural sectors of a commercial society.
The fifth and final book presents the role of the sovereign in a market
economy, emphasizing the nature and limits of governmental powers and the means
by which political institutions are to be paid for. Smith, along with his
Scottish Enlightenment contemporaries, juxtaposes different time periods in
order to find normative guidance. As TMS does, The Wealth of Nations
contains a philosophy of history that trusts nature to reveal its logic and
purpose.
This is a remarkable scope, even for a book of its size. Smith’s
achievement, however, is not simply the multitude of his discussions, but how
he makes it all fit together. His most impressive accomplishment in The
Wealth of Nations is the presentation of a system of political
economy. Smith makes seemingly disparate elements interdependent and
consistent. He manages to take his Newtonian approach and create a narrative of
both power and beauty, addressing the philosophical along with the economic,
describing human behavior and history, and prescribing the best action for
economic and political betterment. And,
he does so building on a first principle that was at least as controversial as
the sentence that began The Theory of Moral Sentiments. He begins the
introduction by asserting:
The annual labour of every
nation is the fund which originally supplies it with all the necessaries and
conveniencies of life which it annually consumes, and which consist always
either in the immediate produce of that labour, or in what is purchased with
that produce from other nations. (WN intro.1)
The dominant economic theory of
Smith’s time was mercantilism. It held that the wealth of a nation was
to be assessed by the amount of money and goods within its borders at any given
time. Smith calls this “stock.” Mercantilists sought to restrict trade because
this increased the assets within the borders which, in turn, were thought to
increase wealth. Smith opposed this, and the sentence cited above shifted the
definition of national wealth to a different standard: labor.
The main point of The Wealth
of Nations is to offer an alternative to mercantilism. Labor brings wealth,
Smith argues. The more one labors the more one earns. This supplies individuals
and the community with their necessities, and, with enough money, it offers the
means to make life more convenient and sometimes to pursue additional revenue.
Free trade, Smith argues, rather than diminishing the wealth of the nation,
increases it because it provides more occasion for labor and therefore more occasion
to create more wealth. Limited trade keeps the amount of wealth within the
borders relatively constant, but the more trade a country engages in, the wider
the market becomes and the more potential there is for additional labor and, in
turn, additional wealth. This point leads Smith to divide stock into two parts,
that which is used for immediate consumption—the assets that allow a person to
acquire necessities—and that which is used to earn additional revenue. This
latter sum he calls “capital” (WN II.1.2), and the term “capitalism”
(which, again, Smith does not use) is derived from its use in a commercial
system: capital is specifically earmarked for reinvestment and is therefore a
major economic engine.
This is, of course, a
philosophical point as much as an economic one: Smith asks his readers to
reconsider the meaning of wealth itself. Is wealth the money and assets that
one has at any given time, or is it these things combined with the potential to
have more, to adjust to circumstances, and to cultivate the skills to increase
such potential? Smith thinks it is the latter. Smith is also concerned
specifically with the distinction between necessities and conveniences. His overarching concern in The Wealth of Nations is
the creation of “universal opulence which extends itself to the lowest ranks of
the people” (WN I.i.10). In other words, Smith believes that a
commercial system betters the lives for the worst off in society; all
individuals should have the necessities needed to live reasonably well. [John
Rawls & Ronald Dworkin. Stephen Walt & John Mearsheimer.] He is less concerned with “conveniences” and “luxuries;”
he does not argue for an economically egalitarian system. Instead, he argues
for a commercial system that increases both the general wealth and the
particular wealth of the poorest members. He writes:
Is this improvement in the circumstances of
the lower ranks of the people to be regarded as an advantage or as an
inconveniency to the society? The answer seems at first sight abundantly plain.
Servants, labourers and workmen of different kinds, make up the far greater
part of every great political society. But what improves the circumstances of
the greater part can never be regarded as an inconveniency to the whole. No
society can surely be flourishing and happy, of which the far greater part of
the members are poor and miserable. It is but equity, besides, that they who
feed, cloath and lodge the whole body of the people, should have such a share
of the produce of their own labour as to be themselves tolerably well fed,
cloathed and lodged. (WN I.viii.36)
Smith argues that the key to
the betterment of the masses is an increase in labor, productivity, and
workforce. There are two main factors that influence this: “the skill,
dexterity, and judgment with which its labour is generally applied,” and “the
proportion between the number of those who are employed in useful labour, and
that of those who are not” (WN intro.3).
Smith repeats the phrase “skill,
dexterity and judgment” in the first paragraph of the body of the book, using
it to segue into a discussion of manufacture. Famously, he uses the division of
labor to illustrate the efficiency of workers working on complementary specific
and narrow tasks. Considering the pin-maker, he suggests that a person who was
required to make pins by him or herself could hardly make one pin per day, but
if the process were divided into a different task for different people—”one man
draws out the wire, another straights it, a third cuts it, a fourth points it,
a fifth grinds it at the top for receiving the head; to make the head requires
two or three distinct operations; to put it on, is a peculiar business, to
whiten the pins is another”—then the factory could make approximately
forty-eight thousand pins per day (WN I.i.3).
The increase in efficiency is
also an increase in skill and dexterity, and brings with it a clarion call for
the importance of specialization in the market. The more focused a worker is on
a particular task the more likely they are to create innovation. He offers the
following example:
In the first fire-engines, a
boy was constantly employed to open and shut alternately the communication
between the boiler and the cylinder, according as the piston either ascended or
descended. One of those boys, who loved to play with his companions, observed
that, by tying a string from the handle of the valve which opened this
communication, to another part of the machine, the valve would open and shut
without his assistance, and leave him at liberty to divert himself with his
play-fellows. One of the greatest improvements that has been made upon this
machine, since it was first invented, was in this manner the discovery of a boy
who wanted to save his own labour. (WN I.i.8)
This example of a boy looking
to ease his work day, illustrates two separate points. The first is the
discussion at hand, the importance of specialization. In a commercial society,
Smith argues, narrow employment becomes the norm: “Each individual becomes more
expert in his own peculiar branch, more work is done upon the whole, and the
quantity of science is considerably increased by it” (WN I.i.9).
However, the more important point—certainly the more revolutionary one—is the
role of self-interest in economic life. A free market harnesses personal
desires for the betterment not of individuals but of the community.
Echoing but tempering
Mandeville’s claim about private vices becoming public benefits, Smith
illustrates that personal needs are complementary and not mutually exclusive.
Human beings, by nature, have a “propensity to truck, barter, and exchange one
thing for another” (WN I.ii.1). This tendency, which Smith suggests may
be one of the “original principles in human nature,” is common to all people
and drives commercial society forward. In an oft-cited comment, Smith observes,
It is not from the benevolence
of the butcher, the brewer, or the baker, that we expect our dinner, but from
their regard to their own self-interest. We address ourselves, not to their
humanity but to their self-love, and never talk to them of our own necessities
but of their advantages. (WN I.ii.2)
Philosophically,
this is a tectonic shift in moral prescription. Dominant Christian beliefs had
assumed that any self-interested action was sinful and shameful; the ideal
person was entirely focused on the needs of others. Smith’s commercial society
assumes something different. It accepts that the person who focuses on his or
her own needs actually contributes to the public good and that, as a result,
such self-interest should be cultivated.
Smith is not a proponent of
what would today be called rampant consumerism. He is critical of the rich in
both of his books. Instead, his argument is one that modern advocates of
globalization and free trade will find familiar: when individuals purchase a
product, they help more people than they attempted to do so through charity. He
writes:
Observe the accommodation of the
most common artificer or day-labourer in a civilized and thriving country, and
you will perceive that the number of people of whose industry a part, though
but a small part, has been employed in procuring him this accommodation,
exceeds all computation. The woollen coat, for example, which covers the
day-labourer, as coarse and rough as it may appear, is the produce of the joint
labour of a great multitude of workmen. The shepherd, the sorter of the wool,
the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver,
the fuller, the dresser, with many others, must all join their different arts
in order to complete even this homely production. How many merchants and
carriers, besides, must have been employed in transporting the materials from
some of those workmen to others who often live in a very distant part of the
country! how much commerce and navigation in particular, how many ship-builders,
sailors, sail-makers, rope-makers, must have been employed in order to bring
together the different drugs made use of by the dyer, which often come from the
remotest corners of the world! What a variety of labour too is necessary in
order to produce the tools of the meanest of those workmen! To say nothing of
such complicated machines as the ship of the sailor, the mill of the fuller, or
even the loom of the weaver, let us consider only what a variety of labour is
requisite in order to form that very simple machine, the shears with which the
shepherd clips the wool. The miner, the builder of the furnace for smelting the
ore, the feller of the timber, the burner of the charcoal to be made use of in
the smelting-house, the brick-maker, the brick-layer, the workmen who attend
the furnace, the mill-wright, the forger, the smith, must all of them join
their different arts in order to produce them. Were we to examine, in the same
manner, all the different parts of his dress and household furniture, the
coarse linen shirt which he wears next his skin, the shoes which cover his
feet, the bed which he lies on, and all the different parts which compose it,
the kitchen-grate at which he prepares his victuals, the coals which he makes
use of for that purpose, dug from the bowels of the earth, and brought to him
perhaps by a long sea and a long land carriage, all the other utensils of his
kitchen, all the furniture of his table, the knives and forks, the earthen or
pewter plates upon which he serves up and divides his victuals, the different
hands employed in preparing his bread and his beer, the glass window which lets
in the heat and the light, and keeps out the wind and the rain, with all the
knowledge and art requisite for preparing that beautiful and happy invention, without
which these northern parts of the world could scarce have afforded a very
comfortable habitation, together with the tools of all the different workmen
employed in producing those different conveniencies; if we examine, I say, all
these things, and consider what a variety of labour is employed about each of
them, we shall be sensible that without the assistance and co-operation of many
thousands, the very meanest person in a civilized country could not be
provided, even according to what we very falsely imagine, the easy and simple
manner in which he is commonly accommodated. Compared, indeed, with the more
extravagant luxury of the great, his accommodation must no doubt appear
extremely simple and easy; and yet it may be true, perhaps, that the accommodation
of an European prince does not always so much exceed that of an industrious and
frugal peasant, as the accommodation of the latter exceeds that of many an
African king, the absolute master of the lives and liberties of ten thousand
naked savages. (WN I.i.11)
The length of this excerpt is
part of its argumentative power. Smith is not suggesting, simply, that a single
purchase benefits a group of people. Instead, he is arguing that once you take
seriously the multitude of people whose income is connected to the purchase of
the single coat, it is hard to even grasp the numbers we are considering. A
single purchase brings with it a vast network of laborers. Furthermore, he
argues, while one may be critical of the inevitable class difference of a commercial
society, the differential is almost inconsequential compared to the disparity
between the “haves” and “have-nots” in a feudal or even the most primitive
societies. (Smith’s reference to “a thousand naked savages” is just thoughtless
eighteenth century racism and can be chalked-up to the rhetoric of the time. It
ought to be disregarded and has no impact on the argument itself.) It is the
effect of one minor purchase on the community of economic agents that allows
Smith to claim, as he does in TMS, that the goods of the world are
divided equally as if by an invisible hand. For Smith, the wealthy can purchase
nothing without benefiting the poor.
According to The Wealth of
Nations, the power of the woolen coat is the power of the market at work,
and its reach extends to national economic policy as well as personal economic
behavior. Smith’s comments relate to his condemnation of social engineering in The
Theory of Moral Sentiments, and he uses the same metaphor—the invisible
hand—to condemn those mercantilists who think that by manipulating the market,
they can improve the lot of individual groups of people.
But the annual revenue of every
society is always precisely equal to the exchangeable value of the whole annual
produce of its industry, or rather is precisely the same thing with that
exchangeable value. As every individual, therefore, endeavours as much as he
can both to employ his capital in the support of domestic industry, and so to
direct that industry that its produce may be of the greatest value; every
individual necessarily labours to render the annual revenue of the society as
great as he can. He generally, indeed, neither intends to promote the public
interest, nor knows how much he is promoting it. By preferring the support of
domestic to that of foreign industry, he intends only his own security; and by
directing that industry in such a manner as its produce may be of the greatest
value, he intends only his own gain, and he is in this, as in many other cases,
led by an invisible hand to promote an end which was no part of his intention.
Nor is it always the worse for the society that it was no part of it. By
pursuing his own interest he frequently promotes that of the society more
effectually than when he really intends to promote it. I have never known much
good done by those who affected to trade for the public good. It is an
affectation, indeed, not very common among merchants, and very few words need
be employed in dissuading them from it. (WN IV.2.9)
Smith begins his comments here
with a restatement of the main point of The Wealth of Nations: “...the
annual revenue of every society is always precisely equal to the exchangeable
value of the whole annual produce of its industry, or rather is precisely the
same thing with that exchangeable value.” The income of any community is its
labor. Smith’s remarks about the invisible hand suggest that one can do more
damage by trying to manipulate the system than by trusting it to work. This is
the moral power of unintended consequences, as TMS’s account of
the invisible hand makes clear as well.
What Smith relies upon here is
not “moral luck“ as Bernard
Williams will later call it, but, rather, that nature is logical because it
operates on principles, and, therefore, certain outcomes can be predicted.
Smith recognizes that human beings and their interactions are part of
nature and not to be understood separately from it. As in The Theory of
Moral Sentiments, social and political behavior follows a natural logic.
Now Smith makes the same claim for economic acts. Human society is as natural
as the people in it, and, as such, Smith rejects the notion of a social
contract in both of his books. There was never a time that humanity lived
outside of society, and political development is the product of evolution (not
his term) rather than a radical shift in organization. The state of nature is
society for Smith and the Scots, and, therefore, the rules that govern the
system necessitate certain outcomes.
b. History and Labor
Smith’s account of history
describes human civilization as moving through four different stages, time
periods that contain nations of hunters, nations of shepherds, agricultural
nations, and, finally commercial societies (WN V.i.a, see, also, LJ(A)
i.27; see also LJ(B) 25, 27, 149, 233). This is progress, Smith insists,
and each form of society is superior to the previous one. It is also natural.
This is how the system is designed to operate; history has a logic to it. Obviously, this account, in fact all of The
Wealth of Nations, was very influential for Karl Marx. It marks the
important beginning of what would be called social science—Smith’s successor to
the Chair of Moral Philosophy, Adam Ferguson, is often identified as the
founder of modern sociology—and is representative of the project the Scottish
Enlightenment thinkers referred to as “the science of man.”
Smith’s discussion of history
illustrates two other important points. First, he argues that the primary
economic tension, and, as a result, the primary economic engine, in any given
society can be found in the interaction between “the inhabitants of the town
and those of the country” (WN III.i.1). According to Smith, agricultural
lands supply the means of sustenance for any given society and urban
populations provide the means of manufacture. Urban areas refine and advance
the means of production and return some of its produce to rural people. In each
of the stages, the town and country have a different relationship with each
other, but they always interact.
Here, Smith is indebted to the
physiocrats, French economists who believed that agricultural labor was the
primary measure of national wealth. Smith accepted their notion that productive
labor was a component of the wealth of nations but rejected their notion that only
agricultural labor should be counted as value. He argues, instead, that if one
group had to be regarded as more important, it would be the country since it
provides food for the masses, but that it would be a mistake to regard one’s
gain as the other’s loss or that their relationship is essentially
hierarchical: “the gains of both are mutual and reciprocal, and the division of
labour is in this, as in all other cases, advantageous to all the different
persons employed in the various occupations into which it is subdivided” (WN
III.i.1).
Again, there are philosophical
issues here. First, is what one is to regard as labor; second is what counts
towards economic value. Additionally, Smith is showing how the division of
labor works on a large scale; it is not just for pin factories. Rather,
different populations can be dedicated to different tasks for everyone’s
benefit. (This might be an anticipation of David Ricardo’s notion of “comparative
advantage.”) A commercial system is an integrated one and the invisible hand
ensures that what benefits one group can also benefit another. Again, the
butcher, brewer, and baker gain their livelihood by manufacturing the lunch of
their customers.
Returning to Smith’s account of
history, Smith also argues that historical moments and their economic
arrangements help determine the form of government. As the economic stage changes,
so does the form of government. Economics and politics are intertwined, Smith
observes, and a feudal system could not have a republican government as is
found in commercial societies. What
Smith does here, again, is anticipate Marx’s dialectical materialism, showing
how history influences economic and political options, but, of course, he does
not take it nearly as far as the German does close to a century later.
Given the diversity of human
experience—WN’s stage theory of history helps account for
difference—Smith is motivated to seek unifying standards that can help
translate economic value between circumstances. Two examples are his
discussions of price and his paradox of value. Within these discussions, Smith
seeks an adequate measure of “worth” for goods and services. Consumers look at
prices to gauge value, but there are good and bad amounts; which is which is
not always transparent. Some items are marked too expensive for their actual
value and some are a bargain. In developing a system to account for this
interaction, Smith offers a range of different types of prices, but the two
most important are natural price—the price that covers all the necessary costs
of manufacture—and the market price, what a commodity actually goes for on the
market. When the market and the natural prices are identical, the market is
functioning well: “the natural price, therefore, is, as it were, the central
price to which the prices of all commodities are continually gravitating” (WN
I.vii.15).
Here, the term “gravitating”
indicates, yet again, that there are principles that guide the economic system,
and a properly functioning marketplace—one in which individuals are in “perfect
liberty”—will have the natural and market prices coincide (WN i.vii.30).
(Smith defines perfect liberty as a condition under which a person “may change
his trade as often as he pleases” (WN I.vii.6)). Whether this is a
normative value, whether for Smith the natural price is better than
other prices, and whether the market price of a commodity should be in
alignment with the natural price, is a matter of debate.
Following the question of
worth, Smith poses the paradox of value. He explains: “Nothing is more useful
than water: but it will purchase scarce any thing; scarce anything can be had
in exchange for it. A diamond, on the contrary, has scarce any value in use;
but a very great quantity of other goods may frequently be had in exchange for
it” (WN I.iv.13). Smith’s question is straightforward: why is water so
much cheaper than diamonds when it is so much more important for everyday life?
Obviously, we are tempted to
argue that scarcity plays a role in the solution to this paradox; water is more
valuable than diamonds to a person dying of thirst. For Smith, however, value,
here, is general utility and it seems problematic to Smith that the more useful
commodity has the lower market price. His solution, then, is to distinguish
between two types of value, “value in use” and “value in exchange”—the former
is the commodity’s utility and the latter is what it can be exchanged for in
the market. Dividing the two analytically allows consumers to evaluate the
goods both in terms of scarcity and in terms of usefulness. However, Smith is
also searching for a normative or objective core in a fluctuating and
contextual system, as with the role of impartiality in his moral system.
Scarcity would not solve this problem because that, too, is fluctuating;
usefulness is largely subjective and depends on an individual’s priorities and
circumstance. Smith seeks a more universal criterion and looks towards labor to
anchor his notion of value: “labour,” he writes, “is the real measure of the
exchangeable value of all commodities” (WN I.v).
What Smith means by this is
unclear and a matter of controversy. What seems likely, though, is that one
person’s labor in any given society is not significantly different from another
person’s. Human capabilities do not change radically from one time period or
location to another, and their labor, therefore, can be compared: “the
difference of natural talents in different men is, in reality, much less than
we are aware of.” He elaborates:
Labour, therefore, it appears
evidently, is the only universal, as well as the only accurate measure of
value, or the only standard by which we can compare the values of different
commodities at all times and at all places. We cannot estimate, it is allowed,
the real value of different commodities from century to century by the
quantities of silver which were given for them. We cannot estimate it from year
to year by the quantities of corn. By the quantities of labour we can, with the
greatest accuracy, estimate it both from century to century and from year to
year. From century to century, corn is a better measure than silver, because, from
century to century, equal quantities of corn will command the same quantity of
labour more nearly than equal quantities of silver. From year to year, on the
contrary, silver is a better measure than corn, because equal quantities of it
will more nearly command the same quantity of labour. (WN I.v.17)
In other words, for example, a
lone person can only lift so much wheat at one go, and while some people are
stronger than others, the differences between them don’t make that much
difference. Therefore, Smith seems to believe, the value of any object can be
universally measured by the amount of labor that any person in any society
might have to exert in order to acquire that object. While this is not
necessarily a satisfying standard to all—many economists argue that the labor
theory of value has been surpassed—it does, again, root Smith’s objectivity in
impartiality. The “any person” quality of the impartial spectator is analogous
to the “any laborer” standard Smith seems to use as a value measure.
Ultimately, according to Smith,
a properly functioning market is one in which all these conditions—price,
value, progress, efficiency, specialization, and universal opulence
(wealth)—all work together to provide economic agents with a means to exchange
accurately and freely as their self-interest motivates them. None of these
conditions can be met if the government does not act appropriately, or if it
oversteps its justified boundaries.
c. Political Economy
The Wealth of Nations is a work of political economy. It is
concerned with much more than the mechanisms of exchange. It is also concerned
with the ideal form of government for commercial advancement and the pursuit of
self-interest. This is where Smith’s
reputation as a laissez faire theorist comes in. He is arguing for a
system, as he calls it, of “natural liberty,” one in which the market largely
governs itself as is free from excessive state intervention (recall Smith’s use
of the invisible hand in TMS). As he explains, there are only
three proper roles for the sovereign: to protect a society from invasion by
outside forces, to enforce justice and protect citizens from one another, and “thirdly,
the duty of erecting and maintaining certain publick works and certain publick
institutions, which it can never be for the interest of any individual, or
small number of individuals, to erect and maintain; because the profit could
never repay the expence to any individual or small number of individuals,
though it may frequently do much more than repay it to a great society” (WN
IV.ix).
Each of the responsibilities of
the sovereign contains its own controversies. Regarding the first, protecting
society, Smith debated with others as to whether a citizen militia or a
standing army was better suited for the job, rooting his discussion, as usual,
in a detailed history of the military in different stages of society (WN V.1.a).
Given the nature of specialization, it should not be surprising that Smith
favored the army (WN V.1.a.28). The nature of justice—the second role of
the sovereign—is also complicated, and Smith never fully articulated his theory
of what justice is and how it ought to be maintained, although, as we have
seen, he was liberal in his assumptions of the rights of individuals against
the imposition of government on matters of conscience and debate. In his
chapter on “the expence of justice” (WN V.i.b), he discusses the nature
of human subordination and why human beings like to impose themselves on one
another. However, it is the third role of the sovereign—the maintenance of
works that are too expensive for individuals to erect and maintain, or what are
called “natural monopolies”—that is the most controversial.
It is this last book—ostensibly
about the expenditures of government—that shows most clearly what Smith had in
mind politically; the government plays a much stronger role in society than is
often asserted. In particular, book five addresses the importance of universal
education and social unity. Smith calls for religious tolerance and social regulation
against extremism. For Smith, religion is an exceptionally fractious force in
society because individuals tend to regard theological leaders as having more
authority than political ones. This leads to fragmentation and social discord.
The discussion of “public goods”
includes an elaborate discussion of toll roads, which, on the face of it, may
seem to be a boring topic, but actually includes a fascinating account of why
tolls should be based on the value of transported goods rather than on weight. This
is Smith’s attempt to protect the poor—expensive goods are usually lighter than
cheaper goods—think of diamonds compared to water—and if weight were the
standard for tolls, justified, perhaps, by the wear and tear that the heavier
goods cause, the poor would carry an undue share of transportation costs (WN
V.i.d). However, the most intriguing sections of Book Five contain his two
discussions of education (WN V.i.f–V.i.g). The first articulates the
role of education for youth and the second describes the role of education for “people
of all ages.”
The government has no small
interest in maintaining schools to teach basic knowledge and skills to young
people. While some of the expense is born by parents, much of this is to be
paid for by society as a whole (WN V.i.f.54-55). The government also has
a duty to educate adults, both to help counter superstition and to remedy the
effects of the division of labor. Regarding the first, an educated population
is more resistant to the claims of extremist religions. Smith also advocates
public scrutiny of religious assertions in an attempt to moderate their
practices. This, of course, echoes Smith’s moral theory in which the impartial
spectator moderates the more extreme sentiments of moral agents. Finally, Smith
insists that those who govern abandon associations with religious sects so that
their loyalties do not conflict.
Regarding the second purpose of education for all ages, and again,
anticipating Marx, Smith recognizes that the division of labor is destructive
towards an individual’s intellect. Without education, “the torpor”
(inactivity) of the worker’s mind:
renders him, not only incapable of
relishing or bearing a part in any rational conversation, but of conceiving any
generous, noble, or tender sentiment, and consequently of forming any just
judgment concerning many even of the ordinary duties of private life. Of the
great and extensive interests of his country, he is altogether incapable of
judging; and unless very particular pains have been taken to render him
otherwise, he is equally incapable of defending his country in war.... His
dexterity at his own particular trade seems, in this manner, to be acquired at
the expence of his intellectual, social, and martial virtues. But in every
improved and civilized society this is the state into which the labouring poor,
that is, the great body of the people, must necessarily fall, unless government takes some pains to
prevent it. (WN V.i.f.50)
Education helps individuals
overcome the monotony of day to day life. It helps them be better citizens,
better soldiers, and more moral people; the intellect and the imagination are
essential to moral judgment. No person can accurately sympathize if his or her
mind is vacant and unskilled.
We see here that Smith is
concerned about the poor throughout The Wealth of Nations. We also see
the connections between his moral theory and his political economy. It is
impossible to truly understand why Smith makes the political claims he does
without connecting them to his moral claims, and vice versa. His call for
universal wealth or opulence and his justification of limited government are
themselves moral arguments as much as they are economic ones. This is why the
Adam Smith Problem doesn’t make sense and why contemporary Smith scholars are
so focused on showing the systematic elements of Smith’s philosophy. Without seeing how
each of the parts fit together, one loses the power behind his reasoning [Zizek
the Clown]—reasoning that inspired as much change as any other work in the
history of the Western tradition. Of course, Smith has his
detractors and his critics. He is making claims and building on assumptions
that many challenge. But Smith has his defenders too, and, as history bears
out, Smith is still an important voice in the investigation of how society
ought to be organized and what principles govern human behavior, inquiry, and
morality. The late twentieth century revival in Smith’s studies underscores
that Smith’s philosophy may be as important now as it ever was.
4. References and Further
Reading
All references are to The
Glasgow Edition of the Correspondence and Works of Adam Smith, the
definitive edition of his works. Online versions of much of these can be found
at The Library of Economics and Liberty.
a. Work by Smith
- [TMS] Theory of Moral Sentiments. Ed. A.L. Macfie and D.D. Raphael. Indianapolis: Liberty Press, 1982.
- First published in 1759; subsequent editions in 1761 (significantly revised), 1767, 1774, 1781, and 1790 (significantly revised with entirely new section).
- [WN] An Inquiry into the Nature and Causes of the Wealth of Nations. 2 vols. Ed. R.H. Campbell and A.S. Skinner. Indianapolis: Liberty Press, 1976.
- First published in 1776; subsequent editions in 1778, 1784 (significantly revised), 1786, 1789.
- [LJ] Lectures on Jurisprudence. Ed. R.L. Meek and D.D. Raphael. Indianapolis: Liberty Press, 1982.
- Contains two sets of lectures, LJ(A), dated 1762–3 and LJ(B) dated 1766.
- [LRBL] The Lectures on Rhetoric and Belles Lettres. Ed. J.C. Bryce. Indianapolis: Liberty Press, 1985.
- Edition also contains the fragment: “Considerations Concerning the First Formation of Languages” in LRBL. Lecture dates, 1762–1763.
- [EPS] Essays on Philosophical Subjects. Ed. W.P.D. Wightman and J.C. Bryce. Indianapolis: Liberty Press, 1982.
- Contains the essays and fragments: “The Principles Which Lead and Direct Philosophical Enquires Illustrated by the History of Astronomy,” “The Principles Which Lead and Direct Philosophical Enquires Illustrated by the History of Ancient Physics,” “ThePrinciples which lead and direct Philosophical Enquiries Illustrated by the History of the Ancient Logics and Metaphysics,” “Of the External Senses,” “Of the Nature of that Imitation which takes place in what are called The Imitative Arts,” “Of the Affinity between Music, Dancing, and Poetry,” “Of the Affinity between certain English and Italian Verses,” Contributions to the Edinburgh Review of 1755-56, Review of Johnson’s Dictionary, A Letter to the Authors of the Edinburgh Review, Preface and Dedication to William Hamilton’s Poems on Several Occasions 261 and Dugald Stewart’s “Account of the Life and Writings of Adam Smith, LL.D.” First published in 1795.
- [Corr.] Correspondence of Adam Smith. Ed. E.C. Mossner and I.S. Ross. Indianapolis: Liberty Press, 1987.
b. Companion Volumes to the
Glasgow Edition
- Index to the Works of Adam Smith. Ed K. Haakonssen and A.S. Skinner. Indianapolis,: Liberty Press, 2002.
- Essays on Adam Smith. Edited by A.S. Skinner and Thomas Wilson. Oxford: Oxford University Press, 1976.
- Life of Adam Smith. I.S. Ross. Oxford: Oxford University Press, 1995.
c. Introductions and Works
for a General Audience
- Berry, Christopher J. The Social Theory of the Scottish Enlightenment. Edinburgh: Edinburgh University Press, 1997.
- Fleischacker, Samuel. On Adam Smith’s Wealth of Nations. Princeton: Princeton University Press, 2004.
- Haakonssen, K. (ed.) The Cambridge Companion to Adam Smith. Cambridge: Cambridge University Press, 2006.
- Muller, Jerry Z. Adam Smith in His Time and Ours. Princeton: Princeton University Press, 1993.
- Otteson, James R. Adam Smith: Selected Philosophical Writings (Library of Scottish Philosophy). Exeter: Imprint Academic, 2004.
- Weinstein, Jack Russell. On Adam Smith. Belmont: Wadsworth, 2001.
- Raphael, D.D. Adam Smith (Past Masters). Oxford: Oxford University Press, 1986.
d. Recommended Books for
Specialists
Any issue of the journal The
Adam Smith Review will be of interest to Smith’s readers. Volume 2 (2007)
has a special symposium on Smith’s notion of rational choice (economic
deliberation), and Volume 3 (2008) will have a special symposium on Smith and
education. Both may deserve special attention.
- Campbell, T.D. Adam Smith’s Science of Morals. New Jersey: Rowman and Littlefield, 1971.
- Cropsey, Joseph. Polity and Economy: An Interpretation of the Principles of Adam Smith (With Further Thoughts on the Principles of Adam Smith) (Revised Edition). Chicago: St. Augustine’s Press, 2001.
- Evensky, J. Adam Smith’s Moral Philosophy. Cambridge: Cambridge University Press, 2005.
- Force, Pierre. Self-interest before Adam Smith. Cambridge: Cambridge University Press, 2003.
- Griswold, Charles L. Jr. Adam Smith and the Virtues of Enlightenment. Cambridge: Cambridge University Press, 1999.
- Haakonssen, Knud (ed.). Adam Smith (The International Library of Critical Essays in the History of Philosophy. Aldershot: Ashgate/Dartmouth Publishing, 1998.
- Haakonssen, Knud. The Science of A Legislator. Cambridge: Cambridge University Press, 1981.
- Montes, Leonidas. Adam Smith in Context. New York: Palgrave MacMillan, 2004.
- Otteson, James. Adam Smith’s Marketplace of Life. Cambridge: Cambridge University Press, 2002.
- Raphael, D.D. The Impartial Spectator. Oxford: Oxford University Press, 2007.
- Scott, William Robert. Adam Smith as Student and Professor. New York: Augusts M. Kelley, 1965.
- Teichgraeber, Richard. Free Trade and Moral Philosophy: Rethinking the Sources of Adam Smith’s Wealth of Nations. Durham, Duke University Press, 1986.
- Weinstein, Jack Russell. Adam Smith’s Pluralism: Rationality Education and the Moral Sentiments. New Haven: Yale University Press, 2013.
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