18 January, 2010Issue 11.1EconomicsHistoryPhilosophy

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Adam Smith: A Moral Philosopher

Nita Colaco

© Penguin Books Ltd.

A cloud looms over Adam Smith’s legacy. The 18th-century scholar is best known as an unalloyed extoller of the market and an apologist for self-interest, a reputation stemming from two centuries’ mischaracterisation of his thought. In the last 50-odd years, this interpretation has been given new credence by economists of the Chicago School (George Stigler famously described his magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations, as “a stupendous palace erected on the granite of self-interest”), by libertarian champions like Margaret Thatcher and Ronald Reagan, and by myriad others who associate him solely with free-market capitalism and self-interest.

The narrow popular perception of Smith hides a simple truth: the putative father of modern economics had a complex understanding of human nature. Indeed, sympathy and societal relations, not rational self-interest, lie at the heart of a work Smith himself considered “much superior” to Wealth of Nations: his Theory of Moral Sentiments.

Smith has been misrepresented for so long that the mere range of his writings often comes as a surprise. After his education at Glasgow and Oxford, he lectured and wrote on subjects from rhetoric to logic to astronomy. But it is his moral philosophy, as articulated in Theory of Moral Sentiments, that presents the greatest challenge to traditionally myopic interpretations of his thought. Published almost two decades prior to Wealth of Nations, Theory of Moral Sentiments celebrated its 250th birthday last year. In recognition of this occasion, and perhaps hoping to restore Theory of Moral Sentiments to the glory of its better-known cousin, Penguin Classics is releasing a special anniversary edition of Smith’s forgotten treatise, featuring an introduction by the modern-day economist-cum-public intellectual Amartya Sen.

Based on lectures Smith delivered during his time as Chair of Moral Philosophy at the University of Glasgow, Theory of Moral Sentiments is the bedrock of Smith’s intellectual project. Unlike Wealth of Nations, with its oft-quoted passage about the role of self-interest in commercial transactions, Theory of Moral Sentiments attempts to explain the motivations of human behavior, broadly construed. In characteristically lucid prose, Smith writes of people as inherently social creatures with a propensity for sympathizing with their brethren (a sharp break from the vision of mankind expounded by Hobbes, or even Rousseau, whom Smith admired). This natural human disposition leads to the formation of a moral sense: we approve of a person’s behavior to the degree that we sympathize with him.

Imagine, Smith writes, that we come upon a downcast man in the street. We hear that his father has died, picture ourselves in his shoes, sympathise with his pain, and thus approve of his actions. But imagine now we see this same man behaving jovially. The dissonance caused by our perception of what his behavior should be and what his behavior actually is produces an unpleasant feeling for us, and we disapprove of his actions.

Moral decision-making becomes more complicated when the number of actors increases (when watching two individuals quarreling, for example), or, better yet, when it’s our own behavior that we must evaluate. In the case of the latter, we must invoke what Smith calls an “impartial spectator”—the “great judge” and “man within the breast”. We divide ourselves into two people: the impartial spectator, or examiner, and our self, the examinee. Imagination is crucial here. Without it, we would never be able to figuratively “step back” and dispassionately view our own behavior to determine whether it is right or wrong.

Where, then, does self-interest enter the story? This was the question German scholars asked in the 19th century, when they began debating the so-called “Adam Smith problem”. The argument went something like this: how could the same man write Wealth of Nations, a paean to self-interest, and Theory of Moral Sentiments, which emphasises qualities such as humanity and generosity? This “problem” has pervaded Smith scholarship until relatively recently, owing in part to the fragmentation of academia. Philosophers tend to examine Theory of Moral Sentiments while economists focus on Wealth of Nations.

Yet there is much evidence to suggest that Smith himself saw Wealth of Nations as but one installment in his intellectual project, albeit one of great importance. Written after his departure from academic life, to “pass away the time” (according to a letter to his friend and fellow countryman David Hume) for some 12 years of his life, Wealth of Nations presents Smith’s vision of a commercial society, where economic thought is inseparable from that of ethics, politics, and justice. Wealth of Nations does acknowledge the role of self-interest in motivating behavior, especially in economic life, which supports Smith’s assertion in Theory of Moral Sentiments that self-preservation is a virtue (a belief which sets him apart from his mentor, Francis Hutcheson, who stressed benevolence as the purest good). But Smith also highlights the destructiveness of pure selfishness, upon which it would be impossible to erect institutions such as rule of law or government. He therefore praises self-denial and prudence, as well as the Christian law of loving one’s neighbor as oneself, in Theory of Moral Sentiments.

Other aspects of Smith’s thought, such as his views on education, also become clearer after reading Theory of Moral Sentiments and Wealth of Nations together. While division of labour greatly increases productivity, the repetition of mundane tasks hundreds of times a day inevitably dulls workers’ senses. Education improves the general quality of peoples’ lives, but more importantly, it livens the imagination, without which people would be hard-pressed to call upon the impartial spectator to make moral decisions. The topic of education is certainly conspicuous in Wealth of Nations, which includes discourses on a number of government policies, from establishing district-based schools to providing monetary rewards to high-performing students, to ensure the general public receives “the most essential parts of education”.

Theory of Moral Sentiments also throws suspicion on Smith’s use of the “invisible hand”, which has been generally interpreted as an omniscient market force. But Smith uses the phrase three different ways in his works. In History of Astronomy, where he traces the origins of philosophy, Smith ridicules polytheistic societies for attributing irregular natural events to mythological forces like the “invisible hand of Jupiter”. In Wealth of Nations, the context becomes international trade: merchants, looking after their own interests, invest in domestic rather than foreign industry and thus benefit society. The reference in Theory of Moral Sentiments is the most complicated. As Smith observes, even wealthy, selfish, rapacious individuals end up benefiting the poor, particularly because they employ labourers to produce their luxury goods. The “invisible hand” thus leads them to distribute goods and resources of the same magnitude “had the earth been divided into equal portions among all its inhabitants”. In this case, as in Wealth of Nations, the unintended consequences of selfish actions yield benefits.

But whereas Smith shows admiration for the ingenious merchants, he disdains the wealthy for their “vain and insatiable desires”. In this instance, he likely uses the “invisible hand” sardonically to show that even an unequal society operates well enough to further the “multiplication of the species”.

Reading Wealth of Nations in the context of Theory of Moral Sentiments does more than dispel popular misconceptions of Smith; it clarifies the reasons for Smith’s insistence on commercial society. After all, men toiling furiously and acting on their instincts to “truck, barter, and exchange” may generate the wealth of nations, but as Theory of Moral Sentiments tells us, wealth does not lead to happiness. Borrowing the language of Cicero and the Stoics, Smith writes that desiring more, and refusing to be content with one’s life position, is the main cause of personal and societal dissatisfaction. According to Smith, wealthy nations provide individuals with something as important as happiness—freedom. Freedom comes from having a system of justice that protects security, property, and dignity. Freedom also depends on having enough resources to stave off widespread destitution.

In Smith’s opinion, commercial society is the last stage in human development, the farthest cry from the primitive world of warlike savages. Wealth of Nations offers a road map for sovereigns to ensure their countries reach this final phase. This includes adopting policies based on division of labour and international trade over those advocated by the physiocrats, with their focus on agriculture, and by the mercantilists, with their money obsession. Smith was convinced that the society he promoted, with its international trade, smart government, and strong institutions, had a far better chance of peace and prosperity than those he saw around him.

Given the importance of both Theory of Moral Sentiments and Wealth of Nations to Smith’s thought, it might seem odd that the books are rarely read together. If so, the problem lies with us, not with Smith, who saw moral philosophy and economics as inextricably linked. Since his time, both disciplines, among others, have increasingly been taught and treated as separate and unrelated, making it that much easier for Smith’s name to be co-opted by those who have only read fragments of his work—a development that the Scottish polymath would have surely deplored. The anniversary publication of Theory of Moral Sentiments is one step toward setting the record straight.

Nita Colaco is reading for an MPhil in Economic and Social History at Lady Margaret Hall, Oxford.

Photograph © Ibrahim Foundation

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