Reading Mr Smith

Adam, that is.  And specifically the Oxford World Classics selection from The Wealth of Nations and the Online Library Of Liberty’s version of the Glasgow edition of The Theory of Moral Sentiments (1759).  My reasons for reading are this.  One of the puzzles about modern economic arguments for the uninitiated (like me) is that though they are used to determine decisions that directly affect the happiness or misery of millions, they rarely refer directly to straightforwardly ethical categories.  So what are the ethical assumptions (if any) of Mr Smith himself, the father of the ideal of perfect market liberty and how do these cohere with his ideal?  Secondly, there is the concept of ‘perfect liberty’ itself.   Though WN clearly presents this as an ideal throughout, the realities of the contemporary world order are equally clearly very different.   So on what basis can we decide that this is indeed the one ideal situation which will guarantee the best outcomes for all?  That’s a puzzle for later.

Value

For the time being I want to articulate a standard impression of the relationship between ethical language and economics, particularly for the purpose of effective argument.   I hope my impression is not too unfair.  ‘Good’ becomes a persuasive factor in ‘good for growth’ or ‘good for business’.  ‘Value’ is ‘market value’ or whatever people are prepared to pay money for.   The arguments for tough economic decisions that will foreseeably make life harsher for our fellow human beings are akin to ‘robust’ arguments for going to war.  Argument A (other-related): If we don’t do it this way, we won’t be in a position to be nice to anyone because [we won’t have any money/we’ll be dead/invaded].    Argument B (self-related) we need to protect our own national interests first before worrying about the interests of other nationals/individuals/collateral damage.  This is not to say that such pragmatic arguments mayn’t sometimes have their place amid a range of other arguments.  But it is to note that they tend to have greater force in collective decision-making than ‘let’s try and be nice to everyone arguments’. (These in turn seem to have much greater force in individual decision-making, or under conditions of collective well-being).  Get the economics right, trust the process and the best possible outcome follows. We do not need to worry about the ethical detail, which must shift for itself.

So where does Mr Smith stand on the relationship between economics and ethics?

Virtuous living

One of the most striking things about the ethical language of Smith – as indeed of Hume – is its focus on virtues, and indeed   virtues very much within the classical tradition (Roman moralists from Cicero to Marcus Aurelius are frequently cited).  These civil and civilised virtues are contrasted favourably with degraded ‘monkish virtues’, which latter (for instance) emphasise servile humility above a proper sense of self-worth and capacity to celebrate one’s abilities (the old virtue of magnanimity).

In this regard there is an important distancing from the ethical assumptions of Medieval Catholicism, with its (theoretical) idealisation of poverty and simple living.  Both Smith and Hume attempt to give a kind of ‘natural history’ of human moral sensibilities and both pick up on what they observe as an instinctive revulsion at those who are poor and our natural attraction to those who are rich and splendid.  Hume (I may be doing him an injustice here, because I have not read enough) seems to take this in his stride.  Smith, however, throughout WN and his Ethics shows concern for the plight of the poor (examples to follow later on in these reflections).

The following passage, it seems to me, reveals clearly the contrast between the universe of moral sensibilities that Adam Smith wishes to celebrate and the alternatives.

“The first are those whining and melancholy moralists, who are perpetually reproaching us with our happiness, while so many of our brethren are in misery, who regard as impious the natural joy of prosperity, which does not think of the many wretches that are at every instant labouring under all sorts of calamities, in the languor of poverty, in the agony of disease, in the horrors of death, under the insults and oppression of their enemies… this extreme sympathy with misfortunes which we know nothing about, seems altogether absurd and unreasonable…  those who affect this character have commonly nothing but a certain affected and sentimental sadness, which, without reaching the heart, serves only to render the countenance and conversation impertinently dismal and disagreeable.”  (OLL Works and Correspondence Vol 1, pp 205 – 6)

It’s not daft: being miserable about something you can’t do anything about probably is fairly pointless.  Nor is it obviously bad to be well-off.  But this does affirm a bracing attitude to the woes of others.  There is an interesting supporting observation about the global situation of humanity, which puts the reason for adjusting our sensibilities on a scientific basis:

‘Take the whole earth at an average, for one man who suffers pain or misery, you will find twenty in prosperity and joy, or at least in tolerable circumstances.’

From this observation he goes on to ask why we should weep with the one rather than rejoice with the twenty.  It seems to me that such ‘bracing’ ethical sensibility is something that we can recognise in different strands of political discourse today.  As well as the wide range of assumptions that go with the phrase ‘tolerable circumstances’.

Nevertheless, Adam Smith inhabits a recognisably virtuous universe and out of this is able to be trenchant in his criticism of the well-to-do.  He denounces the passions of avarice and ambition, in explicitly Stoic vein, as vices that lead a person to misery.  ‘[He] is not only miserable in his actual situation, but is often disposed to disturb the peace of society, in order to arrive at what he so foolishly admires’ (p 215).  We recognise the Stoic ideal of contentment with one’s circumstances as the key to happiness.  (A doctrine promoted without a trace of irony by the fabulously wealthy Seneca).

In a significant passage (which we shall return to) Smith uses phrases like these: ‘The rich only select from the heap what is most precious and agreeable… their natural selfishness and rapacity… though they mean only their own conveniency, though the sole end which they propose… be the gratification of their own vain and insatiable desires…’    There is a clear moral judgment about the motives of the rich and their behaviour, which contrasts dramatically with what Smith believes paradoxically to be the benign consequence of their actions.

Finally, there is place for correcting the imbalance of wealth and success – in favour of virtue. Though nature may allow an energetic ‘knave’ to prosper, while an indolent virtuous person may languish (p 234).  Humanity is ‘by nature directed to correct in some measure the distribution of things which she herself would otherwise have made.’

And we find an optimistic account of the human experience (with a ring of hellenistic philosophical rhetoric to it) as an empirical frame for this moral universe (p 232):

‘If we consider the general rules by which extremes of prosperity and adversity are commonly distributed in this life we shall find that notwithstanding the disorder in which all things appear to be in this world, yet even here every virtue naturally meets with its proper reward, with the recompense which is most fit to encourage and promote it.’

Most particularly, from the point of view of economics and citizenship: ‘what is the reward most proper for encouraging industry, prudence and circumspection?  Success in every sort of business.  Wealth and external honours are their proper recompense, and the recompense which they can seldom fail of acquiring.’  Note the significance of this double claim.  Wealth is a proper reward (in the moral universe) and the actual reward (in the real universe), thus the moral and the real universe naturally come together in the honest pursuit of wealth.  This is a very significant turn from aristocratic (or monkish) contempt for the commercial pursuit of worldly gain, as well as a rejection of the world view of those ‘whining moralists’ who harp on pointlessly about the human misery of an invisible 5%.  Smith notes approvingly the ‘spirit and keenness’ which ‘constitute the difference between the man of enterprise and the man of dull regularity’ (p 240).

The Paradox

In Smith’s moral order human beings are bound by an inner law, found in the moral faculties bestowed by nature, which reward or punish behaviour with tranquillity or agony of conscience (p 231).  He says:

‘By acting according to the dictates of our moral faculties, we necessarily pursue the most effectual means for prompting the happiness of mankind, and may therefore be said, in some sense, to co-operate with the Deity, and to advance as far as in our power the plan of providence’.

So there we have humanity, with humanity’s laws.  But of course, we also have nature, with nature’s laws.  Co-operation in a common end is still the key.   ‘The rules which she follows are fit for her, those which he follows, for him: but both are calculated to promote the same great end, the order of the world and the perfection and happiness of human nature.’ (p 234)

So there is a clear, shared goal, which includes the happiness of human nature.  And an indispensable factor in achieving that goal is ethical human agency.  Yet, paradoxically, when it comes to economics and generating the wealth that will benefit a nation or society, ethical intent may be irrelevant.  Paramount is self-interest.  At WN (Oxford 2008, p 291 – 2) we meet the invisible hand, which leads the entrepreneur, acting (perhaps) entirely in his own interests, to ‘promote an end which was no part of his intention.’  Smith adds, ‘By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it’.

This is most sharply put in the passage we looked at earlier from the TMS (pp 250 – 251).  Smith has been arguing that we are attracted (naturally) by the splendour and conveniences of wealth.  He grants that the attraction is illusory, but claims that the illusion is benign.  ‘It is this deception that rouses and keeps in motion the industry of mankind’ – an industry that has built cities and tamed the earth.  The relentless pursuit of wealth cannot fail to benefit all human kind.  The ‘proud and unfeeling landlord’ may be completely obsessed with his own consumption and give no thought for anyone else, however, the physical limits to the quantity of food that he can consume guarantee that others (his servants, workers etc) will be fed from his abundance.  ‘All of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice’.

This belief (that a rich person’s uncompromising pursuit of wealth often/usually benefits those employed in providing services for the rich person), yoked with the abstract ideal of the free market (as the most efficient system for maximising overall wealth) abstracted from the wider context of Smith’s writing, is the foundation for economic reasoning that enjoys the luxury of being a science promoting universal well-being without the embarrassment of having to consider awkward ethical effects that don’t fit the equations.

Smith cites the Stoics (it seems approvingly) for their picture of divine and human causality in the world.  ‘[They] were of opinion that as the world was governed by the all-ruling providence of a wise, powerful and good God, every single event ought to be regarded, as making a necessary part of the plan of the universe, and as tending to promote the general order and happiness of the whole: that the vices and follies of mankind, therefore, made as necessary a part of this plan as their wisdom or their virtue; and by that eternal art which educes good from ill, were made to tend equally to the prosperity and perfection of the great system of nature.’ (TMS p 104).

Smith’s conjecture implies just such an optimistic view of the metaphysics of providence alongside an ethical realism and a realism about human behaviour.  Perhaps his free market dream is a Newtonian ideal of virtually harmonised forces, in which the nature of the forces (self- or other-centred ambitions) is irrelevant, provided only the balance is right.  Nevertheless, implicit (and occasionally explicit) is the need for human ethical action to adjust the forces when they are wrongly or unjustly aligned.  Nor is it clear that that adjustment will always be about market liberty.  But more there later…

It is worth finishing with Adam Smith’s evaluation of global human happiness c 1759 to supplement the conceptual context for his economic theory.  He has no problem with different economic ranks in society:

‘When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition.  These last too enjoy their share of all that it produces.   In what constitutes the real happiness of human life, they are in no respect inferior to those who would seem so much above them.  In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.’ (TMS p 251).  Worthy of Seneca.

What do Mr Smith’s posterity believe about the facts of human life in 2015?  Do they have a coherent anthropology and world view to frame their beliefs?  Do they make room for ethical imperatives and ‘common humanity’? And how would we be able to tell if their beliefs are true or false?

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