To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections, constitute the perfection of human nature. ~ Adam Smith
Scottish moral philosopher Adam Smith (1723–1790) wrote 2 classic works. The one he treasured most, making extensive revisions until his death, was the first: The Theory of Moral Sentiments (1759). In it, Smith sought to explain how morality could arise from a species renowned for its sense of self-interest. His answer was sympathy.
That we often derive sorrow from the sorrows of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous or the humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.
Sympathy, therefore, does not arise so much from the view of the passion, as from that of the situation which excites it. ~ Adam Smith
In terms of Smith’s legacy, Moral Sentiments sank into oblivion. Instead, the book that earned Adam Smith everlasting fame was An Inquiry into the Nature and Causes of the Wealth of Nations (1776).
Nothing in Smith’s writings suggests an organic view of sociality. Beyond sympathy, Smith saw men as fundamentally individualistic. Despite the selfish inclinations of men, Smith fantastically proposed that pursuing self-interest would be beneficial to society.
Every individual, by pursuing his own interest, frequently promotes that of the society more effectually than when he really intends to promote it. ~ Adam Smith
For Smith, the vigorous pursuit self-interest would benefit society via a mystical “invisible hand” which transforms selfishness into beneficence. The falsity of this hypothesis goes a long way in explaining the egregious inequities and environmental destruction that ‘free enterprise’ has wrought. Comprehending how such absurdity could be spouted by an otherwise sensible man can only be done by considering the context of the times.
England had already become “a nation of shopkeepers” by the time Smith considered wealth. The most frequent opinion of contemporaneous elitist writers who toadied to the upper class was consternation over a rising standard of living in the laboring classes. An economic argument was added to the traditional moralistic denunciation of “luxury” as engendering sin and undermining civic virtue. Rising wages would undermine the will to work, as workers were presumed to favor leisure over laboring for extra income.
Smith countered the utility-of-poverty hypothesis popular with the ruling class by welcoming decent wages as “the liberal reward of labour.” It was a moral argument couched in economics.
No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. ~ Adam Smith
With Wealth of Nations, Smith swept away good sense in seeking to explain how “universal opulence” could be achieved by taking advantage of seemingly natural market mechanisms. Smith identified 2 key facets, from which all else flowed.
The 1st was the propensity to trade in pursuit of self-interest. Smith, not knowing the ubiquitous practice of bacteria exchanging gene packages, considered trade to be unique to humans.
The 2nd essential facet was the division of labor, which might maximize productivity; as it does with colonial ants and bees, as well as several other gregarious animals, which play different roles by sex and social standing, and so better ensure the survival of all.
Smith entangled the 2 facets: it was the ability to exchange labor and its products that engendered division of labor. From there, Smith imagined how a market system, through the pricing mechanism, may lead to prosperity for all.
The “natural price” was the lowest possible by which a commodity could be produced and not lose money. This contrasted to the “market price,” which was determined by supply and demand.
Smith figured that a market price above the natural price would encourage greater production, and vice versa. The market price was a signal to producers of the relationship between supply and demand. Through this signal production would adjust toward optimality.
By Smith’s sophistic reckoning, the market was the most efficient mechanism for channeling self-interest to promote well-being, for both citizens and the wealth of nations.
Smith was not first to suggest that commerce promoted “civilized” behavior. It was a commonplace belief during the Age of Enlightenment. But Smith was outstanding in advocating that commercial society could be a force of social goodness: that virtuous behavior might somehow come from the vigorous pursuit of self-interest. This was in oxymoronic contrast to Smith’s recognition of greed as a powerful force of inequity; a paradoxical self-contradiction that Smith never resolved.
As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. ~ Adam Smith
Despite acknowledging the exploitative scythe of men who could wield it, Smith strongly argued against direct government involvement in the economy. He saw government as an essential institution only “for facilitating the commerce of society,” by providing for defense, rule of law, and infrastructure: that which benefits society but is too unprofitable to be undertaken by individuals.
Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things. ~ Adam Smith
Smith set the tone for laissez-faire capitalism that would long counter the moral sentiments of which he was so fond.
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices. ~ Adam Smith
The impact of Smith’s Wealth of Nations is incalculable. More than any other economist, Smith elevated the study of economics into an academic discipline. Further, Smith influenced the thinking of political leaders, and in doing so was instrumental in engendering industrial evolution, and a nonchalant response to the ills of economic predation: the market system as a lesser evil. In many respects, the pillars of capitalism rest on the brittle and bitter foundation laid by Smith.