The Marketplace of Life Adam Smith on Human Social Institutions

1. The Marketplace of LifeAdam Smith on Human Social Institutions James R. Otteson Professor of Philosophy and Economics Chairman, Department of Philosophy Yeshiva University 500 West 185th Street New York, NY 10033

2. Adam Smith, 1723–90 • Born in Kirkaldy, Scotland. • France and the Physiocrats. • David Hume. • Prof. of Logic, Moral Philosophy, Univ. of Glasgow.

3. Two Lessons from Smith • A theory explaining human social institutions. • An argument about why government should be limited.

4. First: A “Problem”? • Two books: • The Theory of Moral Sentiments (1759) • The Wealth of Nations (1776) • TMS: • Origins of human morality • Based on natural human “sympathy” • WN: • On “wealth”: markets, exchange, trade, money, etc. • Based on self-interest

5. The (Alleged) Problem • Which is it—sympathy or self-interest? • How do the two go together? • Incompatible conceptions of human nature? • Incompatible conceptions of human motivation? • 19thC German scholars: “Das Adam Smith Problem” • 20thC English-speaking scholars: “The Adam Smith Problem”

6. Dothe Books Go Together? • Yes: Each applies a “market model” to a different large-scale human social institution. • In TMS: morality. • In WN: economics.

7. Smithian Sociology • Is there a social science? • Yes: based on a relatively constant human nature. • Newtonian: observe the phenomena, discover rules describing regular behavior. • Smith believed that Newtonian methodology could apply to social world as much as to the world of heavenly bodies.

8. Core Elements of TMS’s Moral Theory • Moral psychology: begin with empirical observation, develop explanatory hypotheses. • Desire for mutual sympathy of sentiments (concord, harmony;not pity). • We develop moral sentiments; an evolutionary account. • Two main questions: • Transition from amoral infancy to moralized adulthood; and • Rough consensus about morality. • Two interesting facts: • Homo iudicans: We are constant judgers. • We behaviorally observe more rules than we realize. • Examples: • Laughing and joke-telling. • Attire.

9. Consider Children: • No right or wrong; only wants. • “Solitary islander” (TMS III.1.3) • Rebukes trigger desire for mutual sympathy of sentiments, search for successful behavior. • “Great school of self-command” (TMS III.3.22) • Success  habits  principles  conscience.

10. Smith’s Genealogy of Morality On the Individual Level: On the Societal Level: Micro intentions lead to macro results. No overall plan. Emergent, “spontaneous” order. Standards depend on interactions with others. Middle-way objectivity. Overlap, not perfect coincidence. • Fundamental desire: MSS. • Over time we get better at anticipating others’ reactions. • Attempts to achieve MSS becomehabits, which become principles to guide our conscience. • Heavily influenced by peers.

11. “Marketplace of Morality” • Motivating desire: “pleasure of mutual sympathy” • Market: communication/exchange of sentiments, judgments • Competition: striving for limited sympathy • Rules developed: ‘Propriety,’ ‘merit’ • Resulting “unintended” system: shared standards of morality • Objectivity: intersubjective; presumptive, not absolute standards

12. Compare: Marketplace of Economics • Motivating desire: “natural effort of every individual to better his own condition” • Market: exchange of private goods, services • Competition: striving for scarce resources • Rules developed: “justice”—“life and person,” “property and possessions,” and “personal rights” • Resulting “unintended” system: economy—network of exchanges of goods, services • Objectivity: customs, contracts, principles, prices

13. Another: A Smithian Marketplace of Language • Motivating desire: to make “mutual wants intelligible to each other” • Market: oral, written communication • Competition: MSS, understanding • Rules developed: grammar, pronunciation, diction, “standard,” “slang,” etc. • Resulting “unintended” system: language. • Objectivity: accepted/preferred usages

14. One More Common Element • Entrepreneurship: • Moral entrepreneurs. • Economic entrepreneurs. • Language entrepreneurs. • Sometimes they succeed, sometimes not. • Very hard to predict.

15. Solving the “Adam Smith Problem” • The same model in both books: the “market model.” • A social science based on: • Common core features of human nature and • Overlapping features of human circumstances. • My claim: Grand unification theory for all human social institutions. • A “marketplace of life”

16. Was Smith Right? • Modern research on Smith’s model: • Economics: Hayek (1960), V. Smith (1997, 2002), McCloskey (2006) • Economic Freedom of the World Index (www.freetheworld.com). • Language: Keller (1995), Mufwene (2008), Pinker (1994, 2002) • Morality: Alexander (1987), Harris (2006), Ridley (1996), Singer (1981), E. Wilson (1999), J. Wilson (1998) • DMSS: Boyd and Richerson (1990), “conformism”; Barkow, Cosmides, and Tooby (1992), “exchange organ”; Darwin (1871), “all-important emotion of sympathy”; Frank (1998), “irrational sacrifice”; Ramachandran (2000, 2001), “mirror neurons”; Pinker (2003), “sympathy knob”; Harris (2006), “mental organ”

17. Second Lesson: Limited Government • From yesterday: Argument based on three claims. • The Economizer Claim • The Local Knowledge Claim • The Invisible Hand Claim • Together constitute argument for commercial society. • Transition from explanation to strategy. • Hypothetical imperative: “If you want generally increasing material prosperity, then you should implement a commercial society.”

18. From “Is” to “Ought” • Emergent orders and good emergent orders. • Trade and markets: opportunities. • Private property; • Freedom to cooperate, exchange, contract, associate. • Implies: feedback and accountability • Good decisions → rewards (profits). • Bad decisions → lumps (losses). • Minimal third-party interposition: spontaneous order. • Note: an empirical, not rights-based, argument. • Empirical questions. • “Pragmatic liberalism.”

19. Conclusions: • C1: Smith’s “market model” … • Unifies Smith’s work • Provides a single model for all human social institutions • Enjoys substantial modern vindication • C2: Smith’s argument for limited government is … • Coherent, robust • Enjoys substantial corroboration from subsequent history (see tomorrow’s lecture!) • Thus it seems Smith’s two main contributions might have been actually . . . • Correct! • Not much more can be expected of historical work: I commend it to you!

20. Thank You! James R. Otteson Yeshiva University 500 West 185th Street New York, NY 10033 otteson@yu.edu