Adam Smith: An Overview of his Work and Vision

1. Adam Smith: An Overview of his Work and Vision by Daniel Klein dklein@gmu.edu

3. "Here are deposited the remains of ADAM SMITH.Author of the Theory of Moral Sentiments and Wealth of Nations: He was born 5th June, 1723, and died 17th July, 1790."

4. A letter from 1790 Smith “always considered his Theory of Moral Sentiments as a much superior work to his Wealth of Nations”(Romilly 1840, I, 404).

5. The Theory of Moral Sentiments, or An Essay towards an Analysis of the Principles by which Men naturally judge concerning the Conduct and Character, first of their Neighbours, and afterwards of themselves

6. Adam Smith’s Project: A science of man? or A culture of liberty? A liberal civilization?

7. At first glance, TMS does not seem to be about politics. I believe it is deeply liberal/libertarian. The key ideas of TMS impart a message of liberty, voluntarism, and the degovernmentalization of social affairs. TMS offers the broader ethical umbrella under which WN resides. WN is an extension of TMS.

8. Let’s peak inside TMS: The social ecology of sympathy “those we live with” The impartial spectator Emphasis on active moral agency Universal benevolence and limited knowledge Justice A society of equals A spontaneous order of correction The four sources of moral approval

9. The amiable virtues and the respectable virtues:The social ecology of sympathy Hayek is closer to Smith than to Mises. I am critical of images of science associated with Mises, Rothbard, and Kirzner.

10. “those we live with” “What reward is most proper for promoting the practice of truth, justice, and humanity? The confidence, the esteem, and love of those we live with. Humanity does not desire to be great, but to be beloved. It is not in being rich that truth and justice would rejoice, but in being trusted and believed, recompenses which those virtues must almost always acquire.”(166)

11. The impartial spectator and the man within the breast

12. Active moral agency awakens our humanity and exercises our virtue The earthquake and your pinky. 1st thought experiment: Passive sentiment 2nd thought experiment: Active moral agency

13. Universal benevolence and the limits of knowledge Smith suggested that ideal virtue entails a kind of universal benevolence. “[H]owever, the care of the universal happiness of all rational and sensible beings, is the business of God and not of man. To man is allotted a much humbler department, but one much more suitable to the weakness of his powers, and to the narrowness of his comprehension; the care of his own happiness, of that of his family, his friends, his country: that he is occupied in contemplating the more sublime, can never be an excuse for his neglecting the more humble department”.(237)

14. Commutative justice “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.” (84)

15. Commutative justice as social grammar Commutative justice: “abstaining from what is another’s” Distributive justice: “the becoming use of what is our own” (269-70)

16. A society of equals Smith noted that his reverence for commutative justice was “among equals.” But the book shows that he wanted the equal-equal relationship to prevail. He wanted to minimize the superior-inferior relationship.

17. An invisible hand in morals • Has the upper-hand in the “middling and inferior stations” • But not in the “superior stations” – or political society

18. A spontaneous order of correction “The great pleasure of conversation and society, besides, arises from a certain correspondence of sentiments and opinions, from a certain harmony of minds, which like so many musical instruments coincide and keep time with one another. But this most delightful harmony cannot be obtained unless there is a free communication of sentiments and opinions.” (337)

19. The four sources of moral approval Jim takes an action that affects Mary: 1st source: our regard for Jim’s motives and intentions 2nd source: our regard for Mary’s sentiments 3rd source: our regard for whether the interaction conforms to rules and expectations suitable to the circumstances. 4th source: …

20. The fourth sources of moral approval 4th source: “and, last of all, when we consider such actions as making a part of a system of behaviour which tends to promote the happiness either of the individual or of the society, they appear to derive a beauty from this utility, not unlike that which we ascribe to any well-contrived machine.” (326)

21. Instruction at the 4th source:The Wealth of Nations The Wealth of Nations is Smith’s moral authorization for: the pursuit of honest profit a presumption of liberty in politics and policymaking TMS provides the ethical framework for WN. It is from universal benevolence that we morally authorize the pursuit of honest profit.

22. The invisible hand The comparative merit of a system of decision-making that respects commutative justice, “abstaining from what is another’s,” and that is likewise respected by others, including by the government—that is, a system of decision-making that is decentralized or free.

23. Not axiomatic:Smith allowed of exceptions Smith’s commitment to the liberty principle was not absolute or airtight. He allowed of exceptions. Interventions he condoned: usury restrictions certain banking restrictions mild support for partial tax financing for elementary schooling about 10 others are also debated

24. The system of natural liberty “All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public 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 687-8)

25. The endThank you for your attention.