Thursday 12 September 2013

The real Adam Smith problem: How to 'live well' in commercial society

Adam, Adam, Adam Smith
Listen what I charge you with!
Didn’t you say
In the class one day
That selfishness was bound to pay?
Of all doctrines that was the Pith,
Wasn’t it, wasn’t it, wasn’t it, Smith?
(Stephen Leacock, Hellements of Hickonomics, 1936)

Adam Smith published only two books in his lifetime. The first, The Theory of Moral Sentiments (TMS) in 1759, laid out an account of virtue ethics and its underlying moral psychology and was the foundation of Smith's contemporary reputation as a public intellectual. The second, which happens to be better known these days, was An Inquiry into the Nature and Causes of the Wealth of Nations (WN) in 1776. Some people claim that the two books contradict each other, since the prudential calculators discussed in WN seem so far from the complex ethical characters commended by TMS. It seems to me, though, that the real Adam Smith problem is more subtle and relates to the tension between true virtue and worldly success, between wisdom and industriousness.

The old ‘Adam Smith problem’ 

A discredited but pernicious academic thesis dating from the 19th century claims that there is a severe discontinuity in Smith’s ethics between his two main works.*  In Smith's book on moral philosophy  actors are said to be motivated by ‘sympathy’, while in his later economics book they are motivated by ‘selfishness’. The most extreme version sees Smith as changing his mind between publishing the two books, with the implication that the endorsement of individual greed in WN represented Smith’s mature thinking about ethics and trumped whatever he had previously said.

The first problem with the thesis is that Smith published multiple editions of both books, with substantial revisions, right up until the end of his life. Thus, the fundamental change of mind attributed to him must have been more of a continuous violent oscillation than a considered judgement. There is also plentiful evidence from drafts, correspondence, and student notes from his lectures in moral philosophy at Glasgow that Smith had been developing the main lines of the analysis that would appear in WN even before the first publication of TMS. Smith appears to have had an entire system of thought in mind, of which the only books he completed occupied quite different branches of moral philosophy: ethics (TMS), and natural jurisprudence (of which WN addressed one sub-branch, concerning “police, revenue, and arms, and whatever else is the subject of the law”). It should not be surprising that two books about different subjects have a rather different emphasis.

The second problem is that WN and TMS do not seem to contradict each other as the thesis claims (which is not to say they are in complete harmony). Smith in WN is of course particularly concerned with the motivation of self-interest (or the "desire of bettering our condition" - WN, II.3.28), but this is not the same as selfishness, of which Smith was rather caustic. Self-interest is positively defended in TMS as natural and morally praiseworthy, in its proper place (under the virtues of prudence and self-command) and as one among other motives. In taking this position, Smith placed himself against those idealists, like his teacher Francis Hutcheson, who saw benevolence as the only virtuous motivation for behaviour, and also against those cynics, like Bernard Mandeville, who likewise saw self-interest always as a vice (as selfishness), but a publicly beneficial one. 

Nor is it correct to say that in TMS actors are motivated by sympathy. For Smith ‘sympathy’ is the technical term for a complex mechanism in our moral psychology responsible for moral judgement (which I will come back to below). It does not motivate us directly, nor should it be confused with selflessness or the disposition to be nice to other people that the word sympathy nowadays evokes. The reason Smith talks about sympathy a lot in TMS, rather than WN, is because his sophisticated (and original) analysis of how sympathy works is the core of his system of moral philosophy. 

This version of the Adam Smith problem never made much sense. Its persistence may be due to its rhetorical usefulness. Those who want to appeal to Smith as the 'father' of their way of doing economics (neo-classical social mathematics) or political economy (neo-liberals) find it convenient to have an excuse not to bother with his ethical analysis. Likewise, those who want to condemn the contemporary market-oriented paradigm of political economy also find it convenient to caricature Smith's WN as proposing an amoral or even anti-moral economic system on Mandevillian lines. The result is a fog of pseudo-scholarship, in which people unleash their morals on the texts instead of reading them.

I've argued previously that stripping the ethical analysis from Smith's economics impoverishes our understanding of what he said, and its contemporary relevance. In this essay I want to examine the real and significant problem that Smith identified for moral life in commercial society, and which led him to accounts of ethics and the economy that point in somewhat different directions.

The foundational question in ethics is Socrates' question: how should one live? Rousseau argued with some vehemence that the context of commercial society presented new challenges for answering that question. Smith accepted a moderate version of Rousseau's critique - that there is a tension between moral excellence and worldly success - but he recommended reconciliation to it rather than a resolution. To explain why, I must first say something of how Smith thought moral psychology worked.

Smith's account of moral psychology

Smith was among the last of the virtue ethicists (another holdout was Jane Austen - previously), a tradition that was swept aside by the two schools of thought most associated with the rationalist enlightenment: utilitarianism and deontology. Unusually for a moral philosopher (but in the spirit of empirical philosophy promoted by his friend, David Hume) Smith was concerned both with the normative question, 
Wherein does virtue consist? Or what is the tone of temper, and tenour of conduct, which constitutes the excellent and praise-worthy character, the character which is the natural object of esteem, honour, and approbation?
and with the empirical question,
by what power or faculty in the mind is it, that this character, whatever it be, is recommended to us? Or in other words, how and by what means does it come to pass, that the mind prefers one tenour of conduct to another, denominates the one right and the other wrong; considers the one as the object of approbation, honour, and reward, and the other of blame, censure, and punishment? (TMS, VII.i.2)
Smith’s answer to the first was a virtue ethics based on propriety like classical accounts, but updated for life in a commercial society and the demotic liberal values of the enlightenment. His answer to the second, which is our concern here, was a sophisticated model of moral psychology derived from an anthropological study of how ordinary people go about our moral lives. He outlined an emotional economy mediated by sympathy and oriented towards harmony

Sympathy depends on what Smith considered a natural human capacity, as fundamentally social creatures, for imagining ourselves in another’s situation, combined with a natural human disposition to seek harmony (also seen in our famous propensity to "truck, barter, and exchange": to disagree, argue, and come to a mutually acceptable agreement). In the sentimentalist tradition of the Scottish Enlightenment - which was less rationalist than the continental enlightenment - Smith understood emotions as having cognitive and normative content. That cognitive content could be vicariously grasped and evaluated by a critically engaged spectator who i) considers the emotions expressed by an actor (from their expressions, talk, and actions); ii) considers how she would feel in the actor’s position (sympathy) iii) brings this together and evaluates whether the actor’s emotions are more or less appropriate for the situation as she understands it.

Of course judgements about the propriety of other people’s displays of grief, joy, anger, or gratitude require an existing understanding of how the world and people work and what standards should apply. Smith argued that this too comes about through sympathy. First, people have a natural desire as social creatures for the approval of others and an aversion to their disapproval (TMS III.i.13). Second, the means by which we learn about ourselves is by seeing ourselves in the mirror of the eyes of other people. From childhood we learn to see ourselves as others see us, and thereby learn what others approve of and what they are unwilling to go along with. And it is through such discipline and direction that we gradually come to understand and internalise the prevailing moral norms of propriety in terms of what the representative disinterested bystander – any impartial spectator – would go along with, even if no such spectator is physically present.

However, Smith’s anthropological approach also reveals asymmetries in this moral psychology. In particular, spectators are more reluctant to sympathise with some emotions than others, even when they are justified. They will go along with an excess of joy far more readily than an excess of grief or anger, because joy is more pleasant to imagine oneself into than grief. Yet those whose emotional state and behaviour is being observed want others to to approve of their conduct (the orientation to harmony). As a result, and in a manner generally beneficial for social order, people will generally tend to self-censor their less pleasant or unsocial passions, to lower their pitch to the level that other people can go along with. (That asymmetry is readily apparent in ordinary life, on Facebook, for example, where most people's status updates present an overwhelmingly positive image of how their lives are going.)

Smith's account explains how individuals come to acquire a normative understanding of conventional 'bourgeois' propriety, i.e. a sense of decency. That is important for social order and an important stage in moral education, but not, Smith believed, its final goal: virtue. Smith argued that as well as desiring praise, people have an innate desire to be objectively worthy of praise, to strive for moral excellence and not merely its superficial appearance (TMS III.i.8). That requires wisdom as well as love of virtue. It involves stepping back from the world to critically reflect on the norms and values we see around us, embedded in social conventions, and working to incrementally improve our understanding of what the ideas of justice, honesty, and so forth really require.

The real Adam Smith problem

As Smith was well aware, the real world doesn't quite follow this picture of moral self-development. Smith thought every individual had an innate interest in and capacity for bettering their condition through moral development (TMS VI.iii.25). He also thought that in a commercial society more people would have the opportunity to pursue truly virtuous lives than ever before, thanks to their increased moral autonomy and other freedoms [previously]. Yet Smith expected that few would try to live lives of moral excellence rather than mere conventional decency. Instead, the great majority would strive for wealth and fame.
To deserve, to acquire, and to enjoy the respect and admiration of mankind, are the great objects of ambition and emulation. Two different roads are presented to us, equally leading to the attainment of this so much desired object; the one, by the study of wisdom and the practice of virtue; the other, by the acquisition of wealth and greatness. Two different characters are presented to our emulation; the one, of proud ambition and ostentatious avidity; the other, of humble modesty and equitable justice. Two different models, two different pictures, are held out to us, according to which we may fashion our own character and behaviour; the one more gaudy and glittering in its colouring; the other more correct and more exquisitely beautiful in its outline: the one forcing itself upon the notice of every wandering eye; the other, attracting the attention of scarce any body but the most studious and careful observer. They are the wise and the virtuous chiefly, a select, though, I am afraid, but a small party, who are the real and steady admirers of wisdom and virtue. The great mob of mankind are the admirers and worshippers, and, what may seem more extraordinary, most frequently the disinterested admirers and worshippers, of wealth and greatness. (TMS I.iii.29).
The cause of this mass failure of moral philosophy is the fundamental asymmetry in our moral psychology mentioned above. People who express positive emotions get more attention and approbation than those who do not, or those who express negative ones, and because they receive more attention they are the ones we learn to see as successful and worth modelling ourselves after.

For Smith it is this economy of attention that drives our moral psychology, and also the material economy. "It is because mankind are disposed to sympathize more entirely with our joy than with our sorrow, that we make parade of our riches, and conceal our poverty” (TMS I.iii.16). People tend to pursue riches instead of wisdom, Smith argued, because wealth draws the attention and sympathetic admiration of others, who enjoy imagining how nice it must be to live such a life and desire to emulate it for themselves. Fame and fortune thus provide a convincing and seductive simulacrum of a successful life. Even the rich, who should know best how trivial the trappings of wealth really are, learn to see themselves as others do and bask in the pleasure of their admiration. In contrast, the wise and virtuous, whose perception is undistorted, live for that very reason a humble and frugal life that draws no such attention, though it is in reality the truly excellent path.

This pernicious effect will be particularly marked in a 'system of natural liberty’, as Smith characterised his ideal of commercial society, where people are free to choose to pursue fame and fortune even though that is not in their true interest. In his parable of “The poor man’s son, whom heaven in its anger has visited with ambition” Smith lays out how the desire to emulate the imagined comfort and tranquillity of the rich can lead to a lifetime of extraordinary industriousness. He shows that not only is such endless industriousness incompatible with the goal of tranquillity (Smith's idea of the good life was rather Epicurean). Its pursuit comes at the cost of the real tranquillity that is always within the grasp of anyone, poor or not.

The problem analysed by Smith in TMS is that the glamour of worldly success outcompetes the attractions of the genuinely good life, particularly in commercial societies where worldly success is in principle attainable by all. Material wealth is a second best option for the individual to pursue, as Smith acknowledges even in his economics book: "An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition. It is the means the most vulgar and the most obvious" (WN II.3.28).

Thus explained, how one should live in commercial society is a problem of the human condition. But it can also be analysed as a market failure: the systematic undervaluation of true virtue in the market for attention means that people do not recognise and appreciate it when they see it. That provides a further justification for Smith's proposal for universal education (detailed together with his other proscriptions to ameliorate market failures in Book V of WN).

Yet this is not the only tension in Smith's analysis. For while worldly industriousness may come at the expense of wisdom, and thus at the expense of an individual's pursuit of the truly good life, from the perspective of society this tendency is beneficial since,
It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which ennoble and embellish human life (TMS IV.1.10
Material prosperity - the 'wealth of nations' - whose causes Smith analysed so systematically in his economics book is, according to Smith himself, ultimately the mere byproduct of an unfortunate shortcoming of our moral psychology. Yet that material prosperity is quite real, and the conveniences it makes possible in all our lives are positive and significant. Not the least of these is the development of theoretical and practical knowledge as a collective, civilisational project from which all can draw. The 'wise and virtuous' individuals can benefit - as 'free-riders' - from these and other public goods (such as modern healthcare) even if they eschew the gaudy baubles that most other people pursue. 

There is a double irony here. H.L. Mencken famously mocked the middle-classes as the "booboisie" for their ignorance and lack of culture. Yet it is the aggregate efforts of such "boobs" too foolish to realise their own true interests that produces a civilisation. It's another case of the providential 'invisible hand' producing social benefits from the unintended consequences of individuals' self-interested actions. (The "wise and the virtuous" seem too otherworldly to have gotten as far as the agricultural revolution.) Yet while the outstanding worldly success of commercial society provides more people with the opportunity to pursue the good life than ever before, few take it up, at least in full (including the industrious Smith, presumably). Its very success makes the ethos of worldly industriousness more attractive than ever compared to philosophical leisure.


One of the social transformations of capitalism was to bring the "gaudy and glittering" road of fame and fortune within the aspirational reach of just about everyone. It attracts many more people than the strictly superior road of the pursuit of excellence for its own sake, because the very superficiality of materialistic achievements makes the lives of the rich and famous appear more glamorous to the observer, and thus more worthy of emulation, than the internal achievements of true wisdom and virtue.

Yet, while Smith regretted this outcome he did not condemn it. He argued that interpreting the drive to better one's condition in materialist terms is generally compatible with decent lives and a moderately flourishing society, because "In the middling and inferior stations of life, the road to virtue and that to fortune, ...are, happily in most cases, very nearly the same." (TMS I.III.32). That is, achieving materialist success in a commercial society by your own efforts and wits generally requires and reinforces the bourgeois virtues (like prudence, self-command, honesty, industriousness, civility, and justice). Even if you didn't set out to master these for their own sake, you will be led to them by your engagement in the marketplace of life, in which your conduct as well as your services will be judged and disciplined. Perhaps that is enough.

* For a thorough debunking of the traditional Adam Smith problem, see the excellent introduction to the standard 1976 Glasgow edition of TMS by Raphael and Macfie pp 20-25.

This essay makes much use of the scholarship of others, particularly Charles Griswold's brilliant book, 'Adam Smith and the Virtues of the Enlightenment' (1999)