Economics and Morality

Adam Smith wrote An Inquiry Into the Nature and Causes of the Wealth of Nations, which was first published in 1776. It is one of the first major works in the field of economics. Smith was a moral philosopher who lectured and wrote on ethics and jurisprudence. In his previous work, The Theory of Moral Sentiments, he laid the foundation for understanding human morality in terms of sympathy. The administration of “the great system of the universe … is the business of God and not of man,” wrote Smith. “To man is allotted a much humbler department [which is] … the care of his own happiness, of that of his family, his friends, his country….” Smith then added another observation, which opened the door to economic science. He said that the “natural selfishness and rapacity” of the rich had unintended beneficial consequences for the poor.

Smith claimed that the voluntary exchange of goods and services benefitted society and the individual. Cultural advancement would be inconceivable without trade. With the advance of trade comes the advance of sympathy and mutual understanding. This meant, from Smith’s point of view, that economic progress might be compatible with moral progress; in fact, it might be essential to moral progress. Consider how the expansion of commerce might prevent wars as various nations develop bonds of sympathy through the exchange of goods. If men were able to provide for themselves peaceably, why should hatred and conflict make them enemies?

It is no accident that a moral philosopher wrote the first great book on economics. The ancients postulated morality by asking the following question: What is the good life for man? This question led various ancient philosophers into discussions regarding virtue and moral goodness. Smith did not attempt to deny this ancient thinking. He merely suggested that utility was a virtue in its own right. He wrote that society appears to be a great machine “whose regular and harmonious movements produce a thousand agreeable effects. As in any other beautiful and noble machine that was the production of human art, whatever tended to render its movements more smooth and easy, would derive beauty from this effect…” On the other hand, “whatever tended to obstruct them would displease upon that account….”

It is therefore important to find out what makes this “beautiful and noble machine” work. Is it man’s selfishness? Is it greed?

Man is not merely a selfish being, wrote Smith. Man is a sympathetic being who applauds the virtue of Cato while detesting the villainy of Catiline. The former fought for freedom under the Roman Republic. The latter was an embittered Roman Senator who fought to destroy the Republic and set up a revolutionary regime of terror. “It was not because the prosperity or subversion of society, in those remote ages and nations, was apprehended to have any influence upon our happiness or misery in the present times,” wrote Smith, “that … we esteemed the virtuous, and blamed the disorderly characters.” Indeed, there is nothing to be selfishly gained from esteeming or blaming people who have been dead more than two thousand years.

Man is capable of disinterested concern and objective regard. He can imagine himself in the shoes of another person. He can distinguish right and wrong in distant ages between persons long dead. “Sympathy … cannot, in any sense, be regarded as a selfish principle,” wrote Smith. “When I sympathize with your sorrow or your indignation … [I am] putting myself in your situation, and thence conceiving what I should feel in the like circumstances.” Such is the bases for society and economy, family and friendship. We act for ourselves, it is true; but we also act on the basis of honor and trust.

Therefore, if we are to understand Adam Smith correctly, we should not understand him as saying that men are selfish beings who are guided solely by the “invisible hand” of the market. That is certainly an important concept – but he also says that our natural sympathy for others is constantly directing us in ways we cannot begin to calculate. “That whole account of human nature,” wrote Smith, “which deduces all sentiments and affections from self-love, which has made so much noise in the world, but which, so far as I know, has never yet been fully and distinctly explained, seems to me to have arisen from some confused misapprehension of the system of sympathy.”

From personal experience most of us realize that our closest relationships are built on trust, above all. Here is the ground of sympathy itself – and of the economy. To give your word that some task shall be performed is all-important in creating wealth. “To tell a man that he lies,” wrote Smith, “is of all affronts the most mortal. But whoever seriously and willfully deceives is necessarily conscious to himself that he merits this affront, that he does not deserve to be believed, and that he forfeits all title to that sort of credit from which alone he can derive any sort of ease, comfort, or satisfaction in the society of his equals.”

Trust is the foundation of every economy even as sympathy is the basis for trust. Under capitalism we are not engaged in a “war of all against all,” which was a term coined by Thomas Hobbes for describing mankind in the state of nature. “In order to confute so odious a doctrine,” wrote Smith, “it was necessary to prove, that antecedent to all law or positive institutions, the mind was naturally endowed with a faculty, by which it distinguished in certain actions and affections, the qualities of right … and … wrong, blamable, and vicious.”

As a moral philosopher Adam Smith attacked government interference in the economy (with a few notable exceptions), he supported the free market, and warned that unchecked government borrowing might lead to unchecked government belligerence. He was not attempting to justify a system of exploitation, but was attempting to understand the proper order of things. In fact, Smith believed that economic freedom was not merely the path to riches. He believed it was morally beneficial. Today we are taught to see things differently. Morality is infrequently discussed, and moral philosophers are nowhere to be found. Society itself has rejected many of the moral teachings that prevailed when Smith was alive. We can only wonder how he might amend his writings if he lived among us today.

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jrnyquist [at] aol [dot] com ()