Propriety and Prosperity

New Studies on the Philosophy of Adam Smith

D. Hardwick, L. Marsh, D. Hardwick, L. Marsh

• Publisher: Palgrave Macmillan
• Year: 2014
• Print ISBN: 9781137320681
• eBook ISBN: 9781137321053
• Topic: Economics
• Subtopic: Econometrics
• Index: Economics

This book is a collection of specially commissioned chapters from philosophers, economists, and political scientists, focusing on Adam Smith's two main works Theory of Moral Sentiments and Wealth of Nations with a view to bringing Smith to a mainstream philosophy audience while simultaneously informing Smith's traditional constituency.

1

Introduction: Epistemology not Ideology

David F. Hardwick and Leslie Marsh

The title of this collection is significant: ‘propriety’ connotes the Adam Smith of the Theory of Moral Sentiments (TMS) and its emphasis on sympathy and benevolence, and ‘prosperity,’ the self-interested Smithean view of human nature as expounded in the Wealth of Nations (WN). The less elegant terms ‘motives’ and ‘mechanisms’ could connote the same dimensions. As Professor of Moral Philosophy at the University of Glasgow, Adam Smith lectured on natural theology, ethics, jurisprudence, and political economy. His philosophical reflections thus ranged from theorizing man’s place in the cosmos¹ through to the place of the individual in the social order, and considering the patterns of freedom and mechanisms that govern an agent’s behavior balanced with the public good.

Adam Smith’s place in the history of economic thought is secure. To philosophers, however, Smith seemed a derivative figure offering moral ideas and arguments available in more sophisticated, cogent, and concentrated form in the writings of Hutcheson, Shaftesbury and, above all, Hume. Smith’s economic theory appeared to raise no philosophical questions, only an inconsistency (das Adam Smith Problem) between its stress on self-interest in economic activity and the role of sympathy in the moral life.

All of this has changed. Philosophers have uncovered the complex and nuanced connections between Smith’s theory of economics and his account of moral motivation. His economic theory has presented conceptual challenges: the famous ‘invisible hand’ has proved an elusive concept much in need of scrutiny. In recent philosophical scholarship two major shifts have occurred. One is that the originality of Smith’s moral theory has been rediscovered and recognized. Smith’s account of sympathy is significantly different from Hume’s: his idea of the ‘impartial spectator’ is independent, rich and complex and he is alert to the phenomenon of self-deception (cf. Kahneman, 2011). The second shift is that Smith’s image as an economic liberal has been drastically revised, making it possible to reclaim him from current ideological use in defense of free markets and the minimal state. Smith links economics, politics, and ethics through notions of justice and utility in subtle ways that make the labels ‘economic liberal’ and ‘laissez-faire theorist’ at best inadequate and at worst misleading. We are particularly concerned with a more recent variant of the ‘two Adam Smiths problem,’ whereby WN has come to be seen as systematic justification for laissez-faire, hived off to the exclusion of TMS² and co-opted into heavy-duty ideological service, in the fervent prioritization of a marketocracy.³ This conceptual myopia is captured by two quotes that resonate strongly with our non-marketocratic reading of TMS and WN:

[T]he concept of invisible hand has become foundational for economics as a religion. (Samuels, 2011, p. 283)

and:

With the collapse of the Eastern Europe economies around 1990 the simple faith in central planning was replaced in some influential minds by an equally simple faith in markets. (Simon, 1996, p. 34)

One may well ask what business it is for two people based in a medical school to be editing a collection of new papers on Adam Smith. After all, we are not Smith scholars; we are not moral philosophers; we are not economists; we are not political economists; nor are we historians of ideas. But we are actively involved with science, the market, and a range of civic intermediaries such as philanthropical institutions and, of course, the government. Since we have overseen the institutional design, management, and interrelationships of large institutions – hospitals, medical schools, research laboratories (Hardwick and Morrison, 1990), as well as an international academy and a voluminous online open-access educational resource – we are well placed to make some observations to which the hardened ideologue would be oblivious. What we are concerned with is a cluster of intricately related philosophical concepts that cut across open systems theory, complexity, emergent or spontaneous order, distributed knowledge, situated cognition, ecological or bounded rationality, and institutional design. Adam Smith is the touchstone for both of us in a theoretical sense and in a very practical sense: the critique embodied in the aforementioned quotes corresponds with our practical understanding of ‘why people do what they do when they do it’ in complex social environments, such as those in which we are involved.

If one agrees that the invisible hand is ‘the most widely known and least understood concept in the history of social theory’ (Samuels, 2011, p. 14 cites H. S. Gordon) then it is incumbent on the theorist to clear some conceptual space for the idea. To this end, Samuels rightly poses four questions (Samuels, 2011, p. xvii):

1. What was the invisible hand?

2. Where did it come from?

3. What functions did it perform?

4. What conceptual and substantive problems are faced by those who deploy the concept?

Or put in philosophical terminology, one must test the concept for:

(a) logical independence

(b) extensional and intensional adequacy

(c) functionality.

Logical independence means that a given concept shouldn’t be analyzable in terms that presuppose that very concept. Extensional and intensional adequacy is philosophical jargon for the idea that a concept should enable one to pick out and identify all and only the things to which the concept applies. The functional adequacy of a given concept cuts across (a) and (b) and asks why would we need a given concept – what work or role would a given concept have to fulfill?

Invisible hand explanations are conceptually empty if understood as an immergent phenomenon, that is, if the multiplicity of individual interactions is somehow informed by a top-down state of affairs. If, however, such interaction is understood as a species of emergence, that is, novel phenomena emerging from a lower-level specification of a system, then a naturalistic non-mystical⁴ account of complexity can be offered. The invisible hand can, à la Hayek, be taken as a theory of unintended consequences: self-interest advances, all unaware of the general good. But, it can hardly be the case that self-interest always advances the general good, even in situations of free exchange (see Samuels, 2011, pp. 53, 56, 58). Why should it? We don’t think Smith would want to say that the connection between self-interest and the general good is purely contingent, a mere matter of chance. Nor do we think that he would say that the connection is necessary. The link is broken in the case of zero-sum games. So we’re stuck with a regularity claim: there is an inherent tendency for self-interest to promote the general good. Here we must consider what mechanisms, or what assumptions about people, make or would make the inherent tendency claim plausible. While Smith did believe that providence enhanced the link between self-interest and general advantage, there is more to it than that. He makes another assumption, namely that in pursuing one’s own interests each agent is a reasonably competent judge (Plamenatz, 1963). Smith recognizes cases in which the general interest will not be advanced purely by the pursuit of self-interest (Yay, 2010): cases in which self-interest and general interest will not automatically coincide, and in which an appeal to the invisible hand fails.

The tie-in between the workings of self-interest and the promotion of the general good appears to be an example of what we would call an emergent property. The idea of an emergent property is not, of course, absolutely perspicuous. We cannot see that the invisible hand will produce Pareto-optimality: an equilibrium distribution, important to economists, in which ‘there exists no physically-feasible movement that would make every man better off’ (Samuelson, 1970, p. 352). Or as Samuels (2011, p. 45, emphasis added) puts it: ‘The regulatory function of the market is obfusticated by the modern emphasis on market solutions as being a priori optimal, or on an a priori free market, or the assumption that business decisions are not only beneficial but optimal.’

Sympathy, in TMS, is not merely a benevolent impulse in the individual. As the impartial spectator is insight driven, sympathy is not the object but the basis of moral approbation. This accounts for Smith’s rejection of utility as an explanation of moral approbation. Smith’s idea that moral judgment is the result of the impartial spectator’s ‘sympathy’ – today’s empathy, whereby we place ourselves in the position of the individual judged and feel, to some extent, as our own the sentiments he observes – has a deep resonance with recent work on mirror neurons in the field of social cognition (Kiesling, 2012). We think it worth quoting a most elegant summary of TMS by Glenn Morrow:

Society as a mirror reflects ourselves: virtue and vice have an immediate reference to the sentiments of others. His [Smith’s] purpose here is to set forth the stages by which the moral consciousness develops and the individual passes beyond himself and his individual concerns. The guiding thread in the discussion is the principle that personal contact is the basis of the social consciousness. There is no mysterious affinity between human beings from the mere fact of their humanity, no love for humanity in general. The individual is brought out of himself by his sympathetic participation in the sentiments and affections of other individuals with whom he associates . . . The social consciousness thus begun in the family group grows as his sympathies spread out in widening circles, first to his clan or neighborhood, then to his nation, and finally to the whole system of the universe. Hence the individual belongs to many groups by which his own sentiments are formed, and toward which his loyalties are directed . . . But the state itself is a group of societies, each possessing a life of its own and an instinct for self-maintenance; and the mutual adjustment of these orders and societies gives the state its constitution. Each individual endeavors to secure the aggrandizement of his own group, and to help it resist the encroachments of others. None of these groups is self-sufficient, however, and the interplay of them all with one another is necessary in the harmonious ordering of the state. (Morrow, 1923, pp. 74–5, emphasis added)

Operating a clinical laboratory with hundreds of employees and many laboratory tests over decades requires a detailed understanding of the ‘division of labour.’ This introduced one of us (Hardwick) to Smith’s work (WN), further enhanced by analysis of F. W. Taylor’s (1911) book on processes and Timothy Taylor’s analysis of productivity enhancements (Taylor, 2001). In addition to this, an analysis of TMS was necessary for ascertaining how to deal with interdependent groups locally and globally. Locally, more than doubling the number of students attending the medical school over a decade required ‘empathetic humility’ (Hardwick and Morrison, 1990). The almost tribal/clannish interests of each community required a factual comprehensive analysis of their needs and then an attitude of ‘helping people help themselves,’ as outlined by David Ellerman in his book of the same title (Ellerman, 2006). Guiding an academic organization globally as the operational Secretary of the International Academy of Pathology required action as an ‘impartial observer’ to improve pathology education in underserved parts of the world without asserting imperious solutions. Empathy and diplomacy, as noted in Smith (and others), has been a foundational behavior.

The Adam Smith with which the other of us (Marsh) was familiar seemed to be caught between an incoherent⁵ 1970s Thatcherite ‘synthesis’ of libertarianism and conservatism, and an Adam Smith who was unfortunately criticized as a capitalist apologist, based upon this Thatcherite misappropriation. It was years later, through Smith’s great intellectual descendent, Friedrich Hayek (also pressed into ideological service by Thatcher and Reagan: see Marsh, 2010),⁶ that Smith’s notion of unintended consequences and Hayek’s notion of spontaneous order came together in an unlikely environment – computational intelligence (Marsh and Onof, 2008; Doyle and Marsh, 2013).⁷ The conceptual confluence between non-Cartesian cognitive science/philosophy of mind and socially situated social theorists such as Friedrich Hayek, Michael Oakeshott, Herbert Simon, Vernon Smith, and Adam Smith became clear and compelling.

Though current libertarianism looks to Smith’s idea of negative freedom (or ‘natural liberty’) for conceptual validation, it is far from obvious that Smith’s roles for government as set out in WN would reduce the level of state activity in current conditions. In any event, our reading of Smith suggests a concern with all monopolies, rather than exclusively with state activity, mercantilism in Smith’s day being his prime target. It is our view that the Smith of WN provides cold comfort for those who see it as a libertarian tract. Let us be absolutely clear that we are not anti-market: we are simply trying to preserve the integrity of the market and other communication systems (spontaneous orders such as science, religion, politics, and art) from being skewed by irrelevant incursions alien to their teleology (Hardwick, 2008; Hardwick and Marsh, 2012b; 2012c; Abel and Marsh, forthcoming). Liberalism’s great achievement was to have the spontaneous orders of science and the market wrested from epistemic monopolies such as the theocratic state, the expansive secular centralized state and, indeed, corporate monopolies – and that was very much Smith’s grand project. To make one order answerable to another order’s metric – as the ‘hard’ liberterian is wont to insist – is both rationalistic and illiberal (Abel and Marsh, forthcoming; Hardwick and Marsh, 2012b; 2012c). The actions of free individuals are embedded in practices that are not simply coextensive with markets: freedom, value, and liberality exist at the nexus of science, morality, religion, politics, markets, art, and much more besides. This critical idea is very much in tune with Samuels’ view that:

The market, in Smith’s total scheme, operated within and gave effect to the rest of the institutional system as well as to individual choice within the system. Voluntary exchange takes place only within legal and moral rules as well as the market. The market, according to Smith, must be comprehended within the larger system involved in the continuing resolution of the problem of order, however much it may contribute thereto. The order produced by markets can only arise if the legal and moral framework is o...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures
• Foreword
• Acknowledgments
• List of Contributors
• List of Abbreviations
• 1 Introduction: Epistemology not Ideology
• Part I Context
• Part II Propriety
• Part III Prosperity
• Index