Evaluating Adam Smith

William Henderson

• Publisher: Routledge
• Year: 2006
• Print ISBN: 9780415336680
• eBook ISBN: 9781134305728
• Topic: Business
• Subtopic: Business General
• Index: Business

Adam Smith is well recognized as the forefather of modern economics, but his success can be attributed not only to what he wrote but also to his use of language. In this exciting new book, Willie Henderson shows how Smith engaged creatively in writing about the economy, and analyzes the extent to which he tried to ensure that the reader is drawn into the text and informed by it.

Demonstrating analysis methods that are helpful to new researchers on Smith's works, Evaluating Adam Smith sets his work in the cultural context of the eighteenth century and explores the lexical and conceptual inter-relations between Smith and the sources he consulted. Issues explored include Smith's use of irony and his work in the context of wealth, virtue and happiness as presented in the Moral Sentiments and the Wealth of Nations.

Henderson's informative study employs the literary techniques of close reading and close textual analysis and applies them to sustained passages of Smith's writing.

1 Reading the Wealth of Nations and Smith's other writings

DOI: 10.4324/9780203421949-1

Introduction

There is a huge and international scholarly industry devoted to interpreting Adam Smith. Hardly a week goes by without some new publication on Smith's economics writings. Even to raise the question ‘Why read Smith?’ would seem to be redundant, and certainly those scholars engaged in reading primary and secondary literature on Smith, and in the creation of new literature, in order to further the academic conversation, are not usually explicitly engaged in such a question. The products of this industry are to be found in intellectual histories, in discussion by economists, philosophers, economic historians, political scientists, those interested in the historical development of Scotland, those interested in the cultural impact of the Scottish Enlightenment and many other disciplinary and interdisciplinary contexts. Whilst there is a great diversity of scholarship, it is also possible to detect, for example, an emerging theme in the current literature that refocuses on the Wealth of Nations as an Enlightenment text, part of the outcome of Scottish Enlightenment thinking and linked to the European Enlightenment by common themes, philosophical inclinations and direct engagement (say) with the Physiocrats of France or the continental natural law tradition. So the question ‘Why read Smith?’ is implicit in the scholarly exercise, and tends to become explicit, in some form or related form such as ‘What to read for in reading Smith?’ especially at periods when key questions change or old questions are refocused. The questions may not be put in either such formal or such general terms but may nevertheless be readily seen to have a connection with such more general questions.

The products are not uncontested. Not everyone likes the periodisation of Scottish history that the notion of the Scottish Enlightenment suggests, or the reemphasis on the cultural significance of the Wealth of Nations as an Enlightenment text (Moore, 1990, 38). Periodisation, and its associated nationalisation, can isolate and may have a tendency to distort. In earlier times those who are now identified as the Scottish Enlightenment were generally known as ‘the Scotch Philosophers’, the term Scottish Enlightenment did not gain currency until the early years of the twentieth century (Stewart, 1990, 3). There is not so much difference between the phrase ‘the Scottish Enlightenment’ and ‘the Enlightenment in Scotland’, yet the sense of who belongs to what and where could be seen as very different. The latter formulation also suggests a coherent European movement and this too may be subject to question.

Even this shorthand form of talking covers individual intellectual projects, disputes and different contexts and may suggest a unity both within and beyond Scotland that on further investigation may not be justified (Brown, 1996, 2). Hume, for example, whom most would consider pre-eminent amongst the group, could also be considered as someone slightly apart, not a member of any University where theological conformity was an expectation, and pursuing, through his religious scepticism, and his notion of justice as a ‘negative virtue’, a path of his own. Adam Smith's ‘theories of justice as a negative virtue’, sets him apart, with Hume, some of whose views Smith shared, from ‘their contemporaries’ (Haakonssen, 1990, 61). The ‘mainstream’ with respect to moral philosophy, according to Haakonssen, is rather the ‘cognitivist and realist tradition’ that goes from Hutcheson through Reid and ‘on to Dugald Stewart’. The outcome of Hume and Smith's approach is that the notion of ‘the common good’ beyond the principles of negative justice cannot be secured by law but by political expediency (Haakonssen, 1990, 85). Hume and Smith were also concerned about ‘obedience to government’ as another ‘artificial virtue’ (Whelan, 1985, 6). Principles are then replaced by empirical investigation. Danford argues that to see Hume as a figure of the Enlightenment is to distort Hume's work for Hume, who has been described as ‘a conservative rationalist’, and put limits on modernity (Danford, 1990, 25; Watkins, 1951, vii). Of course, there is a question here about what ‘Enlightenment’ means for us, as well as what ‘Enlightenment’ or ‘Aufklärung’ meant for the eighteenth century. An ambiguity in Hume, also found strongly in Smith, concerns whether that which is ‘natural’ is inevitable. Smith spots a gap with respect to agricultural development, analysed here in Chapter 7, between what is ‘natural’ and what is found in history (Wood, 1994, 125). Smith, in the context of sectoral development uses what is ‘natural’ to judge what is found in history. What may unite the Scottish approach, even given the differences, is a stress on the essential sociability of human nature and hence on links between values, human emotions (human nature) and economic and political life.

There are, however, also valid reasons for the notion of a ‘period’. It helps to locate the activity in time and to form a stable basis from which to grow a consistent and sustained conversation around themes, texts and problems of scholarship. It provides an economical shorthand for a set of complex ideas. On the other hand, periodisation can exclude, and in the case of the Enlightenment in Scotland set, those designated by convention as the principal actors apart from their contemporaries. Thinkers not located within Universities may be overlooked in favour of the better-known. Periodisation can lead to ways of talking that by repetition become clichéd and unhelpful, such as the identification of Francis Hutcheson, Smith's ‘never to be forgotten’ teacher, as ‘the father of the Scottish Enlightenment’, a product of periodisation thinking, which can cloud as much as it can reveal. Playing around with the paternal metaphor, which is used also to fix Smith in relation to the development of formal economics, can very quickly lead to silliness. Do Hutcheson's concerns and his relationship with Smith make Hutcheson a part of the Enlightenment in Scotland or a precursor? In British terms it would not make sense to exclude him. And are his colleagues and immediate predecessors, such as Gershom Carmichael at Glasgow and Walter Scott at Edinburgh, to be included or excluded from the generative process, and if they are to be included, in what sort of capacity or role? (Emerson, 1990, 18–19; Moore and Silverthorne, 1983, 73 and 87). The point is that there are continuities as well as discontinuities in the intellectual climate of the eighteenth century, some of which reach back into the intellectual and political conditions of the seventeenth, including the development of natural law, thinking and the assimilation of the implications of Newtonianism into the University curriculum. The aim remained, within the Scottish Universities, to instill ‘principles of virtue and good citizenship within a general context of piety’ (Stewart, 1996, 274). In this respect, Stoicism recommended itself for study as it was ‘morally attractive’ and at the same time did ‘not endanger the faith’ (Stewart, 1996, 276). Jones, however, traces out how this tradition was modified as the century progresses by the growing reputation of Scottish institutions for ‘pedagogic efficiency’ and the economic and market consequences for academic staff (Jones, 1983, 116).

Periodisation suggests specific and fenced-off questions such as ‘What was the Enlightenment in Scotland?’, ‘When did it start?’ and ‘When did it end?’. These have their uses but are likely to work best when the questions and the answers are seen as problematic. If we hold, with Griswold and Herman, that the modern world, with all its benefits and faults, is the (unintended) product of Enlightenment thinkers such as Smith, then periodisation becomes problematic (Griswold, 1999; Herman, 2003). Herman points out that the influence of the ‘Scottish Philosophers’ lasted, though ‘in retreat’, in the American Higher Education system until the retirement of James McCosh (Herman, 2003, 375). The question, ‘When did it end’? is transformed, by this insight into ‘Has it ended?’. A problem then becomes determining the sense in which is has or has not ended. If it has ended then Smith's work becomes grounded in the cultural assumptions and understanding of the period.

However, Smith's analytical insights into commercial society and the way that commercial society operates, albeit shaped in terms of Enlightenment concerns, have a significance that go beyond his own historical context. The Enlightenment may have ended, but some of their works still have a modern-day impact beyond the academy. Few economists call upon the Physiocrats to contribute to the appeal of an argument to a modern audience, but an article in Newsweek in 1996 calls Adam Smith ‘a man of our time’ (Samuelson, 1996, 63). The author argues, drawing upon Muller's work on Smith that Smith ‘tried to balance the government and the market’ (Muller, 1993). The journalist (who shares a name with a famous economist) also makes it clear the he has not read the whole of the Wealth of Nations, rather relying, for an appreciation of the work as a whole, on Muller as an informed secondary source. Smith's thinking was concerned with the functioning of a ‘decent society’ and could inform, according to Samuelson, modern-day debates between American liberals and conservatives on the appropriate role of the market and of government.

Newsweek is not alone in using Smith to make a case. In the mid-1970s, Margaret Thatcher linked her drive for economic reform to ‘Adam Smith’ whom she saw, in Copley's words, as having ‘heralded the end of the straitjacket of feudalism and released all the innate energy of private initiative’ (Copley, 1995, 2). Copley's summarisation does not overly distort Smith's views on feudal society. A recent work by Rothschild has tried to revive the understanding that Smith was also concerned about the well-being of the poor, a point appreciated, according to Rothschild, by Malthus in the early part of the nineteenth century (Rothschild, 2001, 62).

Turning to Smith continues. In making a case for globalisation, say, it is possible to reach back to Smith to make a supportive argument in simple terms. The Economist newspaper on 27 September 2001 published an article on ‘Globalisation and its critics’, evaluating the positive and negative aspects of rapidly developing international trade. No matter how significant Smith's predecessors are for the development of Smith's thought, it is Smith, rather than Hutcheson or Galiani or even Hume (the odd mention in the context of monetarism in the 1970s and 1980s), who is quoted in the journalistic press. One of the sub-headings, entitled, ‘Good old invisible hand’, in the article under reference, drew readers’ attention to Smith's notion that individuals choose ‘what serves their own interests’, and ‘society as a whole prospers and advances — spontaneously, not by design of any person or government’ (Economist.com, accessed 6 September 2004). This assumes that in waving the ‘invisible hand’ we are certain of the meaning that can be attached to it. Possible meanings, with respect to Smith's use of the term, to be considered and evaluated are the ‘invisible hand’ as metaphor, irony, situated irony, synechdoche (with respect to the Deity), a notion predictive of ‘general equilibrium theory’ and the implications of these alternative views. Rothschild reviews the notion against a backcloth of ‘invisible hands’ in the literature of the day, including the dagger wielded by an invisible hand in Macbeth (Rothschild, 2001, 5 and 119). It may be surprising that so many figures of speech are listed with respect to the interpretation of the ‘invisible hand’. Smith as a writer produces many sentences of phrases that are short, pithy and memorable. Aphorisms for Smith are often quoted but rarely recognised as such and their availability for integration into a persuasive argument and familiarity are reasons why they are so used. Notions such as ‘the invisible hand’ or ‘nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog’ summarise a whole set of ideas in a neat and transportable way (WN, I.ii.2).

More recent editions of the Economist, in the context of discussing globalisation, also make direct reference to Smith. In the context of the Hayek Memorial Lecture, sponsored by the Institute of Economic Affairs, in 2004, Martin Wolf quotes once from Smith at the start and refers to him once in the opening moves of the lecture. Wolf is a neo-liberal financial writer and the institutional context is that of the free market. Wolf's theme curiously parallels Smith's notion of the individual drive to self-betterment and the capacities of government to frustrate that drive by inappropriate policies (Wolf, 2004). Smith continues, then, to have currency beyond the academic world where there is a desire to find a means of gaining political leverage on the ongoing and necessarily political discussion about what (so-called) free markets can do best and what governments can best do. Smith thought that issues of policy in commercial society needed to be evaluated and discussed and would not have been surprised by the continuation of the debate. Whilst Smith's writing needs to be understood in the historical context, to avoid simply picking cherries out of a bun, some analytical aspects continue to have modern-day relevance, including direct political relevance. Whilst it is true to say that Hume and Rousseau still have cultural relevance, their works do not have direct political relevance in the same manner as Smith's.¹ As a text, the Wealth of Nations is still being read, albeit selectively, and quoted and Smith's ideas are still being fought over. Rees-Mogg writing in the Times newspaper suggested that the cardinals, portrayed as likely to be under the influence of socialist thought, in considering the appointment of a new Pope should inform themselves of Smith's ideas on the best way to help the poor (Rees-Mogg, Times, 11 April 2005). This is an interesting new twist on the notion of the ‘bible of capitalism’.

Hutcheson, Smith's teacher at Glasgow, of Scottish descent, was born in Ireland, and whilst he shaped, directly, a more liberal approach to the curriculum and to the education of the clergy, others in Scotland and beyond helped shape both the context and the content of philosophical thinking in Scotland, including English and continental thinkers. Indeed it has been argued that the reform of Scottish University education, a consequence of the impact of the Glorious Revolution on Scottish political and social life, made a key contribution to the development of the Enlightenment in Scotland (Jones, 1983). Many of the significant figures were University professors, with Hume as the great exception and in contrast to the location of much of Enlightenment thinking elsewhere in Europe. The Enlightenment in Scotland therefore drew upon a teaching and spoken tradition, developed within the Universities that drew upon the continental natural law theories, as well as on the implications of Newtonian and (even) Baconian science and (perhaps significantly in Adam Smith's case) Bacon's sense of the inter-relatedness of knowledge. Hume can be seen as working with tools supplied by the ‘natural law tradition’ as a synthesis taught within Scottish Universities and using elements to establish a new understanding of institutions and social relations (Westerman, 1994, 84). Smith, who shares much with Hume, especially the notion of the significance of history, ‘customs and manners’ for social evolution, must also have changed the expected emphasis of the tradition. The Enlightenment in Scotland was also the product of significant English political and social, as well as international, influences. To a list of names such as Pufendorf, Grotius, Hutcheson, Locke, Mandeville and Hume must be added, when thinking about Smith, Montesquieu and the French philosophes, and, according to Force, Rousseau (Force, 2003, 4). Developing Locke and writing against Hobbes was a source of intellectual stimulation. The balance from within Scotland, from England and from the continent shifts with new perspectives.

The parental metaphor, on the other hand, a metaphor that also links the past with the present through some form of family resemblance, can lead to possibly trivial metaphorical extensions, such as the identification of Edgeworth, Marcet and Martineau, and, more recently, other women economists, as ‘Adam Smith's daughters’ (Polkinghorn and Thomson, 1998). This is a product of the idea of Smith as the ‘father of modern economics’ and hence of the idea that economics subsequent to Smith has what can be called a ‘family resemblance’ to Smith. Generative metaphors seem to recur when a search for the ‘origins’ of modern economics is engaged with. Skinner reports that Hume's essays were identified by the first significant biographer of Hume, John Hill Burton, as ‘the cradle of economics’ (Skinner, 1993, 222).

The notion of ‘Adam Smith's daughters’, however awkward or inappropriate the title may appear, essentially secures legitimacy for a set of writing that was seen, at the time of publication of the first book with this as its title, as being outside the canon and thus excluded from the history of economic thought, considered as the development of economic doctrine or analysis. The notion of ‘family resemblance’ amongst the ideas, suggests some sort of genetic continuity (as a metaphor). It also suggests ‘patriarchy’ and therefore an approach to the group of nineteenth century women writers that does not necessarily fit comfortably with today's feminist approaches to women in economics, however much the notion of patriarchal complicity may apply to (say) Maria Edgeworth. McCloskey talks of ‘the grandsons of Adam Smith’, an idea that expresses not only a family connection but also a degree of difference, and if we push the metaphor there ought to be another set of grandparents, though searching for them is a matter of choice rather than a necessary implication of explicating the metaphor (a metaphor normally suppresses some aspects of the source: the vicious circle of poverty, for example, has direction but no area). Stigler argues that the ‘correct way of reading Adam Smith is the correct way to read the forthcoming issues of a professional journal’ (Stigler, 1982, 110). This would seem to imply that Smith either works in modern terms or he does not work at all. It would be a view that Brown, or Rothschild, concerned with taking Smith as a ‘whole’ and reading it within its historical context, would reject (Brown, 1998; Rothschild, 2001). For Stigler, as for Schumpeter before him, what is important is the history of economic analysis as opposed to wider intellectual history (Schumpeter, 1954, 38). T...

Table of contents

• Cover
• Half Title Page
• Series Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Preface
• Acknowledgements
• List of abbreviations
• 1 Reading the Wealth of Nations and Smith’s other writings
• 2 How does Smith achieve a synthesis in writing? Evidence from his analysis of the propensity to truck, barter and exchange
• 3 Nature’s dupes: irony and economic agency in Smith’s writing
• 4 The political economy of Castle Rackrent: Maria Edgeworth and Adam Smith
• 5 Exemplification strategy in Adam Smith’s Wealth of Nations
• 6 A very cautious, or a very polite, Dr Smith? Hedging in the Wealth of Nations
• 7 Natural and human institutions: reading for argumentation in book three of the Wealth of Nations
• 8 Adam Smith’s construction of ‘History’ and ‘Story’: the analysis of primogeniture
• Notes
• Bibliography
• Index