Beyond Self-Interest, Adam Smith's Integrated Vision

“ The first principle, on which the theory of a science of history can be plausibly argued, is that all actions whatsoever arise from self-interest. It may be enlightened self-interest, it may be unenlightened; but it is assumed as an axiom, that every man, in whatever he does, is aiming at something which he considers will promote his happiness. His conduct is not determined by his will; it is determined by the object of his desire. Adam Smith, in laying the foundations of political economy, expressly eliminates every other motive. He does not say that men never act on other motives ”

“ It is the complement of “The Wealth of Nations,” which is devoted to the selfish side of human nature and the world at large has found no trouble in forgetting it. Adam Smith himself was under no confusion of mind as to his subject when he wrote about political economy. He knew that he was dealing with questions of a selfish character, of an enlightened selfishness, no doubt, but none the less questions of self-interest. He never for a moment thought of putting his political economy on a plane of pure morality. ”

“ By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. ”

“ It was Adam Smith, who, far more than any other man, introduced the conception of uniform and necessary sequence into the apparently capricious phenomena of wealth, and who studied those phenomena by the aid of principles, of which selfishness alone supplied the data. According to his view, the employers of labour have, as employers, no benevolence, no sympathy, no virtue of any kind. Their sole aim is, their [327] own selfish interest. They are constantly engaged in a tacit, if not in an open, combination, to prevent the lower ranks from being benefited by a rise of wages ”

“ A great many economists were—and some still are—evidently quite enchanted by something that has come to be called “rational choice theory,” in which rationality is identified with intelligently pursuing self-interest. Further, following that fashion in modern economics, a whole generation of rational choice political analysts and of experts in so-called “law and economics” have been cheerfully practicing the same narrow art. And they have been citing Smith in alleged support of their cramped and simplistic theory of human rationality. ”

“ It was, for example, a service of no mean order to point out all the ramifications of self-interest in economic life, to set in order the phenomena explained by this principle, and to show how it prompts men to the most diverse deeds, which, undertaken without a view to the welfare of others, nevertheless redound to the common good. ”

“ It becomes impossible to imagine some acts without disapprobation, or others without approbation of the actor, whether he be one's self or anyone else. We come to think in the acquired dialect of morals. An artificial personality, the "man within," as Adam Smith calls conscience, is built up beside the natural personality. He is the watchman of society, charged to restrain the anti-social tendencies of the natural man within the limits required by social welfare. ”

“ The same thing may be said of the gross ignorance and stupidity which, in a civilised society, seem so frequently to benumb the understandings of all the inferior ranks of people. A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. ”

“ The rich cannot fairly be said to get more good from the State than the poor; they probably get less, because they are better capable of providing for their own defence; but the rich are able to do more good to the State than the poor, and because they are able, they are bound.
Such is the social doctrine of Adam Smith, and it is manifestly no doctrine of rigid individualism, calling out for freedom at any price, or banning all interference with the natural play of self-interest and competition. ”

“ Beyond self-love, Smith discussed how the functioning of the economic systems in general and of the markets in particular can be helped enormously by other motives. There are two distinct propositions here. The first is one of epistemology, concerning the fact that human beings are not guided only by self-gain or even prudence. The second is one of practical reason, involving the claim that there are good ethical and practical grounds for encouraging motives other than self interest—whether in the crude form of self-love or in the refined form of prudence. ”

“ It frequently happens that the individual serves the community best when he is most concerned about his own interests; he, at the same time, serves a purpose which he has not proposed as if guided by an unseen hand. Sympathy with human life in every phase forms the basis of Smith's political economy ”

“ Its disorder and confusion, on the contrary, is the object of his aversion, and he is chagrined at whatever tends to produce it. He is sensible too that his own interest is connected with the prosperity of society, and that the happiness, perhaps the preservation of his existence, depends upon its preservation. Upon every account, therefore, he has an abhorrence at whatever can tend to destroy society, and is willing to make use of every means, which can hinder so hated and so dreadful an event. Injustice necessarily tends to destroy it. ”

“ XII. But, we are told, Political Economy is only the science of selfishness; Adam Smith is the prophet of individualism; grow rich per fas et nefas is its ultimate teaching. Such a judgment is evidence of much levity and little enlightenment. How could the man who conceived the study of human interests on so large a scale, the philosopher who acknowledged Hutcheson as his master and gave his ideas a still more expansive character, be the apostle of egotism; and how can the science which he founded be its gospel? ”

“ The spirited attempt to see Smith as an advocate of pure capitalism, with complete reliance on the market mechanism guided by pure profit motive, is altogether misconceived. Smith never used the term “capitalism” (I have certainly not found an instance) . More importantly, he was not aiming to be the great champion of the profit-based market mechanism, nor was he arguing against the importance of economic institutions other than the markets. Smith was convinced of the necessity of a well-functioning market economy, but not of its sufficiency. ”

“ Rather the note of the book is a quiet optimism, impressed by the possibilities of constant improvement which lie imbedded in the human impulse to better itself. What he did not see is the way in which the logical outcome of the system he describes may well be the attainment of great wealth at a price in human cost that is beyond its worth. Therein, it is clear, all individualistic theories of the state miss the true essence of the social bond. Those who came after Adam Smith saw only half his problem. He wrote a consumer's theory of value. ”

“ In the beginning, in the hands of Adam Smith—whose richly suggestive book is now all too little read—political economy was a broad-minded and sane inquiry into the statecraft of trade based upon current assumptions of private ownership and personal motives, but from him it passed to men of perhaps, in some cases, quite equal intellectual energy but inferior vision and range. ”

“ Even though the champions of the baker-brewer-butcher reading of Smith, enshrined in many economics books, may be at a complete loss about how to understand the present economic crisis (since people still have excellent reason to seek more trade even now, in the middle of the crisis—only far less opportunity) , the devastating consequences of mistrust and the collapse of mutual confidence would not have puzzled Smith. ”

“ To understand the nature of a country’s financial stability in a way that is, as it happens, immediately relevant to the current economic crisis, it is extremely important to pay attention to Smith’s argument that “When the people of any particular country have such confidence in the fortune, probity, and prudence of a particular banker, as to believe that he is always ready to pay upon demand such of his promissory notes as are likely to be at any time presented to him ”

“ But though the necessary assistance should not be afforded from such generous and disinterested motives, though among the different members of the society there should be no mutual love and affection, the society, though less happy and agreeable, will not necessarily be dissolved. Society may subsist among different men, as among different merchants, from a sense of its utility, without any mutual love or affection ”

“ As society cannot subsist unless the laws of justice are tolerably observed, as no social intercourse can take place among men who do not generally abstain from injuring one another; the consideration of this necessity, it has been thought, was the ground upon which we approved of the enforcement of the laws of justice by the punishment of those who violated them. Man, it has been said, has a natural love for society, and desires that the union of mankind should be preserved for its own sake, and though he himself was to derive no benefit from it. ”

“ The old idea that one gives up freedom of self for the advantages given by society has no foundation in fact, because we are born into our place in society without power to escape its advantages, disadvantages or responsibilities. The maxim “Each for all and all for each” is thoroughly grounded in the constitution of man; his needs and abilities enforce society and insist upon community of interests. Even personal wealth confers little welfare outside of its relations to other human beings. ”

“ An ideal implies no contrast of observer and observed: conduct is something mental: the ideal is a reality of mind, existing in the minds of those who act upon it. The social ideal has thus a concrete existence in the collective action of good men."
In this manner, the supposed independence of the tendencies towards Individualism and Universalism disappears, the harmony of the individual and his harmony with society being identical—a true independence being equivalent to true coöperation.
Morality implying adjustment to the ideal order, a realization of the bearings of our acts is important. ”

“ The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. ”

“ A man who snares facts is of all men the most likely to be caught in a theoretical trap. Here is an example. In 1759 Adam Smith wrote a book on moral sentiments which he founded on the natural instinct of sympathy. In 1776 he wrote a book on economic sentiments, which he derived from self-love or the desire of man to improve his position. Upon these facts the following theory is built up by the historical school of Germany:—
“Smith was an Idealist as long as he lived in England under the influence of Hutcheson and Hume. ”

“ Second, since the ideas presented in The Wealth of Nations have been interpreted largely without reference to the framework of thought already developed in the Moral Sentiments (on which Smith substantially draws in The Wealth of Nations) , the typical understanding of The Wealth of Nations has been constrained, to the detriment of economics as a subject. ”