A Structured Approach to the Adam Smith Problem Christopher Hodder PhD University of York Philosophy August 2016 “Adam Smith was ‘that half-bred and half-witted Scotchman’ who had taught the ‘deliberate blasphemy’ that ‘thou shalt hate the Lord thy God, damn his laws, and covet thy neighbour’s goods” John Ruskin (Donald Winch’s Wealth and Life: Essays on the Intellectual History of Political Economy in Britain, 1848- 1914. p.91. quoting Ruskin) “All the members of human society stand in need of each others assistance, and are likewise exposed to mutual injuries. Where the necessary assistance is reciprocally afforded from love, from gratitude, from friendship and esteem, the society flourishes and is happy. All the different members of it are bound together by the agreeable bands of love and affection, and are, as it were, drawn to one common centre of mutual good offices.” Adam Smith (Theory of Moral Sentiments. II. II. III. p.85.) 2 Abstract The often discussed but never defined “Adam Smith Problem” is in fact several issues surrounding our understanding of the philosophical framework which underlies the two published works of Adam Smith: The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations. In this thesis, I examine the secondary literature and argue that this is not in fact one problem, but a set of three inter-related issues which require clarification: (1) What principles of human nature are the works committed to and do they contradict one another? (2) What role does the invisible hand play, and according to Smith, to what extent can we rely on it to produce the greater good? (3) Can the economic man of Wealth of Nations be a virtuous man, and if so, how? Having defined this more precise Adam Smith Problem, I examine Smith’s work to understand how he would answer these three questions. To explain (1), I explain how both works are committed to the understanding of human beings as cogs in a machine, unintentionally producing an order which is designed by God. With regards to (2) I argue that the invisible hand is a metaphor for these unintended but providentially designed outcomes, and contrary to some economists, does not express equilibrium in the market or sanction morality-free economics. In order to answer (3), I adapt Russell Nieli’s “spheres of intimacy” account of Smith to show that the same mechanisms are said to underlie human behaviour in both our intimate and economic lives of individuals, and thus the economic man is in fact also the virtuous man. 3 Contents Abstract 3 Contents 4 Acknowledgements 6 Author’s Declaration 7 Introduction 8 Chapter 1: Smith, the Legend, the Problem 10 1.1: Introduction 10 1.2: Smith's Reputation 11 1.3: Smith's Legacy 16 1.4: 'Das Adam Smith Problem' 21 1.5: The Modern Adam Smith Problem 23 1.6: Conclusion of the Chapter 35 Chapter 2: Moral Judgement and the Virtues 37 2.1: Introduction 37 2.2: Smith's Teacher, Francis Hutcheson 37 2.3: Overview of Smith's Theory of Moral Sentiments. 45 2.3.1: Moral Judgement 48 2.3.2: Providence, Method and Formulating the Virtues 57 2.3.3: The Impartial Spectator 78 2.4: Conclusion of the Chapter 89 Chapter 3: The Wealth of Nations 91 3.1: Introduction 91 3.2: Free Trade and the System of Natural Liberty 92 3.2.1: Smith's Goals for WN 92 3.2.2: The System of Natural Liberty 96 3.3: The Economic Man 99 3.3.1: The Division of Labour and the Propensity to Truck, Barter and Trade 99 3.3.2: Self Interest, Greed and Morality in Trade 102 3.3.3: Sympathy, Intimacy and Benevolence in Trade 110 3.3.4: The Moral and Immoral Economic Man 115 3.4: The Virtuous State 117 3.5: Conclusion of the Chapter 119 Chapter 4: The Invisible Hand and Nature 121 4.1: Introduction 121 4 4.2: Led by an Invisible Hand 122 4.2.1: Kennedy's Interpretation of the Invisible Hand 125 4.2.2: The Invisible Hand in TMS 129 4.2.3: The Invisible Hand in WN 140 4.2.4: Conclusion 147 4.3: The Superior Wisdom of Nature 147 4.3.1: Nature, Artifice and the Rationality of Nature in WN 149 4.3.2: The Divine Telos, Theodicy and Nature's Wisdom in TMS 161 4.3.3: The Stoic Connection 171 4.4: Conclusion of the Chapter 174 Chapter 5: Solving the Adam Smith Problem 177 5.1 Introduction 177 5.2 What principles of human nature are the works committed to and do they contradict? 177 5.3 What role does the invisible hand play, and according to Smith, to what extent can we rely on it to produce the greater good? 180 5.4 Can the economic man of WN be a virtuous man according to TMS, and if so, how? 182 5.5 Evidence for Smith's (A)Theism 182 5.6 Concluding Remarks 190 Bibliography 192 5 Acknowledgements Prof. Catherine Wilson – for her advice, supervision and deep insight into the 18th C. Dr Christian Piller – for his deep and extremely helpful critiques of various drafts of this work. Prof. Greg Currie – for his insightful comments on Smith. My parents – for their emotional and financial support. Everyone else – who put up with my excessive drinking and long, incoherent rants about philosophy and academic life. 6 Author’s Declaration I declare that this thesis is a presentation of original work and I am the sole author. This work has not previously been presented for an award at this, or any other, University. All sources are acknowledged as references. 7 Introduction The debate over the legacy of Adam Smith began almost as soon as his coffin was lowered into the Edinburgh soil in 1790. During his lifetime, he had been seen as both a radical social and economic reformer, in league with the revolutionaries in France, and paradoxically as an establishment figure, advising the British government and holding the post of Commissioner of Customs for Scotland. This duality has since fallen away in the public mind, his message distilled to that of Free Trade under the invisible hand of the market. Meanwhile academics and thinkers of all shades, Liberals to Conservatives, Libertarians to Communists have claimed Smith as their own. To an extent they are all right – Smith has been read by Margaret Thatcher and Karl Marx, Milton Friedman and Noam Chomsky – he is an intellectual ancestor of virtually all modern political and economic thought. However, that is not to say that he would have endorsed the modern, neoliberal world any more than he would have endorsed the USSR. Those seeking clarity about the ‘real’ Adam Smith face the problem that in his lifetime he only published two seemingly disparate books: The Theory of Moral Sentiments (1759) (Hereafter, "TMS")1 in which he discusses issues of morality and virtue; and An Inquiry into the Nature and Causes of the Wealth of Nations (1776) (Often referred to as The Wealth of Nations, hereafter, "WN") in which he discusses a broad variety of topics related to political economy and the creation of wealth. It has seemed to many scholars and commentators that there are fundamental inconsistencies between these two works which prevent them from being understood as part of a larger philosophical framework. 1 Note about referencing: since there are very many different editions of Smith's works available including various abridged versions of The Wealth of Nations, I find that citing the page number is rather unhelpful. So I will cite in a particular way: For TMS, I shall first site the Part, then the Section and Finally the Chapter (If present – not all sections have Chapters and vice versa), for WN, I shall cite the Book, followed by the Chapter. I shall provide the page number in the particular edition I am using (details in the bibliography). E.g. "TMS. I. I. I. p.13" For TMS Part I, Section I, Chapter I, page 13 or "WN. I. II. p.9" for WN Book I Chapter II page 9. 8 This debate both over his legacy and how to interpret him has come to be known as “The Adam Smith Problem”. However, contrary to what the name suggests, it's not a single problem, or even a well-defined set of problems, but rather a body of literature from the past two and a half centuries, all of it wrestling with trying to understand his work, his philosophy, his legacy, and even the man himself, and all from differing perspectives over what the problem is (if there is a problem), and where the tensions lie. In my opinion the existing treatment of Smith's work has laid insufficient weight on approaching this problem in a structured manner, and has failed entirely to enumerate and define what the issues are to be solved. The result has been an unfocussed torrent of books, papers and presentations, from historians, philosophers, and economists, almost all claiming that there is a coherence to Smith's work without any clear statement of why the works appear incoherent, nor of which themes need to be reconciled. This is what I call an “unstructured approach,” a general feeling that there is a case to be answered without taking the time to define that case. Therefore, our first objective is to examine the existing literature on Smith as either part of or responses to the Adam Smith Problem, and by doing so, try to construct a definitive set of issues that have prevented clarity regarding the coherence or incoherence of Smith's project.