Sunday, December 10, 2006

Adam Smith on Utility, Principles of Motivation and the Promotion of the Public Welfare

Recent correspondence with John Pratt prompted me to take a closer look at Moral Sentiments, Part IV: ‘Of the Effect of Utility upon the Sentiment of Approbation’; Chapter I, ‘Of the beauty which the appearance of utility bestows upon all the production of art, and of the extensive influence of this species of beauty’ (TMS IV.I.1-11: pp 179-87).

Smith acknowledges the wide recognition of utility as a ‘principal’ source of beauty, specifically citing David Hume as defining the ‘utility of any object … pleases the master by perpetually suggesting to him the pleasure of conveniency which it is fitted to promote.’ Smith notes with undisguised pleasure that the ‘happy contrivance of any production of art, should often be more valued, than the very end for which it is unintended’ had not been noted by anybody else before him, and from this he develops an important principle – people are more interested in ‘the perfection of the machine that serves to attain’ some end more than they are interested in the end itself. Which he returns to towards the end of this chapter.

An untidy room, a watch that runs slow, and ‘trinkets and baubles’ of frivolous utility but which are ‘apt to promote it’ (and which look and feel good) promote activity to change or acquire them, even at inordinate expense or effort. And conduct is influenced by ‘this principle’ (fitness for purpose) in trivial pursuits and those ‘important pursuits of both private and public life’.

In illustration of the effort expended to acquire expensive items, when cheaper items are available or expensive ones could be done without, Smith makes his famous charge against the ‘poor man’s son, whom heaven in its anger has visited with ambition’, which causes him to devote himself ‘for ever to the pursuit of wealth and greatness’ and to sacrifice the ‘real tranquillity that is at all times in his power’. The rich are admired not so much for their ‘superior ease or pleasure which they are supposed to enjoy’ as their possession of ‘numberless artificial and elegant contrivances for promoting this ease or pleasure.’ Nobody imagines that the rich as really happier than others, but they do imagine ‘that they possess more means of happiness.’

Power and riches are ‘enormous and operose machines contrived to produce a few trifling conveniences to the body’ and in his rather melancholy elaboration of this theme he concludes that it as ‘splenetic philosophy’. However, in happier times ‘of ease and prosperity’ it is transformed into admiration of the beauty of ‘the palaces and economy of the great’ because everything in them is ‘adapted to promote their ease, to prevent their wants, to gratify their wishes, and to amuse and entertain their most frivolous desires.’

These contrasting perspectives run right through society, reaching all levels, and while Smith lays into the imaginations of the poor about the splendours of the rich and about striving to emulate their possession of frivolous contrivances, he turns the direction of this argument. For society’s sake it is well that these ‘deceptions’ are widespread, because they ‘rouse and keep in motion the industry of mankind’.

‘It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and the arts, which ennoble and embellish human life; which have entirely changed the whole face of the globe, have turned the rude forests into agreeable and fertile plains, and make the trackless and barren ocean a new fund of subsistence, and the great high road of communication to the different nations of the earth.’ (TMS IV.i.10: p 183-4)

Smith makes an important point following this statement about the ‘proud and unfeeling landlord’ who views his extensive fields without a thought for the wants of his brethren. We can almost hear him when looking at his fields and the harvest growing on them and thinking: ‘Mine! All mine.’ Yet he could not consume anything near what he sees before him because ‘the capacity of his stomach bears no proportion to the immensity of his desires’. He has no choice but to distribute the surplus in some manner. And Smith identifies what a rich landlord must do because he can do no other.

He must distribute from the surplus to:

a) those who prepare ‘in the nicest manner’ that ‘little which he himself makes use of’;
b) those of ‘fit up the palace in which this little is to be consumed’;
c) those ‘who provide and keep in order all the baubles and trinkets which are employed in the œconomy of greatness’;
d) those who ‘derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice’.

This last group are not just the largest numerically, but are of particular interest to Smith’s political economy, namely the labourers who toil in the landlord’s fields for their subsistence. The landlord’s ‘natural selfishness and rapacity’ serves his own ‘conveniency’ and the ‘gratification’ of this own ‘vain and insatiable desires’; he doesn’t undertake labour on his farms, he hires others to do that for him (or rents fields to tenants who deliver the bulk of the produce to the landlord in return for keeping a small share). In either manner, the labourer’s subsistence is maintained by the produce of the land.

Smith makes his famous assertion: The landlords ‘are led by an invisible hand to make nearly the same distribution of the necessities of life, which would have been made, had the earth been divided into equal portions among its inhabitants, and thus without intending it, without knowing it, advance the interests of the society, and afford the means to the multiplication of the species.’

The metaphor of ‘an invisible hand’ has been given a number of meanings since the end of the early 20th century, particularly within the neo-classical paradigm where it has become described widely as his ‘theory’ of markets, but also by those who detect a religious strain in Smith’s language throughout Moral Sentiments (less so in Wealth of Nations) and purport that Smith was, if not a Christian, at least a Deist. The latter is a meaning I shall leave aside on this occasion, as its refutation would take us well way from my main critique.

Let me address Smith’s assertion that landlords ‘make nearly the same distribution of the necessaries of life’ as ‘would have been made, had the earth been divided into equal portions among all its inhabitants.’ First, taking the historical view, in Smith’s Four Stages theory, private property in land emerged during the Ages of Hunting and Shepherding and then superseded them in Europe (I ignore variations of the progression to agriculture associated with the ‘hydraulic’ societies of Egypt, Babylon, India and China). Private property was inextricably bound up with agriculture; open fields exposed to human traffic and to wandering flocks and herds would prove too troublesome (as the Biblical Cain and Abel demonstrate in Genesis).

Property is not incompatible with equal portions, and is more likely to be associated with ‘open’ territories, into which aspirant farmers can move at least up to the capacity of the land. Setting aside the political, legislative and governance characteristics that led to unequal divisions, one clear instigator of landed inequality would be a population rising beyond the output capacity of the territory. Indeed, unless agriculture increased annual output over hunting and shepherding it would not be sustainable; neither would its rising population levels. Unless there is a surplus of subsistence, population densities remain low.

Minimal subsistence, defined in some manner related to the reproduction of the population, sets the base below which it cannot drop without a decline in population. Private property in land is viable if it raises output above alternative modes of production. But for it to be viable, and associated with rising population, per capita consumption has to be at least at the subsistence level. Therefore, Smith’s assertion that private landlords divide their produce ‘very nearly the same’ as ‘would have been made had the earth been divided into equal portions among all the inhabitants’ is not all that challenging, or exceptional, or, for that matter, surprising.

The ‘unfeeling’ landlord is not ‘led by an invisible hand’ in the sense that there is something mysterious or ‘miraculous’ driving him to act in a manner that he does; he is led by a necessity that keeps the ‘operose machines’ of the mode of production working, for without labourers to undertake the labour of farming and herding in production, and without his armed retainers to defend his property rights against all comers, rich and poor or foreign invaders alike, all of his ambitions for his personal ‘vain and insatiable desires’ would be frustrated within a season or two when below subsistence consumption levels took their toll and reproduction rates fell below the levels that multiplied the species. As the whole is the sum of its parts, neglecting the minimal subsistence of the parts, in due course, would be terminal for his ‘greatness and riches’.

Those who seek ‘greatness and riches’, which they do from the principle of ‘beauty’ that pleases the eye and the imagination in the ‘fitness for purpose’ of the ‘numberless artificial and elegant’ appurtenances and contrivances, are the main drivers of society. This is Smith’s original principle of how utility is less important as a driver than its ‘beauty’ (a hovel and a palace provide the same utility i.e., shelter from the elements, but the ‘fitness for purpose’ of the latter gets aspirants out of bed each morning to seek ways of acquiring the means to its beauty).

Smith writes, in a passage drawn to my attention by John Pratt (which has not received the attention it deserves among scholars):

‘The same principle, the same love of system, the same regard to the beauty of order, or art and contrivance, frequently serves to recommend those institutions which tend to promote the public welfare’ (TMS IV.1.11: p 185).

John considers that ‘the same principle’ is the ‘invisible hand’; I do not give a metaphor that level of credit. It is neither a ‘theory’, nor a ‘principle’; at least to Smith it wasn’t either. An ‘invisible hand’ by definition or by allusion cannot possibly ‘frequently serve[s] to recommend’ anything. It would have to be embodied in some way into the consciousness of a human actor for it to ‘recommend’ something. Has the invisible hand also acquired a ‘silent voice’, a sort of extension of the role of Smith’s ‘impartial spectator’?

However, John Pratt’s more important point is in the rest of what is contained in paragraph 11, to which I am most impressed and grateful for him drawing it to my attention. My own working copy of Moral Sentiments has long been heavily underlined for much of paragraph 11, but I never noticed its fuller significance before.

Smith is often ‘credited’ with strong opposition to the role of government in the economy. More accurately, he is often claimed to have been hostile to government intervention, favouring some version of a ‘night watchman state’. I think there is an abundance of evidence in Wealth of Nations to refute the extremer versions of that claim. However, the particular paragraph in Moral Sentiments quoted from above puts a different slant on his alleged views on public intervention and on the conscious support for courses of action disconnected from self-interest.

Smith lists examples of ‘the same principle, the same love of system’, etc:

a) ‘a patriot’ who ‘exerts himself for the improvement of police’ (in Smith’s days this meant: ‘public cleanlyness of the roads, streets, etc; 2d, security; and thirdly, cheapness or plenty’ of provisions, etc. (Lectures in Jurisprudence, vi.1: p 331). His ‘conduct does not always arise from pure sympathy with those who are to reap the benefit of it’;
b) a ‘public-spirited man encourages the mending of high roads’ but ‘not commonly from a fellow-feeling with carriers and waggoners’;
c) a ‘legislature establishes premiums and other encouragements to advance the linen and woollen manufacturers’; its ‘conduct seldom proceeds from pure sympathy with the wearer of cheap or fine cloth, and much less with the manufacturer or merchant’.

Sympathy for those benefited or affected by these public-spirited proposals is not necessary; so what causes these people to act in a public spirited manner? There is no conceivable manner in which ‘an invisible hand’ could be at work in these cases (that really would be to introduce detailed divine guidance in the affairs of humans), and it is not Smith’s invisible ‘principle’ at work. The metaphor is not needed because he explains precisely what is at work, and precisely to which principle he refers.

The ‘perfection of police, the extension of trade and manufactures, are noble and magnificent objects’ and the ‘contemplation of them pleases us, and we are interested in whatever can tend to advance them.’ Why? Because they ‘make part of the great system of government, and the wheels of the political machine seem to move with more harmony and ease by means of them.’ This links to Smith’s beginning of the chapter.

He writes: ‘We take pleasure in beholding the perfection of so beautiful and grand a system, and we are uneasy till we remove any obstruction that can at least disturb or encumber the regularity of its motions’ (fitness for purpose!). We value all constitutions of government ‘only in proportion as they tend to promote the happiness of those who live under them.’ Indeed, this is their ‘sole use and end’. And he returns to his claimed originality at the head of the chapter: from a ‘certain spirit of system’, from a ‘certain love of art and contrivance’ we ‘sometimes value the means more than the end’. What could be clearer? This is the ‘same principle’ he opens the chapter with.

The oft-quoted apparent rebuttal of public spirit in Wealth of Nations is put into its proper context by Moral sentiments, namely where he reports (in the same paragraph where he makes the sole reference in that book to ‘an invisible hand’) that ‘I have never known much good done by those who affected to trade for the publick good. In it is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it’ (WN IV.ii.9: p 456). Indeed, not. Traders do not necessarily, or need, concern themselves with the public good, but others do concern themselves with the ‘beauty’ of the market machine – hyper fit for purpose. A bustling market place in a town on market day is a wonderful and colourful sight; a windswept, damp, empty market with a few desultory people shuffling about is depressing. Discussions about how to improve market day events are bound to feature among the city managers (and other public spirited citizens).

He ends the chapter with comments on how to persuade (and how not to persuade) someone to awaken his industry and passion for improvement. It is not about the ‘happiness of the rich’ and the ‘superior advantages’ of a well governed state. Far better to relate to him the ‘conveniency and arrangement’ of the different apartments of the palaces of the rich, their ‘equipage’ and the number and purpose of their servants, and how the ‘great system of public police’ procures advantages through the ‘connexions and dependencies of its several parts, their mutual subordination to one another and their general subserviency to the happiness of the society.’

Interestingly, from what we know of his antipathies about politicians, he asserts that nothing ‘tends so much as to promote public spirit as the study of politics’ and that ‘political dispositions, if just, and reasonable, and practicable, are of all works of speculation the most useful’, and that even the ‘weakest and worst of them’ serve ‘at least to animate the public passions of men, and rouse them to seek out the means of promoting the happiness of the society’. He certainly spent a lifetime seeking to persuade legislators and politicians, or at least some of them, about the efficacy of his recommendations. To what extent his remedies were ‘just’, ‘reasonable’, and ‘practicable’ is the subject of a wider debate.


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