Thursday, December 28, 2006

Smith's Praise of Public service

From the Blog, The Liberal Order (‘in pursuit of a classical liberal order’) a short posting headed, “Altruism vs. Self-Interest” (27 December) contains what most neoclassical economists would consider to be vintage Adam Smith:

“(One of) Adam Smith's great insight(s) was that self-interest, channeled within a system of institutions and culture promoting specialization and voluntary exchange, would bring about a peaceful social order and improve the human condition far better than any other human motivator, including and especially altruism. This notwithstanding, people will always promote and exalt altruism as being a superior motivator. Unfortunately,
this will certainly fail, once again proving Adam Smith right.”

(Read it at:


Yes, but Homo economicus is not quite the whole story. In tandem with the well-known example from the self-interested motives of the ‘non-benevolent’ ‘butcher, the brewer, and the baker’ in a market transaction, the undoubted insight of Adam Smith as represented by The Liberal Order statement and its accompanying example would be self-evident. The example of rstaurants not charging for food is well taken.

Of that aspect I have no quarrel. In case readers go away with unanimous conviction of a ‘closed case’ on pure self-interest, I shall draw attention to the more nuanced Smithian philosophy.

Smith expressly saw an important and worthy role for motives other than the appropriate self-interested behaviour (albeit mediated by the need to consider the other person’s self-interest) when transacting with ‘butchers, brewers, and bakers’. But Smith was not just interested in market transactions. He also studied the range of human interactions and in a piece hardly noticed by scholars, judging by the absence of references to it, Smith goes well beyond what qualifies for Chicago’s Home economicus, to the much under-rated virtue of ‘public service’.

Part IV, chapter I of Moral Sentiments is about the ‘appearance of Utility upon all productions of art’, and by ‘art’ Smith was not referring to art as understood today in paintings, but of its 18th century meaning of things made by people, including manufactures. This same chapter contains the more often quoted reference in Moral sentiments to ‘an invisible hand’ and it is a pity that the people eager to quote Smith on this metaphor (usually for inappropriate purposes) do not continue reading into the next paragraph (assuming they read the quotation in its place in the book, instead of extracting it second- or third-hand).

Smith described the principle of beauty in the utility of an object that is, what we might say, ‘fit for purpose’, particularly in its design being pleasing to the eye. So powerful is this sentiment that often the ‘happy contrivance of any production of art, should often be more valued, than the very end for which it is intended’ (TMS IV.I.3: pp179-80), and Smith asserted that this point has not been noticed by anybody before himself; in short, it was original to him.

It was on this ‘same principle, the same love of system, the same regard to the beauty of order, of art and contrivance’ that ‘frequently serves to recommend those institutions which tend to promote the public welfare’ (TMS IV.I.10: p 185). The famous reference to ‘an invisible hand’ appears in the previous paragraph. He then provides example of men who exert themselves ‘for the improvement of any part of public police’, which does not mean today’s activities associated with law and order, but its 18th-century meaning of the provision of opulence.

His examples are ‘public-spirited’ men who encourage the ‘mending of high roads’, or legislatures who encourage the ‘advance’ of ‘linen and woolen manufactures’ by (attention all believers in the ‘Chicago Adam Smith’!) by means of ‘premiums’ or public subsidies. He calls ‘the perfection of police, the extension of trade and manufactures’ as ‘noble and magnificent objects’, which is a far cry from laissez-faire, a maxim wrongly attributed to Smith.
And these feeling are not ‘from pure sympathy’ with consumers and ‘much less from that with the manufacturer or merchant’. ‘Public virtue’ is not implanted ‘in the breast of him who seems heedless of the interests of his country’ by ‘eloquent exhortation’, but can be implanted by describing the ‘great system of public police which procures the advantages of’ access to the ‘system’ that produces, through ‘the connexions and dependencies’ of is ‘several parts’. I(n short, the political economy of a society that produces ‘general happiness’ from its opulence.

Smith believes that a man listening ‘to a discourse of this kind’ would not feel ‘himself animated to some degree of public spirit.’ He would ‘feel some desire to remove those obstructions, and to put in motion so beautiful and so orderly a machine’, and ‘those obstructions’ include whatever inhibits people to their removal. Connect this to the duty of government to defend the commonwealth from invasions, to establish and manage a system of justice, to educate the youth, and, of prime relevance here, to provide for ‘public works and institutions for facilitating the commerce of the society’ (WN, Book V), and the role of ‘public spirited men’ takes on a crucial meaning for commercial society as Smith envisaged one. Interestingly, he ends the chapter with awarding to the ‘study of politics’ a prime role in ‘animating the public passions of men’ to ‘rouse them to seek out the means of promoting the happiness of society’.

This is a far cry from the image accorded to him of Chicago of a freak ‘laissez-faire’ individualist, a sort of Ayn Rand in trousers, who, a la Friedman, told business men to ‘keep their heads down’ and their eyes focused on profit maximization and ‘away from corporate responsibilities’. Smith understood the gross limitations of benevolence in exchange for our dinners; he also understood the harnessing of our admiration for workable societies that ensured our dinners were available each dinner in order to promote public spirited acts that helped to make society ‘valued in proportion’ as it tends’ to ‘promote the happiness of [all of] those who live’ in it.

If some people see a way to help with a little bit of altruism (the sparcity of means limits its reach), so be it; if others advocate ‘cleaning up a polluted waterway’, from which they gain nothing but admiration of a once spoilt piece of countryside, so be it; if a corporation cleans up after its, or others’, operations at cost to some of its profits, so be it; all this and much more like it is closer to the ‘insight’ of Adam Smith than the rubbish mouthed by Greko and the insensitive notions of an economy people solely by members of the imaginary tribe of Homo economicus.


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