Monday, November 17, 2008

Smith Knew the Differences Between Self Interest and Selfishness

There is much in the media at present that attempts to draw easy conclusions about the causes of the current financial crises, often of a kind that finds the sins of commission in the commercial market system and the virtues of omission in the state sector.

Hardly, a day goes by when we are not lectured on the ‘end of market capitalism’ and its replacement by what amounts to state capitalism. Fair enough, it’s a free country in this constitutional monarchy and in the largest capitalist market economy, the United States of America.

However, the constant drum beat of nonsense about self interest as taught by Adam Smith, frankly is tiresome because it is so untrue that he didn’t know the difference or, worse, ‘changed his mind’ in Wealth Of Nations, that I think it worthwhile to note something he wrote in Moral Sentiments in a discourse on the effects of a supposed earthquake ‘the great empire of China’ and how a ‘man of humanity' might react to an event, then about two years return distance away by sailing ship.

I have quoted the first part of the discussion several times on Lost Legacy, mainly, perhaps in vain, to correct scribblers who draw the absolutely wrong conclusions from it, namely they calim that even a man of humanity would prefer to save his little finger, of immediate, close and personal interest to himself, rather than save the ‘ruin of a 100 millions of his brethren’. Many quote this thought experiment of Smith as if he concludes the triumph of the ‘man of humanity’s’ sselfish elf-interest over millions of earthquake victims.

They are totally wrong. They should have read on:

When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble? When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self-love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration. It is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self-love can be corrected only by the eye of this impartial spectator. It is he who shows us the propriety of generosity and the deformity of injustice; the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves. It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.” [TMS III.3.5: p 137)

If that is not a final and devastating rebuttal of the ‘selfish greed’ libel against Adam Smith, I don’t know what he could have written in its place.

'Geko’s', ‘greed is good’, outburst slipped in for dramatic affect of a Hollywood script writer did not come from anything that Smith wrote. They expose their ignorance those who claim he did.

They confuse Bernard Mandeville’s satire of [1705-1732] 1924, 'Fable of the Bees, or Private Vices, Public Benefits’, (Oxford University Press) with Smith’s writings from 1744 to 1790 (Mandeville died in 1733; Smith was 10). Now, of course, Smith knew of Mandeville’s writings; he described them as ‘licentious’ in Moral Sentiments (TMS VII.4: pp 306-14).

The piece quoted above from Moral Sentiments is clear and unequivocal.

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Blogger michael webster said...

Where in the history of economic thought does methodological individualism become a dominant thought pattern?

It would appear from this quote Adam Smith is clearly against methodological individualism.

1:04 pm  
Blogger Gavin Kennedy said...

Hi Michael

I suspect that methodological individualism grew out of late-19th century mid-20th century neoclassical economics.

I am not sure that the issue was raised in Smith's philosophical thinking.

1:43 pm  
Blogger kevin quinn said...

This quote is interesting from another angle. Compare Hume: (the quote may not be exact-it's from memory) "it is not contrary to reason to prefer the destruction of the whole world to the scratching of my little finger." This is the locus classicus of the instrumental conception of reason that so swept the field in economics, that makes a reason merely a hand-maiden of desire, a slave, as he famously says, of the passions. Smith, on the other hand, in the passage quoted, makes reason something that can motivate action that is contrary to desire. He is in effect, here and elsewhere in TMS, arguably a proto-Kantian.

4:15 pm  
Blogger r-fields said...

The "inhabitant of the breast" of which Smith speaks can only be his own. He cannot generalize the existance of the "impartial spectator" to any other. The critique of Smith's system does not depend on Adam Smith being selfish, but on the multitude of those who are finding the precepts of the "Wealth of Nations" a fine rationalization of their desires for superiority. The great error was the assumption of an "invisible hand" which supposedly obviated the need for a proper regulation of selfishness.

12:07 am  
Blogger Gavin Kennedy said...

Thank you for your comment. Reason as a slave of the passions is a well known stance of Hume, with which Smith appears to agree.

There is quite a lot of 'Kant' in Smith and 'Smith' in Kant.

The modern myth of the 'invisible hand' has done considerable damage
though your suggestion it promoted selfishness is inteesting. I can see your point.

As Smith taught both the precepts of Moral Sentiments and Wealth Of Nations together to his classes for 12 years; he never separated them or changed them - there is no excuse for imagining that selfishness played a part in his theory.

7:18 am  

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