More on Foley's Folly
In a review Adam’s Fallacy by Duncan K. Foley (2006) on the Mediated Blog HERE: This comment caught my attention:
“The ‘fallacy’ as Foley describes it, is as follows: “Smith asserts the apparently self-contradictory notion that capitalism transforms selfishness into its opposite: regard and service for others.”
To which I posted this comment:
Adam Smith did not confuse self-interest with selfishness. He was a moral philosopher and not one given to sloppy thinking; his criticism of selfishness as a behaviour is set out in his book, The Theory of Moral Sentiments (1759), particularly his specific critique of the ‘licentious’ views of Bernard Mandeville (‘Private Vice, Public Virtue’, 1724), which many modern commentators confuse with Adam Smith’s.
In Wealth Of Nations, 1776, he explains that self interest in a commercial economy (he never used the word ‘capitalism’ – it was not invented in English until 1854) where everybody is dependent on the services of thousands of others for their ‘necessities, conveniences, and amusements of life’, requires them not to think only of their own self interest, but to address the self interest of others, i.e., to be ‘other’ not ‘self’, centred by mediating their mutual self interests.
Unless they do this they may go hungry – there not being enough resources to make relying on benevolence, or stealing, reliable behaviours for everyday civilised life.
Thus, people receive the means for their dinner, and much else besides, by offering others their daily bargains:
“He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.’ (Wealth Of Nations, II.ii.2: p 26).
For this fundamental misunderstanding of Adam Smith by Duncan Foley, a distinguished historian of economics (I have heard him lecture), I described his 2006 book in a review as ‘Foley’s Folly’.
“The ‘fallacy’ as Foley describes it, is as follows: “Smith asserts the apparently self-contradictory notion that capitalism transforms selfishness into its opposite: regard and service for others.”
To which I posted this comment:
Adam Smith did not confuse self-interest with selfishness. He was a moral philosopher and not one given to sloppy thinking; his criticism of selfishness as a behaviour is set out in his book, The Theory of Moral Sentiments (1759), particularly his specific critique of the ‘licentious’ views of Bernard Mandeville (‘Private Vice, Public Virtue’, 1724), which many modern commentators confuse with Adam Smith’s.
In Wealth Of Nations, 1776, he explains that self interest in a commercial economy (he never used the word ‘capitalism’ – it was not invented in English until 1854) where everybody is dependent on the services of thousands of others for their ‘necessities, conveniences, and amusements of life’, requires them not to think only of their own self interest, but to address the self interest of others, i.e., to be ‘other’ not ‘self’, centred by mediating their mutual self interests.
Unless they do this they may go hungry – there not being enough resources to make relying on benevolence, or stealing, reliable behaviours for everyday civilised life.
Thus, people receive the means for their dinner, and much else besides, by offering others their daily bargains:
“He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.’ (Wealth Of Nations, II.ii.2: p 26).
For this fundamental misunderstanding of Adam Smith by Duncan Foley, a distinguished historian of economics (I have heard him lecture), I described his 2006 book in a review as ‘Foley’s Folly’.
Labels: Bargaining, self-interest, Selfishness
4 Comments:
Dear Professor,
You write in this post:
"In Wealth Of Nations, 1776, he explains that self interest in a commercial economy (he never used the word ‘capitalism’ – it was not invented in English until 1854) where everybody is dependent on the services of thousands of others for their ‘necessities, conveniences, and amusements of life’, requires them not to think only of their own self interest, but to address the self interest of others, i.e., to be ‘other’ not ‘self’, centred by mediating their mutual self interests."
But, did not Adam Smith refer to this as a "commercial society" (e.g. Book I, Chapter IV, end of the first paragraph, p. 24 of the Modern Library Classics Edition) rather than a "commercial economy"? I mention this distinction for two main reasons: first, your interest in complete accuracy of modern interpretation of Smith (which I very much appreciate!) and second, the existence of a line of research surrounding the birth of "the economy" as an idea separate from that of the market (Emmison 1983, Mitchell 1998 and various papers since then, Suzuki 2003 being excellent examples). These scholars would dispute the idea that Smith wrote about the economy at all, but rather argue that he discussed "the market" and "society" or "commercial society", but that this distinction actually matters. While "economy" is an old word going back to the Greek oikonomia, its meaning was restricted to the idea of proper management until some point in the first half of the 20th century. Thus political economy concerned itself with the proper management of the nation or polity, as household economy (a somewhat redundant phrase) concerned itself with the proper and efficient management of the household. But the broader and yet more objective sense of the term, something that overlaps somewhat with the idea of "commercial society" but is not quite identical with it, is relatively new.
In particular, I would (and will, in a paper I am supposedly working on) argue that the economy is an object of study imprinted with its time of origins - the 1930s, the Great Depression, the rise of national macroeconomic statistics perceived as reliable, etc. The economy is this narrow sense also broadened out to include the broader, and somewhat older, idea of "economic life", but I would argue that there exists an important difference. "The Economy" is a particular kind of object, measured in particular ways, subject to certain kinds of government interventions (stimulus packages, wars against inflation or unemployment, etc.) whereas "economic life" is diffuse and merely describes a set of relationships whose full extent is not presumed to be measured or capable of being acted on.
I am very interested to know if this topic is discussed at all in your work on Smith, or other work you have come across, as it seems rather important to understanding the rise of macroeconomics in the 20th century, but I have seen it discussed only in a handful of papers such as the ones above, and no histories of economics.
Thanks and keep writing the excellent blog!
Hi Dan
Yes, a good point, to which I shall plead 'guilty' of carelessness.
I shall also make some observations.
In the introduction to Book IV, Smith wrote:
"1. Political œconomy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign.
2. The different progress of opulence in different ages and nations has given occasion to two different systems of political œconomy with regard to enriching the people. The one may be called the system of commerce, the other that of agriculture. I shall endeavour to explain both as fully and distinctly as I can, and shall begin with the system of commerce. It is the modern system, and is best understood in our own country and in our own times." (WN IV. p 428; note his spelling).
I have a book by an Australian scholar, but cannot put my hand on it tonight (his name looks to be Greek in origin). In it he discusses the WN and in particular the spelling of 'œconomy' and its meanings.
Smith does refer to 'commercial society' always, and when referring to politcal œconomy always refers to it as above.
As I am getting ready to go to Oxford at tonight and I have much to do, I cannot look up everything I would like to share with you.
One book I do have to hand is Dennis Rasmussen's excellent volume: "The Problems and Promise of Commercial Society: Adam Smith's response to Rousseau", Penn Statte Press, 2008.
Also: Abbe de Condillac, "Commerce and Government considered in their mutual relationship" [1776: 2008], Liberty Fund, which talks of the 'science of economics'.
I see where you are coming from in your research, which sounds most interesting. I presume you may have read Karl Polanyi's 'Great Transformation', 1944, where he denies that markets pre-date mid-19th-century capitalism, and that from then economic life separated itself from normal society.
There certainly was no concept of macro-economic policy until the 20th century and Big Government.
Thanks for reminding me not to become sloppy in attributions.
Hi Dan
Yes, a good point, to which I shall plead 'guilty' of carelessness.
I shall also make some observations.
In the introduction to Book IV, Smith wrote:
"1. Political œconomy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign.
2. The different progress of opulence in different ages and nations has given occasion to two different systems of political œconomy with regard to enriching the people. The one may be called the system of commerce, the other that of agriculture. I shall endeavour to explain both as fully and distinctly as I can, and shall begin with the system of commerce. It is the modern system, and is best understood in our own country and in our own times." (WN IV. p 428; note his spelling).
I have a book by an Australian scholar, but cannot put my hand on it tonight (his name looks to be Greek in origin). In it he discusses the WN and in particular the spelling of 'œconomy' and its meanings.
Smith does refer to 'commercial society' always, and when referring to politcal œconomy always refers to it as above.
As I am getting ready to go to Oxford at tonight and I have much to do, I cannot look up everything I would like to share with you.
One book I do have to hand is Dennis Rasmussen's excellent volume: "The Problems and Promise of Commercial Society: Adam Smith's response to Rousseau", Penn Statte Press, 2008.
Also: Abbe de Condillac, "Commerce and Government considered in their mutual relationship" [1776: 2008], Liberty Fund, which talks of the 'science of economics'.
I see where you are coming from in your research, which sounds most interesting. I presume you may have read Karl Polanyi's 'Great Transformation', 1944, where he denies that markets pre-date mid-19th-century capitalism, and that from then economic life separated itself from normal society.
There certainly was no concept of macro-economic policy until the 20th century and Big Government.
Thanks for reminding me not to become sloppy in attributions.
Thank you for your prompt reply!
I will look into the sources you suggested. I am a big fan of Polanyi, although the line of research I referred to in my comment suggests that Polanyi missed a large transformation that he was himself taking part in. Polanyi said of Smith (if I recall correctly): "No misreading of the past has ever been more prescient of the future." Mitchell argues that Polanyi made a similar sort of error, by imputing to the period between Smith and Polanyi the idea of "the economy" which was still being born as Polanyi was writing, and which he played a role in. Mitchell argues that the economic and the social were thus not fully separated until the mid-20th century.
I think Mitchell goes a bit too far, but I agree that Polanyi seems to miss the rise of macroeconomics (which, to be fair, was outside of the period he focused on, and not particularly relevant to most of his arguments about the creation of markets for the fictitious commodities of land, labor and capital). I think there comes to be an economic sphere (or "economic life") distinct from other sorts of civil life in the 18th and 19th centuries, but that this economic sphere was vague and amorphous until fixed and measured by the statisticians of the 20th century.
I am right now trying to really understand Polanyi's distinction between "formal" and "substantive" economies to see if it will be helpful for me moving forward. For example, my argument might be that the formal and substantive economies converged in the 20th century as more and more transactions entered into the market, but that this convergence led us to think of the "market economy" as a real thing that was more than a metaphor, which in turn led us to see everything that was still left out (unpaid childcare and care for the elderly, damage to the environment, etc.). Thus, in the same moment that national income becomes accepted as a proxy for the size of the economy which is a proxy for welfare or well-being, we begin to doubt that connection and point out where it fails, and yet rely on it for our policy-making.
Ok, I'll end the rambling here. Good luck at your conference, and perhaps we can continue this exchange over email when you return (and you can share with met any other cites you think would be helpful). I would be most appreciative!
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