Adam Smith On Self-Interest on How Humans Learn About Morality

Ralf Stern, a research professor at New York University’s Stern School of Business  posts “Human Nature Needs to Be Back in Business” in The Economics Populist HERE

 (originally published in The Washington Post).

“This view “of human nature is largely absent in business, a world that believes almost entirely in motivation through self-interest and even in the social good of self-interest.  This viewpoint was famously summarized by Adam Smith:

‘It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” [WN I.ii.2.2: 26-27]

Comment

Professor Stern’s assertions, here, like several others in his post is unwarranted which it is a common error by commentators on this particular paragraph.  Self-interest was not seen by Smith as a one-way street. If two individuals, such as a potential customer and a seller of meat, beer, or bread, both acted on their self-interest alone how would they resolve, say the customer’s self-interested preference for a lower price and the seller’s self-interest in a higher price?  Clearly they couldn’t unless one of them ‘gave in’ and abandoned their original thoughts on the contents of their self-interests.  

Many people see transactions of buyers and sellers in precisely such a narrow manner.  I regularly read anthropologists and economists claiming that in bargaining there is a ‘winner’ and a ‘loser’, allegedly measured by whose self-interest is satisfied the most, and worse, that bargaining is all about such an interpretation.   One such is David Graeber of “5,000 years of Debt” fame, but there are many others.   Clearly a moment’s thought shows those ideas to be untrue and perverse, and Adam Smith recognized that it wasn’t true, a few lines earlier in the same paragraph, mostly unread by those convinced that ‘bargaining’, or rather their caricature of it, is immoral and nasty. 

“Bargaining”, said Smith, was about exchanging successive proposals until one emerges that is acceptable to both of them in the circumstances and the available information, often in the precise form identified by Adam Smith as “Give me that which I want, and you shall have this which you want” (WN I.ii.2. 26-7).  In bargaining language this is the conditional proposition (See my “Everything is Negotiable”, 4 editions, popular-level paperback, or my more academic MBA course textbook, “Negotiation”, Edinburgh Business School - which text is also sold separately, and 2^nd hand – try Amazon or Google). 

Smith in Moral Sentiments describes the sub-process of bargaining as “persuasion”, the key to understanding how different, even competing, self-interests are reconciled, and he does so at several points throughout that book (see TMS I.i.4.5:21; I.i.4.8:22; I.i.4.9-10:23; I.i.5.3 & 4:24; II.ii.3.2:86).  This all boils down to the admonition to achieve our self-interests by mediating them with others to gain the co-operation of others.

[Ralf Stern]:

“Smith, however, was also conscious of the power of altruism.  He could have been describing the scene in Boston when he wrote in 1759:

The plaintive voice of misery, when heard at a distance, will not allow us to be indifferent about the person from whom it comes. As soon as it strikes our ear, it interests us in his fortune, and, if continued, forces us almost involuntarily to fly to his assistance.

Smith devoted a book, “The Theory of Moral Sentiments,” to explaining why widespread altruism is the natural and unavoidable consequence of the human ability to empathize with others.

Comment

I do not think “altruism” is a helpful concept here.  It is not that humans are “altruistic” so much as they have survived as a species by forms of leaned “co-operation” to hunt bigger and dangerous game amidst dangerous rivals, certainly when group tracking, hunting, and dismembering with selected or manufactured tools, became a necessary norm.  Mutual dependence promoted the open agenda of co-operation, not so much as an “inherent” altruism.

Later, through many generations, co-operation was rooted socially and learned, as Smith showed in TMS by new generations from what were the social norms prevalent in the group – “the great school of self-command”, in the schoolyard, as Smith expressed it.  Groups that did not learn those norms that worked in changing circumstances were eliminated by the brute course of events, and as mutual co-operation passed on through tribal rituals of male dominance of other males and all females, social evolution developed in new directions, not all of them “progressive” in any modern sense.  Individual megalomania could wipe out group as could indecisiveness.

[Ralf Stern]:

“A century later, Charles Darwin laid out a theory of natural selection based on the struggle for individual survival.  However, in “The Descent of Man,” Darwin also described what we would call group selection: An advancement in the standard of morality will certainly give an immense advantage to one tribe over another. A tribe including many members who, from possessing in a high degree the spirit of patriotism, fidelity, obedience, courage and sympathy, were always ready to aid one another, and to sacrifice themselves for the common good, would be victorious over most other tribes; and this would be natural selection.”

Comment

Again this is rather a romantic set of beliefs. Natural Selection is “blind” operating from the “fitness” of individuals to survive and procreate. This can affect the group in due course, but not automatically nor inevitably.  I have discussed on Lost Legacy, Robert Franks version of this in his book, “The Darwin Economy:
liberty, competition, and the common good” (Princeton University Press, 2011) and what he alleges Darwin meant by natural selection.  I found his presentation of them wanting, especially how he elaborated on his ideas in the widespread publicity his book achieved at the time.  Natural Selection normally takes many generations to establish a new biological trait.  It begins with an individual and spreads among its successful progeny with their advantage over other individuals not sharing the new, advantageous trait.  Franks cites the case of an individual male reindeer having larger antlers than other reindeers, which gives it an advantage in domination fights to mate with females and which may enable it to sire more successful infants, which in turn continue their successful dominance, raising average antler sizes, and gradually eliminating smaller antler-sized animals in the succeeding generations. 

The allegation by Franks is that market competition, as understood by Smith, is less well suited to explaining social changes than Darwin’s theory of natural selection, with a side-bet that in 100 years future judgements as to which author, Smith or Darwin, will be regarded as the best ‘economist’ (a wholly unverifiable outcome among the present generation).  Except, of course, Smithian growth and Darwinian natural selection are not comparable in such a manner.

Moreover, the idea that “An advancement in the standard of morality will certainly give an immense advantage to one tribe over another” is misleading.  Whether a moral standard is an “advance” depends on the process by which new generations learn and pass on existing mores from the “mirror looking glass” and how it affects the group’s overall fitness to survive in any circumstances it may face.  What is an “advance” in one era may become a serious impediment in others as the environment changes, or new threats emerge, which some individuals adapt to more quickly than others and change their behaviours more successfully. 

[Ralf asserts]: “An unavoidable and perpetual war exists between honor, virtue, and duty, the products of group selection, on one side; and selfishness, cowardice, and hypocrisy, the products of individual selection, on the other.

Evolution has produced two sides of human nature: the more self-centered and the more altruistic.  Different training and circumstances can bring out in us more of one or the other, but they are both in our DNA.”

Comment

This what I called a “romantic” view of Smith’s theory of moral sentiments.  There are not “two sides” to “human nature” (there are probably scores of sides and mixes.  That designation is imposed by a convenient theory and not a reality.  Such categories of a theory are not “in our DNA”, whatever that means, other than as a poor metaphor for something unexplained.  Each individual learns from the other individuals around him or her, usually in their childhood and youth.  Smith called it society’s “mirror”.

A lengthy quote from Smith’s TMS may help:

“Were it possible that a human creature could grow up to manhood in some solitary place, without any communication with his own species, he could no more think of his own character, of the propriety or demerit of his own sentiments and conduct, of the beauty or deformity of his own mind, than of the beauty or deformity of his own face. All these are objects which he cannot easily see, which naturally he does not look at, and with regard to which he is provided with no mirror which can present them to his view”. Bring him into society, and he is immediately provided with the mirror which he wanted before. It is placed in the countenance and behaviour of those he lives with, which always mark when they enter into, and when they disapprove of his sentiments; and it is here that he first views the propriety and impropriety of his own passions, the beauty and deformity of his own mind. To a man who from his birth was a stranger to society, the objects of his passions, the external bodies which either pleased or hurt him, would occupy his whole attention. The passions themselves, the desires or aversions, the joys or sorrows, which those objects excited, though of all things the most immediately present to him, could scarce ever be the objects of his thoughts. The idea of them could never interest him so much as to call upon his attentive consideration. The consideration of his joy could in him excite no new joy, nor that of his sorrow any new sorrow, though the consideration of the causes of those passions might often excite both. Bring him into society, and all his own passions will immediately become the causes of new passions. He will observe that mankind approve of some of them, and are disgusted by others. He will be elevated in the one case, and cast down in the other; his desires and aversions, his joys and sorrows, will now often become the causes of new desires and new aversions, new joys and new sorrows: they will now, therefore, interest him deeply, and often call upon his most attentive consideration.

Our first ideas of personal beauty and deformity, are drawn from the shape and appearance of others, not from our own. We soon become sensible, however, that others exercise the same criticism upon us. We are pleased when they approve of our figure, and are disobliged when they seem to be disgusted. We become anxious to know how far our appearance deserves either their blame or approbation. We examine our persons limb by limb, and by placing ourselves before a looking–glass, or by some such expedient, endeavour, as much as possible, to view ourselves at the distance and with the eyes of other people. If, after this examination, we are satisfied with our own appearance, we can more easily support the most disadvantageous judgments of others. If, on the contrary, we are sensible that we are the natural objects of distaste, every appearance of their disapprobation mortifies us beyond all measure. A man who is tolerably handsome, will allow you to laugh at any little irregularity in his person; but all such jokes are commonly unsupportable to one who is really deformed. It is evident, however, that we are anxious about our own beauty and deformity, only upon account of its effect upon others. If we had no connexion with society, we could be altogether indifferent about either.

In the same manner our first moral criticisms are exercised upon the characters and conduct of other people; and we are all very forward to observe how each of these affects us. But we soon learn, that other people are equally frank with regard to our own. We become anxious to know how far we deserve their censure or applause, and whether to them we must necessarily appear those agreeable or disagreeable creatures which they represent us. We begin, upon this account, to examine our own passions and conduct, and to consider how these must appear to them, by considering how they would appear to us if in their situation. We suppose ourselves the spectators of our own behaviour, and endeavour to imagine what effect it would, in this light, produce upon us. This is the only looking–glass by which we can, in some measure, with the eyes of other people, scrutinize the propriety of our own conduct. If in this view it pleases us, we are tolerably satisfied. We can be more indifferent about the applause, and, in some measure, despise the censure of the world secure that, however misunderstood or misrepresented, we are the natural and proper objects of approbation. On the contrary, if we are doubtful about it, we are often, upon that very account, more anxious to gain their approbation, and, provided we have not already, as they say, shaken hands with infamy, we are altogether distracted at the thoughts of their censure, which then strikes us with double severity (TMS III.1.3-4: 110)

Once again, selection is “blind”; we do not have “inherent” behaviour sets within us, and certainly not in our DNA. Our attitudes at any moment are the summation of what we have learned is acceptable/non-acceptable to those with whom we socialise and from what we have been exposed to around us.  We are not born with our morals as a faculty planted there by God, as Professor Francis Hutcheson taught his class, Adam Smith among them.  And Smith came to his own conclusion and disagreed (politely) with his  “never to be forgotten” teacher.

For these reasons I have spent time and space discussing Ralf Stern’s views because in my view they are at variance with his presentation of Adam Smith’s.   There is more in Ralf’s paper, but the above is enough for now.