Adam Smith On Liberty, Laissez-Faire and Justice

David Henderson of Econ Lib (HERE)
Conducts a Q and A session with Daniel Klein (George Mason University) on Amartya Sen’s article in the New Statesman discussed on Lost `legacy last week.

The issue turns on how ‘soft’ Smith was for the ‘little guy’ in respect of a tax financed poor relief policy. Klein:

“Saying that Smith "had a soft spot for government welfare" is highly misleading. Smith expounded a presumption of liberty - as you and I understand that term. Even Jacob Viner, an earlier cataloger of Smith's exceptions to the liberty principle, says so. Though he was in an important sense an egalitarian, and an affirmer of distributive justice understood in a libertarian way, he never favored a policy that he construed as forced "poor relief," and never argued on such grounds. He was silent, even conspicuously silent, in the otherwise quite comprehensive WN, regarding the essential feature of the poor law, tax-financed poor relief. At the opening of WN he says that he shows "what are the necessary expences of the sovereign, or commonwealth ...", and, in the spirit of enumerated powers, we might infer that he did not regard the poor law as "necessary." Indeed, there is a lot of textual evidence indicating that he would not be supportive of the redistributive state.”

Comment
Daniel Klein equates “laissez-faire” with the “liberty principle”, as he does the “invisible hand”. Wealth Of Nations is a polemic (Book IV) against mercantile political economy.

Laissez-faire is a phrase first stated (significantly) by a merchant, not a consumer, to the French Minister of Finance who had already instituted French-style regulations on trade fares and town markets (if you know France you will know French ‘logic’ in regulations). This was laissez-faire liberty for merchants, nothing was said about consumers.

Liberty for Smith was a philosophical tradition going back to Grotius and Puffendorf, based tightly on legal principles. It superseded patricular economic systems. Smith taught Jurisprudence at Glasgow (1751-64) and was firmly rooted in law and justice (see student notes of his Lectures in Jurisprudence, 1762-63, Liberty Fund 1982). Liberty is this sense is often treated as a synonym for the merchants’ 17th century plea for laissez-faire – it isn’t. And Smith never mentioned laissez-faire in Wealth Of Nations and he was intimate and familiar with the French Physiocrats who tried to popularise it.

For Smith, Liberty was not anarchy; it was a legal prejudice in favour of freedom within Natural Liberty. But nor did he regard Natural Liberty as a pre-condition for progress towards opulence. He chastised Physiocrats (naming ‘Mr. Quesnai’, a physician) for ‘entertaining the notion’ that the ‘political body’ would only thrive under ‘a certain precise regimen, the exact regimen of perfect liberty and perfect justice’. Indeed, Smith adds, ‘the bad effects of political economy’ which ‘retards and more of less is not always capable of stopping altogether the natural progress of a nation towards wealth and prosperity and still less making it go backwards’.

To which Smith appends the devastating evidence of history (all economic systems and all degrees of oppression): ‘If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation that could ever have prospered’. (WM IVix.28: 674) In short, while desirable under Natural Liberty, it was neither necessary nor sufficient to take a nation to opulence. That is an important assertion and it guided Smith’s many suggestions for partial changes within the mercantile political economy of which he criticised specifically in Wealth Of Nations.

His criticism of the mercantile acts of government from Elizabethan times (Apprentices, Town Guilds, Settlement, Corporate town monopolies, etc.,) was directed at their poverty-inducing consequences. To avoid taxes to relieve the poor, the income earners of a locality had an incentive to reduce the numbers of poor by moving them on and destroying their houses (hovels) to reduce the poor rolls; these laws prevented poor people settling elsewhere looking for work.

Smith’s views on ‘the little guy’ (a lovely Americanism) are broadly sympathetic on natural liberty and justice grounds. They are trifle more subtle than modern readers sometimes appreciate, especially in trying to back project onto Smith distributive justice in the modern sense.

In Smith's day distributive justice did not have the same meaning it has today.

Are We Hard-Wired for Fairness?

I attended a ‘Hume Workshop’ at St Andrew’s University on Wednesday which was peopled by faculty and post-graduate PhD students. Now, I am not an authority on David Hume, though as a Smithian I am familiar with much of his work because he and Smith were close colleagues.

Aaron Garrett (Boston University) presented on ‘Reasoning about morals, from [Bishop] Butler to Hume’, which I found most informative, knowing even less about Butler, whose dispute on the logical proof of God's existence was fascinating, because Aaron wove the philosophies of each man together with the confidence one expects in a faculty presentation. Ezra Macdonald, a postgraduate philosophy student, responded with a slightly nervous stance, but with well thought-out questions and comments, and which Aaron handled with the right tone of encouragement and agreement.

After lunch, James Harris (St Andrews) presented on ‘Hume’s peculiar definition of justice’, to which Jesse Tomalty, postgraduate, St Andrews, responded in a somewhat ‘rapid-fire’ style, but with firm command of her material (I sat two seats away from her at the large table and missed bits of what were her most interesting comments – because of my aged hearing not her content – as she flew through some passages). Her most telling question to James was what was ‘peculiar’ about Hume’s idea of ‘justice’?

The discussion among the faculty and students after each paper was revealing, at least to me. I did not speak in the open sessions but I did ask a couple of questions and made comments in the breaks to speakers and commentators.

It seemed to me that more attention paid to the biographies of philosophers like Hume (and Butler) would elucidate relevant aspects of what made their ideas in the form they published. In fact, I have noticed a tendency, if not a compulsion, of philosophers to focus entirely on the texts and their ‘meaning’ in relation to the ideas of other philosophers, ancient and contemporary, separate from any obvious relationship to their times and circumstances.

For example, in relating Hume on justice to the supposed moral senses, whether innate, as in Hutcheson, or from social experience, as in Smith, a commentator raised the work of behavioural experimenters that showed early signs of an idea of ‘fairness’ in young children in the cry of ‘that isn’t fair’, and in chimpanzees (which caught my immediate attention), in which the chimanzees behaved as if they disapproved of certain actions as a group. I thought the main error here lies in transposing modern concepts into the past, where the same words could have different meanings, such as the idea of distributive justice, which in the 18th century (and for long before, back to classical times) had to do with those who deserved re-distributions by virtue of their evident success socially, not their needs, and such justice did not equate to welfare redistributions to the poor (deserving or otherwise) from the rich in today's welfare capitalism.

It struck me that David Hume’s own position illustrated aspects of the justice debate. Smith taught his students (many of whom were the sons of well-off landowners, including aristocrats) that civil justice existed to defend the property of the rich from the landless poor (Lectures On Jurisprudence; Wealth Of Nations). Another source of the threat to property came from the rich, eyeing a weaker neighbour’s property with ‘avarice and ambition’, hence substantial civil law on inheritance, and the sale of property, characterises Roman Law. The Primogeniture laws were enshrined in statutes.

David Hume, as a second son, was excluded from inheritance of the estate where his widowed mother, and his sister, were excluded by law too. His elder bother, John Hume, inherited the farming estate of Ninewells, Berwickshire; Hume was compelled to seek his fortune for himself. Now, if there had been a dispute, then the justice system would have decided in favour of the existing law of primogeniture (which Adam Smith considered pernicious for the growth of commercial markets, especially when entails were prevalent. Whether this was ‘fair’ was not an issue – Hume’s writings hint at discomfort with the existing law – so the supposed ‘hard wired’ sense of ‘fairness’ is most doubtful, which is a more modern notion.

Also, what is fair is often a locally determined notion. People queue in Britain; they don’t in Italy. Both have different notions of ‘taking your turn’ fairly. Children learn about ‘fairness’ in their families, and, later, in the ‘great school of self-command’. It is not ‘hard-wired’.

I spent a productive time at the seminar, and St Andrew’s philosophy department is to be congratulated for running these seminars and inviting others to them (and the Royal Society of Edinburgh – of which Adam Smith was a founder member in 1783 - thanked for funding them).