Wednesday, March 23, 2011

A Budding Sociologist Writes Sense on Adam Smith

Dan Hirschman, who writes ‘A (budding) Sociologist’s Commonplace Book’ (HERE):

"The Passions of Adam Smith: Self-Interest, Sympathy and Societal Good"

[which he considers (far too modestly) that it “may be of wider interest … to one or two of you out there” - it is “part of an independent study on the history of economics”. ]

Adam Smith did not believe that man was solely motivated by self-interest. The first sentence of The Theory of Moral Sentiments (TMS) makes the case quickly enough: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.” In this brief essay, I will explore Adam Smith’s conception of human nature and human motivation with a focus on the role of sympathy and conflicting passions. I will then connect Smith’s microfoundations (to use an anachronism) to his arguments concerning the relative efficacy of markets and states in producing socially beneficial outcomes. Drawing on Viner (1927), Coase (1976), Rothschild and Sen (2006) and Kennedy (2009), I argue that Adam Smith was not a naïve proponent of laissez-faire, and never argued that an “invisible hand” automatically coordinates economic activity to produce optimal results when left alone (see Kennedy 2009). Rather, Smith focused on the institutions that channel self-interest into beneficial or injurious outcomes (Rosenberg 1960). Smith did argue that in many cases where contemporary governments attempted to manipulate trade, they did so in error, but he also left open three tremendous roles for government: maintaining property rights, establishing justice, and building public works. The introductory quote to this essay comes from Adam Smith’s first major work, first published in 1759. Another, much more famous quote, is often seen as being in contradiction to this first principle, “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. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.” (Wealth 15) The inconsistency between the seemingly self-interested, rational, “truck, barter, and exchange” man of Wealth contrasts with that of the sympathetic man of TMS. 19th century German scholars termed this Das Adam Smith Problem, and argued that the two books should be read separately. More recent scholarship (especially the incredibly influential Viner 1927) has argued that Wealth is misread. A closer reading of even this passage about the brewer and the baker shows that it follows a more nuanced treatment of the problem of coordination in a society characterized by the Division of Labor: “In civilized society he stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons… [M]an has almost constant occasion to for the help of his brethren, and it is in vain for him to expect it from their benevolence only.”

I strongly recommend that you follow the link to this excellent, and well-written essay. It is well worth you time. I do not agree with all of it (some references to Karl Polanyi, for example, over whom Dan and I have exchanged our views on Lost Legacy in the past), but I do agree with most of it.

Dan’s treatment of the supposed contradiction between Moral Sentiments and Wealth Of Nations is masterly.

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Blogger IndieEcon said...

Heh, I was pretty shocked to see someone having posts from 2005 focused entirely on Adam Smith. But you seem to keep it pretty interesting - I'm a big fan of Adam Smith too.

11:55 am  

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