Adam Smith Notes

For Smith although people were self interested and calculating he felt that people were still motivated to sympathise and help others. He considered that mutual sympathy is pleasurable, as we are led to see ourselves as others see us and that we take account of others when deciding on a course of action. Famously Smith explained how despite not being greatly disturbed by the deaths of one hundred million in China following an earthquake, as we have little emotional connection with them we would still be prepared to lose a finger in order to save them. This is because the ‘impartial spectator’ inside us forces us to appear worthy in our own eyes. This notion extends to how we conform to the rules of society.

Smith’s most quoted passage by laissez faire economists is his reasoning that the butcher, brewer and baker only exist in those professions to serve their own needs rather than others. This is an important piece and is useful in reemphasising the intension of business, the return of profit. However, this viewpoint is too narrow, as it is followed by Smith stressing that “civilised society [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarcely sufficient to gain the friendship of a few persons.”

Because mutual sympathy is itself pleasurable, it “enlivens joy by presenting another source of satisfaction; and it alleviates grief. It enlivens job by presenting another source of satisfaction; and it alleviates grief by insinuating inot the heart almost the only agreeable sensation which it is at that time capable of receiving.” Adam Smith

This omittance of Smith’s moralising is a hollowing of the laissez faire belief, as it fails to recognise the benefits of mutual support and leaves the ideology free to abuse by people keen to justify selfishness. It is perhaps this abandoning of Smith’s moralistic dimension by his successors that Skidenski describes the invisible hand as paralysed.

Similarly, although Smith recognised and accepted that the market system would go through periods of growth and decline, he held sympathies towards bankruptcy, unlike today’s practitioners who consider it an acceptable method of rooting out the weak.

Rosenburg found that it would be unthinkable for a moral philosopher like Adam Smith to abandon the ideas contained in the Theory of Moral Sentiments in 1759 when he published the Wealth of Nations in 1776 without making it explicitly clear.

Smith was searching for an institutional framework which would eliminate zero sum gains, ways in which wealth may be pursued without contributing to the welfare of society. Therefore, Smith’s vision was not the open free for all that contemporary economists may suggest but as Rosenburg puts it “a careful balancing of incentive, of provision of opportunity to enlarge ones income against the opportunities for abuse.”

Smith highlighted that self interest can be pursued in a number off undesirable ways as self interest will only serve the public interest when the right institutional arrangements create the right psychic tension to direct such self interest The direction of effort is as important as its intensity.

“Society…cannot subsist among those who are at times ready to hurt and injure one another.” Adam Smith

The attainment and possession of wealth are regarded by Smith as almost universally corrupting. For once such wealth has been acquired, man naturally gives vent to his desire for ease, “the indulgence an variety of the rich” is fully as important a force in Smith’s system as is the desire for riches itself.

“The high rate of profit seems every where to destroy that parsimony which in other circumstances is natural to the character of the merchant. When profits are high, that sober virtue seems superfluous, and an expensive luxury to suit better the affluence of his situation.” Adam Smith

A central, unifying theme in Smith’s Wealth of Nations is his critique of human institutions on the basis of whether or not they are so contrived as to frustrate mans baser impulses (“natural insolvence”) and antisocial prodivities and to make possible the pursuit of self interest only in a socially beneficial fashion. Hence his criticism of mercantilism, which strengthened merchants to better themselves without contributing to the nation’s economic welfare.

These notes were collected in June 2008