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Adam Smith’s Wealth of Nations

The pivotal second chapter of Adam Smith’s Wealth of Nations, “Of the Principle which gives occasion to the Division of Labour,” opens with the oft-cited claim that the foundation of modern political economy is the human “propensity to truck, barter, and exchange one thing for another. “1 This formulation plays both an analytical and normative role. It offers an anthropological microfoundation for Smith’s understanding of how modern commercial societies function as social organizations, which, in turn, provide a venue for the expression and operation of these human proclivities.

Together with the equally famous concept of the invisible hand, this sentence defines the central axis of a new science of political economy designed to come to terms with the emergence of a novel object of investigation: economic production and exchange as a distinct, separate, independent sphere of human action. Moreover, it is this domain, the source of wealth, which had become the main organizational principle of modern societies, displacing the once-ascendant positions of theology, morality, and political philosophy.

Smith’s formulation transcends a purely descriptive account of the transformations that shook eighteenth-century Europe. A powerful normative theory about the emancipatory character of market systems lies at the heart of Wealth of Nations. These markets constitute “the system of natural liberty” because they shatter traditional hierarchies, exclusions, and privileges. 2 Unlike mercantilism and other alternative mechanisms of economic coordination, markets are based on the spontaneous and free expression of individual preferences.

Rather than change, even repress, human nature to accord with an abstract bundle of values, market economies accept the propensities of humankind and are attentive to their character. They recognize and value its inclinations; not only human reason but the full panoply of individual aspirations and needs. 3 Thus, for Smith, markets give full expression to individual, economic liberty. This combination of analytical and normative arguments provides Smith with conceptual resources for an implicit theory of social integration based on strategic interaction amongst selfinterested persons.

Not just the economy but the larger social order is reproduced by unplanned behavior and processes, rather than by design. 4 Instead of grounding social order in a thick moral consensus and social homogeneity, Smith considered such possibilities to have been eliminated by social and symbolic transformations experienced by modern commercial society. Additionally, with this emphasis on spontaneous coordination, Smith pointed to the possibility of a social order in which people live in harmony together with a minimum need of a central, coercive apparatus.

He captured the central intuition of classical economists according to which modern commercial society, notwithstanding its conflicts, obeys a kind of pre-established order, and enjoys the advantage of a mechanism, the market, which maintains equilibria by continually adjusting competing interests. Over time, this powerful theoretical proposition has become a legitimating cornerstone for the robust defense of market capitalism, a particular ensemble of political institutions, and a specific line of justification for liberal ideas and values.

Though manifestly plausible as an accurate reading of Smith when Wealth of Nations is read on its own, even on these terms, this interpretation, is limited and partial. Astonishingly, and disappointingly, most readers of Wealth of Nations fail to attend the very next sentence that follows Smith’s seemingly transhistorical, objectivist theory of human dispositions, mindful of Mandeville’s classical representation of human egoism.

Smith immediately probed more deeply by asking “Whether this propensity be one of those original principles in human nature of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech. ” This inquiry, he stated directly, “belongs not to our present subject to enquire. “5 This recusal is striking and puzzling. It also has large theoretical and textual implications.

Within the large body of scholarship on Smith, the book that traces the lineage and attends the consequences of this combination and recusal is Charles Griswold’s recent elegant extensive study. He grasps, almost uniquely, the intertwined connections linking the market, speech, and sympathy: “Life in a market society is an ongoing exercise in rhetoric. “6 Notwithstanding the compelling force of his interpretation, Griswold stops short of developing this important insight.

What we believe to be missing is an effort to conjoin this triad with a striving by individuals for social approbation and ethical recognition, a central feature of Smith’s project and the pivot of this article. Rather than trace back the rhetorical dimension of market relations to the quest for esteem, Griswold halts his account at what Smith called “the desire of being believed. “7 Standing on Griswold’s shoulders, we inquire, again: Did Smith ever, in fact, confront this vexing subject of inquiry, unaddressed in Wealth? If so, where and how? With what results? This article addresses these questions.

We show that Smith devoted considerable attention to these matters, but not in a single, systematic study Rather, his considerations are dispersed in three main texts: The Theory of Moral Sentiments (1759), Letters on Rhetoric and Belles Lettres (1762-1763) and Lectures on Jurisprudence (17621763, 1766). 8 By placing Wealth of Nations within the broader philosophical and moral framework undergirding Smith’s writings, we demonstrate that despite this textual fragmentation he developed a comprehensive and coherent answer to his question about the nature and status of the propensity to truck, barter, and exchange.

Rather than consider Wealth of Nations either as a free-standing text or as the place of departure for a larger grasp of Smith’s theoretical purpose, we approach this treatise as tightly linked to his prior achievements. More than being the cornerstone of his intellectual biography, this classical work caps a long-term project composed of such diverse topics as morality, rhetoric, and law. To better apprehend it, we invert the standard manner in which this book is located in the corpus of Smith. We read Wealth of Nations through the conceptual prism provided by all his major prior writings.

In this account, we place Wealth of Nations in appropriate proportional perspective. Doing so reveals its deeper philosophical objectives and demonstrates how it is dependent and reliant on a more inclusive social and moral theory. 9 Focusing on speech and rhetoric as the main ligaments of social relations, we demonstrate how Smith approached them as constituting attributes of modern markets. Rather than considering markets to be sites for the economic exchange of commodities as such, he treated markets as the modern analogue of previous institutional foundations for social order.

Thus, in modem times, markets are not simply, or exclusively, arenas for the instrumental quest by competitive and strategic individuals to secure their material preferences. Additionally, they are a central mechanism for social integration derived not from strategic self-interest but rather from the inexorable struggle by human agents for moral approbation and social recognition. Smith did not perceive markets exclusively as efficient allocators of resources but as an institutional equivalent of ancient public spaces within which citizens of the classical polls, through speech and deed, struggled for recognition.

He understood, of course, that for the ancients, the content of recognition-greatness through public dedication to the common good rather than greatness as material wealth– as well as the location of the endeavor-ekklesia rather than agora-differed from those of the moderns. Undergirding both, however, is the existence of an identical drive to acquire social esteem and praise. This, Smith believed, provides a universal, transhistorical, motivation for human action, the main torque by which societies achieve cohesion and continuity.

Like Constant, who addressed how the liberty of the ancients could not be reproduced under conditions of modern social pluralism, Smith understood that the forms and institutional means they had designed to achieve social integration had become irrevocably extinct. 10 Unlike Constant, however, who thought the liberty of the moderns had to be reinvented ex nihilo, Smith believed modern modalities for order would not differ radically from those of the ancients because both are based on the similar, and natural, quest for approbation and esteem.

Of course, Smith, like so many in his age, acknowledged the break represented by modernity and capitalism; at the same time, he allowed room in his theoretical construction for continuity. Contrary to excessive celebrations of newness characteristic of many immoderate and presumptuous endorsements of modern times, Smith investigated the multiple configurations linking past and present. The steps in our argument begin, in Part One, with a discussion of the master concept of sympathy in Moral Sentiments. This notion we retranslate, via approbation and esteem, into a modern theory of recognition.

In Part Two we demonstrate how Smith, in his Rhetoric, established the mutual constitution of recognition and speech. Then, in Part Three, we carry this understanding to his Jurisprudence, where we discover Smith’s first formulation of his original theory of the market according to the terms derived from his earlier investigations in moral and social theory. Here, the market is revealed in its deepest sense (a sense deeper than its treatment in Wealth of Nations, which represented a specific, partial, focused, even epiphenomenal, treatment of a vital, but singular, feature of the market).

I In his effort to explain the nature and the particular mechanisms of moral sentiments, Smith, clearly influenced by David Hume,12 further elaborated the seminal category of sympathy. He inserted this concept as a mediating device between what he conceived to be two opposed poles that dominated modern, secular, moral philosophy: Hutcheson’s naturalistic theory of benevolence and Mandeville’s ethics of self-love.

For Smith, Hutcheson’s assumptions about the kind, unselfish qualities of human nature made his moral system unrealistic, even utopian; it thus failed to take into account the complexity and ambivalence of the actual psychological motives of human action. 13 Mandeville, by contrast, Smith thought, while successfully unmasking and demystifying idealizations shared by the predominant moral theories of his time, such as those of Lord Shaftesbury and Bishop Butler, had adopted a reductionist model that leveled everything down to the universal, objective, and inexorable fact of self-interest. 14

Smith refused both approaches, deeming them, despite their opposition, equally monistic and one-sided. To enrich our knowledge of moral psychology, he proposed instead a different moral theory based on sympathy. 15 On this view, moral judgments are derived from a person’s ability to identify with someone else’s situation and feelings through the faculty of imagination. 16 From this empathetic capacity to enter and experience the position of another, Smith extracted conceptual resources to elucidate the elementary multifarious processes by which people make valid moral evaluations, bridging the gap between the self and the other.

The competence of individuals to undertake moral distinctions between the good and the bad, Smith argued, depends on their prior ability to sympathize. Through their passion, not reason, individuals communicate at depth with each another. 17 By such acts of imaginative identification, they reach moral conclusions. Thus, the measure of morality varies according to whether sympathy can be achieved. 18 Only when a subject can sympathize with the social and subjective situation of its interlocutors, and with their acts and passions, can they be judged as moral.

The attributes of goodness and virtue are contingent, therefore, on whether they have become objects of sympathy By contrast, emotions with which the subject cannot sympathize, Smith claimed, are discredited as vicious and immoral. 19 According to this anti-cognitivist ethical system, humans adopt a moral stance toward the world, others, and themselves, and judge the moral validity of facts and behavior by means of the faculty of sympathy This psychological and affective capacity permits them to approve or disapprove of situations and events directly related to the feelings of pleasure and pain experienced by another actor.

Hence, on the problem of how agents arrive at valid moral judgments, Smith identified psychological mechanisms involving the use of imagination and reflection. Sympathy, in short, is the chief criterion of moral judgments. 20 People do not empathize with virtuous intentions and situations as such, but some qualify as virtuous because they have sympathized with them.

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