The Adam Smith Problem is Not a Real Problem

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Table of Contents

Introduction
Discussion
Conclusion
Works Cited

Introduction

In the Wealth of Nations (WN), Smith argues that the societys prosperity can only be achieved if the society guarantees individuals the freedom to pursue their goals within the confines of natural justice. In a book that he had written earlier, ‘The Theory of Moral Sentiments’, smith explains both the origin of rules of justice and the emergence of moral sentiments.

The Adam Smith problem refers to the supposed contradiction between Smith’s argument in favour of self-interest in WN on one hand and his defence of sympathy in TMS on the other. On the face value, it may seem that the two works contradict each other (Adam Smith problem).

However, a detailed analysis indicates that no contradiction exists but rather, the two works support each other. In TMS Smith argues that in the pursuit of individual self-interest, the individual satisfies the interest of society. For example, a baker bakes bread for him to earn some monetary profits (self interest), but in turn he meets the societys demand for bread (societys interest). Under the capitalist system (WN), individuals pursue their goals through trade and production.

As they trade and produce, they must take into account the values of other society members (TMS). Smith argues that an individual or a company will make greater profits if the society (other individuals) place greater value on its activities. It is therefore evident that self-interest contained in the WN and moral sentiments in TMS work towards the same goal.

The market forces of demand and supply cannot function if there is no society, for without society, it is impossible for division of labour and its resulting efficiency to occur. This points to the fact that the market forces of demand and supply to some extent rely on the individuals ability to sympathize (role of justice in free trade). Smiths notion of self interest is therefore in line with his idea of sympathy.

Discussion

In 1776, Adam Smith published his popular book, ‘The Wealth of Nations’ (WN). This book marked the beginning of the concept of market and free trade. To date The Wealth of Nations, remains one of the largely significant books in political economy. However, even before the wealth of nations, smith had published another important work in 1759, titled the Theory of Moral Sentiments.

This book is little known outside the philosophical spheres. TMS provides significant ideas into Smiths perception of human knowledge and nature. This work was the foundation of Smiths economic theory. A number of authors have argued that these two books contradict each other (they call them the two Smiths). They assert that in TMS, smith focuses on having a feeling for fellow humans (sympathy), while in WN; he argues that societies and individuals accumulate wealth by pursuing individual selfish interests.

Connecting Sympathy in TMS to WN

Smiths concept of sympathy is central to the Adam Smith Problem. According to Griswold (260), Smith asserts that one of humanitys original obsession is sympathy or having a feeling for fellow humans. Smith argued that no matter how selfish an individual may be, in his nature, there are certain inherent principles in a mans nature that will attract him to the welfare of his fellow humans and therefore their happiness.

He gains nothing from this other than the satisfaction of seeing it (Smith 1751). The idea of sympathy has been widely misinterpreted to mean concern or pity. However, Smiths idea of ‘sympathy meant the tendency to identify with not only others miseries, but also their fortunes.

So fellow feeling is any similar passion or emotion that arises in the mind of an observer who observes another individuals outward expression of inner feelings. It is therefore clear that inner feeling is not only a function of pain and sorrow but also the joy and happiness of the others (Smith 3).

Smith argues that is much easier to identify with your joy than with your sorrow. As a result, a person who has no envy can easily identify with the good luck of another. On the other side, it is usually hard to identify with grief and we enter into it while dragging our feet (Smith 1751, Book 1 Ch 9).

Smith argues that this is the origin of ambition and class structure that serves to maintain order and stability in society. An individual who has the necessities of life is better placed to seek fame and fortune because he attracts positive sympathy from other individuals. As an inherent characteristic among individuals, they always want to better their lifestyles beyond what is considered a reasonably comfortable lifestyle.

This is partly attributed to the fact that they value sympathy in the form of admiring others who have already achieved that status. This point connects TMS to WN in the sense that individuals are never satisfied with their possessions. In deed if we had such a society where individuals are satisfied with bare necessaries of life, it would have been a very stable society but with no economic growth making it unable to fit in the changing world.

Nations create wealth because of the individuals never-ending pursuit to improve themselves materially. This happens under a conducive environment. According to Smith, countries that have allowed their citizens to pursue their self-interest have grown in wealth while those that failed in the same have fell into poverty.

Even though, the liberty to pursue self-interest cannot be without limit. This is because excess liberty by one individual is only achieved at the expense of others liberty. Therefore, there has to be a framework for regulating individual liberty. This is achieved by the rules of justice. Smith argues that justice is threatened from two sources; corruption in the society arising from the worship of riches and authority and the ambitions of rulers.

Smiths Criticism on the Worship of Wealth and Power

Smith was conscious that the worship of wealth and despise of poverty though important in maintaining social stability and driving industry, equally posed serious threats. He condemned the corruption of the princes and the political elite who ascend to power through intrigue, deception and crime but nowhere does he condemn the wealth creation.

What Smith was against was the careless accumulation of wealth that could corrupt the society, through continuous worship of wealth in total disregard to how wealth is created. He asserts that greatness and wealth in the absence of virtue and merit deserve no respect. In Smiths theory, the attitudes of people shape moral sentiments and passions.

Therefore, the tendency to worship and admire the rich and powerful, while looking down upon and neglecting the poor, though important in maintaining the class structure and order in society, corrupts the moral sentiments (Smith 3). When individuals continuously admire and adore the wealthy and the great, they tend to either ignore or excuse their faults.

This goes against the rules of justice, which is the foundation of social order. Therefore, as much as social class is created and maintained through the creation of wealth, social order is more important and the wealthy should not look down upon the poor.

Humanity in general longs for respect and admiration among his fellows. According to Smith, he can achieve this through two avenues; by studying wisdom and practicing virtue or by acquiring wealth and greatness. To Smith, the latter attract majority of humanity because they admire and worship material prosperity.

This view is similar to the modern celebrity culture in our society that is characterized by the lives of rich and famous. A society that internally undermines justice through blind worship of wealth and greatness is likely to be externally destroyed by the rulers. Absolute power, allows the rulers to manipulate the law for their own economic gains (Smith 9).

Justice as a Moral Basis of Trade in TMS

The central theme WN is that trade is the avenue to national prosperity. Trade is the direct opposite of robbery either by state or by individuals. Trade can only thrive where the security of persons and property is guaranteed. Security as a whole can be secured only through rules of justice.

TMS hypothesizes how these rules are possible and how they are formulated. Our major focus on this part will be on how sympathy transform into rules of justice. Smith puts forward two types of moral judgement; judgement of decency or indecency of an individuals passions in responding to events.

For example, if B steals As wallet containing $ 10, A has a right to be upset and resentful. However, if A responds with excessive grief as if he has lost his entire fortune, those around him may judge his conduct as indecent. Equally, if B boasts of his achievement, his conduct will be judged by others to be improper.

The second category of moral judgements involves the merits and demerits of actions. Judgement based on proper reward or punishment for an act. As noted earlier, sympathy is an instinct that all humans possess. Individual A can have sympathy for individual B only if A can imagine how B is feeling (Griswold 339).

Individual A cannot get into individual Bs mind, the best he can do is to imagine Bs feelings by way he would feel if in his situation. Using the earlier example of a stolen wallet, assume that individual W sees B stealing As wallet. W can have fellow feeling for A, because if he were the victim he would feel the same way.

Similarly, W can sympathise with As anger. Worth noting however, is that W can never fully associate with the feelings of A. His bitterness of BS act is likely to be weaker than As own bitterness of the act. This implies that if A over reacts, then W is not likely to approve it. According to Smith, the aggrieved party (A) should therefore match his passion (the extent of resentment) to that of the impartial spectator (W), if he is to capture his sympathy (Smith 22).

Therefore, the moral judgement about the decency or indecency of an act is that of the neutral spectator who is neutral and has no positive or negative inclination to the parties directly involved. Similarly, the impartial spectator can only issue proper judgement about reward or punishment for the act of stealing. Individual A may feel that the thief (B) deserves a life imprisonment but he will not find much sympathy from (W) the impartial spectator.

The Rules of Justice

From smiths point of view, sympathy forms the basis of justice. The impartial spectator identifies with the grief of the victim of violence and recommends for punishment, though not to that which the victim desires. According to Smith, rules emerge when our sense of justice disappoints us at the time when we need it most.

When this happens, then we have to judge our own actions. Smith argues that it is practically impossible for us to make reasoned judgements before we take every action as humans. This is because we often act so fast that there is no time to make judgements and that our judgements are usually full of our own passions. If we reflect upon our actions afterwards and discover that we made mistakes, we will forgive ourselves.

This necessitates the need for an external instinct in our nature that allows us to identify the proper rule of conduct. By continuously observing the conduct of others, we formulate to ourselves certain general guidelines or rules regarding what are proper and therefore should be done and what are wrong that we should avoid. When these individual perceptions coincide or merge, then the rules of just conduct come into existence.

Generally, were not originally designed with forethought, but rather developed through the accumulation of experience (Smith 23). That notwithstanding, the continuous existence of general rules, involves another element. The primary reason why rules of justice exist is that majority of the people observe them of their free will most of the time.

This element of observance originates from the virtue of self-command that Smith considers the source of all virtues. Understanding and knowing the rules by itself cannot guarantee their observance. This is because self-interest motivates individuals to violate the rules they know and approve of. Through self-command, our urgent temptations are suppressed and it directs us to observe the rules of justice (Smith 4).

According to Smith, when individuals predict disapproval (retaliation strategy in game theory), they are forced to formulate the rules of proper conduct; the rules so formulated have no author (Ferguson 122). Worth noting is that not all the rules formulated turn out to be just. Customary practices and fashion may promote or negate justice (Smith 8).

The Reduced Role of Government in Relation to Moral Sentiments

According to Smith, between the two outward moralities of beneficence and justice, justice is of more importance to the society. He argues that the state has a specific role in the administration of justice. Moral rules of justice receive recognition as lawful obligations in the last resort and the state has the task to enforce.

However, in the determination of rules of justice, Smith does not see any major role for the state because they are formed on impulse through the adaptation of humanity. Smith believed in limited role of government. He was against the idea that a ruler knows best what is good for his people and that a centralised government can better take care of all aspects of social life.

He notes that harmony in society can only be successfully achieved when laws enacted by the peoples representatives are in line with the communitys expectation and that they do not lead to either despair or anarchy. To Smith, the society is so unstructured that is impossible for it to be micro-managed by a central system of government.he further notes that the society should not try to create the best system of laws but instead focus on the best that people can bear (Smith 14).

In his writing, warns against state efforts in promoting beneficence (actions that promote the well-being of others). He notes that even though the lack of beneficence stimulates condemnation, any move to force it can be even more inappropriate (Smith 6). While the well-being of others is desirable, it cannot be achieved without endangering the more elementary morality that is justice. Both justice and beneficence are critical components of societys moral capital.

However, the state is only effective in the enhancement of justice. Beneficence can only be enhanced through urging and recommendation (Smith 16). The secondary importance of beneficence relative to justice is important in understanding the synchrony of the TMS and the WN.

Though Smith was aware and rightly worried about greed and lack of concern towards the poor in his time, he was convinced that the growth of nations is better served by stable adherence to the rules of justice that provide conducive environment for trade and industry, the way to the wealth of nations.

Conclusion

Smiths theory of moral sentiments argues that human beings by nature possess the instinct of fellow feeling. In the wealth of nations, he illustrates that self-interest is the engine of the wealth for countries and that through free trade; nations achieve the best path to prosperity. The Adam smith problem is not a real problem because of the following points;

In TMS Smith stays clear about the importance of self-interest over sympathy, secondly, self-interest and sympathy augment each other. During war, what sets each individual against every other individual is the instinct of sympathy. An individual can relate to another individuals joy as well as misery.

This capability actually enhances individual interests. In the absence of social harmony, the gains made will be short lived. As Paganelli points out, self-interest plays a positive role in the enhancement of virtues and the enforcement of moral rules (Paganelli 369). Third, it is impossible to carry out trade in the absence of steady rules that safeguard property, life and liberty. Without the rules of justice, trade cannot go on and the rules of justice cannot be achieved without sympathy (fellow feeling).

Lastly, sympathy drives self-interest as individuals extend and long for sympathy. To Smith, why we aspire for riches and fame over and above what is necessary is because we long for praise from other people. In the course of doing everything in order to earn praise from others, people end up meeting the society’s needs. It is this broader view of Smiths sympathy that nations are driven to greater prosperity.

Works Cited

Griswold, Charles. Adam Smith and the Virtues of Enlightenment. Cambridge: Cambridge University Press, 1999. Print.

Paganelli, Maria. The Adam Smith Problem in Reverse’ 40:2 history of political economy. New York: Prentice Hall, 2008.Print.

Smith, Adam. The Theory of moral sentiments. Oxford: Clarendon Press, 1976.Print.

Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. Indianapolis: Liberty Classics, 1981.Print.

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