Adam Smith Quote

Adam Smith’s Theory of Moral Sentiments

Adam Smith is best known as the father of modern economics, but his moral philosophy lies at the core of his economic philosophy. Below we explain Adam Smith as a moral philosopher of the Enlightenment and discuss how to understand his theory of moral sentiments in the context of socioeconomics.[1]

POLITICAL THEORY – Adam Smith. An overview of Smith.

The Gist of Adam Smith

Smith is hard to grasp unless you read his books in full (see links below), but a quick skim, or even the summary below will do:

  • Smith is a famous liberal philosopher of the Enlightenment.
  • His economic philosophy lays the foundation of the mechanics of capitalism in the free-market. Before the rise of liberalism and slightly later thinkers like Smith, Kings and Churches ruled both people and economies. Free-trade is in many ways the cornerstone of western democracy.
  • His moral philosophy is based on Moral sentiment: The idea that self-interest drives charity (or more accurately philanthropy) because people are, in simple terms, naturally empathetic and sympathetic. He details this over 300 pages explaining how this simple concept applies to all of human behavior, but that is the gist.
  • The invisible hand combines the two concepts: The idea, that the free-market guides itself due to self-interest inherent in the human condition.

“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… The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.” – Smith on His Moral Philsophy

How to Leverage Moral Sentiment to Ensure the Wealth of Nations in a Free-Market

Adam Smith presents his moral philosophy based on self-interest in his philosophical masterwork, and his personal favorite text, The Theory of Moral Sentiments (1759). This book served as a framework for his economic masterwork, An Inquiry into the Nature and Causes of The Wealth of Nations (1776) which he wrote after 8-9 years of traveling and interviewing the world’s movers and shakers (including Benjamin Franklin).

In Wealth of Nations, Smith is highly critical of “masters” (employers, including everyone from merchants to the robber baron class) conspiring to create monopolies and keep worker’s wages low, the spending habits of politicians, and much more.

Smith isn’t insinuating the “greed is good,” or that self-interest is always pretty. He is simply saying, and here I am paraphrasing heavily, “let us create a system that allows a man to be free and to be driven by his self-interest. This will bear better fruit than the state trying to tell a man what is best for him. When we let the free-market handle supply and demand, resources are divided as if nature had divided them herself.”

Or, in the terms of his own work, Smith shows us how to leverage Moral Sentiment to ensure the Wealth of Nations.

Smith presents his social and economic philosophies based on his moral philosophy. The free-market will work because it is driven by self-interest, which is in turn driven by “moral sentiment.” Thus, Smith manages to present a strictly rational philosophy rooted in Hume-like empiricism. After all, Smith bases much of his economic and philosophical ideas on first-hand accounts and interviews, rather than on pure reason and theory. [2]

Smith will, despite is critiques of the worst of human behavior, insist that we let classical liberalism guide us, but he like the great anti-Federalist Thomas Jefferson, chooses a laissez-faire style for rational, moral, and ethical reasons (rather than for personal benefits).

Smith never insinuates that the unwelcome results of his theories, like monopolies, war-time spending, and other corrosive special interests, be celebrated. Rather, he warns us of their dangers, only hoping that his moral sentiment will prevail in the end.

Adam Smith’s major works are:

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. – Adam Smith

Adam Smith, Theory of Moral Sentiments. An overview of Smith’s moral philosophy.

FACTThe Wealth of Nations was published in 1776 (the same year America adopted the Declaration of Independence) and has been highly influential in America since.[3]

Does the free-market work? Today, in hindsight, we can see that Smith wasn’t fully wrong. The Baron’s of Industry directed most of their fortunes to philanthropic causes, and the individualist spirit of America born from the free-market testing ground of the late 1700’s forward, has seen many of Smith’s predictions come to life, both the good and bad. Ultimately, many believe that state intervention is necessary, but so far neither the laissez-faire crowd nor those who favor government intervention has been proved right. What has been largely proven is that moral sentiment does seem to be a driving factor of human ambition despite not always being able to overcome the pitfalls of cronyism or monopolistic practices.

Understanding Smith’s Moral Philosophy

Now that we have summarized Smith’s position let’s explore his moral philosophy a little deeper.

For Smith, the term “moral” doesn’t refer to morality as understood by a specific religion, much like ethics and justice aren’t comments on a specific legal system. Instead “morality” refers to deriving pleasure through making others happy. It is a sort of selfish-selflessness inherent in the human condition, a type of empathy, sympathy, or compassion, born out of a desire to fulfill one’s ego and feel important.

It isn’t that Smith didn’t believe in higher ideals as presented by the Greeks, it was that Smith was an empiricist (relied on the senses for insight, not purely on ideas).

Smith, based on experience, did not expect altruism out of the merchant class, elite, the state, or even the average person. Instead of creating a philosophy of ideals, he created a philosophy that could help lift up people of all virtues and classes. Smith believed even the worst of people is driven by moral sentiment.

Smith the Populist

Smith can be misread as an elitist, but he was arguably a true Populist in every sense. Despite his work appealing to the merchants, bankers, and general .01% of the world as much as it did the Enlightened liberals, it is ultimately a statement against kings and for empowering people.

Like Sun Tzu’s Art of War, or Aristotle’s Nicomachean Ethics, or Lao-tzu’s Tao, or Niccolò Machiavelli’s The Prince, Bernays’s Propaganda, or so many other classics, Smith’s texts act as a guidebook for leaders, but double as a populist manifesto.

Smith is critical of the unequal and immoral and presents a call to those with influence to steer the ship in the right direction, framed as socioeconomic tactics, and written to be acceptable for the times. His rationality may appeal to a money-man with a mind for numbers, but this should not be misunderstood as a single of moral apathy.

Smith believed that the freedom of men and markets would come at the expense of order, but if well tempered could lead to a great society and the wealth of nations.

Today, we can question if a pure free-market ideology can protect us against special interests. If not, exactly how much state intervention is needed. This is a conversation we started having back in the late 1800’s and early 1900’s when some were turning to Marxism after the abuses of Robber Barons, see the basic political parties.

Regardless of where we stand on the issue today, it’s important to keep in mind that the core of Smith’s philosophy was not based in economics; it was based on the idea that people can be trusted to make their own choices due to moral sentiment. The freedom to trade, own property, and make life choices is at the heart of the liberal revolution and these classical liberal principles are shared by all the great economists from Smith, to Marx, to Keynes, to Hayek, to Friedman.

We need to remember that the free-market isn’t based on some sort of pro-merchant or banker elitism; it’s based on the populist principles of classical liberalism.

Adam Smith vs. Karl Marx – The Industrial Revolution Philosophers. Although you would never say his name out loud on the news for fear of people chasing you with pitchforks, Karl Marx is the other important economic philosopher of the industrial revolution. It helps to compare the two philosophies (which aren’t as different at their core as one might think). Keynes, Hayek, and Friedman are all largely a response to those who came before them, so Smith and Marx.

“The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.” – Adam Smith

Citations

  1. Adam Smith’s Moral and Political Philosophy
  2. HUME AND SMITH ON SYMPATHY, APPROBATION, AND MORAL JUDGMENT
  3. United States Declaration of Independence


"Adam Smith as a Moral Philosopher" is tagged with: Adam Smith, Competition, Cooperation, Empathy, Happiness, Liberty, Money, Morality

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