If You Must Ascribe Ideas to Smith, First Read his Books

I had a mild attack of coughing and shivers last night which took me to bed earlier than normal, with Eric Beinhocker’s ‘Origins of Wealth’ (Harvard), which I recommend you read.

This gave me an opportunity to go back a hundred or so pages to re-read a paragraph on page 121. It follows an erudite couple of pages in the failings of the notion of homo economicus, that phoney construct of the Chicago mind built into the assumptions of the neo-classical paradigm, which, I am glad to say, Beinhocker considers to be erroneous, as any Adam Smithian (of the Kirkcaldy original variety, not the Chicago false version) would agree.

“In a survey of recent behavioural research, Herbert Gintis, of the University of Massachusetts and the Santa Fe Institute, and a group of colleagues note that Adam Smith portrayed humankind as a selfish, materialistic creature in his Wealth of Nations. [quoting from Gintis, H., Bowles, S., Boyd, R., and Fehr, E., 2005. Moral Sentiments and Material Interests, MIT Press, Cambridge] Gintis and company comment that many people forget that Smith wrote another book, The Theory of Moral Sentiments, in which Smith presented a more nuanced view of human nature, portraying it as capable of both selfishness and generosity.” [p 121]

Until I read the Gintis book (it’s on order from Amazon and has not arrived yet) I cannot be sure whether this paragraph is based on what Gintis, et al, wrote or whether it is Beinhocker’s interpretation. Which ever is the case, and whoever is responsible, it is completely wrong, as regular readers wil know.

Smith never endorsed or ‘portrayed humankind as a selfish, materialistic creature in his Wealth of Nations’ or in any other of his works, Moral Sentiments, Lectures in Jurisprudence, History of Astronomy, or his Correspondence. So it is mystery where Professor Gintis, et al, get this idea from, or what prompts them to feel we need reminding of what he wrote in Moral Sentiments.

It seems to me that people writing such errors must have ‘forgot’ to read Wealth of Nations and Moral Sentiments. They have adopted, without quibble, an interpretation of Adam Smith on self-interest that does no correspond to what he wrote in Wealth of Nations. Until I read the Moral Sentiments and Material Interests by Gintis, et al, I cannot be sure, but I bet a dollar that they quote somewhere from Smith’s well-worn statement about the ‘Butcher, the Brewer, and the Baker’ supplying your dinner from their ‘self interest’ and not their ‘benevolence’, [WN I.ii.2: p 26-7] as part of their ‘proof’. If so, I know they have not read his statements about that transaction very closely.

Or they may be relying on George Stigler’s assertion that ‘The Wealth of Nations is a stupendous palace erected upon the granite of self-interest’ [Stigler, G. 1975. p 237, in Skinner, A. K. & Wilson, T. eds. Essays on Adam Smith, Oxford University Press, Oxford] Actually, it is on such statements that Chicago erected its version of Adam Smith upon the granite of misunderstanding Smith’s philosophy.

Briefly, look a little closer at what Smith says. The unsuitability of relying on another person’s benevolence, or them relying on yours, is that it is not a permanent way to get your dinner each day. Resources are scarce; demands are many, and all people rely on numerous thousands for their daily sustenance. Does this mean that there is a constant war of self-interests? Not at all. That is not the transaction we know as bargaining.

Smith goes no to say: ‘We address ourselves, not to their humanity but to their self-love, and never talk of them of our necessities but of their advantages.’ Butchers, brewers and bakers ear the wherewithal to acquire what they want from the many others who co-operate to supply them with their needs by transacting with all the people who seek off them their dinners. By agreeing to a ‘mercenary exchange of good offices according to an agreed valuation’ (Moral Sentiments II.ii.3.2: p 86) each party to the transaction gets what they want: ‘Give me that which I want, and you shall have this which you want’. (WN I.ii.2: p 26)

Two selfish egoists would never conclude a voluntary agreement; they would fight to the end demanding everything, or a lot, and offering nothing, or a little, in return. That is not a bargaining process that can be completed. Each party has to modify its demands by addressing the self-interest of the other. Smith’s says ‘love is not sufficient’ (Lectures on Jurisprudence [LJ(A) vi.45: p 347] He describes a process similar to negotiation in Moral Sentiments (TMS I.i.4.7-4.10: pp 22-3) in which individuals ‘lower their passions’ to achieve the support of the impartial spectator. In impartial competition, in bargaining with strangers, the same lowering of high demands and the raising of low offers occurs. Smith calls it in Wealth of Nations the ‘propensity to truck, barter and exchange’; it is the only method by which ‘everyman’ procures what he wants from others, which necessarily means he must give to others what they want.

We serve our self-interest best by serving the self-interests of others. This is a long, long way from people in commercial exchange being ‘selfish and material’.

I suggest Gintis, et al, or perhaps Eric Beinhocker, take a closer look at their sources. Meanwhile, all strength to the 'campaign' to replace the neo-classical paradigm.

[I cover a more detailed critique of Chicago notions about Smith on self-interest in Adam Smith's Lost Legacy, Palgrave, 2005]