Greed is Not Good, Nor is Selfishness Said Adam Smith

Lee Russ writes interesting posts on the ‘Watching the Watchers’ Blog. This one on 26 May, ‘The Wealth of Nations Revisited; It All Descends from Adam’, caught my eye. Please regard this as Part One of a response:

“Adam Smith's famous ‘invisible hand’ purportedly leads all individuals to follow their own self interest in a way that produces the greatest good for all. Just reading that idea leaves me amazed that such a counterintuitive idea has come to be so thoroughly accepted by really smart people, many of whom have really good educations.

On the micro level, the idea doesn't hold up at all. Just imagine living in a relationship with other human beings in one family household. If the husband always acts only for his own self interest, how exactly will that serve the interests of the family? How does the family benefit if dad spends the entire month's food budget on a trip to Las Vegas? The same analysis holds for the wife, and the same holds for each child.”

Comment
Well, it’s an easy enough mistake to make when put like that. Fortunately for Lee’s peace of mind, Smith did not write anything like that first paragraph remotely as crude about self-interest (or self love). Whoever teaches or claims that he did, has not read or understood what he did write in his ‘Theory Of Moral Sentiments’, and perhaps didn’t read his ‘Wealth Of Nations’ either.

In Moral Sentiments (apologies for not quoting the exact reference, but I did not bring my copy to France, wrongly believing I had another copy here) Smith writes critical comments on selfishness, but also notes that some degree of apparently selfish conduct is actually praise worthy.

Specifically, a man (it was 18th-century Scotland, not PC Boston) would be regarded with disdain who did not make provision for his family – here his ‘selfishness’ would be excused by the ‘impartial spectator’ and would not be regarded as guilty of improper conduct. Indeed, should a man not act in his self-interest to provide for his health and well-being, and act for the same for his family, he would be regarded as deficient morally.

Moreover, regard for the welfare for one’s family, next for relatives, next for friends and acquaintances, was regarded by Smith as appropriate behaviour for people who actions are consistent with praiseworthy moral sentiments.

Therefore, Smith’s actual writings correspond to Lee’s third paragraph:

“The one way in which Smith's theory might apply to a family is if each member of the family recognizes that part of his/her self interest is the health and survival of the family unit. If Dad recognizes that going to Las Vegas will cause the family hardship, and is sufficiently committed to the family that he views family hardship as contrary to his self interest, he won't take the trip.”

Where Lee goes wrong is to passively extend the actions of the moral man to all of society, a rather daunting task given the numbers involved. Most people only know, in addition to their family, a few friends (count your current number of active friends), add your numerous acquaintances, even add in your past friends with whom you have lost contact), and I predict with some confidence that even if you double or quadruple the total you came to, that the number of strangers in society (in your state or county, your country, and then the world), will dwarf your personal total by a large multiple.

It is not a question of your personal intentions – you may intend to ‘love all the people of the world’ – but your time and resources are never, repeat never, going to affect the billions in the world, the millions in your country, the thousands in your community. This does not condemn your attitudes, nor your genuine feelings. It only places them in perspective.

Smith’s contribution as a moral philosopher was to work out, given the moral sentiments of people and given their relative isolation from all but a few others, how it is that societies tends to be stable and harmonious, and how and in what circumstances they collapse into disorder and destruction.

He argued that whatever else we can say about people, in the main they are concerned about others as well as themselves. They are interested in the welfare of others. These moral sentiments are learned from within the family first and then in the ‘great school of self command’ (the school yard) their selfish expectations are curbed by the effect such self-indulgent behaviour has on other children, and how they react to such behaviour in others.

Their parents consider them ‘special’; others do not. This process, which today we call ‘socialisation’ continues through to adulthood. They learn to temper their self-indulgence to the level that their colleagues (immediate family, relatives, friends and acquaintances) will tolerate. They are aided in this by what he called their ‘impartial spectator’ of their behaviour (closely akin to their conscience). Behaviours that are rejected by their fellows, and which they reject in others, are curbed, as they learn to ‘get on’ with others, and they mutually avoid causing strife and offence.

This is what Smith call’s society’s ‘mirror’ and in dealing with strangers we ‘lower’ our passions to the level that strangers will tolerate, as they lower theirs. Hence, vast multitudes learn to behave in ways that even strangers, and not just over indulgent parents, will tolerate. It has nothing to do with being ‘greedy’; Greko's ‘greed is good’ was not in Smith’s litany at all.

I shall come back to the rest of Lee Russ’s article later in Part Two. I have to get back now to the work of finishing my manuscript for my new book on Adam Smith, but I shall return to Lee’s almost correct view of the context in which he wrote his Wealth Of Nations. I shall also challenge the idea that Smith was ‘deeply religious’.