Posts Tagged ‘Adam Smith’

I was recently with a longtime friend who revealed that he does not believe in morality. He thinks the only ultimate good is his own happiness. Now, he tries to act in a way that others see as moral because he believes that that is conducive to his own happiness, and he acknowledges having emotions about what other people do (learning about mass murder would make him unhappy for instance), but he refuses to connect these emotions to any propositional knowledge. For him, words like “wrong,” “right,” “ought,” and “should” have no meaning apart from an instrumental one (“If you want to be happy, you shouldn’t go around murdering people – unless you really really enjoy murdering people”).

I agreed with him that there is no way to prove that morality exists, but I maintained that it’s a properly basic assumption. Morality is like causality. The mere fact that A has followed B 1000000 times doesn’t mean it will do so the next time unless we assume causality (see Hume). We can’t prove causality from anything else; it is a fundamental category of our understanding — just the way our brains organize our sensations of the world (see Kant). In the same way, for most of us, moral judgments are inescapable. When we see someone torture an innocent person to death, we judge that act as wrong, indeed evil. My friend does not apparently judge that act as evil; he says knowing about the act would simply cause him negative emotions.

I didn’t ask him what those negative emotions would be, but my guess is that anger would play the predominant role. If the perpetrator “got away with it,” that anger would mixed with indignation or resentment. But why would you experience indignation or resentment at a criminal’s getting away with murder? Why not fear, which is presumably what asocial animals would experience if they witnessed something like this? Why not melancholy?

We are angry because we believe that the act is wrong and unjust, and should be stopped or punished with force or even violence, if necessary. If the act goes unpunished, we are indignant or resentful; the criminal “owes” something that has not been paid. Our moral judgments cause our emotions; they don’t spring from nowhere, purposeless.

Recently, psychologists have been learning more about how emotion and moral intuition are connected, something Adam Smith knew 250 years ago. Sensitivity to moral concerns is not associated with study of moral philosophy or reasoning capabilities, but with strong empathetic abilities (see Haidt, who is wrong on moral philosophy but right on moral psychology, and Margolis).

With no intended disrespect to my friend, I suspect he scores very low on the empathy spectrum. He fails to see that other human beings have legitimate interests of their own and deserve to be able to pursue happiness just as much as he is. He needs treatment in becoming empathetic — in fact, we all need that treatment from time to time.

Here’s where literature comes in. Literary fiction’s central social function is to train our empathetic organ. When we read fiction, especially with complex, nuanced characters, we put ourselves in the place of some of the characters. We see the world through their eyes and come to understand and value them. We can witness an infinite variety of events, characters, and actions that have never actually existed, so allowing us to fine-tune and to extend our empathy to situations that challenge our intuitions, typically by bringing them into conflict, or that make us think of possibilities we have never previously considered. Literature has other, more personal functions as art and entertainment, but its central social function is training us to empathize. That’s the reason why children should read literary fiction, and why it should be taught in schools, not just considered a private hobby. (more…)

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A colleague of mine pointed me to this anti-Romney ad, adding that he thought it was “effective” because of its focus on one compelling story. Have a watch:

I did not find it effective. It does focus on one story, and it does make it sound like this person was made worse off by Romney. But capitalism is about creative destruction—and you cannot have creation without destruction. The computer I am writing on now (and that my colleague wrote on to send me that link), for example, came into being in part by destroying the manual typewriter manufacturing sector. How many plaintive stories were there about displaced manual typewriter workers? How many people lost jobs when their companies went out of business because of the success of the phone on which I first viewed the ad? Similar stories could be told about countless other cases.

That is not to say that the person (the people) whose story is told in this ad did not suffer displacement, disappointment, anxiety, or frustration. But they are much, much better off overall for living in a place where capitalism’s creative destruction is allowed to continue. What car does he drive? What medical care does he receive? What medicines does he take? How is his home heated and cooled? How fast is his home internet connection, and how many channels does he have on his high-definition television? Do we suppose he, or we, would be able to enjoy such things if we did not allow capitalism’s creative destruction?

As Bastiat pointed out in the nineteenth century (and Adam Smith pointed out in the eighteenth century), production of wealth is not only about the “seen,” but also about the “unseen.” So we see that this man and his co-workers lose their jobs. But what is done with the wealth that is thereby saved, and put to other uses? If Romney and Bain Capital made a profit in this transaction, what did they do with that money? Put it in a coffee can and bury it in the backyard? Carry it around in great big fanny packs? No, they reinvested it elsewhere, in places where it was put to better use, where it was more highly valued.

We could create a lot of jobs by outlawing farm machinery. Just think of how many people would have to be employed by farms, doing with their hands what far fewer people can do today with machines. If you think that would be a good idea, then you are not taking a full view of the situation. You are focusing only on the seen, the jobs people will have working on the farms; you are not considering the unseen, all the things those people would have been doing if they did not now have to work with their hands—all the productive labor in which they would otherwise have engaged, all the wealthy they would otherwise have created.

We should not discount the pain and suffering of people who lose their jobs. It is real, and those of us who can help them, should. But condemning the system that has given rise to the greatest increase in prosperity in human history because it involves displacements and disappointments would be like condemning modern medicine because many treatments hurt.

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I’m sorry, but what does Michael Boskin’s WSJ op-ed entitled “Obama and ‘The Wealth of Nations'” have to do with Adam Smith? The first sentence of the op-ed is “President Obama should put Adam Smith’s ‘The Wealth of Nations’ at the top of his summer reading list.” Perhaps he should—but then again, lots of people should, including, one might even suggest, Michael Boskin.

Boskin quotes the famous line from The Wealth of Nations in which Smith says “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” (bk. 1, chap. 2, para. 2). But there are two problems with Boskin’s use of this passage. First, he misquotes it. I have rendered it correctly here, but Boskin forgets a comma and inserts the word “can” between “we” and “expect.” Not a major blunder, perhaps, but if that is the only line one quotes from the book that ostensibly forms the background for your entire op-ed argument, you should get it right.

Second, and much more important, that line from Smith does not make the point Boskin apparently wants it to. Boskin wishes to criticize President Obama for holding, in Boskin’s words, “that the profit motive is somehow ignoble.” Boskin counters that “every student learns in introductory economics class that the pursuit of profits is essential to a successful economy, allocating resources to the use consumers value most.” (That might be taught in every micro course, but I am not so sure every student learns it; but that is by the by.) Note, however, that both Obama’s and Boskin’s positions, as stated, might be true: they do not contradict one another. Let me explain.

Smith’s claim about how we “address ourselves” to potential partners in market or commercial transactions—namely, “not to their humanity but to their self-love” (ibid.)—would seem to be a descriptive, not a prescriptive, statement. In other words, it describes what people actually do in such situations, leaving the question of whether they should or should not behave that way out of the discussion. Smith is here describing the way markets work, on the assumption—correct then, as it is now—that most people do not know how they work. Now Smith will indeed go on to argue that individuals acting in their own self-interest tend to engage in behaviors and transactions that benefit not only themselves (their intention) but also other people in the society as well (not part of their intention). This gives us a reason, Smith believes, to wish to encourage such transactions. This is Smith’s famous “invisible hand” argument (Wealth of Nations, bk. 4, chap. 2, para. 9).

Hence Smith does develop a prescriptive argument in The Wealth of Nations, but the gains from trade, which he thinks are both real and underappreciated, are nevertheless not decisive. Smith acknowledges other matters that he thinks we should also consider as we evaluate commercial society. Smith worried about the deleterious effects that extreme division of labor might have on the minds and psyches of the laboring class (WN, bk. 5, chap. 1, art. 2, paras. 50 and 61), and he proposed some small measures—like partially subsidized primary schooling for all (ibid., para. 55)—to address them. He also worried about the effects that business–government “partnerships” would have: he thought they would almost inevitably benefit the protected and privileged businesses at the expense of both other businesses and the public generally, so he opposed such partnerships (WN, bk 1, chap. 10, part 2, para. 27 and passim). And he worried about the poor. Indeed, almost all of the policy recommendations Smith comes to make could arguably be seen as motivated by his concern for raising the status of the least among us (here is but one example).

Now, concern for the poor, support for education, and opposition to monopoly privileges for favored businesses are hardly the exclusive provenance of the political left, as some contemporary scholars claim, but neither are they the exclusive provenance of the right. They arise instead from an understanding of how markets work and a genuine desire for people to have the chance, as Smith puts it, to better their conditions. Hence a person who wants to present Smith’s argument the way Smith intended it has to spend time defending him against people on the left, as well as on the right.

But Boskin, who is on the right, offers no discussion of any of this. Instead he wishes merely to criticize President Obama and at the same time make his own policy prescriptions, but from under the protective mantle of Adam Smith. I pass no judgment here on whether Boskin’s policy recommendations are good or bad. But they are a long way from the general claims Smith makes. If Boskin wants to suggest that Smith would endorse them, he has a lot more work to do. But why bother? Why not merely state them as his own recommendations, and argue for them on the merits?

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Matt Zwolinski and John Tomasi have a thought-provoking piece entitled, “A Bleeding Heart History of Libertarianism,” in the latest Cato Unbound. They criticize postwar libertarians (specifically mentioning Mises, Rand, and Rothbard) for seeing property rights as absolute and, in their view, regarding the welfare of the working poor as irrelevant to moral justifications for capitalism:

In the remainder of this essay, we will discuss one particular way that neoclassical liberalism has a better grounding in the libertarian intellectual tradition than the libertarianism of Mises, Rand, and Rothbard. It is not the only contrast, but one of the clearest and most important differences between these two schools of libertarian thought has to do with the proper nature of concern for, and obligation to, the working poor. On this issue, the neoclassical liberal position is that the fate of the class who labor at the lowest end of the pay scale under capitalism is an essential element in the moral justification of that system. And this position, we will argue, has a far more solid grounding in the libertarian intellectual tradition than the justificatory indifference to which the postwar libertarians are committed.

They go on to cite John Locke, Adam Smith, and Herbert Spencer (yes, Spencer!) as classical liberals who would be more sympathetic to the neoclassical-liberal project of justifying markets partly on the basis of their consequences for the welfare of the least well off. However, they also argue, plausibly, that Rand and Rothbard in particular were not indifferent to the fate of the poor, simply that they viewed the coincidence of respect for individual property rights and a better life for all as a happy fortuity. (Mises was more of a consequentialist and perhaps after all a comfortable fit within neoclassical liberalism.)

I would stress that (more…)

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One reason I support the “virtue” approach to morality is that, attractive as some moral rules are in the abstract, there are almost always cases in which good judgment requires either appropriate interpretation or even suspension of them.

Take the moral rule that one should always be honest. Honesty is clearly a virtue, but it can also be used as a weapon or as a cover for viciousness. I have on many, many occasions heard people say rude, mean, or insensitive things to others, and then defended their behavior by saying something like, “I’m just being honest.” I’m sure you have heard such things too. The fact that one is really thinking something does not by itself justify uttering or making public what one is thinking. Having followed the moral rule does not absolve one from the judgment of having behaved badly.

Thus honesty is a virtue in the way, for example, courage is. We should all strive to be courageous, but, as Aristotle argued, being courageous does not mean fighting every battle. It means, instead, fighting all and only those battles that good judgment—or “right reason”—indicates should be fought. By contrast, fighting every battle leads not only to a captious and truculent (and hence unpleasant) personality, but it also dissipates one’s effectiveness. Once others become aware that one is the sort of person who fights everything, they begin discounting what one says and does. One becomes The Guy Who argues About Everything, and it is all too easy to ignore such a person—even when he is right.

Such a person displays not courage, but rashness. That is just as much a vice as when one fails to fight battles that should be fought; such a person too is not courageous, but cowardly.

Similarly with honesty. The person who always speaks his mind is not honest but callous (cruel, meanspirited, etc.). This person probably also has an inflated sense of self-importance, thinking that speaking his mind is more important than whatever psychological damage he might inflict on others. That is not acting virtuously; it is just as morally blameworthy as the person who does not speak the truth when he should.

The difficulty, of course, is knowing when one should fight a battle or speak the truth. There are no short cuts to this; there is, alas, no finite set of rules that can uniquely determine in advance what one should do. Instead, good judgment is required, and good judgment is a hard-won skill based on experience, practice, comparison of cases, delicacy of perception, and plain good sense (to borrow from Hume’s description of what it takes to have good judgment in artistic matters). 

Perhaps there are some virtues that are simpler, more straightforward, and therefore less requiring of judgment in application. Adam Smith argues that justice is such a virtue, which he contrasts on this criterion with beneficence. Argues Smith:

The rules of justice may be compared to the rules of grammar; the rules of the other virtues, to the rules which critics lay down for the attainment of what is sublime and elegant in composition. The one, are precise, accurate, and indispensable. The other, are loose, vague, and indeterminate, and present us rather with a general idea of the perfection we ought to aim at, than afford us any certain and infallible directions for acquiring it.

He has a point, but judgment will still be required in both kinds of cases. That leads me to believe that judgment is always necessary, which I think indicates that the key to morally proper behavior always lies first and foremost in the possession of good judgment. (Liberty might also be a necessary prerequisite, but that is the subject of a different conversation.)

That brings me back to honesty. Perhaps the proper rule is something like this: No matter how hard it is, when you should be honest, be honest; but do not be honest when you should not be honest, no matter how enticing it might seem. Not as intellectually satisfying, perhaps, as a single, universal rule, but truer to the complex and multifaceted reality of human social life.

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There is an interesting review in the New Republic of one of the new Adam Smith biographies (no, not Jim Otteson’s new one, which I’m looking forward to reading).  I quite appreciated this part of the review:

By turning the logic of mercantilist economics on its head and establishing a market designed for the good of the common citizen, Smith believed governments could both unleash immense productivity and wealth and create economic institutions that encouraged discipline, moderation, and order in an open society. This would mean drawing a clear distinction between “pro-market” economic policy and “pro-business” economic policy, and Smith believed there were few threats to the moral order of a liberal society greater than the entanglement of the government with the nation’s largest producers.

That distinction has been lost in our time. In recent decades, the federal government has too often sought to advance the nation’s economic interests by tying itself to our largest corporations. What the left derides as crony capitalism and the right derides as state capitalism has been the policy of Republican and Democratic administrations alike, particularly since the economic crisis of 2008. The Bush administration’s bailouts of large Wall Street firms and the joint Bush-Obama bailouts of the nation’s largest automakers were the epitome of such entanglement. And the Obama administration’s economic reforms—empowering the largest health insurers over smaller competitors in last year’s health-care reform and the largest financial companies over smaller competitors in last year’s financial regulation reform—have taken this approach to new heights.

It was no surprise that those large insurers and financial firms supported those reforms, even though they increased the government’s power over the companies’ operations. As Smith understood, the wealthy and powerful will always look for exemptions from the rigors of competition. Though he was a champion of free markets, Smith was no fan of big business. Large merchants and principals of “joint stock companies” (or corporations), Smith wrote, are “an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.” And they are more than happy to use the government as their instrument.

However, without having read the book itself (and I’d love to find the time to read two biographies of Smith), I’m not sure how much is new on key questions like “The Adam Smith Problem” given Jim’s excellent treatment of it in Adam Smith’s Marketplace of Life (published by Cambridge University Press).  Unfortunately, Levin shows no sign of familiarity with Jim’s book despite his praise of Phillipson’s argument that The Wealth of Nations and The Theory of Moral Sentiment are connected rather than at odds (something Jim handled skillfully more than a decade before Phillipson’s book [and strangely Jim’s well-known work on Smith doesn’t merit an inclusion in Phillipson’s index, though I can’t tell on Amazon if Jim’s work is cited in the text]).

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Economist Daniel Klein of George Mason University has been doing a lot of interesting work recently.

Klein is an Adam Smith scholar in his own right, but he has also been encouraging his students to work on Smith as well. He has recently supervised two PhD dissertations on Smith:

1. Brandon Lucas recently defended his dissertation entitled “The Influence of Adam Smith: The Invisible Hand, Hayekian Narrative, and Honest Profit.” Here is the abstract:

Adam Smith’s contributions to the world and to the field of economics cannot be overstated. College level economics students and even most lay people likely know Smith for his Invisible Hand metaphor, division of labor examples, or promotion of earning honest profit. Though such subjects are over 200 years old and often outwardly accepted as straightforward, debate remains active and divided regarding several of Smith’s ideas.The main chapters of my dissertation address three related, but separate, issues to further advance the broad frames of Smith scholarship. The first paper, “Seeking Honest Profit as Smithian Distributive Justice,” investigates whether seeking honest profit can be viewed as Smithian distributive justice. Before, and certainly since, the industrial revolution scores of writers and scholars have considered profit seeking to be an unbecoming trait. The paper uses Smith’s ideas about justice and honest profit to develop a framework showing how the search for honest profits can be seen as meeting the goals of distributive justice and establish a presumption of innocence rather than guilt.

The second paper, “Adam Smith’s Congruence with the Hayekian Narrative,” searches for congruence between Smith’s ideas and the epic socio-political story that Professor Daniel Klein dubs “The Hayekian narrative.” Several elements comprise the Hayekian narrative, with evolution and atavisms being prominent actors. The paper explains the narrative, discussing how humanity’s instincts, which are carried over from the primeval band, often conflict with the extended order, and how social-democratic worldviews may be interpreted as atavisms. The paper compares several of Smith and Hayek’s ideas to illustrate Smith’s similarities with the narrative.

The third paper, “In a Word or Two, Placed in the Middle: The Invisible Hand in Smith’s Tomes,” is co-authored with Dr. Daniel Klein. The paper evaluates Smith’s use of the Invisible Hand in his two major works, The Theory of Moral Sentiments and The Wealth of Nations. Although many scholars debate Smith’s attributed importance and purpose of the phrase, the paper shows physical centrality of word placement was well understood by Smith and that location of the Invisible Hand metaphor corresponds to such an understanding.

2. A second Klein student, Michael J. Clark, recently defended his dissertation entitled, “The Virtuous Discourse of Adam Smith: The Political Economist’s Measured Words on Public Policy.” Here is the abstract:

When Adam Smith advocated a specific approach for political discussion, he recommended and utilized strategic yielding and caution when necessary. The approach involves a willingness to mull through and respect the surrounding views and can lead one to moderation or fudging of extreme views or simple non-disclosure of extreme views. According to Smith, one needed to consider accommodating his more extreme views given the prejudice of the public. Beliefs and attitudes that would cause uproar or conflict were carefully treated and not brashly put forth. Prudence called for political figures or philosophers to obscure, hedge, conceal, or temper their radical beliefs. Smith related the approach to that of the Athenian official Solon who put forth laws that attempted to be “the best that the people can bear.” However, the cautious approach of Smith’s approach has gone overlooked in modern literature. Smith’s caution is being taken for mild to moderate interventionist support and thus many are claiming the father of economics has many ideas aligned with established modern policies of the welfare state and the regulatory state. While the works and ideas of Adam Smith remain foundational to modern economics the interpretation of Smith is changing. This dissertation examines Smith’s measured words and cautious approach to public policy and defends the interpretation of Adam Smith as a strong proponent of liberty.

But Klein has also been doing his own interesting work. For example, he recently published a provocative essay at Cato Unbound entitled “Against Overlordship.” Klein argues that the reigning background assumption in today’s America is that the government owns all property, and possibly indeed owns us as well, and that it provisionally grants rights to us to use our property and ourselves at its discretion and pleasure. Unsurprisingly, he argues that this is an unacceptable way to understand our relation to our government, and that it is an equally unacceptable way to understand government’s relation to property. What is perhaps more surprising is his claim that the position he opposes is in fact what most people in America have.

Cato Unbound has now also published three responses to Klein’s essay, by Matthias Matthijs, David Friedman, and Ilya Somin. All are worth reading—even Matthijs’s essay, which, unlike the other essays, is a model of bad argument.

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