The two voices of Adam Smith: moral philosopher and social critic

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1 History of Political Economy I9: by Duke University Press CCC /87/$1.50 The two voices of Adam Smith: moral philosopher and social critic Jerry Evensky I. Introduction In an excellent article entitled The socialization of the individual in Adam Smith Robert Heilbroner states: The Adam Smith problem lingers at two levels (1982, 427). At one level there is the question of the consistency between The theory of moral sentiments and the Wealth of nations. At a second level there is the question of whether a virtuous society, not merely a viable one, can be constituted from the socio-psychological premises on which Smith builds both books (ibid.). In his article Heilbroner makes the case that there is a link between Smith s two major works, thus resolving the first question to his satisfaction; but he argues that the paradox posed by Mandeville-the creation of social virtue from private viceremains unresolved (ibid ). It will be suggested in what follows that Heilbroner s conclusions are incomplete owing to the narrowness of his analysis. As Heilbroner himself states: To develop the elements of this unitary conception [of Smith s works] would require another and more ambitious essay than this one (ibid. 435). A broader analysis of Smith s work will lend added support to Heilbroner s conclusion on the consistency issue and will clarify a problem with his statement of the Mandevillian paradox issue. Heilbroner writes that the TMS is written in two voices.... The two voices obviously belong to Smith the empirical observer and Smith the moral instructor (ibid. 429, n.6). The narrowness of Heilbroner s analysis stems from the fact that he writes about only one voice: Smith the empirical observer. A more complete understanding of Smith s work requires that we keep each voice in mind. The focus of my article is those two voices and their relationship to one another. The voices express the two points of view from which Smith views the world. One of them is that of Smith as moral philosopher. From this point of view Smith sees the world as the Design of the Deity, a perfectly harmonious system reflecting the perfection of its designer. Smith s second viewpoint is that of historian, contemporary observer, and Correspondence may be addressed to the author, Dept. of Economics, Syracuse University, Syracuse NY

2 448 History of Political Economy 19:3 (1987) social critic, and from it he sees that the real world is not the Design of his ideal vision. He recognizes that human frailty leads to distortions in the Deity s Design. In my article it will be shown that the unity of Smith s thought is profoundly evidenced by the consistency with which his two voices speak as they move from The theory of moral sentiments to the Wealth of nations, and by the consistency of their relationship to one another. This evidence will make it clear that there is no Adam Smith consistency problem. It will also be shown that the Mandevillian problem Heilbroner finds in Smith s analysis lies not in that analysis, but in the statement of the issue. Smith does not build both books on a single set of socio-psychological premises. He presents two analyses, each built on a different set of premises. Smith s moral philosophical analysis presents a virtuous society built on the socio-psychological premise that there is perfect individual virtue. His real analysis presents a world based on the socio-psychological premise that we suffer from human frailty. In this latter analysis he outlines his prescription for making the world, which can never be perfectly virtuous, at least viable. Viable in Smithian terms means approximating the Design. Smith is not Shaftesbury. He does not have a Panglossian view of the world. It is not his purpose to solve the paradox posed by Mandevillethe creation of social virtue from private vice in an absolute sense. He recognizes perfectly well that individual vice cannot beget collective virtue. His purpose-a purpose that is consistent from one book to the nextis to argue that while we cannot achieve the Design, we can approximate it. Being a moral philosopher and recognizing that humankind cannot approximate what it does not see, he offers his vision of the Design as an objective. Being an historian, contemporary observer, and social critic, he offers his prescription for approximating the Design. My purpose is to represent the full framework of Smith s thought. If the representation herein is correct, it not only resolves current questions about consistency in Smith s thought from The theory of moral sentiments to the Wealth of nations, it will also show the full dimensionality of Smith s analysis. He analyzed economic affairs in the context of the social and political structures of control, always making the threads between these systems explicit. 11. Adam Smith s Moral Philosophy: His Ideal Perspective The moral philosophy of Adam Smith was a major current in the philosophical mainstream of his age, the Enlightenment. The patron saint of the age was Sir Issac Newton. Newton s Principia offered a first full 1. See C. Becker, 63, on the quasi-religious nature of this age. He says of the philosophes: Obviously the disciples of the Newtonian philosophy had not ceased to worship.

3 Evensky Two voices of Adam Smith 449 glimpse of the mechanics of nature and administered the coup de gr&e to the Scholastic approach to knowledge.2 Among the persons at the cutting edge of intellectual endeavor it was no longer considered valid to derive knowledge from an ever more careful reading of received doctrine. By the time of the Enlightenment it was generally accepted that knowledge was accessible only through observation and the application of human reason. While Newton s methodology differed from the traditional theological approach, he was still deeply committed to the belief that the biblical account was valid, and he saw his work as a support for this view.3 The Enlightenment inherited Newton s methodology but combined it with a less biblical though nonetheless teleological approach referred to as the Design argument. The existence of the Design is the foundation of Adam Smith s moral philosophy. The Design argument applies an inductive reasoning process and concludes that the order we experience must be the Design of the Deity.4 It is most clearly expressed by Cleanthes, a character in David Hume s Dialogues concerning natural religion: Look round the world: contemplate the whole and every part of it: you will find it to be nothing but one great machine, subdivided into an infinite number of lesser machines, which admit of subdivisions, to a degree beyond what senses and faculties can trace and explain. All these various machines, and even their most minute parts, are adjusted to each other with an accuracy which ravishes into admiration all men, who have ever contemplated them. The curious adapting of means to ends, throughout all nature, resembles exactly, though it much exceeds, the productions of human contrivance; of human design, thought, wisdom, and intelligence. Since therefore the effects resemble each other, we are led to infer, by all the rules of analogy, that the causes also resemble; and that the Author of Nature is somewhat similar to the mind of men; though possessed of much larger faculties, proportioned to the grandeur of the work, which has been executed. By this argument a posteriori, and by this argument alone, do we prove at once the existence of a Deity, and his similarity to human mind and intelligence [Hume 1947, This teleological view of the universe was applied to moral philosophy by Newton s disciples. Lord Shaftesbury was an optimistic theist5 who They had only given another form and a new name to the object of worship: having denatured God, they deified nature. 2. SeeCohen, See Hurlbutt, It is the invalidity of this application of inductive reasoning that Hume chooses as his primary point of attack on the Design argument. See Randall 1962 for a description of the uncomfortable position Smith was temporarily placed in with respect to the Dialogues. 5. See Stephen, 2~44.

4 450 History of Political Economy 19:3 (1987) saw a divine, happy harmony in nature. He wrote in opposition to Mandeville, who in his Fable of the bees represented the order as the product of the tugs and pushes of individuals motivated only by self-love. Shaftesbury s contemporary Joseph Butler, while not so optimistic, saw virtue in a divine harmony for which corrupt humans could strive. Lord Kames (Henry Home) and Francis Hutcheson, two primary mentors of Adam Smith s intellectual development, were also adherents of the Design argument. It is not surprising, therefore, that Smith s moral philosophy is built on that argument. It comes to him through his mentors as well as through his reading of Stoic philosophy, which embodies a version of the Design argument and had a profound impact on him. As he writes in The theory of moral sentiments: The idea of that divine Being, whose benevolence and wisdom have, from all eternity, contrived and conducted the immense machine of the universe, so as at all times to produce the greatest possible quantity of happiness is certainly of all the objects of human contemplation by far the most sublime [TMS, The major goal of Smith s intellectual agenda was to do for moral philosophy what Newton had done for natural philosophy: to present a coherent model which disclosed the Design. Smith s model consists of three parts: (i) A determination of standards for individual behavior, an ethics of the Design; (ii) A determination of rules for interpersonal or social behavior, a system of jurisprudence consistent with the Design; and (iii) An explication of the manner in which the appropriate behavior guided by appropriate rules (and institutions) will lead to the greatest wealth for the nation? The theory of moral sentiments (TMS) is the first piece in this project. It was Smith s attempt to answer questions which had been central to the major works of two of his mentors, Butler and Francis Hutcheson: First, wherein does virtue exist?... And secondly, by what power or faculty in the mind is it, that this [virtuous] character, whatever it be, is recommended to us? (TMS, 265). Smith attacks these questions using a methodology in the best Newtonian tradition. Adopting general principles, he attempts to account for the array of human behavior by applying human reason to observation. 6. I am indebted to Robert Heilbroner for this suggestion. 7. As it is stated in the General Introduction to the Oxford edition of the WN: Those interested in the scientific study of man at this [Adam Smith s] time sought to apply the

5 Evensky Two voices of Adam Smith 451 Smith begins with the general principle that every human being is endowed with an array of sentiments. These sentiments are the medium through which cause (experience) is transformed into effect (behavior). This entire process constitutes an action: an individual s experiences excite the sentiments and they in turn excite passions which motivate behavior. According to Smith s scheme, in order for an act to be moral it must be in harmony with the Design. To be so is to be in accordance with the intentions of the Deity. Thus in order for a spectator to correctly determine the morality of an act, he must know what balance of sentiments is in harmony with the Design and must also have a perfect vision of the inner self, that is, a clear view of the true sentiments unbiased by perspective. This ideal perspective and vision is necessary for judging one s own acts as well as those of others. Smith recognizes that no such spectator exists in reality, so for the purposes of his philosophical exposition he adopts the concept of an impartial spectator,* the well informed spectator,... the man within the breast, the great judge and arbiter of their [human] conduct (ibid. 130). The measure of approval this impartial spectator feels for an individual s action is determined by the degree of ~ympathy,~ or in other words, identification the impartial spectator feels with the action. Smith divides this judgment into two parts. One is the degree to which the impartial spectator is in sympathy with the sentiments response to the cause (i.e., the experience which excites the sentiments). Smith refers to this as the propriety or impropriety of the act. The other part of judgment is an act s merit or demerit. This refers to the degree of sympathy the impartial spectator feels for the effect (i.e., the passion leading to a behavior) stimulated by the aroused sentiments. Smith emphasizes the former consideration over the latter, noting that Sympathy... does not arise so much from the view of the passion, as from that of the situation which excites it (ibid. 12). It should be clear that the fulcrum in this scale of judgment is the sentiments. The morality of an act is determined by the balance of these sentiments. If they are in a state of equilibrium which is in harmony with the Deity s Design, then they are moral sentiments. This key role for the sentiments is reflected by his choice of a name for his book on ethics, The theory of moral sentiments. The spectator concept Smith adopts is not his own creation. Both Hutcheson and Hume gave prominence in their ethical theories, to the Newtonian vision of a law governed universe to a new sphere, and to employ the experimental method as an aid to the discovery of those laws of nature which governed the behavior of the machine and disclosed the intention of its Design (Campbell & Skinner, 3). As Voltaire put it: Very few people read Newton.... But everybody talks about him (quoted in Becker, 60). 8. See ibid , for an extended description of this concept. 9. See ibid. 317 for more on this concept.

6 452 History of Political Economy 19:3 (1987) approval of a spectator or of every Spectator, even of a judicious spectator. This connection helps bring out the disinterested character of the moral standpoint (Raphael & Macfie, 15). Smith s innovation lay in substituting this spectator concept for Butler s concept of conscience as the perfectly informed inner authority and arbiter among the sentiments. Smith s impartial spectator is thus a synthesis of ideas he had been exposed to by his mentors. It combines the indifferent perspective, unaffected by passion, of a spectator with the clear vision of relevant information available only to one s inner self. Such clear vision in a consciousness which fully appreciates the Design allows the impartial spectator to serve as a perfect arbiter among the sentiments. If sentiments and therefore the excitement and the passion they produce are appropriately balanced in the eyes of an impartial spectator, then the balance must be in harmony with the Design. Here is how Smith makes this point: When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble?... It is not the soft power of humanity,lo it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self-love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct [the impartial spectator].... It is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self-love can be corrected [put back into proper balance with the rest of the sentiments] only by the eye of this impartial spectator.... It is not the love of our neighbor, it is not for the love of mankind, which upon many occasions prompts us to practice those divine virtues. It is the stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honorable and noble, of the grandeur, and dignity, and superiority of our own characters [TMS, This quotation embodies much of the essence of Smith s ethical system. Sentiments are not in and of themselves good or bad. It is their balance that must be considered in judgment. Thus self-love is not inherently evil. It is a valid and useful sentiment. * Only when we allow it to act with 10. A rejection of Hume s view A rejection of Hutcheson s view. 12. As Smith puts it: 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. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages (WN, 26-27).

7 Evensky - Two voices of Adam Smith 453 unbridled passion are we acting in a manner inappropriate to the realization of the Design. Benevolence, by the same token, is not the queen of sentiments. It is too feeble, according to Smith, to play that role, and it does not provide the motive for exertion necessary to spur productive ardor.13 This quotation also reflects Smith s conception of the relationship between the impartial spectator and the Design. It is by following the guidance of that great judge and arbiter of our conduct that one s sentiments are properly balanced, and thus consistent with the Design. For this reason, Smith refers to such behavior as the practice of those divine virtues. As he puts it elsewhere: By acting according to the dictates of our moral faculties, we necessarily pursue the most effectual means for promoting the happiness of mankind, and may therefore be said, in some sense, to co-operate with the Deity, and to advance as far as is in our power the plan of Providence [the Design; TMS, Smith s adoption of the impartial spectator as the arbiter among the sentiments is, as we have seen, a variation on Butler s system. Butler assigns this role to conscience. l4 Their systems are distinctly different, however, when we consider how the dictates of their respective arbiters, conscience and the impartial spectator, are enforced. In Butler s system the conscience is empowered by God with the authority de jure to enforce its will. In contrast, Smith s impartial spectator has no enforcement authority de jure or de facto. In Smith s system the actual enforcement of the impartial spectator s will must come from another source. This brings us to another key concept in Smith s system of moral philosophy, the concept of individual self-command. Self-command is Smith s term for strength of character. It is the power to enforce upon oneself the judgment of the impartial spectator. In Part VI, Section 111, of TMS entitled Of Self-Command, Smith introduces the concept: The man who acts according to the rules of perfect prudence, of strict justice, and of proper benevolence [i.e., with a balance of sentiments as dictated by the impartial spectator], may be said to be perfectly virtuous. But the most perfect knowledge of those rules will not alone enable him to act in this manner: his own passions are very apt to mislead him; sometimes to drive him and sometimes to seduce him to violate all the rules which he himself, in all his sober and cool 13. SeeTMS Around the conscience, in Butler s conception of human nature, are grouped a number of instincts [not identical, but similar to Smith s sentiments], inferior in authority, but each ruling over the province assigned to it.... The two nearest the throne [of conscience] are benevolence and self-love (Stephen, 2:43).

8 454 History of Political Economy I9:3 (I 987) hours, approves of. The most perfect knowledge, if it is not supported by the most perfect self-command, will not always enable him to do his duty [TMS, Self-command is a concept Smith borrowed from the Stoics. l5 The degree of its strength determines the degree to which the Design will be realized. We have seen that TMS presents Smith s view on the nature of individual behavior necessary for the human order to be in harmony with the Design. This is the first piece in Smith s system of moral philosophy. At the end of TMS Smith makes a promise to complete the presentation of his system: I shall in another discourse endeavor to give an account of the general principles of law and government, and of the different revolutions they have undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns police, revenue, and arms, and whatever else is the object of law [TMS, In the Advertisement added to the sixth edition of TMS published in 1790, the last edition Smith edited and revised, he states: In the Enquiry Concerning the Nature and Causes of the Wealth of Nations [the adjustment of the title is his own], I have partly executed this promise.... What remains, the theory of jurisprudence, which I have long projected, I have hitherto been hindered from executing.... Though my very advanced age leaves me, I acknowledge, very little expectation of ever being able to execute this great work to my own satisfaction... I have not altogether abandoned the design [ibid. 31. Thus far we have followed the course of Smith s moral philosophy through its first part in TMS. The next logical step in Smith s exposition on the Design would have been the presentation of a theory of jurisprudence.16 As he feared, it was never written. The Lectures on Jurisprudence (LJP)17 are published notes taken by students attending Smith s lectures at Glasgow in the early 1760s. l8 From these one can discern the general outlines of the missing piece of Smith s design. It is apparent that in this missing volume19 he would have dealt with the analysis of human interaction. 15. This ancient school, it is asserted in the Introduction to the Oxford edition of the TMS, was the primary influence on Smith s ethical thought (Raphael & Macfie, 5). 16. See Campbell & Skinner 1976, Smith, See Campbell & Skinner 1976, Donald Winch refers to this as the missing link in a sequence of overlapping systems running from the science of ethics at one end, to political economy... at the other. The ends of this Sequence are clearly marked by the TMS and the WN respectively, but the intermediate area exists only in the form of two sets of students notes or Smith s Lectures on Jurisprudence (Winch, 9).

9 Evensky Two voices of Adam Smith 455 According to Smith humans are fundamentally social beings: It is thus that man, who can subsist only in society, was fitted by nature to that situation for which he was made. All members of human society stand in need of each other s assistance, and are likewise exposed to mutual injuries (TMS, 85). This exposed position necessitates positive law, and the ideal version of that is natural jurisprudence. Natural jurisprudence is to human interaction what the dictates of an impartial spectator and selfcommand are to individual behavior. These are the two structures of control, interpersonal and individual respectively, which underlie the existence of the Design. They are crucial to Smith s moral philosophical system because they are necessary for the realization of the Design. Having described the structure of control under which the human order would be in harmony with Deity s Design, Smith completes his moral philosophical exposition in WN. Therein he argues that spurred by an appropriately balanced sentiment of self-love in all individuals, and protected by the regulation of natural jurisprudence, economic intercourse will naturally and inevitably result in an allocation of resources and a distribution of returns that is socially optimal: The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighborhood, be either perfectly equal or continually tending to equality.... This at least would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to chuse what occupation he thought was proper, and to change it as often as he thought proper. Every man s interest would prompt him to seek the advantageous, and to shun the disadvantageous employment [ WN, Smith extends this thought in discussing one who employs capital: he intends only his own security; and by directing that )industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end [the benevolent Design] which was no part of his intention [ibid The genius and beauty of the Design is that its realization requires nothing more of humans than that they do not interfere with the invisible hand of the Deity which guides the course of events in accordance with the Design. The invisible hand is Smith s metaphor for the Deity as Designer. It is not meant to suggest the hand of a corporal Deity whose constant manipulation guides each turn in the course of events. Smith s conception of the Deity as Designer is represented by the traditional Enlightenment analogy

10 456 History of Political Economy J9:3 (1 987) of a watchmaker. It is the Deity who at some initial point designed and constructed the universe as a watchmaker does a watch. All the springs, pins, and wheels are set in their proper order, the watch is wound, and the hands begin to move. On the face of it, it appears to the casual observer that the hands of the watch are guided by some immediately present invisible hand. In fact the hands of the watch move in a course and at a pace determined by their designer. So it is with Smith s conception of the universe, and more specifically the human order, and most specifically the economic system. It appears to be guided as if by an invisible hand, but behind that appearance is the intricate order of the Deity s Design. This then is a complete view of the Design as unfolded and presented by Smith. Given the necessary conditions of balanced sentiments and natural jurisprudence, the natural course of events, guided as if by the invisible hand of the Deity, will lead society to the best of all possible worlds, In WN we see that this ideal case will exhibit market prices that conform with natural prices. Smith refers to these as natural because they are the levels that are generated when the system is in harmony with the Deity s Design Adam Smith as Historian, Contemporary Observer, and Social Critic As an historian, contemporary observer, and social critic, Smith recognizes that distortions in the structures of control do exist and are exploited, and therefore the Design has never been realized within the human order at any place in any time. As an Enlightenment figure he shares with his fellow philosophes a hope for, if not a faith in, the improvability of the human condition. These perceptions, combined with his vision of the Design, direct his interests to another set of questions: What causes the failure of human society to realize the Design? And what policies would bring society into the closest possible harmony with the Design? His answers to these questions reflect Smith s practical-prescriptive perspective. Smith identifies human frailty as the characteristic which causes humankind to fall short of realizing the Design. This view is clearly expressed in a passage from TMS. He begins with the perspective of the ideal, the moral philosopher: Human society, when we contemplate it in a certain abstract and philosophical light [emphasis added], appears like a great, an immense machine, whose regular and harmonious movements produce a thousand agreeable effects. He continues, however, with the perspective of a practical observer, cognizant of human imperfection:

11 Evensky * Two voices of Adam Smith 457 As in any other beautiful and noble machine that was the production of human art [emphasis added], whatever tended to render its movements more smooth and easy, would derive beauty from this effect, and, on the contrary, whatever tended to obstruct them would displease upon that account: so virtue, which is, as it were, the fine polish to the wheels of society, necessarily pleases; while vice, like that vile rust, which makes them jar and grate upon one another, is as necessarily offensive [TMS, Thus we see the source of the duality in Smith s thought. He distinguishes between the ideal world-the Design-and the real world. He would assert that the former should be the goal of the latter, but he recognizes that the full achievement of this goal is impossible owing to human frailty. Now we return to TMS in order to trace this second, practicalprescriptive perspective, through Smith s works. TMS is generally viewed as a work on moral philosophy, but it is also a practical-prescriptive guide for approximating the ethical norm it presents. The philosophical voice dominates the book, but the practical-prescriptive voice can be heard: There are some situations which bear so hard upon human nature, that the greatest degree of self government [self-command], which can belong to so imperfect a creature as man, is not able to stifle, altogether, the voice of human weakness or reduce the violence of the passions to that pitch of moderation, in which the impartial spectator can entirely enter into them [TMS, 261. In other words he recognizes that self-command is not always adequate to the task. Given this consideration, he prescribes that in the actual practice of judging the ethics of behavior one must consider that though behavior may fall short of the most perfect propriety, it may still deserve some applause, and even in a certain sense, may be denominated virtuous... and though it fails of absolute perfection, it may be a much nearer approximation towards perfection, than what, upon such trying occasions, is commonly either to be found or to be expected [ibid Smith s point is that humans are not commonly either to be found or to be expected who exercise even a significant measure of self-command. Therefore, it is important when judging others to measure out approbation in proportion to their approximation of perfection. This is his prescription. It is a policy designed to encourage behavior that is appropriate for the realization of the Design.

12 458 History of Political Economy 19:3 (1987) The realization of the Design also requires the abilities of an impartial spectator. Here again Smith s ideal system is founded on an ability which he recognizes as less than perfect in humans. In the judgment of our own acts all humans suffer from a malady Smith terms self-deceit. This selfdeceit, this fatal weakness of mankind, is the source of half the disorders of human life (ibid. 158). Again he offers a prescription. This prescription is designed to help individuals judge their own actions. It requires that individuals refer to general rules... universally acknowledged and established, by the concurring sentiments of mankind.... Those general rules of conduct, when they have been fixed in our mind by habitual reflections, are of great use in correcting the misrepresentations of self-love concerning what is fit and proper to be done in our particular situation [ibid. 160]20 Smith offers a term for this prescription: The regard to those general rules of conduct, is what is properly called a sense of duty,... the only principle by which the bulk of mankind are capable of directing their actions [ibid As Heilbroner points out: [Smith s] complex conditioning apparatus of society [presented above] creates not only moral man, capable of entertaining sentiments that refine and alter his judgments, but economic man whose social activities have been altered in a manner specifically necessitated by commercial society [Heilbroner, Thus those who most closely approximate the behavior appropriate for the Design (i.e., follow duty) are also the individuals who by participating successfully in the daily affairs of society achieve wealth and rank in it. Smith believed that a natural aristocracy with a social consciousness derived from enlightened self-interest would emerge from this upwardly mobile group. These then would be the natural leaders in Smith s less than ideal society, and the distinction of ranks and orders of society maintained by a strong propensity for the poor to pay respect to the rich and reinforced by socialization would give stability to this society. Smith also deals with the question of behavior appropriate for human interaction. Such behavior is very important in Smith s mind because, as cited above, All the members of human society stand in need of each other s assistance...[and yet they] are likewise exposed to mutual injuries (TMS, 85). It is this view of society as fundamental to human exis- 20. See Stephen, vol. 2, on the Common Sense School.

13 Evensky - Two voices of Adam Smith 459 tence, along with the recognition of human frailty, that causes Smith to emphasize the importance of justice. Justice is for Smith the main pillar that upholds the whole edifice of society (ibid. 86). The weakness of individuals would undermine social intercourse if no system of positive law existed in order to regulate that intercourse.21 Positive law is society s means of self-defense. As noted above, in the ideal case, positive law is consistent with natural jurisprudence, for this is the justice of the Design. In fact, however, Every system of positive law may be regarded as a more or less imperfect attempt towards a system of natural jurisprudence, or towards an enumeration of the particular rules of justice. As the violation of justice is what men will never submit to from one another, the public magistrate is under a necessity of employing the power of the commonwealth to enforce the practice of this virtue (ibid. 340). Though the volume on natural jurisprudence and positive law was never written, Smith s view of their interrelationship and the importance of each to his philosophical and practical-prescriptive systems respectively is apparent. It is clear that Smith believes that for natural jurisprudence to be approximated, a system of positive law must insure a fair race for wealth and the protection of property won in this fair race.22 To complete our analysis of Smith s practical-prescriptive perspective we turn to WN. Smith s two voices are heard again in this work. This duality of voice made WN appeal to two audiences simultaneously: those attracted by his philosophical system and those who found his practicalprescriptive analysis relevant to mid-eighteenth century Britain. 23 This alone, however, cannot account for the much larger audience his second book attracted, because both voices are found in both books. The reason lies in his change of subject matter and of emphasis. WN is written on a topic of much wider interest-economics-and the emphasis is on the much more easily accessible and generally interesting voice, the practicalprescriptive voice. The most striking example of Smith s concern with the practical condi- 21. As society cannot subsist unless the laws of justice are tolerably observed, as no social intercourse can take place among men who do not generally abstain from injuring one another; the consideration of this necessity, it has been thought [by Hume, and Smith agrees that this account is undoubtedly true, ibid. 881, was the ground upon which we approve of the enforcement of the laws of justice by the punishment of those who violate them (ibid. 87). 22. See TMS, 82-85, for more on this fair race concept. 23. The WN was not only an intellectual achievement of the greatest magnitude, embracing as it does the explanation of complex social relations on the basis of a few principles, but also a work which provided practical prescription [emphasis added] for the problems of the day (Campbell & Skinner 1982, 171). See also Campbell & Skinner 1976,

14 460 History of Political Economy 19:3 (1987) tions of mid-eighteenth-century British commerce is his vehement attack on the extant structure of control he called the mercantile system. He dedicates almost the entire fourth book of WN to this assault, and it is by no means limited to those pages. What evil does Smith see in the mercantile system? It diverts the flow of economic resources from the channels they would naturally follow if allowed to flow freely. In international policy he cites as one example. Bounties upon the exportation of any home-made commodity [which] are liable... to that general objection which may be made to all the different expedients of the mercantile system: the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord [WN, Considering domestic policy he notes the policy of Europe, [which] by not leaving things at perfect liberty, occasions other inequalities [in wages and profits] of much greater importance [than those caused by the Nature of the Employments Themselves ; ibid In this latter case he has in mind settlement laws, apprenticeship laws, exclusive privileges of corporations, and any other such political or social institutional structure which would limit competition. According to Smith s analysis it is this diversion of the flow of economic resources from their natural channels which causes the market values to vary from their natural values. The degree to which the market values persistently diverge from the natural values is a measure of the distortion of the structure of control from that which is consistent with the Design. Since the primary structure of control in society is government, much of Smith s prescription in WN regards government policy. Smith asserts that government must encourage the free flow of economic resources. He recognizes that this is an heroic ~bjective,~~ but nonetheless it is with this objective in mind that he offers his prescription for government action. The immediate business of government must be to dismantle the mercantile system. This requires an elimination of existing laws and institutions which impede the free flow of commerce. Examples specifically cited and discussed by Smith include entail and ~rimogeniture,~~ settlement laws,26 and exclusive privileges of corporations. 27 It is these 24. He writes: To expect, indeed, that the freedom of trade should be entirely restored in Great Britain, is as absurd as to expect that Oceana or Utopia should ever be established in it (WN, 471). 25. See ibid See ibid See ibid.

15 Evensky * Two voices of Adam Smith 461 kinds of impolitic arrangements which cause the deviations, whether occasional or permanent, of the market price of commodities from their natural price (ibid. the consequence of these divergences from the Design. Smith places special emphasis on the need to eliminate the collusion, coercion, and political influence of special interests. In his classic statement on this problem Smith notes: People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices (ibid. 145). His acute awareness that the incentives lead merchants to behavior which is inconsistent with the social welfare makes this problem a constant theme throughout WN. 29 Smith s prescriptions regarding this particular problem are threefold. First of all, the government should not encourage such combinations. He cites several laws which do just that, the most important example being the corporation act. He states that a corporation, by its coercive power over members, will limit the competition more effectually and durably than any voluntary combination whatever (ibid. 145), and such an institution serves no one except itself.30 Secondly, government should look upon the proposals of any new law or regulation of commerce which comes from this order [dealers]... with the most suspicious attention... [because it] comes from an order of men, whose interest is never exactly the same with that of the publick, who have generally an interest to deceive and even to oppress the publick, and who accordingly have, upon many occasions, both deceived and oppressed it [ibid In Smith s mind the quintessential case of such self-serving proposals that had been successfully enacted was the mercantile system. At the conclusion of an eight-chapter assault on this system in Book IV of WN he states: It cannot be very difficult to determine who have been the contrivers of this whole mercantile system; not the consumers, we may believe, whose interest has been entirely neglected, but the producers whose interest has been so carefully attended to; and among this latter class our merchants and manufacturers have been by far the principal architects [ibid See ibid for more on this. 29. See for examples ibid. 267, 324, 434, and For his words on this latter point see ibid. 146.

16 462 History of Political Economy 19:3 (1987) As a final prescription with respect to this matter, he asserts that government must be the party of last resort to protect the security of the whole society...[from] exertions of the natural liberty of a few individuals, which might endanger [that] security (ibid. 324). In this capacity government has the right and the responsibility to enact protective and procompetitive regulations. An example of the former is the requirement of party walls to prevent the spread of fire.31 As for the latter, Smith condones regulations of the banking trade (ibid.), and in fact he makes specific recommendations in this regard. 32 Smith asserts: The civil magistrate is entrusted with the power not only of preserving the public peace by restraining injustice, but by promoting the prosperity of the commonwealth, by establishing good discipline, and by discouraging every sort of vice and impropriety (ibid. 81). In the Design case vice and impropriety are precluded, and the role of the civil magistrate is reduced to that of a night watchman or fire guard. It is therefore in this Design case, and only in this Design case, that Smith would advocate the libertarian concept of laissez-faire. The point of much, if not most, of WN is to argue that the Design is not the reality. It is a norm. Given human frailty, Smith s prescription for the role of government in the real world is a second-best The best society can hope for is to closely approximate the Design. To accomplish this government must be more than a night watchman. It should be clear, however, that Smith by no means viewed government intervention as an inherently positive instrument. It was the government, after all, that had assembled the mercantile system he wanted to see dismantled. Quite to the contrary, he recognized that government, as a human institution, is as rife with the negative consequences of human frailty as any other human institution. He states in TMS: In all well-governed states... rules are prescribed... and these rules are, in general, intended to coincide with those of natural justice. It does not, indeed, always happen that they do so in every instance.... sometimes the interests of particular orders of men who tyrannize the government, warp the positive laws of the country from what natural justice would prescribe [TMS, 340). Given the immense control government wields, Smith would not advocate laissez-faire with respect to government any more than he does with respect to the behavior of merchants. The more closely government approx- 31. See ibid See ibid. 329 for a summary of these recommendations. 33. Since perfection is not humanly possible, a leader should, like Solon, when he cannot establish the best system of laws... endeavor to establish the best that people can bear (TMS, 233).

17 Evensky Two voices of Adam Smith 463 imates a just institution, the more Smith would trust its regulatory decisions. IV. Conclusion Here we return to an analysis of the two Adam Smith problems cited by Heilbroner. The most famous of these is the long-standing view that there is an inconsistency between TMS and WN. The nature of this problem has been stated in various ways, but its essence is captured succinctly by Jacob Viner in his article Adam Smith and laissez-faire 34 where he states that there exists a substantial measure of irreconcilable divergence between the TMS and the WN; with respect to the character of the natural order (Viner, 221). Viner makes his case by arguing that while In both works [Smith] finds an inherent harmony in the order of nature... in the TMS, this harmony... is represented as universal and perfect. [While in] the WN, this harmony is represented as not extending to all elements of the economic order, and often as partial and imperfect where it does extend. Obviously one must question how two books with divergences between them which are impossible of reconciliation flowed from the pen of a single writer. Viner argues that it is a function of maturation. TMS reflects the naive optimism of a young Smith s Shaftesburian heritage,35 while WN is the more realistic view of a more mature writer. Viner recognizes the obvious problem with this argument: In the last year of his life Smith made extensive revisions of and additions to the TMS, without diminishing in any particular the points of conflict between the two books. This would make it seem that in Smith s mind, at least, there was to the last no consciousness of any difference in the doctrines expounded in the two books [Viner, Viner tries to explain away this apparent anomaly by asserting that When Smith revised his TMS he was elderly and unwell... and had lost the capacity to make drastic changes in his philosophy, but had retained his capacity to overlook the absence of complete coordination and unity in the philosophy [ibid Viner, See Stephen, 2:27 for more on Shaftesbury s Panglossian optimism.

18 464 History of Political Economy I9:3 ( I 987) However, this argument ffies in the face of the extent and complexity of the revisions Smith did make.36 It would seem that Smith saw no Adam Smith Problem. It should be clear from the presentation above that the confusion lies not in the pen of Adam Smith, but in the eyes of those who profess to see an Adam Smith Problem. They mistake a difference in substance, which is in fact consistent from one book to the other, for a difference in emphasis, which is certainly striking between the two works. Heilbroner has shown the continuity of Smith s practical-prescriptive voice as it moves from TMS to WN (see his chart-heilbroner, 437). What we have done here is to reinforce that connection and to expand the representation of the continuity of Smith s thought to his moral-philosophical voice. A moral-philosophical voice dominates TMS, while a practicalprescriptive voice dominates WN. Both voices are heard in both books, however, and the perspective that each voice reports is consistent from one book to the other. We conclude, therefore, as does Heilbroner, that there is no inconsistency between TMS and WN. As for the other Adam Smith Problem: Heilbroner s conclusion that the creation of social virtue from private vice-remains unresolved is strictly correct, but as noted above, this does not pose a problem for Smith s analysis. Smith would never argue that private vice could lead to social virtue. Smith the moral philosopher argues that social virtue rests on private virtue. Smith the historian, contemporary observer, and social critic, recognizes that human frailty gives rise to less than perfect private virtue, which in turn leads to less than perfect social virtue. He would, therefore agree that the creation of social virtue from private vice-remains unresolved. In fact, he would assert that this quandary is unresolvable in any absolute sense. Smith s views on the socialization of the individual are his societal second-best solution. In effect he is saying: Given human frailty, here is my prescription for approximating perfection-the Deity s Design. One more problem that Heilbroner finds in Smith must be treated before we conclude. Heilbroner observes (p. 434) that in Smith s presentation the social fact of inequality... becomes [in part through socialization] itself the reinforcing agency of cohesion and order. Heilbroner finds this method of order maintenance repugnant. He writes (p. 439) that the problem in Smith s socialization of the individual is that social cohesion is achieved at the price of social compassion. This second problem that Heilbroner identifies is not, however, a problem of analytical incon- 36. Campbell and Skinner state that major revisions and additions were effected in the sixth edition (1790) [of TMSI-ample evidence of Smith s continuing interest in the ethical side of his work following the publication of the WN (Campbell & Skinner 1982, 97).

19 Evensky - Two voices of Adam Smith 465 sistency within Smith s work. It is an ethical problem. Heilbroner disagrees with Smith s approval of inequality as an element in the solution for the lack of perfect individual ethics and self-command. Finally it should be noted that all of the above takes Smith s principal assumptions as given. These assumptions are that the Deity is omniscient and benevolent and that humankind is flawed. Given these assumptions the duality of Smith s thought follows and the logic of his argument is consistent. If there is a problem with Smith s presentation, it lies not with the consistency of his analysis but with the apparent inconsistency of his assumptions. 37 How could an omniscient and benevolent Deity produce, as a part of the Design, a flawed element: humankind? Smith must have been aware of this problem with his assumptions. It seems entirely likely that he discussed the problem with David Hume, who made this problem with Deism a point of attack in the Dialogues concerning natural religion.38 Smith does not resolve this inconsistency. It s not clear, in fact, that anyone can. This problem has vexed the great theological minds since antiquity. There seem to be two kinds of responses that Deists make when the problem is pointed out. One is to assert that the Deity is not perfect, but is much closer to perfection than human beings. This is the response of Cleanthes, the Deist of the Dialogues, when confronted by Philo, the skeptic, with the inconsistency problem. This response undermines, however, the very concept of the Deity that the Design argument is itself designed to establish. With this response the work of the Deity loses its insurmountable distinction from that of human contrivance, perfection versus imperfection, and becomes merely a higher standard that humans could conceivably achieve. A second response to the skeptic would be to hold that for some inexplicable reason the Deity included a human flaw in the Design.39 While the reason is obscured by our limited human vision, it must be taken on faith that the purpose is in the ultimate greatest good.40 Responding thus, however, turns the Design argument on its head. Rather than establishing by observation and inductive reasoning the existence of an omniscient and benevolent Deity, the Deity s benevolence must be taken as given a priori. We conclude, therefore, that there is a problem in Adam Smith s pre- 37. Robert Heilbroner, in correspondence, has pointed out this missing link in Smith s presentation. 38. Smith s desire not to be associated with the publication of Hume s Dialogues clearly reflects an awareness of and aversion to the skepticism so powerfully argued therein. See Randall, For instance, it may have been done to discourage humans from challenging the ascendancy of the Deity. 40. See Demea s speech in Hume 1947, 199.

20 466 History of Political Economy 19:3 (1987) sentation, but it is not an Adam Smith Problem. It is a problem for anyone who adopts the Design argument. Since Smith builds on that philosophical base he builds the problem into the foundation of his thought. This fact does not lessen Smith s contribution to the development of economic analysis. If we detach Smith s structure from the Design argument, we find a framework similar to neoclassical general competitive analysis. Given appropriate behavior guided by appropriate rules41 society will achieve a Pareto optimal general equilibrium and therefore the greatest possible wealth for the nation. Thus the importance of presenting Smith s full framework in detail does not lie only in resolving the so-called Adam Smith problems; it is also important to recognize the three-dimensional (social, political, and economic) nature of Smith s framework. By using such a framework Smith drew attention to the threads that connect the economic system to social and political institutions. Since neoclassical theory is built on a Smithian-type framework, it too should, like Smith, explicitly identify these institutional connections. Terence Hutchison points out, however (p. 5 13), that Smith s comprehensive conceptions of the scope and of the wide ranging interdependencies of social and economic inquiry have been rarely followed by subsequent economists. A better understanding of the dimensionality of Smith s framework should encourage and assist neoclassical theorists in recapturing that scope. References Appleby, Joyce Oldham Economic thought and ideology in seventeenthcentury England. Princeton, N.J. Becker, Carl L The heavenly city of the eighteenth-century philosophers. New Haven, Conn. Broad, Charles D Five types of ethical theory. New York. Campbell, R. H., and A. S. Skinner, eds General Introduction in The Glasgow edition of the works and correspondence of Adam Smith, to vol. 2: An inquiry into the nature and causes of the wealth of nations. 2 vols. Oxford. and Adam Smith. New York. Cannan, Edwin A review of economic theory. London. Cohen I. Bernard The Newtonian revolution. Cambridge. Dakin, Douglas Turgot and the Ancien Rkgime in France (1939). Reprint, New York. Fox-Genovese, Elizabeth The origins of physiocracy, economic revolution and social order in eighteenth-century France. Ithaca, N.Y. Gay, Peter The Enlightenment: an interpretation, vol. 1: The rise of modern paganism. New York The Enlightenment: an interpretation, vol. 2: The science of freedom. New York. 41. See p. 450 above.

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22 468 History of Political Economy 19:3 (1987) Spiegel, Henry W The growth of economic thought, 2d ed. Durham, N.C. Stephen, Leslie History of English thought in the eighteenth century, 2 vols. (3d ed. 1902). Reprint, New York. Taylor, W. L Francis Hutcheson and David Hume as predecessors of Adam Smith. Durham, N.C. Turgot, A. R. J Rejections on the formation and the distribution of riches. English trans. London. Viner, Jacob The long view and the short. Glencoe, 111. West, E. G Adam Smith, the man and his works. Indianapolis. Winch, Donald Adam Smith s politics: an essay in historiographic revision. Cambridge.