Adam Smith altruist

Knowledge and Persuasion in Economics - Egalitarian Perspectives - Profits, Priests and Princes - Adam Smith's Discourse
January 27, 1995

All four books reviewed here relate the concerns of economists to those of philosophers: ethics, epistemology, and political philosophy. The key to putting them in historical and intellectual context lies, in my view, in the writings of Michael Oakeshott. Oakeshott's shade -- in at least one incarnation -- haunts the book by Donald McCloskey, Knowledge and Persuasion in Economics.

Oakeshott's famous metaphor about education being an ongoing conversation of mankind provides the organising framework of both McCloskey's earlier book (The Rhetoric of Economics) and the book under review. I have much sympathy with this device, as also with McCloskey's arguments against the pretensions of mathematical formalism in economics (in his Part IV).

But the bulk of the book (nearly 200 pages out of 400) is an extended reply to the critics of his earlier book. His basic point is that "economists in fact argue on wider grounds than certain philosophers would permit". He has three major targets: epistemologists searching for an unattainable ideal of Truth, as opposed to the truth sought by practising scientists; their sub-species, the philosophers of science; and a sub-species of philosophers of science, those methodologists of economics who seek to demarcate science from non-science by laying down prescriptions for Scientific Method, without regard to the actual methods used by scientists and economists in their everyday work (which are closer to the Oakeshott vision).

McCloskey writes fluently and is often amusing. But the above points are made repeatedly, and tested the patience of this reader at least. After all, Keynes said all this much more elegantly and succinctly when he delineated the multifaceted skills required by "the master economist" in his memoir of Alfred Marshall. As suggested by the title of his book, McCloskey is advocating a particular method derived, he claims, from the rhetorics of Aristotle (rather than from Plato, the progenitor of positivism in McCloskey's view) and exemplified in the work of many post-modern literary critics. That economists write with intent, and that they seek to persuade, is obvious, but whether there is a particular way to read their work is not so obvious.

Vivenne Brown's book Adam Smith's Discourse is avowedly an explicit application of this method. But the first 22 pages, which seek to set out the "rhetorical" methodology of "reading" Adam Smith, are unilluminating; they seem scholastic and pedantic. There is little connection between these methodological pages and Brown's lucid account of Smith's three works The Theory of Moral Sentiments, The Wealth of Nations, and the Lectures on Jurisprudence.

One way of judging Brown's "literary criticism" is to compare it with one's own reading of Smith. I see no contradiction between the altruism (sympathy) extolled as the supreme virtue in The Theory of Moral Sentiments, as contrasted with the individualism (self-interest) underlying The Wealth of Nations. I have never understood the academic claim that Smith as a moral philosopher seems to condemn the very society which Smith the economist commends. In The Theory of Moral Sentiments Smith argues strongly in favour of benevolence (his "sympathy"). Brown is particularly persuasive in linking The Theory of Moral Sentiments to Stoic moral philosophy. But as Smith recognises, such benevolence is a scarce virtue.

However, fortunately, (as Smith shows in The Wealth of Nations), a "market" economy which promotes "opulence" does not have to depend on moral virtue for its functioning. It merely requires a vast number of people to deal and live together even if they have no personal relationships, without violating the "laws of justice". This commercial society promotes some lower-order moral virtues -- hard work, prudence, thrift and self-reliance -- but since these benefit the agent rather than others, according to Smith they are inferior to the primary virtue: altruism. Nevertheless these lower-order virtues do promote general prosperity and thus unintentionally they help others. The market economy is therefore neither immoral or amoral. A good government is judged by Smith to be one which promotes "opulence" through a policy of promoting natural liberty by establishing laws of justice which guarantee free exchange and peaceful competition, leaving the improvement of morality as a personal matter not for state legislation. As to the form of government which best promotes good government, Smith, like his friend Hume, was an agnostic.

Now there is nothing in Brown's book which contradicts this reading of Smith. In fact her excellent discussion of Lectures on Jurisprudence reinforces it.

But her reading is firmly contradicted by Peter Minowitz in Profits, Priests and Princes. Much of his book attempts to show that Smith emancipated economics from politics and religion, as his subtitle proclaims. This in itself is uncontroversial: no great textual exegesis is needed to establish Smith's abandonment of God. Nor is there much doubt that Smith sought also to depoliticise the economy. This particular preoccupation in Adam Smith studies is largely of scholastic interest, therefore. Furthermore, Mino-witz's disapproval of Smith's "disparagement of politics and religion . . . anticipating the Marxian vision of religion and state as 'superstructure' that will 'wither away' with the coming of communism", seems to me to be little more than a howl of pain by someone who sees his professional subject (political science) being diminished.

Confidence in Minowitz's reading of Smith is not strengthened by statements such as: "Smith identifies the form of inquiry embodied in The Wealth of Nations as the science of 'political economy' ". By contrast Brown rightly notes that "designating the subject matter of The Wealth of Nations as 'political economy' disregards the textual evidence that the term is reserved for the theoretical systems that The Wealth of Nations is opposing." In fact The Wealth of Nations formulates an alternative system, the system of natural liberty, that is not premised on the directing hand of a legislator/statesman to oversee economic development".

There are similar misreadings by Minowitz of Smith's views on "justice" and "the invisible hand", as can be seen by consulting Brown. So perhaps, given these divergent readings of the same texts, there is something in the "rhetorical" programme after all.

But Brown is not altogether a sound guide. While correctly noting that Smith attacks merchants and manufacturers for what would today be termed the "urban bias" and "rent-seeking" of mercantilism, Brown concludes: "There are many ironies to note in the historical outcomes of Adam Smith's discourse and the canonisation of The Wealth of Nations. The argument of The Wealth of Nations against the undue expansion of trade and manufactures has come to be interpreted as an argument in favour of such an expansion (my emphasis). The invective against merchants and manufacturers has been construed as an apologia for the new capitalist class that emerged in a later age."

This is silly. Who will argue for an undue expansion of trade and commerce? Most development economists rail against the "urban bias" created by the neo-mercantilism of the third world, much in the manner of Smith. Nor does a denunciation of "rent-seeking" entail a blanket condemnation of merchants. For as Brown herself writes: "others have resolved this apparent paradox . . . (by arguing that) it is the role played by merchants and manufacturers under a mercantile system that is being criticised in that they have usurped the nation's economic policy to further their own interests, not the role of merchants and manufacturers as the dynamic commercial classes." Quite.

But in the end, ironically, Brown and Minowitz reach a similar conclusion, which questions Smith's concern with commutative rather than distributive justice. Brown again: "One of the greatest ironies is that Adam Smith's discourse -- indebted as it was to Stoic moral philosophy -- has contributed centrally to the de-moralisation of economic and political categories and to the construction of an economics canon in which moral debate has virtually no place." This, in my view, is a deep misunderstanding of Smith's purpose and the classical liberal tradition of which he was a part.

Enter Michael Oakeshott. His On Human Conduct, and Morality and Politics in Modern Europe, provide both an antidote to the books of Brown and Minowitz and a useful point of entry in judging the last book under review, by John Roemer. Oakeshott makes a crucial distinction between two major conceptions of the state. He notes that the view of the state as a civil association dates back to ancient Greece. In this view the state is seen as the custodian of laws which do not seek to impose any preferred pattern of ends (including abstractions such as the general (social) welfare, or fundamental rights), but which merely facilitates individuals to pursue their own ends. The rival conception of the state is that of an enterprise association; a view which has roots in the Judaeo-Christian tradition. Here the state is seen as the manager of an enterprise seeking to use the law for its own substantive purposes -- for the legislation of morality in particular.

The classical liberalism of Smith and Hume entails the first conception of the state, while socialism, with its moral aim of using the state to equalise people, entails the second conception. The paradoxes that Brown and Minowitz see in Smith are due to their hankering after an enterprise view of the state in an author who is one of the key modern advocates of the alternative civil association view.

Through the Oakeshott lens, the collection of essays by Roemer are seemingly quixotic. Roemer is part of a small group of neo-classical Marxists. He writes clearly and sparely, so that one always knows where one stands with him. These essays spanning the 1980s are Roemer's response to the collapse of "really existing socialism". For Roemer, egalitarianism is a self-evident ethic; and unlike many other fellow travellers he continues to have the courage of his convictions. "I am not one to cheer the inglorious end of the Soviet Union, despite what that state had become", he writes in the book's concluding section. "Its demise marks a setback for socialism, because, for many hundreds of millions, its existence continued to support the belief that one could more than dream about founding a society based on a norm of equality. And holding that belief is a precondition for struggling to create such a society."

Roemer's revised solution, having learnt his lesson from the inefficiencies of the Soviet system, is market socialism, by which he means "any of a variety of economic arrangements in which most goods, including labour, are distributed through the price system, and the profits of firms, perhaps managed by workers or not, are distributed quite equally among the population." No great knowledge of the obvious link between profits and entrepreneurship in a capitalist economy (whose dynamic efficiency Romer recognises and wishes to preserve) is required to see this solution as a recipe for another Mickey Mouse economy.

More interesting are Roemer's reasons why socialists will object to the acceptance of competition in large swathes of economic life under his revised rubric: "Where there is competition. there are losers, and where there are losers, there is often loss of self-esteem. If self-esteem is a (Rawlsian) primary good, and arguably one of the most important, what progress toward human fulfilment would market socialism mark? . . . Another consequence of competition . . . may be a lack of community. If community is capitalism's essential lack, then market socialism would not mark a qualitative improvement."

Here, clearly heard is the ancient voice of Oakeshott's "anti-individual", unwilling or unable to make his own choices. Some became resigned to their fate, but others showed "envy, jealousy and resentment. And in these emotions a new disposition was generated: the impulse to escape from the predicament by imposing it upon all mankind". This the anti-individual sought to do through two means. First he looked to the government to "protect him from the necessity of being an individual, to make the choices on his behalf which he was unable to make for himself". Second he called for a "morality of collectivism", where "'security' is preferred to 'liberty', 'solidarity' to 'enterprise' and 'equality' to 'self-determination'". This collectivist morality inevitably supported the view of the state as an enterprise association, of which Oakeshott identifies three versions: the religious, the productivist and the distributivist. The French Revolution inaugurated this last version--which seems to have terminated in 1989. Romer would demur, quoting Zhou En- lai's remark when asked to comment on the consequences of the French Revolution: "It is too soon to tell". Perhaps it is -- for the victory of the Scottish Enlightenment vision of the state as a civil association rather than an enterprise one does not, on the evidence of three of the books reviewed here, seem to be secure, at least in the minds of our clerisy.

Deepak Lal is a professor of international development studies at the University of California, Los Angeles, and emeritus professor of political economy, University College, London.

Knowledge and Persuasion in Economics

Author - Donald N. McCloskey
ISBN - 0521 43475 0 and 43603 6
Publisher - Cambridge University Press
Price - £40.00 and £14.95
Pages - 445pp

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