Adam Smith

Smith, Adam (1723–90)

Despite his reputation as the founder of political economy, Adam Smith was a philosopher who constructed a general system of morals in which political economy was but one part. The philosophical foundation of his system was a Humean theory of imagination that encompassed a distinctive idea of sympathy. Smith saw sympathy as our ability to understand the situation of the other person, a form of knowledge that constitutes the basis for all assessment of the behaviour of others. Our spontaneous tendency to observe others is inevitably turned upon ourselves, and this is Smith’s key to understanding the moral identity of the individual through social interaction. On this basis he suggested a theory of moral judgment and moral virtue in which justice was the key to jurisprudence. Smith developed an original theory of rights as the core of ‘negative’ justice, and a theory of government as, primarily, the upholder of justice. But he maintained the political significance of ‘positive’ virtues in a public, non-governmental sphere. Within this framework he saw a market economy developing as an expression of humanity’s prudent self-interest. Such self-interest was a basic feature of human nature and therefore at work in any form of society; but commercial society was special because it made the pursuit of self-interest compatible with individual liberty; in the market the poor are not personally dependent upon the rich. At the same time, he recognized dangers in commercial society that needed careful institutional and political management. Smith’s basic philosophy is contained in The Theory of Moral Sentiments (1759), but a major part concerning law and government was never completed to Smith’s satisfaction and he burnt the manuscript before he died. Consequently the connection to the Wealth of Nations (1776) can only be partially reconstructed from two sets of students’ notes (1762–3 and 1763–4) from his Lectures on Jurisprudence at Glasgow (Smith [1762–6] 1978). These writings are complemented by a volume of essays and student-notes from lectures on rhetoric and belles-lettres.

Although a philosopher of public life and in some measure a public figure, Adam Smith adhered to the Enlightenment ideal of privacy to a degree rarely achieved by his contemporaries. He left no autobiographical accounts and, given his national and international fame, the surviving correspondence is meagre. The numerous eyewitness reports of him mostly relate particular episodes and individual traits of character. Just as there are only a few portraits of the man’s appearance, there are no extensive accounts of the personality, except Dugald Stewart’s ‘Life of Adam Smith’ (1793), written after Smith’s death and designed to fit Stewart’s eclectic supplementation of common sense philosophy. While Smith was a fairly sociable man, his friendships were few and close only with men who respected his desire for privacy. David Hume was pre-eminent among them.

1 Life

Adam Smith’s date of birth is unknown, but he was baptized in Kirkcaldy in Fife, Scotland, on 5 June 1723. His father, a customs officer, died some months earlier and Smith was brought up as an only child, a circumstance shared with several contemporary Scots literati, as has been emphasized in recent psycho-history (Camic 1983). Smith evidently remained close to his mother., and some will see this as an explanation for the fact that his attraction to female company never stretched to marriage. Otherwise, we have little evidence of the nature of Smith’s intimate life.

As was common, Smith attended the local parish school and then went to Glasgow University in 1737, where he was taught moral philosophy by Francis Hutcheson. In 1740 he went to Balliol College, Oxford, lingering there for six years. He compensated for the lack of organized education – later condemned in the Wealth of Nations (1776; henceforth WN) – by extensive private study, mainly in Greek, Latin and French literature, turning himself into an extremely well-read man. From 1746–8 Smith seems to have stayed with his mother in Kirkcaldy; but during the following three winters he gave public (non-university) lectures in Edinburgh, sponsored by Henry Home (later Lord Kames) and his circle. The lectures were on rhetoric and belles-lettres, to which was eventually added a series of lectures on jurisprudence (published subsequently as Lectures on Jurisprudence ([1762–6] 1978; henceforth LJ)). This performance had the desired effect; in 1751 Smith was appointed professor at Glasgow University, first in logic and, after one year, in moral philosophy. Until his resignation in the middle of 1763–4, Smith gave the basic course in moral philosophy that had been founded by Gershom Carmichael in the 1690s and developed by Francis Hutcheson in the 1730s and 1740s. It encompassed natural religion, ethics and jurisprudence. In addition, Smith gave an advanced class on rhetoric and belles lettres. Hardly a trace of Smith’s lectures on natural religion has survived, but those on ethics formed the basis for his first major work, the Theory of Moral Sentiments (1759; henceforth TMS). Two student-reports on the lectures on jurisprudence, which include economics, have survived from 1762–3 (incomplete) and 1763–4 (henceforth LJ(B) and LJ(A), respectively); see Smith 1762–6: there is also the fragment of a report from earlier in Smith’s career (‘Anderson Notes’). Finally, there is a student’s report on the lectures on rhetoric and belles-lettres from 1762–3 (henceforth LRBL; see Smith 1762–3).

Early in 1764 Smith became travelling tutor to the Duke of Buccleuch, a lucrative post that afterwards gave him a pension and an influential connection for life. Travelling in France and Switzerland until 1766, Smith met many of the French Enlightenment’s leading thinkers, notably François-Marie Arouet Voltaire and the circle of physiocratic economists led by François Quesnay and Anne Robert Jacques Turgot. Smith admired Voltaire, especially as a dramatist; and he shared the conceptual, empirical and normative concerns of physiocracy, though he reached different conclusions about these matters. Like the physiocrats, he understood the relationship between economics and civil society by postulating ideal–typical stages of social development; and like them, he rejected the common mercantilist analysis of wealth in terms of money and advocated a free economic system to create such wealth. Smith, however, rejected the physiocratic idea of land as ultimate source of wealth.

Smith had begun working on these matters during his Glasgow years, as LJ and the ‘Early Draft’ of the WN (reprinted in LJ) show. But it took him nearly another decade to develop his own grand theory. He worked until 1773 in seclusion at his mother’s house in Kirkcaldy and then spent three years in London revising his manuscript. The WN appeared in the spring of 1776 to resounding praise from David Hume and Edward Gibbon, among many, and quickly turned the distinguished moral philosopher into a famous political economist.

1776 was in another respect a turning point for Smith, for in the late summer David Hume died. This led Smith publicly to indicate his religious outlook more clearly than before. He was already assumed, as we see from the cool attitude of James Boswell (once Smith’s student) and Samuel Johnson, to be a sceptic concerning revealed religion. But when Smith publicly maintained that the infidel Hume had approached ‘as nearly to the idea of a perfectly wise and virtuous man, as perhaps the nature of human frailty will permit’, he was widely taken to have declared his own atheism (1777: xlix). In fact, Smith never made explicit his religious beliefs. Much of his work appears to be in the mould of common deism, but often it is unclear whether Smith is analysing deism as a psychological disposition or whether he is accepting it as a doctrine. In the end his obdurate silence suggests he had accepted the basic lesson of agnosticism. He seems cooler toward religion as he gets older, and his ‘obituary’ for Hume is a milestone on this road.

In 1777 Smith was appointed Commisioner of Customs in Edinburgh, a lucrative office that he discharged conscientiously until his death. In addition to being in public office, Smith was now a public man of letters, sought by government and politicians for advice on matters of state and policy, such as relations with America and Ireland, trade and taxation. He had been elected to the Royal Society and to the Johnsonian ‘The Club’ during his stay in London in 1773–6. When he paid a rare visit to London, he was received in the literary circles around the Oyster Club, and although he never ventured abroad again, he remained a name in the Parisian salon-world, where he had been so well received in the ’60s. He was also part of the cultural life of the high Enlightenment in Edinburgh, sought out by literary tourists and opening his house to a circle of friends once a week (see Enlightenment, Scottish). True to his suggestion that a citizen militia served a moral purpose, he was an officer in the Edinburgh militia. Smith lived with his mother, his cousin, Janet Douglas, and a nephew of the latter, David Douglas, whom Smith made his heir.

During these years Smith kept writing. He revised the TMS several times, including a major recasting (6th edn 1790) shortly before his death. The WN was revised for the second and, especially, the third editions (1778 and 1784) and saw two more life-time editions. But Smith also undertook new projects. One was a ‘sort of theory and history of law and government’, announced already in the first edition of TMS and still aspired to in the last edition of that work. The WN had taken account of ‘police, revenue and arms’, but the part concerning justice, the theory of jurisprudence, was still lacking (TMS, Advertisement: v). Smith’s other project was ‘a sort of Philosophical History of all the different branches of Literature, of Philosophy, Poetry and Eloquence’ (Smith 1977: 287). A few days before he died, Smith requested his sixteen manuscript volumes to be burnt. We can form some idea of the former project from the lectures on jurisprudence and parts of TMS and WN; the latter was obviously related to the early Essays on Philosophical Subjects (henceforth EPS), published posthumously in 1795, and to the Glasgow lectures on rhetoric and belles lettres. But the systematic coherence of Smith’s work is a matter of reconstruction – some scholars even deny that it has such coherence, despite Smith’s declared intentions. Smith died in his house in the Canongate on 17 July 1790 and is buried in the Canongate cemetry.

2 Imagination: scientific and moral order

The single most important influence on Adam Smith was David Hume’s philosophy, especially the theory of the imagination as the active mental power that fashions a specifically human world within nature (see Hume, D.). Like Hume, Smith saw imagination as that which enables us to create connections between the perceived elements of both the physical and the moral world, ranging from particular events and things to the cosmos and the system of humanity. For Smith there are two fundamentally different kinds of imagination, one concerning other persons as agents and one concerning things – human beings included – and events. The former is the basis for personal identity and sympathy (in Smith’s special sense) and, thus, for the moral world. The latter is the basis for all theoretical activity of the mind, including science and the arts. The activity of the imagination is a spontaneous search for order and coherence in the world; satisfaction of it carries its own pleasure, while frustration brings ‘wonder and surprise’ and, if prolonged, anxiety and unease. Smith talks of this imaginative striving in aesthetic terms as a concern with beauty and harmony.

The ‘theoretical’ imagination is invoked for a number of different explanatory purposes. It accounts, according to Smith, for our ability to order things and events so that we can orient ourselves in life. It explains the ‘aesthetics’ of ordinary living, such as our tendency to order things for no other purpose than the order and arrangement that please, and our desire for machinery, gadgets and other ‘systems’. Works of art, as well as of technology, are works of imaginative order. Not least, philosophy and science are products of the imagination’s attempt to create order in the chaos of experience. This is expressed in the recurring machine analogies for the natural world and for society; and it is reflected in the human mind’s tendency to underpin the perceived orderliness of the world by assuming an orderer with a purpose. In other words, science, deism and natural providence are all parts of the explanatory web that the imagination creates to satisfy its desire for order.

Within this framework Smith writes his remarkable histories of science, notably the essay on the history of astronomy. The basic thesis is that empirical evidence can only play a role as evidence if it fits into an orderly system of beliefs. Smith exhibits a sceptical distance in relation to all absolute truth-claims in both science and religion, epitomized in the famous conclusion to ‘The History of Astronomy’ in EPS:

[Newton’s] principles, it must be acknowledged, have a degree of firmness and solidity that we should in vain look for in any other system. The most sceptical cannot avoid feeling this… And even we, while we have been endeavouring to represent all philosophical systems as mere inventions of the imagination, to connect together the otherwise disjointed and discordant phaenomena of nature, have insensibly been drawn in, to make use of language expressing the connecting principles of this one, as if they were the real chains which Nature makes use of to bring together her several operations.

([1795] 1980, IV.76: 105)

When we introduce order into our observations of other people, as opposed to the rest of nature, our imagination takes on a special quality. We are able to ‘make sense’ of the behaviour of others through imaginative identification – what Smith calls sympathy, a central concept in his philosophy. ‘Sympathy’here has no evaluative connotations; it does not mean that one person accepts the motives and actions of another as good and right, nor is it a motive for action. Sympathy is the ability to see the point of view of another person so as to be able to accept or reject it as appropriate in that person’s situation. This native ability is the key to Smith’s social theory of the self and, through that, to his theory of the moral world.

Inclination and need lead people to interact; interaction depends on observation and appreciation of others and their situation, and this is facilitated by the universal tendency sympathetically to adopt the position of the other and compare reactions. Observation of others will bring awareness that oneself is the object of other people’s observation and assessment. Society is the mirror in which individuals see their own nature. Further, in observing that one is being observed one has the basis for such mutual adjustment of behaviour as is necessary for all social living. Each individual is generally led to pre-empt this assessment by others through self-observation and self-assessment. In short, people internalize the spectator, and the internal spectator has the force to prompt such adjustment of behaviour as would otherwise be demanded by external spectators in order to satisfy the inclination to, or the need for, agreement or conformity.

The process of mutual adjustment through the sympathetic search for a common standpoint often fails, of course, leading to moral and social disorder. Thus we are led to imagine an ideal judgment and an ideal judge, transcending the limitations of knowledge, bias, and so forth of those actually involved. Once we establish a dialogue with this imagined ideal of an impartial spectator, we have a moral conscience.

With this social theory of moral personality Smith rejects the idea of Hutcheson and others that moral agency hinges on a special moral sense, offering instead explanations based on empirical features of the mind. Like Hume, Smith rejects the suggestion of Samuel Clarke and others that moral judgment and motivation are forms of rational inference. And he ignores religious ideas of conscience as infusion (inspiration) by the deity or a response (fear) to the deity’s might perceived. For Smith, formation of the moral self begins with others.

3 Moral theory

By means of this theory of the self, Smith produces a complex analysis of moral life. Moral judgment is inevitably an assessment of propriety – first of the motives of an agent in a given situation, then of the motives of the person who is the ‘object’ of the agent’s actions. But our inclination towards orderliness leads us to classify actions just as our search for impartiality suggests general and impersonal points of view; and on this basis we develop general rules of behaviour which, once given social acceptance, significantly influence our assessment of the propriety of particular motives and actions. Sympathy ties us to the particularity of the situation, while the impartial spectator calls for the generality of rules. Similarly, while we have great difficulty making a moral assessment of motives and associated behaviour on the basis of their outcome, we tend to allow utility and disutility to influence our perception of propriety.

In a different mode from that of the analysis of moral judgment, Smith gives a complex account of moral virtue. At one level he looks on the moral and social ideas that make the world go round from the elevated standpoint of the stoic sage (see Stoicism §19). Smith was attracted by the stoic ideal of tranquility as the end of moral life; yet his account of moral psychology showed everything distinctive about the life of the human species to be due to people’s inability to live in tranquility. The exercise of our productive powers, as portrayed in the WN and in the TMS as emulative vanity, is only the most dramatic illustration of an inescapable restlesness pervading our lives. In Smith’s view a dialectic tension between tranquility and activity is bound to be a permanent feature of human life, and the implication is clearly that it would be futile for the philosopher to attempt to defend the one over the other.

At another level, Smith looks at morality from an historical point of view, and combines this with a theory of the cardinal virtues. The features of personality and courses of action people approve and disapprove of in others and in themselves vary from one culture and period to another. Accordingly, a major task for philosophy is to look at humanity historically and comparatively. This reveals that in one sphere of human response there is a great deal that is common to all humankind, namely in the sphere of moral approval and disapproval (as opposed to, say, the aesthetic or religious response). The moral philosopher can identify a number of basic virtues and vices, the tone and composition of which may vary significantly, but which are nevertheless universally recognizable and comparable.

One way of organizing this field is by means of the cardinal virtues, though Smith, like Hume, is more interested in distinguishing ‘positive’ from ‘negative’ virtues, – benevolence from justice. The distinction is based upon spectator reactions. When the spectator, whether the actual or the imagined impartial one, sympathetically enters into the situation of an agent, the result is approval or disapproval of the agent’s judgment and action. When the agent tries to promote the good of someone, whether of self or of other, the spectatorial approval or disapproval tends to vary from person to person. For while we tend to agree on what is good in broad outline, we have great difficulty agreeing on what is good for particular persons in specific situations, unless we are connected in some moral community. By contrast, we tend to agree on what is harmful not only in general but in each case, and the pattern of reaction to harmful behaviour therefore has a high degree of uniformity, known as resentment.

4 Law and politics

The negative virtue of avoiding harm or injury is, according to Smith, justice, which is the foundation of law and the subject of jurisprudence. The positive virtues encompass the life of the private sphere, but, in addition, they are the basis for a public sphere that is neither political nor administrative in modern terms. By maintaining a system of justice, the government protects both private life and the non-political public sector of human activity, and one of the most striking features of the modern world of commerce is, in Smith’s eyes, that by doing so government has made it possible for economic behaviour to be transformed from private to public.

The personal attributes and actions that are protected in each person when others show them justice, that is abstain from injuring them, are their rights. A right is a sphere of freedom to be or do or have something that the individual can maintain against all others because the spectatorial resentment towards infringement of this sphere is so strong that it has been institutionalized in the form of the legal system. This line of argument puts Smith in a tradition of thinking about rights that goes back to Grotius, Hobbes and some religious covenanters. In this tradition the primary moral characteristic of the individual is self-assertion vis-à-vis the rest of humanity, so that all common or social morality arises through ‘negotiation’ between conflicting claims. Natural law is a secondary concept to that of right, in contrast to the ideas of the mainstream of thinking about natural law. While Hume was in some respects close to this tradition, he never found a way of accommodating the concept of rights within his sentimentalist theory of morality. This was left to Smith’s theory of the spectatorial regulation of our moral sentiments (see Natural law; Rights).

‘Rights’, ‘injury’, and ‘personality’ are linked. The imagination depends on social experience and hence varies from one stage of society to another; consequently the idea of moral personality must vary. This is the core of Smith’s historical approach to justice and law. Smith rejects the idea of a state of nature as a device for understanding human nature. The moral life of the species is unavoidably social, since only the social mirror lends us humanity. All consideration of our moral characteristics must therefore include the social setting; this applies not least to rights as the primary characteristic. Even so, certain minimal rights are universal to all social living. A social group is only viable if it recognizes rights to physical, moral and some kind of social personality; these may accordingly be considered universal, ‘natural’ rights. Beyond this minimum, we have to look to the historical circumstance in order to understand rights.

In Smith’s view, humanity can be divided into four broad stages of social development according to the extension of the concept of the person and, consequently, the scope of rights recognized. Hunters and gatherers recognize little beyond what immediately sustains the physical and moral person (food, shelter, personal freedom and social recognition). Dramatic extensions of personhood are produced by nomadic ‘shepherds’, with the recognition of property in food and tools much beyond what is required for each individual and their immediate dependents; and, further, in the agricultural stage, with recognition of property in land. The most abstract extension of the concept of personality occurs in commercial society, with the full development of contractual entitlements and ownership of purely symbolic property (paper money, credits) as parts of what a person is.

Each of these developments requires stronger government to protect its new rights, and, accordingly, the four-stages theory also accounts for the growth of government and law. However, the four stages are not to be understood as the actual steps of the past; they are ‘ideal types’. The historical past has deviated greatly from this conjectural model, mainly due to forceful and tyrannical behaviour by rulers and conquerors. The modern world was thus, for Smith, decisively shaped by the emergence of commerce before agriculture was properly developed, due largely to an alliance of monarchs and city-burghers forged for the purpose of breaking the power of feudal nobility. The resulting alliance of modern government with commerce and finance is the unholy alliance targeted in WN.

The WN is the greatest working-person’s tract ever written. Central to its argument is that in the modern world even the working poor can enjoy personal liberty because the modern economy enables them to sell their labour without selling themselves. With the deepening of the division of labour, each piece of work becomes more ‘abstract’, less tied to personal abilities, and more easily assessed in monetary terms. The labourer can therefore sell his labour-power to anyone, without the personal dependence of traditional service-relationships. But this will only be effective if the labourer’s freedom to sell his labour is protected by government as a right, against traditional monopolistic restrictions.

The liberation of labour from ‘servility’ is central to the transformation of productive life from the private, familial sphere to the public market, from household oeconomy to political economy. This can only take place when the immoral exaggeration of the virtue of prudent self-interest, namely avarice, can be rendered innocuous in the eyes of society. This happens when the problem of distribution begins to be solved through the market. In pre-commercial society, owners can only use their property by consuming it, and this they can do only by maintaining dependents, typically in the extended family. In commercial society they can spend their riches via the anonymous other of the public market. Accumulation of wealth becomes not only compatible with but dependent upon the freedom of the poor, which leads to a distribution of goods that, while unintended, is as equal as is realistic among humanity.

[The rich] are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.

([1759] 1976, IV.1.10: 184–5)

There is a price for this freedom, namely the danger of moral corruption. The rich are constantly tempted to undermine the system that creates their wealth by seeking protection against competition. And the poor are exposed to the stupification of mechanical work, rendering them incapable of taking charge of their lives and making them useless as citizens and soldiers. In both areas protection is to be sought from government; in the former through anti-monopoly legislation and policy, in the latter through basic education funded in part by the public and through freedom of religious worship, both of which tend to establish a moral community of spectators within which the labourer can develop a moral character.

In addition to the economy that springs from self-interest, and the system of law that institutes the virtue of justice, Smith thus operates within a purely political sphere. Politics concerns ‘police, revenue and arms’, which means various municipal services and major construction works that the market cannot provide, and which facilitate commerce, plus defence. But under ‘revenue’ Smith also includes educational and cultural policies that are concerned with ‘positive’ virtues, or at least with facilitating such virtues. Smith is wary of stretching this function of government too far, because of the danger of tyranny in enforcing specific ideas of the good life. This, however, is not the limit of the role of positive virtue in public life: it extends also into an important public, non-political sphere.

Smith has much to say about the importance of a wide variety of social virtues – liberality, probity, generosity, courage, leadership, indeed justice in a distributive sense; or ‘public spirit’, as he often sums it up. But while these are virtues associated with public office, they are not the virtues that provide the very rationale of government in the way that justice does. Nor are these desirable qualities simply the private virtues of public figures, though they are certainly also that. Integral to Smith’s society was a public sphere that was in some sense political, yet was not governmental. This was the world of the local elite, lairds and landlords with significant leadership in local affairs that today are matters of public policy. At the pinnacle of this world were the members of Parliament, whose work overwhelmingly consisted in dealing with private members’ bills – often concerned with local matters – rather than with the business of executive government. The proper basis for these public roles was provided by the kind of positive virtues indicated above. While Smith wanted to exclude, or at least severely limit, these virtues in the function of government proper, he never doubted their essential role in a non-political public sphere. Today this sphere has largely been subjected to politics in a development that Hegelians might think of as the politicization of civil society; but it is anachronistic to use this sense of civil society in reading Smith: the public virtues and behaviour he is concerned with are not defined vis-á-vis the state.

Smith was not simply an advocate of a particular political and economic scheme. From his Humean perspective, there was little point in advocating things unless they were within the limits of people’s imagination. The task was to extend that imagination by informing it of the full complexity of its situation. People who are thus informed may become impartial in judging their society. Smith had educated himself to be an impartial spectator who saw the injuries or injustices done to classes of people in the name of political exigencies that had long since passed. An appeal to the universal virtue of negative justice and an explanation of how and why it was being infringed in this particular historical situation was therefore the backbone of his history and theory of law and government; but he did not thereby reduce all moral life to the administration of justice. At his best he combined the psychological perspicuity of Jane Austen, the historical richness of Gibbon and the philosophical acumen of Hume.