The Morals of Nations
Mises Review 10, No. 3 (Fall 2004)
ADAM SMITH’S MARKETPLACE OF LIFE
James R. Otteson
Cambridge University Press, 2002, xi + 338 pgs.
In his An Austrian Perspective on the History of Economic Thought, Murray Rothbard toppled Adam Smith from his place as the founder of modern economics. Far from being a bold innovator, Smith in Rothbard’s view taught false doctrine. His labor-cost theory of value was far inferior to the subjectivist insights of the Spanish Scholastics. If James Otteson is correct, Smith can in part redeem himself. Not in economics: though I doubt that he agrees with Rothbard’s view, Otteson does not concentrate on economic theory. Rather, Smith according to our author was an outstanding moral theorist. In making the claim that Smith was “a surprisingly sophisticated philosopher,” Otteson has challenged conventional opinion. “With only a few notable exceptions . . . philosophers have tended to pay little attention to Smith” (p. 1).1
According to Otteson, Smith used a market model, in which people were principally motivated by sympathy of a specific sort, to account for the rise and development of morality. Otteson’s principal task in this outstanding book is to explain Smith’s account of morality, as well as the market model of which it is an example.
Otteson’s account of Smith on morals displays enormous patience and subtlety, and I can convey only a rough and truncated account of it here. But the basic idea is quite simple. People have a natural tendency to want others to have the same sentiments as themselves. When we observe someone else’s conduct, then, we will put ourselves in his place and ask: How would we have acted, given his situation? If we would have acted in a similar way, we tend to approve the conduct we observe: if not, we disapprove. “Suppose . . . that I see a Boy Scout help an old lady across the street. I imagine what I would have wanted to do had I been in the Boy Scout’s position, which is to have helped the old lady. . . . The correspondence between my imagined motive to act and the Boy Scout’s apparently similar actual motive to act constitutes a sympathy in me that brings me to approve of the Boy Scout’s act” (p. 24).
Everyone endeavors to adjust his sentiments to those of everyone else, and the attempts to do so are greatly aided by a related process. As the process of mutual adjustment of sentiments continues, a person will no longer take his imagined judgments of what he himself would do as his sole standard of judgment. Instead, he will also ask, “how would an impartial spectator, someone without any bias in favor or against anyone, judge the situation I am now observing?”
By now, readers familiar with Smith’s economics will be able to see what is coming. Even though no one has deliberately constructed a system of morality, sympathy and the impartial spectator will produce one. Just as the self-interested behavior of actors in the market produces “by an invisible hand” a complex social order, so does sympathy generate a moral code. Otteson maintains that invisible-hand explanations are the linchpin of Smith’s thought. “[T]he marketplace of human institutions is not limited to economic institutions . . . or to isolated aspects of morality . . . but rather it is generalized to form the foundational understanding of the overall development and evolution of human social institutions generally” (p. 321).
Otteson wishes not only to give a description of Smith’s view of morality but also to recommend this view to contemporary philosophers. I think that the theory falls victim to a fatal objection; but, I regret to say, another critic has done me the disservice of anticipating my point. But our story has a happy ending: my predecessor’s objection is not precisely the same as mine, and we have the advantage of being able to assess Otteson’s reply to him.
My objection is a simple one. Smith’s theory presupposes what it claims to explain. As Otteson describes Smith’s view, the role of the impartial spectator is crucial. People tend increasingly to assess others by how they think an unbiased judge would have acted. People begin by judging others in terms of what they themselves would have done, but this does not suffice to generate a moral system. To attain this happy consummation, they must invoke the impartial spectator.
This generates my problem. If people judge others by imagining the verdict of an impartial spectator, must they not already have the concept of moral action? Without this, they would be confined to emotions of sympathy or aversion based on their own imagined behavior. Initially, Otteson says, we ask whether we would have acted in a similar way to the person whose action we are judging: “If the answer is yes, then we judge the agent’s action to be proper and the agent himself to have acted with propriety: if the answer is no, then we judge the action improper and the agent to have acted with impropriety” (p. 24).
Without the impartial spectator, people might, by a process of mutual adjustment, arrive at common sentiments of sympathy and aversion. But without impartiality, they would not have a moral system, and one cannot invoke impartiality ex nihilo in an effort to explain morality. If people have the concept of impartiality, they already have the concept of morality.
Perhaps, though, I have moved too quickly; has Smith presupposed at an even earlier point what he tries to explain? When someone imaginatively changes places with another, he judges whether the other person has acted with “propriety.” Where does the person in question obtain this concept? Natural sympathy or aversion might well account for his like or dislike of the conduct, and, as earlier mentioned, a convergence of sentiments might result from mutual adjustment among people in a given community. But where does “propriety,” prima facie a moral notion, enter the scene? And if one claims that Smith uses “propriety” in a nonmoral sense, then we revert to the earlier form of the objection: if people can make use of the impartial spectator, they are already conversant with a moral concept. Smith presupposes the moral ought; he does not explain it.
My predecessor in objection, Eugene Heath, also thinks that Smith’s account presupposes the system of morality it tries to explain. But, fortunately for me, his concerns are not the same as mine. He thinks that without shared moral standards, feelings of sympathy would not suffice to generate a consensus. Without the restrictions of a previously existing moral system, differences of opinion would insure that convergence of sentiments failed. I, by contrast, concede that a consensus might arise, but deny that it would be a moral system.
Though my objection differs from Heath’s, Otteson’s reply is relevant to my point as well. As it seems to me, he concedes the main point at issue: “The question of how a community as a whole could have gone from a morally devoid state to a morally rich state would thus be for him [Smith] otiose . . . this may indicate a genuine limitation in Smith’s theory of moral sentiments” (pp. 131–32). Otteson proceeds to suggest that Smith’s primary concern was how morality develops. With this I have no quarrel.
In his account of Smith’s theory, Otteson raises a point that may well revolutionize the conventional picture of Smith. Otteson asks, does Smith intend his account of how morality develops to be purely descriptive? He suggests that Smith also thought that people ought to obey the moral system that arose in the way he described. So far, nothing revolutionary; but now comes Otteson’s innovation.
He argues that the normative force of Smith’s system depends on holding that it is God’s will that people follow the course of conduct that the impartial spectator recommends. “The impartial spectator represents the fruition of the system of morality that God wanted us to develop; the impartial spectator is thus the manifestation of God’s will in us, the partial manifestation, even, of God himself in us. I [Otteson] think this . . . allows him [Smith] to argue that the natural moral system is intrinsically good and right, not just useful” (p. 256).
Here Otteson turns on its head much of contemporary Smith scholarship, in which Smith’s references to God are viewed as sops to conventional opinion, designed to conceal his real atheism or indifference to religion. Straussians such as Joseph Cropsey, it is safe to say, will be discommoded; and this is all to the good. (Stress on God is also present, incidentally, in Rothbard’s account of Smith. He argues that the notion of an “invisible hand” refers to God’s providential action.) It does not follow from Otteson’s argument that Smith was not a deist. Smith’s view, as Otteson explains it, does not require that God be in continual interaction with the world. It insists only that one ought to conform to a moral system that God has established. And this is consistent with deism, though of course it does not require it.
Otteson also offers a brilliant solution to that perennial conundrum, the Adam Smith Problem. Smith’s account of morality, principally found in The Theory of Moral Sentiments, stresses sympathy; self-interest is to be balanced by benevolence. But Smith paints an altogether different picture in The Wealth of Nations. Here, “Smith’s argument seems to presuppose that people are motivated only by self-interest, and his argument there makes no mention of or room for benevolence” (p. 170).
To most modern scholars, the problem is no longer a pressing issue. In The Wealth of Nations, Smith confined himself to studying the effects of a particular motive, self-interest. This is in no way inconsistent with the more comprehensive analysis Smith presents in his other chief work.
Otteson finds this solution too facile: “If the Smith of TMS [Theory of Moral Sentiments] is right one does not—or should not—check one’s morality at the marketplace door. Thus the matter of how morality mixes with markets must still be addressed” (p. 170).
Otteson reinstates the Adam Smith problem only to solve it. He maintains that the impartial spectator would endorse conduct toward others in the market that is motivated by self-interest. Benevolence, Smith thinks, depends on how closely people are connected: “the more familiar a person is to one, the greater the tendency to feel benevolent to him; the less familiar, the less benevolent” (p. 171). It follows from what Otteson calls the principle of familiarity that since most of our dealings in the market are with people we do not know, Smith’s moral theory does not require that we act from benevolence. The self-interest of Smith’s economics is then entirely consistent with Smith’s moral theory.
There is much more of great interest in Otteson’s book: his account of Smith’s market model of language and his contention that Smith’s labor theory of value is, in contrast to Marx’s, subjective rather than objective deserve close attention. But I think I have said enough to show that Otteson has written a major work, indispensable to anyone interested in Adam Smith.2n MR
1According to J.N. Findlay, Sir David Ross lectured on Smith’s moral philosophy at Oxford. Findlay’s own Values and Intentions (London, 1961), a neglected book of outstanding merit, explicitly draws on Smith’s account of sympathy.
2At one point I think Otteson has been unjust to Hume. He suggests that Hume’s claim that rational consideration of future utility “is the basis of moral approbation or disapprobation” (p. 80) is inconsistent with Hume’s view that our expectations of the future, based as they are on our knowledge of cause and effect, are confined to inferences from past regularities. If so, Otteson thinks, we cannot by reason discern the effects on utility of our future actions. Otteson’s assumption that Hume here means a priori reasoning of the sort he elsewhere repudiates seems gratuitous.
