0:36 Intro. [Recording date: November 18, 2010.] Biography of Adam Smith is a big challenge. Intellectual contributions and status, but also because we do and do not know about Smith's life. Talk about the process of writing this book. Challenge. At a technical level, not altogether usual when dealing with 18th century thinkers. Smith, not documented in conventional ways. We don't have much in correspondence. What correspondence we have comes from a very late period of his life. One of the reasons for this is Smith kept to himself, and towards the end of his life had a great bonfire of his papers. Nearly everything he had was destroyed. That means you have to have to bring Smith to life and try to make sense of what he wrote without being able to draw on conventional biographical sources. So, what I decided to do when I started was to try and say the only way of bringing Smith to life is via his text. What I've got to do is bring his text to life in a historical way. And what bringing him to life in a historical way means is in fact putting him in a local, historical context. Because, Smith wasn't speaking to eternity. He wasn't speaking to our generation. He was speaking to his own generation. And he was doing that in a way you will understand very well--he spent much of the creative part of his life as a university professor, and he is addressing an audience of educated, intelligent students, and beyond that an educated intelligent public who led their own occupations, their own intellectual backgrounds, and their own intellectual experience. I think one of the fascinating things about reading Smith is to read him in that particular context, as someone who is addressing people who lived in the world in which he belonged, and not addressing us, two centuries later. Challenge. What came over to me in doing this, and particularly in working through student notes of his lectures in Glasgow, was what an enormously authoritative lecturer Smith was. Smith comes over as a great revisionist. He's a great one for standing up in front of the class and saying: Mostly the stuff you read on this subject is wrong. Mostly some of it is ridiculous. He really is an iconoclast. And I tell you what interested me about that: Smith is a deeply shy, retiring man, in inordinate private life. One of the themes running through his life as an historical figure, in a particular time, living in a particular place, was this mixture of personal shyness and awesome awkwardness, but enormous authoritativeness and daring intellectually, the moment he got up on his hind legs and started talking to his students or started writing to his audiences. Almost becomes a different sort of man. I found that very intriguing.

4:27 The Theory of Moral Sentiments does not appear to be written by a shy man. It's an aggressively, as you say, authoritative, set of fascinating observations about all kinds of people. Certainly people that Smith knew. But, you'd think he'd know them pretty well, and for a shy person, it's a little bit shocking. It is. He goes far more deeply into the process of how the human personality is made, how we acquire a sense of identity, than virtually anyone else, apart from Jean-Jacques Rousseau, with whom he had lot of awkward relationship--a literal relationship--that is to say, throughout his life. He is a very, very revealing person. For a shy person, that's intriguing. One of the things that's fascinating about the Theory of Moral Sentiments in that context is to look at the examples he gives of how he responds to different sorts of social pressures, social circumstances. The examples very often seem rather dated to us. The thing I found interesting was just how much he was drawing on what, in contemporary terms, were conventional examples. In literature, in 18th century moral journalism, and so forth, examples his contemporaries and students would have recognized the moment they heard them. He takes these familiar examples that by and large people know about and then presses them harder. It's the way in which this intelligence takes ordinary experience, in the ordinary world in which we live and presses these examples further and invites us to think more and rather more clearly about the implications. To us, some of the examples are a bit obscure; some of the philosophy that a person today is not as familiar with. On the other hand, there are many examples in the book of social phenomena that are timeless. Guilt, shame, pride, the pursuit of money, dignity, integrity--these are the themes that run through the Theory of Moral Sentiments (TMS) that are timeless. Even while the examples may be a little dated--tweezer case--that hasn't changed; the gadgets have changed but obsessions are unchanged. The situations repeat. My favorite: disgusting obsequiousness in the presence of the rich. We feel that in the United Kingdom, living in a monarchy as we do. Leap across the centuries--just how much the language of deference is essential to social order. One of his most graphic examples of how the invisible hand does its magic. We tend to assume that the invisible hand only works in the market, in a situation in which we pursue our own interests without realizing that the invisible hand will in fact aggregate those individual efforts and work for a common good. Trick of Smith, calling up of the invisible hand works everywhere, and nowhere more influentially than explaining the patterns of social deference. Having read TMS very late in life--it reads through that text in a bunch of places without using the language, and he invokes often the Creator as the underlying source of this unseen order. He doesn't talk about the unseen order literally, doesn't use the "invisible hand" in TMS, but he invokes it--don't know if it's in earlier or later editions; he wrote that book first but revised it late; but it has that metaphor in it. He uses it in the early editions. The device is central to his theorizing at every conceivable level. You can trace it in his early lectures on rhetoric and on jurisprudence. Fundamental to his frame of mind.

10:39 Let's talk about the little we do know. Talk about what we know about Smith, about where he lived, what his personal life, handful of works we have of his. He belongs in social and political terms to a mainstream of Scottish society. If ever there was a person who came from a particular section of society, it was Adam Smith. His family, friends belonged to what in the 18th century were called the middling ranks, which is not just the middle classes--it's a merchant and professional class to which are added lesser landholders. The Scottish word for that is "lairds"; the English word would be gentry. He comes from that section of society. Family that had done well out of the glorious Revolution of 1688, done well out of the wars with France. Evidence of contractors making money. Family that had invested its money, north of Edinburgh, where he was brought up. Family and friends were incoming landlords. Interested in modernizing estates. People who are going to do things. Smith was born into that world as a rather sickly child; wasn't expected to live. Only son of his mother; his father had died before he was born. In this offbeat part of Scotland, improvement-orientated if you think in 18th century terms, he lived almost exclusively in the company of his mother, a formidable woman. There is a portrait of her which is worth consulting; that was a lady you did not mess with. Very close, clever bond. In addition to his authoritative manner, diffidence, is that absolutely everyone likes him. Difficult to find any backbiting words in Scotland or elsewhere. He actually goes to the local school in Kirkcaldy; just been taken over, probably with the influence of one of these incoming families, by a very avant-garde schoolmaster. Smith got rather surprisingly a good and not conventional education, strongly based on the classics; introduces him to classic philosophy and also to some inkling of contemporary British philosophy. He then goes at the age of 12 to Glasgow University. Very lucky; goes in 1736, and Glasgow University had just been put through a major refit by the people who run it, headed by the Duke of Argyle, who at that stage was called something else. The university, which had been a hotbed of radical Presbyterian thought for quite some time is cleaned out and turned into a moderate Presbyterian university. Resulted in the development of departments which were to be of huge importance to Smith, so much so that he got a first rate introduction to natural philosophy, Newtonian science; more important, taught by one of the greatest mathematicians in Europe, Robert Simson, to who I believe he owed more than historians have allowed. And I believe the icing on this very rich intellectual cake was that his arrival in Glasgow coincided with the arrival of Francis Hutcheson from Dublin, who is made Professor of Moral Philosophy and gives Smith a superb introduction to the state of moral philosophy in ancient and modern world. Smith calls him the never-to-be-forgotten Francis Hutcheson. Nice guy, great teacher, much beloved, and a formidable moral philosopher. He is also a very devout moderate Christian, and this will matter in Smith's life. Smith finishes at Glasgow; leaves for a special scholarship at Oxford University, Balliol College, in 1740. Goes to somewhere he hates. If you want to see how much he hated it, look up in Book V of The Wealth of Nations where Smith discusses the role of universities in the modern state and lets his hair down about the state of teaching in Oxford. He's not a fan. If Smith hated anything or anyone, I think it was Oxford University. Interesting period of his life, 6 years, nice scholarship to have, basically he was left to himself. Very clever boy who has been given a carefully structured education, sophisticated education at Glasgow; needed time just to breathe. He reads copiously. He's a polymath. He saturated himself with the history of philosophy, the history of jurisprudence, history of rhetoric in particular.

19:22 Smith found himself not being properly supervised by college tutors who didn't have much to do with him. Comes into contact with the writings of the infidel David Hume. Pivotal moment in Smith's intellectual development. Must have been at the end or middle to the end of his stay in Oxford. I argue in my book that this is a transformational experience. First, gives Smith an approach to the study of moral philosophy and therefore the study of human society--gives him an approach which rejects any religious premise as a legitimate premise on which to base your reasoning about the principles of human nature. Provides an alternative and an experimental method which can be used if you cannot make these assumptions. Brings to an end the first part of Smith's education, about the age of 22. Meeting Hume would come later. Smith, ambitious, prepared to take on the world of modern philosophy and raring to go at the age of 23. From about that age, when he returns to Scotland, in search of a career, is when his career as a philosopher begins to show, become recognizable. Extraordinary part of the story: he's going to give some lectures, he's going to be successful as a professor, people are going to like him, he writes a book that is well received, TMS; book a bit strange in style; book is a success. Is there any point before 1776 where you would say: This man has in him not just a successful career as a professor, not just a thoughtful book on moral philosophy, but the book that is essentially going to launch the field of economics into its modern era? Not just a clever book, but a massive book of tremendous ambition, diverse insights into behavior, activities all around the world? Who would have thunk it? Highly ambitious; at 23, he has the nerve to write this tome; this rocket that takes off. One of the great historic questions. Smith, from the very first time that he starts to appear as a public philosopher in Scotland, from 1746 or probably 1748 or 1749, when he starts to deliver as a public lecturer. He is working at that time on an enormously wide scale. He is lecturing on rhetoric and particularly on the theory of language, more extraordinary than given credit for. He is lecturing on jurisprudence, fashionable subject in Edinburgh, city where people are seriously interested in legal education. He is constructing something that David Hume called a science of man, study of the principles of human nature as they are formed in us all by living in civil society. Living in civil society, learning to cooperate, exchange, communicate using the powers of language--study of the individual personality. Study of how that happens in different types of civilization. Needs to see his interest in political economy taking shape. We know exactly when and how it started. It did so in the process of lecturing on jurisprudence and in the study of how it is that human beings in ordinary living, in particular societies and civilizations, begin the acquire a sense of justice. One of Smith's major propositions is we can't function in civil society unless there is an idea of justice and that we have feelings about justice. When people are wronged or treated unfairly, that those who have done it need to be punished. A sentiment of justice and injustice is essential to our ability to survive in any society known to history. Where do we get this from? Profoundly influenced by the state of distribution of property, whether we own or don't own property; but also going to be influenced by the way the laws of justice are administered by any form of government. If we feel that government has fallen into the hands of tyrants or incompetents, we are likely to feel that our own interests are being hampered; that we are being treated unfairly; our sense of justice is going to be offended. This is the more immediate territory in which Smith starts to ask essentially economic questions. The way he asks them interesting: What are the important functions of government that have to be administered fairly if we are going to find they are ruling over a stable, relatively contented form of society? One of them is going to be about the price of commodities. This is the point at which he starts to ask questions about how are we to talk about the fair price of commodities, the fairness of administering commodities. This is where Smith comes through with his first insights into the fact that within an economically functioning polity with government, laws to administer, we are going to be more content if we are given more ability to look after our own interests, unencumbered by artificial rules, regulations, and so forth. The notion of a market and the regulation of a market is at the forefront of his thinking about how we should start to address the problems of an economy. Comes into this discussion of government, justice, fairness and all of that leads to much wider project: how we become the people we are and the societies we live in. That's the point of entry. We can be sure that Smith was thinking in these terms when he was in his late 20s in Edinburgh. What he will do after 1752, when he becomes Professor of Moral Philosophy at Glasgow, is he will start working on that problem alongside considering the problems of socialization, which he develops in TMS. Smith's reasoning that forms the backbone of his two great published books takes place simultaneously, although he chooses for reasons best known to himself to complete the work on TMS and the theory of socialization and the ethical implications of that before sitting down and really opening up the questions of trying to understand the dynamics of the trading process.

30:46 What you are really saying is there is a certain synergy that runs through both great works. There is this great issue--Smith has been caricatured terribly, tragically--along the lines of: he wrote one book about how you should be a nice person, TMS, and then he wrote this other book about how it's okay to be not nice. You can be selfish or self-interested. That's the Wealth of Nations (WN). That's clearly not correct; not his science of man, really isn't a schizophrenic aspect to this. There's a unity, a wholeness to it. The wholeness--he didn't use the word so much, but competition runs through all of his work, not in the way we use it as a modern but in the sense of: We're all interacting with each other aware of the fact that there are others out there that offer us both alternatives and judgment and assessment and friendship and profit and bargains, etc. He obviously was very concerned about government's role in creating or inhibiting competition. Very aware of the role self-interested merchants would play in creating artificial impediments to competition; he wanted those to be taken away, I think partly because he saw that in the interpersonal sphere, which is the world of TMS, that the fact that I had to interact with others in a marketplace of morality would create good things, and therefore when I interacted in a marketplace of commerce, those same forces would encourage me to do things that would end up serving my fellow human beings. That's the orderliness that he sees, and the way I see it: he sees it driven by competition, not the way a modern would talk about it, but the way he talked about: you have alternatives, you are searching, looking for a bargain, looking for friendship, respect, esteem of your friends; similarly you are doing the same thing in the commercial world, and it's all working together. What do you think? That's absolutely right. Would just modify it slightly. The slightly dodgy word is the word "competition," if you see it from Smith's point of view. The crucial notion is exchange; he says somewhere that we spend our lives in exchanging things. That's a better word. A key word, concept, for entire understanding of the human condition, it is that we are constantly engaged in a process of exchange. We exchange goods, we exchange our services, we exchange sentiments, and we do it from the moment of our birth to the moment of our death. Well worth turning to the recovered text of his Lectures on Jurisprudence to see how Smith prefaces his discussion of political economy. What he does is spend the first ten pages or so talking about the human condition: why are we different from the animals, most indigent of species; so in order to survive we've had to cooperate; in order to cooperate we've had to invent language. And what does cooperation with the use of language mean? It's about exchange. Exchange when it's discussed in TMS is about trading--we trade sentiments with each other, looking for a sort of psychological deal; it's nice to have a discussion with people and to feel that what we are saying is regarded with sympathy. We relish the process of trading our ideas. It's what happens in any tutorial at any university, any conversation in a park. The process he's describing in TMS and that regulates our social lives is exactly the same process which he is discussing when we trade our goods and services. He says: We spend all our lives trying to persuade people. That's why rhetoric matters. What are we doing when we are trading? We are using our persuasive arts. That notion of exchange is the most useful way of putting it. To talk about competition is much more iffy and more dangerous because it implies a much more native, self-interested impulse in us than I think Smith thought we had.

37:00 Let me correct that and say it in a better way. I don't mean "competitive," though I think he was certainly aware of people's desire to climb the ladders of status. I meant it in the sense of the term the way it's used in economics. It's a term that gets abused a lot. So, let me try to say it in a more simple way. I think Smith was focused on a very simple aspect of competition, which is: More is better. That is, if you have more choices, if you have more people to trade with, you are going to prosper in ways that you won't if you only have a few people to trade with. So, at one extreme, you have a small village where there is only one supplier of something you desperately want; and at the other extreme you have a world where you have lots of suppliers to choose from. Smith to me--his greatest economic insight, which has taken me decades to fully appreciate, that's not obvious--everybody will tell you that the invisible hand is a great contribution; his contributions against mercantilism are incredibly important; but neglected by modern economists until very recently: his insight that the division of labor is limited by the extent of the market. The idea that the more people you have to trade with, not only will they have to treat you better, which is the modern sense in which competition matters; not only will they not have a monopoly over you or exploit you; but the deeper insight of Smith--and we've done a couple of podcasts on this--the idea that as you expand the breadth of who you trade with, the tools and the way you create is going to be different. And you are going to get the potential for wealth, the potential to avoid subsistence, misery. It's hard to do that in a small world with only a few traders and a few suppliers. It's possible to do that, you can create wealth, when you have a little bit of modernity, a little bit of the expansive opportunities to trade. When I invoked "competition" earlier, that's what I meant. And that aspect of exchange--the wideness of exchange--it doesn't quite work in the moral philosophy, moral sentiment world because we don't interact morally with thousands. We interact morally with our sphere of neighbors and family--he talks about that incessantly: the people we touch with our words, our eyes, our hands, shake hands with, hug--that's a small circle. But he saw in the WN that there's this large circle we can interact with commercially. Saw that it allowed some things that weren't obvious. What do you think of that? I think what you are doing is pushing the discussion of the WN beyond--legitimately I may say--beyond where Smith leaves it on the text. I think your contrast with the situation that obtains in TMS where our social world is confined to relatively few people is entirely right. The thought I would give you is I think the notion of the market in the WN is much less finely tuned than we tend to think. Totally agree. The people he's talking about, whose economic behavior really interests him, are people, largely agricultural people, who are locked in to the economy of a world that is just emerging from the sort of closed economy that is represented by late feudalism. These are the people whose ambitions are being stirred in Smith's discussion, who simply want a bit of security, which will give them freedom to improve their own lot, make their own lot convenient--that's the word he uses. Very modest levels of motivations he's talking about. He comes back to this situation again and again and again. He invokes the logic, part of the magic of the WN, of a colossal market--in his discussion of the development of national economies, he never really moves much beyond the operation of the market in particular regions--and I'm thinking of the regions of Britain. The notion of those regions becoming an international market between different sectors--he is surprisingly reluctant to do that. I think the reasons may well be political. Smith is very anxious in the WN not to be a utopian, not to try and envisage how the market will develop beyond our own historical reach, beyond the reach of the present generation of our [?], who are the people who are the ultimate targets, I think, for this book. Although I think you are right about the general tendencies of where competition and markets goes, I think it is interesting as an historian he chooses, I think deliberately, to lay back in understanding what the market is in favor of just trying to focus on things that will change people's patterns of exchanging goods and services in particular regional contexts. May occur to you that this is an historian being excessively cautious. Great point. The sort of behavior he's discussing in TMS, which basically does not stretch much beyond the region of our own family and friends, really is extended in the actual text of the WN, though I do agree that the WN stretches far beyond the reach of that text. I think he leaves it to others to make that stretch.

45:07 Just as in TMS he is dealing with a small circle of intimates who influence our behavior, those insights are applicable today because of a world of the web and television and print--our reputations go way beyond a small circle. Similarly, in the WN, he made narrower assessments then. The wisdom of Smith is that we can make a more general application. Stylistic question that fascinates me: One of the things I enjoyed about your book were some of the quotes from Smith's predecessors, and teachers, people like Hume, Hutcheson in particular, and some of his contemporaries. One of the things that struck me about those is that Smith is a much more accessible and entertaining writer. When I picked up TMS, my colleague, Dan Klein, here at George Mason University, approached me and suggested we do a podcast on this. Picked it up again, thought it would be fun; after about three pages thought I'm not sure I'm going to be able to pull this off. I can't read it. I'm not enjoying it. It sort of starts in the middle. Bizarrely structured book. I thought: Well, I'm already committed to this; I'll push on. Very shortly after that, there were many rewards from reading it in the original. But, reading Hutcheson, I suspect for a modern is quite difficult. Similarly, the WN, much of it, not all of it, is delightful to read. His prose is clear to a modern. He writes longer sentences than a modern would normally write. We think of Smith the way some people think of John Maynard Keynes: Before Keynes there was no economics about macro. This isn't true. There were all kinds of books on it. He eclipsed them. And similarly Smith eclipsed the thinkers of his day. Obviously he was a wise and talented man. But style plays some role in that. I think style hampers a little bit TMS. Style is one of the great successes of the WN. What role did style play in those books having the impact that they did and the fact that we don't read Hutcheson anymore? Last point first: absolutely agree with you that it's a different world when you move from Hutcheson to Smith. Something has happened to moral philosophy, to the whole approach of how you study human behavior. Comes through in style. In general terms about Smith's style, one should say: Smith wrote extremely slowly. Constantly writing, rewriting, doing, and undoing his prose. Never satisfied with it. Seems to have started off composing by dictating. We don't know how exactly he composed, but at an early stage, he seems to have relied on a clark to listen to dictation, put it into text, worked and re-worked on it. So, what you are getting in Smith is very manufactured prose. You said a "clark," right? In America we would call it a "clerk." So, he hired someone to take notes for him? To take dictation. Probably it was the first draft and then he worked it over. If you compare that with the start of David Hume, particularly when Hume is writing about economics, Hume writes very fast. I think that's a lot of the charm of Hume's economic writing. He uses an essay format, which is a pretty concentrated format and does not allow for much exposition. The contrast in Smith's writing habits make it clear he was [?] as a stylist. I don't quite agree with you in finding TMS hard going. Once one starts to add in, the thing comes to life if you realize TMS is designed to answer Jean-Jacques Rousseau's pessimistic views about the civilizing process--a civilizing process which destroys the human personality, by its very nature turns people who are unrecognizable even to ourselves. Smith wants to play with that, to say that in a sort of way it's right to take that line: commercial activity in social life, economic life, does change our personalities. But the question of whether it corrupts us, makes us unfit to reason or live a decent ethical life, Smith thinks we face that well. You get a story coming out of TMS once you think that that strategy. Organizational strategy he uses to discuss the civilizing process. I do think those two books taken by themselves are one-offs. Smith is Smith as a stylist. There isn't anyone else like him. It's something that contemporaries periodically commented on. He was known to be a good writer? He was thought to be an extremely verbose writer. Not in the sense of using words unnecessarily, but people liked much more pithy reasoning about essentially philosophical principles. He throws in a lot of metaphor and examples, which is part of the reason he's got the accessibility; sometimes the examples for a modern are a little bit obscure because they were written for his day; but most of the time we do understand that. He doesn't see that as degrading to come down off the mountain to illustrate his points. I think what you are saying is absolutely right. His examples were often commented on. Over-many examples, but Smith was often admired for the precision with which his examples were given. My explanation of that is that his method of reasoning required him to put an enormous amount of stress on examples. Because actually, the method he uses, which is essentially a mathematical method, is to advance a general proposition which will appeal to anyone of common sense, but then in fact, to increase its truth value, to illustrate it. Illustrations are not the same as evidence, in terms of thinking as someone applying the scientific method. He is not producing his examples and then developing a hypothesis about how it works--division of labor. He takes a general proposition about some aspect of human behavior, and he then says: All I can do, I can suggest you think about this, this proposition is one we all have had in the back of our minds for some time, suggest we think about it; and in order to increase its plausibility, I'm going to illustrate this up to the hilt, examples taken from contemporary life, taken from history.

55:30 These examples are crucial; add truth value to propositions which are merely suggestions. So, maybe the analogy--you mentioned the influence of Simson on him, his math teacher--the mathematical equivalent would be something like: there are an infinite number of prime numbers; can you prove it? Well, I can't prove it but here's a really big one, because you probably thought after 100 or 200 or 300 they'd run out because these numbers are so big that they must have things that go into them other than the number 1. So, if I can keep giving you more and more of these big numbers that are prime, maybe you'll start to agree. And certainly in the area of human behavior, where we are not really amenable to equations, it's not a bad approach. Think it's a very good approach. An approach people remember when thinking about Smith because it does put pay to the notion that economics is never going to be an exact science, or indeed that any of the human sciences are going to be exact sciences. In the last resort all we can do is offer general propositions which are drawn from the experience of everyday life which we wish to develop, and the only way we can increase their truth value is by illustrating them in a convincing manner. And then offering this as something that in Smith's case, our governors should think about. Not offering them as scientific propositions. Plausible hypotheses which he's saying a wise legislator ought to think about when he is doing his basic business of importing rules of justice.