Click here for this week’s podcast on Michael Sandel, markets and morality.

By Pat Tomaino

Would Adam Smith be a happy posterboy for capitalism — all of the good and greed done in its name since the Scottish professor published The Wealth of Nations in 1776?

The answer is more complicated than you may think, and the question itself sheds much needed light on the collision of markets and morality.

Self-love and the hand that feeds

Smith’s Wealth of Nations is focused on self-interest, so it’s a favorite of market fundamentalists from the neoclassical to the neoliberal. Monarchs of Europe, bring down your trade walls, Smith cries. Protecting your industries and making commercial war is so pre-Englightenment. Instead, like the butchers and roofers in market towns, specialize and trade liberally!

A likeness of Smith, engraved by John Kay in 1790.

The protagonist in Smith’s market world is not a king or a chartered monopoly using market power to advance the national interest. She’s a more familiar character; the international wheeler-dealer investing and trading across national borders and, so the theory goes, spreading the social good by acting purely out of self-love. The Nike executive.

Which brings us to the Wealth of Nations passage most quoted by the economic set, the lone appearance of Smith’s famous “invisible hand”:

“[E]very individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, 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 which was no part of his intention.”

The “invisible hand,” like Rand Paul, excuses and contextualizes self-interest. In a free market of actors motivated by self-love, Smith says, things usually work out, so there’s no need to intervene or pick winners.

Mercantilist times are long gone though. So are the economics of royal tariffs, colonial planning, and gold greed that The Wealth of Nations railed against. If he were around today, Smith might be as big a critic of Nike as he was of the British East India Company.

And would Adam Smith build a whole morality out of self-interest and his invisible hand? Probably not. Like many academics playing the policy game, he might direct you to some other relevant lines in his CV. If he sheepishly worked the conference circuit just after the Great Depression or the 2008 meltdown, the free market founder may have reminded audiences that his science of self-love does not say that greed is good.

Self interest to “self help?”

Smith’s got, after all, a whole other monograph that says the opposite: 1759’s Theory of Moral Sentiments, the touchier, feelier companion book to Wealth of Nations. It’s a curious treatise, one of the major works of moral philosophy to come from the Enlightenment, and a surprising paean to sympathy.

Theory of Moral Sentiments gets less attention from economists. When they do engage with the book, two reactions are telling: dismissal and sheer amazement. The first group seems content to treat Smith’s oeuvre as a one-book cannon. Keep the hits, which work well for exactly the party you want to throw; then chuck the B-sides.

Russ Roberts’s “unexpected guide”

The second group are an open-minded but ultimately embarrassing lot. Take Russ Roberts, a Stanford economist, who published a book last year celebrating Theory of Moral Sentiments. He likened the work to a self-help book and said it was a compelling argument for why money isn’t the key to happiness. Roberts confesses that “Smith helped me understand why Whitney Houston and Marilyn Monroe were so unhappy…and then why their deaths made so many people so sad.” An economist’s quest for the humane becomes another reason not to trust our emotions to the dismal science.

But Smith’s moral theories, his B-Sides, deserve your attention. You’ve found the book that economists and the moral philosophers keep for themselves. Now that you have, it’s worth a quick tour — if only to try and reconcile Smith’s view of human nature with your own.

Theory of Moral Sentiments is so fascinating because it recognizes the pull of self-interest that Smith would develop later in his career. He does so, though, only on the way to describing far more compelling forces: the “moral sentiments” like pity, sympathy, pride and joy. And, critically for today, Smith wants us to know that all of these sentiments are prior to self-love and the ethics of the marketplace.

The book has a whole chapter on sympathy and another one devoted to how it drives human relationships. Failing to feel the sadness or misfortunes of other humans is itself inhuman, says Smith, and there is no friendship without sympathy. The very notion of humanity appears to require it.

Smith mastered and described self-interest like a 17th-century physicist. But he doesn’t marvel at it the way he marvels at sympathy.

An empire for your finger

Indeed, Smith does most of his marveling in The Theory of Moral Sentiments, 17 years before his more famous work. It’s where he observes with some awe that — despite all our self-interest — our better angels take over, especially when our pettiness and fear would seem to dictate otherwise.

In Chapter 3, Smith uses some of his most uncanny intellectual engineering to shows us what he means. The extended “would you rather?” scenario starring you, your little finger, and “the great empire of China” is a morality tale worthy of a full read.

First, a scene that plays out at every breakfast table. Reading the paper after a far-away natural disaster, the comfortable Westerner experiences a measure of polite sadness, then returns to his oatmeal:

Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connection with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment. …And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened.

Engraving from a Swiss journal depicting the Istanbul earthquake of 1754.

In a new scenario, we have the same comfy Westerner, but this time the news — a forecast of great personal pain — hits closer to home. Now, Smith predicts, “the most frivolous disaster which could befall himself would occasion a more real disturbance” in the man.

Self-love puts a bit of personal pain in the same league as the Chinese earthquake. Smith will explain, but he needs to borrow your pinky for a moment:

If he was to lose his little finger to-morrow, he would not sleep to-night; but, provided he never saw them, he will snore with the most profound security over the ruin of a hundred millions of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him, than this paltry misfortune of his own.

What a shame it is to fly off the handle at a painful, personal disaster when we can be so cool about Biblical death on the other side of the world. But that’s the bit of self-interest we can’t help. It’s powerful: it boils blood, grinds teeth, and in the end, it might make a weak man do something rash.

What would self-interest make us do in the second scenario? Smith himself asks whether anyone would consider smiting China to save that little finger.

Never, he answers, before things get too uncomfortable. No one would. Not in all of human history: Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it.

As Smith concludes his thought experiment and starts analyzing the data, it’s easy to forget this is the same man who wrote the bible of capitalism:

But what makes this difference? 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? When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, 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.

It’s possible to read these lines as a study of self-love, that familiar force from Wealth of Nations, the one that makes the markets go up and down and the world itself go round and round. But capitalists, and the rest of us trying to square our markets with our morals, might be surprised to find there isn’t much love for self-love here.

Like many of his peers, all followers of science, Smith seems more eager to identify the force, classify it, and then put it in its place. In his second-best-seller, Adam Smith marches past self-interest to all of the more interesting bits of human nature: goodness, will, and — above all for the Enlightenment man — emotion strengthened with reason.