Gains and losses; costs and benefits. Thinking in these terms comes naturally to most of us today. And for this we largely have economists to thank. The language of trade-offs that we all know so well is profoundly indebted to what has been called "the economic way of thinking," and particularly its emphasis on the ways in which opportunity costs shape our individual efforts to pursue self-interest and maximize our utility. But not all economists understand costs and benefits in the same way. For many - and particularly for the eighteenth-century philosophers who formed the first generation of political economists - the costs and benefits of various systems and practices were not just matters of utility, but matters of morality. This way of thinking came especially naturally to Adam Smith, still the best remembered of the Enlightenment economists. Smith's defense of what he called "the system of natural liberty" - that is, the free commercial order that we associate today with capitalism - was itself built on a quite conscious calculation of its costs and benefits. Yet Smith's popular reputation has long outrun our appreciation and study of his arguments, with the result that his assessment of capitalism's benefits has been misunderstood, and his appreciation of its costs largely forgotten outside of scholarly circles. On the positive side of the ledger, Smith defended "commercial society" for two specific reasons. Smith first and foremost argued that commercial society was the best means yet discovered for alleviating poverty. Indeed it was precisely the capacity of free markets to generate "universal opulence" that "extends itself to the lowest ranks of the people" that he thought made them worth defending. Smith of course was hardly naïve, and he knew well that free markets would never be free - indeed could never be free - of inequality. Smith himself was more than a little troubled by the dangers of extreme inequality. Yet he also consistently cautioned us never to let our resentment of inequality supplant what really matters and what he thought free markets are best positioned to provide: namely provision of the poor with a decent and dignified material standard of living. Second, Smith also defended free markets for their capacity to provide the poorest and weakest the maximum possible degree of freedom. Where previous economic orders from the slave states of antiquity to medieval feudal Europe rendered the weak vulnerable and dependant on the strong, Smith welcomed free markets in commodities and labor largely because their complex interdependence made it possible to break this pernicious cycle and secure both the minimal degree of freedom and material security needed for the realization of a decent, dignified life. The positive side of Smith's ledger thus lists increase in the material living standards of the poorest and increase in the freedom of the lowest as the two chief gains of commercial society. Yet for all this, Smith was also profoundly aware of commercial society's moral costs. In detailing these costs, Smith not only distances himself from the ideological defenders of capitalism who seek to deny such costs, but also reveals himself as one of the most acute observers of eighteenth-century social transformations. Smith's accounts of the moral costs of capitalism are striking, and indeed strikingly ubiquitous. Many of these are delivered in the form of parables or set-pieces. Thus the repetitive, specialized labor of workers is said to leave their minds "mutilated and deformed." Ambitious young men seeking to gratify their "love of distinction" are shown to subject themselves to lives full of "fatigue of body" and "uneasiness of mind." As warriors become traders, "heroic spirit is almost utterly extinguished." No wonder then that Smith on more than one occasion calls our attention to "the present misery and depravity of the world, so justly lamented." But his lament is not just a general one. Attending to his arguments, it becomes clear that he thinks this misery and depravity manifests itself in several specific dispositions he believes have been exacerbated by commercial society, including anxiety, selfishness, restlessness, inauthenticity, mediocrity, and indifference to others. In a very basic sense then, Smith sought to diagnose a specific tension at the heart of commercial society. Its gains on a collective level were profound, and were of particular benefit to the least well-off. But its costs on an individual level were no less profound, and threatened to corrupt the individual. In a very real sense, Smith thought that the "wealth of nations" is itself often bought at the cost of individual happiness. Smith's deep awareness of this paradox left him wondering - to put it perversely - "what is to be done?" More specifically, this awareness led him to wonder whether it might be possible to devise a means whereby the practical gains of commercial modernity might be preserved and extended while also mitigating its most pernicious negative externalities. And the fruit of this reflection, I think, is to be found in his treatment of what he calls "the character of virtue" - itself the title of a long section Smith added to his major work in moral philosophy, The Theory of Moral Sentiments, in the final years of his life. In my book Adam Smith and the Character of Virtue, I argue that Smith's intention in adding this section was to set forth a vision of virtue for capitalism, or a morality for modernity. In particular, this section - which he elsewhere referred to as providing a "practical system of morality" - aimed to develop a theory of virtue suited to the conditions and needs of citizens of today's commercial societies, needs that Smith understood in terms of the corruptions that he so powerfully diagnosed. In his newly-added section, Smith offered studies of several discrete virtues, including prudence, magnanimity, and beneficence. These virtues make an interesting set, and it is illuminating to compare them to the catalogues of virtues developed by thinkers from Aristotle and Cicero (whose works Smith knew well) to Benjamin Franklin (who he personally befriended). But in the end Smith's catalogue is all his own, and his focus on these specific virtues is the fruit of his reflection on the specific vices endemic to commercial modernity. In this sense, Smith recommends prudence as a remedy for the anxiety and restlessness endemic to unbalanced pursuits of self-interest - a remedy he thinks capable of both restoring individual tranquility and promoting national opulence. To expand and elevate the all-too-often low and narrow horizons of commercial men, Smith sought to recover the ancient virtue of magnanimity, and thereby reawaken in his readers what he called "the love of what is honorable and noble." And to alleviate the propensity to self-centeredness and cynical indifference that exclusive concern with self-interest can bring, Smith encouraged beneficence. Smith's theory of virtue thus sought to respond to what he understood to be the most pressing moral challenges of his day. Did Smith solve all of capitalism's moral woes? Of course not - it hardly seems fair to ask that of any single thinker or book. Yet it remains the case that those of us today seeking to navigate the specific ethical challenges posed by contemporary capitalism will be hard-pressed to find a better guide.