Tag Archives | moral philosophy

Recovering Adam Smith’s Ethical Economics

Contemporary economists have been eager to claim Adam Smith and his ‘Invisible Hand’ as an early forerunner for modern ideas of people as self-interested, utility-maximising creatures. The truth, as Thomas points out, is a good deal more complicated than that.

Adam Smith

Originally published at The Philosopher’s Beard. Gratefully reproduced here with permission from the author.

“While some men are born small and some achieve smallness, it is clear that Adam Smith has had much smallness thrust upon him.”Amartya Sen

Adam Smith is famous for founding economics as an independent field of study by synthesising and systemizing classical economics in The Wealth of Nations. But he was also a significant moral philosopher in his own right who deserves to be recognised alongside his close friend David Hume as a key figure in the Scottish Enlightenment. Smith saw economics as a branch of moral philosophy, and he saw capitalism as an ethical project whose success required political commitment to justice and freedom, not merely an understanding of economic logistics.

These days Adam Smith is most familiar to us as an economist, and specifically as the defender of the famous Invisible Hand of free-market economics, wherein the private self-interested actions of private individuals, mediated through free markets, generate results that are good for all. The market-system comprehends the true level of demand for any good and provides the appropriate incentives – profits – for producers to adjust their output to match. No external intervention or guidance is necessary. A great deal of contemporary (neo-classical) economics can be understood in terms of translating Smith’s Invisible Hand metaphor into a systematic theoretical form, with a particular emphasis on the economic efficiency of perfectly competitive markets.

Anyone who cares to read Smith’s Wealth of Nations for themselves will find an economics discussed and justified in explicitly moral terms…

However the popular view of Smith that has resulted from this emphasis is twice distorted. Firstly, it is based on the narrow foundations of a few select quotations from The Wealth of Nations (WN) that are taken in isolation as summing up his work (Smith only mentions the ‘all important’ Invisible Hand once), and secondly these quotations have been analyzed in a particularly narrow way. Both selection and interpretation have been driven by contemporary economists’ interest in justifying orthodox economic methodology and their peculiar (Mandevillian) assumption of the selfish utility maximising homo economicus. The Chicago School economist George Stigler once famously declaimed, “I bring you greetings from Adam Smith, who is alive and well and living in Chicago”. What such ‘historians’ have achieved is the diminution of Smith’s economics to those bits which can be claimed to be early (and flawed) fore-runners of contemporary economic concepts and techniques.

But anyone who cares to read Smith’s Wealth of Nations for themselves will find an economics discussed and justified in explicitly moral terms, in which markets, and the division of labour they allow, are shown to both depend upon and produce not only prosperity but also justice and freedom, particularly for the poor. With those concerns in mind, it should not be surprising that Smith was a staunch and vehement critic of those particularly grotesque sins associated with early capitalism: European empires and the slave trade.

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Unhobbling Democracy

Politics is failing. The public square in Australia, like so many other Western countries, is a broken and desolate place. Danu sifts through the wreckage looking for clues, and wonders how committed we really are to democratic citizenship.

It is now de rigueur to make the observation in Australia (and numerous other countries) that faith and trust in politics and especially our political leaders has deteriorated to what must surely be an all-time low. That the only box voters are prepared to tick is the one marked ‘None of the Above’.

This will either resonate with you or it won’t. In any case, plenty of ink has been spilled on the subject elsewhere, especially in diagnosing (and misdiagnosing) its causes and effects and I feel no urge to expend much effort arguing the proposition further here. I actually want to talk about democracy, but it will help to keep this disillusionment in mind.

It is interesting that Australia’s current government in particular should be especially pilloried — the object of a pitch and tenor of grumbling and derision not seen in some time. Whether this is because of the unfamiliar minority governing arrangements, the indelible sense of illegitimacy surrounding how the government came to power, its lack of clear vision, purpose and moral courage, the unpopularity of its policies, the scantily-clad sexism towards its leader or simply its sheer ineffectiveness, is hard to say. There are interesting things to be said about all these claims and in my view they all have some merit, but that is not our subject today.

Rather, I’d like to consider just what it is we want from our political institutions and what exactly we expect them to do. Continue Reading →