Benevolent Adam Smith

A number of great works appeared in 1776—Jefferson’s Declaration of Independence, Paine’s Common Sense, Smith’s Wealth of Nations, the first volume of Gibbon’s Decline and Fall, and the first volume of Bertotti-Scamozzi’s Buildings and Designs of Andrea Palladio. The bicentennial of all five publications was celebrated in 1976; but Smith received the most illuminating tribute—the launching of Oxford University Press’s Glasgow Edition of Smith’s works, a beautifully edited series that will in time include a new biography and all the important Smith fragments and correspondence. These give us the materials to break Smith out of the prison of his popular reputation as the rationalizer of greed.

Smith anniversaries have been uncommonly fruitful affairs. The centennial prompted Bagehot’s essays on the man and his works. The sesquicentennial produced a series of Chicago lectures that became classics of their kind—Paul Douglas on the paradox of value, Jacob Viner on the inaccuracy of calling Smith a laissez-faire purist, Melchior Palyi on the early impact of Smith.¹ Contributors to this new Glasgow volume of Essays are still arguing with Douglas and Viner, still drawing on Palyi’s work.

But the bicentennial outshines former efforts. It can draw on advances in textual scholarship, and on a fortuitous discovery—that of a new (and fuller) set of student’s notes from Smith’s course on jurisprudence. This discovery made it possible for Ronald Meek and Andrew Skinner to redate the sequence of Smith’s fragments on the division of labor, in a seminal article that appeared long enough before the celebration to let the Glasgow editors and some of the essayists absorb its importance.²

The most inclusive approach to Smith looks to what the Germans call “das Adam Smith Problem“—the difficulty of reconciling the 1759 Theory of Moral Sentiments (henceforth referred to as MS) with the 1776 Wealth of Nations (henceforth WN). In the first book, Smith based human happiness and virtue on the “fellow feeling” one has for others:

We have always, therefore, the strongest disposition to sympathize with the benevolent affections. They appear in every respect agreeable. We enter into the satisfaction both of the person who feels them, and of the person who is the object of them. [MS pp. 38-39].³

But WN does not speak of sympathy with others as the driving force of social life. It grounds the wealth of nations in the love of self:

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. [WN pp. 26-27]

Joseph Schumpeter thought it barely conceivable that two such different works could issue from the same brain. Viner, in his 1926 Chicago lecture, spoke of the “irreconcilable divergence” between the two works. Germans tried to solve the Problem with an “Umschwungstheorie,” postulating a complete transvaluation of values between 1759 and 1776. But that seems precluded by the fact that Smith revised his MS text, without altering its basic thesis, fourteen years after publishing WN.

It is not surprising that the Problem gets much attention, not only in the long introductions to the Glasgow texts but in the Essays on Adam Smith (henceforth Essays) and The Market and the State (henceforth Market).⁴ The fact that so many people still circle around this irritant makes it premature to say the Problem has been solved—though the most serious student of it in these papers, D.D. Raphael, finally dismisses it as a pseudo problem.⁵ The truth seems to be, rather, that maturing scholarship on two subjects may in time put the Problem to rest. The first of these is Smith’s central concept of the division of labor, the second is Smith’s debt to the philosopher Francis Hutcheson, under whom Smith studied in Glasgow in the 1730s. Naturally, both these subjects are affected by Meek’s and Skinner’s redating of the pre-WN material.

1. Division of Labor

The starting point of The Wealth of Nations is the famous tale of a pin’s manufacture by “about eighteen” separate operations.

…to make the head requires three distinct operations; to put it on is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands…. If they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they could certainly not each of them have made twenty, perhaps not one pin in a day…. The division of labor…so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labor. [WN, p. 15]

No one can neglect the division of labor in Smith’s thinking. But W.R. Scott focused sharper attention on this concept when, in 1937, he published the “Early Draft” (henceforth ED) of The Wealth of Nations. This looks like a prospectus for a publisher, written when Smith was first planning his work. Thus Scott dated it after 1763 (i.e., after his dating for the notes on jurisprudence and around the time of Smith’s first work on WN in France). This allowed for the extraordinary fact that division of labor is not only the starting point of ED but almost its whole point. There is very little on stock accumulation or competition, the subjects that had drawn attention away from division of labor in many studies of WN. Scott’s dating put ED early in Smith’s thinking; but it did make scholars look harder at division of labor as the kernel from which that thinking had developed.

Meek and Skinner, for a reason to be looked at shortly, date ED even earlier, before 1763. That might seem further to demote the concept of division of labor, making it an even more primitive element in Smith’s thought. But Meek and Skinner also let us see how Smith’s characteristic method grew directly from the concerns he absorbed from Francis Hutcheson.

W. R. Scott had already proved, in 1937, that Smith’s lectures on jurisprudence followed an order of topics used by Francis Hutcheson in his Short Introduction to Moral Philosophy (the basis of Hutcheson’s lectures in the late 1730s when Smith was his student at Glasgow). It puzzled W.L. Taylor⁶ that Hutcheson put his lecture on price between those on oaths and on contracts. But Hutcheson, like most of the Scottish thinkers of the Enlightenment, was anti-Lockean in his insistence on the fact that man is a social animal, born into a family, sharing communal signs and language as soon as he becomes self-conscious. For the Scots, unlike Locke, no hypothetical “individual” could contract into society (an idea Hume ridiculed). Thus Hutcheson treats trade as an aspect of language, of the signals of mutual need that lead to mutual succoring. Thus trade fits naturally into the discussion of oaths and contracts stressing the “fidelity” of human communication. This is the approach everyone recognizes in Smith’s MS, with its grounding of virtue in sympathy with others. And this is what WN, with its emphasis on self-interest and competitiveness, is supposed to contradict.

But look again at that concept, division of labor. This arises, both in ED and the lecture notes, from a discussion of human cooperation that follows Hutcheson’s line of thought. People agree, Smith argues, to work together on one project by doing different things. The performer of one function cannot try to undercut the performer of another, without defeating the whole cooperative endeavor. Competition does not arise, at this level, for Smith. The same is true for Continental theorists of divided labor—e.g., Turgot and the Marquis de Chastellux. Chastellux argued that only a large division of labor in society allows men to specialize in “philosophy” (science), thus making progress possible—the very point of Smith’s famous Fragment A (now redated by Meek and Skinner to post-April 1763).

The same kind of cooperation that brings men together to share in the production of a pin makes society at large recognize the need for specialization. So Chastellux noted that a developed society will not only feed the scientist, who works for the good of the whole society, but feed as well the soldier, who defends that society.⁷ One of Smith’s most striking departures from libertarian views was his defense of standing armies.⁸ It is hard to overstate the importance of this fact. The man thought of as the preeminent enemy of state power seems to grant the state what was considered, in his time, the most dangerous power of all! In this, he agreed with fellow Scots and socializing theorists like Chastellux on the need to divide society’s tasks on a cooperative basis.

But if this is the background of Smith’s thought, how does competition enter such a benevolent system of mutual succor? In one sense, it does not “enter” Smith’s thinking as a fresh element, since it was present in Hutcheson, who preached the virtues of free trade, the need for incentives to industry, and the consequent right to the fruits of one’s own labor. We can, in fact, say that there is a Francis Hutcheson Problem preceding the Adam Smith Problem.

Hutcheson believed in minimal government intervention, because he thought society so natural to men that it needs little regulation. And he, like many philosophes, believed there was a providential machinery disposing men’s actions to a happy outcome, aside even from conscious intention. The invisible hand was ordering many different kinds of social machinery in that optimistic age.

Still, there is a new urgency, apprehended by all, in the way Smith highlighted competitive elements in his system. Most scholars agree now that WN was not original in its parts, just ingenious and thorough in the way it developed and connected available theories. Smith advanced the science of man in rigor, in method. Meek and Skinner allow us to see the very moment when this methodological breakthrough occurred.

The dramatic moment is circumscribable: it occurred at Glasgow, between one Tuesday of 1763 (March 29) and the next Tuesday (April 5), in that academic course covered by the new lecture notes. Indeed, the insight seems to have come by that first Tuesday night, and to have been developed over the weekend. Smith finished, on the first Tuesday, his Hutchesonian discussion of the division of labor. But the very next day he went back over his material, making new points; and the next Tuesday he introduced, out of the order it would later assume, his seminal concept that the division of labor is determined by “the extent of the market,” that is, the size of the area in which products can be sold. In his next year’s lecture notes,⁹ this insight is incorporated in its logical place; suggesting that it had, in the intervening year, been absorbed within his system and begun its leavening action. The well-known Fragments A and B, going beyond ED in their investigation of the market, treat the material of Smith’s March 20 and April 5 lectures, and reflect this absorbing process. Since ED does not have this material, Meek and Skinner can now date it prior to April 1763. The methodological bridge between the first concept of labor’s division and the larger scheme of WN is the concept of the market’s extent.

Extent of the market” was a fundamentally geographical term for Smith. It does no good for a few people to turn out shoes by the hundreds if they have no customers. Finding a market involves, at the outset, two considerations—ability to transport the product to an area wide enough to use the fruits of increased productivity, and a willingness in that widened area to receive the product. This latter consideration also has two aspects—willingness of authorities to allow entry for the product, and willingness of buyers living there to purchase it. The only claim “foreign” shoes can have, in a strange area, is the ability to release “natives” from shoe-manufacturing in order to become productive in another item, tradable not only with the shoe manufacturers but with still other “strange” areas, leading to widespread mutual enrichment.

Now Smith’s real world was one of complex exclusion—of territorial limitations on the market, not only by governments in the narrow sense but by those controlling other “territories”—guilds townships, manor jurisdictions, etc.¹⁰ These were all “other” governments from the vantage point of aspiring producers. And Smith’s opposition to “government” is, principally, to this power of other jurisdictions to exclude men from progressively cooperative intercommunication. In so far as Smith opposed his own government, it was to prevent the underwriting of exclusive prerogative for merchants, masters, stock companies, colonial developers, etc., making oneself an other to one’s own when extending one’s dealings into new areas. (This would be the true Smithian concept of “alienation,” against the Marxist doctrine.) The monopolies he opposed were those granted to private investers by royal grant, sealing off whole colonies and tracts of the world. Like Jefferson, who was also influenced by Hutcheson, Smith saw the colonial policy as a new feudalism, with absentee landlordism aggrandized to trusteeship over whole continents, from which fellow British traders were to be excluded. Smith’s attack on mercantilism was, as its name suggested, on the undue influence of merchants privately banded to use public authority for their own advantage.¹¹

The right to compete with other traders therefore does not enter Smith’s thought as an attack on cooperation, but as a defense of cooperation against the exclusions of joint-stock companies in the new world. Marx, Ruskin, and others, reading Smith backward by way of Mill and nineteenth-century individualism, called Smith’s division of labor a division of men. Actually, it was a uniting of men in joint endeavors, meant to overcome the divisions raised by prerogative in a crumbling royal order of farmed-out colonies.

It seems inconsistent, at first, for Smith to praise the division of labor yet oppose joint stock companies (i.e. corporations). Are these not a superb example of division of labor? Not for Smith. He did not think mere owning of stock was full participation in divided labor (hence his troublesome blessing of controlled interest rates to keep money away from restless speculators).¹² For Smith, full participation meant a fellowship in production. It is important to remember, as some essayists argue here, that Smith’s thought was formed just before the Industrial Revolution¹³—though it was first applied, and misapplied, in the flush of that revolution. The division of labor was still on a small and cooperative scale in his day. Thus he thought one advantage of dividing labor would be to make the workers understand production better and come up with better machinery.¹⁴ That applies to Henry Ford and his assistants putting cars together in the early days, but not to workers on an assembly line, where research and development are entirely separate from production and maintenance—as are, e.g., sales and advertising, management and policy.

Modern corporate procedure stands closer to the things Smith attacked—e.g., to prerogative exclusion, joint-stock impersonality, guild rules—than to the kind of divided labor Smith offered as an example of human cooperation. It is true that Smith said an accumulation of stock (capital) would lead to more thorough division of labor; which leads, logically, to specialization within the production of the item—just as the benevolent view of society leads to full-time specialists like paid soldiers. But the full-time soldier is supported because he stands in defense of the whole society, preserving its peaceful communications. He is not given a role to be used against one part of society in the name of another part.¹⁵ For Smith, then, stock accumulation is just the means to a basically cooperative end.

It was the concept of the market’s extent (as necessary to the cooperative dividing of labor) that made Smith such an enemy to all exclusion. More important, this was the methodological stepping stone from his own (and Hutcheson’s) view of cooperation on the scale of a pin factory to the vision of mutually supportive specializations in society (i.e., from the microeconomics of the firm to macroeconomics of the national economy). Needless to say, specialization in the society at large depends on the ability to plan for society as a whole—e.g., those in authority must decide how many full-time soldiers are needed, and how they will be raised, victualed, drilled, stationed, etc.

But Smith’s emphasis on the extent of the market cannot, of itself, account for the role of competition in his developed WN scheme. The nonexclusion principle seems merely to extend cooperation from the producing firm to society at large. To understand the importance of competition, we must return to the fundamental principles of Smith’s theory. His concept of market extent allowed him to develop the concept of labor’s division, without removing that concept’s original moral base. The role of competition, as it is related to cooperation, is at the origin of Smith’s thought, not in its later details.

2. Hutcheson’s Influence

It is customarily said (and said by some of these books’ essayists) that Smith departed from Hutcheson by granting a positive role to self-interest. But Hutcheson was insistent on the importance of self-interest. Admittedly he equated morality with benevolence (in several degrees and forms); but this did not mean that non-beneficent acts were immoral—simply that they did not, of themselves, involve morality. In the famous algebraic formulas by which he tried to work out the “moment” of virtue for any act, “I” (for selfish interest or advantage) is a regular factor. If “I” coincides with benevolent impulse (“B”), then the moment of virtue is increased. If it conflicts with benevolence, it can weaken, divert, or cancel the “moment” of virtue, or initiate a momentum of vice. “I” is thus the “mass” that is affected by the impact of benevolence, in Hutcheson’s Newtonian dynamics of morality. It is astonishing to read in these books’ introductions and essays that Hutcheson denied a positive role to self-interest when he wrote in his first and most influential work:

Self-love is really as necessary to the good of the whole as benevolence; as that attraction which causes the cohesion of the parts is as necessary to the regular state of the whole as [is] gravitation. [1725 Inquiry, p. 264]

There is an inertial relationship between interest and benevolence, as between mass and gravitation—one that both helps and hinders morality. Without “mass” there can be no “moment” of virtue. For individuals, selfishness is a cohesive force. For society, cohesion within systems (families, clubs, businesses, nations, etc.) is also necessary to the activity of human “gravity.” Hutcheson’s passage on this was often imitated or paralleled among the Scottish thinkers:

This universal benevolence toward all men we may compare to that principle of gravitation which perhaps extends to all bodies in the universe. But [it], like the love of benevolence, increases as the distance is diminished; and is strongest when bodies come to touch each other. Now this increase of attraction upon nearer approach is as necessary to the frame of the universe as that there should be any attraction at all—for a general attraction, equal in all distances, would by the contrariety of such multitudes of equal forces, put an end to all regularity of motion and perhaps stop it altogether.

[This] increase of love toward the benevolent, according to their nearer approaches to ourselves by their benefits, is observable in the high degree of love which heroes and law-givers universally obtain in their own countries, above what they find abroad, even among those who are not insensible of their virtues—and in all the strong ties of friendship, acquaintance, neighborhood, partnership, which are exceedingly necessary to the order of human society.¹⁶

The passage on admiration of heroes and law-givers (which goes into Hutcheson’s algebra as the force of “A,” for abilities) has an important parallel in Smith’s famous MS passage on the admiration of wealth and power—the very passage where the concept of the “invisible hand” is introduced into MS (pp. 183-184).

By an easily understood paradox, the “benevolence” moralists had to give special attention to the force of hostility. It was the most obvious challenge to their system. Hostility was, for this school, the reaction experienced when one of those nearer in one’s affections is threatened by one farther out on the scale of benevolence. Thus Lord Kames differentiated the sharper loves of mankind from general philanthropy; and Adam Ferguson explained war itself as the act of inflamed affection; and Jefferson denied Buffon’s charge that America’s fierce Indians lacked the tender virtue of benevolence—Indians were only harsh to whites because they seemed to threaten their kindred.

Hutcheson said the social order could not last without a contrary tug keeping separate masses apart. As morality needs self-love in individuals, so it needs competing groups in society. One must care more for one’s own family than for other people in general, to form the cohesive fields that benevolent forces can affect. For Smith, in the economic order, one must care more for one’s own partners in the pin operation than for the members of another (competing) operation, or the incentive to industry will disappear. We cannot rely on the beneficence of the baker for our bread because we matter less to the baker than his children do, who can only be fed by our payments. We matter less than the baker’s assistants and suppliers and creditors do, who would leave or cut off or sue him if we did not give him the means to keep his operation going. The incentive for competition is cooperation within the smaller groups that have divided their labor for a joint effort.

Smith, like all the Scottish school, was not talking of competition among individuals, of each man’s hand turned against the world. The proof of this is that he did allow some types of trade exclusion to build up political or commercial unity (cf. WN pp. 539, 651-652, 883, and Essays p. 474). It would take an age of meaner spirit to come up with the concept of social Darwinism. He talked of competition among cohesive groups (formed by the division of labor), and he wanted to control and make competition fruitful by his principle of nonexclusion. Though “cosmic attraction” is stronger or weaker among different cohesive groups, they are all part of the same gravitational system, exerting their competing and cohering force by an adjustment that brings overall advantage. Competition both grows out of and must serve the cooperation that is the basic moral impulse of Smith’s system. In theoretical importance, as well as in the concerns of Smith’s later years, MS takes precedence over WN—for WN was only part of that larger moral system Smith planned to work at, as an explication of the basic doctrines of MS.

There is no reason to think that an emphasis on the virtues of competition made Smith forget the benevolent basis of society. Even Dr. Johnson, the least individualistic of eighteenth-century Tories, praised the emulative spirit in his political “Sermon XXIII,” calling the “honest contention for preference and superiority” a great spur to progress. The only limit Johnson places on the spirit of competition is the same one Smith had placed there. Here is Dr. Johnson:

In the race of life, some must gain the prize, and others must lose it; but the prize is honestly gained by him who outruns his competitor, without endeavoring to overthrow him.

And Smith:

In the race for wealth, and honours, and preferments, he may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should jostle, or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play, which they cannot admit of. [MS p. 83]

Economists of a later period have (understandably) tried to give The Wealth of Nations an autonomy it never had in Smith’s grand scheme of a single work only hinted at in the lectures on jurisprudence, his uncompleted magnum opus which would parallel Hutcheson’s synthesis of moral, legal, political, economic, and aesthetic teaching in the Short Introduction to Moral Philosophy. But Smith was not one to write anything “short,” and one part of his system grew to huge size, without ever breaking free of the implied matrix. Those who read the work apart from that setting are bound to misread it—as most people have.

The tools for a proper reading are now available. The Glasgow WN is richly annotated, with sources and parallels provided in the notes. The introduction rightly begins with the MS, as an orienting text, and has useful things to say on competition (p. 10), the state (p. 12), and Hutcheson (p. 21)—though it repeats the astounding assertion that Hutcheson did not allow a constructive role to self-love (p. 17). The MS edition has less reference to sources and parallels, because it concentrates on the textual problems raised by the successive editions. Raphael’s introduction is especially good on the Stoic sources of Smith’s moral thought, but he too repeats the tired view that Hutcheson allowed no place for self-interest (Introduction, p. 22).

Essays, like the forthcoming biography, is a formal part of the Glasgow Edition—it includes fourteen papers on Smith considered broadly, and sixteen on WN more specifically. It is a dazzling collection, with something for everyone. I found the contributions by S.C. Checkland (on banks), E.G. West (on alienation), N. Rosenberg (on value and profits) especially useful.

Market, though published by Oxford, is not in the format of the Glasgow Edition. It is a record of the Glasgow symposium of 1976, with written answers and criticisms to the eleven papers delivered. It concentrates on WN, and the general quality of the essays seems higher than in the larger and more ambitious book. Thomas Wilson has some good things to say on The Problem. Alexander Cairncross rightly demolishes the “free market” model in ideal terms, without quite recognizing that Smith focused on a dynamic process of extending the market (cf. WN p. 539) into real areas of exclusion, areas that always exist (including, as some essayists note, areas of racial and class exclusion).¹⁷ The abstract market “model” is not what Smith normally worked from. Sylos-Labini on competition and L. Marcus Fleming on mercantilism are also very good.

The Glasgow Edition is magnificently launched. The next anniversary will be very hard put to top this one.