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Truly a moral philosopher: "The Muir Portrait" of Adam Smith by an unknown artist (Scottish National Portrait Gallery) 

"Das Adam Smith Problem" — that problem was put to us a century-and-a-half ago by a German economist (August Oncken, little known today except for that memorable phrase), and we are still wrestling with it. At issue is the apparent contradiction between The Wealth of Nations and The Theory of Moral Sentiments — between the political economist and the moral philosopher.

This is not a case of an early and a late Smith (as with the early and late Marx). The Theory of Moral Sentiments, published in 1759, antedated An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776. But as Smith himself pointed out, the principal ideas of The Wealth of Nations appeared in his lectures in Edinburgh as early as 1750, again in a paper he delivered in Glasgow in 1755 (where he occupied the chair of moral philosophy at the university), and in drafts of the book that he worked on for almost two decades, to the despair of his friends who regretted the delay and feared that its length would discourage readers. Moreover, The Theory of Moral Sentiments was reprinted in 1774, only two years before the publication of The Wealth of Nations, so that he himself evidently perceived no disparity between the two.

One reason why this was not a "problem" for Smith — or for his contemporaries — was because he was not merely an economist, as we now understand that word. He was known at the time as a "political economist". Political economy had a dimension larger than economics, focusing not so much on individual transactions in the marketplace as on the political and social consequences of those transactions. This was in keeping with the mercantilist idea of the dirigiste state, in which trade — foreign trade primarily but also domestic — was deemed to be the proper province of government, reflecting the strength and prosperity of the state in relation to other states; trade was, in effect, war by other means. Smith may have been deliberately provocative when he gave his book a title, The Wealth of Nations, that would seem to place it within the mercantilist tradition — and then proceeded to reinterpret both "wealth" and "nations" so as to create a political economy that was the very antithesis of mercantilism.

If Smith's political economy was in sharp contrast to the prevailing mercantilist doctrine, his moral philosophy was no less opposed to the idea of a "moral economy" — the pre-industrial, pre-capitalist, Christian ideal based on the principles of equity and justice. The Victorian moralist, John Ruskin, had something like that in mind when he inveighed against Smith, that "halfbred and half-witted Scotchman" who deliberately perpetrated the blasphemy, "Thou shalt hate the Lord thy God, damn His laws, and covet thy neighbour's goods." A century later the socialist historian E.P. Thompson explicitly invoked the idea of a moral economy in describing the "crowd" in 18th-century England — the food rioters, for example, protesting against the high price of corn. That idea was the "legitimising notion" that inspired the poor — a traditional, paternalist view of the economy that respected social norms, obligations, and, most notably, fixed or low prices for food ("just prices," in the Catholic tradition). The Wealth of Nations, arguing against the Corn Laws and in favour of free trade, had the effect of "de-moralising" that moral economy, replacing it with a new political economy "disinfested of intrusive moral imperatives" — not, Thompson hastened to add (unlike Ruskin), because Smith himself was immoral or unconcerned for the public good, but because that was the objective effect of his doctrine.

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Roy Lisker
July 8th, 2012
1:07 PM
I'd thought that this problem was solved by Gerard DeBreu in 1984. That's why he received the Nobel Prize in Economics

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