EconTalk |
Klein on The Theory of Moral Sentiments, Episode 6--A Discussion of Parts VI and VII, and Summary
May 27 2009

This is the sixth and concluding podcast in the EconTalk Book Club discussion of The Theory of Moral Sentiments by Adam Smith. In this episode, Dan Klein of George Mason University and EconTalk host Russ Roberts discuss Parts VI and VII of the book. They close by putting the book in context.

Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.


May 27 2009 at 9:26am

About halfway through the podcast right now, and just wanted to say that I love Professor Klein’s exploration of the nuances and history of the famous “man of system” quote. I had no idea about the letter you spoke of, but always regarded that passage along the lines you described–often times libertarians and people of limited government ideologies in general succumb to the temptation to treat the institutions of mankind as something that they can force to conform with their beautiful, rational vision of the perfect society.

I always go back to Edmund Burke:

“We are afraid to put men to live and trade each on his own private stock of reason; because we suspect that this stock in each man is small, and that the individuals would do better to avail themselves of the general bank and capital of nations, and of ages.” (from Reflections on the Revolution in France)

Burke’s point being that our traditions and institutions have withstood the test of time, while our private stock of reason is small and can have at most a single lifetime of context to draw on. Burke is often branded as a “conservative” and Smith as a liberal (classical or otherwise) but I think the two have a lot more in common than people realize. I see the “man of system” passage as being perfectly in harmony with the passage of Burke’s I quoted above.

May 27 2009 at 7:29pm

Wow, I can’t belive we’re done. Its been a long 400 or so pages, but certainly worth it. I want to thank Russ and Dan for putting so much time into these podcasts. I probably wouldn’t have picked up this book until much later in life nor retained so much of it, had it not been for the book club and the reinforcement it provided.

I wanted to respond to the discussion at the end of the podcast about the value of reading this book. Clearly it gives a good deal of moral support to the liberty principal (augmenting the “increased material well-being” argument that you would get from an economist) – among the other contributions you guys talked about.

But economics aside, a modern audience would benefit a great deal from this book purely from its connection to the ancients that comes from Smith’s classical education (which we modern folk sorely lack with everything else we need to know about). He gives a spot-on analysis of the Greek and Roman philosophers, boiling down Plato’s lenghty Socratic dialogues into a philisophical system that makes sense when lined up with the others that came later. I also love his historical anecdotes, like “Caesar wouldn’t look so great to us now if he had lost the Battle of Pharsalus” (because of the gravity that fortune lends to the ridiculus presumption of pride). I think we modern folk will be a lot better off if we continue to maintain the continuity with our distant yet majestic past that an author like Smith can provide, his feet being in a sense in both worlds.

Eric H
May 27 2009 at 8:39pm

I agree with Russ that TMS isn’t set up for reading, or at least easy reading. Once I began part VII, I found myself wishing TMS began with it. It would have been easier to digest the denser prose of the first parts having first consumed the seventh.

But that’s just me. These podcasts have been one hell of a treat.

I hope you guys continue to produce them.

If I were to be somehow magically transformed into the world’s leading Adam Smith advocate, with globe-spanning power over public school curricula, I would mandate TMS be read before the slightest hint of a reference was made to The Wealth of Nations or Smith’s historical position as an advocate of laissez-faire.

Russ touched on just how much the man has been demonized. As one who went through public school, I can certainly vouch for that. I graduated high school in 1993– sixty years after the New Deal’s inception, and two of the three history teachers I had (one in an AP class, no less) gave me nothing but New Deal bromides about the destructive, selfish “Lazy Fairies.” (The third specialized in Greek and Roman history, so he could’ve cared less…) The best thing they could say about Smith was that he helped make the case against mercantilism, but even this was poisoned; they insisted the result of that case was government embrace of greed.

This kind of mis-information is the basis of general education on Smith.

Where, exactly would greed fit into TMS? Greed isn’t prudent; it’s a distortion of self-interest. How can greediness deserve approbation? It can’t; greedy acts are inspired by material obsessions and faulty assessments of the behavior of other people. Yet I was told that Smith believed that greed was a virtue. No he didn’t. Prudence, propriety, justice and beneficence are virtues, according to Smith. And Smith qualifies each one of those virtues with pretty exhaustive descriptions of what happens when each is pursued too passionately, or not passionately enough, and when they are observed properly and improperly.

What a surprise to read TMS and find out just how much of a communitarian Smith was. What I take away from TMS is that self-interest is powerful, but it is one of several powerful things that we can be engaged in to reach our full potential, and, perhaps most importantly, it achieves its fullest power only when engaged in by individuals acting with propriety, justice and beneficence. In other words, individuals that are united by a shared idea of the good.

Thanks again guys for a great series of talks.

Pietro Poggi-Corradini
May 28 2009 at 2:47am

“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 self-interest…” That’s what Adam Smith says in Wealth of Nations and yet in this book (TMS) we learn that prudence, justice, and benevolence (and self-control) are the main qualities of people. It would seem to be a contradiction, but I actually think that there is none. The key is the way one interprets the meaning of ‘self-interest’. After all even the utility maximizing Mr. Max-U can only really do this by sympathizing a great deal with his fellow human beings. Societal interaction is a process of discovery and if the butcher and the baker are competing to understand their costumers they have to strive not only to maximize profits, but also to maximize ‘profit-worthiness’ (to paraphrase Smith’s ‘praise-worthiness’).

May 28 2009 at 1:07pm

Fantastic conclusion. Thank you.

This site, its content and connections to books and blogs has been a wonderful turning point in my intellectual development. I’m in my early 30’s, supposedly well past my peak point of moldability , though I feel thoroughly molded.

Daniel Klein
May 28 2009 at 1:46pm

Thanks Adam, Mike, Eric, Pietro, and Tony for nice comments.

Eric, I wasn’t aware that high schools and other dubious sources were caricaturing Adam Smith as advocating greed etc. Russ, too, spoke repeatedly of the same caricature, but I haven’t really seen so much of it. I don’t think my high school teachers ever mentioned Smith.

The trend I’ve been more disturbed by is the social-democratic spin of Smith.

Mads Lindstrøm
May 28 2009 at 4:12pm

Thank you for a great podcast series. I for one, do not think I would ever have read this book, if it had not been for the series. I had actually bought the book before the series was announced, but after reading approximately 50 pages I gave up. I thought, and still thinks, that the prose is too dense, although I could see Smith had some interesting ideas. But thankfully the podcast series encouraged me to read the hole book.

Dan S
May 28 2009 at 7:03pm

I think the philosopher Daniel Dennett’s metaphor that moral philosophy should be about the business of crafting “eyeglasses for the soul” is very relevant to Smith. I take this to mean that moral philosophy should not take itself as creating some new faculty or binding set of rules for moral judgment, but instead refining and creating a proper balance in an innate human nature. This is helpful for me in thinking about the interplay between the positive and the normative in the book.

May 28 2009 at 8:34pm

Thank you, Russ and Dan

It was great to hear your enthusiasm in finishing the book. From the listener perspective these podcast have not been as polished as the ussual Monday Econtalks. As it is finished and I sum up all the great discussion and discovery that occurred, I realized that to me the Smith podcasts have a different texture and tone, but mostly just a different way of being outstanding.

May 29 2009 at 1:35am

Smith can be viewed as a social-democrat only to an extent. His ideas relating to personal liberty speak for themselves and leave little room for a great deal of confusion about what he was meaning to say.

Eric H
May 29 2009 at 7:04am


Smith was mentioned just long enough to caricature him, if memory serves. In one class, a “World History from Antiquity to the American Revolution” type of thing (that wasn’t the real title of the course, but that was it’s approximate historical span) mention of Smith went something like this:

“Smith debunked mercantilism & paved the way for the ‘successes'(imagine vocal scare quotes) of capitalism in the 19th century. But what kind of ‘successes’ were they? Look what we’ve got now, yada yada yada…”

In another, AP U.S. History, it was more like:

“Those capitalist stalwarts who opposed the New Deal were devotees of Adam Smith-style laissez-faire, in which the government let business trod all over the little guy, yada yada yada…”

Smith’s contribution makes so much more sense to me when I read him in proper context, a context saturated with the classics of Greek and Roman antiquity. For me, TMS provided the context in which to read & understand The Wealth of Nations. In fairness to the suburban history teachers of 15 years ago, maybe they assumed that we kids would supply that context and take their offhanded remarks less seriously. But I doubt it; there was a general disdain for the free market amongst my history and literature teachers. That’s what you get with a government monopoly on education.

I probably should have said “This kind of misinformation is the basis for what little general education there is on Smith.”

arc of a diver
May 29 2009 at 8:16am

I hope you do another book when you have time. Good series.

* * *

Oh, Roberts on for another 25 minutes over at
WAMU and Kojo,
“Another approach to regulating the economy?”

I think debating the same journalist as before.

Tori Adams
May 29 2009 at 5:56pm

have just finished listening and very much enjoyed the discussion. I am so glad you quote George Elliot — the quote from “Middlemarch” is something I often think of and struck me earlier when you were talking about the book.

I was particularly struck by your remark that the longer you do the program the more you move to seeing economic issues as primarily more philosophical and raising more and more philosophical questions. I agree. The older I get and the more I think about the basic issues raised by economics the more I think that we are a branch philosophy. As Tolstoy observed, the only question worth asking is how shall we live and what shall be done? I wonder if all really good economists really begin and end with this question. Smith seems really focused on it, the Austrians were pretty aware of it, and Marshall and Keynes really were focused on it to the exclusion of almost everything else.

I feel that as a profession we need to really focus more on these questions and what the study of traditional economic questions really has to say about these more “moral” questions.

Love the show — you rock Russ

Dan Lundmark
May 31 2009 at 6:43am

Thanks for these thought-provoking podcasts. It seems there is a growing level of discussion in the popular media about altruism and economics. I just read am article in Ode Magazine that mentions Adam Smith’s ‘The Theory of Moral Sentiments’ (see ), and I believe it is their current print cover story as well.

I expect to hear more on these topics as many of us reconsider the moral aspects of economics. I am sure there are additional dimensions that have yet to be fully explored. Thanks again!

Jun 1 2009 at 2:37am

Just want to say “Thanks”!

A very rich experience…

Tori Adams
Jun 1 2009 at 7:43am

have just finished listening and very much enjoyed the discussion. I am so glad you quote George Elliot — the quote from “Middlemarch” is something I often think of and struck me earlier when you were talking about the book.

I was particularly struck by your remark that the longer you do the program the more you move to seeing economic issues as primarily more philosophical and raising more and more philosophical questions. I agree. The older I get and the more I think about the basic issues raised by economics the more I think that we are a branch philosophy. As Tolstoy observed, the only question worth asking is how shall we live and what shall be done? I wonder if all really good economists really begin and end with this question. Smith seems really focused on it, the Austrians were pretty aware of it, and Marshall and Keynes really were focused on it to the exclusion of almost everything else.

I feel that as a profession we need to really focus more on these questions and what the study of traditional economic questions really has to say about these more “moral” questions.

Love the show — you rock Russ

Daniel Klein
Jun 1 2009 at 8:00am


Russ and I touched on pursuing honest profit as a form of Smith’s libertarian distributive justice. Here I elaborate a bit.

On pp. 269-70 Smith says distributive justice “consists in proper beneficence, in the becoming use of what is our own.”

Does pursuing honest profit qualify as the becoming use of what is one’s own?

Suppose Jim pursues honest profit by owning and running a Dunkin Donuts store.

BECOMING: To interpret “becoming” in a proper Smithian way, I think we may invoke Smith’s four sources of moral approval (pp. 326-327).

Pursuing honest profit clearly satisfies Smith’s fourth source of moral approval–that is, contributing to the grand concatentation that is beautiful in its promotion of social betterment.

But is the fourth source sufficient for “becoming”? The fourth source does not subsume sources 1, 2, and 3.

The first source concerns the motives of the actor; the second the sentiments of those affected; the third the ways those two sympathies generally or properly interact.

Pursuing honest profit certainly may satisfy sources 1, 2, and 3, but it is difficult to ascertain that it has.

Source 1: We don’t know a lot about Jim’s motives; maybe they are merely mercenary. We don’t know much about the alternatives to which Jim could have put his resources. If Jim merely follows (commutative) justice and a narrow prudence, we don’t feel that his motive is particularly becoming.

Source 2: Jim’s customers will say “thank you” when they are served their donuts, but the sympathetic connection at the counter is perfunctory and impersonal. Again, there is not a lot here to warrant the word “becoming.”

Source 3: Again, like most commercial establishments, Dunkin Donuts is merely perfunctory and impersonal. The sentiments of Jim and his customers conform to an ordinary propriety, but no expansive beauty.

So it is hard to determine whether Jim’s pursuit of honest profit is becoming.

Those best able to make such a judgment will be those who live with or work with Jim. They will know more about Jim’s motives (the spirit with which he carries on the trade), the alternative uses to which Jim may have put his resources, and the nature of his prudence (e.g., what he does with his profits–is he a good father, is he a good neighbor, etc.).

Smith repeatedly emphasizes that one’s moral life resides most meaningfully in his relations with “those we live with”. (The phrase “those we live with” appears 10 times in the book.) Distributive justice is really an affair among those we live with.

In itself, pursuing honest profit is not becoming at all four levels, and hence is not necessarily becoming, and hence not necessarily a form a distributive justice.

BUT IT MAY BE. Pursuing honest profit in a becoming way is a form of distributive justice.

As was said in the first episode of the series, Smith wrote WN to give moral authorization to the pursuit of honest profit. He wanted us to understand that the pursuit of honest profit satisfies the fourth source of moral approval, and does not typically offend sources 1, 2, and 3. That may not add up to becoming, but it does add up to a moral authorization as beautiful in its utility if only prudent in its motives and perfunctory in its experience.

Eric H
Jun 1 2009 at 8:32pm

From the article Dan Lundemark linked to:

“Behavioral economists Uri Gneezy and Aldo Rustichini conducted another revealing study. Several daycare centers in Israel had problems with parents picking up their children late, so the economists devised a system of nominal fines—about $3 for each late pickup—to see if this would prompt punctuality. On the contrary, tardiness soared, the rate sometimes tripling. The conclusion? Fines rendered lateness acceptable because it became a financial transaction, while social norms—respect for the daycare workers, for example—were a better motivator for punctuality.

No offense Dan; I appreciate your interest in altruism. Kindness and benevolence need rehabilitation, but that can’t happen if data are misinterpreted or misrepresented.

The “conclusion” arrived at by the researchers is only one way of interpreting their results. Perhaps the $3 charge was minor compared to what the parents would gain by picking their kids up a few minutes late.

Maybe the cost of daycare was already socialized, and the parents had no idea what their tardiness actually cost them in terms of extra care for their child. If that was the case, then the $3 charge was only a starting point, and the researchers should have increased the cost to determine whether financial transactions are capable of deterring nuisance behavior.

The author of the article sneers at financial transactions in general; his conclusion seems to be that people become less human when they calculate cost. But the authors of the study he cites opened up a Pandora’s box. If lateness was rampant before the modest fee, and then increased substantially after it was imposed, doesn’t this suggest that a mere “financial transaction” is capable of great power? It turned a bunch of truants into bargain hunters!

Assuming, as the authors of the study did, that “social norms” such as “respect for daycare workers” made more of a difference in discouraging late pickups sounds good superficially. But what of the other costs? What’s wrong with the daycare workers assigning a dollar value to the extra time they must spend caring for someone’s child? What mechanism, other than price, would ensure fewer late pickups and compensate the workers for their extra effort? If you were a daycare worker, which would you rather have in trade for the extra time spent at work? The “respect” of the clientele, or a dollar amount approximating the opportunity cost of your ruined evening, an evening that could have been spent in any number of ways, such as at home with your own children, or studying for the final exam of your night class in business management? Why didn’t the study ask: should daycare workers be respected enough to be allowed to assign their time a dollar value, and if so, how much?

Eric H
Jun 3 2009 at 8:44am

Dan Klein–

Here is one of the ways I’m trying to think about your elaboration. Perhaps I’m still too naive; I believe Jim’s pursuit of honest profit by selling donuts does fit into the first three sources of approval pretty easily. I think I might be mistaking the party that does the approving. I believe the approving that we should focus on is that of Jim and his customers.

Source 1: We don’t need to know anything about Jim’s motives before opening his donut shop. Those motives will manifest themselves quite clearly in the upkeep of his shop and the quality of his product. If his shop is reasonably clean and his donuts are good, it will be clear to impartial observers that his motives are to sell donuts and to do so in a way that meshes with his customer’s senses of propriety. His customers’ repeated patronage of his business shows that they appreciate his motives. Instead of the locus of approval being within “us”–impartial observers?–it is really centered between Jim and his customers. The real impartial observer is the one created by their ideas about their actions, interactions and themselves. The sentimental feedback loop they create might not be the only one, but it seems like the most relevant one.

Source 2: Jim’s customers don’t need to thank him formally. A sympathetic connection is cemented by the repeated patronage of his customers. In a city near where I live, there is a locally-famous corned beef sandwich shop. This shop is packed with customers from about noon to 3pm every weekday. During that time, business is so fast paced that there is little time for the exchange of pleasantries. Customers may talk and enjoy each other’s company once they sit down to eat, but before that time comes, everyone is all business. The proprietors and their staff are furiously (and quite balletically–if that’s a word) gliding past each other behind the counter, filling orders shouted by customers and echoed by the cashier. One would think, by the looks of it, that slinging corned beef sandwiches is a “thankless” business. Nevertheless the shop owner opens up each day and the customers line up to buy his product.

Source 3: The continual interaction between Jim and his customers, in the form of his production of quality donuts and their consumption of them, is a thing of beauty in and of itself, because it requires no a priori, third party approval to come into being and regenerate itself; the needs of the principle actors, as long as they are pursued with prudence, propriety, benevolence and justice, guide and nourish the feedback loop to be beneficial to society. Mutually beneficial exchange is thus like a natural entity or organism that can be admired for its very existence.

I think the “perfunctory” and “impersonal” nature of mutually beneficial exchange is what makes it so beautiful. We take for granted that things like donut sales are done so peacefully and routinely and normally, but they don’t have to be. They can be done under the duress of arbitrary allocation, or they can not be done at all.

The popular narrative about profit, honest or otherwise, gives the impression that sellers may at any moment dilute the quality of their product out of greed or spite. But we are continually warned of the dangers of consuming products that are “too good”: donuts and corned beef sandwiches that are too fattening, cars and computers that are too fast. The humdrum daily grind actually produces this incredible bounty from which we all gladly pick and choose. This bounty sneaks up on us; “society” isn’t constantly aware that new donut shops are popping up (or disappearing) because the approval of society isn’t necessary for that to happen.

These are sort of instinctual ruminations; I feel like I’m missing something or just scraping the tip of the iceberg.

Daniel Klein
Jun 4 2009 at 6:27pm

Eric, I will write soon. This night in Stockholm my wife and I saw Springsteen in concert! Talk about coordinated sentiment!

Daniel Klein
Jun 5 2009 at 9:07am


Unquestionably, Jim’s honest work in selling donuts is respectable, it satisfies the first three moral sources adequately, it meets propriety, but I think one needs to go beyond customary propriety to be “becoming,” and to be earn admiration in terms of distributive justice, which Smith also dubs “proper beneficence”.

In deeming Jim’s efforts in terms of distributive justice, I think that Jim’s alternatives to entering the donut business are relevant. Distributive justice is a matter of the becomingly distributing one’s social resources. Jim has distributed his capital (including time, energy) on an honest donut business. Is that a becoming distribution? Well, to judge that we would need to know what else Jim may have done with his resources. What if Jim could have done something of much greater significance and utility? Wouldn’t that make us disinclined to see proper beneficence, the becoming use of what is Jim’s own, in his pursuing and performing the donut business?

Again, I don’t think that the pursuit (or even attainment) of honest profit necessarily qualifies as distributive justice. To qualify it must, further, be becoming, and that is very hard to determine.

Of course you are right that common notions of private enterprise tend to be vulgar in their over-readiness to doubt the honesty of profit, to rule out the possibility of Jim achieving a benevolence that is actually becoming, and even to begrudge it ordinary propriety or decency. But don’t go overboard by claiming that Jim’s honest profits necessarily qualify as proper beneficence.

Eric H
Jun 6 2009 at 8:56am


I think I understand. I’m trying to unclutter my thinking a bit.

A few questions:

How can we really know what Jim’s options are? We may look at his high school and college transcripts and find him to be some kind of intellectual über mensch slumming in the donut trade because of a misspent youth. Or maybe he has a sincere, philosophical appreciation for working with his hands, like this guy.

In those cases, we might consider Jim’s donut enterprise a complete waste of time, especially in light of comparative advantage. Maybe he’s smarter and more talented at other pursuits, say designing buildings or programming computers, and yet he chooses to apply those skills to deep-frying blobs of sweetened bleached flour and selling them to people, some of whom should be doing that instead of him. An apparently complete misallocation of resources. Jim’s opportunity cost is pretty high. Isn’t “society’s” as well, then? Wouldn’t society be better off if Jim applied his skills to a more technically- and knowledge-dense field that rewarded him more financially? That seems like the “most becoming use of what is one’s own.”

If Jim does his job well, keeps a clean shop, produces tasty donuts, and expands his business and starts selling franchise rights ten years later, didn’t he “becomingly” use “what is his own,” too?

Maybe these questions are mired in the widespread romanticization of manual labor. I don’t subscribe to the idea that people should worry to much about “what ‘we’ lose” when the labor to produce something is reduced–there is always more than enough work to go around. I guess where I am struggling is: who should be doing the caring about Jim’s endeavors, and why?

Daniel Klein
Jun 7 2009 at 1:41pm


Well put.

Look, distributive justice/proper beneficence/becoming use of what is one’s own is not a political or economic matter. It is quite personal and moral.

Sure, regardless of Jim’s potentialities, now or previously, running an honest and profitable donut shop is thoroughly respectable and even sedately admirable. But we must admit that, shy of greater information to the effect that Jim’s motives and efforts were especially beneficent, we have no grounds for glorifying or greatly admiring Jim.

Moreover, we are rarely sure how honest Jim’s profits are. Knowing that Jim’s motives and efforts were becoming is extremely difficult. Knowing that his profits are basically honest is only a little less difficult. We generally don’t know whether we should call Jim’s business becoming/distributive justice.

Eric H
Jun 7 2009 at 8:50pm


Look, distributive justice/proper beneficence/becoming use of what is one’s own is not a political or economic matter. It is quite personal and moral.

This sentence set me straight right away. I think I was operating under the idea that, for some act to be considered a becoming use of what is one’s own, it required approval by the impartial spectator. I think I conflated the impartial spectator with “society.”

It’s an honest mistake– I think a lot of modern social intercourse is based on turning the determination of what is a becoming use of one’s own into a political and/or economic matter.

My wife and I were shopping at Whole Foods yesterday, something we rarely do. She had a couple of gift cards and we thought we’d pick up a few things we don’t normally consume: nice cheeses and crackers, etc. I was struck by the amount of reassuring heiroglyphics on the packaging for everything from frozen pizzas to laundry detergents. A particularly funny example was a frozen pizza box festooned with art similar to the album cover for the Band’s Music from Big Pink depicting earnest-looking women and bearded men toiling around a stone oven, under a primitive banner proclaiming “Good Food Helps.”

This seems like a producer straining to convince me that their product is worth consuming, that it’s becoming, because they think they’ve gone above and beyond merely slinging pizzas and started really “caring”. I stand corrected by your last post: knowing what actually is becoming is really difficult, and I think we make it harder by trying to frame everyday activities, like making and selling pizzas and donuts, as if they were in the same league and deserving of the same kind of praise as the cannon-shot officer Smith spoke of.

Anyway, no need to go on much further I suppose. I think I’m at the same point Russ was: I want to read TMS again! Doing that after participating in these discussions is sure to yield more insight than a guy like me would know what to do with…Thank you! And I hope you guys get the time to do another series of book club discussions!

Peter Wogan
Jun 9 2009 at 12:24am

Russ and Dan,

At the risk of sounding trite, I have to say I loved the toast at the end of this series! That was such a human touch–a real expression of gratitude. It felt like I was right there with you, as well as the rest of the listeners. And that moment nicely tied together many themes in Russ’ orientation: Adam Smith, exploration, the human heart, receptivity to philosophy…and good scotch!

So (raising my glass) here’s to the community you’ve created, and to the discussions still to come… Cheers.

Peter Wogan

Jun 11 2009 at 4:04pm

I mean this in no impersonal or perfunctory way, thank you! Excellent work.

I tried reading Wealth of Nations and ended up opting for PJ O’Rourke’s and Wikipedia’s accounts to get the gist. I can only imagine how tough it would be read TMS.

I appreciate these podcasts. Very valuable.

I’m curious, which of the four sources motivated you two to do these podcasts?

user X
Jun 17 2009 at 11:52pm

Thanks to Russ and Dan for creating such a valuable series.

Like most of the respondents here, I held an incorrect view of Smith. Not so much from exposure to the rhetoric of those that politically oppose him, but instead from free marketeers that create clumsy policy. The first lesson I take from the series is that Smith’s work is a consilience, something much more complex than what we see manifest as policy. A case in point, and in regards to Dan’s comment about the ‘social-democratic spin’; wasn’t that spin used to pave the way from Reagan to Clinton? Each political camp cherry-picks those parts that suit their needs, but problems ensue when the philosophy isn’t applied in total. So, watching the political action, I thought Smith’s work had to be shallow and that other mechanisms would have to be found and incorporated into it’s application. Also, most political supporters of free markets are moral absolutists and they would probably regard Smith as a relativist or worse. In that light, it seems that any resulting policy could be partially due to political expediency, or merely coincidental. I’m optimistic though, because it does seem to have momentum. Perhaps Barney Frank could be made to listen to the series Clockwork Orange style.

Comments are closed.

About this week's guest: About ideas and people mentioned in this podcast:

Podcast Episode Highlights
0:36Intro. Last time finished through Part V. Today, Part VI, briefly Part VII; and putting book in context.
1:14Part VI: Of the Character of Virtue. First sentence: "When we consider the character of any individual, we naturally view it under two different aspects; first, as it may affect his own happiness; and secondly, as it may affect that of other people." Concerned about character. Challenge to take care of yourself; prudence depends on communion with impartial spectator. Social distance theory of sympathy, who it is we care about and pay attention to. Concentric circles: self, family, friends, neighbors, workmates, citizenship, nation. Extreme condition, very poor or very rich. Orders within one country--guilds, parishes. Different circles of care and identity. Seeking of meaning: neither me nor you but ours. Social distance, not propinquity. Good character and bad character rub off, social organic thing. How to manage meaning-seeking, which can become socially destructive. Quell, pull back meaning-seeking, or channel it into beneficial ways. Downside of pursuit of meaning, pride, vanity can mean to destructive acts. False and real pride and vanity. Someone arrogant and proud we tend to look up to if they are successful. Prior to pride versus vanity, people getting wrapped up in fetish, fashion, factionalism. Serving whole of society, universal benevolence, corresponding duty to that. Flips Chinese earthquake episode on its head: In previous podcast episode, if you lose your finger you'd be more upset than if you heard a hundred million Chinese had died in an earthquake. Human nature; but nobody says it's a good thing to kill 100,000,000 people to save one finger. Now reverses that: a wise man would give up his finger to save 100,000,000 Chinese. Active, moral, wise, beneficent to give up a small pain to yourself if gain to others may be large. Affirming looking to do a larger good. Don't confuse sacrificing for the whole or collective; still individualistic. Improve beauty of large machine.
10:51Knowledge problem. We don't know enough to make beneficence effective. Stick to your humble department. Each person does his own laundry. Happy if each does each other's laundry. Manufacturing versus service economy in the United States. Benevolence toward each other. In Part VII, he says you can't have benevolence as the only virtue; got to have prudence and justice. God can have benevolence, but since we can't have perfect knowledge we need prudence and justice. Russ's book: without prices, how would you begin to know best use of your scarce diamond and effort? Wealth of Nations (WN) as an extension of this, discussed in first podcast in this series, Smith showing that in pursuing prudence through honest profit you are helping others even though that motive often gets lost. People assume that because you are making a profit you can't be benevolent. Nobody has a motto: The highest prices and the lowest cost. Most business mottos are about serving their customers. Not trusted. Ritz-Carlton motto: "Ladies and gentlemen serving ladies and gentlemen." If you get lost, they don't tell you--they take you. Try to find employees who think that's nice. ToGo, sandwich shop: "Making the world a better place one sandwich at a time." In Part VII, distributive justice: is going out and making honest profits the becoming use of one's own? Then pursuing profits is distributive justice. Because of knowledge problem, don't get carried away with benevolence. Problems with this: With prudence, people might aggrandize themselves. "Every individual is naturally more attached to his own particular order or society...." Profession, guild, class. Balance of power, notion of rent-seeking. Milton Friedman. Mind, justice. Another problem: unlike prudent man, many succumb to sense of importance in serving larger departments around them, intoxicated with ideas of system, become "dupes of their own sophistry...". Statesmen act with a sense of the liberty and independence of nations admirable, but so often they don't.
22:40Man of system: "The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it... He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it...." Each person and piece has a principle of motion of its own, unlike chess. Russ, knight, Dan, bishop or rook. Pro-liberty, anti-planning, comes after paragraph on what a public spirited man would do. "He will accommodate, as well as he can, his public arrangements to the confirmed habits and prejudices of the people; and will remedy as well as he can, the inconveniencies which may flow from the want of those regulations which the people are averse to submit to. When he cannot establish the right, he will not disdain to ameliorate the wrong; but like Solon, when he cannot establish the best system of laws, he will endeavour to establish the best that the people can bear...". May be taken as even if you are pro-liberty, you should be like Solon. Long-range sense of what will serve liberty. Aside about political times Smith lived in: not a lot of political liberty as we would define it. World dominated by monarchy, not by rule of law. These paragraphs were new to the 6th edition of 1790, post French revolution. Paragraph about the good statesman taken from letter which Pierre-Samuel duPont de Nemours wrote to Smith, laissez faire, moderated the liberty principle to not shock people. Conservative with a small "c." Thomas Jefferson in his study versus as President.
31:43Wonderful passages on looking up to success and status. We make those things focal points around which we coordinate our attitudes toward society. Government authority tolerated. Conventionalist view. Also in Hume. Different from a consent view, notion that there is a compact or consent. David Friedman. No social contract, different from Locke and others. Love of country or self can cloud our judgment about the good. Citizen, sovereign: self-awareness, imperfect knowledge of ourselves. Strong sense of duty. Fanatacisms, fetishes, statism. If separation of school and state, wouldn't be all these great dangers of school policy. Benign, invisible-hand view, but degovernmentalization is not explicit here; but he is trusting of the power of the impartial spectatator. Didn't he talk about political society is where virtue is least found; lower and middle classes? Dandies of his day, celebrities modern version. Authors, poets. Powerful argument that school of life is better source of education. Also in David Henderson, Joy of Freedom. Could you ever think you'd learn more in an academy than in the world, which was designed by God to be educational?
40:36What taken from Part VI. Challenge of book is it is not organized for reading. Russ thinking of reading it again. Hard-going, challenging, full of ideas, not much organizational overview. Big three virtues for Smith: Prudence, justice, and benevolence. Prudence: take care of yourself. Justice: don't harm your neighbor. Benevolence: help your neighbor. Learn how to do these things partly through impartial spectator. Is that right? Self-command might be a separate virtue; sense of duty. Propriety. No longer prudence that I exercise daily, but propriety. No longer benevolence to contribute to condo association, but propriety. P. 216, "This superior prudence, when carried to the highest degree of perfection..."; like platonic justice in Part VII. Each virtue more like a frame, not separable or rankable. Self-command referenced through stoics mentioned in Part VII. End of Part VI, statement about little people vs. big shots. "Temperance, decency, modesty, and moderation, are always amiable,... sober luster...". Parallel with last passage of George Elliot's Middlemarch: of Dorothea, "The effect of her being on those around her was incalculably diffusive...". Modern, radical idea that history and fiction and what was important wasn't just the kings and famous folk. Last sentence of Part VI: "The effects are too often but too little regarded." Everyday vigilance.
49:17Part VII, will not try to be exhaustive. Comes out against sterile homoeconomicus view of mankind, what Dierdre McCloskey has characterized as Max-U, maximization of utility or satisfaction. Altruism; but ultimately all about self-love. Smith's point is that that is not what people are about. Criticizes Mandeville in particular. Wants to differentiate himself from others who have written on this. Smith eager to condemn ambition and lust for material as dangerous pursuit, but says look at all the good things that produces, Mandevillean. Epicureans. Human enterprise is about that richer view of what motivates people, idealistic, romantic, positive not just normative view: deep down inside is a desire to be good in certain ways, fundamental drive. Sad that he wrote this masterwork but is treated as if all he cares about is self-interest. Gary Becker. Mandevillean view that people are fundamentally selfish; as economists we spend a lot of time on incentives and self-interest and we should; but Smith is saying that's got to be embedded in a richer view of who we are as people and where we get our meaning. Sympathy and in whom we have sympathy. Affection as habituated sympathy. People are looking to get it right, line it up with rightness or goodness. Optimistic view. Evolutionary theme, can habituate yourself. Social scientist and preacher.
57:43Starts Part VII with what is virtue, intellectual history, schools of thought--Stoics looked at propriety, somebody else at prudence. Rejects all three by themselves as sole virtue. Proud. P. 265: "If we examine the most celebrated and remarkable of the different theories which have been given concerning the nature and origin of our moral sentiments, we shall find that almost all of them coincide with some part or other of that which I have been endeavouring to give an account of...". They are onto something but didn't have the impartial spectator. Hutcheson. Why do I feel inside respect for a prudent person? Divine, providential, or evolutionary: if that's inside us then that should matter. Mandeville. In Section III, principle of approbation: moral judgment, what determines what we approve and disapprove of. First podcast discussion: Four senses of approval, richer than historical; if you want to do the right thing, it's hard to know what that is. Some obvious, grammar rules; but most of life, loose, vague, and indeterminate; have to go on a case-by-case basis. Casuists, set of rules, rejected as impossible, complex nature of life. System. If you want to be a mensch, gentleman, bourgeois, got to step back; spectator, and one looking in four different ways.
1:05:00Four senses of approval: "When we approve of any character or action, the sentiments which we feel, are, according to the foregoing system, derived from four sources...". Sympathize with the motives of the agent; gratitude with those who receive the benefit of action; observe conduct agreeable to general rules, setting of propriety, norms; part of system of behavior which tends to promote happiness of individual or society imparts beauty. Watch Jim, doing something to neighbor. Smith also talking about not just Jim but me, step back and think about the spectator judging me. Onion. Fourth part, seen and unseen, unintended consequences; for Smith, really saw much of what we do as moral actors as having harmonious aspect, part of a grand system, providential or part of what makes life work well. Want to make sure you are part of this, aware of it. Optimistic, have to be responsible; two guys planning to rob the 7-11 can be cooperate, be honest, share with each other but at the third and fourth levels total failure. Pirates. Book subtitle from fourth edition on: How we judge first of ourselves and then of our neighbors. Private society, proprieties tend to converge. In political society, fourth source might not be well-connected to the other sources. Press, image, what is seen are manufactured in politics. Wrote the Wealth of Nations to help us understand that fourth source better. Neighbor making sawmill to pursue profits, don't be so critical. Serving customers, invisible hand, should tolerate or perhaps admire. For statesman, it's under natural liberty.
1:12:44Invoking Wealth of Nations, put book in context. Smith gets caricatured because of one WN sentence: "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." People conclude Smith thought there wasn't any benevolence. He was right--benevolence is not the reason they do they get up at 4 in the morning. But it doesn't lead to conclusion that people can't be benevolent. Coarse clay view, people imperfect. Why important to read TMS other than to give a fair view of Smith's view of human nature? Extraordinary experience; didn't get payoff as economist, but helped think about human nature and morality. Do you need to read this book as an economist? Yes. TMS wider umbrella, WN nested within that; discussed in first podcast. Enterprise of liberty. TMS asking at broadest level about platonic justice, pp. 269-270: "Justice, the last and greatest of the four cardinal virtues,...". Right behavior, right characters. WN takes that up in the context of public policy, last paragraph of book: "... police, revenue, and arms, and whatever else is the object of law. I shall not, therefore, at present enter into any further detail concerning the history of jurisprudence." Police in modern parlance is policy, taxes, national defense--WN. Also promised work on jurisprudence, which he never wrote, though we have his lectures on jurisprudence. WN is proper character, morals, efforts in respect to issues of state and commercial behavior. Should have a presumption of natural liberty, government respecting commutative justice as if it were our equal. Allows exceptions, a dozen worth talking about, e.g., options clause in banking; Smith assumes the burden of proof for these. Burden of proof should be on the interventionist, status quo.
1:22:04Smith's big political message--broader cultural impact--don't try to keep the toothpaste in the tube, have confidence that it will work out okay. In TMS, get sense that Smith develops a commitment to liberty. Libertarian; goes into WN looking to explain this in other dimensions, but not primary grounds for liberty, which are more in TMS. Bottom-up principle, self-government, etc. In WN, not about nationalizing GNP; better placed within wider array of considerations; TMS assures you that it within broader warrants. Dan more of a philosopher than Russ. Economics as a philosophy and less as a science. Old hat, standard economist: WN is Smith as social scientist; TMS is Smith as a philosopher. TMS about how the world works when you leave it alone. Unlike Hobbes's life is nasty, brutal, and short, we want to be praised and we want to be praiseworthy, but not rosy-eyed. Invisible hand that without the power of the state directs people much of the time. Moral web keeps us in line. Chinese earthquake story: Smith not a fool, doesn't think Westerners care, but we don't act as if they are unimportant even if we feel that way. Political economy hat writ large: how do we get to the good life? Don't want to embrace view that we want to be free because it maximizes GDP. Want kids to have a meaningful life. Profit-motive, talking about "the economy" as if separate entity from us; measurable. See it more in the WN after you've read TMS. Example: In WN, Smith arguing against mercantilism and manipulate policies storing up gold and silver; makes no more sense than if the government induced families to have more pots and pans to induce good cheer of private families. Tension in both books and in economics profession between saying it's not all about money, but it does matter. Jealousy between nations example. Smith believes in material progress, hard to be spiritual person when starving to death. Balance.
1:32:35Last podcast in Book Club on TMS. Toast, plastic glasses: single malt scotch, appropriate given Smith's origins. Flask: Bottle seen, flask unseen. If not a single-malt Scotch fan, strong and expensive, habit best enjoyed after age of 40 when you can afford it. Toast to Dan Klein, Lauren Landsburg, Rich Goyette, and Liberty Fund. And to Adam Smith and to all those out there listening. See you soon.

More EconTalk Episodes