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Adam Smith: What He Thought, and Why it Matters by Jesse Norman

In the days before economics had been identified as the dismal science, there lived a genius called Adam Smith (1723-90), a philosopher who treated economics as part of a much wider inquiry into human nature.

He is the most famous and influential economist who ever lived, but his work is often distorted by politicians and economists who use it for polemical or narrowly economic purposes.

From such narrowness, Jesse Norman sets out to rescue him. In these pages Smith becomes once more a philosopher, an adornment of the Scottish Enlightenment and a close friend of David Hume, who was 12 years older than him. We find ourselves breathing lucid, 18th-century air, in which disconcertingly novel ideas are expressed in temperate, rational and amusing language.

Norman is an excellent tutor for an intellectual journey of this kind. One topic leads gracefully into the next, nothing goes on for too long and even the modern economists become comprehensible.

But an unintended consequence of his work is that it made me want to read, or reread, Hume, even more than I want to read Smith. Having written an admirable account of Edmund Burke, reviewed here in 2013, and edited the Everyman collection of Burke’s works, could he now provide us with a collected Hume?

In 1759, when Smith’s first great work, The Theory of Moral Sentiments, was published, Hume wrote him a teasing letter, in which he pretended repeatedly to be interrupted by visitors, whose news he felt constrained to report at length, before going on:

“But what is all this to my book? say you. My dear Mr Smith, have patience: compose yourself to tranquillity: show yourself a philosopher in practice as well as profession. Think on the emptiness, and rashness, and futility of the common judgments of men…

“Supposing, therefore, that you have duly prepared yourself for the worst by all these reflections, I proceed to tell you the melancholy news, that your book has been very unfortunate; for the public seem disposed to applaud it extremely.”

One of the delights of Smith’s work, especially if one comes to it after the fervid denunciations which characterise so many arguments (or non-arguments) about Brexit, is the good faith with which it is permeated. In The Theory of Moral Sentiments, Smith writes:

“To judge of ourselves as we judge of others…is the greatest exertion of candour and impartiality. In order to do this, we must look at ourselves with the same eyes with which we look at others: we must imagine ourselves not the actors, but the spectators of our own character and conduct…”

Smith is always trying to see how people actually behave, not just telling them how they should behave. He is one of the great empiricists, who contends that moral sentiments proceed from our sympathy with other people, and our inclination to adopt their moral standards.

He makes us wonder how in fact we do learn to distinguish right from wrong. And his idea that we imitate the people around us is in many ways far more persuasive than the notion that we obey a set of commandments, whether Christian or secular.

On arriving at a new school it may be interesting, and even prudent, to read the school rules. But we actually learn how to behave – what is acceptable and unacceptable, good and bad in the eyes of that society – from the other students.

That example is not, so far as I know, used by Smith. But a part of his genius was to illustrate his insights from everyday life, so everyone could see what he meant. In the second chapter of his most celebrated work, The Wealth of Nations, first published in 1776 and much revised thereafter, can be found the famous passage:

“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.”

Who can deny this is true? Nations become rich by allowing people to enrich themselves by trading for mutual benefit with other people. Smith points out that even the beggar who exchanges the old clothes he has been given “for other old clothes which suit him better” is a trader.

But from his understanding of business people’s “regard to their own interest” springs Smith’s warning that if they can, these people will form cartels and monopolies, and rip us off. High profits are generally a sign that something has gone wrong.

So Smith is not some mindless apostle of capitalism, who imagines that for a society to prosper, it should simply do what the lobbyists on behalf of commercial interests demand. He saw the defects of crony capitalism, exemplified at that time in the East India Company.

Nor is Smith an apologist for the rich, who “ruin themselves by laying out money on trinkets of frivolous utility”:

“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.”

Norman remarks that any summary of Smith’s work is inadequate. So is any attempt to draw lessons from isolated parts of it. But Smith’s example, the way he went about things, is instructive. As Norman points out,

“to look at Smith in parts is to miss the power and coherence of the whole. For Smith, ‘The state of property must always vary with the form of government,’ and since both property and government rely on norms and patterns of social consent as they have evolved, both have a grounding in humans’ moral sentiments. It is, therefore, ultimately impossible to separate politics and economics from each other, or either from moral evaluation. There can be no such thing as a value-free economics…”

That last phrase does not trip so readily from the tongue as “There’s no such thing as a free lunch”. But it is still a vital insight into the study of economics, today so often presented, at least by implication, as a discipline which is sufficient unto itself, requiring technical insight uncontaminated by moral or political considerations.

Norman is a practising politician, since 2010 the MP for Hereford and South Herefordshire, and since 2016 a junior minister. But the wonder of this book is that setting aside the vanity of authors, it is disinterested. It proceeds, as Smith himself proceeded, from an insatiable intellectual curiosity.

In a democracy, the politician is placed under a continuous temptation, one might almost say a professional obligation, to promise short cuts to happiness, while knowing perfectly well – as do a large proportion of the voters – that no such short cuts exist.

Meanwhile the economist is supposed not merely to explain the past but to forecast the future, while knowing perfectly well (one hopes) that the explanations are inadequate and the forecasts useless.

And the moralist is left mouthing vacuous platitudes on Thought for the Day, or in the leader columns of our more solemn newspapers, while knowing perfectly well (one hopes) that no one will pay a blind bit of attention, although friends of the moralist who move in the same circles and say the same things may for those reasons nod respectfully.

The politician, the economist and the moralist who promise more than they can perform, and who expect the rest of us to nod respectfully, threaten to drag us into a morass of humbug, where nothing can any longer be studied for its own sake.

After those hucksters (as plentiful in his day as in ours), Smith comes as a refreshment of the spirit. This philosopher has no designs on us, for he recognises (in a passage warning against “the man of system”) that “in the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it”.

So read Smith, enjoy his “system of natural liberty”, and if you want to place Smith in the context of his times and of ours, read Norman too.

23 comments for: The genius of Adam Smith, who knew there could be no such thing as value-free economics

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