Adam Smith published his economic theories in the second half of the 18th. century which coincides with the intellectual revival in Scotland known as the Scottish Enlightenment. This was a movement of ideas in philosophy, literature and the sciences. The philosophical underpinning of this revival had several characteristics:
- scepticism about rationalism and the attempts of Cartesianism to find a single method or set of rational rules from which all truths might be deduced.
- the important place given to sentiments and moral sense
- the quest for empirical methods of inquiry,
- the desire to replace rationalism as a means of distinguishing true from false beliefs with the development of a science of human nature
In 1759 Smith published his first work, The Theory of Moral Sentiments. It lays the psychological foundation on which The Wealth of Nations was later to be built. In it Smith described the principles of “human nature,” which, together with Hume and the other leading philosophers of his time, he took as universal and unchanging data from which social institutions, as well as social behaviour, could be deduced. In the prevailing logic of the philosophical context it was the ethics equivalent of rationalism.
The Theory of Moral Sentiments was inspired by the work of Francis Hutcheson who promoted a theory of a sixth sense in order to explain morality. This would be Smith's inspiration for the 'invisible hand' David Hume, with his Treatise of Human Nature, built on this theory and argued that utility is what makes people happy. (Utility covers the inherent benefits in something, or its ability to prevent something negative.) Smith followed Hume’s vision of focusing on human experience to construct his book.
The author's moral philosophy is a four-part theory made up of ethics and virtue, private rights and natural liberty, economics and state and individual rights.
Following his contemporaries' tendencies to generalisation Smith presents morality as a natural state in humans because they are social. He observes that when individuals see happiness or sadness in others they also experience those emotions. This natural human empathy leads the perceiver to control personal emotions and align them with those of others. This system of behaviours is what he defines as morality.
Praise and blame are basic concepts of morality and help humans to see themselves as part of a collectivity. Individuals can do this because they have a conscience which allows them to view the self objectively.
On religion Smith argued that as a good and kind God created the universe as a harmonious unity then innate human behavioural tendencies must have divine goodness as their final objective. Humans are designed by God to be moral by nature. However, people can be led astray into immorality. One example is when wealth and status are confused with virtue, then people pursue wealth for wealth’s sake. The author deems this immoral.
Despite this possible corruption of morality Smith considers the social class system as part of God's plan. The author also believes that even if the rich class continues to act with only its own desires in mind, it is still a good thing for society. For example, a result of having a wealthy class might be increased opportunities and financial rewards for the working classes. Smith refers to this concept as an “invisible hand,” when people focused only on their own interests end up helping others in the process.
According to Smith people develop a moral code through their experiences of moral and immoral actions. Justice is, however, different from other virtues since it is the only one susceptible to enforcement and people can be punished for breaking its rules. Despite humanity's inclination to selfishness, a moral conscience is formed through social relationships. This is his theory of 'empathy' where observation of others' behaviours makes you more aware of yourself and your own moral behaviour. Smith suggests that we have a vested interest in developing this empathy.
A question which Smith's contemporaries also asked was the source of the ability to form moral judgements, despite the natural instinct of self-interest. The author hypothesised that each of us has within us an "impartial spectator" telling us what is morally correct and incorrect. Smith envisaged humans as moved by passions and simultaneously self-regulatory through reason plus their capacity for sympathy. This dual nature sets people against each other and also gives them the rational and moral faculties to create institutions through which these conflicts can be resolved and even turned to the common good. He wrote that the self-seeking rich are often:
"... led by an invisible hand ... without knowing it, without intending it, [to] advance the interest of the society."
He developed this idea in his later book on economics: An Inquiry into the nature and causes of the Wealth of Nations (1776). That book established many of the most important principles for economists for the next two hundred years..
The foundation of Smith's theory of moral sentiments is the idea that people render judgments on the actions of others by sympathizing -- that is, by using imagination to project how they might feel if they were in different positions. It is even common, according to Smith, for one individual to see both sides of a situation. For example, if you see someone exacting revenge upon someone else for a purported injustice, you will enter into the perspectives of both people in order to determine whether the revenge exacted is justified.
Sympathy is essential to Smith’s system of morals. He claims that human beings naturally imagine how other people think and feel. Through their imagination they can put themselves in the place of others:
"How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it…. As we have no immediate experience of what other men feel, we can form no idea of the manner in which they are affected, but by conceiving what we ourselves should feel in the like situation."
Smith argues that our sympathy is both innate and learned. We naturally feel sympathy towards others. People are dismayed by the distress and lifted up by the happiness of those around them. At the same time, we also teach children to consider how they would feel if they were in someone else’s shoes.
The empathy we feel towards others helps us know whether they are acting well or poorly. We approve or disapprove of what they do. And they approve or disapprove of what we do. That approval is a moral judgment. We believe that their behavior or actions are conducive toward some good end, or follow some right principle. We all live in moral communities. Even if we were to face few coercive restrictions on our freedom, we should not expect to live entirely free of moral condemnation or opposition. Libertarians should not be libertine or laissez‐faire when it comes to moral issues. Free societies require justice – including tolerance – not simply self‐esteem and approval of anyone and everyone’s choices of religion, occupation, or lifestyle. Yet in economics Smith is famed for his promotion of laissez-faire market transactions with little government overseeing.
Before Christianity, the ancient Greek philosophers developed a set of four cardinal virtues: Prudence, Temperance, Justice, and Fortitude. It was only later, in the Middle Ages that Christian theology added the theological virtues of faith, hope, and charity to make a set of seven virtues. Smith adopts the four cardinal virtues but treats charity (which he calls benevolence) differently. In this way he is following the ancient tradition of the stoics more closely than the Christian tradition of Aquinas.
Regarding temperance, which is Smith's word for moderation, he begins by arguing that the basis of moral judgments is sympathy. An essential component of his theory is the degree to which people modulate the appearances of their sympathetic sentiments in public. We are necessarily more interested in our own affairs than other people are. Because of this, he argues, we typically temper the outward expressions of our feelings so that people can more easily sympathize with them. For example, if someone is cheated and becomes infuriated on account of this wrong, the wronged individual should only express a civil offence outwardly. Thus, observers can sympathize without seeing that behavior as self-indulgent or unreasonable. Such a capacity to restrain your passions, according to Smith, constitutes the virtue of temperance, which is another reason why people appreciate the modulation of appearances: an observer knows first-hand just how difficult it is to exert control over strong passions, and so admires anyone who can do so gracefully.
“Virtue is more to be feared than vice, because its excesses are not subject to the regulation of conscience.”
According to Smith, the conscience is, in essence, the third party to our actions. Through the operations of conscience, we are able to imagine how our own actions might appear to observers before we even act. Because morality is grounded in the ability of an observer to sympathize with others, the imaginative capacity of conscience allows us to test the moral fibre of what we might do. By adhering to the guidance of conscience, we can live lives that are morally-informed and just.
"... can deserve to be pursued with that passionate ardour which drives us to violate the rules either of prudence or of justice; or to corrupt the future tranquillity of our minds, either by shame from the remembrance of our own folly, or by remorse from the horror of our own injustice."
According to Smith, justice is unique among moral virtues because it alone can be justifiably enforced under threat of punishment. While other virtues are laudable and merit approbation, justice is what is owed to ourselves, to each other, and to society in general. Similarly, Smith finds that being just is not praiseworthy in the same way as benevolence (charity) is, because one can be both just and cold towards others. However, a violation of justice is far worse than a deficiency in a different virtue. Again, the reason why this is so, as Smith explains, is that justice is what constitutes the proper treatment of others in terms of abstention from offense. It is worse to commit a positive offense than not to do someone a favour.
Like the general population of his time, Smith was religious, and this religious spirit is apparent in the concept of God in his philosophy. Specifically, Smith utilises the idea of intelligent design to explain how systems such as society work so that all of their pieces function in harmony. This coordination appears, for example, in the metaphor of the "invisible hand" which guides the distribution of wealth in society. It is based on the natural state of social classes because higher class people are not inherently capable of consuming more resources and more pleasures than lower-class people. The surplus of pleasures and resources that is generated through wealth ends up also bettering the lower-class people who are in the vicinity of higher class individuals.
"The rich... are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species."
Smith makes a general distinction between sentiments which are positive and those which are negative. He argues that the average person has far less to gain than he or she has to lose. Therefore, people are very unlikely to take risks unless they have substantial incentives to do so: for example, the acquisition of glory through exploits of significant heroism could be such a strong incentive. It is for the same reason that people are more inclined to respect those who maintain their dignity and sense of grace when they have suffered significant losses than those who have decided to sacrifice positive opportunities: it is much more difficult to handle the loss of what one already has gained than the loss of what one might have hypothetically gained.
Corruption of Moral Sentiments by Wealth
"The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments."
Though Smith believes that respect for and admiration of those who are wealthy are necessary for maintaining the proper balance of classes in a given society, he also sees this respect and admiration as primary causes of moral corruption. People become accustomed to seeing the great respect and admiration given to those of wealth and status, and therefore admire the wealthy more than the wise. The net result of this tendency is that the population at large ends up misconstruing wealth as virtue; rulers are consequently able to commit morally-questionable actions with the approval of their people.
Moral Sentiments Theory and The Wealth of Nations
It is debated whether The Theory of Moral Sentiments (1759) complemented or was in conflict with The Wealth of Nations (1776). At one level there is a seeming clash between the theme of social morality contained in the first and the mostly amoral explication of the economic system in the second. On the other hand, the first book can also be seen as an explanation of the manner in which individuals are socialised to become the market-oriented and class-bound actors that set the economic system into motion.
The common thread of the books is the approbation gained from having material possessions. This issue is covered by both books which focus on the approbation generated by showing off material possession. In The Theory of Moral Sentiments approbation from material possessions seems to generate a moral and prosperous individual and society through spreading riches. In The Wealth of Nations that same desire for approbation is described as a potentially destabilizing force for individuals and society, not always bringing prosperity or morality. However the books may be complementary. The Theory of Moral Sentiments can be seen as the “theory” which contains the positive description of the mechanism through which approbation works. On the other hand The Wealth of Nations is the “practice” book which looks at how humans live in a world with “police, revenue, and arms”, where the level of wealth changes through time, and where the government is a forceful player. Approbation derives both from appropriate moral conduct and from wealth, but enough wealth can override moral conduct in achieving approbation and so generate social malfunction. The strength of the incentives in poor pre-commercial societies is different from the strength of the incentives in rich commercial societies and as a consequence behaviors and consequences will differ.