Adam Smith’s Synergistic Moral Authorizations

This essay was slightly revised on Thursday, June 23rd, 2022.

Commerce, David Hume told us, decays not just where it is insecure, but where it is not honorable. McCloskey elaborates across her Bourgeois Trilogy how the Great Enrichment came from changing attitudes about work, profit-seeking, and enterprise. The Great Enrichment came on the wings of a moral affirmation of the pursuit of honest income.

Clarifying that moral affirmation was the tradition of natural jurisprudence, associated with figures like Francisco Suárez, Hugo Grotius, Samuel von Pufendorf, Richard Cumberland, and Jean Barbeyrac. In last month's essay, Dan Klein discussed jurisprudence and McCloskey’s Great Enrichment. In developing a secular, social grammar, these jural theorists, Klein writes, “were clarifying the category of honest income” just as “moral leaders were authorizing” its pursuit. The synergy between that clarification and authorization bore much fruit.

Klein and McCloskey both point to Smith as a high point in the articulation of bourgeois virtue and the moral affirmation of enterprise. As I’ve written elsewhere, what Smith called “the liberal plan” in political economy is “liberal” (generous, munificent, giving width to facts and interpretation) in the wide and diverse array of human activities it legitimates. Each pursues her interest her own way; she may do so with confidence and presumptive self-approbation, so long as she stays within the bounds of justice.

In this essay I unfold Smith’s moral authorizations of the pursuit of honest income and the presumption of liberty. The authorizations involve virtuous feedback loops between his ethics in The Theory of Moral Sentiments (TMS) and his political economy in The Wealth of Nations(WN).

A key ethical principle in TMS is something I call “focalism” in an article forthcoming in the Journal of the History of Economic Thought. Focalism is about how our attention ought to be directed. In the article I say that focalism maintains that “we ought to principally attend to the objects of our sympathetic affections, beginning with our own person, and then circling outwards, with concurrently diminishing moral obligation, to our family, friends, neighbors, workmates, fellow citizens, and fellow humans anywhere or anytime in the future.”

Focalism rests upon three propositions, each supported throughout Smiths’ work.

1. “Ought” implies “can.” We have no obligation to attempt that which is not in our power. If we were to discover people on Mars, we would wish them well, but would have no concrete obligations towards them since they exist entirely beyond our reach (TMS III.3.9).

 

2. “Can” implies knowledge. We can’t act effectively if we lack local, circumstantial knowledge. To help others requires us to gather contextual details about their situation, anticipate the probable effects of our aid, and so forth. The point looms large in Smith’s politics (WN IV.ii.10; WN IV.ix.51).

 

3. Knowledge is limited by social experience. We learn about others by engaging with them and sympathizing with them. We are less well-equipped to help those we don’t know than those we do. In our relationships we develop relational knowledge, including mutual expectations about moral duties to one another. Relational knowledge begins with our relationship with ourself. We have an immediate obligation to tend to our own needs because we have better knowledge of our hunger, thirst, and so on. Our obligations diminish, on the whole, as familiarity diminishes. Smith captures the point when he says that “the great society of mankind would be best promoted by directing the principal attention of each individual to that particular portion of it, which was most within the sphere of both his abilities and of his understanding” (TMS VI.ii.2.4).

In our efforts to serve the good, focalism teaches us to orient our efforts around a “humbler department” than the abstract care of humankind in general: “the care of [our] own happiness, of that of [our] family, [our] friends, [our] country” (TMS VI.ii.3.6). Friedrich Hayek communicates the idea this way: “all man’s mind can effectively comprehend are the facts of the narrow circle of which he is the centre.”

The focalism in TMS is complemented by key insights of WN. Those insights illustrate how tending to our “humbler departments” in fact serves the common good of humankind. As we focus on concrete duties of care for self, family, and community, we may, so long as our acts stay within the bounds of commutative justice, be said to serve the good of humankind generally, in part because self, family, and community form parts of the whole of humankind. Smith shows us that as we bring our goods and services to the marketplace, as we innovate and strive to better our condition, we unwittingly participate in a grand, global concatenation. That concatenation is metaphorically coordinated by the price system, which in turn relies on shared conventions of ownership and contract.

Virtuous feedback loops

As indicated in Figure 1, focalism and liberal political economy are bidirectionally reinforcing.

FIGURE 1

Reflections on the limits of our knowledge lead us towards the principle of focalism. As we understand the limits of our power and influence, we rightly feel that it is proper for us to focus on that which we can influence—our personal well-being and the well-being of our familiars. As we reflect on the teachings of liberal political economy, we come to see how a focus on these humbler departments serves the good of the many. Smith helps us see that the pursuit of honest income might be a species of what James Buchanan called “benevolent self-interest.” The pursuit of honest income channels our interests to serve the good of the whole. We can think of the pursuit of honest income as either a literal or metaphorical cooperation with God in serving the good of humankind. That notion inheres in Smith’s “invisible hand.”

The relation between focalism and liberal political economy may be said to influence Smith’s teachings on policymaking throughout WN. With a sense of the propriety of private enterprise and its benefits, Smith advances a presumption of liberty in public policy, whereby violations of liberty (understood essentially as the negative freedom that comes with each person’s bodily sovereignty and ownership of property) bear the burden of proof. Smith’s liberalism does not derive deductively or axiomatically from first principles, but, like the sensibilities of his teacher Francis Hutcheson, stems from a conviction that freedom best serves the common good.

By removing barriers to market entry, lifting trade restrictions, diminishing government subsidies, repealing government-granted monopoly privilege, and allowing for labor mobility, liberalization in public policy frees economic activity. Freedom extends and complexifies the division of labor, reinforcing the logic of focalism—as the world become more complex, our knowledge of things beyond our narrow circle of familiarity further diminishes. Reinforcing the logic of focalism spreads the general sense of the propriety of “having a go,” so to speak, among the population, further inspiriting the economy. As this inspiriting runs its course it displays the truths of the teachings of liberal economic theory—new forms of organization in industry, innovations and capital accumulation, further subdivision in production all serve to increase the quality and quantity of output, all the while providing individuals with greater scope of opportunity. In turn, such developments further authorize liberalization in policy. 

In Figure 1, the images of Smith represent aspects of his efforts in moral education across his works. He looked to inform citizens of modern, commercial polities of their duties and obligations towards one another. He was a part of building what John Greville Agard Pocock has called a “commercial humanism”. He looked to teach his readers that honest industry and attention to our focal relations is, especially in the complex realties of the modern world, perhaps the most effective way that most of us can serve the good of humankind.

Let’s look at each of the four arrows in Figure 1, beginning in the top left part of the picture: the arrow from focalism to economic activity.

Focalism and economic invigoration

Smith tells us in WN that each person naturally desires to better his or her condition, but not how each understands betterment. In TMS we learn of the strong desire each of us has for praise and approval from our fellows. What our fellows approve of partially conditions how we understand circumstantial improvement.

For much of human history, commercial enterprise was understood as a necessary but somewhat degrading activity. Merchants, traders, and craftsmen were viewed with suspicion. As of the late Middle Ages, honor and praise were conferred on those privileged with political and religious authority. In the Western Christian tradition, right and holy living was often understood in terms of contemplation and removal from the temptations and distractions of mundane life. These sensibilities depressed commercial spirit, even where the requisite institutions for an extended commerce largely obtained, as in England.

Out of the Renaissance, attitudes about the dignity of commerce and, more generally, the character of virtue began to change. Northern Christian humanist discourse (particularly the writings of Erasmus) and then Protestant theology emphasized the virtues of social engagement and activity over cloistered living. Martin Luther taught that although God does not need our good works (they are irrelevant for our salvation), our neighbors do. In faith we look upwards to God. Transformed by faith, in love we look outwards to our neighbor. Through our ordinary work, we cooperate with God in bringing his kindness and provision to others.

In the seventeenth century, thanks in part to jural theorizing, notions of honest trade entered public discourse. Trade and commerce came to be understood as callings (God-appointed tasks), for example in the teachings of prominent Puritan divines like William Perkins and Richard Baxter. Changing conceptions of commerce, at least in England, come across in the title of Richard Steele’s (1629-1692) enormously popular The Tradesman’s Calling, in which he argued that “every Pin and Nail in the Building, how obscure soever, concurs to the Beauty and Strength of the [whole] Work.”

Smith’s discourse belongs to this flow of changing sensibilities about commercial enterprise. In the first chapter of WN he tells how even a “course and rough” woolen coat of the “day-labourer” is the “produce of the joint labour of a great multitude” (WN I.i.11). There is beauty beneath the surface even in so mundane a good. Being sensible to that beauty morally authorizes participants to continue in their humble tasks with focus and diligence, even verve and alacrity. That authorization invigorates economic activity by depicting humble commercial tasks as laudable, even sanctified.

The ethic of focalism teaches the limitations of disinterested benevolence. Because the knowledge required to serve the good is, in most cases, developed circumstantially, we are unable to effectively serve the good outside of our relational networks. If we would serve what a universally benevolent spectator would approve of, then, we should diligently focus on our humbler departments. In a free political and economic order, that focus brings us to cooperate with others, each of whom is focusing on his or her humbler departments; together we serve the good of the whole by tending to our parts. In these activities, we may not be able to tout our own benevolence or beneficence, but we can claim beneficialness.

Economic philosophy and focalism

Ideas about focalism were developed from Stoic ideas prior to Smith by Shaftesbury, Hutcheson and especially Joseph Butler. Those ideas complemented the burgeoning theological discourse on work and calling. In the eighteenth century, economics provided new analytical justification for the notion of commerce as a divine calling. Smith’s analysis of the division of labor, the ”higgling and bargaining” of the price system (WN I.v.4), and the coordinating function of speculation, and much more, elucidate how our humble efforts serve the good.

Smith’s economic philosophy teaches us about the correspondence—or lack thereof—between the interest of each part and that of the whole. In grain markets, for example, it is the grain speculator or “the inland dealer” and not the prudent statesman who most effectively wards off famine: “the interest of the inland dealer, and that of the great body of the people, how opposite soever they may at first appear, are, even in years of greatest scarcity, exactly the same” (WN IV.v.a.3).

In this lesson, along with many others throughout WN, Smith is not condoning the neglect of our fellows. Rather, in illustrating the workings of the economy he casts light on how working to better our condition and the condition of our familiars serves the good of strangers—more effectively, on the whole, than through ad hoc policy intervention.

Economic philosophy reinforces the ethic of focalism by spelling out in greater analytic detail how “God” cares for “the universal happiness of all rational and sensible beings” (TMS VI.ii.3.6), as it were, through our ordinary pursuits.

Economic philosophy and policymaking

Now we turn to the arrows on the righthand side of Figure 1. Smith’s economic philosophy culminates in “the liberal plan of equality, liberty, and justice” under which each person can pursue “his own interest his own way” (WN 664). The liberal plan cites economic analysis in its own justification; but we shouldn’t neglect its ethical provenance in ideas about the dignity of work. Our labor is “sacred and inviolable” (WN I.x.c.12).

In WN Smith focuses on bringing about four main kinds of reforms: free choice in occupation, free trade in land, free domestic trade, and free international commerce. But he applies his liberal sensibilities to other areas of policy as well: “Let the same natural liberty of exercising what species of industry they please be restored to all his majesty’s subjects” (WN IV.ii.42).

WN advances a presumption of liberty in policymaking. Smith understands, according to Charles Griswold, that 

Policymaking and economic activity: Completing the loop

In conjunction with changing cultural attitudes about commerce, liberalization frees and encourages economic activity. Smith sought to repeal the laws of settlement and statues of apprenticeship—initially enacted under Elizabeth I as the Statute of Artificers in 1562—to enable workers, by allowing them greater freedom, to develop skills and bring their labor to market. He worked towards freer domestic and international trade to extend the division of labor, encourage specialization, and increase technical progress, which would raise living standards and create new opportunities and new markets for refined goods and services.

Moral authorizations of, on the one hand, honest income and, on the other, of policy liberalization spelled the Great Enrichment, the fruit of which billions of people now enjoy. One of the patron saints of the Great Enrichment, Smith teaches how we do our part in serving the good of the whole; how in focusing diligently on the good of our part we serve that of the whole; and how freedom fortifies the remarkable correspondence between those two goods.


Erik Matson is a senior research fellow at the Mercatus Center at George Mason University and the deputy director of the GMU Adam Smith program. His personal website is erikwmatson.com.

This essay is part of the AdamSmithWorks series Just Sentiments curated by Daniel B. Klein and Erik Matson. New essays will be published on the fourth Wednesday of the month. You can read more about the series in this Speaking of Smith post, "Just Sentiments- Welcome!". Klein and Matson lead the Adam Smith Program in the Department of Economics at George Mason University, in association with the Mercatus Center. In the program, they study big ideas in jurisprudence, politics, ethics, and economics as they were pursued during the original arc of liberalism, especially in the 18th century in Britain.