coase ronald, admas smith vews of man

Selected Papers No. 50

Adam Smith’sView of Man

R. H. Coase

Graduate Schoolof Business

The Universityof Chicago

R. H. Coase was born in 1910 in London, En-gland. He studied at the London School of Eco-nomics from which he graduated in 1931. Afterholding positions at the Dundee School of Eco-nomics and the University of Liverpool, hejoined the faculty of the London School of Eco-nomics in 1935. Mr. Coase continued at theLondon School of Economics and was appointedReader in Economics with special reference toPublic Uti l i t ies in 1947. In 1951, Professor Coasemigrated to the United States and has held po-sitions at the Universities of Buffalo, Virginia,and Chicago. He is the Clifton R. Musser Pro-fessor of Economics in the University of Chi-cago Law School, and editor of the Journal ofLaw and Economics. “Adam Smith’s View ofMan” was presented at a meeting of the MontPelerin Society, St . Andrews, 1976.

Adam Smith’sView of Man

Adam Smith was a great economist, perhapsthe greatest that there has ever been. TodayI am going to discuss his views on the natureof man. My reason for doing this is notbecause I think that Adam Smith possessedan understanding of man’s nature superiorto that of his contemporaries. I would judgethat his attitudes were quite widely sharedin the eighteenth century, at any rate, inScotland, but no doubt elsewhere in eight-eenth century Europe. Adam Smith was notthe father of psychology. But I believe hisviews on human nature are important tous because to know them is to deepen ourunderstanding of his economics. It is some-times said that Adam Smith assumes thathuman beings are motivated solely byself-interest. Self-interest is certainly, in AdamSmith’s view, a powerful motive in humanbehaviour, but it is by no means the onlymotive. I think it is important to recognisethis since the inclusion of other motives inhis analysis does not weaken but ratherstrengthens Adam Smith’s argument for theuse of the market and the limitation ofgovernment action in economic affairs.

Adam Smith does not set down in oneplace his views on the nature of man. Theyhave to be inferred from remarks in TheTheory of Moral Sentiments and The Wealthof Nations. Adam Smith deals more exten-sively with human psychology in The Theoryof Moral Sentiments, the ostensible purposeof which was to uncover the bases for whatmay be termed our feelings and acts ofbenevolence : “How selfish soever man may

‘ T h i s p a p e r a p p e a r e d i n The Journal o f Law andEconomics Vol. 19(3), October 1976. All rights reserved.

2 Selected Papers No. 50

be supposed, there are evidently some prin-ciples in his nature, which interest him inthe fortune of others, and render theirhappiness necessary to him though he derivesnothing from it, except the pleasure of seeingit. . . . The greatest ruffian, the most hardenedviolator of the laws of society, is not altogetherwithout it.“’

Adam Smith makes sympathy the basisfor our concern for others. We form our ideaof how others feel by considering how wewould feel in like circumstances. Therealisation that something makes our fellowsmiserable makes us miserable and whensomething makes them happy, we are happy.This comes about because, by an act ofimagination, we put ourselves in their place,and, in effect, in our own minds becomethose other persons. Our feelings may nothave the same intensity as theirs, but theyare of the same kind.

The propensity to sympathise is strength-ened because mutual sympathy is itself apleasure : “nothing pleases us more than toobserve in other men a fellow-feeling withall the emotions of our own breast."2 Becausemutual sympathy is itself pleasurable, it“enlivens joy and alleviates grief. It enlivensjoy by presenting another source of satis-faction; and it alleviates grief by insinuatinginto the heart almost the only agreeablesensation which it is at that time capableof receiving."3 One consequence is noted byAdam Smith : “Love is an agreeable, resent-ment a disagreeable passion: and accordinglywe are not half as anxious that our friendsshould adopt our friendships, as that theyshould enter into our resentments. . . . Theagreeable passions of love and joy can satisfyand support the heart without any auxiliarypleasure. The bitter and painful emotions

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of grief and resentment more strongly requirethe healing consolation of sympathy."4

If the existence of sympathy makes us careabout others, the practice of putting ourselvesin the place of others, of imagining howthey feel, also has as a consequence that weimagine how they feel about us. This includesnot only those directly affected by our actions,but those third parties who observe how webehave towards others. By this means weare led to see ourselves as others see us.This reinforces our tendency, when decidingon a course of action, to take into accountthe effects it will have on others.

The way in which Adam Smith developsthis argument affords a very good exampleof his general approach. He says: “ . . . theloss or gain of a very small interest of ourown appears to be of vastly more importance,excites a much more passionate joy or sorrow,a much more ardent desire or aversion, thanthe greatest concern of another with whomwe have no particular connection."5 Hethen considers a hypothetical example :

Let us suppose that the great empireof China, with all its myriads of in-habitants, was suddenly swallowed upby an earthquake, and let us considerhow a man of humanity in Europe,who had no sort of connection withthat part of the world, would be affectedupon receiving intelligence of thisdreadful calamity. He would, I imagine,first of all express very strongly hissorrow for the misfortune of thatunhappy people, he would make manymelancholy reflections upon the pre-cariousness of human life, and thevanity of all the labours of man, whichcould thus be annihilated in a moment.He would, too, perhaps, if he was a


man of speculation, enter into manyreasonings concerning the effects whichthis disaster might produce upon thecommerce of Europe, and the tradeand business of the world in general.And when all this fine philosophy wasover, when all these humane sentimentshad been once fairly expressed, hewould pursue his business or hispleasure, take his repose or his diver-sion, with the same ease and tranquillityas if no such accident had happened.The most frivolous disaster which couldbefall himself would occasion a morereal disturbance. If he was to lose hislittle finger to-morrow, he would notsleep to-night; but, provided he neversaw them, he will snore with the mostprofound security over the ruin of ahundred millions of his brethren, andthe destruction of that immense multi-tude seems plainly an object less in-teresting to him than this paltry mis-fortune of his own.6

Note that Adam Smith is maintaining thatpeople do behave in the way so vividlydescribed in the example - and if we recallhow few of us lost our appetites on hearingof the tremendous loss of life in recent yearsin Bangladesh or Chad or Guatemala, andin other places, we need not doubt theaccuracy of Adam Smith’s account. Thequotation clearly can be used, rightly in myview, as an illustration of the strength ofself-interest in determining human behaviour.What does at first sight appear strange isthat this quotation is to be found in a chapterentitled, “Of the Influence and Authorityof Conscience,” since Adam Smith’s de-scription of the response of a man of humanityto this appalling disaster in China, seems

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designed to demonstrate the absence ofconscience.

But this is to ignore the subtlety of AdamSmith’s mind. Given that people wouldrespond to this disaster in the way hedescribes, he now asks the question: supposethat it were possible to prevent the loss ofthose hundred million lives by sacrificinghis little finger, would a man of humanitybe unwilling to make the sacrifice? AdamSmith gives this answer:

Human nature startles with horror atthe thought, and the world, in itsgreatest depravity and corruption, neverproduced such a villain as could becapable of entertaining it. But whatmakes this difference? When ourpassive feelings are almost always sosordid and so selfish, how comes it thatour active principles should often beso generous and so noble? When weare always so much more deeply affectedby whatever concerns ourselves than bywhatever concerns other men; what isit which prompts the generous upon alloccasions, and the mean upon many, tosacrifice their own interests to the greaterinterests of others? It is not the softpower of humanity, it is not that feeblespark of benevolence which Nature haslighted up in the human heart, thatis thus capable of counteracting thestrongest impulses of self-love. . . . Itis a stronger love, a more powerfulaffection, which generally takes placeupon such occasions; the love of what ishonourable and noble, of the grandeur,and dignity, and superiority of our owncharacters.’

Professor Macfie thinks that the ending ofthis eloquent passage strikes a false note.*


But I do not think so. It is the last sentencewhich states (no doubt a little too ornatelyfor our modern taste) the essence of AdamSmith’s position. It is not the love of mankindwhich makes the “man of humanity” willingto make this sacrifice, but because he seeshimself through the eyes of an impartialspectator. As we would say today, if hewere to act differently, had chosen to retainhis little finger by letting a hundred milliondie, he would not have been able to livewith himself. We have to appear worthyin our own eyes. It is not love for theChinese (for whom he might have no feelingat all), but love for the dignity and super-iority of his own character which, if he hadto face such a choice, would lead the manof humanity to sacrifice his little finger.

Of course, Adam Smith presents us withan extreme case. But it enables him to makehis point in a set t ing which brooks noobjection. It is easy to see that if the manof humanity had been faced with the loss,not of his little finger, but of his arms andlegs, and had the number of Chinese whowould have been saved by his sacrifice beenone hundred rather than one hundred million,he might, indeed probably would, decidedifferently. But this does not affect AdamSmith’s point. He knew, of course, that theextent to which we follow any course ofaction depends on its cost. The demand forfood, clothing and shelter similarly dependson their price, but no one doubts theirimportance when we are discussing theworking of the economic system.

The force of conscience in influencing ouractions is, of course, weakened by the fact,which Adam Smith notes, that while somemen are generous, others are mean and lessresponsive to the promptings of the impartial

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spectator. But more important in reducingthe influence of the impartial spectator is afactor which Adam Smith discusses at length.We tend, because it is agreeable, to thinkmore highly of ourselves than is reallywarranted. Says Adam Smith: “we are allnaturally disposed to overrate the excellenciesof our own character.“9 Of our tendencyto indulge in self-deceit, he says:

The opinion which we entertain ofour own character depends entirely onour judgment concerning our past con-duct. It is so disagreeable to think illof ourselves, that we often purposelyturn away our view from those circum-stances which might render that judg-ment unfavourable. He is a boldsurgeon, they say, whose hand does nottremble when he performs an operationupon his own person; and he is oftenequally bold who does not hesi tate to pulloff the mysterious veil of self-delusionwhich covers from his view the de-formities of his own conduct. . . . Thisself-deceit, this fatal weakness of man-kind, is the source of half the disordersof human life. If we saw ourselves inthe light in which others see us, or inwhich they would see us if they knewall, a reformation would generally beunavoidable. We could not otherwiseendure the sight.‘10

However, says Adam Smith, “Nature. . . hasnot. . . abandoned us entirely to the delusionsof self-love. Our continual observationsupon the conduct of others insensibly leadsus to form to ourselves certain general rulesconcerning what is fit and proper either tobe done or to be avoided.” These generalrules of conduct are of great importance.They represent the only principle “by which


the bulk of mankind are capable of directingtheir actions. . . . “11

The picture which emerges from AdamSmith’s discussion in Sentiments is of man suffused with self-love.“We are not ready” says Adam Smith “tosuspect any person of being defective inselfishness.” 12 Nonetheless, man does haveregard for the effect of his actions on others.This concern for others comes about becauseof the existence of sympathetic responses,strengthened because mutual sympathy ispleasurable and reinforced by a complex,although very important, influence, whichAdam Smith terms the impartial spectatoror conscience, which leads us to act in theway which an outside observer wouldapprove. The behaviour induced by suchfactors is embodied in codes of conductand these, because conformity with thembrings approval and admiration, affect thebehaviour of the “coarse clay of the bulkof mankind.” Presumably Adam Smithwould argue that everyone is affected by allthese factors, although to different degrees.

It will be observed that Adam Smith’saccount of the development of our moralsentiments is essentially self-centered. Wecare for others because, by a sympatheticresponse, we feel as they feel, because weenjoy the sharing of sympathy, because wewish to appear admirable in our own eyes;and we conform to the rules of conductaccepted in society largely because we wishto be admired by others. The impact ofthese factors is weakened by the fact thatthe forces generating feelings of benevolencehave to overcome those arising from self-interest, more narrowly conceived, with theperception of the outcomes distorted byself-deceit .

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Adam Smith makes no effort to estimatethe relative importance of the various factorsleading to benevolent actions, but he doesindicate the circumstances in which, con-sidered as a whole, they are likely to exerttheir greatest influence. This subject AdamSmith discusses in a chapter entitled “Ofthe Order in which Individuals are recom-mended by Nature to our care and attention.”He says:

Every man. . . is first and principallyrecommended to his own care; andevery man is certainly, in every respect,fitter and abler to take care of himselfthan of any other person. Every manfeels his own pleasures and his ownpains more sensibly than those ofother people. . . . After himself, themembers of his own family, those whousually live in the same house withhim, his parents, his children, hisbrothers and sisters, are naturally theobjects of his warmest affections. Theyare naturally and usually the personsupon whose happiness or misery hisconduct must have the greatest influ-ence. He is more habituated to sym-pathize with them: he knows betterhow every thing is likely to affect them,and his sympathy with them is moreprecise and determinate than it can bewith the greater part of other people.It approaches nearer, in short, to whathe feels for himself.13

Adam Smith goes on to consider the sympathywhich exists between more remote relationswithin the same family:

The children of brothers and sistersare naturally connected by the friendshipwhich, after separating into different


families, continues to take place betweentheir parents. Their good agreementimproves the enjoyment of that friend-ship-their discord would disturb it. Asthey seldom live in the same family,however, though of more importanceto one another than the greater part ofother people, they are of much less thanbrothers and sisters. As their mutualsympathy is less necessary, so it is lesshabitual, and, therefore, proportionablyweaker. The children of cousins, beingstill less connected, are of still lessimportance to one another; and theaffection gradually diminishes as therelation grows m o r e a n d m o r e re-mote.14

Our feelings of natural affection, however,go beyond the family, beyond even theextended family :

Among well-disposed people the ne-cessity or conveniency of mutual accom-modation very frequently produces afriendship not unlike that which takesplace among those who are born tolive in the same family. Colleagues inoffice, partners in trade, call one anotherbrothers, and frequently feel towardsone another as if they really were so.. . . Even the trifling circumstances ofliving in the same neighbourhood hassome effect of the same kind.“15 Thenthere are the inhabitants of our owncountry and the members of the par-t icular groups within a country towhich we belong. “Every individual isnaturally more attached to his ownparticular order or society than to anyother. His own interest, his own vanity,the interest and vanity of many of hisfriends and companions, are commonly

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a good deal connected with it: he isambitious to extend its privileges andimmunities - he is zealous to defendthem against the encroachments ofevery other order or society.16

Adam Smith’s view of benevolence seemsto be that it is strongest within the familyand that as we go beyond the family, tofriends, neighbours and colleagues, and thento others who are none of these, the forceof benevolence becomes weaker the moreremote and the more casual the connection.And when we come to foreigners or membersof other sects or groups with interests whichare thought to be opposed to ours, we findnot simply the absence of benevolence butmalevolence :

When two nations are at variance, thecitizen of each pays little regard to thesentiments which foreign nations mayentertain concerning his conduct. Hiswhole ambition is to obtain the appro-bation of his own fellow-citizens; andas they are all animated by the samehostile passions which animate himself,he can never please them so much as byenraging and offending their enemies.The partial spectator is at hand: theimpartial one at a great distance. Inwar and negotiation, therefore, the lawsof justice are very seldom observed.Truth and fair dealing are almosttotally disregarded. . . . The animosityof hostile factions, whether civil orecclesiastical, is often still more furiousthan that of hostile nations, and theirconduct towards one another is oftenstill more atrocious. . . . I7

The picture which Adam Smith paints ofhuman behaviour is not edifying. Man is


not without finer feelings; he is indulgentto children, tolerant of parents, kind tofriends. But once this is said, it is also truethat he is dominated by self-love, lives in aworld of self-delusion, is conceited, envious,malicious, quarrelsome and resentful. AdamSmith’s view is in fact a description of manmuch as we know him to be. This is notthe aspect of of Moral Sentimentsto which commentators normally draw ourattention. The book is usually thought ofas present ing, and here I quote JacobViner, “an unqualified doctrine of a har-monious order of nature, under divineguidance, which promotes the welfare ofman through the operation of his individualpropensities."18 How this bland interpre-tation came to be made of what is a veryunflattering account of human nature issomething to which I now turn.

Adam Smith did not address himselfdirectly to the question of whether therewas a natural harmony in man’s propensities.However, it can be inferred from variousstatements he made that Viner’s generalisationis not far from the truth. Take as anexample what he says about the fact thatwe judge people by what they do ratherthan by what they intend to do, althoughit would seem more reasonable if, in ourassessment of their characters, it was theother way around:

Nature . . . when she implanted theseeds of this irregularity in the humanbreast, seems, as upon all other occa-sions, to have intended the happinessand perfection of the species. If thehurtfulness of the design, if the ma-levolence of the affection, were alonethe causes which excited our resentment,we should feel all the furies of that

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passion against any person in whosebreast we suspected or believed suchdesigns or affections were harboured,though they had never broken out intoany actions. Sentiments, thoughts, in-tentions, would become the objects ofpunishment; and if the indignation ofmankind run as high against them asagainst actions; if the baseness of thethought which had given birth to noaction, seemed in the eyes of the worldas much to call aloud for vengeanceas the baseness of the action, everycourt of judicature would become areal inquisition. There would be nosafety for the most innocent and cir-cumspect conduct. . . . Actions, there-fore, which either produce actual evil,or attempt to produce it, and therebyput us in the immediate fear of it, areby the Author of nature rendered theonly proper and approved objects ofhuman punishment and resentment.Sentiments, designs, affections, thoughit is from these that according to coolreason human actions derive theirwhole merit or demerit, are placed bythe great Judge of hearts beyond thelimits of every human jurisdiction, andare reserved for the cognizance of hisown unerring tribunal. That necessaryrule of justice, therefore, that men inthis life are liable to punishment fortheir actions only, not for their designsand intentions, is founded upon thissalutary and useful irregularity inhuman sentiments concerning merit ordemerit, which at first sight appears soabsurd and unaccountable. But everypart of nature, when attentively sur-veyed, equally demonstrates the provi-


dential care of its Author; and we mayadmire the wisdom and goodness ofGod even in the weakness and follyof men.19

Adam Smith also explains that this “irreg-ularity of sentiment” is not without itspositive utility :

Man was made for action, and topromote by the exertion of his facultiessuch changes in the external circum-stances both of himself and others, asmay seem most favourable to thehappiness of al l . He must not besatisfied with indolent benevolence, norfancy himself the friend of mankind,because in his heart he wishes well tothe prosperity of the world. That hemay call forth the whole vigour of hissoul, and strain every nerve, in orderto produce those ends which it is thepurpose of his being to advance, Naturehas taught him, that neither himselfnor mankind can be fully satisfied withhis conduct, nor bestow upon it the fullmeasure of applause, unless he hasactually produced them. He is madeto know, that the praise of good inten-tions, without the merit of good offices,will be but of little avail to excite eitherthe loudest acclamations of the world,or even the highest degree of self-applause.20

Adam Smith on many occasions observesthat aspects of human nature which seemreprehensible to us, in fact serve a usefulsocial purpose. “Nature. . . even in the presentdepraved state of mankind, does not seemto have dealt so unkindly with us, as tohave endowed us with any principle whichis wholly and in every respect evil, or which,

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in no degree and in no direction, can be theproper object of praise and approbation.“*’Consider his discussion of pride and vanity:

Our dislike to pride and vanity gen-erally disposes us to rank the personswhom we accuse of those vices ratherbelow than above the common level.In this judgment, however, I think weare most frequently in the wrong, andthat both the proud and the vain manare often (perhaps for the most part)a good deal above it; though not nearso much as either the one really thinkshimself, or as the other wishes you tothink him. If we compare them withtheir own pretensions, they may appearthe just objects of contempt. But whenwe compare them with what thegreater part of their rivals and com-petitors really are, they may appearquite otherwise, and very much abovethe common level. Where there is thisreal superiority, pride is frequentlyattended with many respectable virtues-with truth, with integrity, with ahigh sense of honour, with cordial andsteady friendship, with the most in-flexible firmness and resolution; vanitywith many amiable ones-with human-ity, with politeness, with a desire tooblige in all little matters, and some-times with a real generosity in greatones-a generosity, however, which itoften wishes to display in the mostsplendid colours that it can.22

Of more interest to those of us concernedwith the working of the economic systemis Adam Smith’s discussion of the view, towhich his teacher Dr. Hutcheson subscribed,that virtue consists wholly of benevolence


or love and that any admixture of a selfishmotive detracts from that virtue. Hutcheson,according to Smith, argued that if “anaction, supposed to proceed from gratitude,should be discovered to have arisen from anexpectation of some new favour, or if whatwas apprehended to proceed from publicspirit should be found out to have taken itsorigin from the hope of a pecuniary reward,such a discovery would entirely destroy allnotion of merit or praiseworthiness in eitherof these actions. . . . The most virtuous ofall affections. . . was that which embracedas its objects the happiness of all intelligentbeings. The least virtuous . . . was thatwhich aimed no further than at the happinessof an individual, such as a son, a brother,a friend."23 Adam Smith, as we have seen,did not deny the existence of benevolencenor that it contributed to human welfare.But he regarded this doctrine of Hutcheson’sas being too extreme: “Regard to our ownprivate happiness and interest . . . appearupon many occasions very laudable prin-ciples of action. The habits of economy,industry, discretion, attention and applicationof thought, are generally supposed to becultivated from self-interested motives, andat the same time are apprehended to be verypraiseworthy qualities, which deserve theesteem and approbation of every body."24Adam Smith adds:

Benevolence may, perhaps be the soleprinciple of action in the Deity, andthere are several not improbable argu-ments which tend to persuade us thatit is so. . . . But whatever may be thecase with the Deity, so imperfect acreature as man, the support of whoseexistence requires so many things ex-ternal to him, must often act from

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many other motives. The condition ofhuman nature were peculiarly hard ifthose affections which, by the verynature of our being, ought frequentlyto influence our conduct, could, uponno occasion, appear virtuous, or deserveesteem and commendation from anybody.25

Furthermore, Adam Smith points out, thenotion of benevolence as encompassing “thegeneral happiness of mankind” would requireman to do something of which God is nodoubt capable but that is beyond the powers ofm a n : “The administration of the greatsystem of the universe, . . . the care of theuniversal happiness of all rational and sen-sible beings, is the business of God, and notof man. To man is allotted a much humblerdepartment, but one much more suitable tothe weakness of his powers, and to thenarrowness of his comprehension-the careof his own happiness, of that of his family,his friends, his country: . . . . “26

It was not Adam Smith’s usual practiceto proclaim that there was a natural harmonyin man’s psychological propensities. What henormally did was to point out that particularcharacteristics of human beings which werein various ways disagreeable were accom-panied by offsetting social benefits. Man’snature may seem unpleasant to our fastidioustaste but man appears to be as well adaptedto the conditions in which he has to subsistas the tapeworm to his. The implication ofthe various remarks of Adam Smith wouldappear to be that any change in man’s naturewould tend to make things worse. But AdamSmith avoids stating this general conclusion.It is not difficult to see why he showed thiscaution. If he had asserted that therewas such a natural harmony, how did

Selected Papers No. 50

i t come about that this was so? AdamSmith tended to think, as I suppose wasusual at that time, of the universe as amachine. He speaks of “the various appear-ances which the great machine of the universeis perpetually exhibiting, with the secretwheels and springs which produce them.”If there was such a natural harmony inhuman nature, how did it happen that humanbeings were designed in the way they were?According to Viner, Adam Smith thoughtthat this was due to divine guidance, thatman exhibited these harmonious character-istics because he had been created by God.It is difficult for us to enter the mind ofsomeone living two hundred years ago, butit seems to me that Viner very muchexaggerates the extent to which Adam Smithwas committed to a belief in a personal God.As Viner himself notes, in those parts of thediscussion where we would expect the word“God” to be used, it is rarely found andthe word “Nature” is substituted or somesuch expression as “the great Architect ofthe Universe” or “the great Director ofNature” or even, on occasion, the “invisiblehand."27 It seems to me that one can gaugethe degree of Adam Smith’s belief from theremark he makes in The Wealth of Nationswhen he notes that the curiosity of mankindabout the “great phenomena of nature” sucha s “the generation, the life, growth anddissolution of plants and animals” has ledmen to “enquire into their causes.” AdamSmi th obse rves : “Superstition first attemptedto satisfy this curiosity, by referring all thosewonderful appearances to the immediateagency of the gods. Philosophy afterwardsendeavoured to account for them, from morefamiliar causes, or from such as mankindwere better acquainted with than the agency

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of the gods."28 This is hardly a remarkwhich would have been made by a strong,or even a mild, deist.

The fact of the matter is that, in 1759,there was no way of explaining how sucha natural harmony came about unless onebelieved in a personal God who created itall. Before Darwin, Mendel and perhaps alsoCrick and Watson, if one observed, as AdamSmith thought he often did, a kind of harmonyexisting in human nature, no explanationcould be given if one were unwilling toaccept God the creator. My own feelingis that Adam Smith was reluctant to adoptthis particular explanation. His use of theterm “Nature” and other circumlocutionswas rather a means of evading giving ananswer to the question than the statementof one. Since Adam Smith could only sensethat there was some alternative explanation,the right response was suspended belief, andhis position seems to have come close tothis. Today we would explain such aharmony in human nature as a result ofnatural selection, the particular combinationof psychological characteristics being thatlikely to lead to survival. In fact, AdamSmith saw very clearly in certain areas therelation between those characteristics whichnature seems to have chosen and those whichincrease the likelihood of survival.

Consider the following passage from The

With regard to all those ends which,upon account of their peculiar im-portance, may be regarded. . . as thefavourite ends of nature, she has con-stantly. . . not only endowed mankindwith an appetite for the end which sheproposes, but likewise with an appetite


for the means by which alone this endcan be brought about, for their ownsakes, and independent of their tendencyto produce it. Thus self-preservation,and the propagation of the species, arethe great ends which nature seems tohave proposed in the formation of allanimals. Mankind are endowed witha desire of those ends, and an aversionto the contrary. . . . But though weare. . . endowed with a very strongdesire of those ends, it has not beenentrusted to the slow and uncertaindeterminations of our reason, to findout the proper means of bringing themabout. Nature has directed us to thegreater part of these by original andimmediate instincts. Hunger, thirst, thepassion which unites the two sexes, thelove of pleasure, and the dread of pain,prompt us to apply those means fortheir own sakes, and without anyconsideration of their tendency tothose beneficient ends which the greatDirector of nature intended to produceby them.29

This comes very close to a modern attitude.The “passion by which nature unites thet w o sexes”30 or love, was considered byAdam Smith, a life-long bachelor, as “alwaysin some measure ridiculous”: 31 “The passionappears to every body, but the man whofeels it, entirely disproportioned to the valueof the object. . . . " 3 2 But, of course, thepassion which unites the sexes serves tosecure the propagation of the species and ifrationality impedes this, we can count onthe great Director of nature to make surethat in this area man is not rational. Similarly,we care much more for the young than theold . “Nature, for the wisest purposes, has

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rendered in most men, perhaps in all men,parental tenderness a much stronger affectionthan filial piety. The continuance and prop-agation of the species depend altogetherupon the former, and not upon the latter."33“In the eye of nature, it would seem, a childis a more important object than an old man,and excites a much more lively, as well asa much more universal sympathy. It oughtto do so. . . . In ordinary cases an old mandies without being much regretted by anybody. Scarce a child can die without rendingasunder the heart of somebody."34

In all these cases nature, as Adam Smithwould say, or natural selection, as we wouldsay, has made sure that man possesses thosepropensities which would secure the propa-gation of the species. 35 But even if AdamSmith had been aware of the principle ofnatural selection, of itself this could nothave given him an explanation of why therewas a natural harmony in man’s psychologicalpropensities. That the instincts which regu-late sexual activity and the care of the youngwere the result of natural selection poses noproblem. These are, after all, instincts whichman shares with all other mammals andnatural selection has had a very long periodto bring about this resul t . The socialarrangements of the tiger, the wolf or eventhe chimpanzee are, however, very differentfrom those of human beings and unless therehas been a long period during which naturalselection could operate to shape humannature, we can have no confidence that man’spsychological propensities are appropriatelyadjusted to the conditions of human society.It was David Hume’s view, and presumablyalso Adam Smith’s, that human nature isrevealed as being much the same in allrecorded history :


.. . Ambition, avarice, self-love, vanity,friendship, generosity, public spirit;these passions mixed in various degrees,and distributed through society, havebeen from the beginning of the worldand still are the source of all actionsand enterprise which have ever beenobserved among mankind. Would youknow the sentiments, inclinations, andcourse of life of the Greeks andRomans? Study well the temper andactions of the French and English. . . .Mankind are so much the same in alltimes and places that history informsus of nothing new or strange in thisparticular.36

Without being tied down to Bishop Usher’schronology, it would still have been difficultfor Adam Smith to use natural selection asan explanation of what he thought heobserved, that is, harmony in human nature,unless recorded history was but a small partof human history. There had to be anearlier period in which human nature wasnot the same as it is now.

Fortunately, we have learnt a great dealabout the antiquity of man in recent years.We now know, what Adam Smith couldnot, that modern man (homo sapiens) hadexisted for perhaps 500,000 years, that homoerectus came into existence about one-and-a-half million years ago, while creatureswhich may or may not be classified as menbut from which man almost certainlyevolved, were in existence several millionsyears ago.37 We are thus able to fill inthe gaps in Adam Smith’s position. Wehave the principle of natural selection, amechanism of inheritence, and an extremelylong period during which natural selectioncould play its part. Adam Smith’s view of

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a harmony in man’s nature no longerrequires us to postulate a divine creatorand Adam Smith’s use of the word Natureis singularly appropriate. The harmony inhuman psychological propensities should,however, be regarded as the existence of thatcombination of traits which makes forsurvival rather than as leading to the “per-fection and happiness” of mankind. Sucha position, which assigns a genetic basisfor human psychology, is one for whichthere is, today, some support.38

I can find no essential difference betweenthe views on human nature in The Theoryof Moral Sentiments and those expressed inThe Wealth of Nations. Of course, thesubject is not treated systematically in TheWealth of Nations and Adam Smith’s viewshave to be inferred from incidental remarks.But self-love is everywhere evident. We aremore familiar with the effect of self-love onthe actions of merchants and manufacturersbut in fact all men, whatever their occu-pations, are much the same. When speakingof teachers, he says: “In every profession,the exertion of the greater part of thosewho exercise it, is always in proportion tothe necessity they are under of making thatexertion.“39 Of those engaged in the “ad-ministration of government,” he says thatthey are “generally disposed to reward boththemselves and their immediate dependentsrather more than enough.“40

Self-love also shows itself in the “over-weening conceit which the greater part ofmen have of their own abilities” and their“absurd presumption in their own goodfortune,"41 which is used by Adam Smithto explain why, among other things, peoplebuy lottery tickets, invest in gold mines,become lawyers, engage in smuggling, join


the army or go to sea. It may seem strangethat self-love sometimes results in self-harmbut the reason is that self-love leads toself-deceit and self-deceit colours our per-ception of the outcomes of alternative coursesof action. This is all of a piece with AdamSmith’s view that man overestimates thedifference between one permanent situationand another. “Avarice overrates the differencebetween poverty and riches: ambition, thatbetween a private and public station: vain-glory, that between obscurity and extensivereputation."42 This theme is illustrated bythe discussion of ambition and in particularthe case of the poor man’s son “whomheaven in i ts anger has visi ted withambition”:

. . . He studies to distinguish himselfin some laborious profession. With themost unrelenting industry he laboursnight and day to acquire talents superiorto all his competitors. He endeavoursnext to bring those talents into publicview, and with equal assiduity solicitsevery opportunity of employment. Forthis purpose he makes his court to allmankind; he serves those whom hehates, and is obsequious to those whomhe despises. Through the whole of his lifehe pursues the idea of a certain artificialand elegant repose which he maynever arrive at, for which he sacrificesa real tranquillity that is at all times inhis powers, and which, if in the extrem-ity of old age he should at least attainto it, he will find to be in no respectpreferable to that humble security andcontentment which he had abandonedfor it.43

However, if the ambitious man is not madehappy by the inner forces which drive him,

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the rest of us gain. Says Adam Smith:“ . . . it is well that nature imposes upon usin this manner. It is this deception whichrouses and keeps in continual motion theindustry of mankind. It is this which firstprompted them to cultivate the ground, tobuild houses, to found cities and common-wealths, and to invent and improve all thesciences and arts, which ennoble and em-bellish human life. . . . "44

Benevolence is not absent from The Wealthof Nations but, as in The Theory of MoralSentiments, it is put in its place. ConsiderAdam Smith’s view that slavery could “affordthe expence of slave cult ivation” in theproduction of sugar and tobacco, but thatthis was not true for corn. He supports thisconclusion by observing that the “late reso-lution of the Quakers in Pennsylvania to setat liberty all their negro slaves, may satisfyus that their number cannot be very great.Had they made any considerable part oftheir property, such a resolution could neverhave been agreed to."45 This quotationreveals the weight which Adam Smithassigns to benevolence. Freeing the slaveswas certainly a benevolent action but hardlyone likely to be undertaken if the pricewas personal ruin.

Dr. Arthur H. Cole after referring topassages such as these concludes that AdamSmith had a “pretty low opinion of mankindin general.” This he finds difficult to reconcilewith the picture drawn by Adam Smith’sbiographers of a man who was “friendly andgenerous.“46 I do not regard this as aproblem. Adam Smith saw the less agreeablequalities of human beings as being productiveof good. Self-interest promotes industry;resentment discourages aggressive actions byothers; vanity leads to acts of kindness; and


so on. Furthermore, one can hardly beupset by people’s actions, even if in somerespects disagreeable, if one believes thatthey are incapable of acting otherwise. Any-one who knows anything about cats will notspend much time deploring their unkindnessto mice.

Many economists have thought that thereis an inconsistency between Adam Smith’sargument in ments and in The Wealth of Nations. 47Jacob Viner refers to this question in thefollowing terms : “The Germans, who, itseems, in their methodical manner commonlyread both The Theory of Moral Sentimentsand The Wealth of Nations, have coined apretty term, Das Adam Smith Problem, todenote the failure to understand either whichresults from the attempt to use the one inthe interpretation of the other."48 Theinconsistency which Viner himself finds isthat in The Theory of Moral Sentiments,Adam Smith assumes that there exists anatural harmony while in The Wealth of

Nations, Adam Smith seems to have aban-doned this belief, as is shown by the referencesto desirable government actions. Viner’s viewinvolves, I think, a misunderstanding of thesetwo books. The Theory of Moral Sentimentsis a study of human psychology. The Wealthof Nations is a study of the organization ofeconomic life. A harmony in human naturedoes not imply that no government actionis required to achieve the appropriate insti-tutional structure for economic activity.

Most economists, however, who havethought that there was an inconsistencybetween Adam Smith’s position in these twobooks have come to this conclusion foranother reason. In The Theory of MoralSentiments, man’s actions are influenced by

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benevolence. In The Wealth of Nations, thismotive is apparently absent. This view issupported by a much-quoted passage: “It isnot from the benevolence of the butcher,the brewer, or the baker, that we expectour own dinner, but from their regard totheir own interest. We address ourselves, notto their humanity but to their self-love, andnever talk to them of our own necessitiesbut of their advantages.” 49 What is notquoted is something which Adam Smith saysearlier in the same paragraph: “In civilizedsociety, [man] stands at all times in need ofthe co-operation and assistance of greatmultitudes, while his whole life is scarcesufficient to gain the friendship of a fewpersons.“50 This puts a completely differentcomplexion on the matter. For that extensivedivision of labour required to maintain acivilized standard of living, we need to havethe cooperation of great multitudes, scatteredall over the world. There is no way in whichthis cooperation could be secured throughthe exercise of benevolence. Benevolence,or love, may be the dominant, or, at any rate,an important factor within the family or inour relations with colleagues or friends, butas Adam Smith indicates, it operates weaklyor not at all when we deal with strangers.Benevolence is highly personal and most ofthose who benefit from the economic activitiesin which we engage are unknown to us.Even if they were, they would not necessarily,in our eyes, be lovable. For strangers to haveto rely on our benevolence for what theyreceived from us would mean, in most cases,that they would not be supplied: “ . . . manhas almost constant occasion for the helpof his brethren, and it is in vain to expectit from their benevolence only.” 51

Looked at in this way, Adam Smith’s


argument for the use of the market for theorganization of economic activity is muchstronger than it is usually thought to be.The market is not simply an ingeniousmechanism, fueled by self-interest, for secur-ing the cooperation of individuals in theproduction of goods and services. In mostcircumstances, it is the only way in whichthis could be done. Nor does governmentregulation or operation represent a satisfactoryway out. A politician, when motivated bybenevolence, will tend to favour his family,his friends, members of his party, inhabitantsof his region or country (and this whetheror not he is democratically elected). Suchbenevolence will not necessarily redound tothe general good. And when politicians aremotivated by self-interest unalloyed by benev-olence, it is easy to see that the results maybe even less satisfactory.

T he great advantage of the market is thatit is able to use the strength of self-interestto offset the weakness and partiality of benev-olence, so that those who are unknown,unattractive, or unimportant, will have theirwants served. But this should not lead usto ignore the part which benevolence andmoral sentiments do play in making possiblea market system. Consider, for example, thecare and training of the young, largelycarried out within the family and sustainedby parental devotion. If love were absentand the task of training the young wastherefore placed on other institutions, runpresumably by people following their ownself-interest, it seems likely that this task,on which the successful working of humansocieties depends, would be worse performed.At least, that was Adam Smith’s opinion:“Domestic education is the institution ofnature-public education the contrivance of

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man. It is surely unnecessary to say whichis likely to be the wisest.” 52 Again, theobservance of moral codes must very greatlyreduce the costs of doing business with othersand must therefore facilitate market trans-actions. As Adam Smith observes, “Society.. . cannot subsist among those who are atall t imes ready to hurt and injure oneanother. . . . ” 53

Adam Smith allows for a good deal offolly in human behaviour. But this does notlead him to advocate an extensive role forgovernment. Politicians and governmentofficials are also men. Private individualsare constrained in their folly because theypersonally suffer its consequences : “Bank-ruptcy is perhaps the greatest and mosthumiliating calamity which can befall aninnocent man. The greater part of men,therefore, are sufficiently careful to avoidit. ” 54 But, of course, men who bankrupta city or a nation are not necessarily them-selves made bankrupt. Adam Smith, there-fore, continues : “Great nations are neverimpoverished by private, though they some-times are by public prodigality and mis-conduct.” 55 As he later observes: “[Kingsand ministers] are themselves always, andwithout any exception, the greatest spend-thrifts in the society. Let them look wellafter their own expence, and they may safelytrust private people with theirs. If theirown extravagance does not ruin the state,that of their subjects never will.” 56

In the regulation of behaviour, AdamSmith put little confidence in human reason.When discussing self-preservation and thepropagation of the species, Adam Smith said,in a passage to which I have already referred,that the securing of these ends is so importantthat “it has not been entrusted to the slow


and uncertain determination of our reason”but to “original and immediate instincts.”Jacob Viner makes a similar point: “Theimportant thing for the interpreter of Smithis to note how low down. . . reason entersinto the picture as a factor influencing socialbehaviour. The sentiments [ that is , theinstincts] are innate in man. . . . Undernormal circumstances, the sentiments makeno mistake. It is reason which is fallible."57

It is wrong to believe, as is commonlydone, that Adam Smith had as his view ofman an abstraction, an “economic man,”rationally pursuing his self-interest in asingle-minded way. Adam Smith would nothave thought it sensible to treat man as arational utility-maximiser. He thinks of manas he actually is-dominated, it is true, byself-love but not without some concern forothers, able to reason but not necessarily insuch a way as to reach the right conclusion,seeing the outcomes of his actions butthrough a veil of self-delusion. No doubtmodern psychologists have added a greatdeal, some of it correct, to this eighteenthcentury view of human nature. But if oneis willing to accept Adam Smith’s view ofman as containing, if not the whole truth,at least a large part of it, realisation that histhought has a much broader foundationthan is commonly assumed makes his argu-ment for economic freedom more powerfuland his conclusions more persuasive.

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Footnotes

1. Adam Smith, of Moral Sentiments 3(E.G. West ed. 1969) [hereinafter cited asTheory].

2. Theory 10.

3. Theory 11.

4. Theory 12-13.

5. Theory 192.

6. Theory 192-93.

7. Theory 193-94.

8. A. L. Macfie, The Individual in Society: Paperson Adam Smith 96 ( 1 9 6 7 ) .

9. Theory 189.

10. Theory 222-23.

11. Theory 223-24, 229.

12. Theory 446.

13. Theory 321.

14. Theory 332-23.

15. Theory 328-29.

16. Theory 338.

17. Theory 217-19. Jacob Viner, who adopts a similarv i e w , p o i n t s o u t t h a t A d a m S m i t h ’ s s e n t i m e n t sg r o w w e a k e r w i t h “ s o c i a l d i s t a n c e . ” S e e J a c o bViner, The Role of Providence in the Social Order80-81 ( 1 9 7 2 ) .

18. See Jacob Viner, “Adam Smith and Laissez-Faire,”in Adam Smith 1776-1926: Lectures to Commem-orate the Sesquicentennial of the Publication ofThe Wealth of Nations, 116-55 (1928).

19. Theory 152-153.

20. Theory 153-54.

21. Theory 109.

22. Theory 378.

23. Theory 442-44.

24. Theory 445.

25. Theory 446-47.

26. Theory 348.

27. Theory 110, 264, 442. See Jacob Viner, supranote 18, at 121.

2 8 . A d a m S m i t h , A n Inquiry in to the Nature andCauses of the Wealth of Nations 723 (EdwinCannan ed. 1937) [hereinafter cited as Wealth].

29. Theory 110.

30. Theory 33.


3 1 .

3 2 . T h e o r y 3 9 .

33 . Theory 1 9 9 .

3 4 . T h e o r y 3 2 2 .

35. Michael T. Ghiselin, a biologist, has noted thatAdam Smith “clearly grasped” that “our moralsentiments have an adaptive significance.” SeeMichael T. Ghiselin, The Economy of Nature andthe Evolution of Sex, 257 (1974).

36. David Hume, “Human Uniformity and Predict-a b i l i t y , ” in The Scottish Moralists on HumanNature and Society 44 (Louis Schneider ed. 1967).

37. See Philip V. Tobias, “Implications of the NewAge Estimates of the Early South African Homi-nids,” 246 Nature 79-83 (1973); and Charles E.O x n a r d , Uniqueness and Diversity in HumanEvolution: Morphometric Studies o f Australopi-thecines ( 1 9 7 5 ) .

38. For a general survey of the problem, see Edward0. Wilson, Sociobiology: The New Synthesis 547-5 7 5 ( 1 9 7 5 ) . See . a l so Rober t L . Trivers, “TheEvolution of Reciprocal Altruism,” 46 Q. Rev.Biology 35-57 (1971); and Robert L. Trivers,”“Parental Investment and Sexual Selection,” inSexual Selection and the Descent of Man” 136(Bernard Campbell ed. 1972).

39. Wealth 717.

40. Wealth 818.

41. Wealth 107.

42 . Theory 2 1 0 .

43 . Theory 259-60.

44. Theory 263-64.

45. Wealth 366.

46 . Arthur H. Cole , Puzzles of the “Weal th ofNations,” 24 Can. J. Econ. & Pol. Sci. 1, 5 (1958).

47. See August Oncken, “The Consistency of AdamSmith,” 7 Econ. J. 443-50 (1897).

48. Jacob Viner, supra note 18, at 120.

49. Wealth 14.

50. Wealth 14.

51. Wealth 14.

5 2 . T h e o r y 3 2 6 .

54. Wealth 325.

55. Wealth 325. The reasons why Adam Smith ad-vocated limited government cannot be summarisedin a single paragraph. Professor J. Ralph Lindgren

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has argued persuasively that it was Adam Smith’sview that the institutional role of men in govern-

will inevitably lead them to adopt attitudesdominated by a “love of system.” See J. RalphLindgren, The Social Philosophy of Adam Smith,60-83 ( 1 9 7 3 ) .

56. Wealth 329.

57. See Jacob Viner, supra note 17, at 78.

coase ronald, admas smith vews of man

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