On March 13th, 2007, the Bank of England issued a new series of bank notes. On the £20 note Adam Smith, the Scottish founder of the discipline of economics, replaced the composer Edward Elgar. If portraits on bank notes tell us anything about the spirit of their time, this seems to be a case in point. Smith’s portrait seems appropriate for a period in which the optimism about efficient free markets had reached a peak. But the cliché of who Adam Smith is, and the 18th-century scholar whom one encounters when turning to his writings in their entirety, are at a considerable distance.
Of course it would be foolish to deny that Smith was an economist, if only because defining what “an economist” is means that one needs to define what “economics” is, which has proved notoriously difficult. But in any case, he was not only an economist, as philosophers and political theorists have rediscovered in the last 30 years or so. Of the many things that Smith was, let me pick three.
After having spent some years on a scholarship at the University of Oxford – mostly in private study, as most Oxford professors had at the time “given up altogether even the pretence of teaching” – his first series of lectures in Edinburgh was on rhetoric. Smith-the-rhetorician was well versed in classical rhetoric. But he rejected the traditional manuals on the classification and application of figures of speech as “a very silly set of Books.” Instead, he developed an account of rhetoric that focused on the ability of transmitting one’s ideas and sentiments to the audience through sympathy. For him, rhetoric is about communication in a broad sense and has mostly do with the appropriateness of different styles for different occasions.
Sympathy, “our fellow-feeling with any passion whatever” is also are the core of Smith’s moral theory. Smith had been called to the University of Glasgow as professor of logic, but quickly switched to the chair of moral philosophy. It is Smith-the-moral-philosopher who first became known to a wider public. The Theory of Moral Sentiments first appeared in 1759 and was an immediate success. David Hume, his life-long friend, told him in a letter that “the Public seem disposd to applaud it extremely. …the Mob of Literati are beginning already to be very loud in its Praises. Three Bishops calld yesterday at Millar’s Shop in order to buy Copies.” Based on his lectures on moral philosophy in Glasgow, the Theory develops an account of moral philosophy that builds on the ideas of sympathy and the “impartial spectator,” the perspective of a neutral person who can share the sentiments of those on whom she passes moral judgment. Sympathy creates ties between men that are prior to any instrumental interest in others, as the very first sentence of the Theory emphasises: “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.“ The Theory is a contribution to the 18th-century debate about the source of moral judgments. It also contains, however, an intellectual history of moral philosophy, a theory of virtue, and an account of human nature as being part of a larger framework created by a benevolent deity.
At the end of the Theory Smith announced that he intended to write a book on jurisprudence. This book has never been published; only two sets of student notes from Smith’s lectures on jurisprudence have been saved. Importantly, however, for Smith economics was a part of his account of jurisprudence – the part that deals with “police, revenue, and arms.”
Smith-the-economist thus saw economics as integrated into his wider system. After 14 years of intense private study, interrupted by long strolls along the Scottish coastline, Smith published the book for which is he known today, An inquiry into the nature and causes of the wealth of nations. Economists often see it as the birth certificate of their science – but it is hardly read in economics courses, and often quoted in alarmingly selective ways. For Smith, political economy is “a branch of the science of a statesman and legislator.” The Wealth of Nations is in an important sense a political book, not just a textbook in economics. It describes the vision of a society characterized by a subtle interplay of natural and political institutions. The free market is presented as the best way of organizing economic life – but it can only function well against a background of equal personal and property rights that protect all members of society, from the very rich to the very poor. It is distorted if remnants from feudalism, such as primogeniture or entail, obstruct the free circulation of property, or if special privileges are granted to powerful groups, such as the “merchants and manufacturer” who try to influence legislation and present their own advantage as the general good of the country. It is this coalition of economically and politically powerful groups and their tendency to destroy the equal treatment of all citizens that Smith attacks, and against which he invokes the free market as an institution that grinds down power and integrates the working poor into society. Smith firmly believed that the social cosmos had been wisely designed in ways that facilitate social coordination by a benevolent deity. The “invisible hand” of the market is an instance of such a “contrivance of nature”: a fortunate coincidence of private interest and public good which, together with the natural human propensity to “truck, barter and exchange,” can lead a commercial society to a state of opulence in which everyone flourishes.
But despite this focus on free markets, crucial tasks remain to be done by the state. These include not only the provision of public goods like roads or bridges, but also public education or measures against epidemic diseases. Smith rejected direct interference in the market and paternalistic attitudes towards the poor, but he clearly saw the need for a strong state that could keep up legal equality in the face of economic inequalities, and for political solutions to a number of problems that mar commercial societies. In this sense, Smith-the-economists was also Smith-the-political-theorists – and as such, he is an extremely interesting interlocutor for today’s political theorists.
By the way, Smith-the-rhetorician never disappeared when Smith-the-moral-philosopher and Smith-the-economist came to the fore. On the contrary: his moral philosophy and economic theory are presented with great rhetorical mastery, in consciously crafted phrases and memorable vignettes. The success of Smith-the-economist certainly has to do with his rhetoric abilities. The phrase about the self-interest of “the butcher, the brewer, or the baker”, for example, has made its way into numerous economics textbooks. But this passage is easily misunderstood when ripped from its context. A few sentences earlier Smith argues that a commercial society needs to be built on self-interest because people have many more exchange partners than they have friends – while benevolence is quite appropriate among friends and family members. Smith never retracted his earlier reflections about human sympathy and moral philosophy – he kept revising the Theory over the course of his life – and never saw man as motivated exclusively by economic motives narrowly conceived. While our exchanges with the butcher, brewer or baker is based on self-interest within the limits of justice, other social relations should be guided by benevolence and generosity. It is a sad irony that Smith’s rhetoric abilities have contributed to overshadowing his deeply humanist vision of a free society, and turned him into an iconic figure of ruthless free-market social Darwinism – a position that is difficult to reconcile with his concern for the poor, his reflections on the need for public education, and his endorsement of the market as an institution that allows everyone, even the poorest members of society, to acquire the goods without which they would be “ashamed to appear in publick.” In his time, the case in point were leather shoes, but it is not difficult to imagine what it might be today. Amartya Sen’s “capability approach”, as well as John Rawls’ primary good of the “social bases of self-respect,” can be understood as modern heirs of the Smithian idea that all members of society need certain goods, material or immaterial, in order to live a flourishing life.
These neglected dimensions of Smith’s system are relevant not only for correcting one of the greatest misperceptions in intellectual history. Smith’s system also invites us to think about the ways in which we theorize about the social world today. After Smith, economics became a “separate science,” a discipline that analysed constellations in which people follow their self-interest, narrowly conceived. The social, political and cultural framework within which this takes place was often taken for granted and not made an issue. At least this is the case for the mainstream of economic research, and also, importantly, for the way in which it is taught to cohort after cohort of undergraduate students.
But economic phenomena never take place in a vacuum. At least since the recent financial crisis, this problem has come back into the focus of attention of economists. It is quite likely that political factors, for example the influence of powerful economic actors on legislative bodies, played a role in causing, or exacerbating, this crisis, as Daron Acemoglou, for example, has recently argued. Until recently, many economists would have said that such phenomena are not their business, but rather belong to political science or sociology. For Smith, in contrast, the risk that the “merchants and manufacturers” influence the legislator was part and parcel of his description of commercial society, inscribed in its most basic architecture, as it were. Embedding his economic theory into a wider account of a modern society, undergirded by the moral philosophy and psychology developed in the Theory, Smith was keenly aware that there is no such thing as a “market” in the abstract, and that political and economic processes are interdependent in many and complex ways.
But not only economists, but also political theorists can learn from Smith. It is questionable whether it makes sense, in the 21st century, to reflect about questions of social justice, liberty, equality or other core concepts of political theory without taking economic issues into account. Economics is not just a black box to be put into a framework of ideal principles. Especially for questions of international justice it is high time to look for ways in which the economic, political and cultural dimensions of social problems can be integrated in theoretical frameworks, and their interrelations made visible.
Allegedly, Smith was so absent-minded from time to time that he once mistook a piece of bread for a tea bag and then complained about the quality of the resulting brewage. But he had a keen sense of the multifacetedness and complexity of “commercial society” – and of the way in which different mechanisms and institutions hang together, and cannot be neatly separated along the lines of disciplinary boundaries. This inheritance is worth remembering.
Lisa Herzog is a DPhil candidate in Political Theory at New College and “wissenschaftliche Mitarbeiterin” at the Peter Löscher Chair for Business Ethics at the Technical University of Munich. Her thesis discusses the constructions of “the market” in Adam Smith and GWF Hegel and the meaning of these constructions for contemporary political theory.
 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations(Oxford: Clarendon Press, 1976), 761.
 Adam Smith, Lectures on Rhetoric and Belles Lettres, The Glasgow edition of the works and correspondence of Adam Smith (Oxford: Clarendon Press, 1983), 26.
 Adam Smith, The Theory of Moral Sentiments (Oxford: Clarendon Press, 1976), 10.
 Adam Smith, The Correspondence of Adam Smith (Oxford: Clarendon Press, 1977), 35.
 The Theory of Moral Sentiments, 3.
 Wealth of Nations, 428.
 Wealth of Nations, 27.
 Wealth of Nations, 870.
 Daron Acemoglu, “Thoughts on Inequality and the Financial Crisis” (presented at the American Economic Association Annual Meeting, Denver, CO, January 7, 2011), http://econ-www.mit.edu/files/6348.