THE HEDGEHOG REVIEW: VOL. 16 NO. 3 (FALL 2014)
The Emptiness of Modern Economics: Why the Dismal Science Needs a Richer Moral Anthropology
Not long after its publication last spring, a treatise on economic inequality by a respected but hardly celebrated professor at the Paris School of Economics became the most unlikely bestseller of 2014. The public appetite for Thomas Piketty’s Capital in the Twenty-First Century, and the lively debate it occasioned, were nothing short of astonishing. Having received reviews and other treatments (including profiles of its author) in media outlets as varied as The Wall Street Journal, Vanity Fair, and The Colbert Report, the book also earned the distinction of being the only tome on economic theory ever to sell out on Amazon. No doubt, much of Piketty’s appeal lay in his intent to restore the kind of grand, sweeping theorizing not seen since the classic works of political economists like Adam Smith, John Stuart Mill, and Karl Marx. That ambition was linked to his openly expressed dissatisfaction with the increasingly sterile and fragmented focus on econometrics that characterizes so much of his field today. “To put it bluntly,” Piketty writes in his introduction
the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves.1
Piketty clearly sees himself bucking this trend by attending to real data: No more armchair theorizing for economists! seems to be one of the rallying cries of his work. It’s time for economists to get their hands dirty with real numbers that describe real places, in real time. And the reading public appears to love him for doing just that. The debate over the future of capitalism prompted by Piketty’s claims about increasing economic inequality would not have been possible without his meticulously researched analysis of two centuries of economic history.
It’s tempting to conclude that Piketty understands and delivers what the public wants from economics: a return to classical political economy. More than a few reviews of his work make this exact claim; he’s been hailed as the Smith, Mill, or Marx the twenty-first century has been waiting for.
If only it were true. Or, to be fair, completely true. Piketty’s work is certainly a welcome step in the right direction, but it doesn’t make him the new Adam Smith. Empirical attention to the sweep of history was not the only thing that enabled the grand theorists of classical political economy to make sense of market life for their readers. The other half of what made political economy—the forerunner of economics—so compelling was its ability to take on “big questions” by connecting economic matters with moral and philosophical concerns, often by way of what might be called moral anthropology.
For those longing for a revival of political economy in the tradition of Smith, even Piketty’s remarkable turn to richer data doesn’t fully satisfy their hunger for a fully worked out exploration of the connection between economics and larger philosophical and moral questions. These questions are about more than mere markets and politics; they pertain directly to the moral dimensions of economic life.
Because early economists such as Smith (1723–90) were also moral philosophers, they took up such questions naturally. They assumed that theories of justice and normative reflections on society were inseparable from their theories about pricing, the distribution of resources, and national wealth. They assumed that their field could advance only if all such concerns were part of a seamless whole.
This may seem a surprising history for a discipline that has long been known as the “dismal science,” on the grounds that its business is to make gloomy statistical predictions backed with the authority of science. The little-known origin of the phrase, however, had to do precisely with philosophical arguments over anthropology, and nothing at all to do with statistics. Nineteenth-century historian Thomas Carlyle used the term in a pro-slavery essay to attack the profession of political economists such as John Stuart Mill, who supported slave emancipation on the basis of their egalitarian beliefs about human nature.2 It’s a mark of how much economics has changed that—rather than serving as a badge of honor—the title now generally conveys a sarcastic commentary on the discipline’s total lack of philosophical, or humanistic, aspirations.
The Dismal Science Today
If Piketty falls short of connecting economic theory with this broader kind of moral philosophy, he is not alone among his fellow economists, as I learned firsthand as a participant in the 2013 Summer Institute at Duke University’s Center for the History of Political Economy. For three weeks I was part of a group of economists, philosophers of economics, and fellow humanists who had gathered with the stated purpose of learning about the history of political economy. Though I am a scholar of religious studies, I frequently felt more like an anthropologist, observing the economists in their natural habitats, watching how they thought and communicated with each other in their native language. For the most part, this ethnographic snooping was entertaining and even useful. I learned a lot about the discipline. But at times, such as the week we spent on Adam Smith, I found it curiously disappointing.
As those who have dipped into it know, the ocean of Smith scholarship is broad and deep. There’s no shortage of work on the man and his thought in a variety of fields, including economics, political theory, intellectual history, psychology, and theology. Surprisingly, though, economists—the very people who claim Smith as the founding father of their discipline—appear to have read very little of his work beyond that which deals strictly with economics.
While we were covering Smith’s work, especially his 1759 treatise on moral philosophy, The Theory of Moral Sentiments, I repeatedly thought that what I was reading was fairly transparent, only to find that others in the room didn’t agree. We had exceptional visiting faculty as our guides, and I don’t want to give the impression that my colleagues and I walked away with a flat reading of Smith. Nonetheless, I was struck by the difficulty the economists among us seemed to have in reading his work. Even after our time together, they seemed unable to overcome a certain insensibility toward the moral dimensions of Smith’s political economy, and to the depth of the connections between The Theory of Moral Sentiments and his other major work, The Wealth of Nations (1776).
After a while, I began to compile a list of complaints about these peculiarly incomplete readings of Smith. Their gist was that the economists failed or refused to approach Smith in his own context, that of a moral philosopher of the Scottish Enlightenment, and so missed the full-orbed moral sense of his economic writing, particularly the role of his moral philosophy and moral psychology in making his political economic observations plausible. Because of my own academic orientation, I began casting about for works of theology and religious ethics that might provide a corrective to this stunted reading of Smith. To my surprise, I didn’t find what I had hoped to find. Instead, I learned that Smith is only infrequently addressed in religious ethics, and even then largely in the narrow terms used by most economists—that is to say, in language that I think misses or obscures critical parts of what Smith was doing.
I couldn’t say why we scholars of religion turn to economists such as George Stigler and Tony Aspromourgos more than to other humanists such as Emma Rothschild (or even Amartya Sen, the outstanding example of an economist who avoids the pitfalls of a narrow, economic reading of Smith), but we do. As a result, we proceed along unbalanced lines, even when we have the tools that could help us be more attentive to the moral complexity of his work. The unfortunate consequence of this is that scholars of religion, along with many economists, largely accept the view that the real Smith is the hardheaded proto-economist of The Wealth of Nations—and that even if Smith’s theory is at all theological or ethical, it is only sloppily and nefariously so, perhaps because it seems to advance a kind of theodicy in which the market confirms the justness of God’s order. Consequently, it is not uncommon to find theological engagements with Smith in which he is summarily indicted as a conspirator in the illegitimate secularization of modern life or as the scourge of charity, banishing it from the public sphere in favor of self-interest. All of which is a shame.
So while I started out feeling frustrated with economists, I ended up being equally nonplussed by religious ethicists. Smith’s political economy, as I saw it, was firmly grounded in a consistent moral psychology. Why hadn’t more scholars of religion discovered that he is a natural conversation partner for religious ethicists? Why do we accept this parochialism, especially when deeper engagement with Smith’s moral anthropology across disciplinary lines stands to yield so many benefits? Not least, such engagement would relieve some interpretive difficulty in Smith scholarship by underscoring that his ambivalence about what he called “commercial society” was moral as well as practical. Such engagement could also improve the ability of religion scholars to contribute to wider conversations about the moral dimensions of economic life.
Even more important, the time is right for renewed philosophical engagement with economic conversations more generally, and for the sake of these conversations themselves. The recent excitement over Piketty’s break with “economics as usual” attests to the public sense that something substantive has been missing for some time from economics. Revisiting the theories of the discipline’s founder can advance the quest to find out what exactly this missing element is. Moreover, revisiting Smith offers one way to begin moving beyond our current disciplinary impasse, which undoubtedly would have appeared quite strange to Smith himself.
Smith’s Moral Anthropology
Consider, first, what I call Smith’s moral anthropology, the particular way in which he invited his readers to understand the moral dimensions of human nature. For Smith, this anthropology centered on a particular psychology enabled by the faculty of sympathy. Although the word sympathy usually indicates benevolence, pity, or some other altruistic feeling, Smith repurposed it to signify a design, something like humanity’s operating system. In this usage, sympathy describes the instinctual cognitive and affective ability individuals have that enables them to understand the motivations and feelings of others by imaginatively identifying with them. In the absence of immediate experience of what others suffer, for example, he surmised that we put this capacity into action by “conceiving what we ourselves should feel in the like situation…[and] by changing places in fancy with the sufferer.”3 A virtuous person can hone this faculty, to be sure, but its presence doesn’t depend on virtue. According to Smith, even “the greatest ruffian” feels at least traces of the sentiments and emotions that sympathy enables.4 Sympathy is a load-bearing concept in Smith’s moral anthropology. First, it enables moral judgment. When judging others, he thought, we evaluate the propriety of their actions by imaginatively identifying with them, and deciding whether we would act and feel the same way if we were in their shoes.5 It follows that we apply this mode of examination when judging ourselves, in that we “place ourselves in the situation of another man, and view [our conduct and motives], as it were, with his eyes.”6 In addition to imagining the gaze of an actual other, we also use sympathy to imagine the gaze of an “impartial spectator,” whose reason serves as our conscience, and can counter our excesses of self-love, should we choose to heed its voice.7 The voice of this spectator is not perfect—by both lack of perspective and actual self-deception, we may delude ourselves regarding its impartiality.8 Even so, the voice remains audible in even the most hardened criminal, issuing judgments on conduct, motivation, and sentiments.
For Smith, the faculty of sympathy is also the font of both virtue and vice, given that humans naturally desire the approval of others.9 He noted that it is natural to desire to be worthy of this approval. We want “to be respectable” as well as “to be respected.”10 The virtuous person builds on this hunger for approbation by moderating her conduct and sentiments so as to earn the respect of others and to satisfy her impartial spectator. The mere fact of this desire for approval does not guarantee moral rectitude, of course. Ever the moral realist, Smith admitted that the desire for respect is always tainted by self-love, and that it is easy to mistake the conditions for respect, and to both seek and bestow it inappropriately.
Susceptible to misuse as it may be, the presence of this impartial spectator, alongside the natural human desire for moral approval, is the loving design of the ultimate impartial spectator: God. It was the plan of the “Author of our nature,” according to Smith, that moral norms exert themselves on the human psyche both cognitively and affectively, and that all humans be constituted so as to be aware of these norms.11 Given this, it is appropriate that humans discern moral rules with reference to each other, and to their own sentiments.12 This is a design with which humans can cooperate in varying degrees; it facilitates moral action, without commanding it.
In blending reason and sentiment in this way in his ethics, Smith joined his contemporaries in developing what can be called a “moral sense theory,” or “ethical intuitionism.” It is possible to see in Smith’s own version of this the influence of both Stoicism and his Scottish Calvinist context, including his sense that Providence has planned human nature in a particular way, and that this design participates in a natural ordering of creation. Neither of these influences, however, led Smith to the conclusion that such an ordering always produces agreeable outcomes, either at the level of individual behavior or at that of the social whole. First, such an idealistic picture is inconsistent with Smith’s acknowledgment that individuals regularly reject the judgment offered by the voice of the impartial spectator, and accordingly fail to act with propriety and virtue. Moreover, Smith disagreed vociferously with the provocative claim of his contemporary, Bernard Mandeville, who, in his half-verse, half-prose commentary on economic relations in eighteenth-century England, The Fable of the Bees, asserted that “private vices are public benefits.”13 Indeed, Smith had a deep and, at times, pessimistic awareness of unresolved injustice.14
Set alongside the more sanguine alternatives of the time (such as those offered by Mandeville and by Smith’s mentor, Francis Hutcheson, who proposed a theory of moral senses in which benevolence was the root of most actions), the moral psychology Smith sketched appears fairly modest, realistic, and even ambivalent: By his reading, humans are designed to be moral persons—that is, both aware of and capable of meeting moral norms—and this design has both cognitive and affective dimensions having to do with our ability to imaginatively identify with others.
More Than Selfishness
Smith’s moral psychology is decisively operative in The Wealth of Nations, and approaching his economic treatise with that in mind can helpfully challenge the tendency to read it, as Chicago school economist George Stigler does, as “a stupendous palace erected upon the granite of self-interest.”15 Although a growing number of intellectual histories now bring into question this once dominant interpretation of Smith’s work, Stigler is hardly alone in his interpretation. In fact, this misreading remains the single greatest reason for Smith’s popular reputation as a conservative neoclassical economist whose pessimism about governments, regulation, and human nature was matched only by his optimism about market outcomes, and who accordingly proclaimed that free markets tidily channel individual selfishness toward the greater public good, as if by an “invisible hand.” Although the heyday of the conservative sartorial phenomenon of “Adam Smith neckties”16 has passed, most invocations of his name in contemporary politics still focus on his alleged discovery that free markets lead to the greater good by shaping selfishness through some unseen force.
Connecting Smith’s philosophy with his economics militates against this caricature by helping us see the moral ambivalence in his evaluation of commercial society. Take, for example, his claims regarding that “certain propensity in human nature…to truck, barter, and exchange one thing for another.” Pointing out that no one has ever seen two dogs make a “fair and deliberate exchange,” he noted that this uniquely human ability rests on the art of making contracts that are advantageous to both parties: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”17
With all due respect to George Stigler, I find that reading these famous lines with Smith’s moral psychology in mind reveals that it is the faculty of sympathy on which exchange is built, not self-interest. Understanding another’s advantage through sympathy is what allows bargaining in the first place. Why talk about engaging the butcher’s self-love at all, unless we can imagine and therefore anticipate it? Along with reason and rationality, it is this imaginative capacity that distinguishes humans from animals, and allows us to bargain with each other toward mutual advantage. The two dogs certainly have self-interest, but they don’t have this.
Given that this account of exchange is fundamentally morally neutral, much like the faculty enabling it, the actors in any given exchange may possess varying proportions of benevolence and self-interest. Indeed, Smith was already alert to the fact that even exchanges that are freely entered into may result in one party taking advantage of the other, due to situational constraints.
So far, then, exchange appears to be as much about sympathy as self-interest. But what about self-interest? What is it, exactly? And what are we to make of the “desire of bettering our condition” that Smith mentions so frequently in The Wealth of Nations, which “comes with us from the womb, and never leaves us till we go into the grave”?18 Here as well, we find the faculty of sympathy popping up, since for Smith the pursuit of wealth is grounded in the desire for approval that accompanies the faculty of sympathy.
As early as The Theory of Moral Sentiments, he had connected the two: “What are the advantages which we propose by that great purpose of human life which we call bettering our condition? To be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation.”19 Smith thus linked the drive to gain wealth with the foundation of moral behavior itself. The connection is not straightforward, of course; he had also observed that humans have a tendency to sympathize more readily with the wealthy, and to ease standards of moral judgment when regarding them in relation to the agreeableness of their estate in life. At the same time, Smith used the cautionary tale of a poor man’s ambitious son whose material success failed to bring him happiness to illustrate that “wealth and greatness are mere trinkets of frivolous utility.”20 So in Smith’s evaluation, the desire to better one’s condition is ultimately a morally complicated admixture of the shallow search for mere status with the more commendable striving for deserved respect.
Among things that are morally complicated, Smith viewed the outcomes of a market order with clear ambivalence. The invisible hand metaphor in The Wealth of Nations (which, it should be noted, Smith does not use to make a general philosophical point, but to argue against mercantilist policies banning exports), though it is used only once in that book, is often invoked as support for the idea that Smith believed that the market always redirects self-interest toward the common good, whether providentially or in accord with some proto-Hayekian account of spontaneous order.21 If the hand was providential, however, then Providence only planned so far. In addition to many injustices perpetrated by self-interested actors, Smith assiduously chronicled numerous instances of unavoidable divergence between public and private interest. Indeed, a stark illustration of the inevitability of certain negative market outcomes is provided by his analysis of the division of labor: Smith feared that it produced mental and moral enfeeblement in the class of laborers engaged in menial and repetitive tasks (for which he suggested public education as a partial remedy).22 His lengthy discourse in The Theory of Moral Sentiments on the character and behavior of the prudent man may have been his acknowledgment that it was going to be difficult to simultaneously cultivate industry, virtue, and happiness in an emerging commercial society that held as many opportunities for corruption and social disharmony as it did for the amelioration of the general welfare.23
In sum, these two levels—the individual and the social—are linked in Smith’s analysis: It is exactly Smith’s measured ability to navigate between the more sanguine and cynical accounts of human nature of his time, which we first see in The Theory of Moral Sentiments, that allows him, later, in The Wealth of Nations, to assess commercial society more broadly, and with a level of realism, and to laud the market’s good and practical effects without neglecting to lament its corrupting tendencies and negative outcomes.
Restoring Humane Breadth
Why does it matter whether we acknowledge the moral dimension of Adam Smith’s economics? Is this just about setting the record straight on Smith? While that would be helpful—and I do hope that a more nuanced interpretation of his work will one day prevail over his clichéd public image as a patron saint of self-interest—I hope I have made the beginning of a case for restoring the conversation between moral philosophy and economics. Today, the two certainly seem like completely divorced disciplines, with little to say to each other, in light of the fact that the former claims to be value based and philosophical, while the latter sees itself as an empirical, fact-based science akin to Newtonian physics.
Oddly, by many accounts this rupture between the fields was Smith’s own doing. Many seemed to agree thirty years ago when George Stigler claimed that neoclassical economics is premised upon Smith’s “Newtonian” discovery “of the self-interest–seeking individual in a competitive environment.”24 In the more recent words of Tony Aspromourgos, it was Smith who bequeathed to the “newly emerging intellectual discipline” its “conceptual universe.”25 It might appear, then, that conversations between these disciplines are both impossible and unnecessary precisely because Smith’s seminal work liberated economics to become the science it now is.
But if the moral psychology I’ve sketched is a plausible reading of Smith, to claim that his Newtonian bequest to economics was the self-interested model of the individual is to seriously misunderstand him. This is true with regard to both content and genre, given that Smith was engaged in something more than a purely proto-economic investigation. He was still firmly situated at the nexus of multiple disciplines, habituated to the disciplinary hedge-jumping one might expect in an era when sociology and economics were still twinkles in the eye of moral philosophy. As a result, his economic observations were grounded in a normatively encoded account of the human person. Separating his theory from this foundation creates the risk not simply of misapprehending Smith, but of preempting the argument before it even starts. Even sloppy Smith scholarship that repurposes him to rather un-Smithian ends, to the extent that it remains within his worldview, cannot help but be premised upon moral anthropologies. (For example, readers who find Smith to be a champion of libertarian “free-market” economics may find within his work a moral account of human nature that is unduly, even monomaniacally focused on self-interest—but they find a moral account of human nature nonetheless.)
More important, given the central importance of Smith to the discipline of economics, we should not be surprised to find that this pattern extends beyond the confines of intellectual history. What modern mainstream economics fails to recognize is that the conceptual universe of political economy—the universe supplied by Smith and, arguably, inhabited by economists ever since—is riddled with presuppositions about moral anthropology. Even those later economists who did not intend to extend Smith’s moral philosophy worked within the universe established by his theory, which cannot be wholly or productively emptied of anthropological questions. Moral philosophy is woven into the DNA of economics itself. To fail to recognize this is to remain ignorant of what is fully at stake in economic debates.
Are humans intrinsically self-interested or selfish? And if so, does this nature participate in some larger order—either spontaneous or divinely planned—in which self-interest invariably redounds to public benefit? Can we be described, without remainder, as rational utility-maximizing actors? Or does this characterization fail to capture, in some real manner, the complicated way in which our selves are morally constructed, and the complicated ways in which our behavior develops? And, inching toward more modern issues, is it really the case that interpersonal utility comparisons are impossible to make, and fruitless besides?
We can’t push these questions aside. Nor should we. They float around, behind, and beneath most of our conversations about market orders, wealth inequality, and the future of capitalism. And this is so precisely because the discipline of economics cannot avoid being about human nature and human behavior. As much as a century after Adam Smith, economists still took this for granted. In 1890, economist-philosopher Alfred Marshall opened his famous textbook,Principles of Economics, with the claim that
Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing. Thus it is on the one side a study of wealth; and on the other, and more important side, a part of the study of man.26
The fact that economics today has largely set aside the big questions proper to this study—both empirical and normative—has left it with a gaping hole of meaning at its center. Piketty’s remarkable work begins to fill the void by returning attention to big-picture questions about real peoples’ lives. But even Capital in the Twenty-First Century fails to restore fully the humane breadth of the earliest discussions of political economy. Surely, such breadth is called for as we try to talk together about the common good and the future of our economic arrangements.
- Thomas Piketty, Capital in the Twenty-First Century, trans. Arthur Goldhammer (Cambridge, MA: Belknap Press of Harvard University Press, 2014), 32.
- Although it is generally supposed that Carlyle coined the phrase in response to Thomas Malthus’s prediction that mass starvation would follow population growth, the term did not appear until Carlyle’s 1849 essay Occasional Discourse on the Negro Question. In it, Carlyle argued for the continuation of slavery; his use of the phrase “dismal science” was meant to imply that the emancipatory policies proposed by political economists would come to naught. It is interesting to note that John Stuart Mill and his nineteenth-century contemporaries were not the first political economists to adopt an egalitarian view of human nature; such claims can be seen at least as early as Adam Smith, who began a section on equality in The Wealth of Nations with the claim that “the difference of natural talents in different men is, in reality, much less than we are aware of.” Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, in The Glasgow Edition of the Works and Correspondence of Adam Smith, vol. 2., R. H. Campbell and Andrew S. Skinner eds. (Indianapolis: Liberty Classics, 1979), I.ii., 4, 28–29 (first published 1776).
- Adam Smith, The Theory of Moral Sentiments, in The Glasgow Edition of the Works and Correspondence of Adam Smith,vol. 1., D. D. Raphael and A. L. Macfie eds. (Indianapolis: Liberty Classics, 1982), I.i.1, 9–10. First published 1759.
- Ibid., I.i.1, 9.
- Ibid., I.i., 3–4, 16–23.
- Ibid., III.i.1, 109–110.
- Ibid., III.iii., 4, 137.
- Ibid., III.iii., 38, 153, and III.iv., 5–6, 158–9.
- Ibid., I.i., 5, 23–25.
- Ibid., I.iii., 3.2, 62.
- Ibid., III.v., 5–6, 165.
- Ibid., III.ii., 32, 130.
- Smith regularly repeats his objections to Mandeville’s position throughout The Theory of Moral Sentiments,addressing Mandeville’s moral philosophy at length in VII.ii., 4, 306–14.
- Smith’s acute awareness of unresolved injustice in this life serves as the foundation for his argument that the moral life inevitably requires belief in the ultimate judgment of a divine arbiter. See The Theory of Moral Sentiments,III.ii., 32–33, 131–32, and III.v., 10, 169.
- George Stigler, The Economist as Preacher and Other Essays (Chicago: University of Chicago Press, 1982), 136.
- Adorned with tiny portraits of Adam Smith and popularized by Milton Friedman and members of the Reagan administration’s economic team, these ties were once dubbed by The New York Times “an essential part of a well-dressed Republican’s wardrobe.” Clyde Farnsworth, “Neckties with an Economics Lesson,” The New York Times, July 7, 1982. http://www.nytimes.com/1982/07/07/us/neckties-with-an-economics-lesson.html.
- Smith, Wealth of Nations, I.ii., 2, 26–27.
- Ibid., II.iii., 28, 341.
- Smith, Theory of Moral Sentiments, I.iii., 2.1, 50.
- Ibid., IV., i.8–10, 181.
- Smith, Wealth of Nations, IV.ii., 9, 455–56. “Invisible hand” also appears, again just once, in Theory of Moral Sentiments, IV.i., 10, 184.
- Ibid., V.i.f., 50, 782.
- Smith, Theory of Moral Sentiments, VI.i., 212–17.
- Stigler, The Economist as Preacher, 158.
- Tony Aspromourgos, The Science of Wealth: Adam Smith and the Framing of Political Economy (New York: Routledge, 2009), 6.
- Alfred Marshall, Principles of Economics: An Introductory Volume, 8th ed. (London: Macmillan, 1920), 1 (first published 1890).
For further elaboration of many points developed in this essay, see Christina McRorie, “Adam Smith, Ethicist: A Case for Reading Political Economy as Moral Anthropology,” forthcoming in the Journal of Religious Ethics.