On the Wealth of Nations

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by P. J. O'Rourke


  The host would have to be at least as intelligent as Sigmund Freud. Smith also described the operation of the superego long before Freud did, and more astutely. Smith gave it a moniker that didn't sound like a comic book hero's. And Smith connected our conscience to human attributes more noble and reasonable than what drives a miniature schnauzer to hump our leg.

  We envision the Impartial Spectator as having perfect knowledge of everyone's circumstances, experience, and intentions. And since the Impartial Spectator is imaginary and has no self, it has no selfish interest in any judgment that it makes. Smith claimed that what we do, when we develop morality, is shape our natural sympathies into the thoughts and actions that we would expect from an Impartial Spectator who is sympathetic, but objective and all-knowing (and still sympathetic anyway).

  'When our passive feelings are almost always so sordid and so selfish, how comes it,' Smith asks, 'that our active principles should often be so generous and so noble?'11 The answer is 'the inhabitant of the breast … the great judge and arbiter of our conduct'.12 Looking at things from the Impartial Spectator's point of view instructs us in the emotional self-discipline that we need to behave even tolerably well. Consider how toddlers and drunks behave, who haven't yet received, or who have temporarily forgotten, their instructions.

  Thanks to our imaginative sympathy, we are happy when other people are happy and sad when they're sad, and hope they feel the same way about us. But this emotional engagement is laborious. We have to prod our imagination to put ourselves in the place of someone who's feeling stronger sensations than we can feel – and mourn the death of a friend's ancient, stupid, leg-humping schnauzer. We have to control our own emotions when someone can't feel the sensations that we can – and laugh politely when we've taken the schnauzer's old chair and sat in the last mess it made.

  According to Adam Smith, the 'wise and virtuous man' uses his imagination to create 'the idea of exact propriety and perfection'. This is 'gradually formed from his observations upon the character and conduct both of himself and of other people. It is the slow, gradual, and progressive work of the great demigod within.'13 If, Smith wrote, the Impartial Spectator did not endeavor to teach us 'to protect the weak, to curb the violent, and to chastise the guilty',14 then 'a man would enter an assembly of men as he enters a den of lions'.15 Or toddlers. Or drunks. Or as he enters the set of a daytime TV show, or sits in a dead schnauzer's chair.

  Adam Smith's recognition of the primary role of imagination in moral thinking reveals several things about morality. Morals are the result of effort. The proper course of moral behavior is not some piece of arcane knowledge that can be acquired by reading esoteric texts such as Who Moved My Cheese? Morality can't be learned by a literal reading of the Bible, for that matter. Smith pointed out that 'In the Decalogue we are commanded to honour our fathers and mothers. No mention is made of the love of our children.'16 God didn't put it in there, because God doesn't regard us as totally unimaginative numskulls. Our sympathy for our children should go without saying. Our sympathy for our parents, on the other hand … Did you visit Mom at Sundown Center? Or was this my week to go?

  Imagining things is work. The imagination that Adam Smith describes is not the easy, whimsical one that we foist on our children, with whom we supposedly sympathize so much. There is nothing in The Theory of Moral Sentiments that resembles the improbably colored and far more improbably noncarnivorous tyrannosaurus on children's television. Singing along with 'Barney can be your friend, too / If you just make believe him,' leads, at best, to churnings of froth such as Oceana. Kim Jong Il is said to be an avid movie fan, and probably leads the imaginative fantasy life that goes with large collections of DVDs.

  The imagination that Smith describes is the strenuous imagination of an Einstein or a Newton, with all the discipline that this implies. 'Self-command is not only itself a great virtue, but from it all the other virtues seem to derive their principal lustre,' Smith writes.17 And, 'In the common degree of the moral, there is no virtue. Virtue is excellence.'18

  This hard, creative work that imagination does links the moral sympathy central to The Theory of Moral Sentiments with the material cooperation central to The Wealth of Nations. The imagination also has to make a creative effort to divide labor and conduct trade. Sympathy and cooperation are the more-conscious and less-conscious sides of what allows civilization to exist. They are the 'principles in his nature' that man has, 'which interest him in the fortune of others'.

  It applies to this man. I'm more or less conscious of when I'm being good with the family at home on the weekend, and I'm more or less unconscious at the office on Monday morning.

  Smith saw the moral potential in both our interest in others and our self-interest. When we give somebody a bottle of whiskey, we know we've benefited somebody else. When the family gets to be too much for us over the weekend and we drink that bottle of whiskey ourselves, we've also benefited somebody else – the distiller, the bottler, the liquor store owner. Feeling disjointed and discordant on Monday, we don't realize this, unless we work at 'inventions of the imagination, to connect together the otherwise disjointed and discordant phenomena of nature'. The apparatus of unintended benefit was what Smith meant by the 'invisible hand', a concept he first put forth in The Theory of Moral Sentiments.19

  If we don't do the difficult job that imaginative sympathy requires, we put ourselves into what Smith called 'the vilest and most abject of all states, a complete insensibility to honour and infamy, to vice and virtue'.20 Villains are imaginative only in the public imagination. The corporate scandals of recent years may seem to be the highly inventive and original schemes of evil genius. But when the obscurities of accounting and finance are brushed aside, a prosaic hand in the till is revealed.

  Policemen, prosecutors, bartenders, parents, and anyone else who has seen wrong done in large amounts can testify to Hannah Arendt's characterization of Adolf Eichmann's behavior: 'banality of evil'. Banality is the main constituent in criminal thinking – among chiselers and mopes as well as upper-echelon Nazis.

  It's a mistake to read the The Wealth of Nations as a justification of amoral greed. Wealth was Adam Smith's further attempt to make life better. In The Theory of Moral Sentiments he wrote, 'To love our neighbor as we love ourselves is the great law of Christianity.'21 But note the simile that Christ used and Smith cited. The Theory of Moral Sentiments is about the neighbor. The Wealth of Nations is about the other half of the equation, ourselves.

  It is assumed, apparently at the highest level of divinity, that we should care about ourselves. And logically we need to. In Moral Sentiments, Smith insisted, paraphrasing Zeno, that each of us 'is first and principally recommended to his own care',22 and 'endowed with the principle of self-love'.23 A broke, naked, hungry, and self-loathing me is of no use to anyone in the neighborhood. In Wealth, Smith insisted that in order to take care of ourselves we must be free to do so. The Theory of Moral Sentiments shows us how the imagination can make us care about other people. The Wealth of Nations shows us how the imagination can make us dinner and a pair of pants.

  Nothing but imagination could justify Genesis 1:26: 'And God said, Let us make man in our own image,' certainly not our looks. Imagination may be our only distinctively human attribute. Animals detect with their senses everything that humans do and more. Probably animals think many of the same thoughts we do, at least from nine to five. When's lunch? Animals can love. For all we know a romantic pang goes through an amoeba's heart – or whatever single cell organisms have – just before it splits. But animals, whose complete insensitivity to vice and virtue is evident when the miniature schnauzer humps your leg, cannot sympathize, let alone do so morally. Nor can animals cooperate enough to build a civilization. Unless an ant heap is your idea of the Acropolis. 'Nobody,' Adam Smith wrote in Wealth, 'ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.'24

  Adam Smith did not think we are innately good any more than he thou
ght we are innately rich. But he thought we are endowed with the imaginative capacity to be both, if we're free to make the necessary efforts. The Theory of Moral Sentiments and The Wealth of Nations, read together, do provide a blueprint – though it's for the soul rather than society.

  Smith never made any religious claims about his philosophical project. In a footnote to part 1 of Moral Sentiments he wrote, 'The present inquiry is not concerning a matter of right, if I may say so, but concerning a matter of fact.'25 Smith meant to show, as well as his 'mere inventions of the imagination' could, only what he called 'the plan and system which Nature has sketched out'.26 Yet the design that Adam Smith drew was for nothing less than the mechanical engineering of the Holy Ghost.

  CHAPTER 4

  The Wealth of Nations, Book 1 How the High Price of Freedom Makes the Best Things in Life Free

  Considering the immense orb of Adam Smith's thinking and his tendency to go off on tangents, The Wealth of Nations is surprisingly well organized. Smith divided Wealth into five books. He presents his economic ideas in books 1 and 2. Book 1 addresses production and distribution, and book 2 concerns capital and profit. Book 3 is an economic history of western Europe showing how various aspects of production, distribution, capital, and profit evolved and how their evolution caused a, so to speak, global warming in the climate of ordinary life. Book 4 is a refutation of economic ideas other than those of Adam Smith. It includes a particularly – too particularly – detailed attack on the mercantilists. And Book 5 is Smith's attempt to apply his ideas to solving problems of government. But since problems are the only excuse for government, solving them is out of the question. For this and other reasons, Book 5 is surprisingly disorganized.

  It should be noted that Adam Smith did not create the discipline he founded. What we call economics was invented by François Quesnay and the French physiocrats, whom Smith knew. The physiocrats, however, badly overthought the subject. Quesnay, who was Louis XV's physician, drew an elaborate Tableau Économique, a minutely labeled, densely zigzagging chart – part cat's cradle, part crossword puzzle, part backgammon board. It may have put Smith off the whole idea of graphic representation. The tableau supposedly showed how agriculture is the source of all economic progress, how trade and manufacture do no good for anyone, and how everything – from wagon wheels to Meissen chamber pots – grows, in effect, on farms. Food is the entire basis of living, therefore agriculture must be the entire basis for getting a life. So went the physiocrat reasoning, more or less.

  To Quesnay and his fellow courtiers the motive for investigating economics was something between Pour la France! and finding a way to kill time while waiting to put leeches on royals. What Adam Smith did was give economics a reason to exist. Smith's inquiry had a sensible aim, to materially benefit mankind, himself by no means excluded.

  The Wealth of Nations, Book 1

  Smith called book 1, 'Of the Causes of Improvement in the productive Powers of Labour, and of the Order according to which its Produce is naturally distributed among the different Ranks of the People,' one of those people not being a modern-type book editor, who would have punched up the title.

  Smith began by asking two very large questions: How is wealth produced, and how is it distributed? Over the course of the 250-some pages in book 1 the answers – 'division of labor' and 'mind your own business' – are explained. But in the meantime Smith answered two even larger questions: Why is everyone equal, and why do we have property rights?

  All men are created equal. We hold this truth to be self-evident, which on the face of it is so wildly untrue. Equality is the foundation of liberal democracy, rule of law, a free society, and everything that the reader, if he or she is sane, cherishes. But are we all equal because we all showed up? It does not work that way at weddings or funerals. Are we all equal because it says so in the American Declaration of Independence, the French Declaration of the Rights of Man, and the UN Universal Declaration of Human Rights? Each of these documents contains plenty of half-truths and nontruths as well. The UN proclaims, 'Everyone has the right to rest and leisure, including reasonable limitation of working hours.' I'll have my wife inform the baby.

  High-minded screeds cobbled together by unrepresentative and, in some cases, slightly deranged members of the intelligentsia are not scripture. Anyway, to see what a scripture-based polity gets for a social system we have only to look at the Taliban in Afghanistan or the Puritans in Massachusetts. Everyone has an immortal soul and every soul is of identical value to God, maybe, but that doesn't take us far as a matter of practical political philosophy. And Adam Smith was practical. His footnote to Moral Sentiments about how his theory was 'not concerning a matter of right … but concerning a matter of fact' is suitable to all of his philosophy.

  When Smith considered how division of labor developed, he briefly – for Smith – directed our attention to an interesting and characteristic quality of man. The most powerful creature to ever stride the earth is the most pitifully helpless. We are born incapable of caring for ourselves and remain so – to judge by today's youth – until we're forty. At the age of two when any other mammal is in its peak earning years, hunting, gathering, and procreating, the human toddler cannot find its ass with both hands, at least not well enough to use the potty. The creativity of a Daniel Defoe couldn't get Robinson Crusoe through the workweek without a supply of manufactured goods from the shipwreck's hold and the services of a cannibal executive assistant.

  We must treat other people with the respect due to equals not because we are inspired by principle or filled with fraternal affection but because we're pathetic and useless.

  Smith wrote that an individual 'stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons'.1 This nearly left-wing statement was the prologue to Adam Smith's most quoted passage: '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.'2 Smith wasn't urging us to selfishly pursue wealth in the free enterprise system. He was urging us to give thanks that the butcher, the brewer, and the baker do. It is our good fortune that they are endowed by their Creator with certain unalienable rights, that among these are steak, beer, and hoagie rolls.

  Smith's answer to why we have property rights was equally straightforward: 'The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable.'3 Property rights are not an invention of the rich to keep poor people off their property. Property rights are the deed we have to ownership of ourselves. The property may be modest, but it is inherent. 'The patrimony of a poor man,' Smith wrote, 'lies in the strength and dexterity of his hands.'4 From this humble grasp of hammer and, ahem, sickle, comes all free enterprise: 'and to hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbour, is a plain violation of this most sacred property.'5

  Any definition of liberty that is not based on a right to property and a right to the same rights as all other people have is meaningless. What we have is ours, and nobody can push us around. This is practically all we mean when we say we are free. Other rights derive from these, when we even bother with those other rights.

  Freedom of speech is wonderful, if you have anything to say. A search of the 'blogosphere' reveals that hardly anyone does. Freedom of religion is more wonderful, but you can, when you pray, 'enter into thy closet, and when thou hast shut thy door, pray to thy Father which is in secret' (Matt. 6:6). Jesus Christ himself said so. Freedom is mostly a workaday experience, taking place in the material, economic world. Before Adam Smith was even well under way with The Wealth of Nations he had proved that we require and deserve an equitable society where we're free from the exercise of arbitrary power and can go to the mall and swipe our Visa cards until the magnetic strips are toasted crisp, if that's what we want.

 
The Divisibility of Labor

  However, the main purpose of Book 1 of Wealth, as Smith conceived it, was to show the importance of the division of labor. The purpose of division of labor, wrote Smith, is 'to make a smaller quantity of labour produce a greater quantity of work'.6 Smith perceived that the division of labor – specialization – is the original source of economic growth.

  Specialization increases economic value. As an example Smith famously used the 'trifling manufacture' of a pin. Without specialization and specialists' machinery it would take us all day to make one pin. In an early draft of Wealth, Smith noted that if we went so far as to dig in the iron mines, smelt our own ore, and so forth, we could 'scarce make a pin in a year'.7 And somewhere a group of hobbyists – contactable via the Internet – is doing just that, to the irritated mystification of their wives.

  The Indivisibility of Price

  Smith proved his point, and should have left it at that. But here we come to an interesting difficulty in the rational consideration of economics – getting too rational with it. This is economics' original sin, a fault that has existed since economics was conceived. Any student in any Econ class knows the problem and has had to memorize various rationalizing formulae that result from – no, are – the problem.

  While writing about the increase of economic value, Smith decided to delve into the concept of value itself. He tried to analyze price, and he could not. The price of something is what someone will pay for it, nothing more, nothing less, nothing else. David Hume, in a letter to Smith congratulating him on the publication of Wealth, praised the work but noted the error. 'If you were here at my fireside,' Hume wrote, 'I should dispute some of your principles. I cannot think … but that price is determined altogether by the quantity and the demand.'8 Yet, to think that went against Smith's inclination to think things through; so he thought things through anyway.

 

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