Learning from Adam Smith: Propriety in Individual Choice, Moral Judgment, and Politics

Paul D. Mueller

Advisor: Daniel B Klein, PhD, Department of Economics

Committee Members: Peter J. Boettke, Donald J. Boudreaux

Enterprise Hall, #318
April 01, 2015, 02:00 PM to 11:00 AM


This dissertation explores and develops several important themes in Adam Smith's thought. Firstly, it explores the relationship between happiness and consumption. Smith thought that consumption was a necessary but not sufficient condition for happiness. Virtue is also necessary. Secondly, it examines how Smith's moral theory works better or worse depending on the context. At low levels of concrete context, sympathy and moral judgment work remarkably well. At high levels of context involving macrocosms, however, there is no actual impartial spectator and our moral judgments are far more prone to error and corruption. Thirdly, it comments on a debate over how Smith thought of political actors and government intervention. Rather than being naive about the motives of political actors, or being dogmatically laissez faire, Smith had a realistic and skeptical view of political actors, thus supporting a strong presumption of liberty that could be overruled in a few special circumstances. At the same time, Smith recognized that political actors are still moral agents and encouraged them to advance universal benevolence by resisting the influence of special interest groups. 

This work consists of three main chapters. Chapter is about Smith's views on consumption and happiness. It explores the puzzling fact that Smith both praises and condemns consumption in The Wealth of Nations. Looking at his moral theory, however, reveals that he was most concerned about advancing happiness—which he defines as inner tranquility. Achieving this tranquility does require some basic level of consumption but it also requires virtue. Consumption, therefore, is a necessary but not a sufficient condition for happiness. Smith condemns consumption that he feels cuts against virtue. 

Chapter two explores how Smith's mechanisms of sympathy, the "man within the breast," and the impartial spectator give us the ability to judge ourselves and others in a socially harmonious way. But these mechanisms do not always work perfectly. Sometimes they are corrupted by our natural admiration for the rich and powerful, by our passions causing us to deceive ourselves, and by the bias of faction and fanaticism. This chapter offers a new lens for thinking about moral judgment and its potential for corruption. In particular, it develops three parallel examples given by Smith (in Part IV of TMS) that show how the context in which a judgment is being made affects its susceptibility to corruption. At low levels of context where the situation is concrete and well-known, Smith's mechanisms of judgment work quite well. But as we move to higher contexts involving macrocosms, both direct and indirect effects need to be considered. At this high level of context there is no actual spectator who is impartial, and our judgments are more likely to be corrupted. Politics and political issues are macrocosms in this highest level of context—making it very difficult to judge them well. The problem posed by macrocosmic complexity helps explain why Smith frequently advocates decentralization and degovernmentalization. 

Chapter three analyzes how Smith thought about politics and liberty. It builds on some of the ideas from the previous chapter about moral corruption and degovernmentalization. There is a misunderstanding of Smith's views of political actors from both the right and the left. George Stigler, for instance, faults Smith for not recognizing that politicians are fundamentally self-interested just like everyone else. Emma Rothschild, on the other hand, approves of Smith treating politicians as altruistic people and for loosening his commitment to people being always and everywhere self-interested. Both readings of Smith are somewhat misleading. Smith was not naive about politicians' self-interest. In both The Wealth of Nations and The Theory of Moral Sentiments he talks about how politics creates faction and fanaticism, how the conceited "man of system" can create all kinds of trouble, and how political actors in general should not presume to do things for people that people can and will do for themselves. Again, Smith’s general favoring of liberty and degovernmentalization stem from his skeptical view of how politics and government actually work.