Das Adam Smith problem? Nein!

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2023 is the 300th anniversary of Adam Smith’s birth. This post is part of a series highlighting aspects of Smith’s thought that continue to influence liberal thought in general, and CEI’s work in particular. Part 1 on the real Adam Smith is here. Part 2 on Smith and American bureaucracy is here. Part 3 on Smith’s concepts of love and loveliness is here.

Do Adam Smith’s two books contradict each other? It sure looks that way sometimes. His first book, 1759’s Theory of Moral Sentiments, is about the virtues of empathy. The Wealth of Nations, published in 1776, is about how self-interest can enrich societies. This disconnect has so puzzled scholars over the years that there is a German phrase for it: Das Adam Smith Problem. On closer examination, Smith’s two sides are not only consistent, but each makes the other stronger. They are part of a unified system. There is no Das Adam Smith Problem.

Part of this shows in the books’ publishing history. Theory of Moral Sentiments is Smith’s first book, published in 1759. It is also his last book. He issued revised editions every so often as he refined his thoughts. The sixth and final edition came out in 1790, the year Smith died, and 14 years after The Wealth of Nations was published. Similarly, The Wealth of Nations went through five editions in Smith’s lifetime, the last appearing in 1789. Both works evolved together and influenced each other.

A more subtle key to resolving Das Adam Smith Problem is in Adam Smith’s prose style. His 18th century prose can seem formal and stilted to 21st century readers. But as with any writer, if you invest an hour or two in reading him, you will develop an ear for his style. It is much easier going once that happens. You will also discover repeated phrases in Smith, such as frequent use of the word “approbation,” the phrase “or, what comes to the same thing,” along with other little stylistic quirks that may be hard to verbalize.

Another of Smith’s prose hallmarks is that he tends to explore all aspects of an argument in order. This is one reason why his books are so long, but Smith was more interested in being thorough than in being catchy. This systematic nature is also in part because Smith’s books began as his notes for lectures he delivered at the University of Edinburgh, where he taught for many years. Smith’s third-best-known work, Lectures on Jurisprudence, has similar roots, but consists mostly of Smith’s students’ class notes, and not Smith’s own prose.

Just as Smith’s paragraphs will treat one part of an argument and then another, his books do the same thing on a larger scale. For Smith, the interplay between empathy and self-interest was fascinating enough to merit a whole book about each. While both books each contain plenty of material on both empathy and self-interest, Moral Sentiments focuses more on empathy, while Wealth of Nations focuses more on self-interest. That may be one reason Das Adam Smith Problem arose in the first place. Scholars weren’t seeing the big picture.

Admittedly, the books have other differences. Theory of Moral Sentiments is more inward-focused, and Wealth of Nations is more outward-focused. Both look through the lens of empathy, but point it in different directions; one at the mirror, the other at the world.

The impartial spectator theory from Theory of Moral Sentiments is a way for people to judge if their own actions are just: Would an imaginary impartial third-party observer reasonably believe that I am treating other people fairly? This takes a keen enough sense of empathy to see things from other people’s perspectives. But even though the impartial spectator’s judgments all occur in one person’s imagination, it is still a social concept. The point is to gauge how well one is treating other people. Even this inward-looking book sees more than the person in mirror.

Economic concepts from Wealth of Nations are about dealing with other people. Trade, division of labor, and human progress are also the result of people using empathy to find ways to cooperate with other people. Yet they also involve the self. People won’t trade or specialize in a job unless they think they will benefit. Civil and political institutions are important because they can guide people’s self-interest in different directions. Incentives matter because people are self-interested, as well as empathetic. Seen that way, the two books are not that different. Even if they differ in degree, they both involve self-analysis and taking others into account. Not one or the other, but both.

A second difference is that Theory of Moral Sentiments is about empathy itself, while Wealth of Nations is more about applied empathy. Moral Sentiments ideas like the impartial spectator, and Smith’s ideal of to love and be lovely are all about empathy. Wealth of Nations takes those ideas and shows how empathy is the engine that drives successful political and civil institutions, trade, money, and other parts of economic life. It is in one’s self-interest to have a keen sense of empathy.

Das Adam Smith Problem itself has a problem. Human beings have a natural tendency to think in binaries; things must be black or white, on or off, left or right. The real world is more like a spectrum, full of gray areas and in-betweens. Empathy and self-interest are not opposites set apart from each other, as Das Adam Smith Problem assumes.

Empathy and self-interest interact, advance, retreat, and bleed into each other. It is more like a spectrum than an either-or binary. While Moral Sentiments and Wealth of Nations focus on different parts of that spectrum, it is still the same spectrum. They have the common themes of human nature and human betterment. In that sense, a better way to read Smith’s unified project is as Das Adam Smith Solution.