Happy 300th Birthday, Adam Smith

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Our friends at National Review have created a fascinating publication series to celebrate the 300th anniversary of the birth of Adam Smith, legendary moral philosopher and father of modern economics. The most recent essay in the series is from the 2002 Nobel Prize winner in economics, Vernon Smith of Chapman University. Prof. Smith takes on a much remarked upon tension in Adam Smith’s work, the idea that human beings are driven both by self-interest to maximize their own advantages, but also compelled by the experience of living in society to be empathetic and considerate of the feelings of their family members, friends, and neighbors. 

While some previous writers have considered this a “problem” in the understanding of Adam Smith’s work, it isn’t really a contradiction. The modern Prof. Smith points out that when we live in society with other people, our happiness and success is inextricably tied up with the happiness of others. Even if we for some reason wanted to live a life of perfect selfishness, we wouldn’t be able to extract our interests and own future happiness from the concerns of others. Our whole process of living – going from infant to child to adolescent to adult – involves us becoming ever more deeply entwined with the needs and wants of those around us. We come to understand instinctively, without any conscious thought, that the happiness of those around us is necessary for us to maximize our own potential and fulfillment.

Prof. Smith writes:

Adam Smith brings to our contemporary intellectual and socio-economic world a rich theory of community and economy fresh and relevant 300 years after his birth. Community is founded in the rules we learn to follow among family, friends, and neighbors. Efficiency is an outcome of community, an unplanned consequence. The rules that arise in communities, summarized as propositions, fall into two categories: beneficence and justice.

Beneficence is about the good things we do for each other, things that underlie reciprocity in community, and ultimately, I believe, trade in economy. Justice is about bounding the harmful things we do to each other, so that we may achieve a stable state of security from injury.

Seeking our own best interest and living in community with others thus yields a virtuous cycle in which we have to help each other to get ahead ourselves. That doesn’t mean any of us are perfect, just that we’re naturally social creatures who have an impulse to cooperate peacefully, as long as there is a baseline of lawful order around us. 

Make sure to check back on National Review to see the subsequent Adam Smith 300 essays. Smith’s birthday is June 16th, so future essays will appear on the 16th day of each month. Thanks to the Capital Matters team at NRO and in particular Rhodes Fellow Dominic Pino for curating this series. I should also remind readers that Vernon Smith is the winner not only of the Nobel Prize (2002), but of the Competitive Enterprise Institute’s Julian L. Simon Memorial Award (2015) as well. 

This topic was also covered recently on the Free the Economy podcast. Listen to Episode 9 here.