Adam Smith's Lost Legacy.

Jerry Evensky [*]

This piece outlines Adam Smith's moral philosophical vision. It traces the central role he ascribed to civic ethics as an antidote to the incentives for rent-seeking and thus as a key element in the successful development of a constructive, cohesive liberal society. The case is made that standard neoclassical analysis, as represented by the work of Gary Becker, identifies no such antidote and thus cannot model the constructive liberal case. The best modern work on the issue is that of Amartya Sen and of James Buchanan. Sen's work and its relation to Smith's vision are examined.

1. Introduction

Adam Smith's intention was to leave a legacy. He wanted to leave a philosophical contribution that would serve humankind. He didn't imagine that he had discovered "truth." He understood that his work was not the last word on his subject. He simply hoped to enhance our understanding of what makes humankind function most constructively, and thereby to contribute to the constructive development of humankind.

In every generation since his death in 1790, Smith's disciples in economic thought have paid homage to him for the legacy he left. But sadly for Smith he's been studied more often than not as an economist, and not as the moral philosopher he was. In doing so his disciples in economics have lost sight of an essential dimension of his moral philosophical vision--of his legacy. My objective here is to highlight that lost dimension of Smith's legacy and to make the case that retrieving this lost legacy can enrich our modem analysis.

In a larger sense my purpose is to demonstrate, with Smith as an example, that the history of economic thought is not just an antiquarian exercise in which antique works of folks long dead are studied as one might study 19th century steam engines--great innovations in a march toward progress that has passed them by. Rather, the work of our predecessors offers a rich source of alternative ways of thinking about the human condition, and exploring these alternative visions can inform our current thinking on the subject. [1] The plan of this work is as follows.

Section 2 explores Adam Smith's work. His view of philosophy, his story of the evolution of natural philosophy, and his distinction between natural and moral philosophy are reviewed. With this frame in place the central story of his moral philosophy, the evolution of the human condition from the rude state to the first ages of liberal society, is presented. The focus of that presentation will be on Smith's vision of how institutions and individuals evolve, and how their evolution makes possible the development of the civic ethics necessary for the emergence of constructive liberal society. This ethical dimension of his story lies at the heart of Smith's thinking. This essential role of civic ethics in a constructive liberal society is the lost legacy of Smith's moral philosophy that warrants our attention. [2]

Smith believed that the human condition is unique in nature because the nexus of human reason and human frailty [3] puts humankind in a peculiar and problematic position. Our reason gives us dominion over the earth and the constructive capacity to develop our natural resources into wealth far beyond our requirements for survival. But, that reason, when wedded to frailty, also sets the stage for destructive interpersonal conflict as we each seek to capture a larger share of the human bounty for ourselves. This dilemma was brought into focus by the moral philosophers of the first ages of liberal society who, including Smith, struggled with the "cohesion question": If the productive potential of liberal society derives from individuals' freedom to pursue their own interests (the Physiocrats' "laissez-faire"), how can such a society avoid a Hobbesian war of all against all? In modem terms: How does a liberal society avoid degenerating into a rent-seeking society? (Buchanan, Tollison, and Tullock 1980) What cohes ive force can hold liberal society together so that its potential--a good, secure life for each individual and the greatest possible wealth for the nation--can be realized? [4] Smith's belief in the possibility of constructive liberal society derived from his assumption that humans are capable of a multiplicity of motives including, if properly nurtured, justice.

Section 3 makes the case that in standard neoclassical analysis, constructive liberal society is theoretically impossible. Using Gary Becker's work as representative of the most expansive claims for the economic approach [5] and allowing Becker all of his assumptions including the standard economic assumption on human nature that we are constrained utility-maximizing beings, Homo economicus, it is demonstrated that there is no cohesive force in such a theory sufficient to hold society together in the face of the destructive power of rent-seeking.

Two modem commentators who are richly addressing this "cohesion question" are Amartya Sen and James Buchanan. The theme of Sen's work is presented. Building on James Buchanan's "Constitutional Economics," [6] Sen identifies a solution to Arrow's impossibility dilemma. That solution lies in relaxing the Homo economicus assumption and returning to Smith's conception of human nature as encompassing a multiplicity of motives--especially the capacity for ethical behavior.

Scope and method are interdependent. If we follow Sen and adopt a more Smithian assumption on the nature of being to expand the scope of our analysis, this may have implications for our method. Section 3 ends with some reflections on this issue.

In the concluding section 4, I return to Smith. Having highlighted that ethical dimension of his legacy that has been long lost, I note another that is worthy of reflection: his perspective on the role of a social philosopher in exploring the possibilities of human progress.

2. Adam Smith's Work

On the Practice of Natural Philosophy

Adam Smith took as a matter of faith that there is an order in nature and that the connecting principles of that natural order are the product of the design of a Deity. [7] In this grand spectacle, this "the theatre of nature" that the Deity produced, we humans are like an audience in an opera house (Smith 1980, (hereafter HA), pp. 42-3). As we watch nature's play unfold we wonder at the spectacle, we are surprised by scenes we have never before seen or anticipated, and we admire the beauty of what passes before us. But unlike the audience at a grand theater of London or Paris where after the show we might be allowed backstage to see the "machinery of the opera-house" that made such a grand spectacle possible; we are not "admitted behind the scenes" of nature's grand spectacle (HA, pp. 42-3). Thus, while our senses allow us to experience the face of nature, we have no access to the invisible principles that give things their nature or that order the connections among these things. For Smith, then, philosophi cal inquiry is not about Truth: "What is the Deity's design?"; it is about imagination: "What do we conceive that design to be?".

The casual observer of everyday events is generally satisfied with a story that allows the custom of connection to stand as an explanation of any regularly observed chain of events. Smith cites for example the "common artizans; such as dyers, brewers, [or] distillers" who daily watch their art unfold without ever wondering at the invisible chain of events that must link the sequence they observe. These constant but casual observers "cannot conceive what occasion there is for any connecting events to unite those appearances, which seem to [them] ... to succeed each other very naturally." (HA, p. 44) It is only the more studied eye that wonders at what seems so common a sequence and feels that there must be missing links in the common explanation of events derived from casual empiricism. This studied eye that sees wonder in all things is the eye of a philosopher.

[A] philosopher ... [spends] his whole life in the study of the connecting principles of nature ... which, to more careless observers, seem very strictly conjoined....

Philosophy is the science of the connecting principles of nature ... Philosophy, by representing the invisible chains which bind together all these disjointed objects, endeavours to introduce order into this chaos of jarring and discordant appearances.... (HA, pp. 45-6)

For Smith the practice of philosophy is an art of storytelling, and thus the first requisite for success in philosophy is developing a persuasive story. A key to persuasiveness is familiarity. In his essay "The Principles Which Lead and Direct Philosophical Enquiries; Illustrated by the History of Astronomy," as Smith invites the reader to follow that history with him he notes that the systems he will present in his history are those that have gained "reputation and renown to their authors ... [and] no system, how well soever in other respects supported, has ever been able to gain any general credit on the world, whose connecting principles were not such as were familiar to all mankind." (HA, pp. 46)

Because familiarity relates to what we observe (or believe we observe), successful philosophical practice must be based on and relate back to observation. The more closely a system designed to represent nature reflects what we observe on the face of nature, the more plausible it seems. Plausibility in turn increases the perceived probability that a system represents the real but invisible chains that link the events of nature.

Smith writes for example that "the system of concentric Spheres, the first regular system of Astronomy, ... [t]hough rude and inartificial ... gained the belief of mankind by its plausibility." (HA, pp. 55-6) But not only was that system plausible, "it [also] attracted their [(mankind's)] wonder and admiration; sentiments that still more confirmed their belief, by the novelty and beauty of that view of nature which it presented to the imagination." (HA, p. 56) So given consistency with familiar observation, Smith believed that philosophical systems are more convincing to the degree that they are more elegant and simple in their representation of the connecting principles. Indeed, he notes that the demise of a geocentric vision of the universe began when the apparent planetary retrograde motion and other anomalies of the system of concentric spheres that were "discovered by the most attentive observation" had to be addressed. (HA, p. 57) In the process of doing so

[t]his system had now become as intricate and complex as those appearances themselves, which it had been invented to render uniform and coherent. The imagination, therefore, found itself but little relieved from that embarrassment, into which those appearances had thrown it, by so perplexed an account of things. (HA, p. 59, emphasis added)

Copernicus' "hypothesis" offered a system that seemed consistent with observations of the heavens, and that represented those observations in a more simple and elegant way than the existing system. But Smith notes that while the Copernican system established a following in astronomy, a following that was expanded by the observations of Galileo, "[t]he learned in all other sciences, continued to regard it with the same contempt as the vulgar." (HA, p. 77) This was so because of the differences in observational focus of these groups:

It may be said, that those who considered the heavens only, favoured the system of Copernicus, which connected so happily all the appearances which presented themselves there. But that those who looked upon the Earth, adopted the account of Tycho Brache, which, leaving it at rest in the center of the universe, did less violence to the usual habits of the imagination. [8] (HA, p. 82)

Copernicus' system was entirely inconsistent with the assumption of an earth at rest that underlay both the system of contemporary physics and the common understandings of the general public. Its more general acceptance awaited a new physics that could "unite those incoherent qualities, the rapid motion, and the natural inertness of the Planets." (HA, p. 92) Descartes' physics filled that void, but then his work too ultimately faced "embarrassment." With Newton, Smith arrives at his destination: "that summit of perfection to which it [(natural philosophy)] is at present supposed to have arrived." [9] (HA, p. 46)

In Smith's story of natural philosophy, progress was often slowed by the intellectual inertia that comes from deference to authority and by social investment with the implications of extant theory, [10] but nevertheless progress was made and Newton's work represents "the greatest and most admirable improvement that was ever made in philosophy." (HA, p. 98) Furthermore, the "Newtonian method ["lay[ing] down certain principles known or proved in the beginning, from whence we account for the severall Phenomena, connecting all together in the same Chain" (Smith 1983 [hereafter Rhetoric], p. 146)] is undoubtedly the most Philosophical, and in every science whether of Moralls or Naturall philosophy etc., is vastly more ingenious and for that reason more engaging than [any] ... other." [11] (Rhetoric, p. 146)

From Natural to Moral Philosophy: A Different Scope, A Distinct Method

Smith was a proud disciple of Newton and a believer in Newtonian methodology: A persuasive story should be built on a few simple principles and it should be systematically comprehensive, coherent, comfortable (consistent with familiar observation), and beautiful (reflect the harmony and elegance of the design in nature). [12] He appreciated, however, that these general methodological principles must be adapted to the scope of the enquiry, and in his view there is a significant distinction between the enterprises of moral and natural philosophy. This distinction derives from a fundamental difference between the human condition and the natural world that surrounds it: Given reason and frailty, the human condition does not exhibit the regular and harmonious movements we see in nature. [13] We can only imagine a harmonious society in the abstract: Human society, when we contemplate it in a certain abstract and philosophical light, appears like a great, an immense machine, whose regular and harmonious movements p roduce a thousand agreeable effects. As in any other beautiful and noble machine that was the production of human art, whatever tended to render its movements more smooth and easy, would derive a beauty from this effect, and, on the contrary, whatever tended to obstruct them would displease upon that account: so virtue, which is, as it were, the fine polish to the wheels of society, necessarily pleases; while vice, like the vile rust, which makes them jar and grate upon one another, is as necessarily offensive. (Smith 1976a [hereafter TMS], p. 316, emphasis added)

Human reason gives us the ability to impose the distortions of our frailty into the course of human events (even, as noted above, in the progress of systems of natural philosophy), and thereby to perturb the regularity and distort that natural harmony that we would enjoy in the human condition if there were no vice. Thus, representing the human condition as a system (the purpose of moral philosophy) is more complicated than doing so for the natural order that surrounds us (the purpose of natural philosophy), because what we observe in the human condition is not a singular regular and harmonious case but an endless variety of irregular and cacophonous, distorted cases.

Given this endless variety of distortions, humankind's evolution [14] unfolds as a multiplicity of experiments (societies) simultaneously developing along different paths. These experiments take many peculiar turns because of circumstance, they often intersect and affect one another, and there is not a single example one can examine that reflects inexorable progress from the origin, Stagnation or regression of particular experiments has been the rule. [15]

The observational challenge of the moral philosopher is all the more complex because the power of human reason drives change in the human condition and thus humankind's evolution very quickly. When we observe the retrograde motion of Jupiter it is the same phenomenon that Eudoxus contemplated over a millennium ago. This constancy makes regularity more observable and this in turn makes natural philosophy more manageable. As Smith writes in the Astronomy: The heavenly objects exhibit a "regular principle of motion, ... [and thus we can] methodize and dispose them into an order that should enable the imagination to pass as smoothly, and with as little embarrassment, along them, as along the most regular, familiar, and coherent appearances of nature." (HA, p. 64) It is not so for the moral philosopher whose subject is humankind.

Because all societies, past and present, evolved/are evolving in different ways (and indeed even variously within subsets of those societies), the observational matrix facing the moral philosopher (here/there, past/present) is incredibly complex. Furthermore we each stand in a singular, unique location (time and place) inside this complex matrix. That position sets the frame through which we observe, and much of the information necessary for representing the story of the human condition (other times/other places) is beyond direct view through that frame.

Smith appreciated all these limitations and sought to ameliorate their effect by adapting the Newtonian method to the distinct domain of moral philosophy. On the basis of his own education and observations, on reports of other cultures from travelers, and on the accounts of history, Smith established a few basic principles with respect to human nature, societal constructs, and societal change. Then with these principles in mind, he sifted through his historical/anthropological sources trying to identify those connecting principles that would, if unimpaired by human frailty, guide the course of humankind's evolution toward the constructive outcome that he took on faith as the human prospect.

On the basis of these connecting principles he told his story of humankind's history--describing its natural course, pointing out the distortions in that course, [16] and reconstructing the story of those periods that are beyond the scope of reported history based on his principles. Dugald Stewart refers to this reconstruction as "conjectural history." [17]

Telling His Story--Human Nature, Societal Constructs, and Flow of History

Smith's first book, The Theory of Moral Sentiments, takes us on the first step in this process. Smith assumes that human beings have a multiplicity of motives: [18] We are first and foremost attuned to ourselves and consider our self as we act. But we are also capable of weighing considerations of justice and beneficence as we choose our actions. Indeed, the character of a being in his story is determined by the balance of these sentiments (self-love, justice, and beneficence), [19] for it is this balance that guides the actions of individuals as autonomous actors:

[I]n the great chess-board of human society, every single piece has a principle of motion of its own. (TMS, p. 234)

But while we are autonomous beings, we are at the same time a uniquely social species. [20] Our system of production is social because our natural propensity to participate in exchange gives rise to the division of labor. [21] We are also social in our standards for appropriate behavior because these standards are to a significant degree a function of socialization:

Nature, when she formed man for society, endowed him with an original desire to please, and an original aversion to offend his brethren.... She rendered their approbation most flattering and most agreeable to him for its own sake; and their disapprobation most mortifying and most offensive. (TMS, p. 116) [22]

This natural disposition to accommodate and to assimilate, as much as we can our own sentiments, principles, and feelings, to those which we see fixed and rooted in the persons whom we are obliged to live and converse a great deal with, is the cause of the contagious effects of both good and bad company. (TMS, p. 224)

It was from his observations, [23] accounts of other cultures, [24] and his reading of history that Smith established a connection between psychic hardware (e.g., the desire for approbation) and social learning (e.g., accepting limits), the former providing the motive that inculcates the latter. Combining this with his view that while we are social we are also autonomous, he comes up with an engine to drive his story of history: The autonomous choices of socialized beings each with a unique biography [25] have intended and unintended consequences which, in the context of chance and geography, drive societal change. But that just drives the process. Next we turn to the way in which Smith explains the general constructive direction he believed humankind's evolution would follow.

Smith assumes not only that there is an order to nature designed by the Deity, but that the Deity is benevolent. [26] Thus, Smith's story of the evolution of humankind is a normative story of progress toward an ideal harmonious liberal society. That ideal is a limit that can be approached but never reached. [27] Although individuals, institutions, and chance can and do distort and perturb the course of events causing the rise and fall of nations and empires, the power of the design (the Deity, nature) determines the long-term path of the human condition, and that path is progressive in a normative sense. Human nature is constant (we are not "better" than our predecessors), but human character evolves along with human institutions [28] and these have the capacity to mature toward the ideal. [29]

Smith envisioned this evolution of humankind as passing through four stages: hunting and gathering, pasturage, agriculture, and commerce. His task was to represent the connecting principles that shape each stage, that lead to the rise and demise of particular societies, but that allow humankind to evolve from stage to stage toward greater maturation of human potential. He envisioned this maturation as the product of the coevolution of individuals and institutions: Institutions shape individuals as they grow into society. Individuals in turn shape the societal constructs in intended and unintended ways as each acts, on the basis of a unique biography, in and on the societal constructs she has inherited. These individual actions, along with the chance of circumstance and serendipity, direct societal evolution.

In this process more mature societies are, ceteris paribus, more capable of sustaining themselves. So whereas individual societies may grow, stagnate, and decline, humankind will progress toward the limiting point of a constructive liberal society with minimalist government in which sovereign, ethical individuals live in perfect harmony and realize, through their autonomous efforts, the best for themselves and in turn the greatest possible wealth for the nation.

The Theory of Moral Sentiments not only lays out the social psychology of his story, it also demonstrates the centrality of "government" (external [the magistrate] or internal [ethics]) if societal cohesion and constructive evolution are to be realized.

In his Lectures on Jurisprudence (Smith 1978, hereafter Jurisprudence) Smith picks up this point, explaining and reviewing historical cases of the central, instrumental role of systems of law in this evolutionary process.

The Wealth of Nations develops the story of the twists and turns of material progress in the context of the lessons laid out in the Theory of Moral Sentiments and in his Lectures on Jurisprudence. [30]

In brief outline, the path of humankind's evolution goes as follows: Progress from the rude state to the stage of hunting and gathering begins with the division of labor. The raison d'etre of the division of labor is the generation of surpluses that can be exchanged. But exchange requires rules--so even at this most rudimentary stage positive law emerges. The system of law becomes ever more complex as hunting and gathering gives way to pasturage, for the domestication of animals makes issues of ownership significantly more complex.

In these first ages of society even as humans are struggling with survival they are wondering at the world that surrounds them (e.g., eclipses). The first explanations of these wondrous events take the form of superstitions. But as society grows and the market extends, the division of labor grows finer. Among these new labors some are employed in reflection and systematization of belief--so popular superstition gives way to a priesthood and polytheistic religion. Religion, in turn becomes another organizing principle of society and serves to reinforce the rules that sustain the division of labor. [31]

As Smith's story of stages moves from pasturage to agriculture, Smith makes the point that the emergence of this new societal construct with its much more complex issues of ownership (fixed, inheritable property in the form of land) requires a much more complex system of laws. Thus a given society's advancement to this third stage with its finer division of labor and greater productivity can only occur if positive law matures accordingly. And, evolving alongside these economic and political dimensions are the structures of religion and inquiry.

The reflection that gave rise to religion ultimately gives space to more systematic observationally based reflection: philosophy. Philosophy, in turn, by representing the invisible connecting principles of nature, can often enhance the technical possibilities in the division of labor, thus further expanding the societal surplus and making ever more space for specialized inquiry. As philosophy evolves it develops more unified systems of analysis for natural events, and this in turn according to Smith contributes to the evolution of religion from polytheism to monotheism.

In Smith's story the last great transformation of societal constructs is that that was only in its nascent state in his own day: the emergence of liberal society.

An ideal liberal society is, according to Smith, one in which there is liberty and justice for all. Liberty offers freedom of movement and choice, and justice insures the security that empowers individuals to take advantage of their liberties. [32] With liberty and justice the fluidity of movement of physical resources and of people and the free exchange of commodities through markets makes possible the greatest wealth for the nation.

Smith considered Britain to be the most mature form of human progress to date, the best extant example of a constructive liberal society. His moral philosophical inquiries were driven in large part by a desire to understand how humankind had come to this point and how this liberal experiment worked best so that it could be nurtured and matured by active citizens. He shared with his predecessors (e.g., Locke) and his contemporaries (e.g., the Physiocrats) a recognition that if a society of autonomous individuals who enjoy liberty is to cohere, there must be some system for insuring justice or the society will degenerate into the Hobbesian war of all against all. However, he rejected the social contract of Locke and the despotime legal (benevolent dictator) of the Physiocrats as the ultimate glue to hold liberal society together.

Smith believed that liberty can only be complete and thus the fruits of liberal society can only be fully realized where justice is based on a common willingness of citizens to voluntarily follow the dictates of civic ethics. In his view, to the degree that external Government enforcement of constructive behavior is necessary it not only reduces the fruits of liberal society, since productive resources must be used on enforcement, [33] it reflects the tenuousness of that liberal experiment. A need for more Government reflects a lack of cohesiveness in a liberal order. More police is not a good sign for a liberal society. [34] In Smith's view the ultimate success of a liberal experiment lay in the institutional development and general inculcation of a mature set of civic ethics.

Smith located the roots of British success in an evolution of societal institutions that refined civic values and the subsequent inculcation of those values into a large portion of the citizenry. In his Lectures on Jurisprudence he explores the serendipitous circumstances (e.g., being an island) and the unintended and intended consequences of human actions that contributed to Britain's refinement of civic values (the former reflected in the process that brought courts adherence to precedent of common law and the latter in Henry II's development of juries [Jurisprudence, pp. 283-4]). [35] These institutional changes were instrumental in Britain's progress, [36] but it was the inculcation in the citizenry of the civic ethics embodied in these institutions that determined the extent and sustainability of that progress. Indeed, even as Smith wrote of British progress he was concerned that the power of faction (excessive partiality), [37] in particular the mercantilist interests, might stifle or even destroy Brit ain's achievement. [38]

Britain was still a long way from a fully mature liberal society, that stage of human progress when the institutional structures of enforcement that were born in the period of pasturage and that expanded tremendously in the ages of agriculture and early commerce could begin to wither away. Small Government is only possible when through civic discourse and institution building mature ethical standards have been established, and when through education and example these civic ethics become second nature for all citizens. In Smith's story small Government is not the cause of liberal society's success, it is the benefit of that success.

Sifting through the sources at his disposal, Smith found patterns in the apparently chaotic twists and turns of human events caused by our capacity for human reason and frailty. [39] On the basis of these patterns he developed the principles of his moral philosophy. [40] One such principle is that the dimensions of human society (social, political, economic) are interdependent, and humankind's progress requires that these dimensions evolve in complementary ways. [41] Another is that humans are guided by a multiplicity of motives and that if humankind's evolution is to achieve it highest form, individuals' capacity for justice must be nurtured.

3. On Adam Smith and the Practice of Modern Economics

On Homo Economicus, Impossibility, and Societal Cohesion

Standard economic analysis is built on the assumption that human beings are motivated by utility maximization. The New Palgrave entries "utility and decision theory" and "expected utility hypothesis," by Peter Fishburn (Fishburn 1987) and Mark Machina (Machina 1987) respectively, make it clear that although layers of sophistication have been added to utility theory, ultimately utility maximization is still neoclassical theory's standard assumption on human nature.

The classic assertion of the power of theory based on this assumption is found in the work of Gary Becker. Becker asserts that

The combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and unflinchingly, form the heart of the economic approach as I see it. ...

Needless to say, the economic approach has not provided equal insight into and understanding of all kinds of behavior: for example, the determinants of war and of many other political decisions have not yet been much illuminated by this approach (or any other approach). I believe, however, that the limited success is mainly the result of limited effort and not lack of relevance. ... I am saying that the economic approach provides a valuable unified framework for understanding all human behavior. ... (Becker 1976, pp. 5, 8, 9, 14)

Indeed, Becker argues that the economic approach can address what is "[a]ccording to [Edmund] Wilson, 'the central theoretical problem of sociobiology ...: how can altruism, which by definition reduces personal fitness, possibly evolve by natural selection.' (1975, p. 3)" (Becker 1976, p. 283) Citing "[s]ociobiologists ... [efforts] to solve their central problem by building models with 'group selection'" (Becker 1976, p. 283) Becker asserts that such "models of group selection are unnecessary since altruistic behavior can be selected as a consequence of individual ["utility maximizing" (Becker 1976, p. 294)] rationality." (Becker 1976, p. 284)

But Becker's foray into altruism and sociobiology brings us back to a question that confronted Smith and those other philosophers in the first ages of the liberal experiment: How does a society of autonomous individuals cohere? Edmund Wilson, the parent of sociobiology, identifies the source of the cohesion problem very clearly:

During the past ten thousand years or longer, man as a whole has been so successful in dominating his environment that almost any kind of culture can succeed for a while, so long as it has a modest degree of internal consistency and does not shut off reproduction altogether. No species of ant or termite enjoys this freedom .... Man has temporarily escaped the constraint of interspecific competition. (Wilson 1975, p. 550)

Whereas this escape has freed us from "the constraint of interspecific competition," it has confronted us with an equally dangerous problem. Our dominion over our world has allowed us to generate surpluses and now we are trapped in an intraspecific competition over control of these surpluses: a "rent-seeking" society. In sociobiological terms having escaped the "stabilizing selection" of interspecific competition (Figure 1) we have made ourselves vulnerable to the "disruptive selection" of intraspecific competition (Figure 2).

Unfortunately Becker's altruism offers no solution to this human quandary, for it suffers from an inverse square law, diminishing exponentially with social distance. Indeed, Wilson writes that "[t]o counteract selfish behavior and the 'dissolving power' of higher intelligence, each society must codify itself. Within broad limits, virtually any set of limits works better than none at all." (Wilson 1975, p. 562) So we are back to the "cohesion question" recognized in the first ages of liberal society: From whence the government that makes liberty work?

This is not just an abstract philosophical question. The degenerative forces that continue to plague long-standing liberal societies and that we see unfolding in the new experiments in liberal order can only be understood if we relax the Homo economicus assumption and consider a larger, Smithian frame of analysis. On this point Amartya Sen writes:

The trouble with reading much into ... [Adam Smith's] homely butcher-brewer-baker example [often cited as the classic statement of Homo economics] [42] is ... that it downplays the function of institutions that sustain and promote economic activities. The concern of different parties with their own interests certainly can motivate people to take part in exchange from which each benefits. But whether the exchange will operate well will depend also on organizational conditions. There is a need for institutional development which can take quite some time to emerge--a lesson that is being learned rather painfully in Eastern Europe and the former Soviet Union. The importance of institutions was rather eclipsed there in the first flush of enthusiasm about the magic of allegedly automatic market processes.

The need for institutional development has some clear connection with the role of codes of behavior, since institutions based on interpersonal arrangements and shared understandings operate on the basis of common behavior patterns, mutual trust and confidence in the behavioral ethics of each other. The reliance on rules of behavior may typically be implicit rather than explicit--indeed so implicit that its importance can be easily overlooked in situations in which such confidence is unproblematic. But whenever it is not unproblematic, the overlooking of its need can be quite disastrous. (Sen 1995, p. 26)

James Buchanan's Constitutional Economics enterprise grows out of his concern with the powerful, degenerative force of rent-seeking and his recognition that some form of governance over individuals is necessary for liberal society to be constructive--an insight that Buchanan credits to Adam Smith. [43] Sen shares Buchanan's concern and recognizes the merit of Buchanan's approach, but Sen moves even closer to the moral philosophy of Adam Smith by proposing what is in effect a synthesis of his and Buchanan's ideas that is very much in the Smithian tradition.

Sen's presidential address to the American Economic Association, "Rationality and Social Choice," was designed to demonstrate the possibility and the power of setting aside our "fight for basic principles" and transforming competing paradigms into a synthesis. To make this case he invites his audience to join him in examining the following question:

How are we to view the demands of rationality in social decisions? How much guidance do we get from Aristotle's general recommendation that choice should he governed by "desire and reasoning directed to some end"?

His point of departure into this inquiry is the problem raised by Arrow's impossibility result:

[W]hose desires, whose ends?...Kenneth Arrow (1951) has shown...that in trying to obtain an integrated social preference from diverse individual preferences, it is not in general possible to satisfy even some mildlooking conditions that would seem so reflect elementary demands of reasonableness.... Are the pessimistic conclusions that some have drawn from them [(these Arrovian "difficulties")] justified? Can we sensibly make aggregative social-welfare judgments? (Sen 1995, p. 1)

Sen then introduces James Buchanan as counterpoint:

Buchanan ... [has] argued that "rationality or irrationality as an attribute of the social group implies the imputation to that group of an organic existence apart from that of its individual components" ... [and] that there was a deep "confusion surrounding the Arrow analysis" (not just the impossibility theorem hut the entire framework used by Arrow and his followers) which ensued from the mistaken idea of "social or collective rationality in terms of producing results indicated by a social ordering" .... Sen 1995, p. 2)

Buchanan has "suggested" (Sen 1995, p. 5) that the notion of "social preference" implying an organic character to society should be dropped, and that with it would go the impossibility issue. Sen's response: "We certainly have to examine whether Buchanan's critique negates the impossibility result, but we must also investigate the more general issues raised by Buchanan." (Sen 1995, p. 2) This last line prepares Sen's audience for the transformation story he is about to tell: from competing paradigms to synthesis.

Sen's vehicle for developing this synthesis is a further exploration of the impossibility issue. He begins by "distinguish[ing] between two quite different uses of the notion of 'social preference,' ... decision mechanisms" which reveal "the 'underlying preferences' on which choices actually made for the society ... are implicitly based" and "social welfare judgments ... [which reflect] some ranking of what would be better or worse for the society." (Sen 1995, p. 5) Responding to Buchanan's critique, Sen asserts that since "social welfare judgments (are made] by an individual or agency, [the relevance of] Arrow's impossibility theorem [to such judgments] ... cannot be disputed on the ground that some organic existence is being imputed to society.... However, Buchanan's critique of Arrow's theorem would apply to mechanisms of social decisions (such as voting procedures)." (Sen 1995, p. 5) So if we follow Buchanan and drop any idea of social preference does that eliminate the impossibility problem? No:

The "impossibility" result identified in a particular form by Arrow can be extended to hold even when the idea of "social preference" is totally dropped and even when no conditions are imposed on "internal consistence" of social choice. (Sen 1995, p. 7)

"How might we then avoid that impossibility?" (Sen 1995, P. 7) Sen examines this question along the two dimensions cited above.

With respect to social welfare judgments Sen locates the source of the impossibility problem in overly narrow informational premises. "[B]ecause of its utilitarian form, traditional welfare economics had ... been opposed to any basic use of nonutility information ... [and t]o this was ... added the exclusion of interpersonal comparisons of utilities .... [The result is a] barren informational landscape [that] makes it hard to arrive at systematic judgments of social welfare." (Sen 1995. p. 7)

To try to make social welfare judgments without using any interpersonal comparison of utilities, and without using any nonutility information, is not a fruitful enterprise. ... Once interpersonal comparisons are introduced, the impossibility problem, in the appropriately redefined framework, vanishes. The comparisons may have to bc rough and ready and often open to disputation, but such comparisons are staple elements of systematic social welfare judgments. (Sen 1995, p. 8)

By introducing the notion that overly narrow premises can act as an artificial constraint on our vision, Sen sets the scene for his synthesis case.

Next Sen addresses the impossibility problem with respect to decision mechanisms. It has "greater resilience here," (Sen 1995, p. 9) and it is here that Sen's presentation takes a crucial turn. Now he explicitly begins the process of transforming the analysis by integrating the premises of social and public choice.

Rejecting the notion that analysis must begin with a choice between competing, incompatible premises, Sen makes the case that to address the question of decision mechanisms constructively, we must escape from the "dichotomy" (Sen 1995, p. 11) between process independence identified with social choice and consequence independence identified with public choice. After reviewing the cases for each, Sen concludes:

[I]t is not easy to believe that the public-choice approach is--or can be--really consequence-independent. For example, Buchanan's support of market systems is based on a reading of the consequences that the market mechanism tends to produce ... While this is not in serious conflict with Buchanan's rejection of any "transcendental" evaluation of the outcomes ... nevertheless the assessment of outcomes must, in some form, enter this evaluative exercise.... [O]n the other side of the dichotomy: can we have sensible outcome judgments in a totally procedure-independent way? [No, argues Sen.]...

The contrast between the procedural and consequential approach is, thus, somewhat overdrawn, and it may be possible to combine them, to a considerable extent, in an adequately rich characterization of states of affairs. (Sen 1995, pp. 11-12)

Having opened the case for synthesis, Sen presses the issue. He looks to a melding of premises as a reasoned escape from the impossibility problem. In particular, the informational base can be expanded and the domain of impossibility can be contracted by taking into account the concept of a "'value restriction'." (Sen 1995, p. 9) This requires a synthesis of the social choice and public choice stories on the formation, role, and dimensionality of these value restrictions.

[C]oncern[ing] the role of social interactions in the development of values, and also the connection between value formation and the decision-making processes ... [s]ocial choice theory has tended so avoid this issue, following Arrow's own abstinence: "we will also assume in the present study [Arrow's social Choice and Individual Values (1951)] that individual values are taken as data and are not capable of being altered by the nature of the decision process itself" (Arrow, 1951, 7).... [44] On this subject, Buchanan has taken a more permissive position--indeed emphatically so: "The definition of democracy as 'government by discussion' implies that individual values can and do change in the process of decision-making" .... (Sen 1995, p. 3)

But while Sen asserts that social choice theory should open its mind to the dynamic development of values, he believes that Buchanan and the public-choice school should do the same regarding the nature of individual beings:

[T]he practical reach of social choice theory, in its traditional form, is considerably reduced by its tendency to ignore value formation through social interactions. Buchanan is right to emphasize [this] However, traditional public choice theory is made unduly narrow by the insistence that individuals invariably behave as Homo economicus ... This uncompromising restriction can significantly misrepresent the nature of social concerns and values. (Sen 1995, p. 18)

Arrow's ... formulation is more permissive; it allows social considerations to influence the choices people make. [45] (Sen 1995, p. 2)

Now with the explicit melding of premises Sen concludes with a call for the synthesis he envisions:

There are plenty of "social choice problems" in all this, but in analyzing them, we have to go beyond looking only for the best reflection of given individual preferences, or the most acceptable procedures for choices based on those preferences. We need to depart both from the assumption of given preferences (as in traditional social choice theory) and from the presumption that people are narrowly self-interested homo economicus (as in traditional public choice theory.). (Sen 1995, p. 17)

Sen envisions a synthesis model that "examine[s] value formation that results from public discussion ... [and leads to] commitment on the part of citizens to do something .. .." (Sen 1995, p. 17) It is a model of society in which active citizens make social welfare judgments that are "rough and ready and often open to disputation" (Sen 1995, p. 8), and that encompass considerations of both the processes and consequences. It is a model of society in which social values and their construction play a central role. It is very much the model found in Adam Smith's moral philosophy.

Smith's story, although technically less elegant, is a conceptually rich version of the synthesis envisioned by Sen. As Sen advocates, Smith's story captures Buchanan's dynamic development of values by detaching that process from the constraints of Homo economicus. It represents the role of geography, societal environment, and unintended and intended consequences of individual actions in a transgenerational evolution of human institutions that shape social beings. [46] Returning to Smith's story of the nexus between value formation and constructive liberal processes and exploring this neglected dimension of his legacy can help us develop the research program advocated by Sen.

On Modern Scope and Method

As Smith appreciated when he adapted Newtonian method to moral philosophy, scope and method are interdependent. If following Sen (and Smith) we expand the dimensions of our analysis to include ethics, it is worthwhile to reflect on our method. In particular, if ethics takes a big part in our story, does that have any implications for a privileged position of mathematical language as a medium for analysis?

The value of mathematics as a language for analysis is clear and compelling. It is a much more clean, crisp, unambiguous language than any other. Because ambiguity undermines and clarity enhances the persuasiveness of a model, Smith would appreciate and value this strength in mathematics. But, Smith also understood that with any language's strengths come weaknesses.

As part of his larger story of the evolution of society, Smith explored the role of language in the evolution of society in general and in the development of philosophical systems in particular. Indeed, Smith's story of humans as social beings begins with the first formation of language, [47] for a means of communication is the first requisite and the foundation of all subsequent social constructions. Clearly different languages emerge in different times and places, and "[a]s [Smith] ... observes, depending on the special features of each language, various species of thought and intellect are produced. ... [For] Smith ... language is a frame that sooner or later fixes the scope of our vision ...." [48] (Becker 1961, pp. 17, 21) Thus, the price of using any particular language as the medium for analysis is that with that language comes a frame that delimits the scope of analysis.

Maurice Dobb makes this point eloquently in response to Joseph Schumpeter's assertion in his History of Economic Analysis (1954) that economic analysis has made progress, that our "box of tools" is better. (Schumpeter 1954, pp. 38-41) Dobb writes:

A mathematical 'model' can (and should be, inter alia) examined in its purely formal aspect, as a consistent structure. At the same time, qua economic theory, its very structure is relevant to the statement it is making about reality .... In choosing one structure in preference to another, the model-builder is not only providing a scaffolding or framework within which human thought can operate, but is laying emphasis upon certain factors and relationships and excluding others or casting them into the shadows; and in doing so he can be judged to be ... illuminating some comers or facets of reality, or certain situations that recur, at the same time as he is obscuring, or totally concealing others. (Dobb 1973, pp. 4-5, 7)

Homo economicus, optimizing along a function subject to constraints, has proved an ideal assumption for mathematical analysis, and as our conception of this optimization problem has grown more complex so too have our mathematical tools. But whether math is a sufficient language to represent the complexity of a story in which multidimensional unique social beings participate in a human condition that is evolving along multiple interactive nonlinear paths remains to be seen. [49]

4. Conclusion--Adam Smith on the Human Prospect and His Role in Its Progress

Adam Smith believed that if from an analysis of history we can approximate an understanding of the principles that guide human events, we can then work as active citizens to move our society away from superstition and ignorance and toward that enlightened and beneficent outcome that he took on faith is the best of the human prospect:

The characters of men, as well as the contrivances of art, or the institutions of civil government, may be fitted either to promote or to disturb the happiness both of the individual and of the society. (TMS, p. 187)

[So] the greatest and noblest of all characters ... [is] that of the reformer and legislator of a great state ... who by the wisdom of his institutions, secure[s] the internal tranquillity and happiness of his fellow-citizens for

many succeeding generations. [50] (TMS, p. 232)

The role of the moral philosopher in this process lies in the fact that

[s]ome general, and even systematical, idea of the perfection of policy and law, may no doubt be necessary for directing the views of the statesman. (TMS, p. 234)

Upon this account political disquisitions, if just, and reasonable, and practicable, are of all the works of speculation the most useful. Even the weakest and worst of them are not altogether without their utility. They serve at least to animate the public passions of men, and rouse them to seek out the means of promoting the happiness of society. (TMS, p. 187) [51]

Smith's purpose was to make such a contribution. But, always the humble scholar, Smith believed that moral philosophy should be a general guide for policy, not a blueprint for arranging the social construct. It would be the height of arrogance to act as a "man of system," (TMS, p. 233) imposing an order on society. [52] The specific policy prescriptions he offered were intended to foster the natural progress of society, because that progress is toward a beneficent limiting case made possible by the benevolence of the Deity. Such prescriptions certainly include removing obstacles to the free flow of commerce, the mercantile impediments. But Smith's economic prescriptions were only one dimension of a larger vision of societal improvement. Pursued in isolation they cannot accomplish his goal. Markets are, like all other institutions, only instrumental. The character of any given society and the ultimate hope for the human prospect derive not from markets, but from the character of the individuals that people soc iety. A society of unethical individuals pursuing their self interest would turn a perfectly free market system into an Hobbesian abyss-a rent--seeking society. A society of perfectly ethical individuals pursuing their self interest would interact on the basis of justice and beneficence, would realize the best for each individual on the basis of his or her talents, and in the process of bringing out the best in each would serve all by producing the greatest possible wealth for the nation. Thus, most fundamental to societal progress in Smith's view are those policies that develop an independent, educated, ethical citizenry. [53]

Epilogue: Adam Smith the Philosopher and the Person

For the reader who has come this far in my "adventures in Adam Smith" I offer the following reflection on Smith the philosopher and Smith the person.

In a letter celebrating the life of his recently deceased, very dear friend David Hume, [54] Smith offers a description of his last conversation with Hume. Smith reports that in the course of their conversation he made note of Hume's "cheerfulness" and said to Hume that he "could not help entertaining some faint hopes" that Hume might survive his malady. Hume's response: "'Your hopes are groundless."' (Smith 1977, hereafter Correspondence), p. 218)

Hume then went on to say that with this sense of inevitable death in mind he had been reading Lucian's Dialogues of the Dead. Smith's letter continues:

[A]mong all the excuses which are alleged to Charon for not entering readily into his boat, he [(Hume)] could not find one that fitted him; he had no house to finish, he had no daughter to provide for, he had no enemies upon whom he wished to revenge himself. ... 'I. therefore, have all reason to die contented.' He then diverted himself with inventing several jocular excuses, which he supposed he might make to Charon, and with imagining the very surly answers which it might suit the character of Charon to return to them. 'Upon further consideration,' said he, 'I thought I might say to him, Good Charon, I have been correcting my works for a new edition. Allow me a little time, that I may see how the Public receives the alterations.' But Charon would answer, 'when you have seen the effect of these, you will be for making other alterations. There will be no end of such excuses; so, honest friend, please step in the boat.' But I might still urge, 'Have a little patience, good Charon, I have been endeavouring to o pen the eyes of the Public. If I live a few years longer, I may have the satisfaction of seeing the downfall of some of the prevailing systems of superstition.' But Charon would then lose all temper and decency. 'You loitering rogue, that will not happen these many hundred years. Do you fancy I will grant you a lease for so long a term? Get into the boat this instant, you lazy loitering rogue.' (Correspondence, pp. 218-9)

This shared moment contemplating the end of a life's work as a philosopher reflects a central element in the character of both Hume and Smith: These were humble scholars. [55] Both wanted to make a contribution. Neither thought their work would be the last word.

And what was it that Smith valued in a friend and admired in a person? In the same letter Smith writes of the "most excellent, and never to be forgotten" Hume:

His temper ... seemed to be more happily balanced [note "balance" as in sentiments] ... than that perhaps of any other man I have ever known. Even in the lowest state of his fortune, his great and necessary frugality never hindered him from exercising, upon proper occasions, acts both of charity and generosity. It was a frugality founded, not upon avarice, but upon the love of independency. The extreme gentleness of his nature never weakened either the firmness of his mind, or the steadfastness of his resolutions. His constant pleasantry was the genuine effusion of good-nature and good humour, tempered with a delicacy and modesty, and without even the slightest tincture of malignity, so frequently the disagreeable source of what it called wit in other men. ... And that gaiety of temper, so agreeable in society, but which is so often accompanied with frivolous and superficial qualities, was in him certainly attended with the most severe application, the most extensive learning, the greatest depth of thought, and a capacity in every respect the most comprehensive. Upon the whole, I have always considered him, both in his lifetime and since his death, as approaching as nearly to the idea of a perfectly wise and virtuous man, as perhaps the nature of human frailty will permit. (Correspondence, pp. 220-1)

Here we see Smith's association of frailty and limits. We are each and all flawed, but we as individuals and collectively as humankind can approximate the ideal.

(*.) Department of Economics, The Maxwell School of Citizenship, Syracuse University, Syracuse, NY 13244, USA; E-mail [e-mail].

This piece includes some selections from an "Adam Smith" entry I wrote for the Elgar Handbook on Economic Methodology. I thank Edward Elgar for the permission to use those selections. I also thank an anonymous reviewer and my colleague Jerry Kelly for offering very significant, constructive suggestions that were extremely valuable in developing this piece. Finally I want to express a deep and abiding appreciation for the late Jesse Burkhead and to Robert Heilbroner for the support and encouragement each has given me. While I thank and appreciate these scholars, I claim no endorsement from them for the ideas presented here. I am responsible for what is here.

Received August, 1997; accepted March 2000.

(1.) The maintained assumption in this piece is that while technology can and has changed dramatically, as it has since 1776 when Adam Smith published his Inquiry into the Nature and Causes of the Wealth of Nations, human nature has not changed. This "constancy of human nature" is an assumption that has informed economic thought from Smith to Becker. But although this assumption is consistent, the assumed content of that constant human nature has changed significantly. This change is central to the story told here.

(2.) See Evensky 1992a, l992b, and 1993a for background on this issue.

(3.) One can get a sense of Smith's usage of the term "human frailty" in what he writes of his dear and recently deceased friend David Hume: "Upon the whole, I have always considered him, both in his lifetime and since his death, as approaching as nearly to the idea of a perfectly wise and virtuous man, as perhaps the nature of human frailty will permit." (Correspondence, p. 221)

(4.) How is e pluribus unum possible?

(5.) Which according to Becker explains "all human behavior" (Becker 1976, p. 14)

(6.) I will focus on Sen here, but Buchanan (1991) directly and richly addresses this cohesion quandary. In another piece, "E Pluribus Unum?: Exploring the Liberal Dilemma from Homo economicus to Civic Values and the Possibility of Constructive Liberal Society" (Evensky, MS) I analyze Buchanan's contribution to this issue in detail.

(7.) Unlike many of his contemporaries, however, who believed that the order of nature is discoverable and that on the basis of this knowledge the existence of the Deity is provable, Smith believed that such knowledge and thus such a proof are beyond the reach of humankind.

(8.) Smith was keenly aware that our perspective, the frame through which we see events, is a significant determinant of what we "see." He understood that language is such a frame, a point that will be addressed in more detail below.

(9.) "Such is the system of Sir Isaac Newton, a system whose parts are all more strictly connected together, than those of any other philosophical hypothesis. ... It is every where the most precise and particular that can be imagined, and ascertains the time, the place, the quantity, the duration of each individual phaenomenon, to be exactly such as, by observation, they have been determined to be. Neither are the principles of union, which it employs, such as the imagination can find any difficulty in going along with. The gravity of matter is, of all its qualities, after its inertness, that which is most familiar to us. ... His system ... now prevails over all opposition. ... His principles, it must be acknowledged, have a degree of firmness and solidity that we should in vain look for in any other system. The most sceptical cannot avoid feeling this. They not only connect together most perfectly all the phaenomena of the Heavens, which have been observed before his time, but those also which the perseverin g industry and more perfect instruments of later Astronomers have made know to us; have been either easily and immediately explained by the application of his principles, or have been explained in consequence of more laborious and accurate calculations from these principles, than had been instituted before." (HA, pp. 104-5)

(10.) For example, the Church's resistance to a geocentric system. Smith cites cases of inertia or "habits of the imagination" in HA, pp. 65, 76, 77, 82, 87, 88.

(11.) And with that progress comes the seductive belief that Truth is knowable: "And even we, while we have been endeavouring to represent all philosophical systems as mere inventions of the imagination ... have insensibly been drawn in, to make use of language expressing the connecting principles of this one, as if they were the real chains which nature makes use of to bind together her several operations," (HA, p. 105, emphasis added) Note the "as if." It reminds us: Be humble. We are only imagining.

(12.) See Lindgren 1969 for more on Smith's standards.

(13.) While concepts of natural evolution were in a nascent state in his day, Smith took the constancy of nature as a given. Smith's point about the special observational challenge of the moral philosopher is nevertheless still relevant even after Darwin. The exogenously driven processes of natural selection are glacial relative to the evolution of societal constructs that are both exogenously and endogenously driven. Obviously in this day and age this sharp distinction between the natural and human orders is ever more artificial given that the natural domain is dramatically more subject to the same human perturbation that Smith understood as an engine of rapid change in the human condition. This would suggest not that Smith is wrong in his analysis of the dynamics of change, but rather that his insight into that special dynamic has expanded in its implications.

(14.) It is important to distinguish humankind's evolution from human evolution. The former is about societal constructs and their "organic" change, whereas the latter is about the change in the human organism. Smith does not ascribe humankind's progress to better" humans, but to more constructive societal constructs. For Smith human nature is universal and constant. More on this below.

(15.) Dugald Stewart, reflecting on Smith's thought in a 1793 biographical essay, wrote: "[P]aradoxical as the proposition may appear, it is certainly true, that the real progress [of human events] is not always the most natural." (Stewart 1980, p. 296)

(16.) Book III of The Wealth of Nations, "Of the different Progress of Opulence in different Nations" (Smith 1976 [hereafter WN], p. 376) is an extended example of this.

(17.) "In this want of direct evidence, we are under a necessity of supplying the place of fact by conjecture; and when we are unable to ascertain how men have actually conducted themselves upon particular occasions, of considering in what manner they are likely to have proceeded, from principles of their nature, and the circumstances of their external situation." "To this species of philosophical investigation ... I shall take the liberty of giving the title of Theoretical or Conjectural History ...." (Stewart 1980, p. 292-3)

(18.) See Sen 1977 and 1995 on this multiplicity of motives.

(19.) Ergo the title: The Theory of Moral Sentiments.

(20.) "It is thus that man, who can subsist only in society, was fitted to that situation for which he was made." (TMS, p. 85) One need not assume zero sociality among other species for Smith's point to be well taken.

(21.) "The division of labour ... is not originally the effect of any human wisdom ... [but the] consequence of a certain propensity in human nature ... to truck, barter, and exchange one thing for another.... It is common to all men, and to be found in no other race of animals ...." (WN, p. 25)

(22.) Elsewhere Smith writes "Man naturally desires, not only to be loved, but to be lovely: or to be that thing which is the natural and proper object of love. He naturally dreads not only to be hated, but to be hateful: or to be that thing which is the natural and proper object of hatred." (TMS, pp. 113-4)

(23.) He was keenly aware of and analyzed at length this process in children; interesting for one who never had children of his own, See Evensky 1993b for this and other examples of Smith's application of personal observation to represent principles of human nature.

(24.) For examples of Smith's application of cross-cultural and anthropological observation to represent principles of human nature see Evensky l993b.

(25.) With proper "discipline, education, and example" (TMS, p. 162) one grows into the role society defines. As Smith writes in The Wealth of Nations: "The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education." (WN, pp. 28-9) David Hume writes in a similar vein: "When we consider how nearly equal all men are in their bodily force, and even in their mental powers and faculties, till cultivated by education. ... (Cited in WN, pp. 28 fn. 11).

(26.) "The happiness of mankind, as well as of all other rational creatures, seems to have been the original purpose intended by the Author of nature, when he brought them into existence. No other end seems worthy of that supreme wisdom and divine benignity which we necessarily ascribe to him. ... (TMS, p. 166)

(27.) Humankind cannot reach the ideal because human beings can never be perfect. Recall Smith's description of Hume cited in an earlier footnote: "Upon the whole, I have always considered him, both in his lifetime and since his death, as approaching as nearly to the idea of a perfectly wise and virtuous man, as perhaps the nature of human frailty will permit." (Correspondence, p. 221, emphasis added) The concept of a limit is clear here.

(28.) See Evensky 1994 and 1998 for analysis of this process and examples.

(29.) It is important to note that while this is a normative system with an imagined ideal, given that we have no access into the mind of the deity Smith would never presume to 'know' the ideal and thus would never presume to dictate how to get there. Such arrogance was indicative of what Smith referred to as "[t]he man of system." (TMS, p. 233) More on this below.

(30.) The weave of the story is certainly much more complex, but this is representative of its broad outline--a life's work Smith laid out in the closing paragraphs of its first installment, The Theory of Moral Sentiments.

(31.) See Evensky 1998 for a full story of Smith's views on the role of religion.

(32.) Referring to China, Smith writes that "In a country...where, though the rich or the owners of large capitals enjoy a good deal of security, the poor or the owners of small capitals enjoy scarce any, but are liable, under the pretence of justice, to be pillaged and plundered at any time by the inferior mandarines, the quantity of stock employed in all the different branches of business transacted within it, can never be equal to what the nature and extent of that business might admit. In every different branch, the oppression of the poor must establish the monopoly of the rich ...." (WN, p. 112)

(33.) This point underlies Smith's distinction between productive and unproductive labor. Police, lawyers, judges, soldiers, ... these are all essential participants in a less-than-ideal society, but to the degree that they exist to enforce the rules of justice they are unproductive labor, for they are doing a job that would not be necessary in the ideal case.

(34.) For example, citing empirical evidence from London and Paris on crime, Smith asserts that the necessity of police for personal security is not proportional to population but to the "nature of the manners of the people." (Jurisprudence, p. 332)

(35.) See Evensky, 1994 for a detailed version of this story.

(36.) In Smith's story, although they were not the ultimate solution to the liberal cohesion quandary, the social contract of Locke and the despotime legal (benevolent dictator) of the Physiocrats might each be of value in this instrumental role.

(37.) See TMS, pp. 230-4.

(38.) As Smith got older, and especially after his years in London (1773-1776) when he became more plugged into the dynamics of Parliamentary decision malting, his view of the mercantilist system changed. He had initially seen mercantilism as an historical artifact that should and could be swept away by a more mature understanding of the connecting principles of commercial society, principles he laid out in his Wealth of Nations. Experience in London and the actions of Parliament in pursuing what Smith thought were totally wasteful colonial wars convinced him, however, that mercantilism was a dynamic, destructive force that exerted immense influence on the political process: A rent-seeking cancer that must be fought aggressively. In response, his policy pronouncements against mercantilism became more sharp as the text of The Wealth of Nations evolved. There is evidence that the delay in initial publication (1776) was due to revisions aimed primarily at mercantilism, and the most significant subsequent revisio n to the book (1784) was a whole new chapter (Book IV, Chapter viii) titled, "Conclusion of the Mercantile System" in which Smith offers a scathing attack on this rent-seeking cancer. See Evensky 1989 for more on this.

(39.) As H. M. Hopfl writes, "Conjectural history, by connecting paradigmatic sequences of events which exhibited such connecting principles of nature [a la Smith], ordered the chaos. ... The employment of conjectural history was at least as much for the sake of trying to make sense of the human world, as for the practical purpose of making that world controllable," (Hopfl 1978, p. 39) Interestingly, in combining the notion of chaos and movement toward a limit, Smith seems to capture something of the spirit of modem chaos theory with the juxtaposition of the concept of chaos with the strange attractor.

(40.) Modern social scientists who read Smith as detaching his economic analysis from other dimensions of his work significantly diminish the analysis and distort its lessons. The perception of an "Adam Smith problem" represents such a misreading of Smith.

(41.) The progress of the whole is determined by the degree of this complementary change and is limited by its most inert dimension.

(42.) One of the most often quoted lines in Smith: "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." (WN, pp. 26-7)

(43.) "Adam Smith stressed [that the] ... properties [of the market] that allow for self-interested behavior of persons and yet generate socially beneficial results, require an environmental setting of appropriate 'laws and institutions."' (Buchanan 1991, P. 208)

(44.) Sen notes here that "Arrow ... himself points out 'the unreality of this assumption.' [(Arrow 1951, p. 8)]" (Sen 1995, p. 3, fn5)

(45.) Arrow writes that "[f]ormally, a social action is ... taken to be the resultant of all individual actions. In other words, any social action is thought of as being factored into a sequence of individual actions.

"I certainly do not wish to deny that such factoring takes place, but I do wish to emphasize that the partition of a social action into individual components, and the corresponding assignment of individual responsibility, is not datum. Rather, the particular factoring in any given context is itself the result of a social policy and therefore already the outcome of earlier and logically more primitive social values.

"In economic transactions the point is clearest when we consider what we call property. Property is clearly a creation of society ... [t]he very notion of control over one's 'own' property ... acquires its meaning through the regulations of society." (Arrow 1983, p. 64, latter emphasis added)

(46.) It is not surprising to find much of Buchanan and Sen in Smith, for both Buchanan and Smith see much of Smith in their own work. See for example Sen 1995, p. 15 and Buchanan 1991, p. 208.

(47.) See his "Considerations Concerning the First Formation of Languages," (Smith 1983, p. 201).

(48.) This notion of frames and its application to language anticipates the work of Kahneman and Tversky (1984) on frames, Hirsch (1987) on schema, and Berger and Luckmann (1966) on the role of language in The Social Construction of Reality.

(49.) In a piece titled "Adam Smith's Theory of Inquiry," Ralph Lindgren (1969) argues that Smith "adopted language, not mechanics, as the model of inquiry; and he drew a fundamental distinction between the methods of inquiry in the natural and the social sciences." (Lindgren 1969, p. 899) Deborah Redman (1993) makes the case that "the narrow, technical, mathematical elements that Smith indirectly supported by labeling his method Newtonian have become increasingly exaggerated in the course of the twentieth century." (Redman 1993, p. 226) Lindgren and Redman both assert that the conception of Smith as a lockstep follower of Newtonian method has had perverse effects on Smith's heritage. Redman "conclude[s] that the richness of Smith's method lies not in the beauty of a precise mathematical theory or system like Newton's but in its wide social emphasis ... [and] there would probably be no better antidote to the narrowness of economics' current methods than a greater appreciation of and revival of the Scottish ap proach in association with today's analytical, theoretical approach." (Redman 1993. p. 228, latter emphasis added) Lindgren concludes that "[h]opefully, we can yet restore the vision of his genius and, given time and similar motivation, put an end to that alienation which he aptly understood to be the necessary consequence of insensitive and mechanical methods of inquiry in the social sciences." (Lindgren 1969. p. 914)

(50.) But a part of such wisdom is humility; such a leader will not try to impose a vision on a nation: "He will accommodate, as well as he can, his public arrangements to the confirmed habits and prejudices of the people; and ... [w]hen he cannot establish the right, he will not disdain to ameliorate the wrong; but like Solon, when he cannot establish the best system of laws, he will endeavor to establish the best that the people can bear." (TMS, pp. 233-4)

(51.) But this is secondary to active citizenship: "The most sublime speculation of the contemplative philosopher can scarce compensate the neglect of the smallest active duty." (TMS, p. 237)

(52.) Indeed, Smith warns, we must always be wary of "[t]he man of system ... [who] is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation for any part of it." (TMS, pp. 233-4) "Amidst the turbulence and disorder of faction... [such men] often propose ... to new-model the constitution .... The great body of the party are commonly intoxicated with the imaginary beauty of this ideal system, of which they have no experience, but which has been represented to them in all the most dazzling colours in which the eloquence of their leaders could paint it. Those leaders, themselves, though they originally may have meant nothing but their own aggrandisement, become many of them in time the dupes of their own sophistry ...." (TMS, pp. 232-3)

(53.) Smith's last major undertaking was a significant revision (1790) of the Theory of Moral Sentiments with an addition of an entire new Part VI, "Of the Character of Virtue" in which he appealed to future leaders to be wary of the influence of factions (e.g., mercantile or other interests) asserting that when a leader transcends the natural instinct to serve his faction and instead thinks with

a more enlarged and enlightened mind .. . [in terms of t]he love of our country, ... [he emerges] from the very doubtful and ambiguous character of the leader of a party, [and] he may assume the greatest and noblest of all characters, that of a reformer and legislator of a great state. . . . (TMS, pp. 229, 231, 232)

See Evensky 1989 for more on this.

(54.) The letter to William Strahan (publisher of Smith's and of Hume's work) written at Kirkaldy, Fifeshire (Smith's home) on 9 November 1776.

(55.) "In all the liberal and ingenious arts, in painting, in poetry, in music, in eloquence, in philosophy, the great artist feels always the real imperfection of his own best works, and is more sensible than any man how much they fall short of that ideal perfection of which he has formed some conception, which he imitates as well as he can, but which he despairs of ever equalling. It is the inferior artist only, who is ever perfectly satisfied with his own performances." (TMS, p. 248)

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