Review of James R. Otteson's, Adam Smith (Bloomsbury Press, August 2013) 200 pages; $29.95.
In our day, Adam Smith has generally been represented as if he were simply the Wall Street movie character Gordon Gekko dressed up in an eighteenth-century wig and breeches. This has not been simply a left-wing view. In his 2006 book Crunchy Cons, the journalist Rod Dreher claimed to be arguing in the name of Russell Kirk that "Adam Smith and Karl Marx are two sides of the same coin" – gross materialists both. Douglas Jeffrey in the Claremont Review of Books chided Dreher for not knowing Kirk very well, observing that Kirk labeled Smith, along with Edmund Burke and Samuel Johnson, one of the West's "three pillars of order."
If Dreher didn't know Kirk well enough, he similarly misunderstood Adam Smith, a writer who is now gestured at, but very seldom read, both by those who claim his patronage and those who instinctively thumb their noses. In James Otteson's short, witty, and well-sourced introduction to Smith, one can see why Kirk and Burke thought so highly of this figure— and why our contemporaries should, too.
Otteson, a favorite speaker at Acton University, is an extremely gifted philosopher (Ph.D., University of Chicago) and expert on Adam Smith who has taught at Georgetown, Alabama, and Yeshiva University. His 2006 book Actual Ethics, a defense of the classical liberal political order, won him a $50,000 Templeton Enterprise Award given for works exemplifying "the very best that has been written ... to advance the cause of ordered liberty around the world." This fall, Otteson begins his new position as director of the BB&T Center for the Study of Capitalism and full professor at Wake Forest University.
Otteson's first book on Smith, Adam Smith's Marketplace of Life (2002), was an attempt at resolving the "Adam Smith Problem." The "problem" is how to reconcile Smith's 1759 book, A Theory of Moral Sentiments, which argued that ethics are based on the natural desire for a "mutual sympathy of sentiments," with his auspiciously dated 1776 Wealth of Nations, which argued that social good was derived from humans seeking their own self-interest. That self-interest, Smith argued, was channeled by an "invisible hand" into greater good for others. Otteson's solution is to highlight Smith's "market" understanding of human behavior in the fields of language, morality, and economics. In all three, human self-interest (to communicate, to have approval of our conduct, and to better our situation) leads people to make certain decisions on the local level in an effort to achieve their wants. Through a complex process, rules are generated not from some figure on high, but from the very interactions of people themselves. In all of these fields, Smith's notion of self-interest has little to do with Gordon Gekko; even our natural desire to better ourselves materially usually involves bettering those we love and to whom we have obligations. In order for us to "get ahead" in life, we are obligated to think about what others want or desire in order to get what we want. We don't use certain words that will confuse others, we don't treat people in certain ways that will injure or anger them, and we must offer something that others need or want in order to get what we want, whether it be money, a job, a service, or a product. Otteson credits Smith with the discovery, later popularized by Friedrich Hayek, of "spontaneous order," created by human interaction itself. This "spontaneous order" is created as if there were an "invisible hand." While it doesn't create a perfect paradise of communication, behavior, or economics, Smith understood such order to be more successful at producing positive results than any conscious human attempts to promulgate in detail the specific kinds of rules needed to navigate the intricacies of everyday life – especially in commercial life.
If the reader sees some similarities between Smith's notion of spontaneous order and Burke's notion of Tradition, this should not be surprising, since Burke was "an admiring reader" and correspondent of Smith as well. Like Burke, Smith warned against the dangers of the "man of system" who believes that he can dictate exactly how society or markets should be ordered: Otteson calls this Smith's "Great Mind Fallacy" which imagines that some expert or group of experts can create a utopia out of their own understanding— usually immediately. While Smith's nosethumbers like to ridicule the invisible hand theory, Otteson shows how it is composed of three arguments about the nature of markets of all kinds.
First, Smith's "local knowledge argument": because people have a better grasp on their own "local" situation, they are the ones in the best position to decide what course of action to take. Otteson notes that this is not an argument of the infallibility of ordinary people, but instead "means that their unique local knowledge provides them a better chance of knowing best how to use their resources and what actions to take to achieve their goals." Second, Smith's "economizer argument" holds that because we seek to better our own condition, we will seek out the most efficient use of our resources in our "peculiar and unique circumstances" to maximize our own output and return on our own investments. Third is the "invisible hand argument" itself, which Otteson calls "trickier than it seems" and requiring "delicacy" in parsing. While people work for the best "return" on their investments of time, resources, and energy principally to benefit themselves and those closest to them, they benefit others as well. Otteson explains that this division of labor creates a "general plenty" and "universal opulence" (not divided equally, of course) because:
when we specialize or concentrate our efforts on some small range of tasks or talents, we usually produce more than we ourselves can consume or use, which means we create a surplus; which means we create a surplus that we can trade or sell away; that in turn, means that the overall stock of goods and services increases, and their prices thus decrease, for everyone. Additionally, as we seek out exchanges, forms of contract and trade, and so on that serve our local interests, others may learn from us and imitate our successes and avoid our failures, thereby saving ourselves time and energy, thereby enabling them to go marginally further than we did in securing their – and thus, indirectly, everyone else's – ends.
Otteson's book is part of the excellent Bloomsbury series "Major Conservative and Libertarian Thinkers," and Otteson takes pains to show that Smith is not just an economic thinker, but an important philosophical mind whose recognition is finally coming in other fields like linguistics and moral philosophy as well. While some have tried to pigeonhole Smith in modern terms as either a proto-progressive or an ideologically minded libertarian, Otteson rejects both of these characterizations.
Because Smith was pragmatic, he understood that even his own principles could have exceptions. His basic rule was that government's duty should be limited to to the "negative" task of justice – protecting the lives and properties of its citizens, as well as enforcing their free contracts – he also believed that it should use tax money for certain public purposes like infrastructure (roads and canals) and possibly education. Further, he also acknowledged that local public officials might be allowed in certain circumstances to intervene in markets. But, as Otteson notes, "the burden of proof must be high" for those officials seeking to intervene.
While Otteson is clearly in Smith's camp, he does not cover over Smith's mistakes. He highlights particularly Smith's labor theory of value and his understanding of happiness as "tranquility." On the latter topic, I think Otteson rightly notes the absence of industriousness in Smith's accounting for most people's ordinary happiness, but Smith's adherence to a more stoic notion of happiness seems to me compatible with this insight and also includes people in society whose ability to work is limited or ended.
Otteson's book is an excellent introduction to Smith and a valuable resource for those who study him. His notes and bibliography are a vademecum for scholars wanting to wade into historical studies and contemporary uses of Smith's thought. It is also a good, short read – perfect to give to those who thumb their nose without knowledge.
David Paul Deavel is associate editor of Logos: A Journal of Catholic Thought and Culture and the 2013 winner of the Novak Award.
