Review of Russ Roberts' How Adam Smith Can Change Your Life – An Unexpected Guide to Human Nature and Happiness (Portfolio, October 2014) Hardcover, 272 pages, $27.95.
Adam Smith is conventionally thought of in a very specific manner: He is the "father of economics," the man who gave birth to the very idea that self-interest is a good thing and that seeking profits was among the most socially productive endeavors a man could undertake. But what many people are unaware of is that Adam Smith was also a moral philosopher and social psychologist (and one of the greats). In fact, it was his Theory of Moral Sentiments that first brought Adam Smith to fame, not his Inquiry into the Nature and Causes of the Wealth of Nations. Russ Roberts of Stanford University's Hoover Institution seeks to remind us of this in his latest book, How Adam Smith Can Change Your Life.
The book's subtitle – An Unexpected Guide to Human Nature and Happiness – hints at the two themes of this book: 1) why are humans good to each other and 2) how can we apply these insights to our own lives and be happier? The answer to the first comes from what Smith calls the "impartial spectator." This spectator is an imagined figure with whom we converse that exists outside of our situation and is able to accurately assess the morality of our decisions and actions. The major insight here is that we are not being judged by God or by our own principles when we act, but rather by an imagined fellow human being looking over our shoulder.
Roberts provides several contemporary examples of this to illustrate the point – when presented with an opportunity to steal something and get away with it, many of us still refuse to do so. In fact, we may wander the store in search of a cashier to pay for an item. One answer that is commonly given is that God is always watching and would know if you sinned against your fellow man. While true, Smith's point is that you are also watching, and you do not like stealing. As Roberts says, " … as you contemplate committing the act, you imagine how an outsider, an impartial spectator of your crime, would react to your moral failure. You step outside yourself and view your actions through the eyes of another."
This spectator goes further than this, though. He also "speaks to us in the voice of humility, which reminds us that we are little and the world is great." We as human beings tend to believe that, because we are the center of our own universe, we must therefore be the center of the universe. Roberts calls this "The Iron Law of Me." Stated simply, I think more about myself than I do of you, or anyone else. The impartial spectator, by virtue of being a person separate from us, serves to remind us that there are other people in the world who matter just as much as we do. We are not the center of the universe.
The second theme of this book is a sort of self-help book on how to be happy. In this respect, this book is quite simply amazing. Roberts reminds us that Smith says that we all "naturally desire, not only to be loved, but to be lovely." Unpacking this simple sentence, Smith is saying that we all want to be appreciated, desired, and praised. We want people to take us seriously and pay attention to the things that we say, to want our presence, and to enjoy our company. Second, we want to be worthy of being loved honestly by "being respectable, honorable, blameless, generous, and kind." In other words, we want to have a good reputation – a good rapport, if you will. But how do we do this?
Again, we can turn to the impartial spectator. Roberts recalls the story of Bernie Madoff and his investing strategy. For years, people touted Madoff as a financial genius, but inside, Madoff knew that he was a fraud or to put it in Smithean terms, while thousands of people loved Madoff, he knew that he wasn't lovely. His inner self, the one that the impartial spectator could see clearly, did not match his outer self. The tension between our inner self and our outer self, Roberts says, transforms that undeserved love into a harsh reminder of how we have failed to be lovely.
So the answer lies in keeping our inner self in line with our outer self. This can be difficult because while we are capable of understanding our own actions better than anyone else, we are also capable of deceiving ourselves better than anyone else. Roberts moves on to discuss how best to earn love – through fame and fortune or wisdom and virtue? While many of us love the rich and famous, that love is short and fleeting. It is better, Smith says, to be loved for being wise and virtuous. In addition to being longer lasting, it is earned by being lovely to those you know well rather than zealously pursuing the love of those you do not know at all.
The impartial spectator is clearly a powerful figure and discerner of character, but where do his morals come from? Roberts describes Smith as saying that, at a minimum, we must behave "appropriately," which means that we must meet the expectations of those around us. In this sense, "appropriateness" is not an objectively defined set of behaviors but is instead contextual. This is not to say that there are no higher truths, but Smith seems to be concerned more with the day to day affairs of man amongst men. In this, the impartial spectator understands both your own motives and beliefs as well as the contextual standards of behavior that are unique to your current location and acts to judge you accordingly.
Roberts concludes the book with one piece of advice – love locally, trade globally. This piece of advice and understanding its implications is invaluable for everyone in today's society, and so I wholeheartedly recommend this book to everyone. But I would especially recommend this book to students of economics, who have a tendency to forget the limits of pure economics.
David J. Hebert teaches in the Department of Management at Ferris State University in Big Rapids, Mich.