What you will learn from reading How Adam Smith Can Change your Life:
– Cultivate self-awareness and integrity to guide your actions.
– Use the “impartial spectator” as an internal guide to correct self-interest.
– True happiness comes from being both loved and worthy of that love through virtuous behaviour.
Chapter 1 How Adam Smith Can Change Your Life:
Once you start to think about human motivation and the bright and dark side of humanity-what Faulkner called the “human heart in conflict with itself”-it’s hard to think about anything else.
Trying to understand your neighbour and, in turn, yourself really doesn’t get old. There’s a brand new set of data every day to chew on and explore if you’re interested-all those interactions with friends, family, colleagues, and strangers.
Reading The Theory of Moral Sentiments, you realise that morality and the meaning of life and how people behave haven’t changed much since the eighteenth century. A wise enough man can reach across more than two centuries, get your attention, and teach you a thing or two about yourself and what’s important
Economics is about something more important than money:
Economics helps you understand that money isn’t the only thing that matters in life. Economics teaches you that making a choice means giving up something. And economics can help you appreciate complexity and how seemingly unrelated actions and people can become entangled.
These insights and others are sprinkled throughout The Theory of Moral Sentiments. Money is nice, but knowing how to deal with it may be nicer. A student once told me that a professor of hers said that economics is the study of how to get the most out of life. That may strike some of you, even those of you who majored in economics, as an absurd claim. But life is all about choices. Getting the most out of life means choosing wisely and well. And making choices-being aware of how choosing one road means not taking another, being aware of how my choices interact with the choices of others-that’s the essence of economics.
Chapter 2 How to Know Yourself
Self interest and the invisible spectator:
Smith seems to be saying that we are grotesquely self-interested. This seems to confirm a commonly held view that Smith sees the world as driven by selfishness. Smith is often caricatured as a Scottish forerunner of Ayn Rand, who in addition to Atlas Shrugged wrote a book titled The Virtue of Selfishness. What Smith does suggest in his famous book The Wealth of Nations is that people are fundamentally self-interested, which is not the same thing as selfish.
Smith ponders the discrepancy between our self-interest and our seemingly selfless actions. Despite being inherently driven by self-love, we often act in ways that prioritise others over ourselves. One explanation could be that we possess an innate sense of benevolence or compassion, caring for others and despising their suffering. However, Smith challenges this notion, pointing out that we are often more bothered by losing a finger than by millions losing their lives. He dismisses the argument that our benevolence or compassion alone dictates our actions.
Instead, Smith proposes that our behaviour is influenced by an imaginary interaction with what he terms the “impartial spectator” – a virtual figure with whom we engage in conversation. This impartial spectator serves as an objective judge of the morality of our actions. It resembles our conscience, but Smith provides a unique source for it. He asserts that we imagine being judged not by God, our values, or principles, but by a fellow human being who scrutinises our actions.
According to Smith, the voice of this impartial spectator speaks to us with humility, reminding us of our insignificance in the vast world. It is through the eye of this impartial spectator that self-love can be corrected. This figure illuminates the appropriateness of generosity and the ugliness of injustice, guiding us to recognise the value of sacrificing our own interests for the greater good of others, and the wrongness of causing harm to others for our own benefit.
CHATGPT
The Value of the Impartial Spectactor:
We know that we are small relative to the rest of the world. But we feel much of the time, maybe most of the time, as if we are the center of the universe. Call it the Iron Law of You. You think more about yourself than you think about me. There’s a corollary to the Iron Law of You-the Iron Law of Me. I think more about myself than I do about you. That’s just the way the world works.
The impartial spectator reminds us that we are not the center of the universe. Remembering that we are no more important than anyone else helps us play nicely with others. The impartial spectator is the voice inside our head that reminds us that pure self-interest is grotesque and that thinking of others is honorable and noble-the voice that reminds us that if we harm others in order to benefit ourselves, we will be resented, disliked, and unloved by anyone who is looking on impartially. If we are only for ourselves, it’s not a pretty sight.
It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.
What spurs us to take care of our neighbor is the desire to act honorably and nobly in order to satisfy what we imagine is the standard that would be set by an impartial spectator.
It’s hard to treat people the way they want to be treatedyou’re so busy; you have so many responsibilities. You like to think the people you work with will give you the benefit of the doubt if you’re rude or inconsiderate. Would an impartial spectator see you as a kind and thoughtful boss or as falling short of the ideal?
The power of God:
I was once talking with a friend about God and morality. Does believing in God reduce your chance of committing a crime or a sin? What if you knew there was no chance of being caught-you’re going to get away with a misdeed with certainty? So, on the surface, it’s rational to steal or sin because no one is watching. My friend smiled and said that the whole idea of God is that He’s always watching.
Smith’s point is that you are always watching! Even if you’re alone with no chance of being caught, even if no one knows you’re stealing, you know. And 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.
Smith believes that our desire for approval from those around us is embedded within us, and that our moral sense comes from experiencing approval and disapproval from others. As we experience those responses, we come to imagine an impartial spectator judging us (God?).
Pay Attention:
If you want to get better at what you do, if you want to get better at this thing called life, you have to pay attention. When you pay attention, you can remember what really matters, what is real and enduring, versus what is false and fleeting. Thinking of an impartial spectator can help you know yourself and help you become a better boss, a better spouse, a better parent, a better friend. Thinking of an impartial spectator can help you interact with actual, real-life spectators and change how they think of you.
Chapter 3 How to Be Happy
Adam Smith was not a big fan of the pursuit of fame and fortune. His view of what we truly want, of what really makes us happy, cuts to the core of things.
It takes him only twelve words to get to the heart of the matter: Man naturally desires, not only to be loved, but to be lovely.
Being Loved:
The first part of Smith’s summary of human desire-that people want to be loved-seems pretty straightforward, although Smith doesn’t mean loved the way we mean it today, as connected to romance and family. He means it in a fuller sense. He means that we want people to like us, respect us, and care about us. We want to be appreciated, desired, praised, and cherished. We want people to pay attention to us and take us seriously. We want them to want our presence, to enjoy our company.
Most people want to be loved. And it comes to us naturally, Smith says; it’s part of our essence. More than that, he says, “the chief part of human happiness arises from the consciousness of being beloved.” Smith also says it this way, emphasizing not just being loved but deserving to be loved, meriting being loved:
What so great happiness as to be beloved, and to know that we deserve to be beloved? What so great misery as sort to be hated, and to know that we deserve to be hated?
But Smith isn’t arguing that our goal in life is to impress people around us so that we can be happy. That’s the wrong way to be loved. For Smith, being loved is a natural result of being lovely. What does Smith mean by lovely?
Being Lovely:
In today’s language, lovely means attractive to the eye or satisfying, as in “what a lovely vase” or “she sent me a lovely thank-you note.” But when Smith says that we want to be lovely, he means worthy of being loved. When we earn the admiration of others honestly by being respectable, honorable, blameless, generous, and kind, the end result is true happiness.
Smith’s ideal is achieved when your inner self mirrors your outer self. Smith understood that we often fall short of the ideal. Smith realized that people are capable of fooling themselves, rationalizing or ignoring their imperfections and lack of loveliness.
We want to be real, and we want the people around us to be real in how they think about us. Respect or love or attention that is inaccurate because I don’t deserve it isn’t real. Someone who is thought to be lovely, but who knows he isn’t, is living a lie.
So if I get praise I don’t deserve, says Smith, it should bother me. The praise feels good. But knowing it is undeserved makes it impossible to enjoy, he says. Why? It’s as if someone else is being complimented instead of you: “The man who applauds us either for actions which we did not perform, or for motives which had no sort of influence upon our conduct, applauds not us, but another person. We can derive no sort of satisfaction from his praises.”
It’s not just the dishonesty of the compliment but that the compliment reminds us of what we might have done: “To us they [his praises] should be more mortifying than any censure, and should perpetually call to our minds, the most humbling of all reflections, the reflection of what we ought to be, but what we are not.”
To be loved without being lovely-to be praised without being praiseworthy-is a temptation for the weak and foolish person, not the wise one. Smith is encouraging us to strive for harmony between our inner self and our outer self. We may be tempted at times to be loved without actually being lovely. The wise man, says Smith, avoids that temptation.
By “unmerited praise” Smith means praise that is simply mistakenmy admirers thought I was someone who I am not. I know better, so ideally I correct the mistake.
Detecting Flattery:
Once you realize the importance people place on being loved and lovely, you become a little better at detecting strategic flattery. And you’re less likely, perhaps, to indulge in it yourself.
Perhaps the biggest challenge we face isn’t detecting false praise from others. Our biggest challenge comes from ourselves. We so much want to be lovely that we can convince ourselves of our loveliness when the reality is otherwise. The wise man may reject the praise he does not deserve. But it’s so hard to be wise. And it’s our own praise that’s hardest to reject.
Chapter 4 – How Not to Fool Yourself
Doing the right thing:
So many times we have to choose between what is pleasant or good for us and what an impartial spectator would see as the right thing to do. A consulting opportunity comes along that isn’t as legitimate as you’d like-taking the job means betraying a principle using a measurement technique that you know is somewhat suspect. But maybe it seems like only a small betrayal-it’s really no big deal, you tell yourselfand the opportunity is large.
What are you willing to give up in order to be lovely? Then there are the smaller decisions we face.
What we think of as “small decisions,” are really not so small. Day by day, they add up to a life. How do we handle these choices? We want to be lovely. But being lovely can be hardso hard that all of us know of times, maybe many times, when we fall short of the standard that an impartial spectator would demand or that we like to think we demand of ourselves. We often fail to live up to the ideals we champion and the principles we claim to embrace. How does Smith reconcile these failings, large and small, with his claim that we desire to be lovely?
Deceiving ourselves:
Adam Smith had a different idea of why we fail to live up to the standards an impartial spectator might set or the standards of the people around us whose respect and affection we’d like to earn: we are prone to self-deception.
Smith says we are not always “quite candid” when we reflect on our past behavior. An honest assessment of our behavior is often too hard to bear:
It is so disagreeable to think ill of ourselves, that we often purposely turn away our view from those circumstances which might render that judgment unfavourable.
To rephrase Smith’s original line about being loved and lovely, we want not only to be loved, we want to think of ourselves as lovely. Rather than see ourselves as we truly are, we see ourselves as we would like to be. Selfdeception can be more comforting than self-knowledge. We like to fool ourselves.
Confronting our frailty and our failings can be too painful. So, yes, we avoid situations in which we are forced to confront our shortcomings. It’s much more pleasant to delude ourselves. We are all cowards to some degree when it comes to self-awareness.
We may be overly sensitive to our physical deformities or even the slightest physical imperfections when we look in the mirror. Our eyes are drawn to those shortcomings the way a sore tooth attracts the tongue. But our moral failings? My failings as a husband, as a father, or a son or a friend? There is apparently no mirror for those. Most of the time, I’d rather not look.
Smith’s view of self-deception, of overestimating one’s merits, was decidedly negative: “This self-deceit, this fatal weakness of mankind, is the source of half the disorders of human life. If we saw ourselves in the light in which others see us, or in which they would see us if they knew all, a reformation would generally be unavoidable. We could not otherwise endure the sight.”
Seeing Flaws in Others:
You aren’t as lovely as you think you are. I’m not as lovely as I think I am. Our inability to face this reality, our desire to see ourselves as lovely, as more lovely than we truly are, keeps us from repairing our behavior. Self-deception makes us think we’re lovely when we’re not. Self-deception lulls me into thinking I’m virtuous when I am not. Not surprisingly, we find it much easier to see the moral imperfections in others than our own shortcomings. Smith is warning us about that asymmetry.
He said that we notice the flaws in those around us to remind us of our own flaws and to spur us to selfimprovement. Our flawed neighbors are the mirror that allows us to see our own imperfections and ideally to remedy them. So when you see the annoyance of a co-worker over something trivial, instead of being surprised that he or she is so sensitive to so minor a slight, ask yourself if there are times when you get annoyed over something silly and unimportant.
Our continual observations upon the conduct of others, insensibly lead us to form to ourselves certain general rules concerning what is fit and proper either to be done or to be avoided.
How Selflessness is often Selfish:
Those general rules can mute our self interested passions and give our conscience a fighting chance against our self-love. We see people choosing a path of behaviour, and we notice how that behaviour is judged by others. If it is judged negatively, that encourages us to avoid it. If it is judged positively, we are encouraged to engage in that action ourselves:
Once you’ve noticed this strange logical inversion-what seems good for me is actually good for you!-you start to notice it more often. You can see it in daily life when you call someone who isn’t as interested in your latest story as you are in telling it. “I’ll let you go,” they say. What they really mean is that they have to go.
I used to think the reason people use selfless-sounding language to describe what are in fact selfish actions is to make others think they’re selfless. It’s a form of advertising. We want to be loved, so we couch our desires in a selfless form. We cloak our selfishness in something that looks more like kindness.
But Smith presents another possibility: we say these things not only to convince others but also to convince ourselves. We fool ourselves into thinking we’re lovely when we’re not. We do what’s best for ourselves but convince ourselves that our motivation is for others. We fool ourselves because we have such a powerful urge to consider ourselves to be lovely
So why do we fall short of our ideals?
According to Smith, our behavior sometimes falls short of our ideals not because we’re bad people and not because our self-interest outweighs our benevolence, but because we don’t realize we’re not living up to our ideals. It’s hard to say which idea is more depressing-that we fail to be lovely because we aren’t lovely or because we’ve fooled ourselves into thinking we are. We not only hide our deformities behind the mysterious veil of self-delusion-we transform our deformities into virtues. That’s how hard it is for us to face the impartial spectator
All the evidence we notice and remember confirms our views. Everything else is ignored or forgottenor, better, dismissed based on flaws in the analysis. A reader of mine, Sam Thomsen, said it very well: “The Universe is full of dots. Connect the right ones and you can draw anything. The important question is not whether the dots you picked are really there, but why you chose to ignore all the others. Too often, that’s what we do-we draw pretty pictures and ignore the missing dots, the congratulate ourselves on our artistry.”
As Russ Roberts has gotten older, he has become less confident and maybe more honest. The economy is too complex; we can’t measure the interactions of all its various pieces with any precision. We don’t have enough data, and we don’t understand how things fit together. We are drunks looking for our lost keys under a lamppost not because that’s where we lost our keys but because that’s where the light is. We should be humbler and more honest. Our empirical studies are very imperfect. We often hold the views we do because of ideology and principle. Then we find some evidence that supports those views. We ignore the rest.
Summary:
We want to see ourselves as lovely. We all live some version of the narrative fallacy, censoring the parts of our life’s story that we don’t like seeing.
Smith alerts us to a flaw in our nature-our desire to be lovely can be so strong that we ignore any evidence to the contrary. We can fool ourselves into thinking we are lovely when we’re not. But we don’t just struggle to be lovely and to perceive ourselves honestly. Smith also argues that our desire to be loved has its own pitfalls.
Chapter 5 – How to Be Loved
The Theory of Moral Sentiments about happiness: “What can be added to the happiness of the man who is in health, who is out of debt, and has a clear conscience.”
Smith makes it abundantly clear that money and fame don’t lead to happiness. What leads to happiness is being loved and being lovely. Money and fame just don’t seem to fit into that equation.
Money and Fame:
Sometimes money seduces us and encourages us to do things we know deep down aren’t what we really want. A lot of ink has been spilled reminding us that the rat race is run by rats. But sometimes the rat inside us takes charge, and we find ourselves running the maze, looking for a bigger piece of cheese.
Smith says we naturally desire not only to be loved but also to be lovely. How does he reconcile this claim with what seems to be what we really desire-fame and fortune? Aren’t those the two urges that drive us?
Smith has an answer, and to get to it, we need to understand just how negative he is about ambition and the drive for fame and fortune. Let’s start with the fortune part.
In The Theory of Moral Sentiments, Smith recalls a story from Plutarch’s Lives that may shed light on my friend’s inability to quit his job. It’s the story of Pyrrhus, the king of Epirus, a region of Greece. Pyrrhus is planning an attack on Rome. His trusted adviser, Cineas-Smith him calls the king’s “favorite”-thinks it’s a bad idea. Cineas is an impressive guy, a brilliant wordsmith and negotiator whom the king often uses to represent himself. But even though he has the trust and ear of the king, it’s usually not a great idea to tell the king he’s making a mistake, even when you’re a favorite of his, so Cineas takes a roundabout approach. Here’s how Cineas begins in Plutarch’s version:
The Romans, sir, are reported to be great warriors and conquerors of many warlike nations; if God permits us to overcome them, how should we use our victory?”
Well, says Pyrrhus, once we conquer Rome, we’ll be able to subdue all of Italy. And then what? asks Cineas.
Sicily would be conquered next. And then what? asks Cineas. Libya and Carthage would be next to fall. And then what? asks Cineas. Then all of Greece, says the king. And what shall we do then? asks Cineas. Pyrrhus answers, smiling:
“We will live at our ease, my dear friend, and drink all day, and divert ourselves with pleasant conversation.” Then Cineas brings down the hammer on the king: “And what hinders Your Majesty from doing so now?” The moral? We have all the tools of contentment at hand already.
Things and Gadgets:
Adam Smith said no-things don’t make us happy. But at the same time, he understood the seductive appeal of toys and gadgets. Though he lived two centuries before Apple’s founder Steve Jobs, Smith understood the weird sensation that you are missing out because you don’t have the new iPad with Retina display or a lime-green magnetic cover or a video camera. My iPad-the first model-doesn’t even have a camera that takes still shots! I should upgrade, don’t you think.
Smith couldn’t imagine a twenty-first-century machine-a robot on an assembly line, or an electric razor. But his insights into technology are surprisingly prescient. He understood the human desire to make life easier, better, faster. And he also understood the seductive appeal of machines, and that ear pickers and nail clippers may not always deliver on their promise of excitement and novelty. But we want them anyway, and we look for ways to make them more effective and more elegant.
Then Smith really opens fire on the gadget lovers: “How many people ruin themselves by laying out money on trinkets of frivolous utility? What pleases these lovers of toys is not so much the utility, as the aptness of the machines which are fitted to promote it. All their pockets are stuffed with little conveniencies. They contrive new pockets, unknown in the clothes of other people, in order to carry a greater number.”
The real problem I have with my gadgets is keeping them from taking over my life. Just keeping their batteries charged and keeping track of the chargers and cords and cases is time-consuming enough. But the real challenge is the temptation to spend too much time in the virtual world rather than the real one, compulsively seeking the modest dopamine rush of a new e-mail or three versus connecting in a more vivid way with the human being next to me.
Smith blamed ambition for our urge for the newest device and the false belief that newer equals happier:“The great source of both the misery and disorders of human life, seems to arise from over-rating the difference between one permanent situation and another.” The grass on the other side of the fence often appears greener. We imagine we’d be happier if only we were richer or more famous or had a better job. Greed, ambition, and vanity are how Smith characterizes the vices that push us toward dissatisfaction with what we already have.
Success, Fame and Being Loved:
Smith sees nothing wrong with what we moderns call success. It’s the passionate pursuit of success that corrodes the soul, in Smith’s view. If they rarely make us much happier, if at all, why take the chance? How does Smith explain our pursuit of so many unhealthy goals?
One answer is that we are simply mistaken or ignorant we think that being rich and famous will indeed make us happy. But Smith sees something more pernicious at work, and it comes from our desire to be loved and lovely.
Remember that Smith uses the word loved to encompass not just romantic love. When he says we want to be loved, he means paid attention to, liked, respected, honored. We want to matter. We want people to notice us, to think highly of us. Smith notes that the world pays attention to rich and famous and powerful people and not necessarily to wise and virtuous people.
We sometimes think celebrity is a modern invention chronicled by People magazine and propagated through cable television or YouTube. Certainly, we moderns have a special flair when it comes to celebrity. More and more people get fifteen minutes of fame, and the durable celebritiesthe movie stars and singers and athletes-have a level of exposure that is unparalleled. But there is nothing new under the sun, as the author of Ecclesiastes understood long ago. The obsession of the masses with the rich and famous is a very old phenomenon.
There is something ineffable about fame that draws us to it. Maybe Smith’s insight into our desire to be loved is part of the answer. Somehow, being near people who are loved is exhilarating. For Smith, the pursuits of money, fame, or power were all part of the same temptationvarious paths to being loved, paths to being relevant and noticed by others. It is the attention paid that motivates people to seek wealth.
The Drug of Celebrity:
Smith is saying is that we live vicariously through the famous. Using our imagination, we put ourselves in their shoes and get a taste of what they must be feeling-their joy and exultation, emotions that we imagine accompany their nearly perfect life. One of the ways the rich and famous are loved is that people pay attention to their pronouncements even when there is little or no expertise or understanding behind them. We listen anyway. We can’t look away.
Smith argues that if you want to be rich and famous, powerful and successful, you have to give up leisure and ease and careless security forever. And you have to toil and have anxiety and endure “mortifications”-pain and shame-if you want to make it. You have to work hard. You have to give up tranquillity. In return you get a great deal of attention. People want to know what you think, they look to you for how to dress and speak and behave. When you enter a room, all eyes are on you. And the envy and admiration that everyone else has for the great makes the price that is paid worthwhile, at least in the eyes of many.
It must be a terrible drug, the drug of celebrity. Once you have been famous, once you have been not just respected by the masses but adored, the normal pleasures of life no longer satisfy.
Chapter 6 – How to Be Lovely
Smith’s prescription for happiness is a simple formula. To be content, you need to be loved and to be lovely. You need to be respected and respectable. You need to be praised and praiseworthy. You need to matter to other people, and you need for their image of you to be the real you-you need to earn their respect and honor and admiration honestly. There are two ways to be loved. You can be rich and famous. Or you can be wise and virtuous
Becoming Socialised (social reactions):
Most of us, in our daily lives, encourage proper and appropriate behavior. Telling our children that some behavior or other is inappropriate is the modern mantra of parental disapproval. And we raise our kids that way because we understand how important it is to meet the expectations of the people around us. We teach our children to say “please” and “thank you.” We teach them the difference between an indoor voice and an outdoor voice. We teach them to eat somewhat graciously.
Meeting expectations of what is proper allows those around us to interact with us effectively and, more than that, with grace and style and pleasure. Propriety is about playing your part in the human symphony. There can be solos and improvisation, but these novelties work best when they take place in expected ways
Smith’s discussion of propriety is less about fashion and etiquette and more about our emotions and our reactions to the emotions of others-our ability to be sympathetic or unsympathetic to the emotions and experiences of those around us. Smith focuses on how we approve or disapprove of other people’s behavior depending on whether their reactions match ours. So if you roar at a joke that I also find hilarious, I approve of your laughter. If you cry at a tragedy that also breaks my heart, I approve. You’re crazy about that new pop song and I can’t get it out of my head either that’s perfect. But in other cases, our reactions may not match. In those cases, when our responses are so out of sync, says Smith, we disapprove. Propriety is about matching our responses to those around us.
Excessive grief or inadequate grief embarrasses us and makes us uncomfortable. When a political scandal is in the news and our friends take a different perspective, it makes us uneasy and sometimes angry. And the greater the gap between my sentiments and yours, the more you and I will disapprove of each other’s reactions, seeing them as improper. We prefer harmony in our mutual sentiments to disharmony. This idea of harmony-of the matching of my reactions to yours, and vice versa-runs through Smith’s discussion of emotions and social interactions.
Humans – The slightly sympathetic animal:
Because of our lack of sympathy, Smith says it’s common for people to hide their vexation or annoyance at small inconveniences or even to make fun of themselves over what they’ve endured. We don’t look for sympathy in those situations. We make light of what we’ve experienced, beating our friends to the punch and showing that such “uneasinesses” are no big deal to us. We’re made of sterner stuff. Some of my favorite stories are the ones my brother tells me about his travel troubles. He doesn’t complain about them. He turns them into comedy routines.
Despite the transitory nature of our sympathy with the suffering of others, Smith concludes that we have just the right amount of concern for others. If we had more, we would find life difficult to bear. Less, and we would be unable to comfort our friends in hard times: Nature, it seems, when she loaded us with our own sorrows, thought that they were enough, and therefore did not command us to take any further share in those of others, than what was necessary to prompt us to relieve them. We have enough troubles of our own. Taking on the suffer ing of others in full measure would be too hard. Our ability to sympathise with others is limited. But that limited amount is enough to bring them consolation.
It is because mankind are disposed to sympathize more entirely with our joy than with our sorrow, that we make parade of our riches, and conceal our poverty. Nothing is so mortifying as to be obliged to expose our distress to the view of the public, and to feel, that though our situation is open to the eyes of all mankind, no mortal conceives for us the half of what we suffer. Nay, it is chiefly from this regard to the sentiments of mankind, that we pursue riches and avoid poverty
Acting with propriety is one measure of what Smith would call a gentleman. Propriety-that is, acting properly gains you the approval of those around you, says Smith. But it is not admired or celebrated. For admiration and celebration, you need virtue.
Chapter 7 – How to Be Good
Smith encourages us to be virtuous as the better way to being loved. But what exactly does Smith mean by virtue? Virtue is multifaceted for Smith, but his big three are prudence, justice, and beneficence. These are the traits that make us lovely and that in turn make us respected and admired by those around us-the traits that make us loved. What does Smith mean by prudence, justice, and beneficence?
Prudence:
For Smith, prudence means, in modern terms, taking care of yourself, justice means not hurting others, and beneficence means being good to others. The prudent man is genuine. He is modest about his skills and successes. A simpler way to capture Smith’s advice is “Say little, do much.”
Another quote to capture the essentiel of prudence, smith said: ‘His conversation is simple and modest, and he is averse to all the quackish arts by which other people so frequently thrust themselves into public notice and reputation.’
We don’t know the quackish arts of self-promotion were in Smith’s time. Today, we use Twitter and Facebook and blogging and various public relations stunts to gain attention for our products, our ideas, and ourselves. Are these quackish arts lacking in virtue for their imprudence? Certainly relentless self-promotion can feel demeaning. And the narcissism of our day likely surpasses the worst excesses of Smith’s. That leaves the modern man and woman with a challenge. How do you maintain your dignity in an increasingly undignified world?
Maintaining your dignity becomes a matter of style and balance. The question is how to say “Look at me” in the most prudent and dignified way. For starters, don’t lie or embellish. Don’t exaggerate your achievements or qualifications. Don’t give yourself a degree you haven’t earned or claim a tour of duty in Vietnam that never happened.
Justice:
One way Smith talks about justice is by invoking the impartial spectator’s view of our behavior. In a lengthy passage, he gives an eloquent vision of how we are perceived when we act unjustly. He starts by explaining that the only justification that people accept for hurting someone is to avenge or punish harm:
‘There can be no proper motive for hurting our neighbour, there can be no incitement to do evil to another, which mankind will go along with, except just indignation for evil which that other has done to us.’
Our self-love may encourage us to play dirty in order to finish ahead of someone else. But when we see ourselves through the eyes of the impartial spectator, we know it’s wrong.
Once we start to think that the rules of justice can be ignored in special circumstances, we are no longer trustworthy, and we become capable of the greatest villainy. Smith gives two examples-the thief and the adulterer-of how such rationalisation can get us in trouble.
Beneficence:
Smith sees the role of norms and the “general rules” of morality that we learn from the world around us as a way for us to bolster the voice of the impartial spectator when our passions conflict with what we know is right.
Smith understands something deep about human nature with this warning. Hard-and-fast rules are easier to keep than rules that are slightly relaxed. The opposite should be true. You’d think abstinence would be much harder to keep than moderation. Yet it is much easier to give up potato chips than to eat just one. Or a few.
Virtuous behavior is like good writing. We know it when we see it, but it is not easily taught or described with any precision. I don’t think Smith says it explicitly, but the imprecision of the rules of beneficence is what makes being good so daunting.
Chapter 8 – How to Make the World a Better Place
Even if you are totally selfless and your only goal is to maximize your impact on the world, it’s hard to know the most productive use of your time and effort. And how do you make sure that what you think is productive actually does make the world better? Sometimes, those good intentions pave a road to a very hot place. How do we avoid unintended consequences from our actions that darken our world instead of brightening it?
Spontaneous Order:
F. A. Hayek is perhaps known best for his intellectual battle with John Maynard Keynes over the business cycle and what causes the economy to sputter. He is less known for his writing on the topic of unplanned order emerging out of complex interactions. Hayek frequently used the phrase “spontaneous order,” in which spontaneous means unplanned. But spontaneous also has other meanings that are quite different. I prefer the phrase emergent order to describe social phenomena that emerge from the complex interactions of individuals and that have an orderliness and logic to them even though they are not designed consciously by any individual.
Thinking clearly about the complex interaction of individual actions that lead to unintended patterns of predictable and orderly outcomes is, as russ Roberts believes, the single deepest contribution of economics to understanding how the world works. Ironically, Smith’s most eloquent description of this phenomenon is not in The Wealth of Nations, his “economics” book, but in The Theory of Moral Sentiments, his “philosophy” book. And the example he uses is not a monetary phenomenon but a moral one.
In The Theory of Moral Sentiments, Smith describes how individual choices can lead to important social outcomes. He’s talking about something more important than the price of apples. He’s describing the role each of us plays in creating a moral society. You can even make the bolder claim that he is describing the role that each of us plays in creating our civilization, the society that many of us are fortunate enough to live in, which, despite its immense imperfections, is many steps above savagery.
Proper and improper behaviour:
We often know what is proper and what is improper. We know what people consider to be the minimum standard and what it takes to go beyond propriety. It is as if there are rules of social interaction that go way beyond what we call etiquette-which fork to use and when a thank-you note via e-mail is acceptable.
Where do these rules come from? Who decides what is proper behavior and what is improper?
Adam Smith’s answer is that we decide what is proper and improper, what is virtuous and what is not. We decide these things-the basis for morality and civilization-in the same way we decide what is acceptable English. All the norms that overlay our daily interactions-the trust, the empathy, the respect, the disdain, the rejection, the kindness, the cruelty-all these patterns of behavior around us come from all our actions together in a similar way that language usage is “decided” by all our individual actions together.
These urges and inclinations are feedback loops that have the potential to create a civilized society. Good behavior is encouraged by approval. Bad behavior is discouraged by disapproval. Those are the incentives created by those around us-the actual spectators of our actions. Then there is the internal regulator we carry with us, the “man within the breast,” our self-awareness of our own loveliness or lack of loveliness. This internal guideactivated by our imagining of an impartial spectator-is an additional thermostat. The pride we feel when we are lovely encourages good behavior, and our shame when we behave badly discourages bad behavior.
How well does the system work? Very imperfectly. But it sometimes works much better than a system of explicit external punishment by a police force.
We collectively become what we value:
Smith’s point is that civilization is sustained to a great extent by a decentralized system of feedback similar to how we come to our views on how to treat our children when they misbehave. Social feedback that we give and receive influences how we behave and how others behave in response to our reactions.
The virtues of courtesy and kindness and thoughtfulness and compassion and honor and integrity are the virtues we celebrate and applaud. There’s no way to legislate these kinds of behavior. They are loose, vague, and indeterminate. They fall under the category of beneficence. No statute could be written to enforce them or to punish their opposites. They are best encouraged-and their opposites discouraged-by human interaction
Yes, we have a legal system that legislates against the worst crimes, such as theft and murder. But our conscience keeps most of us on the straight and narrow. More important, there are cruel and selfish behaviors we don’t indulge because norms and culture vilify those behaviors, without legislation.
To commit those acts of cruelty or selfishness is to risk not prison or a fine, but the disapproval of those whose approval we desire-our friends and family, along with our colleagues and acquaintances. And ourselves, ultimately, through our desire to be lovely rather than unlovely.
This world of decent behavior doesn’t have to be created by someone’s intention or exhortation. Creating it comes naturally through the signals of approval and disapproval we send to each other and through the admonitions we give to our children. Sustaining it comes naturally.
How to make the world a better place:
We need to be lovely even when we can get away with not being lovely. When we act poorly, when we take advantage of someone else, when we are cruel, we make the world a little less civilized. But we also have a part to play in encouraging others to behave well and to discourage others from behaving badly. And that is to honor those who are honorable and to dishonor those who are dishonourable.
When we honor bad people or avoid good people, we are playing a role in degrading the world around us. It’s a small role, almost negligible. But together, our combined actions are decisive. Each step we take away from loveliness is a step away from civilization. As more and more of us take those steps, our seemingly negligible actions are no longer negligible. Through our actions, we create the norms and rules of what is attractive and what is unattractive.
One important characteristic of civilization is trust. When you can trust the people you deal with-when you don’t have to fear that your trust will be exploited for someone else’s gain-life is lovelier and economic life is much easier. How does trust get created? By the myriad small interactions we have with each other when we honor our word and pass up the chance for opportunism.
Chapter 9 – How Not to Make the World a Better Place
Idealism and Utopia:
But Smith reserved his greatest disdain for what, in The Theory of Moral Sentiments, he called the man of system, the leader with a scheme to remake society according to some master plan or vision. He warned that such people fall in love with their vision of the ideal society and lose the ability to imagine any deviation from that perfection. They are blind to those who are harmed by that vision or harmed by its implementation.
Many of the world’s policy failures fall into this Chessboard Fallacy, the consequences of attempting to improve or manipulate people who don’t necessarily want to be improved or manipulated.
The independence of the chess pieces and their desire to go their own ways, ways that the rest of us often cannot fully understand, also reminds us that not all legislation achieves what its proponents intend or claim to intend. Not all legislation is obeyed. Not all legislation is enforced. The fact that legislation is passed does not mean that the problem it addresses is solved. Sometimes the legislation makes the problem worse or masks side effects that benefit self-interested parties.
Chapter 10 – How to Live in the Modern World
Growing Distance:
What we call civilization-the comforts of heat, electricity, transportation, medical care, communication, and everything elserequires us to interact with millions of people on a daily basis whom we can never meet or know. Our modern form of economic activity is very different from that of our ancestors. It requires a very different set of social norms and legal institutions that allows us to transact with each other.
In The Theory of Moral Sentiments, Smith argues that we care more about the people around us than we do about others who are farther away. That’s why you can sleep well when millions die in an earthquake on the other side of the world. An earthquake across town is a different matter.
In The Wealth of Nations, Smith is writing about how we behave in a world of impersonal exchange, which is inevitably a world of strangers.
If I cannot see the people I truck, barter, and exchange with, it’s hard to care about them. I may care a little; I may pay a premium for a cup of coffee hoping that the people who grew the beans are making a little more money than they otherwise would. But, in general, my interactions are almost, by their very nature, self interested.
The Two Spheres of Life:
Writing in The Wealth of Nations, Smith was interested in how people behave when they trade at a distance. He wasn’t just writing about trade with foreigners, though a good chunk of the book is about what we call international trade. He was writing about all kinds of trade with strangers, both within our borders and outside them. When one is thinking and writing about that world, it is best to assume that people are primarily selfinterested. And so The Wealth of Nations is a book that deals with our self-interested side. But our interactions with others go far beyond the commercial and the material. We have various circles of friends and family associated with our work, our hobbies, and all the ways we join with others to create community and recreation, pleasure and meaning in our lives
The Theory of Moral Sentiments simply has a different focus from that of The Wealth of Nations. It doesn’t represent a different view of human nature or a different theory of how people behave or a more optimistic vision of humanity. It’s about a different sphere of human interaction. The author of The Theory of Moral Sentiments and The Wealth of Nations is the same man with a consistent view of humanity. He is mostly interested in how people actually behave, not how he’d like them to behave. He’s interested in understanding human behavior.
So in the two books the emphases are different because he is writing about two very different spheres of life.
At the same time that we begin adult life-interacting with a landlord, an employer, business competitors-we’re often starting a family. Once again, we see a stark contrast between the loving world of a spouse and children, where everything is shared and cooperation is generated by love, and the less friendly world of work, where cooperation is generated by the potential for profit and the fear of loss.
These are two different worlds. Nothing really prepares us for the differences. As F. A. Hayek pointed out in The Fatal Conceit, a modern person has to inhabit two worlds at the same time-a world that is intimate and a world that is distant, a world that is held together by love and a world that is held together by prices and monetary incentives.
Smith felt that we cannot extend the love and concern (both selfless and self-interested) beyond our immediate circle of friends and associates. We can only pretend to do so. Whether that pretense is a noble ideal or a dangerous urge is an unanswerable question.
Our economic system has to be an impersonal system if it is to continue to deliver the life-transforming and life affirming gifts of better health, better music, and opportunities to interact with people all over the world. We may wish it to be otherwise. But in a world of specialisation, strangers have to play a big role in our lives. And that’s OK. Fortunately, I don’t have to love the CEO of the company that makes a heart valve or the car that gets forty miles to the gallon or my iPhone. And those CEOs don’t have to love me either. They make my life better and more interesting even though they will never see me or feel for me the way my family does.