An Interview with Adam Smith: Part 1*

essay impartial spectator system of natural liberty happiness unintended consequences adam smith biography economic growth free trade monopoly moral sentiments self interest self love interview human exchange sectarianism

Alejandra Salinas for AdamSmithWorks

This text presents Smith’s ideas in the manner of an imaginary dialogue or interview with a contemporary person, where Smith answers the questions of our time (formulated here in the voice of the interlocutor) mainly on the basis of the arguments put forward in his writings

December 16, 2020
The work of Adam Smith (1723-1790) offers a set of ideas in defense of the principles, norms, and institutions that make possible life in a free society. His thought is anchored in the recognition of the equal dignity and freedom of persons, the moral and economic superiority of market processes, an ethics of work, and the need to limit the action of governments in order to protect the system of natural liberty.

This text presents Smith’s ideas in the manner of an imaginary dialogue or interview with a contemporary person, where Smith answers the questions of our time (formulated here in the voice of the interlocutor) mainly on the basis of the arguments put forward in his writings. The purpose of this dialogue form is twofold: on the one hand, to ease the reading of the presentation by sequencing it into questions and answers structured by topic, and on the other hand to introduce the reader to a variety of fundamental reflections on the characteristics and dynamics of social processes.

Part I: Smith’s General Approach[1] 

You have analyzed with great detail many topics of current interest in the study of modern societies. How would you summarize the focus of your work?

Well, I find it quite difficult to summarize my approach in only one answer, but I will try nevertheless. Over time I have studied the relation between the moral, social, political, and economic aspects of the interactions that take place in modern societies. I turned those ideas into a body of writings where I describe, evaluate, and recommend certain courses of action so that social life is orderly, enjoyable, prosperous, and most importantly, free.

I was always attracted to the idea of organizing all knowledge through a few simple principles. Some of those who follow this method often turn to a single fundamental principle to address what is difficult for us to know. In my case, I have tried to connect various social phenomena in a “systematical arrangement” that acknowledges and explains an underlying order to a complex human reality.[1]

What kind of social phenomena do you have in mind?

I am particularly interested in the exploration of the origins of moral norms, the causes of a sustained creation of wealth, and the limited role of governments. My studies have been published under the titles The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations.

The guiding principle of these works is the “liberal plan of equality, liberty and justice,” which I also call “the system of natural liberty” or “the cause of truth, liberty and justice.”[2] According to this principle all people must be treated as free and morally equal beings, and their rights have to be protected. Throughout my work I analyze the motivations, social practices, and laws and institutions that give origin and configuration to the system of liberty thus understood. To put it simply, I argue that liberty, security, and justice should never be obstructed nor destroyed by governments.[3]

Could you please analyze any of the basic arguments of your work?

Well, I would like to refer first to the phenomenon of human exchange, and to the recognition of the unintended consequences of that exchange. If we stop to observe, only human beings exchange words, gestures, sentiments, and things between them, based on the different motivations that drive them to interact. In the economic sphere, a propensity or general tendency leads us to obtain what we expect and need from others, and to offer them what they seek. Since we cannot produce everything we wish to consume, we exchange most of the desired things with others, and we seek each other’s help. The way to do it is by delivering what one person produces and by buying what is produced by others.[4]

In your view, is economic exchange the most relevant aspect of social life, as other authors think?

That would be a kind of reductionism, wouldn’t it? Far from it, I am equally interested in analyzing other motivations behind social exchanges in order to explain the regularities and characteristics of individual sentiments, decisions, and actions. Many of the latter are also guided by the desire to receive or –better still- be worthy of social approbation, and by the achievement of honor and greatness, besides taking care of increasing personal wealth. It is only in regard to the latter that the processes of economic exchanges emerge.[5]

Would you please illustrate this last idea with an example from daily life?

Sure! Let me reproduce a paragraph from my book to illustrate how economic exchanges proceed: “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 self-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” [6]

The recognition of the underlying self-interest in economic exchanges leads us to think about the most appropriate conditions to develop these exchanges, and thus to cooperate among all in order to live better. The set of norms, institutions and public policies that protect the most suitable conditions to achieve this goal is what I call the system of natural liberty.

Before going deeper into the analysis, I would like to remind you that there are those who have criticized what they considered to be an uninhibited pursuit of self-interest. How would you reply to that critique?

The pursuit of self-interest is an undeniable fact of reality, and refers to the disposition that moves millions of people to embark on social exchanges that are mutually beneficial. Those who find in the word “interest” a negative connotation and refuse to accept it should note that in the quotation above mentioned I use the expression “self love” as equivalent. Both terms refer to the individual motivation to find the best possible way to ensure material well-being. Contrary to what some people erroneously think, I never said self-interest was an “uninhibited” disposition, one without moral limits. That is a fallacy used by superficial or prejudiced critics.

In my model, merchants and consumers make exchanges within the conditions imposed by the “rules of a fair game.” These rules set limits on what a person can do with the rights of others. That is, they prevent the pursuit of self-interest from being “uninhibited.” Everyone is free to engage in as many exchanges as they want, as long as they keep in mind that the violation of those rules is completely unacceptable. [7]

On the other hand, it should be noted that, curiously, those who criticize self-interest overlook the existence of other kinds of uninhibited pursuits also analyzed in my work. Unlike self-interest, which uses free and voluntary individual exchanges as the only path to progress, the “private interests” impairing those exchanges are actually the real agents of social harm.

In which specific ways do special interests disrupt the social order?

They are “subject to the wretched spirit of monopoly” and choose to operate through privileges granted by the government, the consequence of which is an inefficient use of productive resources. So it is important to distinguish between two kinds of interests: those operating within the rules of a fair game, and those operating outside those rules. The latter are even worse than public prejudices because they are more difficult to combat. [8]

Since minority groups close to political power try to influence it in search of sectarian privileges, those who desire to impair the growth of “uninhibited” self-interest should direct their criticism against those groups, and also against the politicians who grant them concessions and favors.

This last observation is interesting, as it anticipates contemporary Public Choice literature according to which political decisions in a democracy tend to be influenced by active minorities. I regret we do not have enough time to elaborate on this important topic. Let's talk now about a different issue, that of the “unintended consequences” of free trade. What does that expression refer to?

The theory of the prevalence of unintended consequences of human actions is a construction shared with other authors of my time. The core idea is that exchanges between people produce results that are not part of the initial individual intention. In the case of free and voluntary exchanges, when trying to satisfy our interests within the rules of fair play, a general social benefit is indirectly promoted. This general benefit is twofold: it allows for a better use and a greater distribution of the resources employed by people to improve their condition, and it generates norms and procedures so that those exchanges are carried out in a peaceful and orderly manner. When exchange is free, more benefits are obtained than when people are obliged to interact according to guidelines and regulations imposed by governments.

I find the notion of unintended consequences quite difficult to grasp...

Well, it has indeed a relatively high degree of abstraction. Maybe a metaphor can help illustrate it. In my books, I speak of an “invisible hand” in reference to the assignment and distribution of the general benefits that are the indirect results of free exchanges guided by self-interest. These results were not anticipated or desired by individual actors, and in this sense it seems that an “invisible hand” leads people to produce those benefits. This is the case, for example, of the entrepreneurs who freely dispose of their capital to invest, and in doing so achieve better results than if the government indicated to them where and how to invest that capital. It is also the case of “the rich and the powerful” who only intend to satisfy their whims and desires through excessive and luxurious consumption, but indirectly create employment opportunities and promote the general interest by generating resources to meet the needs of the less well off.[9]

Just to be a little bit more specific: what are the main positive aspects of those unintended consequences?

We could point out two main aspects of the unintended and positive consequences of free trade and industry: on the one hand the progressive extension of markets and their general benefits, and on the other the establishment of norms and institutions that have been adopted throughout history in order to protect economic activities.[10] In the latter sense, just as the growing production and distribution of things is an unintended consequence of free individual actions, many of the social institutions are also the unintended result of decisions and practices that have evolved over time. 

In other words: in modern societies, customs, norms, and institutions were adopted that are not the result of established human designs with specific objectives and parameters, but rather the unintentional result of millions of human interactions guided by particular sentiments, needs, and inclinations, which converge in a cooperative social order and in increasing overall progress and well-being.

Besides economic growth, is your analysis extendible to other areas of social life, such as morality? Could you elaborate on your moral theory?

Indeed, just as there are beneficial economic exchanges, there are also moral exchanges generated from sentiments and attitudes towards others, which allow people to relate to each other in the appropriate ways, and thereby ensure a relatively harmonious social life. There is a sentence that I would like to quote here: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. .”[11] 

This must be read in conjunction with the previous quotation on the need to resort to the services provided by the butcher, the brewer, and the baker. Just as people care about their self-preservation and material prosperity to obtain what they seek in the market, they also care about their moral well-being. Thus they exchange with others the proper expression of respect, care, and consideration required in each particular case.

How do we evaluate if the sentiments and actions shown towards each other are of the “proper” kind?

Here, again, a metaphor can be useful. The “impartial spectator” refers in part to the voice of individual conscience, which puts limits on our self-esteem and indicates the course of action more appropriate to follow. That voice tells us that we should not “prefer ourselves so shamefully and so blindly to others.”[12] What the impartial spectator recommends us to do, as well as what she recommends us to avoid, gradually becomes a set of shared social practices, embodied in certain norms of social behavior. For example, in the face of damages caused by an act of injustice, the impartial spectator indicates that the victim’s resentment should not become blind revenge, but it also forces society to apply the proper amount of punishment and avoid remission as a rule.

The sentiments and actions related to one’s own happiness (and others’ happiness as well) that receive social approval become moral norms, and over time some of the latter become the laws and institutions that hold societies together. 

Apologies for the interruption, but when you talk about happiness, what do you mean?

Well, happiness could be defined as tranquility in joy. Thus understood, it is a mental and emotional quality. It consists, on the one hand, in the tranquility and individual enjoyment of possessing sufficient means for self-preservation. On the other hand, it also consists in the tranquility of knowing we are esteemed and even “beloved” by others.[13] I believe that the first duty of an adult person is to take care of one’s own happiness and that of one’s family, friends, and co-nationals, since the attainment of universal happiness is beyond our limited human possibilities.[14]

Needless to say, we all want to achieve happiness. People use economic and moral exchanges that provide them with the means or tools to do so in diverse ways. I must add here that the institution of government has a role to play: its duty is to protect the necessary conditions for these exchanges to take place, and thus enable the search for individual happiness while at the same time ensuring general well-being. 

Is happiness a political goal then?

No, happiness is an individual goal. A government must only secure the conditions for the individual pursuit of happiness, which leads to more flourishing and thus, indirectly, to a happier society. A regime that secures such conditions is preferable to other governments that do not do so. In this sense, mine is a comparative effort to describe and evaluate which government is “wiser” than others when it comes to securing general tranquility and happiness. In this sense, political disquisitions “if they are just, and reasonable, and practicable, are of all the works of speculation the most useful.”[15]

Please notice that I have spoken of general happiness as the indirect result of political wisdom. Along this line, I would suggest that there can be no happy society if most people are in a “poor and miserable” situation.[16] Therefore, a wise government must also ensure that the right to free exchange is extended to all so that people can provide themselves with basic goods. Those governments that restrict markets, especially the labor market, do not realize that they harm the interests they claim to defend. In the long run, political interventionism is the cause of widespread misery and not of greater happiness.

* This is the unpublished translation of the original essay “Libertad, Ética y Prosperidad: Adam Smith en Diálogo” that received an Honors Mention in the XIV Essay Contest organized by Fundación Caminos de la Libertad (México, 2019).
Herein we use the Glasgow Edition of Smith’s The Theory of Moral Sentiments, An Inquiry into the Nature and Causes of the Wealth of Nations, and Lectures on Jurisprudence (TMS, WN and LJ, respectively). 

[1] WN 768.
[2] WN, 664, 687; TMS 238.
[3] TMS 81, WN 530.
[4] WN 25-28.
[5] TMS 50, 183, 298; WN 454.
[6] WN 26-27; LJ 493.
[7] TMS 83; WN 687.
[8] WN 461, 471.
[9] WN 456; TMS 184.
[10] WN 412.
[11] TMS 9.
[12] TMS 137-138.
[13] TMS 41,166.
[14] TMS 166, 237.
[15] TMS 187, 232.
[16] WN 96.