Adam Smith: Self-Interest and the Partiality of the Moral Sentiments

system of natural liberty what makes nations wealthy? patriotism constitutions distribution of wealth moral sentiments self interest constitutional change moderation french revolution public interest factions

Edward J. Harpham for AdamSmithWorks

February 24, 2021
Adam Smith’s moral and economic thinking can help us grapple with the tensions we face as individuals with conflicting moral commitments grounded in the moral sentiments. For Smith, individuals are committed "first and principally" to looking after themselves. Through the operations of sympathy—the human capacity to share others’ emotions through the imagination—nature implants in the breast of everyone an evolving and ever-present desire to “better one’s condition” from birth to death. Nature also implants in each person affectionate principles that concern them with the well-being of others, including children, family, and close friends. (1982: 219). Finally, natural principles cause individuals to be concerned with the well-being of their own countries and states.
This distinction between natural self-interest and concern for close friends, family and larger social groupings gives rise to an intriguing view of the political life that Smith outlines in the 6th edition of The Theory of Moral Sentiments. A political community is divided into "many different orders and societies, each of which has its own particular powers, privileges, and immunities." Individuals are naturally more attached to their own order and society than to any other in the political community. Consequently, they are "ambitious to extend its privileges and immunities." They also want to defend them "against the encroachments of every other order or society." (1982: 231)
The constitution of a particular political community, in turn, depends upon two things: first, the way in which the society is divided into particular orders and societies; and second, the way in which various "powers, privileges, and immunities" are distributed among specific orders (1982: 230). The stability of a constitution depends upon the ability of each order or society to maintain its own powers, privileges, and immunities against the encroachment of every other. (1982: 230-31). From Smith's perspective, all states are caught in a constitutional dynamic of the moral sentiments that can never be fully resolved. Individuals are naturally disposed to a love of country. But they are naturally more strongly disposed to favor their own interests and the interests and privileges of the order to which they belong. The moral education championed in The Theory of Moral Sentiments teaches individuals that all of the partial affections must ultimately be subordinate to the general interest of the state. Members of a particular order may be called upon to sacrifice certain of their powers, privileges, and immunities for the larger public good of society as a whole. Partiality for one’s own group thus may work to undermine an individual’s commitment to the general public good. The partiality of the moral sentiments has a positive dimension. In checking the spirit of ambition, partiality to ourselves and those close to us "tends to preserve whatever is the established balance among the different orders and societies into which the state is divided” and “contributes in reality to the stability and permanency of the whole system" (1982: 231).
This reading of the partiality of the moral sentiments makes room for looking at the Wealth of Nations not just as a mode of economic reasoning but also of constitutional reasoning. By investigating the nature and distribution of property and the "privileges, powers and immunities" found in the Britain of Smith’s day, the Wealth of Nations can be seen to provide a previously unappreciated insight into the dynamics of constitutional change in modern "civilized" societies. Such an investigation is what political economy is ultimately about for Adam Smith.
Its title to the contrary, the Wealth of Nations is much more than an "Inquiry into the Nature and Causes of the Wealth of Nations." Wealth of Nations actually explains three things: (1) how wealth is created by and distributed among the various orders found in a commercial society, (2) how the self-interest of each order is related to a general public interest in increasing economic growth, and (3) how particular groups of individuals successfully use government to promote their own economic ends, often at the cost of the public good. By offering a systematic investigation of the relationships among individuals' self-interest in various contractual relations and the public interest in economic growth, the Wealth of Nations provides a new way of conceptualizing the political tensions lying at the foundation of all commercial societies.
Smith's discussion of the distribution of wealth in Book I of the Wealth of Nations follows directly out of his analysis of the component parts of the natural price of any commodity. According to Smith, the wealth of a nation ultimately divides itself into three parts: the rent of the land, the wages of labor, and the profits of stock. These parts, in turn, constitute the revenue that goes to three different orders of people that constitute the society, respectively: landlords, wage earners, and merchant-manufacturers. "These are the three great, original and constituent orders of every civilized society, from whose revenue that of every other order is ultimately derived" (1981: 265).
Others before Smith had recognized the important role played by property interests in defining the constitutional life of a nation and had provided a place for a discussion of these interests in their constitutional theory. Smith goes beyond these previous discussions by explaining what those interests are, how they change over time, and how the interest of one order might diverge from the interest of another under different economic circumstances. Smith's theories of rents, wages, and profits clearly delineate how self-interest works through the division of labor and gives individuals belonging to separate orders very different stakes in economic growth.
Landlords and wages earners, for example, prosper as a nation grows wealthier because prosperity causes rents and wages to increase. Conversely, both suffer when a nation grows poorer and its rents fall and wages collapse. The interests of these two orders are thus "strictly and inseparably connected with the general interest of society" (1981: 265). Those who derive their income from profits have no such connection. Indeed, through his economic analysis of profits, Smith explains why the interests of merchants and manufacturers so often diverge from both the public interest and the interest of the other two major groups in society. It is the divergence of this order’s interests that makes Smith suspicious of any policy proposals coming from this group. Smith’s analysis does not defend the interests of the merchant-manufacturing order. It warns us about how they might diverge from the public interest in growth.
Smith's economic theory of distribution highlights two important conclusions derived from political economic reasoning. First, it explains the constitutional meaning of mercantile regulations to the body politic as a whole. Far from mediating between the public interest and self-interest, governmental attempts to direct the economy are seen to be the result of self-interested orders seeking to further their own interests at the expense of other orders and the public as a whole. Mercantile regulations are the clearest expressions of "factions of interest" imposing themselves upon the body politic. "Every such regulation introduces some degree of real disorder into the constitution of the state, which it will be difficult afterwards to cure without occasioning some disorder" (1981: 472).
Second, the theory of distribution explains why the "system of natural liberty," that is, an economic system in which government refrains from getting involved in economic affairs, is the best way to guarantee economic prosperity for the nation as a whole and to balance peacefully the interests of one order against the interests of another. By limiting the reach of government and minimizing the political tensions arising from the partiality of the moral sentiments, the system of natural liberty offers a political vision of a commercial society that is wealthy, prosperous, and largely free from the harmful effects of factions. This vision offers a route to escaping the struggles that break out among special interests seeking to protect their group’s place in the constitutional order of their society. The system of natural liberty thus is a balanced constitutional order grounded upon the natural drives of our moral sentiments.
Smith’s vision of a stable and just political order based on an analysis of the partiality of the moral sentiments and the idea of the system of natural liberty is tempered by a practical commitment to political moderation. An individual seeking to reform the existing constitutional order through the lessons derived from political economy must not expect to be able to impose his will immediately upon the body politic. "To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established" (1981: 471). For Smith, the true public interest is best served when reform-minded individuals respect the existing "powers and privileges" both of individuals and of the great orders into which the state was divided. Where existing policies could not be eliminated without great violence, Smith cautions, publicly spirited reformers must content themselves with only moderate changes. "When 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 endeavour to establish the best that the people can bear" (1982: 233).
These words in defense of moderation were offered as a warning to individuals beginning to witness the uncertainty and pain of the early stages of the French Revolution. Together with the idea of the system of natural liberty, these words of moderation are worth considering again today to help us face our uncertain, painful, and faction-driven political world.

Smith, Adam. 1981. An Inquiry into the Nature and Causes of the Wealth of Nations. R.H. Campbell and A.S. Skinner, General Editors. W.B. Todd, Textual editor. Indianapolis: Liberty Classics.
Smith, Adam. 1982. The Theory of Moral Sentiments. Edited by D.D. Raphael and A.L. Mafie. Indianapolis: Liberty Fund.

Related Links:
Jonathan Jacobs, Adam Smith on Moral Education
Clark Neily, A Modern Lawyer and Smith's Lectures on Jurisprudence, Part 2