Moral Judgment & Governmentalizing Social Affairs

limited government localism moral judgment public goods

Paul D. Mueller for AdamSmithWorks

Mueller shows how the ideas Adam Smith developed in The Theory of Moral Sentiments further undergird his arguments for limited and mainly local government.

"Where social affairs are free from governmentalization, people operate in contexts that promote more robust moral judgments. People better find the path of virtue."

March 22, 2023
Adam Smith advocated free markets and limited government. He wrote extensively about the mistakes, abuses, and distorted incentives created by certain government interventions. He also made a case for limited government—especially at the national level—through reflections on the nature of human judgment. He argued that as we move from concrete, private contexts to more general and abstract contexts, there is a natural rise in the hazard of the corruption of judgment. Both the intentions and the effects of government quickly become abstract. As our ideas become more abstract, however, our moral judgment can more easily be skewed, warped, or corrupted. This has significant implications for what can sometimes be a fine line between good governance and harmful regulation and over-governance—“governmentalization.”
Smith was no anarchist or revolutionary. He believed firmly in the rule of law and the value of established political authority. Yet, as he elaborates throughout the Wealth of Nations, a good many government polices are harmful. In this essay I hope to show how the ideas Smith developed in The Theory of Moral Sentiments further undergird his arguments for limited and mainly local government. Leaving social affairs voluntary and governance local helps keep our judgment on a healthy footing. We should resist governmentalizing social affairs, prudently roll back existing governmentalization, and promote a robust principle of voluntary association.
Real vs. imagined utility
Smith’s argument against governmentalizing social affairs builds on moral psychology. The moral corruption that grows in highly governmentalized social affairs has both epistemological and psychological sources. To address the matter, I turn to a part in The Theory of Moral Sentiments (TMS) in which Smith develops his idea about how we rely on fittingness or propriety in making decisions, rather than a calculus of the consequences—partly because making such a calculus is often impossible.
In Part IV, Ch. 1 of TMS, Smith develops the relationship between the imagined and the actual utility of objects, choices, and policies in three parallel contexts: trinkets, private life, and public life. “Utility” means beneficialness, both to the whole society and to the individual taking action. Smith focuses on how the concreteness versus abstractness affects the imagined utility to the individual or to society. As Smith addresses actual and imagined utility in the three contexts—trinkets, private life, and public life—he moves from the more concrete to the more abstract. And he suggests that with that movement people’s moral judgments worsen. Smith describes how a sense of fitness or aptness of an object for serving some useful function often means more to us than its actual usefulness: 
But that this fitness, this happy contrivance of any production of art, should often be more valued, than the very end for which it was intended; and that the exact adjustment of the means for attaining any conveniency or pleasure, should frequently be more regarded, than that very conveniency or pleasure, in the attainment of which their whole merit would seem to consist, has not, so far as I know, been taken notice of by any body. (TMS 179-180; emphasis added) 
While it would seem that we should value objects or choices based upon how much utility they actually bring us, we quite often value them based on how well we think they are suited to bring us utility, whether or not they actually do. 
Smith then gives many contexts in which the “fitness” sensibility operates: “That this however is very frequently the case, may be observed in a thousand instances, both in the most frivolous and in the most important concerns of human life” (TMS 180, emphasis added).
Smith begins with “trinkets.” He claims that many people would feel dissatisfied with a watch that lost a minute of time every week. Some might even sell such a watch and spend a significant sum of money buying one that doesn’t lose any time. But why? The old watch served quite well enough to give us a good sense for when we ought to be somewhere. And, as Smith observes, people who buy the new watch 
will not always be found either more scrupulously punctual than other men, or more anxiously concerned upon any other account, to know precisely what time of day it is. What interests him is not so much the attainment of this piece of knowledge, as the perfection of the machine which serves to attain it. (TMS 180)
Smith also highlights the impulse of a man whose housekeeper will tomorrow straighten a disorderly room he enters. The mess may not inhibit the man’s present course of action in the slightest. And yet, Smith says, a man disturbed by the departure from the accustomed and fitting order
voluntarily puts himself to more trouble than all he could have suffered from the want of it; since nothing was more easy, than to have set himself down upon one of [the chairs], which is probably what he does when his labour is over. What he wanted therefore, it seems, was not so much this conveniency, as that arrangement of things which promotes it. (TMS 180)
As the father of five young children, constantly battling with chaos, I can attest that Smith is on to something here!
We like things to be orderly and well-suited towards some end, even if we do not ultimately achieve that end ourselves. In matters of the watch or organizing a room, this curious divide between imagined utility and actual utility may not be all that significant. But when it comes to how we order our personal lives, this divide can be the source of trouble and difficulty. And when it comes to public life, it can be the source of disaster and ruin.
Private life
In the same chapter of TMS Part IV, we find the parable of the poor man’s son. The son "admires the condition of the rich" and becomes captivated by the imagined ease and tranquility he will have with riches—a commodious house, easy travel, good food, and so on. He pursues his ambition even though becoming rich is difficult: "to obtain the conveniences which these afford, he submits in the first year, nay in the first month of his application, to more fatigue of body and more uneasiness of mind than he could have suffered through the whole of his life from the want of them" (TMS 181). Still, his imagination and the desired utility of wealth spur him on.
Yet, toward the end of his life, he makes another discovery, namely that “wealth and greatness are mere trinkets of frivolous utility, no more suited” to promoting ease and utility than the literal trinkets of watches and tweezer cases that we value for their imagined utility. The son’s imagination of the utility of wealth does not match the reality. 
Smith even calls this incongruence “a deception”—but a useful one, if only from a social point of view. For this deception leads the poor man’s son to industry and to serve his fellow man. It is in this chapter that the sole mention of the invisible hand in TMS occurs, leading those who pursue or who have wealth to benefit the poor unwittingly: 
They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of society, and afford means of the multiplication of the species. (TMS 184-185) 
Although one might pity the poor man’s son, his self-deception is his own and his industriousness renders benefits to others.
In trinkets and baubles, the connections between the intended utility, the object, and the actual utility are fairly clear and observable. As for the objects of private life, much more time and perspective are required to accurately assess how one’s actions, imagined utility, and actual utility are connected, or not. There is greater abstraction involved when assessing the suitability of one’s chosen profession and the imagined utility one seeks to achieve. Still, it is the same person choosing, imagining, experiencing, and reflecting.
Public life—and the pitfalls of governmentalization
Smith does not take an “invisible hand” view of the divide between imagined utility and actual utility when it comes to public life. Coercion and force are often the tools of public life rather than voluntary exchange. With only weak correction mechanisms in public life, the abstractness of what one proposes leads to ongoing distortion of one’s moral judgment.
One source of corruption, in both private and public life, is factions. Smith writes that we imagine how an impartial spectator would judge our decisions. But in order to do this well, we often require feedback and the assistance or experience of actual spectators. Rubbing shoulders with our peers and equals helps us to understand both impartiality and the idea of spectators judging our actions. When we are part of a faction, our peers and “spectators” have built-in partiality, by definition. Yet we come to view their partiality as impartial because it seems universally held within our circle of peers.  
Political parties are an example. What seems reasonable or appropriate in a political rally often varies drastically from what we find appropriate in other contexts. Similarly, national conflicts promote partiality. Smith argues that people living in one country in conflict with another have a difficult time forming impartial judgments about the conflict—they are immersed in a society of “partial” spectators who share similar perspectives on the matter.
Politicians and bureaucrats also face the problem of living in an echo chamber. They are surrounded by people who are not likely to be impartial: their staff, lobbyists, and the fellow partisans of their party. As a result, they are less likely to see themselves as being “but one of the multitude, in no respect better than any other in it” (TMS 137). And this means that as they consider the virtue of their choices and actions, their judgments are more likely skewed or partial than those of ordinary citizens who rub shoulders with their equals every day. The partiality of peers corrupts moral judgment—and this problem is more prevalent in political settings. 
But a second hazard is more prevalent in political decision-making: the lack of direct feedback of the effects of one’s decisions. When a politician proposes some course of legislative action, the imagined utility is necessarily abstract, as it will affect many people in varied ways. What’s more, the actual utility of such policies may be impossible to discern because it is experienced by people in ways that defy aggregation—very much like the Hayekian knowledge problem faced by central planners. So how is a politician, or his myriad followers, or voters in general, to know whether the actual utility of his plan lives up to the imagined utility? Smith suggests that often he can’t, at least not in any direct, immediate fashion. The direct effects of national laws, for example, are difficult to decipher and often create unintended and overlooked consequences.
And here lies a major problem with political centralization and governmentalizing social affairs. The feedback of actual usefulness and the feedback of (supposedly impartial) spectators are lacking or faulty. How is the representative from Bath or Birmingham to consider sanitation policy in London judiciously? It is in light of such difficulties in judgment that Smith offers the “liberal plan” for government and society. His plan, in the main, is to relieve the government of many assumed obligations:
Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way… The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people… (WN 687, emphasis added)
Although Smith acknowledges the role of government as a “nightwatchman” along with a potential role providing basic public-goods, the presumption weighs against governmentalizing social affairs. Even with governmental provision of public goods like street lamps, canals, or roads, Smith says local provision is far superior to national provision; and funding should be provided principally by user fees. That makes the policy more concrete and less abstract with more real as opposed to imagined feedback, and more easily observed utility.
The concern of governmentalization tending towards moral corruption also relates to Smith’s arguments that workers and employers should be free to arrange labor contracts how they see fit; that tariffs and subsidies should generally be avoided; and that the owners of capital should be free to decide what to do with it. These individuals nearly always have the healthiest feedback mechanisms, the best incentives, and the best knowledge to make decisions.
Where social affairs are free from governmentalization, people operate in contexts that promote more robust moral judgments. People better find the path of virtue. And that, too, can be incorporated into our thinking about beneficialness or social utility. Smith cares not only about having a prosperous society, he wants a moral and virtuous society too. 

Paul Mueller teaches at The King’s College in New York City. He has written many academic articles, essays, public outlet columns and op-eds, and a short book on the 2008 financial crisis. He owns and operates a bed and breakfast (The Abbey) in Leadville, Colorado where he lives with his wife and five children.

This essay is part of the AdamSmithWorks series
Just Sentiments curated by Daniel B. Klein and Erik Matson. New essays will be published on the fourth Wednesday of the month. You can read more about the series in this Speaking of Smith post, "Just Sentiments- Welcome!". Klein and Matson lead the Adam Smith Program in the Department of Economics at George Mason University, in association with the Mercatus Center. In the program, they study big ideas in jurisprudence, politics, ethics, and economics as they were pursued during the original arc of liberalism, especially in the 18th century in Britain.