1During the past thirty years, numerous studies have revised the traditional view of Smith’s economic agent as a mere self-interested individual, showing the close connection between the Wealth of Nations (henceforth WN) and the Theory of Moral Sentiments (henceforth TMS).
Part of this debate has focused on the plurality of motives that create individual behaviour in both the social and economic contexts, resulting in a consequent reinterpretation of the Smithian economic agent. In addition, Smith’s moral philosophy has been reinterpreted in order to understand the emergence of institutions, and theoretical figures like the "impartial spectator" and the "prudent man" have been considered in order to gain a more comprehensive view of human behaviour. Nonetheless,
the recent literature has also pointed out some theoretical differences between TMS and WN, even though such analytical revision does not constitute a contemporary version of das Adam Smith Problem [3]. 2Bearing this general context in
mind, the limited aim of this essay is to analyse some questions about the individual as an economic agent, exclusively focusing on the WN. In particular, this essay will consider the concept of self-interest, emphasizing the following three different points of view: 3All this implies that self-interest coincides neither with the principle so frequently invoked in the liberal tradition (especially during the nineteenth century) nor with the concept usually used in economic theory as an explicit (or implicit) assumption for maximizing utility. In fact, it will be shown that Smithian individuals are not the best judges of their own "interest," and this
sheds light on their hypothetical disposition "to improve" their condition. Finally, according to this view, the lack of a shared notion of interest points to some important problems concerning the capacity of the market to realize a spontaneous order that is able to increase public wealth. 4The first problem is linked with the possibility of individuals’ abilities to conserve their "undivided personality" in a generic society that is organized by the division of labour. As is well known, the term "division of employments" appears in Book I of the WN
[4]. The transition from the primitive age that preceded the division of labour to the subsequent one can be interpreted as a generic phase in which individuals lost their original "undivided personality." This was necessary in order to attain social and economic development. In fact, before the division of labour, all individuals could discover and exercise their human
faculties by applying themselves to any kind of activity. After the division of labour this was no longer possible, and personal faculties were, so to speak, separated from individuals and gathered together in "social spaces" (those of specialized "professions") defined by the division of labour. Smith also describes this process in terms of available time for individuals: 5 "A shepherd has a great deal of leisure; a husbandman, in the rude state of husbandry, has some; an artificer or manufacturer has none at all. The first may, without any loss, employ a great deal of his time in martial exercises; the second may employ a some part of it; but the last cannot employ a single hour in them without some loss, and his attention to his own
interest naturally leads him to neglect them altogether". 6Thus, the more the division of labour advances, the more the time available to the individual for multifarious activities decreases (and correspondingly the individual’s intelligence decreases). There is no space for dividing one’s time between productive and unproductive labour, in which the latter
corresponds to the "martial exercises," activities that become a specific form of work (for example, that of the soldier). Moreover, as the quotation shows, this process delineates the sequence of the last three stages of society: pasturage, agriculture, and commerce (because, evidently, the division of labour is almost nonexistent in the first stage, which is based on hunting). It also means that the more societies evolve from one stage to another, the more their complexity and their internal
division of labour increase. 7In short, before the division of labour, any activity was a direct manifestation of personal faculties; after it, activities lost this distinctive feature. They were socially organized and, I repeat, they were gathered together in different "social spaces" (the spaces of employment, which is external to individuals), which gave them new
shape and ruled them coherently with the logic of the division of labour (cf. Fiori and Pesciarelli 1999). 8This was the first phase of the "disintegration" of the individual (Hont and Ignatieff 1988, p. 8). Intellectual labour, for instance, was now an activity undertaken by specific groups (scientists, philosophers, etc.) and not the direct manifestation of
individual intelligence. This was the fundamental condition for the growth of social knowledge and corresponding to it was the reduction of individual intellectual capabilities (Rosenberg 1965). Evidently, this condition was strictly connected to the technical division of labour by which means further divisions were achieved in order to increase productivity. Moreover, the principle of the division of labour always exhibited its properties homogeneously and the
technical division was conceived as an extension of the division among professions (WN I.i.2). 9In Smith’s view, this situation reflects the famous contrast between "barbarous societies" (of hunters, shepherds, and the "rude state of husbandry") and commercial societies. In the former, intelligence is connected to the possibility of individuals’ exercising abilities,
"invention," and creativity by means of "varied occupations" (WN V.i.f.51). In the latter, on the contrary, Smith (referring to laborers, or more precisely to the "greater part of those who live by labour, that is, of the great body of the people" – WN V.i.f.50, emphasis added) says, "the life is spent in performing a few simple operations" (WN V.i.f.50), and men become "stupid and ignorant"
[5]. 10In sum, the "disintegration" of individuals can be observed in two processes: 11First, the division of
labour, as a general principle, which in precapitalistic ages introduced a simple "division of employments" and reorganized and included personal faculties in social spaces. The more this process advances, the less these faculties are the free manifestation of human abilities, but rather obey the rules that are separated from individuals. Of course, every age has experienced a division of labour (WN I.ii.3); consequently, the process by which individuals are separated from their faculties
assumes greater importance the more the division of labour is a fundamental characteristic of a market society. 12Second, the technical division of labour, which emerges clearly in modern manufacturing, denotes a more profound level of individual disintegration. It reduces human capabilities, which are not solely separated from agents but undergo a process of
fragmentation (in fact, work becomes a set of a "few simple operations"). 13These arguments raise a number of questions: How do individuals (as divided entities) in a market society really know what their own "interests" are? Does the condition of partiality influence their knowledge of self-interest? Can they possess a shared view of self-interest? Are
economic agents really the best judges of their interests? In rude societies - Smith says – "[e]very man […] can form a tolerable judgment concerning the interest of the society" (WN, V.i.f.51), but this is not so in a market society [6]. 2 – Self-interest and social groups14This topic can be further analysed by considering the role of the individual as a member of a social class. 15The thesis sustained is that each "order of society" (labourers, capital owners, and landlords) exhibits (and acts in consequence of) a specific view of its specific interest. This latter seems to mould individual interest, which emerges through a process whereby agents assume the point of view of their reference groups, so that collective perspectives determine subjective ones. In particular, these various notions of self-interest (which social groups embrace) are not convergent. Consequently, people do not share a common concept of personal "interest." Moreover, the inclination to improve one’s personal condition [7] acquires different meanings based on the distinctive features of each social group. Finally, these meanings explain why each class is characterized by different choices and behaviours. 16First, Smith affirms that "every improvement" in market society increases rents and wages. Nonetheless, both landlords and labourers are unable to recognize the close connection between their real "interest" and "the general interest of society" (WN I.xi.p.1-8) [8]. Their "real interest" consists of improving their personal circumstances in terms of private wealth. But, Smith remarks, both social groups fail to perceive the difference between their "real interest" and their subjective (or personal) one. The latter generally leads them astray from the correct way to improve their condition. The dichotomy between real interest and the subjective perception of one’s own interest is very important, because the first term represents the ideal principle that should direct individual choices and the latter is the motive that actually determines individual decisions in the economic arena, although it usually produces erroneous agent performances [9]. 17The reasons for this dichotomy are described in terms of structural conditions that connote both classes (landlords and labourers). In short, the difference between real and subjective interest is not a mere temporary "visual illusion"; on the contrary, it is rooted in the historical and functional roles fulfilled by each social class. In fact, Smith maintains that the landlords often do not possess a "tolerable knowledge" of their real interest. This latter is not mere ignorance; instead, it mirrors structural (and historical) features of landowners. Consequently, Smith writes, 18
19Even in modern commercial society, landowners, who are the heirs of feudal landlords, maintain "that indolence" that impedes them from understanding their real interest. This indolence is rooted in a material condition of life connoted by "the ease and security of their situation." 20Consequently, they conceive their own interest as lying in increased consumption, instead of increased wealth. This means that the subjective representation of their self-interest prevails over the "real" one. Only the former guides the choices of landlords as economic agents. The same propensity for consumption led the great proprietors to exchange their entire surplus and their power "for a pair of diamond buckles" (WN III.iv.10). Finally, the contrast with the merchants sheds further light on these phenomena: 21
22Once again, subjectively different notions of interest produce divergent plans and decisions: for landlords their interest coincides with increasing consumption, for merchants with increasing profits. 23Similar considerations apply to labourers, who are prevented by their material circumstances from distinguishing real from subjective interest. As a consequence, Smith maintains, 24
25From this quotation one can infer that
26Capital owners, as is well known, are the exception compared with the previously identified social groups. They know their self-interest and consequently, at first glance, there is almost no difference between their real and subjective perceptions of interest. The former, in fact, coincides with the endeavour to improve their circumstances in terms of increasing private wealth, so that the "merchant ‘coherently’ is accustomed to employ his money chiefly in profitable projects" (WN III.iv.3); he follows the "principle of turning a penny wherever a penny was to be got" (WN, III.iv.17). Therefore, the "better knowledge of their own interest" (WN I.xi.p.10) defines the "superiority" of capital owners over both "country gentlemen" and (implicitly) labourers. But the interest of capital owners "is always in some respects different from, and even opposite to, that of publick" (WN I.xi.p.10) [11]. Hence the capital owners’ clear notion of self-interest implies the possibility of an improper use of such knowledge from which selfish behaviour may derive. This engenders a new problem. In order for (real) self-interest to allow action by the "invisible hand," it must be consistent with the public interest. Smith, in fact, considers the growth of private and public wealth to be an essential condition for market order. If the capital owners’ behaviour is selfish, the "optimal" market order fails and economic agents increase their wealth, damaging the public [12]. The gains of selfish merchants are losses for other individuals because free competition is altered. Consequently, in this case, too, the subjective notion of interest (the selfish view) guides (as in previous cases) the concrete choices of agents (merchants). The selfish interest prevails over the real (and appropriate) one. The latter involves the correct exploitation of opportunities and an ability to invest capital in the most profitable branches of industry. It implies proper behaviour in the economic arena and enables the "invisible hand" to act correctly. In contrast, the subjective selfish interest of merchants prevails over the ideal one, in which the term "ideal" denotes an "interest" that is able to generate a harmonious coherence between private and public welfare. 27However, it should be pointed out that the subjective view of personal interest of landowners and labourers depends on a lack of understanding of what the real interest is. This means that there is no choice among alternatives. However, in the case of capital owners, this does not happen, and they are able to choose between two options (selfish or proper, self-interested behaviour). Nonetheless, the main problem remains: the subjective view prevails over the real one and determines agents’ decisions. This is an assumption that also applies to action by the "invisible hand": "every individual" pursues "his own interest," and it is not his intention to "promote" social welfare (WN IV.ii.9). Even well-informed agents do not consider how their choices modify public wealth. Consequently, in "optimal" conditions, the "invisible hand" brings about the convergence of both private and public welfare, although this does not occur if agents do not follow their "real" interest and act selfishly against the public interest. In short, with regards to capital owners, knowledge of the general interest is not a condition that is able to influence their decisions because the public (general) interest is achieved unintentionally by the "invisible hand." Like the other agents, they act in accordance with their personal views, aims, and preferences. 28Finally, as in the case of the previous social groups, the structural position of capital owners is an essential determinant of the representation of their private interest. More specifically, their superior knowledge with respect to that of the other classes, in most cases, prompts them to refer to the selfish view when forming their decisions. 29We can synthesize the themes previously discussed as follows.
3 – Self-interest as persuasive instrument30Given these premises, it is evident that no transparent and shared notion of "interest" really guides the choices of economic agents. Nevertheless, a further argument requires examination. What happens in usual transactions, when individuals exchange something with the "butcher," the "brewer," or the "baker"? The thesis sustained here is that a fundamental role is performed by persuasion and not simply by self-interest. 31A classic interpretation of the apologue of the "butcher," the "brewer," or the "baker" has depicted Smith as a theoretician of self-interest, although numerous studies have demonstrated that his "moral" view essentially modifies this narrow interpretation. 32In a famous passage, Smith remarks that a human being needs the "help of his brethren," so that 33
34To invoke "only" benevolence in a market context is not a persuasive argument. On the contrary, according to Smith, the strategy consists in a) addressing the other agents’ "self-love in his favour" and b) showing "them that it is their own advantage to do for him what he requires of them." At first, both actions do not require the agent to be selfish; rather, Smith points out, the first step of the persuasive strategy consists in showing the other parties of the transaction what their self-love consists of, and, particularly, what advantages they will obtain from the exchange. We start not from our self-interest (or self-love) but from others’ self-interest (although we are "interested" in accomplishing a certain transaction). 35Once again, "self-love" (as well as self-interest) is not a transparent principle. Why should other agents be shown their self-love? If self-interest were perfectly known, no reason would prompt an individual to show others either self-love or the advantages derived from a given exchange. Everything would be perfectly known before the transaction. On the contrary, personal "interest" must emerge as a consequence of the exchange relationship. It is not the premise but the conclusion of the process. 36The persuasive element also emerges in the following sentence: 37
38The economic relation must not be rationally selfish; instead, it must be persuasive, because the aim of both parties is to obtain precise advantages, and this entails discovering what their reciprocal interest is. 39This point was well made in Lectures on Jurisprudence (henceforth LJ(A)), in which Smith argued: 40
41In my view, the context just sketched permits reinterpretation of the famous apologue of the "butcher" and the relative argument about benevolence: 42
43The same theme recurs on another occasion. Smith does not claim to be selfish, but instead points out that the persuasive strategy is to show others their "own interest" because it is not transparent to them. On the contrary, benevolence is not a good means of persuasion in the market [13]. 44As shown, there are a number of reasons why the notion of self-love/self-interest is not evident to the eyes of economic agents. Their subjective perception differs considerably from what Smith calls individual’s "real interest." Consequently, addressing the "advantages" of landlords is very different than addressing those of capital owners. The views of personal interest to which they refer are profoundly different, and this implies that different strategies of persuasion must be used. Notes
Bibliography
What did Adam Smith's The Wealth of Nations argue in 1776?Smith argued that the free-market system along with free trade would produce true national wealth, benefiting all social classes, not just the privileged few. In a major section of The Wealth of Nations, Smith attacked mercantilist trade practices.
What is the main principle of Adams Smith The Wealth of Nations?The central thesis of Smith's The Wealth of Nations is that our individual need to fulfill self-interest results in societal benefit. He called the force behind this fulfillment the invisible hand.
What did Adam Smith's The Wealth of Nations argue in 1776 quizlet?Adam Smith's work, The Wealth of Nations, argued that the "invisible hand" of the free market did not direct economic life more effectively and fairly than governmental intervention.
|
In the wealth of nations, adam smith in 1776 argues in favor of the principle of
Urheberrechte © © 2024 defrojeostern Inc.
