Before The Wealth of Nations, Adam Smith Wrote a Book About Conscience

Here is a pub quiz question that ends friendships. Name Adam Smith's favorite of his own books. Most people say The Wealth of Nations, because it is the only one they have heard of, and the caricature of Smith as the patron saint of greed has done the rest. There is a strong case for the other one, the book about conscience, the one he kept revising until the year he died.

That fact should embarrass two groups at once: critics who think capitalism was invented by a man with no moral sense, and a few of its defenders who talk as if he had none either. Adam Smith was a professor of moral philosophy before he was anything else. His economics sits on a theory of the moral life, and you cannot read the second book well until you have read the first. Let me make the case.

The professor and his first book

Smith was appointed to the chair of logic at the University of Glasgow in 1751 and moved to the chair of moral philosophy in 1752. His lectures covered natural theology, ethics, jurisprudence and what we would call economics, all as parts of one subject: how human beings live together.

The Theory of Moral Sentiments came out in 1759. It made his reputation across Britain and Europe and led to a post as tutor to the young Duke of Buccleuch, which took him to France in the 1760s, where he met the leading French economists of the day. An Inquiry into the Nature and Causes of the Wealth of Nations followed in 1776. Smith then spent much of his remaining life revising the moral book. The sixth edition, published in 1790, added an entire new part and substantial new passages. He died in Edinburgh in July of that year.

Put those dates in a row and the order of his priorities is plain. The moral book came first and came last.

The first sentence sets the whole argument

The opening line of The Theory of Moral Sentiments is one of the great first sentences in philosophy, and it reads like a rebuttal written in advance to every lazy summary of Smith:

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.

Define the key term. By sympathy Smith does not mean pity. He means fellow-feeling of any kind: our capacity to imagine ourselves in another person's situation and feel, in a weaker form, what he feels. We wince when we see a blow about to land on someone else's arm. We feel lighter when a friend gets good news. Sympathy is the raw material of moral life.

From there the argument builds in steps.

1. We naturally imagine what others feel, and we judge their feelings as proper or improper by whether we can go along with them.
2. We want others to sympathize with us. We desire not only to be loved but to be lovely, that is, worthy of love.
3. So we learn to see ourselves as others see us, and to moderate our passions to a pitch others can share.
4. But other people are partial, ignorant or wrong. So we learn to imagine a better judge: a spectator who knows everything relevant about our situation and has no stake in it.
5. That imagined judge, internalized, is conscience.

The fourth and fifth steps are Smith's great contribution, and they need their own section.

The impartial spectator

Smith calls this inner judge the impartial spectator, and sometimes the man within the breast, the great judge and arbiter of our conduct. The idea is subtle and practical at the same time.

When I am angry with a neighbor, my own feelings shout. The neighbor's feelings shout back. An actual bystander might side with whichever of us he likes better. The impartial spectator is the viewpoint I reach when I ask: how would this look to someone fully informed, fair and uninvolved? If my anger survives that question, it is just. If it shrinks, I was simply angry.

Smith's most famous illustration is his thought experiment about an earthquake in China. Suppose, he says, a great empire with its millions of inhabitants were swallowed up, and a man of humanity in Europe heard the news. He would express his sorrow, reflect on the precariousness of life, perhaps speculate about the effects on trade, and then go to sleep as soundly as ever. Yet if he were to lose his little finger tomorrow, he would not sleep tonight. Our raw feelings, Smith admits, are that lopsided.

Then he asks the real question. Would that same man sacrifice the lives of a hundred million strangers to save his little finger? Human nature, Smith says, recoils at the thought. Why? Not because our soft feelings for strangers are strong. They are not. It is because reason, principle, conscience, the inhabitant of the breast, calls to us that we are but one of the multitude, in no respect better than any other in it. The impartial spectator corrects the distortion of self-love.

That is a conservative account of morality in the best sense. It does not pretend human beings are naturally impartial. It describes a process, built from ordinary social experience, by which partial creatures learn to judge impartially. It is a moral education, not a moral miracle.

The man of system and his chessboard

The sixth edition of 1790 added Part VI, on the character of virtue, and in it Smith wrote the passage most quoted by conservatives today. He contrasts the man of public spirit, who respects established powers and the habits of his people and reforms gently where he must, with the man of system:

He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it.

Smith goes on: if the two principles move the same way, society runs smoothly and happily; if they are opposite or different, the game goes miserably and society is at all times in the highest degree of disorder.

Notice where this passage sits. It is not in the economics book. It is in the book about conscience, and Smith wrote it while the French Revolution was beginning across the Channel. The objection to the man of system is moral before it is economic. He treats persons as pieces. He mistakes his own plan for the good of the people it is imposed on. He fails, in other words, the test of the impartial spectator, because he never imagines himself in the position of the pawn.

That insight runs straight into twentieth-century thought. Hayek's account of orders that no one designed, which we explain in Nobody Designed the English Language, and Hayek Called That Spontaneous Order, and his warning about who rises in a planned society, in Why the Worst Get on Top, Hayek's Most Uncomfortable Chapter, are both elaborations of the chessboard image.

The so-called Adam Smith problem

Now for the strongest objection, which has a name. In the nineteenth century, German scholars posed what they called das Adam Smith Problem. Stated fairly, it runs:

The Theory of Moral Sentiments builds morality on sympathy, our concern for others. The Wealth of Nations builds economics on self-interest, the butcher, the brewer and the baker who serve us out of regard to their own interest, not benevolence. These are contradictory accounts of human motivation. Either Smith changed his mind after his time in France, or he held two incompatible views. In either case, the market half of Smith cannot claim the moral half as support.

It is a tidy theory. It does not survive contact with the texts. Here is why, point by point.

1. The dates refute the change-of-mind story. If Smith had abandoned sympathy for self-interest, he would not have spent the years after 1776 revising and expanding the moral book, publishing its sixth edition in 1790 with every core doctrine intact. The editors of the standard Glasgow Edition of Smith's works, published in 1976, dismissed the supposed problem as a pseudo-problem arising from misreading.
2. The moral book already includes self-interest. The Theory of Moral Sentiments has a whole account of prudence, the virtue concerned with one's own health, fortune and reputation. Smith calls it a respectable virtue. He never said self-interest was vicious. He said it needed governing.
3. The economics book already includes morality. The Wealth of Nations attacks merchants who conspire against the public, condemns the colonial monopolies, and worries about the effect of minute division of labor on the minds of workers. It is not a hymn to appetite.
4. Different books, different subjects. Sympathy governs our dealings with people close enough to know. Commerce governs our dealings with strangers too numerous to know. Smith observes that in civilized society a man stands at all times in need of the cooperation of great multitudes, while his whole life is scarcely sufficient to gain the friendship of a few persons. You cannot run a supply chain on friendship. Exchange is the moral arrangement for the stranger, and justice, the virtue Smith calls the main pillar of the whole edifice, is what keeps it honest.
5. The invisible hand appears in both books. In Part IV of The Theory of Moral Sentiments, Smith describes a rich landowner whose own consumption is limited by the size of his stomach, so that in feeding his household and workers he is led by an invisible hand to distribute the necessaries of life much as they would have been distributed had the earth been divided equally. We look at the phrase's single appearance in the economics book in The Invisible Hand Appears Once in The Wealth of Nations, Here Is Why.

The two books are not rivals. They are two floors of one building. The moral book explains how people become fit to live together. The economics book explains how such people, trading under just laws, produce wealth that none of them planned.

Why the order matters

So what follows for us? Three things.

First, markets presuppose morals. Smith's market works because traders keep contracts, refrain from fraud and accept the rule of law. Those habits are not produced by the market alone. They are produced by families, churches, schools and the steady pressure of the man within the breast. Wilhelm Ropke made the same argument in the twentieth century, as we note in Wilhelm Röpke Defended Markets and Warned They Need Something Beyond Them. A free economy is a moral achievement, and it can be spent down.

Second, the case for markets is a moral case, not merely an efficiency case. A market lets people serve strangers they will never meet and be served in return, without anyone commanding anyone. That is the theme of Markets Reward Serving Strangers, and That Is a Moral Achievement. Smith would have recognized it at once.

Third, the man of system is still with us. Every proposal to manage a great society from the center, to set prices, direct investment or redesign institutions by blueprint, treats citizens as chess pieces. Smith's objection to it is first an objection of conscience: it does not respect the principle of motion each person carries within.

The Founders' Constitution rests on a view of human nature close to Smith's. Federalist No. 51 says ambition must be made to counteract ambition, because men are not angels. That is the prudential half of Smith. The Declaration of Independence says all men are endowed by their Creator with unalienable rights. That is the moral half: each person is a principle of motion of his own, not a piece on someone else's board.

How to read him today

If you want to understand Smith rather than his reputation, start with The Theory of Moral Sentiments, Part I on sympathy and propriety, then Part III on the impartial spectator and the China passage, then Part VI and the man of system. Only then open The Wealth of Nations. You will find the butcher and the baker read differently once you have met the man within the breast. They are not monsters of greed. They are prudent people dealing honestly with strangers, inside a moral order they did not invent and should not squander.

And you will notice that the caricature of Smith as the apostle of selfishness was always a case of judging a man by a single sentence, which is precisely the kind of partial judgment his impartial spectator was meant to correct.

The case in brief

1. Adam Smith was a professor of moral philosophy, published The Theory of Moral Sentiments in 1759, seventeen years before The Wealth of Nations, and was still revising it in its 1790 sixth edition, the year he died.
2. The book grounds morality in sympathy, our capacity to share others' feelings, and in the impartial spectator, the fair and informed judge we learn to carry within ourselves as conscience.
3. Its man of system passage condemns rulers who arrange a society like pieces on a chessboard, forgetting that every person has a principle of motion of his own.
4. The supposed Adam Smith problem fails: prudence appears in the moral book, morality in the economic one, the invisible hand in both, and Smith never abandoned his moral theory.
5. The lesson is that free markets rest on moral habits that families, faith and law must keep supplying.

What you can do: read Part III of The Theory of Moral Sentiments, on the impartial spectator, which is in the public domain and free to read, then discuss the China passage with your family at dinner.