Some say he was absent-minded or even oblivious, but I rather like to think of it as frequent states of profound thought. The man I refer to is Adam Smith and after having read the assigned excerpts and a few other passages from his The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations I not only hold him in a new light, but I have arrived at three heavily debated conclusions. First, he believed that self-interest is the singular motivation that effectively leads to public prosperity. Second, although Smith feels that the one s pursuit of self interest should be their primary concern, he knew that humans are inclined to take interest in and enjoyment from kind and charitable acts. Lastly, when Smith developed the concept of the invisible hand he assumed that the economy would relatively remain unchanged. Let us start with my first hypothesis.
Self-interest is defined as regard for one s personal advantage or benefit. We see and carry out this everyday. It is natural to look of one s self first and Smith knew that, in fact he encouraged it. He observed that if everyone acted in his or her own best interests the market would automatically produce what the people demand. He knew this would work be more effective and efficient than any governing body or groups of planners to decide the Three Economic Problems: What to produce? How to produce it? For whom to produce? He knew because the people, the consumers would be making those decisions for themselves. Smith also noticed that self-interest lead to increased trade and bargaining. It is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of (Classic Readings in Economics, pg 7). It is this same trucking disposition which originally gives occasion to the division of labour (Classic Readings in Economics, pg 7). When Smith speaks of the division of labour he refers to the specialization of workers into certain trades. This happens because an individual discovers talents that he possesses and may be advantageous for him to further develop in order to increase his wealth. People perhaps imagine that goods will make them happier and seek them for that reason, but they are deluded. Adam Smith for one thinks the delusion is a good thing because without it people would not work. This desire to acquire acts as a driving power to guide men to whatever work society is willing to pay for (The Worldly Philosophers, pg 46). So as you see, Adam Smith felt that the selfish motives of men are transmuted by interaction to yield the most unexpected of results: social harmony (The Worldly Philosophers, 47). You may ask, What kind of cold-hearted man would promote selfishness as the only way to think and act? This leads to my next hypothesis.
Smith s first book the Theory of Moral Sentiments was published just five years before he began writing his second, the Wealth of Nations which dealt with the pursuit of self-interest. It s hard to believe that Smith could have written the second book devoid of morality not too long after finishing a book with the word moral in the title. The very first sentence of Moral Sentiments is as follows, How selfish man may be supposed, there are evidently some principles in his nature, which interest him in fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Smith realized that although man thought material wealth would bring him happiness it is through selfless acts of charity and kindness that one must truthfully receive enjoyment. Smith had virtues in mind when he wrote of self-interest; he just chose not to focus on them for he already had in his first book.
The third topic that I have pondered is whether Smith had given any thought as to what context his invisible-hand would apply to. Smith was an objective economist; he based his invisible-hand theory upon what he observed in the eighteenth-century economy. He did not believe that the new corporate systems or the attempts of workmen to form protective organizations would last. He felt that the marketplace would continue to only grow; remain free of any social disturbances. Today we function in a marketplace full of corporations, labor unions, and involved governments, barriers that upset Smith s free-flowing market.
Now some may disagree with what I say, which is perfectly reasonable, for this is only what I have gathered from my limited readings. This is only a taste, a theory upon one man s thoughts. If you find yourself even the least bit interested, I implore you to further explore the reflections and writings of Adam Smith. Then you can decide for yourself whether Smith was a genius or he and I are both fools.