Adam Smith's Economics : Its Place in the Development of Economic Thought 9781135174958, 9780415562010

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R O U T L E D G E L I BR AR Y EDI TI ONS: A D A M SMITH

ADAM S M I T H ’S ECONOMICS

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A D A M S M IT H ’S E C O N O M IC S Its Place in the Development of Economic Thought

MAURICE BROWN Volume 1

First published in 1988 This edition first published in 2010 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint o f the Taylor & Francis Group, an informa business

First issued in paperback 2012 © 1988 Maurice Brown All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library ISBN 13: 978-0-415-56201-0 (hbk) ISBN 13: 978-0-203-09274-3 (ebk) ISBN 13: 978-0-415-52143-7 (pbk) Publisher’s Note The publisher has gone to great lengths to ensure the quality of this reprint but points out that some imperfections in the original copies may be apparent. The publisher has made every effort to trace copyright holders and welcomes correspondence from those they have been unable to contact.

ADAM SMITH'S ECONOMICS: Its Place in the Development of Economic Thought

For Patsy

ADAM SMITHS ECONOMICS Its Place in the Development of Economic Thought

Maurice Brown

CROOM HELM London • New York • Sydney

© 1988 Maurice Brown Croom Helm Ltd, Provident House, Burrell Row, Beckenham, Kent BR3 1AT Croom Helm Australia, 44—50 Waterloo Road, North Ryde, 2113, New South Wales

Published in the USA by Croom Helm in association with Methuen, Inc. 29 West 35th Street New York, NY 10001 British Library Cataloguing in Publication Data Brown, Maurice Adam Smith’s economics : its place in the development of economic thought. I. Smith, Adam, 1723-1790 2. Economics — Scotland — History — 18th century I. Title 330.15'3 HB103.S6 ISBN 0-7099-5079-9 Library of Congress Cataloging in Publication Data ISBN 0-7099-5079-9

Printed and bound in Great Britain by Billings & Sons Limited, Worcester.

Contents Author Note

vi

Acknowledgements

vii

1. Introduction

1

2. Methodological Approach

7

3. Smith’s Epistemology: Meaning, Context and the Nature of Science

25

4. Metascientific Perspectives: The Individual and Society

51

5. Specialisation and Social Change: The Division of Labour

72

6. Riot, Debauchery and the Science of a Legislator

92

7. Purposive Action and Unintended Consequences

127

8. Economic Concepts and Historical Dynamics

146

9. Conclusion

178

Index

184

v

Author Note I have used throughout this book the Glasgow Bicentennial Edition of the Works and Correspondence o f Adam Smith , referring to it as the ‘Glasgow Edition5. It can now be regarded as the definitive collection of Smith’s work and was published as a series of volumes from 1976 onwards by the Clarendon Press, Oxford. In quoting Smith’s written and reported works, I have used both abbreviated and full versions of titles and these are listed below, including names of the editors responsible for the volume in the Glasgow Edition. Con EPS

LJ

LRBL TM S WN

Correspondence o f Adam Smith (E.C. Mossner and L.S. Ross) Essays on Philosophical Subjects (W.P.D. W ightman). These

references are in some cases followed by the relevant essay, e.g. (EPS: Astronomy) Lectures on Jurisprudence (R.L. Meek, D.D. Raphael, P.G. Stein). These lectures or student reports were dated 176263 and 1766 respectively and have only recently been evaluated and added to the literature. Where Lectures appears alone it refers to both sets of lectures; the date is given in respective cases, e.g. (LJ: 1762-63, p. 104) Lectures on Rhetoric and Belles Lettres (J.C. Bryce) The Theory o f Moral Sentiments (A.L. Macfie and D.D. Raphael) An Inquiry into the Nature and Causes o f the Wealth o f Nations, 2 vols. (R.H. Campbell, A.S. Skinner, W.B. Todd)

I have also made use of an associated volume in the same series, also published by the Clarendon Press, Oxford, Essays on Adam Smith (A.S. Skinner, T. Wilson). In quoting Smith’s words I have used the original spelling but have ‘modernised’ spelling in those cases where I feel it necessary and to help clarify meanings.

vi

Acknowledgements This book has its origins in work undertaken, at Sheffield University, for a PhD thesis which was completed in 1984 and I would like to thank the many members of staff who, in formal and informal discussion, helped to shape the present work. I am greatly indebted in particular to Roy Houghton of the Departm ent of Economics who suffered the many iterations of this book and provided constructive criticism with unfailing good humour. I am also indebted to the late Peter Nidditch whose clear and rigorous thinking I shall always admire, and to Rolf Gruner who gave help and advice in the early stages of this project. Thanks are also due to Donald Winch who generously spent a long day in discussing some of the issues raised in this book, and resolved some of the problems I then faced. Finally my thanks to Ruth Barker for her painstaking efforts in typing the many revisions of the book.

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1 Introduction

The central focus of this book is upon the socio-economic methodology of Adam Smith. The objective is to provide a re­ interpretation of the way in which his basic methodological approach is related to the totality of his work, and in so doing to argue for a conclusion which can here be given a preliminary presentation. It is that Smith’s work can plausibly be interpreted as a coherent and well-developed ‘dialectical materialism’ based upon philosophical and anthropological premisses1 which are considerably different from those underpinning M arx’s work, and thus offering an alternative explanation of socio-historical change. In the process of justifying this claim, it will be suggested that there has been a tendency on the part of those who have sought the ‘m aterialist conception of history’ in Smith’s work, to approach the problem from the perspective of seeking ‘anticipations’ of Marx’s treatm ent of socio-historical change, rather than recognising that Smith’s methodological approach constitutes such a treatm ent in its own right. Since it will be argued that this ‘m isinterpretation’ of Smith stems from an inadequate definition of ‘dialectical materialism ’ which uses M arx’s methodology as the paradigm , one of the first tasks will be to seek to generalise the concept, by approaching it from a different perspective. Rather than beginning by asking how dialectical materialism functions, the question here asked will be: ‘W hat does it seek to explain?’ In order to answer this question, it will be necessary to make some rather unconventional extensions to the contemporary philosophy of science, and this will be the task of C hapter 2. W hilst it will be necessary on occasion to question some of the existing interpretations of Smith, this is regarded as a secondary objective, the prime aim being to make a modest contribution to 1

Introduction an existing body of scholarship on Smith, and to offer an alterna­ tive perspective of his work which resolves some of the apparent contradictions in his writing. The model here presented is regarded as a historically based, taxonomic reconstruction of the structure implicit in Smith’s work, and before proceeding it is necessary to say something about the difficulties of such an approach. W. Von Leyden has suggested that: The study of any concept or theory of an earlier period, in order to be relevant, is bound to have a peculiar Janus-faced character: it must look towards the present as well as to the past.2 This may well be true, but it can be argued that there has been a marked tendency amongst interpreters of Smith to emphasise those aspects of his work which are analogous to contemporary scientific practice, whilst neglecting other facets of his work which are equally, if not more, im portant to its overall structure. This is notably true of those historians who take an ‘absolutist’ (as opposed to a ‘relativist’) approach, in that they see the develop­ ment of economic thought as a progress towards the truth,3 or at least towards more value-free and effective analysis. Such writers frequently discard the bulk of a previous thinker’s work in order to isolate those aspects of it that can be regarded as ‘anticipations’ of contemporary social science.4 Whilst not disputing either the validity of such an approach,5 or its contribution to an understanding of contemporary science, I would also wish to defend what might be called the opposite approach: that is, to take a thinker’s work as a whole, and analyse it within the context of the perspectives and objectives of his own particular time. The ‘relevance’ to contemporary science is here of a different sort; an understanding of the way in which Smith’s model relates to his implicit philosophical and anthropological assumptions may well illuminate the way in which our own models relate to preconceptions implicit in their own assumptions. This is the approach I have sought to take in this book and, whilst the tools and methodological perspectives of contemporary social science philosophy will be used in an attem pt to penetrate to the core of Smith’s system, this will be done as far as possible in the context of his own ‘problem atic’. The ‘qualitative residuals’ (Chapter 2) which are implicit in the use of any particular 2

Introduction methodology to interpret a writer, cannot be eliminated, but, if he is to be comprehended in his own terms, they must, as far as possible, be made explicit. W ith this in mind, a central objective of C hapter 3 will be to show that the reconstruction of Smith’s methodology there undertaken is fully consistent with his own explicit discussions of the subject, and not a Procrustean imposi­ tion of contemporary concepts upon his work. The philosophical apparatus used is thus intended to identify and label concepts that are at least implicit in Smith’s work, and in turn to enable those concepts to be applied to an elucidation of its meaning. Further, although the perspective developed in C hapter 2 will be maintained throughout the book, its prime function is to indicate an alternative way into the complexities of Smith’s writing and thus to be an aid to, rather than a substitute for, careful textual exegesis.6 At this stage a few points need to be made concerning the intended scope of this book: Firstly, it must be stated that the range of Smith’s work is vast by modern standards, so that any historically-based treatm ent of his writing must inevitably cut across contemporary subject demarcations. I will write primarily as an economist with — for good or ill — some training in philosophy; but, in order to follow Smith where he leads will on occasion have to venture (with considerable trepidation) into territory now occupied by other disciplines such as politial science, sociology, moral philosophy, literature and linguistics. It is somewhat ironic that the ‘division of labour’ that Smith so well analysed, should have rendered that analysis much less accessible now, than it was in Smith’s day. The modern social scientist, no m atter what his or her specialisa­ tion, is doomed to be (at best) an ‘education laym an’ in many of the areas dealt with by Smith. The history of the social sciences has been one of fragmentation by specialisation and sub-division, so that in contemporary practice only severely restricted aspects of hum an behaviour are studied by any of the sub-sets of the various disciplines. At the same time, the study of the ethical and moral dimensions of hum an existence, once regarded as an indispensable feature of any com­ prehensive ‘science of m an’ has moved outside the boundaries of what is regarded as scientific, and is now seen as a purely philosophical m atter.7 This is not to say that there are not numerous psychological and sociological studies o f‘morality’, but the study of the moral dimension as such, and within its own 3

Introduction terms of reference (an integral part of Smith’s perspective), has become a residual category, having been, more or less consciously, purged from the social sciences.8 In the eighteenth century, science and philosophy were regarded as being very much the same sort of activity,9 whereas they are now seen as discrete categories. This fundamental change of perspective presents problems of interpretation when Smith’s work is being examined, and it has no doubt been responsible for a great deal of emphasis being placed upon those aspects of his work that are analogous to what is now classified as social-scientific practice. The second point is closely related. Neo-classical economics has been no exception to this process of specialisation, and has come to adopt a perspective that, whilst much deeper in its analysis than anything Smith could have envisaged, is also much narrower in its range of application. Seen from the standpoint of twentiethcentury economics, the relevant areas of Smith’s work are mainly to be found in the first two books of the Wealth o f Nations where some rudim entary anticipations of contemporary analysis are to be found. Such a view is both legitimate and instructive, but enough has already been said above to make it clear that it is not the perspective that I have taken in this book. I am not concerned with the Neo-classical economists’ Adam Smith and have virtually nothing to say about him. It should be said also that, other than for the purpose of relating Smith to the context of his time, no systematic attem pt will be made to trace the numerous anticipations of aspects of Sm ith’s work by writers such as M ontesquieu, Cantillon, Turgot, M irabeau and Quesnay, or by the members of the ‘Scottish Historical School’, with whom Smith was closely associated. As Meek has pointed out,10 Smith’s contribution to the history of thought is not so much to be found in any totally new elements that he produces, as in his overall synthesis. Tracing the anticipations of this synthesis is a most valuable activity and, despite a considerable input of scholarship over the past fifteen years or so, much remains to be done. It is not, however, the concern of the present work. Finally, a word should be said about the approach taken here concerning the interconnections between the Theory o f Moral Sentiments (1759) and the Wealth o f Nations (1776), and between these two books and the rest of Smith’s published and reported work. It is a major objective of this book to show th at the same basic methodological perspective is to be found in all of Sm ith’s 4

Introduction work, and that ‘The Adam Smith Problem’ is not therefore a problem at all.11 This view will be supported as the work develops, but at this stage it should be noted that subsequent chapters will draw freely across the whole range of Smith’s work in support of the arguments made. The Lectures on Jurisprudence (1762-63 and 1766) and the Lectures on Rhetoric and Belles Lettres (1762-63) are taken as being more or less accurate — if incomplete — records of Smith’s views at the time of their presentation, and these texts are therefore accorded almost the same status as the published works. Biographical evidence, however, whilst used in a support­ ing role on occasion, is regarded as being of a much lower order, and not, therefore, adequate as a justification of any of the major arguments presented.

Notes 1. What can be called his ‘anthropological ontology’; the term is somewhat unwieldy, but has the advantage over ‘human nature’ of being neutrally applicable to both Smith’s work, and that of Marx. Cf. for a discussion of this issue, I. Meszaros, M arx’s Theory o f Alienation (Merlin Press, London, 1970), pp. 162-86. 2. W. Von Leyden, Seventeenth-Century Metaphysics (Duckworth, London, 1968), p. xiii. 3. A good discussion of this issue is in W. Stark, History o f Economics in Relation to Social Development (Kegan Paul, London, 1944). 4. The method is well exemplified in F.H. Knight, ‘The Ricardian theory of production and distribution’, Canadian Journal o f Economics and Political Science (1935) and also in M. Blaug, Economic Theory in Retrospect (Irwin, Homewood, 111., 1962). See too J.A. Schumpeter, History o f Economic Analysis (Allen & Unwin, London, 1954) which might also be cited in this connection although the subtlety of Schumpeter’s thought makes his work difficult to categorise, despite his explicitly ‘absolutist’ discussions of methodology. 5. On this topic see D.F. Gordon, ‘The role of the history of economic thought in the understanding of modern economic theory’, American Economic Review (1965). 6. For an excellent discussion of this issue see Q. Skinner, ‘Meaning and understanding in the history of ideas’, History and Theory (1974) and ‘Some problems in the analysis of political thought and action’, Political Theory (1974). For a recent example of Skinner’s approach in action, see Q. Skinner, Machiavelli (Oxford University Press, Oxford, 1974). An alternative view to that of Skinner is to be found in C.D. Tarlton, ‘Historicity meaning and revisionism in the study of political thought’, History and Theory (1973). 7. Not, however, in the sense that philosophy attempts, as it did formerly, to establish values; it now only claims to analyse them. This

5

Introduction may indeed be held to be one of the reasons for its apparent aridity. It is interesting that philosophy itself has tended to undergo a process of fragmentation, analogous to that which has taken place in the social sciences. The wide-ranging schématisations of, say, Aristotle, Leibniz, Kant or Hegel, have been replaced by specialised ‘philosophies of biology5, or ‘sociology5, etc., which concern themselves with elucidating problems generated within the particular disciplines. In as far as there remains an autonomous social philosophy, it is very much outside of the ‘mainstream’ of contemporary philosophical practice. Cf. P. Winch, The Idea o f a Social Science (Routledge & Kegan Paul, London, 1953) and M. Roche, Phenomenologyy Language and the Social Sciences (Routledge & Kegan Paul, London, 1973). 8. There is a vast literature on ‘values’ in the social sciences, but Weber’s ‘Methodology of the social sciences’, Archiv f i r Sozialwissenschaft und Sozialpolitick (1904) probably remains unsurpassed. For a critique of Weber’s view, cf. L. Strauss, Natural Right and History (Chicago University Press, Chicago, 111., 1953), pp. 35-80. The Marxist perspective is well exemplified by L. Goldmann, The Human Sciences and Philosophy (Cape, London, 1969). For an up-to-date defence of the Weberian position cf. F. Machlup, Methodology o f Economics and Other Social Sciences (Academic Press, New York, N.Y., 1978), p. 315 et seq. 9. T.D. Campbell, Adam Smith’s Science o f Morals (Allen & Unwin, London, 1971): ‘... the boundary between science and philosophy is ... to be found within eighteenth-century moral philosophy and logic and not between these subjects and natural philosophy.’ Cf. alsoj. Habermas, Knowledge and Human Interest (Heinemann, London, 1972), p. 4. 10. R.L. Meek, Precursors o f Adam Smith (1750-1775) (Dent, London, 1973). 11. Much of the recent literature on Smith has recognised that there is a fundamental homogeneity of approach in his work, and the view that holds that substantial dichotomies are to be found is now somewhat passé. For a recent discussion which traces out the interconnections which exist between the parts of Smith’s system, see A.S. Skinner, A System o f Social Science (Clarendon Press, Oxford, 1979).

6

2 Methodological Approach

Any critique of the theoretical structure of the work of a social scientist must itself be based upon a ‘philosophical’ interpretation of the nature of scientific theories in general, and of social science theories in particular. The first task, therefore, is to make explicit the philosophical perspective that will be implicit in all that follows. Although the conclusions that will be reached do not necessarily depend upon this perspective, it will undoubtedly permeate the whole book and be responsible for certain points of emphasis. This section will constitute a relatively brief exposition of a particular methodological perspective rather than an argument for its validity. Here it will be sufficient to show that the methodology chosen is coherent and consistent in its internal structure. Given the nature of philosophical concepts, this is indeed the only a priori test that can be applied. However, the subsequent application of the approach to Smith’s writing will, to the extent that it yields an adequate analysis of his work and resolves some of the apparent contradictions within it, provide some sort of empirical test of the position chosen. It will subse­ quently be argued that the model to be developed here, although based on contemporary perceptions of science, is in its formal structure very close to Smith's model of science. It is indeed this possibility of reflexive application that enables the model to generate a set of organising principles which suggest how the various aspects of his work might be related. The methodological approach taken here is based upon the work of the late Im re Lakatos, although his schématisation will have to be extensively supplemented in order to deal with the complexities of Smith’s ‘dialectical’ approach. Lakatos was 7

Methodological Approach responsible for developing K arl Popper’s ‘falsificationst’ position1 into what he called ‘sophisticated methodological falsificationism’.2 His purpose in doing so was to strengthen Popper’s view of science against the ‘irrationalist’ attacks of Thom as K uhn and his followers. As is generally known, Popper holds that science is fundamentally a rational exercise, in which falsified theoretical conjectures are rejected, and replaced by other conjectures, in what we might call (although Popper does not) a ‘dialectical’ interaction between theory and empirical reality.3 For Popper, the progress of science, whilst by no means linear, can be ‘ration­ ally reconstructed’ in order to reveal the logic of scientific discovery, which can be discerned when looking back at the development of science. K uhn on the other hand has a socio-psychological view of science. Scientists carry out ‘normal science’ within a ‘paradigm ’ which is secured as far as possible against refutation. Inconsis­ tencies abound, but are ignored until such time as a ‘crisis’ occurs, during which the old paradigm is swept away, and replaced by a new one. There is no rational cause for such a crisis to appear at any particular time; it is a psychological phenomenon, akin to ‘mass panic’. The transition to a new paradigm is a m atter of quasi ‘religious conversion’, and since scientific paradigm s are incommensurable, there can be no m etaparadigm atic standards by which to judge the adequacy of paradigms, and thus no logic of scientific discovery, but only a psychology thereof.4 W hilst K uhn has consistently denied that such a model does in fact involve an irrationalist perspective, it is difficult to see that he has made out a convincing case for this claim. In particular he is unable to provide any ex-ante criteria which can be used to identify a ‘rational’ change to a new scientific paradigm. In the absence of such criteria the adequacy of a paradigm can only be a function of the confidence which its adherents place in it, and such a test falls well short of the objectivity sought by Popper. Popper’s view has been (and remains) very influential amongst practitioners of science, partly one might suspect because it is rather more pleasant to consider oneself as engaged in a rational activity, rather than as being a member of an irrational, and potentially panic-stricken, mob. His model has had rather less influence amongst philosophers of science, perhaps in p art because his approach is too broad to fit in with contemporary notions of what constitutes legitimate philosophical activity, but even here his work has gained general acceptance as a coherent statem ent of 8

Methodological Approach the rationalist position. There can, however, be little doubt that the actual development of science has been much closer to K uhn’s model than to Popper’s. Scientists in general have in the past clung to theories in the face of considerable ‘refutation’, and ‘crucial experiments’ (such as the famous Michelson-Moreley experiment with light) are seen as such only long after they took place, when a new paradigm has been established. Further, there are, as Lakatos has pointed out, logical objections to Popper’s position, in that there is no clear-cut distinction between ‘theoretical’ propositions, and ‘observational’ propositions — i.e. all scientific observation is ‘theory laden’ rather than ‘pure’ or ‘basic’. As a standard example of this we can take an observation made in a ‘Wilson Cloud C ham ber’ where the condensation traces are ‘seen’ as atoms, in terms of pre-existing theory. This alone makes the refutation of a theory contingent upon the acceptance of other theories, which can themselves be modified to avoid an inconsistency. Sophisticated methodological falsificationalism seeks to avoid these serious difficulties by postulating the following model: To be classed as scientific, a theory must have more empirical content than its predecessor, in that it generates additional empirical propositions, as well as including all the unrefuted content of the previous theory. Further, some of this new empirical content must be confirmed by observation, but it is im portant to recognise that such observation is interpreted within the context of the theory. A theory is only falsified upon this view, if another theory exists which satisfies the above criteria. To save a theory by adding new auxiliary hypotheses is good scientific practice only if new corroborated content is thereby introduced, in which case we speak of a ‘progressive problemshift’. Saving a theory by introducing ad hoc hypotheses, without such additional content, is bad scientific practice, if not indeed unscientific metaphysics — we speak here of a ‘degenerative problemshift’. As an illustration, we can say that the adding of ever more ‘epicycles’ to the Ptolemaic system of astronomical explanation, in order to explain deviations from the model’s predictions, was a degenerative problemshift, whilst if those additions had in fact also generated new (corroborated) predictions about the move­ ment of the planets (rather than simply explaining already observed anomalies) the problemshift would have been progressive. 9

Methodological Approach It is this notion of progressive problemshifts that gives a dynamic element to Lakatos’s model. As he says: ‘The idea of growth and the concept of empirical character are soldered into one. Clearly, here, no single observation can lead to the falsification of a research program m e— only a prolonged struggle with another research programme, which turns out to be better (i.e. more pro­ gressive) will lead to its being abandoned. The central core of a research programme consists of a formal calculus — as, for example, a system of mathem atical equations — and a series of epistemological assumptions, implicit or explicit, about the nature of the events with which the theory is concerned. We can say that the epistemology specifies the sorts of things or events that are dealt with by the theory, whilst the calculus specifies the relationships between them.6 This core is accepted as irrefutable by those who work with the theory — i.e. it is regarded as unproblematical background knowledge — and is defended when necessary by auxiliary hypotheses in the face of inconsistencies. Lakatos speaks of the ‘negative heuristic’ which is, in effect, an implicit specification of those elements within the core which must not be subjected to the process of refutation. He has been interpreted here as being quite close to Kuhn, in that his model is more tolerant of inconsistency than that of Popper, who takes a sterner line concerning the permissibility of auxiliary hypotheses. However, such an interpretation tends to ignore the fact that, in his progressive/degenerative distinction, Lakatos does provide, at least in principle, a ‘touchstone’ for detecting ad hoc defences of a theory. The central core also generates a definition of the sorts of problems to be solved in the peripheral (refutable) area of the research programme, and this he calls the ‘positive heuristic’. As a concrete example of such a core, we could take Newton’s three laws of dynamics, together with his principle of gravitation. It will be clear from the above discussion that such theoretical cores can fairly be described as ‘m etaphysical’, in that they themselves are pre-suppositions with no empirical content. However, given that the word ‘m etaphysical’ has distinctly pejorative connotations, it will be better to avoid it and call the protected core ‘metascientific’. W hilst it can be argued that all scientific theories are based upon systems of metaphysical assumptions of the sort outlined above, it is not the case that all such systems serve a function in science; i.e. in the absence of the 10

Methodological Approach empirical corroboration implicit in the notion of a progressive problemshift, they could be held to be purely metaphysical, rather than metascientific. Lakatos’s perspective provides a highly satisfactory explanation of the fact that many refuted scientific theories, when seen from the standpoint of their (more progressive) successors, appear metaphysical, as do for example Cartesian Dynamics, Corpuscu­ lar Theory, Phlogiston Theory and (post Einstein) Newtonian Dynamics, whilst the metaphysical (or metascientific) nature of current theories is usually hidden from their adherents. In this connection Ernst M ach7 demonstrated the metaphysical nature of many previous theories, but, far from concluding that this was a feature of all science, he went on to urge that all such metaphysics should be purged. Schumpeter also adopted a similar position in his monumental History o f Economic Analysis8 where he suggests that an original pre-analytic ‘vision’ is, and should be, purged of metaphysics, by successive refinements of the analytical tech­ niques it generates. The view taken in the present work, however, is that a pre-empirical, metascientific, orientation is an irreducible constituent of all scientific theories, and that it is a precondition of successful scientific practice that scientists do accept their protected assumptions as unproblematical. Lakatos’s view of scientific theories is, in a sense, a synthesis of K uhn’s view with that of Popper, in that it emphasises the role of conventional methodological decisions and also makes the refutation of a theory a much more protracted, and less clear-cut process. The synthesis is not unproblematical, in that it is not fully clear how one distinguishes between rational and irrational factors in the ultimate overthrow of a research programme, so that the model seems rather closer to K uhn’s position than Lakatos appears to have believed it was. To be fully effective as a defence against K uhn’s relativism it has to be possible to make an ex ante specification of the criteria applied during the progressive/ degenerative test, and it is not at all clear how Lakatos can do this. However, his model does at least leave the question of rationality open, and also has greater generality than either K uhn’s or Popper’s, both of which can be subsumed under it as special cases. It also adds some, much needed, ‘fine-structure’ to K uhn’s model and provides the possibility of a non-circular definition o f ‘paradigm ’, and ‘normal science’, thus removing one of the central weaknesses in K uhn’s approach. His schématisation is in fact a subtle blend of three major lines 11

Methodological Approach of philosophical thought, in that it incorporates elements of the K antian ‘activist’ conception of knowledge, ‘conventionalism’ and ‘empiricism’. As well as being logically consistent, it has great explanatory power when applied to the historical, and to the contemporary, practice of science.9 Even more importantly, for the present purpose, it is sufficiently general to serve as a vehicle for an exposition of what will be termed a ‘dialectical’ model, and to permit contrasts to be drawn between such a model and the more conventional ‘empiricist’ models of science. At the same time, it is sufficiently restrictive to exclude most of w hat is generally classified as ‘un-scientific’ activity. Lakatos tended to confine the application of his model to, and drew his examples from, the physical sciences,10 but later writers have extended his perspective to include the social sciences11 and in some cases specifically to economics.12 However, at the time of writing I know of no detailed application of Lakatos’s schémati­ sation to a particular economic thinker, although there is no reason in principle why such an application should not be made. Indeed it will be argued below that Smith’s work has a structure which makes it an example par excellence of a Lakatosian research programme. It is encouraging in this connection to find that no less an authority than the late Ronald Meek has, in one of his later works, gone some way towards this position, although working with K uhn’s schématisation of ‘paradigm ’. He suggests that Smith’s political economy ... possessed most of the basic characteristics of a paradigm as Professor K uhn defines them. A ‘group of adherents’ was certainly attracted to its system from competing modes of scientific activity: its two main rivals — the system of the Physiocrats, and that of Steuart’s Inquiry — did not long survive its publication ...13 and that the system was ‘enduring’ and ‘open ended’ in that it left problems to be solved by later adherents. Meek, however, shares K uhn’s doubts about the possibility of using ‘paradigm ’, in its strict sense, in the social sciences, and considers that here a ‘community of practitioners’ is not as readily identifiable as it usually is in the physical sciences,14but he says ... even if Smithian political economy can’t be described as 12

Methodological Approach a paradigm in the strict sense of the word, it surely represented one of the nearest approaches to it in the history of economic thought. (Ibid.) We shall return shortly to the model so far developed, but first need to establish a definition of what it means for a social-science model to be dialectical. Here a definition is sought that is sufficiently general to include the dialectics, both of M arx and (as we shall see) of Smith, as special cases, but also sufficiently restrictive to exclude not only ‘non-scientific’ dialectical models (such as that of Hegel) but also empiricist models. It should be recognised at the outset that when we discuss the nature of dialectical (or for that matter, empiricist) models of science, we inevitably raise questions that may well be incapable of being given any definitive answer, for at bottom, we are here concerned with the link between (scientific) thought and reality. It is not intended to pursue these deep, and possibly irresolvable, questions into the realms of metaphysics; it is sufficient for the present purpose to speak of the way in which social science models appear to be constructed (or at least of the way in which they can be formally reconstructed) without enquiring as to the precise m anner in which those models are (or are not) adequate reflections of reality. It should also be made clear that this book is concerned only with scientific knowledge, which should not be identified with knowledge in general. The commonly held view, popularised by Huxley that science is ‘nothing but trained and organised common sense’, neglects the role of theory in the sciences and so blurs a crucial distinction. Even if we take the view that ‘common sense’ observation involves interpretation in terms of a complex network of preconceptions, it is clear that an additional, and perhaps different, process of interpretation is involved when observations are made in the context of a scientific theory. W ith these qualifications in mind, the claim made here is that a distinction can be drawn between dialectical and empiricist approaches to social science, and that they can be shown to be addressed to fundamentally different sorts of problems. It may be of course that neither approach will often be found in its pure form, and that in practice it is the degree of emphasis that is relevant, but this does not invalidate the argument. To establish this position, the first distinction that must be made is between what Nicholas Georgescu-Roegen15 has called an ‘arithm om orphic’ concept and a concept that is designed to 13

Methodological Approach reflect qualitative phenomena. A clear example of arithm om orphic conceptualisation is the set of real numbers, each of which is discretely distinct from any other. Qualitative concepts are, for reasons that will become clear, more difficult to specify, but at this stage the notion can be illustrated with Georgescu-Roegen’s examples o f‘democracy’, ‘good’, ‘justice’, ‘likelihood’, and ‘w ant’. These he says ... have no arithm om orphic boundaries; instead they are surrounded by a penumbra within which they overlap with their opposites. (Ibid., p. 145.) Though they are ... not discretely distinct, dialectical concepts are nevertheless distinct. The difference is this. A penum bra separates a dialectical concept from its opposite. In the case of an arith­ momorphic concept, the separation consists of a void... (Ibid.) He considers that such qualitative concepts violate the logical principle of non-contradiction in that, in certain instances ‘B is both A and not A’ and it is indeed for this reason that he calls them (showing the strong influence of Hegel on his work), ‘dialectical’. Violation of the law of non-contradiction is generally regarded as a somewhat serious business, and could indeed be held to render all coherent discourse impossible, so that Georgescu-Roegen’s presentation of this point is perhaps too strong. But from what he says elsewhere it seems clear that what he means here is, that within the penum bra that separates a qualitative concept from its opposite, we have a ‘moment of becoming’ or a qualitative change — i.e. ‘B’ is in transition from being ‘not A’ to being ‘A’. The law of non-contradiction is, there­ fore, perhaps better thought of as being suspended, rather than violated, in that we have a zone of qualitative transition, which cannot be grasped by the purely arithmomorphic, and thus intrinsically static, symbolism of conventional logic. This interpretation would seem to be confirmed by his later statem ent that one of the essential features of a qualitative concept is that as a ‘... penum bra surrounded by another penum bra it confronts us with an infinite regress ...’ (ibid., p. 54), whilst claiming that: 14

Methodological Approach Far from being a deadly sin, the infinite regress of the dialectical penum bra constitutes the salient merit of the dialectical concept; as we shall see it reflects the most essential aspect of change. (Ibid., p. 47.) One of his central arguments in this context, is that the application of arithmomorphic concepts to some aspects of social reality leaves ‘qualitative residuals’. He sees the ‘indifference’ curves of ‘standard economics’ as being residuals of this type projected on to a cardinally quantifiable m apping of commodity combinations, and holds that much the same is true of conven­ tional economic presentations of the production function. The distinction that Georgescu-Roegen wishes to establish is far from unproblematical, as he himself would be the first to admit. There is in fact a powerful school of thought which rejects the belief that any meaningful distinction of this sort can be drawn, and insists that what have been here called qualitative concepts are in fact pre-scientific first approximations, which must be analysed into quantifiable and empirically operational components.16 However, this assertion is not self-evidently true, and indeed, the progress of social science in general, if measured by such a standard appears exceedingly lim ited.17 It can indeed be argued that it is precisely the empiricist emphasis upon quantification, together with its implications for verification that has led to frequent misinterpretations of Smith. M uch of what he was attem pting to do is no longer regarded as ‘scientific’ because of changes in the methodology and perspectives of science itself. An empiricist interpretation of Smith tends to focus on limited and selective aspects of his overall model, which happen to conform to empiricist preconceptions, but this leaves out key elements of his work which in fact give it unification. As a result, his problems and objectives, in so far as they are noticed at all, are not seen as legitimate science, and thus the major part of his work, which is qualitative in its orientation, is ignored. Underlying this dispute about the status of qualitative concepts, is a fundamental difference of perspective concerning the ultimate structure of reality. O n the one hand we have a view of the world which sees it as being composed of discrete, atomistic, ‘simples’ of some sort, whilst on the other hand it can be seen as a continuum .18 In the former case our concepts are, or can be, representations of pre-existing discrete entities and the application 15

Methodological Approach of discrete symbolism to the world is theoretically unproblematical. In the latter case, we ourselves must somehow ‘cut up’ a continuous reality into conceptually manageable ‘lum ps’, and such a conceptual compartmentalisation is presum ­ ably a precondition of being able to think at all. This dichotomy seems to be as old as philosophy itself, being present in the contrast between Plato’s view o f ‘the real’ as being composed of discrete ‘forms’19 and Aristotle’s notion of a qualitative continuum.20 It has reappeared in numerous guises; for example, in the perennial dispute between ‘nominalism’ and ‘realism’; in the early classical empiricist emphasis on the distinction between prim ary and secondary qualities,21 together with its associated doctrine of the a posteriori nature of general concepts, and in the continuing debate between ‘methodological individualism’ and ‘methodological holism’.22 It perhaps finds its most concise expression in the work of Ludwig Wittgenstein, whose early attem pts to show how language ‘hooks on to the world’ by being the formal analogue of the logically discrete, atomistic, ‘simples’ that form the ultimate structure of reality23 became, in his own opinion, untenable, as the result of its inability to handle purely qualitative, and, therefore, logically inter­ dependent, phenomena, such as colour.24 For the present purpose it manifests itself most relevantly in the dichotomy between the empiricist view of verification, and what can be called the dialectical view. The empiricist position can be characterised as seeking the refutation/confirmation of propositions or hypotheses by referring them to an atomistic ‘given’ which is static in the sense that only quantitative change is postulated. The discrete ‘objects’ or ‘facts’ to which verification is linked are not conceived of as being in themselves capable of qualitative transition: it is for precisely this reason that in all the numerous variants of empiricism, ‘m eaning’ is identified with ‘verification’. This remains true despite the fact that the somewhat naive tenets of ‘logical positivism’ have now been more or less abandoned in favour of more sophisticated models which allow for the role of theory. Interestingly, the distinction we are seeking to pin down finds clear expression in the literature of Samuel Beckett, for this is surely what he has in mind when, in his play, Watt, he says: The change. O f what did it consist? It is hard to say. Some­ thing slipped ... There is a great alp of sand, one hundred 16

Methodological Approach metres high, between the pines and the ocean, and there in the warm moonless night, when no one is looking, no one listening, in tiny packets of two or three millions the grains slip, all together, a little slip of one or two lines maybe, and then stop. All together, not one missing, and that is all ...25 W att is generally interpreted as being a ‘logical positivist’ and as such is obsessed with quantification; the passage appears to postulate the existence of change which is purely qualitative, and thus outside the scope of quantitative comprehension. A further implication of the empiricist view is that, in so far as qualitative concepts have any role at all to play, it is in the heuristic context and not in the context of verification, but since meaning is so tightly linked to verification26 such concepts are left without any formal status.27 By contrast, in the dialectical view, verification is to be found in the ‘confirmation’ of genetic accounts of ‘becoming’ — i.e. of qualitative development. The ‘real’ is the totality of a continuum of dynamic development, not an atomistic structure existing at any given moment in time. This continuum is conceived of as being both spatial and temporal, and the concepts we devise to reflect it are thus seen as a ‘cutting up’ of an essentially continuous reality. Dialectical models are thus inextricably linked to historical context. They are designed to ‘reflect’ or ‘m irror’ the dynamic principles which are believed to govern reality. Borrowing Hegelian terminology, we might say that they have a dual status being conceived of as both concept and mode of being. A word of warning is perhaps appropriate at this stage. As a direct consequence of the present broadening of Lakatos’s definition of science, to include historical accounts of qualitative change, terms such as ‘model’ and ‘theory’ have taken on a wider range of application than is normally found in empiricist inter­ pretations of science. The notion o f‘reflecting’ dynamic principles of change, which was discussed above, falls outside the rigorous definitions of scientific activity found in such interpretations, and the position argued for here is that these standards must be relaxed and broadened in order to see that Smith’s historical approach is scientific in intention. Indeed if we work with the standard empiricist definitions of model and theory, then, as numerous writers from Shumpeter onwards have pointed out, there is little that qualifies as scientific in Smith’s work outside of the first two books of the Wealth o f Nations. Given such an interpretation the 17

Methodological Approach ‘Theory’ of Moral Sentiments is in fact nothing of the kind, being at best a system of pre-scientific first approximations. A further (closely related) aspect of dialectical models of hum an behaviour, is that the empiricist notion of causality, where cause and effect are discrete entities in a deterministic chain, is replaced by the notion that cause and effect are contained in the same concept or principle. It is this dialectical tension that gives rise to what Georgescu-Roegen calls ‘the infinite regress of the dialectical penum bra’ (as discussed above). The social world is not seen as a causally linked network of discrete objects, but as a complex of self-generating processes in which qualitative changes can occur. The ‘given’ empirical reality at any ‘mom ent’ is the dynamic process of ‘becoming’. There are of course many ambiguities in the notion of an ‘internal’ cause, not least of which is that change appears to be both caused and uncaused. But in its defence it must be said that all notions of causality contain paradoxes. It is not, however, intended here to enter into metaphysical discussions of causality, since it is adequate for the present purpose to identify the implications of a dialectical approach to methodology. In brief summary of the above, it can be said that in the empiricist conception of science, it is concerned with the quantitative extrapolation of ‘the given’, and in as much as there is change which is irreducibly qualitative, it must of necessity be beyond the scope of scientific enquiry. This is not to say that empiricist science cannot take account of qualitative change, but it can only do so ex post, by constructing a model which incorporates the new param eters. At the formal, or analytical level (as opposed to the purely descriptive), it proceeds, as it were, by discrete jum ps from one qualitative nexus to the next. Dialectical science on the other hand seeks to comprehend the moment of qualitative transition itself — its ‘verification’ thus lies in the ability of its principles to reflect such transitions. To do this, a scientific dialectical model must isolate features that are, in some sense, essential principles of movement in society, and give these principles speculative development. The question must of course arise as to how we know that the principles chosen are the essential ones. It is here that the generality of Lakatos’s schématisation of science is of value, for by seeing dialectical models as Lakatosian ‘research programmes’, we can at least in principle apply a modified form of the progressive/degenerative test. A dialectical research programme will then be classed as 18

Methodological Approach progressive, in so far as it generates concepts and hypotheses which have what will here be called ‘genetic’ empirical content, in that they make meaningful references to, and provide coherent explanations of, aspects of a concrete, historical, society which is undergoing (or has undergone) qualitative change. Seen from this perspective ‘verification’ has a very different meaning from that found in contemporary science, being linked with plausibility, coherence and explanatory power rather than prediction. A strict empiricist would, of course, argue that predictive power is the ‘touchstone’ of science and that the other factors mentioned simply do not constitute verification. For the present purpose, however, it is sufficient to show that Smith believed that they do, and this will be done in due course, when it will be shown that his position is fully consistent with the present interpretation. The characterisation of the dialectical model as so far developed is not sufficiently restrictive; the ‘objective idealism’ of Hegel, and possibly even the ‘subjective idealism’ of Fichte, would qualify as candidates for the status of dialectical models as they have been depicted here, although, since neither model could lay serious claim to genetic empirical content, we should not have too much trouble in eliminating them. The definition can be made more restrictive, however (thus excluding them at the outset), if we introduce the notion of dialectical materialism. The issues here are complex, and at this stage only a partial characterisation will be provided; this will be further developed during the application of the whole schématisation to Smith’s work. At the most general level we can say that the ‘materialistic’ element in dialectical materialism resides in the view that the economic organisation of a society is the fundamental factor in shaping its institutions and its intellectual activity. Such a perspective is not of course confined to dialectical models, and many ‘empiricist’ economists, and some (but by no means all) historians and political theorists would accept it as noncon troversial. The dialectical materialist view is however distinctive, both in the stress that it places on the interaction of economic organisation and socially generated individual con­ sciousness, and in its emphasis on the dynamic, historical, nature of that interaction. Here, the economic ‘base’ of society is both cause and effect of people’s conscious activity. It generates and constrains the boundaries within which conscious activity is possible, but at the same time it is the product of that activity. 19

Methodological Approach Dialectical materialism is thus to be contrasted not only with the ‘idealism’ of Hegel28 or Collingwood, but also with the deterministic materialism of, say, Hobbes or Helvetius. One of the basic strengths of dialectical materialism is that it does attem pt to occupy this middle ground, and thus formally denies the duality of thought and m atter implicit in most philosophy down to Hegel. One of its basic weaknesses is that it fails to provide an adequate account of the precise nature of the interaction which it postulates, so that the position taken is in constant danger of being conflated with the doubtless true, but trivial, proposition that ‘everything depends upon everything else’. Some of the best work in the Hegelian-M arxist tradition has been addressed to this issue but it can hardly be said to have been satisfactorily resolved. It is however beyond the range of this book29 to pursue this question further as far as Hegel and M arx are concerned, although further reference will be made to it in connection with Smith. In summary of the above characterisation it can be said that the dialectical m aterialist perspective has, as the ‘subject’ of history, people creating their social world by conscious productive activity, in concrete systems of economic organisation, and not any extra-hum an subject such as ‘Spirit’, ‘Collective M ind’ or ‘Reason’. This leads me to a not uncontroversial claim which m ust be justified as the text unfolds. The ‘labour theory of value’ at one level is nothing more, or less, than a technical, economic, assertion that the labour embodied in the production of a commodity deter­ mines its exchange value; this indeed is, to a large extent, how the theory functions in the work of Ricardo. But, on a broader definition it becomes something more fundamental for it is then the assertion that people through their productive activity create their own social reality. This, it will be argued, is how the theory functions in the work of Adam Smith; it is the fundamental metho­ dological perspective that shapes and guides virtually everything that he has to say about society.30 It is necessary here to enter a disclaimer. If we work with the narrower, technical definition of the labour theory of value, we are almost inevitably led into a discussion of what has become known as the ‘transformation problem’ and into an economic analysis of Ricardo’s and M arx’s criticisms and extension of Smith’s discussions, of ‘labour embodied’ and ‘labour commanded’. Such a treatm ent is the legitimate territory of the 20

Methodological Approach economist, Neo-classical or M arxian, but not of the present work which has chosen other, and less conventional, ground. I have nothing to contribute to the debate and will refer to it again only in passing. Before concluding this chapter it might be appropriate to provide a brief summary of the methodological equipment developed so far, and then to indicate how it will be used in the remainder of the book. It has been argued that the notion of Research Programmes, as presented and developed by Im re Lakatos, gives a schématisa­ tion that is both logically consistent, and plausible in that it provides a reasonable explanation of the actual progress of scien­ tific endeavour. The model provides us with a coherent explanation of the interaction of ‘metascience5 and empirical testing, and challenges many established beliefs as to the nature of falsification and/or verification in the context of scientific theories. Further, because of its vision of science as a process, and thus intrinsically dynamic in nature, it can be extended to cover socio-historical models of qualitative change, which fall outside the traditional (empiricist) definitions of scientific activity. It is the function of C hapter 3 to show that the methodological position arrived at in this process is fully in accord with Smith’s own explicit discussions of the nature of science, and it will there be suggested that the present chapter has in fact used modern philosophical concepts to reconstruct and formalise the perspec­ tive found in Smith's own ‘philosophical5 writings. Later chapters will seek to demonstrate that much of his work is amenable to penetration when approached from this perspec­ tive, and that some of Smith's key concepts then undergo subtle, but not unim portant, changes of meaning.

Notes 1. K. Popper, The Logic o f Scientific Discovery (Hutchinson, London, 1959). 2. I. Lakatos, ‘Falsification and the methodology of scientific research programmes5in I. Lakatos and A. Musgrave (eds), Criticism and the Growth o f Knowledge (Cambridge University Press, London, 1970) and also I. Lakatos, ‘The methodology of scientific research programmes5 in Philosophical Papers I (Cambridge University Press, Cambridge, 1978). 3. It is rather ironic that Popper, who has been a severe (if unconvincing) critic of Hegel, has himself postulated a schématisation

21

Methodological Approach of the process of the growth of knowledge which is formally (although not perhaps epistemologically) very close to Hegel’s position. For criticism of Hegel (and Marx) see K. Popper, The Open Society and Its Enemies (2 vols., Routledge & Kegan Paul, London, 1945), vol. 2, and The Poverty o f Historicism (Routledge & Kegan Paul, London, 1957). Popper’s own schématisation is to be found in Objective Knowledge (Oxford University Press, Oxford, 1972). 4. Cf. S. Kuhn, The Structure o f Scientific Revolutions (Chicago University Press, Chicago, 111., 1970). 5. I. Lakatos, ‘Falsification and the methodology of scientific research programmes’ in I. Lakatos and A. Musgrave (eds), Criticism and the Growth o f Knowledge (Cambridge University Press, London, 1970), p. 119. 6. Lakatos does not normally work with the traditional tripartite division of a scientific theory into ‘calculus’, ‘model’ and ‘linking terms’, but for the purpose of illustration we can do so, identifying the calculus with the formal relationships explicit within the theory, and the model with its implicit or explicit epistemology. The ‘linking terms’ would then be analogous to the implicit ‘interpretations’ made within the perspective of the model. On the role of models in science, see N.R. Campbell, Foundations o f Science (Dover, New York, N.Y., 1957) and M.B. Hesse, Models and Analogies in Science (Sheed & Ward, New York, 1963). 7. E. Mach, The Science o f Mechanics (Open Court, LaSalle, 111., 1942). 8. J.A. Schumpeter, History o f Economic Analysis (Allen & Unwin, London, 1972). Cf. for example, p. 41 et seq. 9. There is a substantial secondary literature on Lakatos. Cf. for example, S.J. Latsis, ‘A research programme in economics’ and A. Leijonhufvud, ‘Research programmes in economic theory’, both in S.J. Latsis (ed.), Method and Appraisal in Economics (Cambridge University Press, Cambridge, 1976). 10. Lakatos himself provided a superb application of his model in I. Lakatos, Proofs and Refutations: The Logic o f Mathematic Discovery (Cambridge University Press, Cambridge, 1976). Cf. also D. Bloor, ‘Two paradigms for scientific knowledge’, Science Studies (1971); and C. Howson (ed.), Method and Appraisal in the Physical Sciences (Cambridge University Press, Cambridge, 1976). 11. Cf. P. Ur bach, ‘Progress and degeneration in the I.Q. debate’, British Journal for the Philosophy o f Science (1974). 12. Notably by M. Blaug, The Methodology o f Economics (Cambridge University Press, Cambridge, 1980). Cf. also S.J. Latsis, ‘A research programme in economics’ in S.J. Latsis, Method and Appraisal in Economics (Cambridge University Press, Cambridge). 13. R.L. Meek, Precursors o f Adam Smith (1750-1775) (Dent, London, 1973), p. viii. 14. The existence of ‘paradigms’ in economic thought is debated in G.J. Stigler, ‘Does economics have a useful past?’, History o f Political Economy (1969); and A.W. Coats, ‘Is there a structure of scientific revolutions in economics?’, Kylos (1969), and in D.F. Gordon, ‘The role of the history of economic thought in the understanding of modern economic theory’, American Economic Review (1965). Cf. also H. Katouzion, Ideology and Method in Economics (Macmillan, London, 1980).

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Methodological Approach 15. N. Georgescu-Roegen, The Entropy Law and the Economic Purpose (Harvard University Press, Cambridge, Mass.). Georgescu-Roegen’s published work has been of considerable influence in shaping the general perspective of this book. 16. The literature on this topic is considerable, and indeed, obscure; however, lucid discussions are to be found in R. Dubin, Theory Building (Free Press, New York, N.Y., 1978) and A. Kaplan, The Conduct o f Inquiry; Methodology for Behavioural Science (Crowell, New York, N.Y., 1964). 17. Cf. H. Woolf (ed.), Quantification: A History o f the Meaning o f Measurement in the Natural and Social Sciences (Irvington, New York, N.Y., 1961) and P. Doreian, Mathematics and the Study o f Social Relations (Schocken, New York, N.Y., 1971). An interesting historical treatment of probability concepts is to be found in I. Hacking, The Emergence of Probability (Cambridge University Press, Cambridge, 1975). 18. A.O. Lovejoy, in The Great Chain o f Being (Harvard University Press, Cambridge, Mass., 1936), makes some perceptive comments upon this topic. 19. For example, in the Phadros, the Meno and the Republic. Also cited here can be the Pythagorean conception of the world, which was unambiguously atomistic and arithmomorphic; very similar perspectives are also to be found in Kepler’s work, and that of Galileo. 20. As presented in the Physics. For Aristotle all forms of being were seen as forms and types of movement. 21. Cf. J. Bennett, Locke, Berkley and Hume (Clarendon Press, Oxford, 1971), for a detailed discussion and also H.H. Price, Hume’s Theory o f the External World (Clarendon Press, Oxford, 1948). Von Leyden has said, on this topic, that ‘as the result of the contemporary mechanistic view of nature it was natural for (Locke) as it had been for Galileo and Descartes, to single out as real the so-called primary qualities of bodies such as extension figure and motion: they were quantitative and hence mathematically definable characteristics and could also be regarded as both necessary and sufficient conditions of sensory perception.’ W. Von Leyden, Seventeenth-Century Metaphysics (Duckworth, London, 1968), p. 46. 22. Cf. K. Popper, The Poverty o f Historicism (Routledge & Kegan Paul, London, 1957) and J.N.N. Watkins, ‘Historical explanation in the social sciences’, British Journal for the Philosophy o f Science (1952). The whole debate is well reproduced in P. O ’Neill (ed.), Modes o f Individualism and Collectivism (Heinemann, London, 1973). Cf. also I. Krimerman (ed.), The Nature and Scope o f Social Science: A Critical Anthology (Meredith, New York, N.Y., 1969). 23. L. Wittgenstein, Tractatus Logico-Philosophicus (Kegan Paul, Trench, Trubner, London, 1933), p. 37. ‘203 In the atomic fact objects hang one in another like members of a chain. 2031 In the atomic fact the objects are combined in a definite way. 2032 The way in which the objects hang together is the structure of the atomic fact. 204 The totality of existing atomic facts is the world.’ 24. Cf. L. Wittgenstein, Philosophical Investigations (Blackwell & Mott, Oxford, 1972). There is a good discussion of this issue in A. Kenny,

23

Methodological Approach Wittgenstein (Penguin, Harmondsworth, 1975). See also articles by A. Kenny, R.M. White and R. Rhees in Understanding Wittgenstein, Royal Institute of Philosophical Lectures, Vol. 7, 1972/73. 25. S. Beckett, Watt (Calder, London, 1976), p. 41. 26. The literature on meaning in empiricist perspectives is vast; good representative treatments are G. Ryle, The Theory o f Meaning in British Philosophy in the Mid-Century (Allen & Unwin, London, 1957), R. Carnap, Meaning and Necessity (Chicago University Press, Chicago, 111., 1956) and W. Quine, ‘Designation and existence’, Journal of Philosophy (1939). 27. Cf. G. Radnitzky, Contemporary Schools o f Meta-Science (Akademi Forlaget, Gotenborg, 1970) and P. Feyerabend, Against Method (New Left Books, London, 1975). Feyerabend’s book is, in part, a critique of Lakatos’s work from the standpoint of ‘epistemological anarchy’. 28. Hegel is notoriously difficult to categorise, precisely because he is a dialectician, and thus looks at the interaction of ‘spirit’ and matter. Despite this (and despite some claims to the contrary) his orientation is such that I have little hesitation in classing him as an ‘Idealist’. The true subject of his metaphysics is ‘Spirit’, and it could well be argued that he regarded ‘Matter’ as merely an aspect of ‘Spirit’. 29. Cf. G. Lukács, History and Class Consciousness (Merlin Press, London, 1971), K. Korsch, Marxism and Philosophy (N.L.B., London, 1970) and J. Habermas, Knowledge and Human Interest (Heinemann, London, 1972). Lukács later renounced this work under pressure from the Soviet state, and at the time of his death he still held that it was fundamentally mistaken — arguably however, it remains the most coherent attempt at elucidation. 30. This interpretation is close to the view held by Meek, who has said that the essence of the labour theory of value is that the ‘... fundamental relationships into which men enter with one another in the field of production ultimately determine the relationships into which they enter in the field of exchange.’ R.L. Meek, Studies in the Labour Theory o f Value (Lawrence & Wishart, London, 1973), p. 73.

24

Smith’s Epistemology: Meaning, Context and the Nature of Science

The first problem we are faced with when seeking to reconstruct Smith’s epistemology is that, at least on first examination, he does not appear to have a great deal to say on the subject.1 This in part can be seen as a reaction to the metaphysical system building of scholastic writing, what Smith calls ‘... that species of metaphysics which confounds every thing and explains nothing’ (EPS: O f the External Senses, p. 140). He certainly had a surfeit of such metaphysics during his years at Oxford, where he formed a low opinion of much that was taught in many of the European universities, and his views on the subject find frequent expression in the Wealth o f Nations. He was also very well aware that lengthy discussions of metaphysical assumptions tended to have a distinctly soporific effect on the general reader, to whom his two major works were addressed. His letter to his publisher, Thomas Cadell, concerning a recently issued work on ‘Ethics and Natural Philosophy’ seems a fair statem ent of his position, for he found it ... as free of metaphysics as it is possible for any work on that subject to be. but added, Its fault, in my opinion, is that it is too free of them. But what is a fault to me, may very probably, be a recommenda­ tion to the public. (Letter 261, Con.) W hatever the reason, if we are seeking in Smith’s extant work — written or reported — a comprehensive treatm ent of epistemo25

Smith's Epistemology logical and methodological issues, comparable to that presented by his more overtly philosophical contemporaries such as K ant or Hume, we shall be disappointed. However, fortunately for our present purposes, what he does have to say is sufficiently explicit for us to be able to reconstruct his overall epistemological perspective with a high degree of confidence, and this can then be developed to show that his views on scientific methodology, are in fact a special case of this more general perspective. Indeed it will emerge that Smith uses this same epistemological framework to explain all aspects of m an’s interaction with nature, covering areas as wide ranging as the evolution of social institutions, the development of science, logic, the arts and metaphysics and the invention of machinery. We shall also see that the importance of language for Smith is that, in its form and content it reflects this fundamental interaction, so that a study of the development of language, and of its present state, has implications beyond the merely linguistic or philological. This link between language and our perception of reality is in fact a convenient place to start our detailed investigation of Smith’s epistemology. Let us begin with ‘nam ing’. Smith sees the act of naming as being both logically and historically amongst the first types of mental activity. It seems probable that those words which denote certain substances which exist, and which we call substantives, would be amongst the first contrived by persons who were inventing a language. (LR B L, p. 9.) Thus, he explains, in a primitive state, a man would have need to identify his own particular cave, or source of food, and would need to communicate these concepts to his fellow savage. From this would arise a substantive to cover the concept of this particular cave, or source of food, and these words would serve as a rudim ent­ ary language amongst the people in question. The next step would be to generalise these specific substantives to cover classes of objects having similar qualities; to move from the notion of a particular cave, to that of caves in general. As he puts it: The association of ideas betwixt caves, trees, etc, and the words they had denoted them by, would naturally suggest that those things that were of the same sort might be denoted 26

Smith's Epistemology by the same words. Thus it might perhaps be that those words which originally signified singular objects came to be Special names to certain classes of things. (Ibid.) Smith is, of course, well aware of the lengthy epistemological discussions to be found in Locke and Hume on the difficulties of moving from the particular to the general, and makes no claim to have resolved these complex issues.2 His reservations, however, are not central to his discussions and need not detain us in the present task. The discussion in the Lectures on Rhetoric and Belles Lettres is in terms of a logical reconstruction of the history of language, but in the Essays on Philosophical Subjects (Astronomy) we find the same process discussed more overtly in terms of epistemology, pre­ sented, as is usual with Smith, in the context of a psychological explanation of hum an propensities. It is evident that the mind takes pleasure in observing the resemblances that are discoverable between different ob­ jects. It is by means of such observations that it endeavours to arrange and methodise all its ideas, and to reduce them into proper classes and assortments. (EPS: Astronomy, p. 37.) Now on the face of it, the above passages are merely logical implications of the tenets of what we may loosely call ‘Associa­ tionism’.3 If, following Hume, we accept that all knowledge is derived from concrete perceptual experience, presented in the form of sense data — what Hume calls ‘impressions’ — then it is reasonable to suppose that the reflection of these impressions in language will begin with the naming of individual objects, and proceed, by a process of abstraction, to general concepts. The fact that Smith presents his discussion in the language of Associationism has led some commentators to assume that he also holds the ‘realist’ epistemology that is the normal concomitant of such a view. Bitterman, for example, has claimed that: ‘Adam Smith’s methodology was essentially empirical deriving its inspiration from Newton and Hum e in contrast to the rationalistic method of the natural-law school of thought.’4 We must, however, go further than this, and probe beyond Smith’s use of language of Associationism if we are to establish his true position. He reveals this clearly in the History o f Ancient Logics and Metaphysics where he explains that we can never know 27

Smith's Epistemology the true nature of external objects, so that even at the relatively simple level of ‘naming’ substantives there can be no question of a realist view of perception. As he puts it: No corporeal substance is ever exactly the same either in whole or in any assignable part, during two successive moments, but by the perpetual addition of new parts, as well as the loss of old ones is in continual flux and succession. Things of so fleeting a nature can never be the objects of science or any steady or permanent judgem ent. (EPS: Logics, p. 121.) and further: No man ever saw, or heard, or touched the same sensible object twice ... our sensations, therefore, never properly exist or endure one moment; but, in the very instant of their generation, perish and are annihilated for ever. (Ibid., p. 120.) We must, therefore, abstract from the dynamic perception of objects to construct ‘specific essences of things’, so that even at this level, the mind must ‘work up’ the raw sense-data of experience and thus make an active contribution to perceived reality. Smith, like K ant,5 is postulating an unbridgeable gap between percep­ tion and the object represented, so that external reality is essentially unknowable. Indeed he makes it clear that all we can ever be certain of are our personal internal states (EPS: External Senses, p. 141 etseq.) and — because of his somewhat curious belief that touch is somehow more fundamental than the other senses6 — the distinction between our own body and external objects (ibid., p. 135 et seq.). We cannot even rely upon the correlation between one sense — such as touch — and another such as sight, for: As, in common language, the words or sounds bear no resemblance to the things that they denote, so in this other language [sight] the visible objects bear no sort of resemblance to the tangible objects which they represent, and of whose relative situation, with regard both to ourselves, and to one another, they inform us. (Ibid., p. 156.) Fortunately, despite these limitations, our perceptions do in 28

Smith's Epistemology fact work at a practical level. There must, therefore, be sufficient ‘affinity or correspondence’ between sight and touch, and between our perceptions as a whole and the external world in general, for them to function. But they represent external reality analogously, without any possibility of independent verification or correction. The analogue is adequate, since it functions, but beyond that we know nothing. The comparison is with language which is adequate to represent the world, even though its form and content bear no resemblance to the form and content of reality. The words ‘cave’ or ‘tree’ are adequate analogies of the ‘real’ cave or tree, but in no other way resemble them. Smith is quite explicit in making this comparison. The language which nature addresses to our eyes, has evidently a fitness of representation, an aptitude for signify­ ing the precise things which it denotes, much superior to that of any of the artificial languages which hum an art or ingenuity have ever been able to invent. (Ibid., p. 158.) and, In this language of Nature, it may be said, the analogies are more perfect; the etymologies, the declensions and conjunctions ... more regular than any hum an language. (Ibid., p. 161.) Before proceeding, I would like to make two points which will be developed later in the chapter. Firstly, the active role that the mind plays in ‘working up’ or interpreting the raw material of experience has fundamental implications for Smith’s views on science. In particular, what he says about the nature of ‘verification’ in science will be shown to have been profoundly influenced by his epistemology. Further support for the present interpretation will be developed in that context. Secondly, it is im portant to note that language is the model that Smith uses when presenting his analogies. This will prove to be of relevance when we come to examine those interpretations of Smith that, whilst recognising the central role of analogy in his work, see mechanical analogy as the paradigm case. Let us return to Smith’s account of the development of language. Despite the difficulties we encounter when forming substantives, 29

Smith's Epistemology they are fairly straightforward, when compared to the other parts of speech. Next to be formed would be adjectives, which ‘... would have required a much greater degree of exertion than that of substantives ...’ (LRBL, p. 10). Here the contribution made by the mind in interpreting percep­ tion is much greater than with the formation of even general nouns. Thus: The quality denoted by an adjective is never seen in the abstract, but is always concorded with some substance or other; the word signifying such quality must be formed from it by a good deal of abstract reflection. (Ibid.) — and our problems increase as we move into constructing those words which deal with pure relationships, as opposed to qualities possessed by classes of object, so that ‘... whatever difficulty there might be in the formation of adjectives, there must be still more in forming prepositions.’ (Ibid.) We have, therefore, a distinction between two sorts of mental activity, which are, I think, best seen as opposite ends of a continuous spectrum, rather than discrete categories. O n the one hand we have the process of classification, where the material provided by perception is grouped according to similarity of qualities, whilst on the other we have the process of postulating relationships between the objects we have classified. The mind plays a role in both these activities, but that role increases as we move towards the ‘relational’ end of the spectrum. There is also a difference in the kind of mental activity involved as we come to construct relational concepts, for whilst the fundamental act of interpretation by analogy remains, we in addition introduce a process of ‘abstract reflection’ or ‘judgem ent’, so that a higher degree of reasoning is involved. The parts of speech, as we have seen, reflect this range of perceptual and mental activity, but Smith goes further than this, for he also holds that the grammatical structure of language displays this interaction:7 In every member [i.e. phrase] there are generally three principal parts or terms, because every Judgem ent of the hum an mind must comprehend two Ideas, between which we declare that relation subsists or does not subsist; concerning Two of these we affirm something or other, and 30

Smith's Epistemology the third connects them together and expresses the affirmation. (LR BL, p. 17.) If we now turn to the Essays on Philosophical Subjects we can take Smith’s arguments a stage further, for here again we can find the same concepts presented in terms of hum an psychology, rather than linguistics. Here Smith tells us not only how we classify, and postulate relationships, but also, why we do so. Classification he says, makes us feel that we understand the world better. If we are able to group an observation under some generic heading, we no longer feel it strange. We have assimilated our perception into an existing category, into some ‘... species or class of things ...’ and even though ... we often know no more about them than about it, yet we are apt to fancy that by being able to do so, we show ourselves better acquainted with it, and have a more thorough insight into its nature. (EPS: Astronomy, p. 39.) The criteria we use here, as Smith makes clear later, are familiarity, uniformity, coherence and generality. W hat we see must accord with what we already comprehend and understand, so that it can be slotted into the appropriate category, without disturbing our expectations. The role of analogy is crucial here, in that it explains ‘... that which was strange ...’ in terms of ‘... that which was familiar ...’ (EPS: Astronomy, p. 47). If we are faced with an unfamiliar observation, we automatically attem pt to fit it into our network of preconceptions. If we are able to do so, we are content, and consider that we have an adequate understanding of what we see. However, if we can not so assimilate the unfamiliar observation, we experience a feeling of ‘surprise’ followed almost at once by one o f ‘wonder’. T hat is, we are shaken in our beliefs about the world by our inability to classify, and at once begin to speculate as to why this might be. Smith makes clear that the surprise/wonder sequence is unpleasant, and that we seek to remove it by finding some explanation for the aberrant perception, if need be, by a suitable modification of our classificatory system. An extension of the same explanation is offered for our need to establish relationships between the objects we have classified. Here: 31

Smith's Epistemology W hen two objects, however unlike, have often been observed to follow each other, and have constantly presented themselves to the senses in that order, they come to be so connected in the fancy, that the idea of one seems of its own accord to call up and introduce that of the other. (EPS: Astronomy, p. 40)8 Ideas, says Smith, move faster than objects and if the sequence or development of objects follows the course of our ideas, they appear to be closely connected and thought glides smoothly along. Provided that we can fit our observations into the sequential structure of our expectations, there is no problem. However, when confronted by any new event or relationship that can not be so interpreted, then ‘... the imagination which accompanies with ease and delight the regular progress of nature, is stopped and embarrassed by those seeming incoherences ...’ (EPS: Astronomy, p. 50).

We feel such events as a gap or void in the network of our preconceptions; events which should be linked together are seen as disconnected. This anomaly again gives us a feeling of surprise, followed as before by wonder. We seek by all possible means to bridge this gap within the context of our existing perspective. We will, for example, dismiss the observation as a random or chance event, which is thus atypical. If, however, the anomaly persists, we will modify our perceptual framework in order to fit in the new event, and thus soothe the imagination. Here again the mind plays an active role in postulating new hypotheses about the nature of reality, which ‘... by representing the invisible chains which bind together all these disjointed objects, endeavours to introduce order into this chaos of jarring and discordant appearances’ (EPS: Astronomy, p. 46). Smith again lays considerable stress on the role of analogy; the principles postulated by the imagination must, as far as possible, be analogous to those we accept already. The criteria as before are in terms of familiarity, coherence, simplicity and generality, and to the extent that they are satisfied, we have a feeling of ‘adm iration’ for the new hypotheses. An im portant implication of this view is that these criteria function in the context of, and are applied relative to, our existing framework of interpretation. T hat is to say that meaning is inextricably contextual, and the criteria for an articulation, or modification, of meaning are, in this sense, ‘aesthetic’.9 This point 32

Smith's Epistemology will prove to be im portant as the discussion proceeds. This then is Smith’s basic epistemological perspective. The picture he paints is of an ongoing interaction between men’s mental activity and perceived reality. The raw material of our perception is furnished by an external reality, but is ordered by the mind which interprets w hat is ‘seen’ in the context of a pre­ existing framework of expectations and beliefs. The causal links we postulate are the produce of ‘abstract reflection’ and the judgem ent of the mind, and their continuing adequacy as an analogy of ‘reality’ is measured in terms of the coherence they impose on the discordant appearances of nature.10 This whole dynamic process is reflected in the structure and content of our language. This epistemological perspective permeates all of the Essays on Philosophical Subjects, and much of the Lectures on Rhetoric and Belles Lettres. It is used by Smith not only to explain the development of language and (as we shall see) science, but also appears in his accounts of logic, history, theatre and painting,11 all of which, like language, are analogies of reality.12 This has been clearly seen by Ralph Lindgren who, although approaching Smith from a markedly different perspective from the present intepretation, has come to very similar conclusions on several key points. He interprets Smith in terms of linguistics and maintains that his model is in fact one o f ‘sign signification’, in which the imitative arts seek to provide analogues of reality by constructing systems of conventional signs. Lindgren’s inter­ pretation sees the perceptual anomalies that Smith discusses as indicating ‘... an inadequate semantic formula ...’ which makes the observer feel a gap that ‘... divides the simple unity of the objective event from the complex unity of expression and image ...’ (ibid.) so that we ‘... attem pt to bridge this gap by revising the semantic formula ordinarily associated with the sign object’ (ibid., p. 909 et seq.).13 He maintains, I believe correctly, that because Smith sees language, art and science as systems of conventional sign signification, he accepts that there is no possibility of objective confirmation in terms of a correspondence test with reality. We must now move beyond an interpretation of Smith’s general epistemological position to look specifically at his views on the nature of scientific knowledge. This, in fact, is but a small step for Smith sees scientific inquiry as nothing more than a formalisation of the basic interaction that we have already examined. In other 33

Smith's Epistemology words, as society advances, the efforts of the mind to provide connecting links between objects or events, and thus impose order onto chaos, becomes formalised into ‘philosophy’, which in eighteenth-century usage includes both philosophy and science. Thus: ‘Philosophy is the science of the connecting principles of n ature.’ (EPS: Astronomy, p. 45) and, ‘... may be regarded as one of those arts which address themselves to the im agination.’ (Ibid., p. 46) Smith’s discussion of the development of a science of prim ary elements in his History o f Ancient Physics is worth quoting at length, in that it makes some of the links between his general epistemology and his view of science very clear: To render, therefore, this lower part of the great theatre of nature a coherent spectacle to the imagination, it became necessary to suppose, first, T hat the strange objects of which it consisted were made up out of a few, with which the mind was extremely familiar: and secondly, T h at all their quali­ ties, operations, and rules of succession, were no more than different diversifications of those to which it had long been accustomed, in these prim ary and elementary objects. (EPS: Physics, p. 107) The role of the imagination, the conventional nature of scientific knowledge, the role of analogy and the need for familiarity, simplicity, coherence and generality, are all, more or less, explicit in this passage, which is closely analogous to Smith’s discussions of the origins of language and of pre-scientific perception. Further, he also uses the same psychological framework to explain scientific activity in terms of surprise and wonder, and suggests that it is the prime function of science to alleviate wonder and that any other advantages are secondary. As he puts it: ‘Wonder, therefore, and not any expectations of advantage from its discoveries, is the first principle which prom pts mankind to the study of Philosophy’ (EPS: Astronomy, p. 50). Scientific ‘models’ are, therefore, formalised systems of speculative hypotheses which seek to soothe the imagination, by providing linking mechanisms which render a potentially chaotic reality, coherent and meaningful. They differ from everyday perception and interpretation, only in the degree of their abstraction; in what we would now term their reliance on theoretical constructs. The difference between primitive m an’s 34

Smith's Epistemology attempts to form a preposition which would express the relation­ ship between two objects, and the system of, say, Kepler, is thus only one of degree. The same epistemological framework covers both, but they function at different levels of abstraction. The transition from one system, or model, of scientific interpre­ tation to another — say from that of Kepler to that of Newton — can thus be seen as a change from one interpretive structure of preconceptions and expectations to another. In other words, scientific laws and theories are intrinsically contextual; they function in terms of a particular perspective, take their meaning from that context, and are judged by standards that are largely internal.14 To the extent that we accept what has been argued already concerning Smith’s epistemological position, it will be clear that the rejection of one scientific perspective in favour of another can­ not simply be the result of objective comparisons with reality. Since the ‘real chains’ of causal connection are inaccessible, verification, or refutation, must involve more than merely ‘empirical’ observation. There must of course be a process of observation, from which anomalies may arise, but what we see — or indeed look for — will depend upon the prim ary principles which form the interpretive context in question. Smith is, in fact, quite explicit about this point. For example, when discussing the relative merits of the astronomical systems of Copernicus and Ptolemy, he says that the former was more accurate due to obser­ vational errors in the system of Ptolemy. This ‘... ought naturally to have formed a prejudice in favour of the diligence and accuracy of Copernicus in observing the heavens ...’ (EPS: Astronomy, p. 76) but, ‘... it ought to have formed none in favour of his hypothesis; since the same observations and the result of some calculations, might have been accommodated to the system of Ptolemy’ (ibid.). The rejecting of Ptolemy’s system was not, therefore, because of empirical evidence against it. Why was it in fact rejected? Copernicus’s system, says Smith, offered an easier method of calculating the position of the planets in order to predict their movements, and: The superior degree of coherence which it bestowed upon the celestial appearances, the simplicity and uniformity which it introduced into the real direction and velocities of the Planets, soon disposed many astronomers, first to favour, and at last to embrace a system which thus connected 35

Smith's Epistemology together so happily, the most disjointed of those objects that chiefly occupied their thoughts, (ibid.) The criteria used are thus, as in Smith’s basic epistemology, coherence, simplicity and generality. Familiarity is not explicitly mentioned here, but later in the same essay Smith develops the theme in a discussion of K epler’s system of laws, and their associated model: The imagination, when acquainted with the law by which any motion is accelerated or retarded, can follow and attend to it more easily, than when at a loss, and as it were, wander­ ing in uncertainty with regard to the proportion which regu­ lates its varieties; the discovery of this analogy therefore, no doubt, rendered the system of Kepler more agreeable to the natural taste of mankind. (EPS: Astronomy, p. 89) However, the analogy was lacking in simplicity and was thus not fully adequate. Smith’s discussions of the development of astronomy and physics make it quite clear that he sees scientific activity as an ongoing dynamic process, in which successive systems are first modified in order to preserve the internal coherence of their prim ary principles, and then rejected in favour of those which offer more plausible explanations. Science takes place within the nexus of metascientific preconceptions and assumptions under­ lying the model in question, and in the face of anomalies, we modify peripheral aspects of our model in order to preserve its coherence and generality. W hat we postulate as an acceptable modification will depend upon the nature of our existing perspec­ tive, and our subsequent observations will also be interpreted in this context. Smith specifically instances the ‘earth centred’ model of ‘Celestial Spheres’, where continuing anomalies were interpreted in terms of the existing model, which was, as a result, repeatedly modified. Eventually: ‘The system had now become so intricate and complex as those appearances themselves, which it had been invented to render uniform and coherent.’ (EPS: Astronomy, p. 59.) The system thus became aesthetically unacceptable, so that the imagination was no longer soothed, and was eventually rejected in favour of the helio-centric model. Smith’s belief in the conventional nature of scientific know­ 36

Smith's Epistemology ledge — in the m ind’s active contribution to the totality of percep­ tion — extends even to the model of Sir Isaac Newton, which in the second half of the eighteenth century was the paradigm case o f ‘hard-science’. Newtonian Mechanics, he says, is the accepted system of the day; the framework within which contemporary science is taking place (EPS: External Senses, p. 140). This makes it difficult to recognise that Newton’s model, like all systems before it, is a conventional interpretive perspective, so that ‘... even we, while we have been endeavouring to represent all philosophical systems as mere inventions of the imagina­ tion, to connect together the otherwise disjointed and dis­ cordant phenomena of nature, have insensibly been drawn in to make use of language expressing the connecting prin­ ciples of this one, as if they were the real chains which N ature makes use of to bind together her several operations. (EPS: Astronomy, p. 105) Given this interpretation of Smith, it is clear that there cannot be any fundamental distinction between the physical, and the social sciences. Both are seen as extensions of m an’s basic interaction with nature, and must, therefore, share the same underlying epistemology. This is very clear in the Essays on Philosophical Subjects, where Smith uses exactly the same format when discussing, say, Plato, Aristotle and Descartes as when speaking of Kepler or Newton. Further confirmation is provided by the general approach of both the Theory o f Moral Sentiments and the Wealth o f Nations (and indeed of the reported Lectures on Jurisprudence) where we will search in vain for any suggestion that the sciences of morals, or the ‘general principles of law and government’ are in any significant sense different from the laws of physics. Indeed this interpretation gains further support from the one distinction Smith does make, for he makes clear that the moral (and by implication, social) sciences are more precise and rigorous than the physical sciences. Thus in the Theory o f Moral Sentiments, when discussing the work of Mandeville, he says: But how destructive soever this system may appear, it could never have imposed upon so great a num ber of persons ... had it not in some respects bordered upon the truth. A system of natural philosophy may appear very plausible, 37

Smith's Epistemology and be for a long time very generally received in the world and yet have no foundation in nature ... [but] ... it is otherwise with systems of moral philosophy, and an author who pretends to account for the origin of our moral senti­ ments, cannot deceive us so grossly, nor depart so very far from all resemblance to the truth. (TM S, VII.ii.4.14) Thus to the extent that a distinction can be made, it is clearly the moral sciences that are ‘harder’ than the physical sciences. Two further points need to be made about this passage: Firstly, on the present interpretation, the reason for this distinction lies at the heart of Smith’s epistemology, in his view of the difference between internal states, and external objects. The physical sciences are concerned with external events, so that even though the criteria for evaluating such a system are anthropocentric — being a function of the model’s ability to soothe the imagination — the interconnections and relationships postulated are, as it were, at one step removed from our internal states. This is not, however, fully true of the moral (and I will argue social) sciences, which, for fundamental principles, appeal to internal states and feelings. True, they move rapidly beyond this in postulating that other people are formed along similar lines, but at least we have the possibility of checking the plausibility of the analogy we need to make, against our own internal perceptions. This interpretation is supported by Smith’s explanation of the distinction made in the quoted passage, which is in terms of an analogy which distinguishes between ‘. .. a traveller [who] gives an account of some distant country ...’ in the case of the physical sciences, and ‘... an account not only of the affairs of the parish we live in, but of our own domestic concerns ...’ (ibid.) in the case of the moral sciences. Secondly, ‘resemblance to the tru th ’ in the quoted passage should be interpreted as meaning that a more coherent, familiar and general analogy is needed to convince us of the adequacy of a moral system. This again finds some support later in the same passage, when he says: The author who should assign, as the cause of any natural sentiment, some principle which neither had any connection with it, nor resembled any other principle which had some such connection would appear absurd and ridiculous to the most injudicious and inexperienced reader, (ibid.) 38

Smith's Epistemology So far it has been argued that Smith’s approach to science is fundamentally homogeneous, in that he sees the physical, moral and social sciences as formalised extensions of the basic interaction found at the level of everyday observation. To the extent that this is accepted, it follows that there can be no ‘Adam Smith Problem’, in the sense of there being significant differences of methodological approach within his major works. Numerous dichotomies have, however, been postulated; for example, that the Theory o f Moral Sentiments relies on natural law and a benevolent Providence, whilst the Wealth o f Nations does not (Viner15); that the genuine science in Smith’s work is confined to (parts of) the first two books of the Wealth o f Nations (Schumpeter16); that a distinction can be made between Smith’s inductive approach and his deductive explanation (Cropsey17), or that we must distinguish between Smith the sociologist and Smith the economist (W est18). The list is by no means exhaustive. It is significant that all of the quoted studies proceed by establishing contemporary definitions of scientific methodology, and then seek applications of the approach in question in Smith’s major works. It is, however, very much more difficult to find support for any of these views within Smith’s own writing on methodology, either in his explicitly epistemological treatments in the Essays on Philosophical Subjects, or in more down-to-earth discussions in his ‘applied’ work. Let us allow Smith to speak for himself, by juxtaposing two quotations, one from each of these sources. Firstly, his well-known advertisement to the sixth edition of the Theory o f Moral Sentiments, where he makes reference to the final paragraph of the first edition, where he said ... and that I should in another discourse endeavour to give an account of the general principles of law and government, and of the different revolutions which they had undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns policy, revenue and arms and whatever else is the object of law. This clearly implies (as the editors of the Glasgow edition point out) that the ‘other discourse’ would ‘continue the sequence of thought set out in the Theory o f Moral Sentiments' ,19 But Smith continues:

39

Smith's Epistemology ‘In the Enquiry concerning the Nature and Causes o f the Wealth o f Nations, I have partly executed this promise; at least so far as concerns policy, revenue and arms. W hat remains [is] the theory of jurisprudence ... (Ibid.) There is no evidence of any perceived dichotomy here; the Theory o f Moral Sentiments, the Wealth o f Nations and the proposed work on jurisprudence are presented as being three aspects of the same programme, grouped according to subject, not methodologi­ cal approach. Add to this the second quotation, taken from the Essays on Philosophical Subjects (Logic). Here he is discussing interpretations of Plato, saying that some authorities have sought to identify hidden meanings in his work. He refers to the ... strange fancy that, in his writings there was a double doctrine; and that they were intended to seem to mean one thing, while at bottom they m eant a very different, which the writings of no man in his senses ever were, or could be intended to do. (EPS: Logic, p. 122.) If we consider Smith’s own writings on methodology in the light of the above passage we are, I think justified in agreeing with Donald Winch20 who has concluded that ‘... there is no Adam Smith problem in the original sense of a fundamental incompatibility of the ‘sym pathetic’ ethic of the TM S and the ‘selfish’ ethic of the WN.’21 and that: The latter work can, therefore, be regarded as a specialised application to the detailed field of economic action of the general theories of social (including economic) behaviour contained in the earlier work. If we now strip Smith’s statements on epistemology of their psychological terminology, and concentrate on their logical and taxonomic status, it becomes clear that they closely conform to the modified Lakatosian format presented in C hapter 2. We can begin with the metascientific world-view (the nexus of our preconceptions and expectations) which is not in itself testable, but which forms a ‘model’ or perspective within which observa­ 40

Smith's Epistemology

tions can be interpreted and classified. The analogue of Lakatos’s ‘negative heuristic’ here would be those fundamental principles, which can’t be changed without the abandonm ent of the entire world view. Examples here are explicitly provided by Smith; the belief that the earth is the centre of the universe in the ‘System of Celestial Spheres’, the alternative assumption of the heliocentric model, or the principle of gravity in Newton’s model and the associated mathematical laws.22 Smith’s own model of sympa­ thetic interaction within a developing socio-economic framework will be shown, in due course, to be of precisely the same nature. The positive heuristic, as with Lakatos, is then the range of problems generated by the world-view, which are seen as requiring attention. We form hypotheses about what sorts of relational links might exist between given classes of event, and these postulations are based upon our existing preconceptions. If observational anomalies challenge these hypotheses, our world-view also specifies the sorts of modification that will be consistent with its overall perspective. An example here would be observations made from within a geocentric model of the universe. O ur world-view will firstly suggest the sort of astronomical observation we should be undertaking in order to confirm (or refute) our expectations of the relationships which might exist. Should these observations repeatedly ‘refute’ our hypotheses, as for instance when a planet appears to reverse its direction of travel, our world-view will specify the ways in which we can modify our peripheral hy­ potheses, whilst leaving the protected core intact. We may thus add yet another epicycle to our model, but may not question its central assumptions. The fact that Smith conducts his discussion of this process in terms of psychological concepts — surprise and wonder — should not prevent us from seeing that a close analogy to our ‘positive heuristic’ exists. We also find in Smith’s epistemology, the same emphasis on the dynamic character of scientific knowledge; as in Lakatos’s model, there is a continuous interaction between hypothesis and observation (see C hapter 2) and the ‘refutation’ of a world-view is a long term process which is dependent upon its adequacy to adapt in the face of anomalies. A degenerative world-view, such as the system of celestial spheres is thus one which can only defend its central core (as specified by the negative heuristic) by ad hoc hypotheses which eventually render the model aesthetically un­ acceptable, within its own framework of reference. A progressive world-view is one which can accommodate anomalies without 41

Smith's Epistemology

such a loss of coherence, thus preserving its internal elegance. The adequacy of the genetic empirical content generated by a world-view is thus evaluated in terms of explanatory power and overall plausibility, rather than in terms of verified predictions. Moving beyond Lakatos into the realms of qualitative change is complex and we will need the arguments to be presented in C hapters 4 and 5 to complete the discussion; however, some points have begun to emerge, and these can be given a preliminary presentation at this stage, and developed more fully as the work proceeds. Firstly, the transition from one system of interpretation to another can be regarded as a qualitative change of the type discussed in C hapter 2 above. Since meaning is intrinsically contextual, there will be a discontinuity when we move from one conceptual framework to another. An obvious example of this is the change in the way we ‘see’ the movement of a planet when we move from a geocentric to a heliocentric world-view. A par­ ticular hypothesis, therefore, has meaning only within the context of the system that generates it. Further, it is assessed by standards of aesthetic acceptability that are grounded on the perspective of the system in question. It follows from this that relational hypotheses (and arguably, even classificatory systems) cannot be fully comprehended in isolation from the world-view that generates them, and, further, that alternative systems and the concepts they employ are, in this sense, incommensurable. Secondly, we shall see in due course that Smith sees social institutions in very much the same way as he does other systems, and treats them as if they conformed to this same, basic, epistemol­ ogy. T hat is to say, they too are intrinsically contextual, deriving their meaning and relevance only within the context of a specific socio-historical framework. Given this view, it follows that any ‘model’ constructed in an attem pt to comprehend the development of social institutions must be ‘dialectical’ in the sense defined above (Chapter 2). T h at is, it must depict the qualitative transi­ tion of the socio-economic framework which generates specific institutional patterns. This, it will be argued, is why Smith invariably links social and moral science to a historical treatment, and seeks not ju st to establish general principles, but also (as he says in the advertise­ ment to the Theory o f Moral Sentiments already quoted) to give an account o f ‘... the different revolutions which they had undergone in the different ages and periods of society’.23 42

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Thirdly, it will also be argued that the specific model that Smith constructs to mirror this process of qualitative transition, is itself consciously constructed as a ‘system’ of the type described in his epistemological discussions. He has thus attem pted to build a model which links together, and explains in terms of primary principles, the development of many aspects of hum an society. His model is one of sympathetic interaction, which finds its context within a progressively evolving socio-economic framework. It depicts the institutions generated by this process as being appro­ priate to a particular socio-economic phase, but as becoming outmoded as society develops, and eventually being modified or replaced. As we shall see in Chapters 5 and 6, Smith measures this socio-economic development in terms of the degree of specialism, or ‘division of labour’, attained, and relates the institutional framework of society to this economic base. This same basic format is used in all of Smith’s historical explanations. It is used in the Wealth o f Nations to explain the progress of ‘policy revenue and arm s’; in the Theory o f Moral Sentiments to explain the development of morality and general rules of conduct, and in the Lectures to explain the evolution of jurisprudence.24 Finally, given Smith’s belief in the conventional nature of scientific knowledge (discussed above), it follows that the adequacy of such a system cannot be judged in terms of normal empiricist standards of verification, which would require some form of realist epistemology. As we might therefore expect, Smith holds that its adequacy is to be judged, not in terms of predictive power, but rather in terms of its ability to provide a plausible analogy of the actual process of socio-historical development. T hat is to say, it must explain this evolutionary process by means of an analogy that is familiar, simple, coherent and general. The final task in the present chapter is to conduct an examina­ tion of these criteria, in terms of the perspective that has been presented so far. The criteria put forward by Smith are closely interlinked. Coherence, for example is largely assessed in terms of familiarity, simplicity and generality, and simplicity is, at least in part, assessed in terms of generality. W hat is being evaluated is the adequacy of a particular model to function as an analogy of a fundamentally inaccessible reality. The criteria are thus, at least in part, self-referring; being established within the context of the model, they are, in this sense, aesthetic. 43

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Familiarity, for example, is measured in terms of the perspective in question. The addition of a further epicycle in a geocentric world-view would be a familiar analogy and thus acceptable, but to use the same hypothesis to explain observational anomalies in the Newtonian model would be aesthetically unacceptable. In other words, modifications on the periphery of our model must conform to our metascientific perspective, by being the sort of ‘event’ specified as acceptable by the prim ary principles of the system in question. Familiarity is closely linked with both simplicity and generality. The addition of a familiar analogy to extend or modify our model will not destroy its simplicity or detract significantly from its generality. However, if we were to introduce unrelated, ad hoc, modifications, the model would rapidly lose its acceptability. Smith holds that to conform to this requirement for simplicity and generality a model must use a small num ber of inter-related basic principles, to explain as wide a range of phenomena as possible. This view finds clear expression in the Lectures on Rhetoric and Belles Lettres, where he makes a distinction between two forms of ‘... didactic writing containing an account of some system ...’. (LR BL, p. 145). We may, he says ... in N atural Philosophy, or any other Science of that s o r t... either, like Aristotle go over the Different branches in the order that they happen to cast up to us, giving a principle, commonly a new one, for every phenomenon; or in the m anner of Sir Isaac Newton, we may lay down certain principles known or proved in the beginning, from whence we account for the several Phenomena, connecting all together by the same Chain. The Latter, which we may call the Newtonian method is undoubtedly the most Philosophi­ cal, and in every science, whether of Morals or N atural Philosophy etc. is vastly more ingenious, and for that reason more engaging than any other. (LR BL, pp. 145-6) Similar views are expressed in the Essays on Philosophical Subjects where, in the Astronomy (p. 99 et seq.), Smith praises Newton’s mechanics at some length for the universality of its basic prin­ ciples; and an analogous position is maintained in the Logic, where Smith concludes that:

44

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In every case, therefore, Species or Universals and not Individuals, are the object of Philosophy. Because whatever effects are produced by individuals, whatever changes can flow from them, must all proceed from some universal nature that is contained in them. (EPS: Logic, p. 119) and he goes on to say that this fundamental requirement of natural philosophy also has its reflection in metaphysics which ‘... considered the general nature of Universals ...’ and logic, which: ... from the general nature of Universals, and of the sorts into which they were divided, endeavoured to ascertain the general rules by which we might distribute all particular objects into general classes ... (ibid., p. 120) Simplicity has another aspect besides restricting the number of basic principles used to explain a class of events; it also refers to the complexity of the analogies used. Kepler’s model was ‘too difficult’ to be fully coherent, whilst that of Descartes was more satisfactory, being ‘... ingenious and elegant, tho’ fallacious ...’ (Letter 5, Corr.). Coherence is, at least in part, measured in terms of the other three criteria and is closely related to Smith’s view that we interpret new observations in terms of our existing expectations. If a new event can be assimilated into our system without breach­ ing the rules of simplicity, generality and familiarity, then it conforms to our expectations and the perspective retains its coherence. Observations that cannot be so accommodated lead to a feeling of incoherence; of wonder and surprise at an event that makes us examine our framework of beliefs. All of this will be shown to be of relevance when we come to examine Smith’s ‘im partial spectator’ whose impartiality is measured largely in terms of coherence, and thus of the other criteria we have examined. His objectivity lies in the universality and generality of his judgem ent relative to the existing nexus of appraisal. If coherence is to be preserved, the judgem ent made in any particular case must be appropriate to the social context — the dynamic element in Smith’s model stems from the fact that he sees social context as evolving through qualitatively different phases, as the division of labour increases. Before concluding this chapter, there is one final point to be 45

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made about the role of analogy in Smith’s work. His frequent citing of Newton’s model as a paradigm case of analogy, together with his view that: ‘Systems in many respects resemble machines.’ (EPS: Astronomy, p. 66) has led some commentators to suppose that mechanical analogy is the basic requirement. Campbell, for example, follows Smith’s view that ‘... all theories should be a type of mechanical analogy, becomes in the end a sterile methodological principle.’25 O n the present view, however, this needs qualification. The basic requirement as I have tried to show, is for any form of analogy which is adequate to depict reality. It may be mechanical, but it could also be linguistic, perceptual, artistic or of any other form provided that it satisfies the necessary criteria. Indeed, as Lindgren has pointed out, in so far as Smith has any ‘basic’ model it lies in the way in which language functions as an analogy of reality, so that ‘... he adopted language, not mechanics as the model of inquiry.’26 If systems resemble machines, it is because both resemble the same fundamental interaction which takes place in the formation of a language. Smith makes this clear in the Lectures on Rhetoric and Belles Lettres when he says: The languages in this have made advances a good deal similar to those in the construction of machines. They are at first vastly complex, but gradually the different parts are more connected and supplied by one another. (LR BL, p. 13)27

We may, therefore, conclude that whilst mechanical analogy may conform particularly well to the criteria of familiarity, generality, simplicity and coherence, it is not for Smith, in any other sense, fundamental. This chapter has covered a lot of ground and before proceeding a summary of the central issues would seem appropriate. Firstly, it has been argued that Smith sees man as being in an ongoing process of interaction with a nature which is, in significant respects, inaccessible. The mind plays an active role in this process by constructing classificatory systems and relational analogies which seek to order, and link together, an otherwise chaotic flow of perceptual experience. Observation is conditioned by the expec­ tations and preconceptions implicit in our current perspective 46

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(system). Modification of our systems is a more or less continual process, which is assessed by criteria which can be termed ‘aesthetic5. Secondly, Smith sees this process as universal, so that all forms of hum an interaction with nature can be explained by the same epistemological model, which is also reflected in the content and structure of language. Science is an extension of this process; scientific models are formalised systems of interpretation which seek to impose coherence on an external reality. Scientific con­ structs and hypotheses thus take their meaning relative to a specific context, and can only be fully comprehended within this framework. The move from one system of interpretation to another is, therefore, a qualitative transition from one context of meaning to another. Each system of interpretation consists of a (small) set of metascientific principles, which are fundamental to the model, which generate peripheral hypotheses aimed at linking together observations of appearances. These fundamental principles also specify the types of modification that will be aesthetically acceptable in the peripheral area of the model. Rejection of one system in favour of another is also on aesthetic grounds, the criteria being familiarity, simplicity, generality and coherence. Thirdly, it will be argued below that the same epistemological perspective is to be found in the way Smith perceives the evolution of social institutions. These too are seen as being appropriate to, and deriving their full meaning from, a specific (socio-historical) context, defined in terms of the degree of specialisation attained. Qualitative changes occur when there is a transition from one socio-historical context to the next. During such a transition the relevance and meaning of a given institution — such as age as ‘the sole foundation of rank and precedency5 ( WN , V .l.b.6) — may well change, so that what is appropriate in the age of hunters, for example, may be inappropriate in commercial society. We shall see that the model Smith uses to depict this process of social evolution is itself a ‘system5 of the type we have been examining, and conforms to the same epistemological approach. The task of the next two chapters is to provide a detailed reconstruction of this model. C hapter 4 will concentrate on the fundamental principle which Smith employs, which is that of sympathetic interaction within a socio-economic context, and Chapter 5 will examine the nature of that context, and the dynamics of its qualitative development.

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Notes 1. Cf. A.S. Skinner, A System o f Social Science (Clarendon Press, Oxford, 1979), p. 14 et seq., for a discussion of this issue. 2. ‘To explain the nature and to account for the origin of general Ideas, is, even at this day the greatest difficulty in abstract philosophy.’ (EPS: Logics , p. 125.) 3. Despite the dangers of reification implicit in the use of such general labels to cover what was in fact a somewhat heterogeneous collection of views, it remains true that, if used with care, they form a convenient ‘shorthand’. Some further justification of the use of this label can be found in the fact that those who held and worked with the doctrine of the association of ideas recognised each other as a clearly defined ‘school’, sharing many common beliefs. Unpacking the term would involve us in a discussion of the relative influence of (at least) Hume and Locke upon Smith’s work, which is beyond the scope of the present work. However, for what it is worth, I would wish to maintain that, despite the immediate influence of Hume, it is to some of the ambiguities present in the work of Locke that we must turn, if we wish to trace the origins of many of Smith’s concepts. 4. H.J. Bitterman, ‘Adam Smith’s empiricism and the law of nature’, Journal o f Political Economy (1940), p. 497. Cf. also J.R. Becker, ‘Adam Smith’s theory of social science’, Southern Economic Journal (1961). 5. That is to say, there is an unbridgeable gap between perception and the object represented, so that external reality is essentially unknowable. As Kant was to put it (1781): ‘The true correlate of sensibility, the thing in itself, is not known and cannot be known, through these representa­ tions; and in experience no question is ever asked in regard to it.’ I. Kant, Critique o f Pure Reason (Macmillan, London, 1950), p. 74. 6. ‘... the thing which presses or resists I feel as something altogether different from those affections, as external to my hand, and as altogether independent of it’ (EPS: External Senses, p. 135). Smith’s belief that touch is somehow more fundamental than the other senses is somewhat curious, but no doubt has its roots both in Locke’s epistemological distinction between primary and secondary qualities, and Newton’s doctrine of the impenetrability of matter. Smith in fact traces the origins of this latter view back to, ‘Lecippus, Democritus and Epicurus’ (EPS: External Senses, p. 140). 7. This interpretation is to some extent supported by the evidence that Smith does in fact regard the study of the use of language as sufficiently important to warrant a major study. Cf. his letter of 1 November 1785 to La Rochefoucauld (Letter 248, Con). 8. Cf. also Essays on Philosophical Subjects (Astronomy) , p. 37: ‘... custom and frequent repetition of any object comes at last to form and bend the mind or organ to that habitual mood and disposition which fits them to receive its impression without undergoing any violent change.’ The exposition is again in the language of Associationism (this might almost be Hume on causality) but, as before, the explanation proceeds well beyond that perspective. 9. For a discussion which is relevant to this issue, see R. Olsen, Scottish

48

Smith's Epistemology Philosophy and British Physics 1750-1880 (Oxford University Press, Oxford, 1975), p. 123 et seq.

10. We can find some support for the present interpretation in Smith’s letters. He wrote to George Baird, on 7 February 1763 (Letter 69, Corr) concerning a proposed system of rational grammar. ‘I am’, he says ‘convinced that a work of this kind ... may prove not only the best System of Grammar, but the best System of Logic in any language, as well as the best History of the natural progress of the Human mind in forming the most important abstractions upon which all reasoning depends.’ 11. See, for example, Essays on Philosophical Subjects: Rhetoric (p. 100), History (p. 110), Theatre (p. 122) and Painting (p. 123). 12. ‘... it should be remembered, that to make a thing of one kind resemble another thing of a very different kind, is the very circumstance which, in all the Imitative Arts constitutes the merits of imitation.’ (EPS: Imitative Arts , p. 191.) Smith explicitly includes science in this category (EPS: Astronomy, p. 46). 13. J.R. Lindgren, ‘Adam Smith’s theory of inquiry\ Journal o f Political Economy (1969). 14. In other words, science is a matter of postulating relational concepts, by a process of ‘abstract reasoning’. This is, I think what Haakonssen means when he says of Smith, ‘... the basic structure of his moral philosophy and indeed his philosophy generally ...’ (is that) ‘... things have to be dealt with relationally, in their coherence with other things.’ K. Haakonssen, The Science o f a Legislator (Cambridge University Press, Cambridge, 1981), p. 120. 15. J. Viner, ‘Adam Smith and laissez-faire\ Journal o f Political Economy (1927). 16. J.A. Schumpeter, History o f Economic Analysis (Allen & Unwin, London, 1954). 17. J. Cropsey, Polity and Economy (Greenwood, London, 1977). 18. E.G. West, ‘The political economy of alienation’ Oxford Economic Papers (1969). 19. D.D. Raphael and A.L. Macfie (eds), Introduction to the Theory o f Moral Sentiments (Clarendon Press, Oxford, 1976), p. 24. 20. D. Winch, Adam Smith’s Politics (Cambridge University Press, Cambridge, 1978), p. 10. He goes on, however, to warn against regarding the T M S as being ‘logically or philosophically prior in all respects ...’ and against using it as ‘an ad hoc source to fill in gaps in the opinions presented in the W N ...’ — a position which is not incompatible with the present interpretation which sees the T M S and the W N as specialised presentations of the same fundamental model. 21. The sympathetic/egoistic dichotomy referred to here was first postulated by German commentators on Smith, in the mid-nineteenth century: Hilderbrand (1848), Kries (1853) and Skarzynski (1878). 22. ‘Allow his principle, the universality of gravitation; and that it decreases as the squares of the distance increase, and all the other appearances which he joins together by it, necessarily follow’ (EPS: Astronomy, p. 104). A Lakatosian ‘protected core’ par excellence. 23. Some support for this interpretation is to be found in A.S. Skinner,

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Smith's Epistemology ‘From one point of view this is the classic pattern of cultural history — human activity released within a given environment ultimately causing a qualitative change in that environment — as illustrated, say, by the development of language or the transition from feudalism to the commercial stage.’ (p. 26.) 24. Ronald Meek has argued that the ‘four stages of theory’ is a fundamental organising principle which underlies much of Smith’s work. This view gained some support with the publication (in 1978) of the second set of lecture notes on jurisprudence, which placed greater emphasis on the ‘four stages’. However, on the present interpretation, the ‘theory’ is better seen as a heuristic device which displays aspects of a more fundamental methodological approach. (Cf. R.L. Meek, ‘Smith, Turgot and the four stages theory’, History o f Political Economy (1971). 25. T.D. Campbell, Adam Smith’s Science o f Morals (Allen & Unwin, London, 1971), p. 39. 26. J.R. Lindgren, ‘Adam Smith’s theory of inquiry’, Journal o f Political Economy (1969), p. 899. 27. He goes on to qualify this, saying that ‘... the advantage does not equally correspond. The simpler the machine the better, but the simpler the language ... the less it will be capable of various arrangements ...’. (Ibid.)

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4 Metascientifie Perspectives: The Individual and Society

During the seventeenth century, the dom inant mode of philo­ sophical and psychological explanation of hum an behaviour was rooted in a belief that man was possessed of innate capacities, dispositions and knowledge. H um an cognitive processes reflected an inherent ratiocinative capacity which was prior to the formative influences of individual experience. Associated with this view was the belief in the adequacy of reason to reality — i.e. that the mind could by deductive reasoning, reveal the necessary logical structure of the world. As Professor Blanchard puts it, Reason was conceived as being: ... the natural light by whose aid we can discern lines of structure running like the veins of a leaf through the fragment of nature which is open to us. These lines run out and away into the world beyond, and are continuous with that web of relations on which the world appears to be woven. And because these lines are necessary they are intelligible.1 This is the view that found clear expression in the writing of Descartes, and was developed by the later Cartesian Rationalists; notably by Spinoza and Leibniz. Closely coupled with this view of the relationship between the knowing mind and nature, was what M andlebaum has called ‘nativism’ in the realm of psycho­ logical theories. Hum an thought and action were regarded as being explicable in terms of innate capacities common to all men, so that: ... the themes of m an’s malleability had not deeply pene­ trated either the explanation of hum an behaviour, or views which were held regarding the history of m ankind.2 51

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The publication of Locke’s Essay in 1689 constituted a radical attack upon this position. Locke held that all the primitive elements of knowledge were derived from experience, there being no innate ideas. Men ... by the use of their natural faculties, may attain all the knowledge they have, without the help of any innate impres­ sions, and may arrive at certainty, without any such original notions or principles.3 The mind is ‘furnished’ with knowledge through the senses, and through introspection into its own workings. The elements of knowledge are atomistic ‘simple ideas’ derived from sensual experience, and the constant conjunction of particular simple ideas leads us to associate them together and thus form ‘complex’ ideas of m aterial objects, and of general concepts. The mind, however, has a role to play in the construction of complex ideas, since it compares them and abstracts from them. Locke was not fully explicit as to how much of the m ind’s organising activity was the result of innate powers of judgement; what is certain, however, is that those who developed his work (notably Berkeley and Hume) came to hold the much more radical thesis that the m ind’s own operations were also the result of experience. We thus find in the work of Smith’s close friend, Hume, a highly mechanistic account of the association of ideas, in which language, the operation of the imagination, the growth of complex emotions, and the basis of morality are all derived from simple ideas, or ‘impressions’, received through the senses. Central to this belief was the notion that reason was ‘the slave of the passions’; since all knowledge was derived via the senses, which in turn were affected by the passions, reason was intrinsically inadequate to a full and certain understanding of reality. This of course is in direct contradiction to the Cartesian Rationalist view of reason outlined above. The empiricists thus dethroned reason as the defining characteristic of man, and substituted emotional drives (dependent upon ‘hum an nature’) which were beyond m an’s complete control. The springs of hum an action were the passions which were inborn as was the inherent tendency of all men to pursue their own interests in seeking pleasure and avoiding pain. Further, since the perception of ‘sense-data’ was conceived of as being, what we would now call, a logically private act, the individual was regarded as being 52

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intrinsically atomistic, rather than social. It is im portant to realise that those who held to this doctrine of the ‘association of ideas’ did not in general use it to explain diversity in men, but rather, similarity ; since all men had the same inherent passions, and were subject to continual repetitions of broadly similar impressions, then much of hum an experience would overlap. As Hartley put it: ... our original bodily Make and the Impressions and associations which affect us in passing through life, are so much alike, and yet not the same, that there must be a great general resemblance amongst M ankind.4 Thus, Smith was firmly within this tradition when he wrote: The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions ... is not upon many occasions so much the cause, as the effect of the division of labour. ( W N , I.II.4.) This view was to have im portant implications for Smith’s labour theory of value which not only sees labour as the source or origin of value, but also as an invariant measure of value, since it has, more or less, equal disutility for all men. (Chapter 8.) Despite its emphasis on the similarity of men, the Associationist view of man does, unlike the earlier doctrines of ‘fixed’ hum an nature, open up the possibility of a dynamic view of hum an society. Since the customs and institutions established by one generation, would help to shape the range of individual experiences undergone by the next, there could be a slow transition from one type of society to another. This view has been called ‘geneticism’.5 The above discussion can be summarised as follows: Smith to a large extent accepted the Associationist view of hum an psychology that was current in his time, and this yields a picture of man as a logically discrete, egocentric individual, motivated largely by self-interest and emotion. This, we can call the ‘individualistic’ strain in Smith’s thought. The influence of this line of thought is particularly clear in the Essays on Philosophical Subjects, where (as discussed in C hapter 3) Smith’s epistemological discussions tend to take, as their starting point, the tenets of Associationism. Part of the task of these essays 53

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is to explain how the individual, locked in a logically private world of internal experience comes to gain a shared understanding of external reality. The same stress on individual experience is to be found in both the Theory o f Moral Sentiments and the Wealth o f Nations', in both cases, Smith always depicts socio-historical change as acting through the perceptions and responses of individuals. Explanations purely in terms of ‘social wholes’ are very rarely used, and when they do occur, as, for example, in his discussion of the ‘State of Europe after the Fall of the Roman Em pire’ ( W N , 111.11), they are clearly introductory generalities which are soon ‘unpacked’ into the languge of individual experience.6 Now anyone holding such a theory of individual behaviour is going to have severe problems when seeking to explain the more complex aspects of collective social behaviour. It is, for example, difficult if not impossible to derive a coherent explanation of morality from Associationist premisses and it may well be that, without the aid of ad hoc hypotheses (such as divine intention) which clearly beg the question, it is logically impossible to move, within the confines of such a perspective, from the notion of the individual to that of the general good. W hat we have here is, at bottom, a ‘social’ variant of the age-old philosophical problem of the relationship of the particular to the universal — in this case of the individual to his society. This will be examined in depth when we come to look at the nature of the ‘social’ side of Smith’s model, and at the checks which Smith thinks will restrain the individual from excess in pursuing his own self-interest. Here it is sufficient to note that ‘reason’, because of its dependence upon the passions has, in Smith’s view, inherent defects which make it inadequate to supply directly the requisite social bonds. This is one reason why Smith, like Hum e, rejects the ‘contract’ theory of society and government.7 This conceptual framework — and the problems of aggregation that are its logical concomitants — forms the ‘individualistic’ side of Smith’s metascientific perspective. It is adequate to explain how social factors help in the formation of the individual, but has limitations when we seek to comprehend how collections of indivi­ duals aggregate into social groupings. These limitations become particularly severe when we wish to explain how such groupings can undergo a process of social evolution. Smith, as we shall see, has an answer to this problem, and it is to this aspect of his metascience that we now turn. In order to reconstruct the ‘social’ side of the dialectical 54

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interaction used in Smith’s model, we must examine a line of thought which has its roots in the belief in the power of reason that was the idée directrice of much of the French Enlightenment. It is not my intention to present a systematic treatment, however brief, of the thought of the French Enlightenment, nor to probe the very considerable differences of perspective that existed amongst the members of that loosely affiliated ‘school’. The purpose here is much more limited, being confined to providing a highly selective and generalised characterisation of some aspects of thought that were more or less common to the men of the Enlightenment, which had a very considerable influence on the members of the Scottish Historical School in general, and Smith in particular. The perspectives to be examined, which are closely interrelated can be labelled, the organic view of society, the historical perspective, materialism, and the idea of progress. These will be briefly discussed in turn. Firstly, the organic view of society. This can be defined as the belief that men are, to a very large extent, shaped by the institu­ tions and cultural patterns of the particular society in which they live. At first sight, this appears to be a thesis closely similar to ‘geneticism’, but there is a crucial difference. For whilst geneticism also holds that men are, to a degree, malleable in the sense of being formed by experience, it does so from the perspective of the individual. T hat is to say, it is &psychological theory of the formation of the individual, which focuses on the role of individual experience, whereas the organic view approaches the issue from the macro-social perspective. It is ‘culture’ as a whole which shapes men, and their potential individual experience is limited by the patterns of culture existent in their society; the perspective is sociological and historical, rather than psychological. Indeed it can be, and has been, held that, if we accept a strong form of ‘organicism’ there is no room for psychological theories of the individual; his formation is fully explained by reference to his society. It could be argued that geneticism and organicism are simply two aspects of the same process, and as such are complementary, rather than mutually exclusive, and there is indeed a sense in which this is true. But they are rooted in radically different philosophical traditions, aspects of which are mutually exclusive; it is the overall perspective which is different. Both the genetic and the organic view first began to emerge as explicit doctrines during the Enlightenment (although their 55

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origins are much older) when they gradually replaced the ‘nativist’ conception of man as being shaped by an inborn ‘hum an nature’. The genetic approach was, as we have seen, developed by the associationist tradition, whilst the organic view finds the beginnings of a clear expression in the work of M ontesquieu8 and Turgot9, although the orientation is at least implicit in the ‘Romanised’ presentations of Greek Stoicism that were of con­ siderable influence in the m ainstream of European thought in the eighteenth century. The emphasis of writers like Cicero and M arcus Aurelius is upon the notion of the individual’s obligation to a ‘natural’ society.10 Secondly we have the historical perspective, which has often been called ‘historicism’. Here the development of any aspect of a particular society is seen as part of an overall historical process so that specific events are seen, as it were, against a background of unfolding historical development.11 The systematic presentation of this approach can be traced back at least as far as Vico’s Scienza Nuova (1725), in which he claimed that an adequate understanding of reality required a historical perspective.12 This notion gained ground rapidly and is obvious in the work of Voltaire and the Encyclopedists; it finds clear expression in T urgot’s On Universal History (1750) and in M ontesquieu’s Spirit o f the Laws (1748). The third perspective, which had a very considerable influence on those now known as the Scottish Historical School, was materialism. The term is used here in a restricted sense and is taken to mean that an inductive and empirical (‘scientific’) approach is taken to the explanation of society7, rather than a deductive approach which ‘explains’ observed events by reference to either theology, or some form of ‘natural’ state. This trend in European thought has a much older history than the other three we are examining, and has been identified as far back as Nicholas of C usa’s De docta ignorantia (1440). It is beyond the scope of this book to trace its subsequent development, but we can identify two major works, both well known to the Scottish Historical School, in which it finds an unambiguous presentation. The first of these was Bacon’s Novum Organum (1620) where the concept was set forth as a methodological prescription for scientific practice, whilst the second was the bible of ‘hard ’ empiricist science, Newton’s Principia (1678). Both Bacon and Newton advocated a form of inductivist approach to explanation, although there were, as one would 56

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expect, considerable differences in the interpretation of just what was involved in this process. Such an approach could indeed arguably be labelled simply ‘inductivism’, but in the case of the Scottish Historical School, we can add a further restriction which renders the term ‘m aterialism’ appropriate. For them, social explanation is made with ultimate reference to the economic organisation of society. Here again, we can find clear antecedents of this perspective in Montesquieu, although in his case, economic materialism centered upon the property relationships of society. At the risk of some oversimplification, his fundamental thesis could be characterised as being that the distribution of property — especially land — is the ultimate determ inant of most other aspects of social life. In the work of the Scottish Historical School, this thesis was modified; for them it is the way labour is organised, not property, that is the crucial factor. Finally, we have the idea of progress, which can be taken to be the notion that society can, in some sense, develop and improve. This idea was to have enormous influence upon subsequent thought and could well be called the dominant ideology of nineteenth-century European culture, and is indeed still pervasive, despite the fact that events since 1914 have tended to destroy the overwhelming hold it once had on men’s imaginations. Given the influence the idea has had, it is difficult to appreciate that it is of comparatively recent origin.13 For all practical purposes the idea of progress arose with the post-Reformation cult of Pietism,14 which held that the Reformation had not gone far enough and must develop as time went on. Whilst there had previously been numerous ‘theological’ conceptions of progress, in the sense of an after-life in some better realm of existence, we are here concerned with progress as occurring in society, and the development advo­ cated by the Pietists, although rooted in theology, was conceived of as being embodied in the real world. The idea of progress gradually became secularised, and by the time Smith was writing the notion was commonplace. The degree to which this perspective influenced the thinkers of the Enlighten­ ment — French or Scottish — varied enormously, but the belief in progress tended to be heavily qualified in most cases. The near-Messianic fervour of the M arquis de Condorcet, with his vision of a Europe reborn, free and enlightened (with Reason playing the role of midwife) was largely atypical. In general the all-embracing Rationalism of Descartes had given way to a much 57

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more heavily qualified position; reason had the potential to steer hum an progress, but the pitfalls were many, and the road steep. Smith, explicitly rejecting ethical rationalism and always cynical as to hum an wisdom, none the less shared this qualified belief in progress, which, as we shall see, plays a central role in his model. The four ideas outlined above were of course closely inter­ connected, both logically, and in terms of actual historical development. The idea of progress, for example, is partly dependent upon the historicist notion of a universal history, and the links between the concept of progress and the organic view of society are almost as strong. All four notions were clearly present in M ontequieu’s Spirit o f the Laws — a book which greatly influenced the thought of the Scottish Historical School and perhaps to an even greater extent, the thought of T urgot.15 Smith, himself, frequently makes direct or indirect reference to this work in the Wealth o f Nations, and there can be little doubt that one reason for the close similarity between some aspects of Sm ith’s work and that of Turgot is that both were making similar exten­ sions of ideas and perspectives taken from M ontesquieu. Summing up we can say that the Scottish Historical School shared, to a greater or lesser extent, a common perspective; they saw man as the product of his historical society and they saw that society itself as a potential vehicle for progress. They held that the economic structure of society has an overwhelming influence upon its institutions, laws and customs, and their notion of progress thus tended to be linked with economic development.16 The fundamental unit of enquiry was seen by them as being, not the individual, but rather society. Their approach tended to be inductive and empirical, rather than speculative and deductive. Given these outlines of the two central influences upon Smith, it can now be seen that there is, prim a facie, a tension between the Associationist tradition, and the progressive conception of man. W ith the former we have an individualistic model of logically discrete man, who is shaped by private experience which is filtered by the passions, and who lives in a society which has grown by a natural, immutable process. The latter perspective, on the other hand, sees man as a social being who lives in, and is shaped by, a society which has at least the potential for collective moral and socio-economic progress, which is guided by the principles of hum an rationality. Such a tension is far from uncommon in the history of European thought and elements of it have found expression in numerous 58

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ways. An obvious example is the dispute (somewhat sterile in my view) between supporters of ‘methodological individualism’ and ‘methodological holism’, and the same themes occur in the far richer pastures of K an t’s perception of the tensions between Classical Empiricism and Cartesian Rationalism. In the case of Smith, commentators have noted various aspects of the tension within his work, often seeing it as a dichotomy between the approach of the Theory o f Moral Sentiments and that of the Wealth o f Nations, but, in contrast to the present interpretation, have tended to see it as unresolved.17 It has also been suggested that the same tension is present, and unresolved, in the Wealth o f Nations, where it has been interpreted as an ambivalence between Smith’s faith in the homeostatic properties of a perfectly competitive market economy, and his emphasis upon regulation and control. As Douglas Vickers has pointed out (in a somewhat different context): ‘... the notion of the self-interest of economic entities and the invisible hand that guides their actions to socially beneficient outcomes is set against the considerable, and even on a careful reading of the work, pervasive argument for an appropriate institutional structure or framework of economic society.’18 The position taken here is that the tension does exist in Smith’s writing, in that he wishes to hold both of the positions discussed, but that, because of his methodological approach, his model offers a resolution in which individual and social interact. In other words what could have been left as a dichotomy is, in Smith’s dynamic model, presented as a dialectical interaction in which the individual, depicted largely in terms of the Associationist perspective, is defined in terms of a progressively evolving social context. Let us now come down to detail, and look at what Smith says about his model of socio-economic interaction. To start with, there are two distinct, but interconnecting links between the individual and the social in Smith’s work, the first being based upon the individualistic strand of his thought, and the second upon the social. The first of these starts with hum an vanity, which leads on to pride, and in turn to the social virtue of magnanimity. The second route stresses the role of sympathy and the effects of the ‘im partial spectator’. Let us examine these 59

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in order. Vanity, pride and magnanimity: All men, says Smith, are possessed of ‘self-love’19: Every man is, no doubt, by nature first and principally recommended to his own care ... much more deeply interested in whatever directly concerns himself than in what concerns any other man. ( T M S , II.ii.2.1) and this gives rise to a universal ... desire of bettering our condition, a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us until we go into the grave. ( WN , I I .I I I .28; see also III.III.1 2 and IV.IX.28.) Related to this is one aspect of the ‘trucking urge’ to barter, as a means of bettering our condition, and this is the individualistic premiss for Smith’s central economic concept — the division of labour. The second element in the trucking urge is social in origin, being related to our need for the ‘help of our brethren’; this will be examined below. In the Wealth o f Nations the urge to better our condition is itself treated as the basic hum an propensity, but in the more philosophi­ cal Theory o f Moral Sentiments the model is given a fine structure, by introducing ‘vanity’ as the underlying cause. Smith asks: ... to what purpose is all the toil and bustle of the world? W hat is the end of avarice or ambition, of the pursuit of wealth, of power and pre-eminence? Is it to supply the necessities of Nature? (TM S, I.iii.2.1.) It is not, says Smith, for even the meanest labourer has these necessities. On the contrary: To be observed, to be attended to, to be taken notice of with sympathy, complacency and approbation are all the advan­ tages which we can propose to derive from it. It is the vanity, not the ease, or the pleasure which interests us. (Ibid.) Vanity leads on to pride, says Smith, and to the desire for the esteem of others — ‘to be loved and know that we deserve it is 60

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the highest hum an happiness’ (ibid.). Thus vanity can grow into pride and (encouraged by the social forces to be discussed below) on into ‘magnanimity’ — prudent acts which justifiably gain the respect of others. This then is one link between the individual and the social; starting from individualistic, psychological premisses, and without significantly departing from the associationist model of ‘ego­ centric’ man, leading to actions consistent with social harmony. But Smith is well aware that ‘magnanimity’ as it stands, is inadequate to control the potential excesses o f ‘self-love’ and thus the interacting social element is needed to provide a system of institutional and cultural restraints. The second basic hum an propensity, says Smith, is ‘sym pathy’. When we contemplate the actions of another we can, to the extent that we consider them appropriate to the particular situation, enter into a sympathetic bond with the actor. We consider his action proper and approve of both its fitness to the emotion which prompted it, and of the emotion itself. Further we can also enter into a sympathetic bond with the emotions of the third parties affected by the action, so that there is a double element of sympathy involved.20 Thus, for example, if an agent performs a benevolent act (which is generous but not rashly so) we can fully approve of his action, and can also approve of, and enter into, the gratitude of the recipient. The constant action of sympathy, coupled with the desire to be loved (generated by vanity, as outlined above) provides moral checks upon behaviour, and further, in the process of socio-historical development, these checks become embedded in general rules of conduct, and laws. Smith draws a distinction between ‘propriety’ and ‘m erit’; in considering the first of these we evaluate the intensity of a ‘passion’ and assess its fitness relative to the events which occasioned it, whilst in the second case we consider the action which the emotion stimulates. As Smith puts it: ... the sentiment or affection of the heart, from which any action proceeds, and upon which its whole virtue or vice depends, may be considered under two different aspects, or in two different relations: first in relation to the cause or object which excites it; and secondly, in relation to the end which it proposes, or the effect which it tends to produce ... (TM S, II.i.2.)

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But there is more to sympathy than this, for Smith introduces the notion of the ‘im partial spectator’; when we contemplate our own actions and assess their merit, we do so from the standpoint of a supposed im partial observer — i.e. we abstract from the actual judgem ents of our fellow men, which may be coloured by prejudice, and attem pt to form an ideal judgem ent of our actions. It is im portant to recognise that sympathy is a social concept; it is not created by each individual, but by a process of social inter­ action and then is internalised by the individual and acts through his own hum an propensities. Like language, the results of sym­ pathetic interaction confront men at the level of social rules and structures. Closely associated with this view of sympathy is Smith’s belief that man at all times needs the ‘help of his brethren’. M an is a social animal and can only exist in a civilised state by depending upon the assistance of others. Observe, says Smith: ... the accommodation of the most common artificer or day labourer in a civilised and thriving country, and you will perceive that the num ber of people of whose industry a part, thought but a small part, has been employed in producing him this accommodation, exceeds all com putation.’ (W N, I.I.II.) We find the same notion expressed in the Lectures on Jurisprudence (1766), where he says: ‘When we consider the conveniences of the day labourer, we find that even in his easy and simple manner, he cannot be accommodated without the assistance of great numbers ...’ (pp. 161-2). This generates the social aspect of the ‘trucking urge’ and thus forms a second premiss for the ‘division of labour’ concept. Smith suggests that the trucking urge is probably ‘... a necessary consequence of the faculties of reason and speech ... and ... is common to all men and to be found in no other race of anim als’ (W N , I.II.2). In the Lectures on Jurisprudence (1766), the social nature of this aspect of the division of labour is even more clearly brought out, for here its being a ‘necessary consequence of reason and speech’ is shown to be rooted in ‘... that principle to persuade which so much prevails in hum an nature’ (p. 493). The picture drawn is of reasoned argument in a social interaction, giving rise to the urge to bargain. 62

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We will return to this aspect of Smith’s work in C hapter 5, when the full model is reconstructed. The next step in the present argument is to examine the role played by hum an reason in the formation of general rules in the process of sympathetic interaction. We begin by noting that Smith explicitly rejects the view now commonly known as ‘ethical rationalism ’, which holds that reason is adequate to generate directly standards of morality and general behaviour. As he puts it: ... it is altogether absurd and unintelligible to suppose that the first perceptions of right and wrong can be derived from reason, even in those particular cases upon the experience of which the general rules are formed. These first percep­ tions, as well as all other experiments upon which general rules are founded, cannot be the object of reason, but of immediate sense and feeling. ( T M S , VII.iii.2.7.) It is, therefore, to the ‘passions’ that we must turn to find the origins of morality, and it is thus: ... by finding in a vast variety of instances that one tenor of conduct pleases in a certain manner, and that another con­ stantly displeases the mind, that we form the general rules of morality, (ibid.) Thus far we appear to be well within the confines of Associationism (the last quoted passage could easily be taken from Hume), and this impression is reinforced by the fact that Smith claims that: ‘The general maxims of morality are formed, like all other general maxims, from experience and induction’ (TM S, VII.iii.2.6) — a position fully compatible with the doctrine of the association of ideas. Campbell has taken Smith’s position at its face value and con­ cluded that the only role of reason in Smith’s model is the induction of general rules from a series of particular events.21 He sees that, for Smith, the individual is capable not only of internalising the moral rules that are ‘given’ to him by his society, but also of going beyond them — this indeed is the way in which they gradually evolve. But Campbell regards this transcendence as being merely inductive — i.e. the individual extrapolates from a given moral rule, and to the extent that his extrapolation agrees with that 63

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made by other individuals, it becomes ‘objective’ and is incorpora­ ted in a modified variant of the original rule. As Campbell puts it: The objectivity which attaches to such a spectator’s moral judgem ent is the sort of objectivity which arises out of agree­ ment and not that which implies an external standard known through the exercise of some rational faculty which tran­ scends the normal sources of moral judgements, (ibid., p. 139) Thus, on the numerous occasions when Smith speaks of the part played by reason in the formation of general rules, Campbell interprets him to mean simply induction, and not ratiocination in some wider sense, and concludes that: The fundamental causes of hum an behaviour are therefore the passions. These are conceived on the analogy of physical forces and may be regarded as the principles of movement in the hum an constitution, (ibid., pp. 66-7) This seems to be correct as far as it goes, but, if we accept the epistemological arguments put forward in C hapter 3 above, it will be clear that for Smith, ‘induction’ does not mean quite the same as it does for Campbell. In Smith’s view the mind plays an active role in ‘working-up’ and interpreting sense experience. Induction is not merely extrapolation, but involves judging the coherence of each individual experience, relative to a pre-existing contextual framework. This interpretation is confirmed by the text of the Theory o f Moral Sentiments, where Smith repeatedly lays stress upon the fact that a judgement must be made of the propriety of any particular action, relative to the situation in which the action was taken. He is quite explicit on this point: Philosophers have, of late years, considered chiefly the tendency of affections, and have given little attention to the relation which they stand in to the cause that excites them. In common life, however, when we judge of any person’s conduct, and of the sentiments which directed it, we con­ stantly consider them under both these aspects. ( T M S , I.i.3.8.) and he goes on to say that if the sentiments of another 64

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... not only coincide with our own, but lead and direct our own; when in forming them he appears to have attended to many things which we had overlooked, and to have adjusted them to all the various circumstances of their objects; we not only approve of them, but wonder and are surprised at their uncommon and unexpected acuteness and comprehen­ siveness, and he appears to deserve a very high degree of adm iration and applause. ( T M S , I.i.4.3; see also I.i.1.10 and IV.2.6.) W hen we are called upon to assess the propriety of some action, we judge its adequacy in terms of the context in which the action takes place. The standards we apply in making such judgements are also contextual; our perceptions of right and wrong, of propriety and im propriety depend upon the general rules and conventions that have already been induced, by the process of reason guided sympathetic interaction. As Smith puts it: We observe in a great variety of particular cases what pleases or displeases our moral faculties, what these approve or disapprove of, and by induction from this experience, we establish those general rules. But induction is always regarded as one of the operations of reason. From reason, therefore, we are very properly said to derive all those general maxims and ideas. (T M S, VII.iii.2.6.) The general rules and conventions thus formed become the value system within which context we evaluate future actions: It is by these ... that we regulate the greater part of our moral judgem ents, which would be extremely uncertain and precarious if they depended altogether upon what is liable to so many variations as immediate sentiment and feeling, (ibid.) We thus evaluate the propriety of any particular action relative to the value system which we have already internalised. Such judgem ent is, therefore, like that made within scientific systems, contextual, in that it involves relating a new ‘observation’ into the nexus of our preconceptions. The criteria presented by Smith in his epistemological discussions would seem to be appropriate here as well. T h at is to say, that we evaluate any particular act 65

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in terms of its coherence (measured in terms of familiarity, simpli­ city and generality) relative to our existing system of values. Indeed Haakonssen has gone so far as to claim that: The principle of im partiality ... really amounts to a principle of universality. W hat the im partial spectator approves of is what everyone is able to go along with, if they are properly informed. It is, in other words, w hat is possible as a general rule.22 and further, that: Closely connected with the requirem ent of universality are two others which we might call consistency and coherence. One of the elementary requirements for an im partial specta­ tor’s judgem ent must be that it is not contradicting any of the other judgem ents he would make, and another is that the behaviour to which it leads and the rest of the behaviour following from the spectator’s judgem ent must cohere. (Ibid.) This seems to me to be a fundamentally sound interpretation of the role of the im partial spectator in Smith’s model. If we accept the argum ent as presented so far, Sm ith’s extensive development of the im partial spectator, in the final revision of the Theory o f Moral Sentiments can be seen as an attem pt to develop his model along lines suggested by his basic epistemological per­ spective. The im partial spectator is, in a sense, a proxy for dispassionate, contextual, ratiocination, which attem pts to incorporate new perceptual experience into an existing perspective whilst preserving the overall coherence of the contextual frame­ work in question. Smith in fact makes clear the link between our judgem ent of moral propriety and his basic epistemological perspective when he says, earlier in the Theory o f Moral Sentiments, that: ‘It is in the same m anner that we judge of the productions of all of the arts which address themselves to the im agination.’ (T M S, I.i.5.10) which as we have seen includes science (see C hapter 3). It is, however, im portant to recognise that the process of ‘im partial’ contextual judgem ent involved in sympathetic inter­ action is of a much lower order than that postulated by either Cartesian, or ethical, rationalism. Reason for Smith is not 66

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‘adequate to reality’ in the sense that it can deduce general maxims from first principles; it is rather that informed ‘low level’ judgem ent working through innumerable instances, can aggregate into social structures which are appropriate within a given context. The contribution made by reason in any individual instance of sympathetic interaction is, therefore, very small, although its overall role is highly im portant. To avoid conflating this inter­ pretation of Smith with either Cartesian, or ethical, rationalism, I will in future, refer to the process involved as ‘practical reasoning’. Further, most of the variants of rationalism suggest that general maxims can be deduced which, by their conformity with ‘universal’ standards of rationality, transcend social context, and are, in this sense, objective. This is not the case with Smith’s model, which is intrinsically contextual. Here the interpretive framework is produced by practical reasoning within a social context, and its standards of evaluation are internal. We evaluate the adequacy of a particular general rule relative to the context in which it operates, and there can be no external (non-contextual) standards of evaluation beyond this. As with scientific systems, there is a qualitative transition when we move from one interpre­ tive context to another. At first sight, this would seem to leave Smith in a position of total relativism, but this is not, in fact, the case. Even though the adequacy of a particular product of sympathetic interaction can only be evaluated relative to the context in which it is formed, the mechanism by which it is formed is common to all societies, and thus bridges the qualitative gap between one context and the next. It is crucial to recognise that it is not any particular set of laws, rules and conventions that makes society possible, but the actual process of forming these social structures. Men have a need for the approval of their fellows (based on ‘vanity’)23 and also require their help (a need which increases with the division of labour). In order to obtain these objectives, they control the impulses of the passions and modify their behaviour, so as to bring it into line with that expected by the im partial spectator.24 The im partial spectator is, in effect, a proxy for dispassionate judgem ent, based upon an adequate contextual knowledge, both of the value system involved, and the particular circumstances of the act to be judged. It is this modification of behaviour that provides social cohesion, rather than the specific value system that happens to be current at the time; this interactive mechanism 67

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is the ongoing process which bridges the qualitative gaps between successive contexts of interpretation. The process itself can thus be the carrier of hum an rationality, which is reflected in the social structures that it creates. There is thus at least the possibility of ‘progress’, be it moral, legal or economic. This, I will suggest in due course, is as close as Smith comes to having a teleology in that he holds that hum an (practical) reason, working through a long process of sympathetic interaction will develop and evolve, and that the results of this process are embodied in changing social structures. Individuals both create these structures, and are in turn shaped by them, in an ongoing dialectical interaction. The individual in any specific social setting may well be unaware of this process, and has in any case no criteria for assess­ ing its adequacy. Social structures confront him, as does language, as determ inate and objective, though he in fact is engaged in the process of creating both. We can indeed make a distinction between the short run, in which the individual functions within an apparently ‘given’ environment, and the long run, in which the reason guided evolution of social institutions forms an overall pattern. This leads into a discussion of unintended consequences and what I shall call Smith’s ‘deception theory’, and this will be dealt with in C hapter 7. For the present it can be said that Smith’s position appears to be that, by taking a ‘high level’ and dispassion­ ate view, the social scientist/philosopher can discern at least some aspects of the long-run dynamic process. Given the above, Sm ith’s model can be seen as a synthesis of key elements of the two lines of thought, which were discussed at the start of this chapter. His ‘individual’ is that of Associationism, driven by the passions and pursuing his own self interest; but the social context within which he interacts is capable of reason guided progress. Some support for this interpretation is to be found in the views of Macfie who has come to similar conclusions (although by a somewhat different route) about this synthesis. Sm ith’s main feat, he says, ... was his interpretation of eighteenth-century individualis­ tic theory in terms of the actual working of reason as it evolves and in turn builds on ‘general rules of conduct’ and social institutions. These stem from the vigour of self-love and conscience, themselves held in a living unity of social 68

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feeling by sympathy; the rules themselves reflecting the constant criticism of the ‘impartial spectator’ and the constant pressure of propriety.25 If we accept this interpretation, we are no longer faced with the choice of seeing Smith either as an ethical rationalist, such as W ollaston or Clarke, or as a mechanical associationist such as Hartley. His model is dynamic synthesis of Associationism with some of the more ‘rationalist’ perspectives of the European Enlightenment. The idea of progress, the historical perspective and the organic view of society are all reflected in this model, as is the notion of qualitative change. Two tasks remain in the reconstruction of Smith’s model. Firstly, it still has to be dem onstrated that his work is ‘materialist’, as defined in C hapter 2 and discussed above in connection with the Scottish Enlightenment. Secondly, it has so far been shown that qualitative change is possible within Smith’s world-view, but it still has to be shown why it in fact does take place. As we shall see in the next chapter, both of these tasks will be accomplished by an examination of the division of labour concept in Smith’s work — for it is the changing way in which labour is organised that supplies the dynamic element in Smith’s model of qualitative social change.

Notes 1. B. Blanchard, Reason and Analysis (The Carus Lectures for 1959, Illinois, 1962), p. 73. Quoted by S.V. Keeling, Descartes (Oxford University Press, London, 1968), p. xviii. 2. M. Mandlebaum, History, Man and Reason (Johns Hopkins University Press, Baltimore, Md., 1971). 3. J. Locke, An Essay Concerning Human Understanding (Collins, London, 1964), p. 67. 4. D. Hartley, Observations on M an (Richardson, London, 1749), Part 1, Proposition 14. 5. Mandlebaum has used the term ‘geneticism’ to mean the belief in the malleability of man. M. Mandlebaum, History, Man and Reason (Johns Hopkins University Press, Baltimore, Md., 1971), Chapter 8. 6. Haakonssen has said that ‘... according to Smith economic factors can only be socially determining through their influence on individuals. One supra-individual phenomenon does not bring about another without the intervening activity of particular persons.’ And: ‘In this sense Smith is a methodological individualist.’ However, he continues — and the qualification is crucial for the present

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Metascientijic Perspectives treatment — ‘... this does not prevent the motives and behaviour of individuals from being explained with reference to a social framework.’ K. Haakonssen, The Science o f the Legislator (Cambridge University Press, Cambridge, 1981). 7. Smith also has an empirical reason for rejecting the contract theory — the fact that men never mention such a contract as being the foundation of their adherence to society (LJ: 1762-3, p. 12 etseq.) and this is coupled with what might best be called, a moral reason; that they have in general no choice about being members of a particular society. 8. Cf. Baron de Montesquieu, The Spirit o f the Laws (1748) (Hofner, London, 1962). For discussions of Montesquieu’s work, see R. Aron, M ain Currents in Sociological Thought (2 vols., Pelican, Harmondsworth, 1968), vol. 1; R. Shackleton, Montesquieu, A Critical Biography (Oxford University Press, London, 1961) and L.M. Levin, The Political Doctrine o f Montesquieu’s ‘Esprit des lois’ (Columbia University Press, New York, 1936). 9. A. Turgot, Reflections (1766) (Macmillan, New York, N.Y., 1898). Cf. also R. Meek, Turgot on Progress, Sociology and Economics (Cambridge University Press, Cambridge, 1971) and D.D. Groenewegen, ‘Turgot and Adam Smith’, Scottish Journal o f Political Economy (1969). Material contained in Smith’s reported lectures shows clearly that there was parallel development in the work of Turgot and Smith rather than a direct influence. 10. See D.A. Raphael and A.L. Macfie (eds) Introduction to the Theory o f M oral Sentiments (Clarendon Press, Oxford, 1976), for a discussion of the influence of Stoicism on Smith. There they claim that the ‘... Universalist ethic of Stoicism became enshrined in the “law” of nature’, in Smith’s work (p. 7). 11. The most celebrated documentation of the rise of historicism is F. Meinecke’s D ie Enstehung des Historismus (Oldenbourg, Berlin, 1936). See also the essay by J.S. Mill, ‘The Spirit of the Age’ (1831) (Chicago University Press, Chicago, 111., 1942). 12. J.C. Morrison has suggested that the source of Vico’s historicism might well lie in Spinoza’s Theological-Political Treatise and that: ‘A common link which unifies these apparently quite disparate works is found in the concept of history, for as Vico laid the basis for the modern historisation o f philosophy, so Spinoza laid the basis for the modern historisation o f religion .’ J.C. Morrison, ‘Vico and Spinoza’, Journal o f the History o f Ideas (1980). 13. The development of this notion of progress is traced by J.B. Bury, The Idea o f Progress (Dover, New York, N.Y., 1955); cf. also W.W. Wagar (ed.), The Idea o f Progress Since the Renaissance (John Wiley, New York, N.Y., 1969). 14. In fact we can find the beginning of a secularised presentation of the idea of progress in J. Bodin, M ethodfor the Easy Comprehension o f History (1565) (Columbia University Press, New York, N.Y., 1945). Bodin attacked the, then, almost universal view that the ‘golden age’ lay in the past: ‘The age which they call “golden”, if it be compared with ours, would seem but iron.’ However, it was only in the hands of the Pietists that the notion was given an unambiguous presentation. A similar

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Metascientijic Perspectives perspective to that of Bodin is to be found in Bernard la Bovier de Fontenelle’s Digression sur les Anciens et les Modemes (1688). 15. For a detailed analysis of the place of Montesquieu in the stream of European thought which flows from Machiavelli to the American Revolution, see J.G.A. Pocock, The Machiavellian Moment (Princeton University Press, Princeton, N.J., 1975). (See also Chapter 6.) 16. This is perhaps less true of Hutcheson, whose main concern was with moral progress, but even here there is a clear linking of the development of morality with the development of civilisation as a whole. 17. Cf. for example, P. Walton and A. Gamble, From Alienation to Surplus Value (Sheed & Ward, London, 1972). A notable exception here is A.L. Macfie, The Individual in Society (Allen & Unwin, London, 1967) who take a position much closer to the present exposition. Macfie’s views will be discussed below. 18. D. Vickers, ‘Adam Smith and the status of the theory of money’ in A.S. Skinner and T. Wilson (eds), Essays on Adam Smith (Clarendon Press, Oxford, 1976). 19. Not for Smith, identical with ‘selfishness’, which is regarded as a limiting ease of self-love. Cf. E. Fromm, Man fo r H im self (Holt, Rinehart & Winston, Eastbourne, 1967); J. Bonar, ‘The theory of moral sentiments by Adam Smith’, Philosophical Studies (1926). For a more general treatment, see A.O. Hirschman, The Passions and the Interests (Princeton University Press, Princeton, N.J., 1977). 20. Smith distinguishes between the ‘unsocial’ and the ‘social’ passions. In the unsocial passions (such as resentment) ‘our sympathy is divided between the person who feels them and the person who is the object of them’ ( T M S , I.ii.3.3), whilst in the case of the social passions (generosity, humanity etc.), our sympathy is reinforced. 21. T.D. Campbell, Adam Sm ith’s Science o f Morals (Allen & Unwin, London, 1971). Campbell is concerned with moral general rules but as the last quoted passage from Smith makes clear the mechanism applies to ‘all other general maxims’ as well. 22. K. Haakonssen, The Science o f a Legislator (Cambridge University Press, Cambridge, 1981). 23. This of course is taken from the ‘individualistic’ side of the model. The need for approval is regarded as being an extremely powerful ‘passion’ and indeed: ‘Compared to the contempt of mankind, all other external evils are easily supported’ (T M S , I.iii.2.12). The word ‘external’ was inserted in the sixth edition, and seems to reflect Smith’s distinction between internal states and external events. 24. This indeed is Smith’s answer to Hobbes. The passions are not intrinsically evil, to be restrained only by the ‘extraordinary use of reason or a constant severity of punishing them’. If unconstrained they can indeed be socially disruptive, but they themselves help to generate the social cohesion which holds them in check. T. Hobbes, Leviathan (1651) (Collins, London, 1962), p. 268. 25. A.L. Macfie, The Individual in Society (Allen & Unwin, London, 1967), p. 57.

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5 Specialisation and Social Change: The Division of Labour

It has been suggested already that Smith, in common with the other members of the Scottish Historical School, regards the economic organisation of society as being a fundam ental deter­ m inant of many of its other attributes. Now, when we come to examine this proposition in detail it will be seen th at it is in need of a more precise specification; for Smith it is the way hum an labour is organised which shapes society. This proposition in its static form I have called Smith’s ‘labour theory of value’ (see C hapter 2), but it will here be examined in its dynamic form, in terms of the division of labour. Let us begin with basics by looking at w hat Smith has to say about the causes of economic growth. In his Introduction (Section 4) to the Wealth o f Nations he isolates two factors. Firstly, the productivity of labour increases with the growing ‘skill, dexterity and judgem ent’ of the labourer, and secondly, the proportion of productive labourers who are engaged in what Smith calls ‘useful labour’ gradually increases. Smith regards the first of these as being the most im portant, for as he points out, in many primitive societies, virtually everyone is productively employed, despite which per capita product is at, or at times below, subsistence level. He directly links increases in productivity with a progressive division of labour, this being a consequence of his general perspective which views socio­ economic development in terms of the application of labour to the raw materials provided by nature. Viewed from this perspec­ tive, changes in the level of national income are seen as changes in the productivity of that labour as specialisation develops. This indeed is the theme of all of Book I of the Wealth o f Nations and is clearly set out there, in the opening sentence of the opening chapter: 72

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The greatest improvement in the productive powers of labour, and the greatest part of the skill, dexterity and judge­ ment with which it is anywhere directed, or applied, seem to have been the effects of the division of labour. {W N y 1.1.1: see also II.III.32.) And in the same chapter (Section 5), he explains that this is ... owing to three different circumstances; first to the increase in dexterity in every particular workman; secondly to the saving of time which is commonly lost in passing from one species of work to another; and lastly to the invention of a great num ber of machines which facilitate and abridge labour.1 Smith’s famous discussion of the working of a pin factory is, of course, an illustration of the increase in productivity resulting from the division of labour, and he holds that ‘...in every art and manufacture, the effects of the division of labour are similar to what they are in this trifling one ...’ {W N, 1.1.4.) He views the intrinsic productivity of the division of labour as holding both at the level of the individual firm, and for society as a whole. Indeed he clearly regards both aspects as being essen­ tially the same thing, for he says: W hat takes place among the labourers in a particular workhouse, takes place for the same reason, amongst those of a great society. The greater their number, the more they naturally divide themselves into different classes and sub­ divisions of employment. ( WN , I. V III.57.) Already we can begin to see that the division of labour is Smith’s central dynamic concept; it is, as it were, the ‘vehicle’ of social evolution, and we shall see later that it links with the process of sympathetic interaction to become the carrier of hum an rational­ ity, as objectified in social institutions and structures. Indeed, upon a full analysis of Smith’s model, it will become clear that the division of labour is the only dynamic element in his schématisation. Schumpeter has clearly recognised this point in his History o f Economic Analysis, for he there writes: ... nobody, either before or after Adam Smith ever thought 73

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of putting such a burden on the division of labour. W ith Adam Smith it is practically the only factor of economic progress.2 And a similar view is expressed by Campbell, Skinner and Todd in their introduction to the Oxford Edition of the Wealth o f Nations, where they say: The division of labour remained central to the institutional analysis. Even when Smith recognised the theoretical possi­ bility of the operation of other factors — an increased labour force, or mechanisation — the division of labour remained in practice the fundamental cause of economic growth.3 Given the present interpretation of Smith’s underlying epistemological perspective, we can see that the fundamental role played by the level of specialisation will have implications for the adequacy of social institutions. Since the division of labour is the carrier of dynamic change, Smith naturally relates the progress of society to the extent to which the division of labour has progressed. T hat is to say, the degree of specialisation defines the m aterial context, relative to which the social structures created by sympathetic interaction take their relevance and meaning. Further, it is a logical implication of Smith’s dynamic epistemology that the process of development should be continuous, and that any ‘cutting up’ of this process into discrete phases should be largely arbitrary (see C hapter 3). I, therefore, take the ‘four stages’ theory to be a heuristic device, rather than a fundamental organising principle (which is how Meek sees it),4 in that any num ber of ‘stages’ can be distinguished, depending upon where we choose to make the cuts. It is significant from this point of view that the four stages view is much more explicit in the Lectures than it is in either the Theory o f Moral Sentiments or the Wealth o f Nations, although the same dynamic perspective is to be found in all three works. However, as a heuristic device, the four stages approach is very valuable and I will follow Smith in making use of it. The stages he distinguishes are, firstly, hunting and gathering, ‘such as we find amongst the native tribes of North America’. Secondly we have pastoral society in which animals are domesticated and grazed by nomadic tribes. This leads on to the third, agricultural, stage where land is tilled in settled communities, and finally we have commercial society where commodities are 74

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exchanged in a market economy. Each is characterised by a specific level of the sub-division of labour, because, as we shall see, the division of labour is itself a dialectical concept, it is regarded as being both the cause and the effect of socio-economic change. Thus the degree of sub-division defines the type of society, whilst at the same time, the type of society generates the possibilities of sub-division and limits their extent. Smith, at various points in the Wealth o f Nations traces the effects of the division of labour from ‘... that rude state of society in which there is no division of labour, in which exchanges are seldom made, and in which every man provides everything for him self...’ (WW, II, Introduction I) through agricultural society, which ‘... does not adm it of so many sub-divisions of labour, nor so complete a separation of one business from another ...’ (W N, 1.1.4)5 — as does a society having a manufacturing sector, and on to commercial society6 where the division of labour has ‘thoroughly taken place’. Here: ‘... it is but a very small part of [his needs] ... which a m an’s own labour can supply him. The far greater part he must derive from the labour of other people.’ (W N , I.IV .I.) It should be noted here that in the transition from an agri­ cultural to an exchange economy, the division of labour itself is seen by Smith as undergoing qualitative change. Agriculture enables a large num ber of people to be supplied with food by the labour of comparatively few farmers. This generates the possibility of specialisation on a large scale, since those who are freed of the need to till the land can become tradesmen supplying each other, and the farmers in a market economy. As Meek and Skinner commented some years ago in a perceptive discussion of two fragments by Smith on the division of labour: ... the division of labour properly so called exists only where there is specialisation, both in terms of area of employment and process of manufacture. For Smith such specialisation was a characteristic of the fourth socio-economic stage alone.7 And they go on to quote Smith as saying, in these fragments, that whilst the first three stages gave increasing scope to the division of labour, ‘... the complete division of la b o u r... is posterior to the invention even of agriculture.’ 75

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Thus, a commercial economy is characterised by social special­ isation, and in such an economy the exchange of the products of labour between specialised workers is not found in direct personal relationships (as it was in the more ‘primitive’ economies) but in the network of market relations.8 This qualitative shift in Smith’s genetic account of the stages of economic development has interesting consequences to which I will return shortly. First, however, a further point must be established, which is that Smith always seeks to explain the development of morality, laws, customs and social institutions as being relative to, and satisfying the needs of, specific historical stages of economic development. We can see this most clearly in his lectures on justice, where he consistently shows how laws and institutional structures are called forth by the developing needs of a particular society. Two examples will serve to illustrate a theme which pervades these lectures: We shall first treat of occupation, the laws of which vary according to the periods of hum an society. The four stages of hum an society are hunting, pasturage, farming and commerce ... The age of commerce naturally succeeds that of agriculture. As men now confined themselves to one species of labour, they could naturally exchange the surplus of their own commodity for that of another of which they stood in need. According to these stages occupation must vary. (L J: 1766, p. 459. See also L J : 1762-63, p. 14.) He goes on to explain the way in which these laws of occupation are formed by reference to the workings of sympathetic interaction. Again, writing on the ‘first ages of society’, he says: Thus amongst hunters there is no regular government, they live according to the laws of nature. The appropriation of lands and flocks which introduced an inequality of fortune was that which first gave rise to regular government, the very end of which is to secure wealth and defend the rich from the poor. (LJ: 1766, p. 404.) A variation on this same general theme is present in the Theory o f Moral Sentiments where morality is shown to be socio-relative and to develop with the economic progress of society. He says for example: 76

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Since our sentiments concerning beauty of every kind, are so much influenced by custom and fashion, it cannot be expected, that those, concerning the beauty of conduct, should be exempted from the domination of these principles. (TM S, V.2.1.) In the case of morality, however, Smith holds that some actions — such as the conduct of a Nero or a Claudius — are intolerable to the hum an passions in any society so that ‘no custom will ever reconcile us to them ’. But despite this ‘... though the influences of custom and fashion upon moral sentiments is not altogether so great, it is however perfectly similar to what it is everywhere else.5 {TM S, V.2.2.) Further, when we come to the Wealth o f Nations, we find a very clear linking of law, policy and institutions to the developing economic structure of society. Thus, for example, writing on farm­ ing, he shows how the accumulation of a surplus product, coupled with a growth in merchanting and manufacture, created in the landlord a desire for extra income to purchase commodities, but: His tenants could agree to this upon one condition only, that they should be secured in their possession for such a term of years as might give them time to recover with profit, whatever they should lay out in a further improvement of the land. The expensive vanity of the landlord made him willing to accept this condition; and hence the nature of long leases. (MW, III.IV .13. See also V.I.g.25.) O r again, when giving a genetic account of money as a social institution (which eventually leads on to a discussion of banking), Smith explicitly relates its introduction to the development of society, whilst linking this in turn to the progressive division of labour. He traces the evolution of money from cattle in ‘the rude ages of society5, through gold and silver bars, and into coined money, relating the type of money to the specific historical stage of economic development. Taking his work as a whole we find an explicit linking of hum an development in its totality to the changing economic structures of society. As Skinner has pointed out: ‘Even if the work done by Smith and his contemporaries finds parallels and precedents, nevertheless it does appear to have been remarkable for the weight of emphasis which it placed on economic factors.’9 77

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Further, as was suggested above Smith also regards the legal, moral and institutional structures of society as influencing directly the level of the sub-division of labour and its effectiveness. This, of course, is why agricultural societies, for example, cannot achieve a very high degree of specialisation. Indeed, it is for precisely this reason that so much of the Wealth o f Nations is concerned with attacking social institutions, laws, or customs that Smith regards, at best, as being appropriate only to earlier stages of development. M any of his attacks on ‘monopoly’ for example, are explicitly based on the premiss that it interferes with the efficient sub­ division of labour, or prevents such sub-division being carried forward as far as it otherwise might be, and this is also true of his attacks on the restrictions then in force on the mobility of labour (see C hapter 6). O n the positive side, he regards social institutions such as money as greatly facilitating the efficient and widespread division of labour, and through this, influencing economic growth. We can now summarise what has been established so far: The division of labour is intrinsically productive and is the source of economic growth, and functions in such a way that the degree of economic development is related to the level of specialisation attained. Laws, morality, customs and socio-economic institutions are related to the level of economic development, which forms the ‘context’ within which they function. Finally, as the institu­ tional framework of society develops in response to changes in the level of economic development, it in turn facilitates further, and more efficient division of labour. From this we can see that the division of labour is both the cause of the economic and institutional development of society and its effect; a truly dialectical interaction. The link between the economic context and the behavioural and institutional development of society is extremely complex, because of the role of ratiocination in the formation of social structures. We will have to get to grips with this problem in due course, but for the present it should be noted that I am not suggesting that Smith holds to a strong form of economic determinism. The materialist element in his model is much more subtle than this, mainly because the element of judgem ent and interpretation permits a range of response within any given socio­ economic context. For the purpose of analysis, we can regard the model as functioning at two levels: Firstly at the very general level which 78

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is concerned with providing a historical explanation of the evolu­ tion of successive forms of social organisation. At this level the model has no fine structure, being concerned only with broad outlines. I will call this Smith’s ‘general theory’ of socio-economic development. Secondly, the model also functions at the level of explaining the progressive development of commercial society, seen as one of the evolutionary stages covered by the general theory. Here the central structure of the model is unchanged, but there is much more institutional content, in that the model is tightly linked to a specialised exchange economy. In other words the contextual framework is more fully specified and this enables the related social structures to be more fully analysed. I will call this Smith’s ‘special theory’ of socio-economic development. The move from the general to the special theory involves a qualitative change in the division of labour concept and this can be regarded as the reflection of an actual change in social organis­ ation which accompanied the growth in the market economy. Given the distinction, it turns out that we have so far been examining Smith’s model at the level of his general theory. W ithout losing sight of the overall framework, we must now, therefore, expand the analysis to include the fine detail, and thus pick up the institutional content implicit in the special theory. First, let us note that Smith regards the degree of technological innovation as being controlled by the extent of the division of labour. For example, he says: ... the invention of all those machines by which labour is so much facilitated and abridged, seems to have been originally owing to the division of labour ... in consequence of the division of labour, the whole of every m an’s attention comes naturally to be diverted towards some very simple object. It is naturally to be expected that some one or other of those who are employed in each particular branch of labour should soon find out easier and readier methods of performing their own particular w o rk ... ( W N , 1.1.8. See also LJ: 1766, p. 492.) This implies that technological innovation is not itself regarded as being the initiator of a dynamic process of change; is not seen as an exogenous variable, but rather as an endogenous function of the level of specialisation. Clearly bound up with this, is Smith’s view that innovation is embodied in labour rather than in the machines themselves. In other words, he works with a sort of 79

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‘learning by doing5 model in which hum an knowledge and ingenuity are the carriers of innovation and are themselves reciprocally related to the degree of specialisation. Further, he does not in general speak of the quantity of machinery per worker increasing but rather of the quality; usually, as mentioned earlier he sees such qualitative improvement as a process of simplification. His usual practice is to take the quantity of capital per worker to be fixed, for a given industry, and then to develop his analysis using ‘capital5principally as a wages fund. The view that machinery becomes simpler with technological innovation seems odd at first sight, and is one which, even in the 1770s must have squared ill with empirical observation. However, on the present interpretation, we can take this as an implication of Smith's epistemological position; machinery is a way of improving m an5s interaction with nature, and simplification is the process of refinement in fitting the instrum ent to the external function required. Like linguistic or scientific analogies, machines are at first a ‘bad fit5 with a recondite external reality, but are gradually rendered more fitting and appropriate, by successive refinements. The role of the imagination is im portant here, in that it postulates the various modifications that are ‘fitted5against reality. This process is accelerated as the division of labour increases for this focuses the imagination more closely on the process in hand. Given this interpretation, it becomes very clear why Smith sees technological improvement as being embodied in hum an know­ ledge, rather than in the machinery itself. The second point to be made, is that Smith holds that the increase in the division of labour, because it is intrinsically productive, will in short run increase profitability. Although a proportion of these extra profits may be consumed, in general this is not the case. As he puts it: Though the principle of expense, therefore prevails in almost all men on some occasions, and in some men on almost all occasions, yet in the greater part of men taking the whole course of their life at an average, the principle of frugality seems not only to predominate but to predominate very greatly. (W N, II.III.2 8 .) The bulk of the profits will therefore be invested, thus setting more labourers to productive employment. It follows from this 80

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that the ratio of productive to unproductive labour (the second source of economic growth identified above), is itself related to the division of labour, but indirectly, being a function of capital accumulation. The increase in profitability in any given sector, causes new investment to flow into that sector, so that at a constant capital per man, more labour can be employed in those areas where it is most productive. The central role of capital in the dynamic process is, therefore, to carry the division of labour furthest in the areas where it is most productive — capital is the regulating mechanism which keeps the division of labour on, or near, its optimum growth path. The dem and for labour temporarily exceeds supply in the areas of increased profitability, and wages are competed up so that: ‘The wages of labour ... are never so high as when the demand for labour is continually increasing.’ ( WN , I.V III.22) and this, of course, calls forth a larger supply of labour. Taking the economy as a whole, not only does the increasing division of labour pull more labour into productive work, but it also calls forth, through higher wages, a larger absolute supply of labour as population increases. As Smith puts it, if the demand for labour is continually increasing: ... the dem and for labour must necessarily encourage in such m anner the marriage and multiplication of labourers as may enable them to supply that continually increasing demand. (W N , I.V III.40.) Both of these effects increase effective demand. In the case of labour attracted into productive employment from the personal service sector, the increase in effective dem and will be because of the higher standard of living enjoyed by those who have transferred. Smith’s theory of wages is not simply a bare subsistence model, since there is a socially defined component, at least in growing or static economies. Since his overall model is dynamic and pro­ gressive, the growing economy is in fact the standard case; he does indeed hold that economies can also regress, but, such regres­ sions seem to be ‘contingent’ events rather than a direct implica­ tion of the logical structure of his model (see C hapter 6). The absolute growth of effective dem and is related to the divi­ sion of labour in a similar way, but here the time scale is clearly 81

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much longer, being linked to the rate of hum an reproduction. The division of labour is itself limited by the extent of the market ( WN, I.III. 1) and so the increase in dem and in turn makes possible a further division of labour, upon which the cycle begins anew. This part of the special theory model can now be summarised before it is further developed: Firstly a division of labour, which is intrinsically productive, takes place. This causes short term profits to rise, with the surplus being reinvested and in turn the dem and for labour rises, so that wages are competed upwards. The labour supply increases partly due to the productive sector, and partly due to absolute growth. These effects cause an increase in effective dem and (both absolute and relative) and finally the widening market makes possible a further division of labour. In the process of this cycle there has been technological innovation, a growth of capital, population and (probably) standard of living, these all being endogenous variables. As we have already seen, there will also have been changes in the institutional structure of society. Two peripheral comments can be made concerning the time scale of this complex interaction, which seems very extended when compared with that of our contemporary models of economic growth. Firstly, as part of a dialectical model, the interaction between the division of labour and the widening market should be thought of as a continually present tension, rather than as a cyclic series. To put that another (and less adequate) way, there will be a vast num ber of such interactions occurring sim ulta­ neously, each having a different time scale. Secondly, Smith’s model (of which the above schématisation is only a part) is designed to explain socio-economic change of both a quantitative and qualitative nature, and the leisurely nature of the process reflects this orientation. By the time Ricardo was writing, the orientation of the mainstream of economics had changed, and the static analysis of an existing form of social organisation had become the central preoccupation. In short, what H arrod has called Ricardo’s ‘magnificent dynamics’ in fact lacked the historical dimension and were, in terms of the present interpreta­ tion, ‘magnificent statics’. It is interesting that so many commentators on Smith, whilst noting the centrality of the division of labour in his analysis and recognising its dynamic nature, should have failed to see that this economic dimension forms the contextual progression within 82

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which sympathetic interaction functions. Such a position leads to one-sided interpretation of Smith, which sees him as a more or less ‘hard’ determinist, viewing man as functioning within a nexus of immutable laws.10 The locus classicus for this view is to be found in Marx, who wrote that: We have the fatalistic economists ... Economists like Adam Smith and Ricardo, who are the historians of the epoch, and have no other mission than that of showing how wealth is acquired in bourgeois production relations, of formulating these relations into categories, into laws and of showing how superior these laws, these categories are for the production of wealth, to the laws and categories of feudal society.11 But even a less ‘partisan5 interpreter, of Schumpeter’s stature could hold that: Division of labour is attributed to an inborn propensity to truck and its development to the gradual expansion of markets ... It thus appears and grows as an entirely impersonal force, and since it is the great motor of progress, this progress too is depersonalised.12 Such views neglect the interaction between the institutional structure of society and the level of the division of labour. H ad this dynamic interaction been based upon a purely mechanistic form of Associationism, the overall picture would indeed have remained bounded by the limitations of mechanical determinism, supplemented perhaps by a ideological view of the working of Nature. But the role played by practical reason in the long-run evolution of social structures opens up a whole new dimension. Smith’s model constitutes a denial of the traditional implications of mechanistic Associationist psychology, and in doing so opens the door for a concept of hum an progress. By an inductive process the ‘sym pathy’ mechanism builds the products of ratiocination and informed judgem ent into general rules of behaviour, laws and social structures; the raw material of hum an existence is indeed the product of the passions — but the ‘working up’ of this raw material into the institutional framework of society involves much more than mechanical induction. Smith thus rejects the dualism of feeling and reason, and substi­ tutes a dialectical model in which purposive hum an activity is, 83

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in the ultim ate analysis, the driving force of hum an history. Ego­ centric individuals, motivated largely by emotions, are melded into society by a process of interaction, in which rational argument and judgem ent play a central role. The whole dynamic process is seen in historical perspective, and is firmly rooted in the concrete activity of men within the framework of their economic mode of production. The division of labour is not, therefore, merely a mechanical and deterministic concept. It has a ‘fine structure’ generated by Smith’s metascientific anthropological premisses, which allows for hum an activity, both emotional and rational. In particular, hum an consciousness, although heavily conditioned by social factors is given a constructive role in the model; men labour within a contextual framework which, in small measure, they help to create. It should, however, be stated that the major difficulty of the present interpretation is not to refute ‘economic determ inist’ interpretations of Smith, but rather to justify calling an interactive model such as that reconstructed here, ‘m aterialist’ in any sense. As K nud Haakonssen has said: It would seem that the basic question to be asked here is whether the ultimacy o f ‘the economic’ means that all social phenomena can be explained as ultimately determined by economic factors, or whether it means that economic factors are always, or normally, amongst the determ inants of social phenomena and hence ultimately have to be referred to in social explanations ... The former view is untenable as an interpretation of Smith, and the latter, while perhaps largely true, can only misleadingly be described as an economic or ‘m aterialist’ view of society and history.13 This will be answered in C hapter 6 but in anticipation of that treatm ent, the following can be said. The level of specialisation attained in society ‘determines’ the forms of social structure that are appropriate to that stage of development. Certainly there will be a range of possible alternatives, and hum an practical reason plays a role in interpreting both the limits of the range and the adequacy of the alternatives within it, but the choice is neverthe­ less constrained by the m aterial factors involved. (One could not, for example, continue for long without money in an advanced society.) Further, whilst Smith gives full recognition to the role 84

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of responses to chance events, and to exceptional personalities (strong queens or foolish kings), the range within which any action will be ‘appropriate’ to particular circumstances, is still governed by the level of the division of labour. Smith ‘never mistakes taxonomy for explanation’, as Haakonssen rightly says, but he confines the limits of that explanation within a taxonomic framework. For the above reasons, whilst being much closer to Haakonssen’s position than to that of, say, Meek, I would still wish to classify Smith’s model as ‘m aterialist’, leaving the ‘dialectical’ component of the label to pick up the wide range of qualification needed. We are now in a position to complete the analysis of the division of labour concept as it functions at the level of the ‘special theory’ of commercial society. It has been suggested above that at this level the model is loaded with institutional content to a much greater extent, and undergoes a qualitative change to reflect the existence of specialisation in commercial society. Smith holds that in the fourth socio-economic stage the division of labour is manifested in the market exchange of social labour in the form of commodities. Commercial society is thus characterised by the interdependence of men: Every man is rich or poor according to the degree in which he can afford to enjoy the necessities, conveniences and amusements of life. But after the division of labour has once thoroughly taken place, it is but a very small part of these which a m an’s own labour can supply him. The far greater part of them he must derive from the labour of other people and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase. ( WN , I.V .I.) Exchange value has become central, being the ‘social cement’ which binds discrete, self-interested individuals into ‘civilsociety’.14 It is indeed this emphasis on the link between specialisation and interdependence, as manifested in exchange value, that leads Smith to see labour as the measure of value, as well as its origin. He says: The real price of everything, what everything costs to the 85

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man who wants to acquire it, is the toil and trouble of acquiring it ... W hat is bought with money or with goods is purchased by labour as much as what we acquire by the toil of our own body ... They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity. ( WN, I.V.2.) Smith works with the Aristotelian distinction between ‘value-inuse’ and ‘value-in-exchange’ ( WN , I.IV.13). At first sight Smith’s treatm ent of value-in-use seems unproblematical, it being simply the ability of an object to satisfy a hum an need. But once we penetrate beneath the surface, a complex set of problems presents itself, for it becomes clear that Smith in fact works with two scales of use-value. One of these is based, straightforwardly, upon the subjective estimation made by agents of the goods and services they seek to acquire; but the other appears to pre-suppose an objective hierarchy of needs which transcends the values not only of the individual, but also of any particular social grouping. A resolution of the complex problems implicit in this approach will be attem pted in C hapter 7 and here it will only be noted that Smith’s treatm ent both of the ‘invisible hand’, and the ‘waterdiamond paradox’ are two related tips of this particular iceberg. It has been suggested, notably by Hollander, that in his treat­ ment of use-values, Smith made some rudim entary anticipations of the modern utility theory of value.15 The approach here is to suggest that Smith’s treatm ent of the subjective estimation of use-value, taken together with the notion of increasing returns to scale which is implicit in his dynamics gives a crucial role to ‘tastes’ in his model. T h at is to say, to the extent that tastes are exogenous they have a long-run role in shaping the composition of national output. If dem and pushes the division of labour further in a particular manufacture, increasing returns to scale will lower the price in the long run, so that the whole system of relative prices is, in part, a function of subjective use-value estimations. This interpretation is somewhat weakened if we accept the position I have urged, for then ‘tastes’, like other social customs and institutions, are formed by the interaction between the individual and his macro-social reality and are thus not ‘exogenous’ in the normal sense of the word. Despite that, we could consider them as one side of a dialectical interaction and thus as one example of how (constrained) hum an consciousness 86

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helps shape the social world. However, the existence of an objective scale of values severely complicates the interpretation, and indeed, as we shall see when we return to the topic, renders it inadequate. Returning to the present discussion, when he comes to deal with exchange value, Smith asks: ‘First, what is the real measure of this exchangeable value; or wherein consists the real price of all commodities?’ (W N y I.IV.15). He goes on to enquire: ‘Secondly, what are the different parts of which this real price is composed or made up?’ (Ibid., I.IV . 16). And ‘... lastly, what are the different circumstances which some­ times raise some or all of these different parts above their natural or ordinary rate?’ (Ibid., I.IV.17). Smith’s search for an objective measure of value is a further example of the dual status of many of his concepts. For, on the one hand it can be interpreted as being a necessary consequence of the logical structure of his division of labour model, but it can also be seen as a natural response to — or reflection of — the actual historical development of commercial society. In a primarily agricultural society, such as eighteenth-century France, the Physiocratic view of the produit net as being the result of the application of labour to land was adequate, and the surplus (over subsistence etc.) could be measured in physical terms, with corn as input (food and seed) and output. Smith, however, was en­ deavouring to build concepts that would reflect what for him was a subsequent ‘stage’ of development — a commercial economy with a growing manufacturing sector. Here the application of labour in any sector needs to be regarded as productive, and input and output can no longer be treated as being homogeneous. Hence a more generalised standard than ‘corn’ is needed and Smith, seeing this, postulates labour as the measure of value, as well as its source. Before the ‘accumulation of stock and the appropriation of land’ (W N, I.V I.l) the measure of value is unproblematical, being the quantity of labour embodied in the object: It is natural that what is usually the produce of two days or two hours labour should be worth double of what is usually the produce of one days or one hours labour. (Ibid.) It is when Smith moves on to consider a more advanced economy that he runs into severe difficulties. W ith the hindsight gained from Ricardo’s or M arx’s criticism of Smith, we can see that the perspective that views value as a social relationship, with 87

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labour as its source, can only be extended to make labour also the measure of value if the quantity of labour embodied is regarded as the determ ination of exchange value. Smith sees that in the ‘rude state of society’ preceding profit and rent, the quantity of labour is equal to the value of labour, but as both Ricardo and M arx were to point out, he failed to see that in a ‘capitalist5 society these are no longer equivalent. Smith’s attention is focused on the exchange of commodities since he sees this as a major social bond in an economy where the division of labour has been well developed, and it is thus natural that he should seek a measure of value based upon labour, but manifested in exchange. It is this that leads him into the ambivalence between ‘labour embodied5 and ‘labour commanded5, that has been the subject of a great debate.16 This debate leads on, of course, to what has become known as the ‘transformation problem 5. This too is well-stamped ground and numerous interpretations of the problem and its possible solution have emerged.17 For the present purpose, however, any ‘defects5 in Smith's treatm ent of the topic are of little significance, and in any case, as M arx was to point out, in practice, Smith almost always works with the ‘correct5labour embodied standard, so that: ... this jum bling up of completely heterogeneous deter­ minations of value [does] not affect Smith's investigations into the nature and origin of surplus-value because in fact, without even being aware of it, whenever he examines this question he keeps firmly to the correct determ ination ... the quantity of labour, or the labour time expended ...18 M arx is, of course, assessing Smith's work as an ‘anticipation5 of his own — as his use of ‘surplus-value5 makes clear — but that aside, this seems in substance, a fair summary of Smith's practice. This completes the initial presentation of the ‘m aterialist’ side of Smith’s dialectical model. The interpretation will be developed and defended by further argument as we proceed. The overall model as here reconstructed depicts a dialectical interplay of sympathetic interaction, guided in the long run by practical reason, within a materialist ‘context’, which is specified by the level of the division of labour attained. The degree of specialisation thus defines the context within which institutional structures function, and their relevance and fitness for their purpose is 88

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assessed within that context. In the language of Chapter 3, the level of the division of labour supplies the nexus of interpretation within which social institutions take their meaning, and qualita­ tive change occurs in the transition from one nexus to the next. As the division of labour progresses, old structures become inappropriate — one might say they lose their universality and coherence — and through the process of reason guided sympa­ thetic interaction are modified, or replaced by new ones. Hum an rationality has a long term influence on this process, in that the aggregation of individual contextual judgements (practical reasoning) is reflected in the generalisations which eventually become crystallised into social structures. Smith’s model functions both as a general theory of historical development and as a special theory of change within commercial society. The next three chapters will attem pt to strengthen the argu­ ments already presented by showing how the basic model, as here reconstructed, relates to specific areas of Smith’s work. C hapter 6 will examine his views on the possibility of imperfec­ tions in the dialectical interaction of individual and society, and on the role of hum an agency in this process. C hapter 7 will continue the theme by extending the analysis to look at ‘unintended consequences’, and C hapter 8 will apply the same perspective to re-interpret some of Smith’s ‘economic’ concepts.

Notes 1. A similar perspective is to be found in F. Hutcheson, who writes: ‘... tis well known that the produce of the labours of any given number ... shall be much greater by assigning to one a certain sort of work of one kind, in which he will soon acquire skill and dexterity, and to assigning work of a different kind, than if each ... were obliged to employ himself, by turns, in all of the different sorts of labour ...’. A System o f Moral Philosophy (1755), Book II, Chapter IV. 2. J. Schumpeter, History o f Economic Analysis (Oxford University Press, Oxford, 1954), p. 187. He goes on to say: ‘Technological progress, “invention of all those machines” — and even investment — is induced by it and is in fact, just an incident of it.5 3. R.H. Campbell, A.S. Skinner and W.B. Todd, Introduction to the Wealth o f Nations (Clarendon Press, Oxford, 1976), p. 43. 4. For a discussion of this issue, cf. R.L. Meek, ‘Smith, Turgot and the four stages theory’, History o f Political Economy (1971). Cf. also L.L. Price, Adam Smith: The Division o f Labour (Methuen, London, 1891) and D. Forbes, ‘Scientific Whiggism: Adam Smith and John Millar’,

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Specialisation and Social Change Cambridge Journal (1954). For a recent critique of Meek’s position see A.S. Skinner, ‘A Scottish Contribution to Marxist Sociology’ in I. Bradley and M. Howard (eds), Classical and Marxian Political Economy (Macmillan, London, 1982). 5. R.L. Meek points out that for Quesnay and Mirabeau, the commercial stages of society ‘... are assumed to develop alongside agricultural societies’ ... but with Smith ... ‘agricultural societies are assumed to develop into commercial societies’. R.L. Meek, Precursors o f Adam Smith (Dent, London, 1973), p. 104. 6. Not to be identified with ‘capitalism’ in the modern usage of the term. As Donald Winch has pointed out: ‘The adoption of the liberal capitalist perspective by most economists and historians of economic thought has taken the form of supplying nineteenth-century meanings to the far less familiar eighteenth-century concepts which comprise Smith’s system.’ D. Winch, Adam Smith’s Politics (Cambridge University Press, Cambridge, 1978), pp. 141-2. 7. R.L. Meek and A.S. Skinner, ‘The development of Adam Smith’s ideas on the division of labour’, Economic Journal (1973). 8. On this point see M. Myers, ‘Division of labour as a principle of social cohesion’, Canadian Journal o f Economic and Political Science (1967). 9. A.S. Skinner, ‘Adam Smith: An economic interpretation of history’, in A.S. Skinner and T. Wilson (eds), Essays on Adam Smith (Clarendon Press, Oxford, 1976). Cf. also R.H. Campbell, A.S. Skinner and W.B. Todd in their introduction to the Glasgow edition of the Wealth o f Nations (op. cit.) who say: ‘The historical analysis is a way of showing that the commercial stage, or exchange economy, may be regarded as the product of certain historical processes, and of demonstrating that where such a form of economy prevails, a particular social structure, or set of relations between classes is necessarily presupposed.’ (p. 17) 10. This indeed has tended to become a standard textbook interpreta­ tion. See for example J. Oser and W.D. Blanchfield, The Evolution o f Economic Thought (Harcourt Brace Jovanovich, New York, N.Y., 1975), p. 47. They say that the classical economists (including Smith): ... viewed economic laws as immutable, not to be tampered with or thwarted. They and their followers could not understand that economic laws, which are generalisations about tendencies, can be curbed, overcome, or redirected — that people can control economic life.’ 11.K. Marx, The Poverty o f Philosophy (Collected Works, Lawrence & Wishart, London, 1976), Vol. 6, p. 176. 12. J. Schumpeter, History o f Economic Analysis (Allen & Unwin, London, 1954), p. 188. 13. K. Haakonssen, The Science o f a Legislator (Cambridge University Press, Cambridge, 1981), p. 182. The literature on this topic is considerable, but for example, cf. A.F. Skinner, ‘An economic interpretation of history’ in A.S. Skinner and T. Wilson (eds), Essays on Adam Smith (Clarendon Press, Oxford, 1976) and S. Hollander, ‘Historical dimension of the Wealth o f Nations’ in G.P. O ’Driscoll, Jr (ed.), Bicentennial Essays on the Wealth o f Nations (State University Press, Iowa, 1979). 14. Cf. for a discussion of social stratification in the commercial stage of society, H. Mizuta, ‘Moral philosophy and civil society’ in A.S. Skinner

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Specialisation and Social Change and T. Wilson (eds), Essays on Adam Smith (Clarendon Press, Oxford, 1976). 15. Cf. S. Hollander, ‘The role of utility and demand in the Wealth o f Nations' in Skinner and Wilson, op. cit. 16. Cf. for example, M. Dobb, Theories o f Value and Distribution since Adam Smith (Cambridge University Press, Cambridge, 1973) and R.L. Meek, Studies in the Labour Theory o f Value (Lawrence & Wishart, London, 1973). 17. Cf. P. Sraffa, Production o f Commodities by Means o f Commodities (Cambridge University Press, London, 1960) and A. Medio, ‘Profits and surplus value’ in E.K. Hunt and J.G. Schwartz (eds), A Critique o f Economic Theory (Penguin, Harmondsworth, 1972). For a good summary of this whole issue (which includes a treatment of Bortkiewicz’s solution) see M. Desai, Marxian Economics (Blackwell, Oxford, 1979). 18. K. Marx, Theories o f Surplus Value (Lawrence & Wishart, London, 1971), p. 71.

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6 Riot, Debauchery and the Science of a Legislator

I have argued that it is the actual process of sympathetic interaction within a specific socio-economic nexus, that makes society possible, and not any particular set of social structures. This process is not only the carrier of hum an rationality, but is also the mechanism which ‘universalises’ the individual by binding him into a social grouping. It shapes the individual, forms the social context within which he functions, and, through the day-today judgem ent of the im partial spectator (practical reasoning) brings his behaviour, within acceptable limits, into line with the morality, laws and institutional conventions of his society. Thus ‘... it is by the wisdom and probity of those with whom we live that a propriety of conduct is pointed out to us, and the proper means of attaining it.’ (LJ: 1762-63, p. 160.) It is this process of social interaction which renders society both universal and coherent. Deviant behaviour will of course occur, when men let their self-interest override the judgem ent of the impartial spectator — this is why an adequate legal system is both necessary and, at a very basic level, sufficient, for society to function but the overall pattern is one of conformity and coherence. Smith, however, recognises that there is a wide range of potential and actual imperfections in this dynamic process. These imperfections are not in any sense ad hoc or contingent, but are necessary concomitants of his basic model. Indeed, as we shall see, it is a fundamental implication of his perspective that the imperfections in question will, in the absence of corrective measures, get worse as the division of labour proceeds. The range of imperfections to be discussed is very wide indeed, covering monopoly, restrictive practices, faction, dual standards 92

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of morality, inequality of income, debauchery in the towns, loss of martial vigour, the restriction of the individual’s intellectual and cultural development, his ‘estrangement’ from society, the m aladministration of justice and the corruption of political power. At first sight this is a distinctly heterogeneous collection of problems, and it is not indeed here being suggested that they are all covered by one simple explanation. There are significant differences between Smith’s treatm ent of, say, monopoly and of dual standards of morality, but these differences should not prevent us from recognising that all the imperfections listed have one thing in common. They are all analogous aspects of the process of sympathetic interaction failing to achieve full universality in the area in question. In each case the problem results from a distortion or fragmentation of the contextual framework in which sympathetic interaction functions and this shortcuts the workings of practical reasoning, which results in the formation of less than universal social structures. Further, since the possibility of such distortion and fragmentation increases as the division of labour proceeds, there is a clear implication that each of these problems will accentuate as society develops. Many aspects of this process have been recognised by those writers who have sought, within Smith’s work, anticipations of M arx’s views on alienation, and some of the recent literature will be examined in detail (in so far as it concerns Smith) below.1 Indeed ‘alienation’ presents itself as a possible term to label the set of imperfections to be discussed in the present work. I have however rejected this, partly because of the dangers of an anachronistic ‘reading backwards’ inherent in the use of M arx’s term, to discuss Smith’s concepts, but mainly because ‘alienation’ is a concept which is much narrower than the range of problems we are to examine. A much better candidate for the task is ‘corruption’, which was in common use in the eighteenth century, and was indeed used by Smith on occasion. However, since I wish to avoid conflating the position taken here, with that to be found in the contemporary literature on corruption (discussed below), I have chosen the term ‘social estrangem ent’ to cover the problems of incomplete universalisation as interpreted here. This, despite its somewhat Hegelian flavour, is sufficiently unusual (and indeed, inelegant) to avoid any possibility of unwanted preconceptions being carried forward into the discussion. We can begin a detailed analysis of Smith’s view of social estrangement by recalling that, like many of his contemporaries, 93

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he held that men were roughly equal in innate ability, and that their diversity was largely the result of the division of labour. As he puts it: The difference of natural talents in different men is in reality much less than we are aware of and the very different genius which appears to distinguish men of different professions ... is not upon many occasions so much the cause as the effect of the division of labour. (W N , I.II.4 .2 See also LJ: 1766, p. 493.) We have already seen that in Smith’s dialectical model, ‘social reality’ is shaped by the underlying structure of economic organis­ ation, and that the individuals whose labour constructs the social nexus, are themselves constrained and formed by the nature of their labour within the context of prevailing institutions and customs. As he says in the Wealth o f Nations: ‘... the understandings of the greater part of men are necessarily formed by their ordinary employments.’ ( W N , V.I.f.50.) This is a line of argum ent which occurs frequently in Smith’s writing, and which he illustrates with numerous specific examples, as for instance, when he discusses commerce in the towns, in C hapter IV of Book II I of the Wealth o f Nations: The habits ... of order, economy and attention to which mercantile business naturally forms a merchant, render him much fitter to execute with profit and success, any project of improvement.3 or again, in his essay entitled ‘O f the External Senses’, he says, concerning differences in visual ability: ... it no doubt, may sometimes depend upon some differences in the original configuration of their eyes, yet seems fre­ quently to arise altogether from the different customs and habits which their respective occupations have led them to contract. (EPS: External Senses, p. 151.) and he goes on to illustrate the point by reference to ‘men of letters’ and mariners. This thesis is of course from the ‘individual’ side of his model; it is concerned with the formation of the individual, not with the 94

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formation of macro-social structures. Both are really aspects of the same process, being parts of a dialectical interaction, in which the individual shapes the society, and the society shapes the individual; but for the purpose of analysis they will here be examined separately. It was suggested above (Chapter 5) that when Smith comes to apply his division of labour concept to an exchange economy, the concept itself undergoes a qualitative transition to become his ‘special theory’ of socio-economic development. It takes on a much more institutional content and functions in the context of a specialised society in which ‘exchange-value’, rather than feudal obligations and rights4 has become the medium which binds men into society. It is this specialisation that makes possible the greatly improved standard of living enjoyed by all in the exchange economy; but it is im portant to realise that, as in the development of language and machinery, specialisation for Smith is a process of simplification. Men become more productive in the process of performing simpler tasks.5 As the exchange economy develops, therefore, men are engaged in increasingly simple tasks; given the thesis that men are formed by their productive labour, it is, therefore, (ceteris paribus) inevitable that they should become narrower in outlook. Smith’s account of this is quite explicit: In the process of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few simple operations frequently one or two. But the under­ standings of the greater part of men are necessarily formed by their employments. The man whose life is spent in per­ forming a few simple operations ... naturally loses therefore the habit of such exertion and generally becomes as stupid and ignorant as it is possible for a hum an creature to become. (W N, V.I.f.50.)6 It is for this reason that Smith regards the farm labourer, who works in a sector where the division of labour cannot be taken very far, as being greatly superior to the specialised worker in manufacturing. O f the former he says: His understanding, however, being accustomed to consider a greater variety of objects is generally much superior to that of [the mechanic] — whose whole attention from morn­ 95

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ing till night is commonly occupied in performing one or two very simple operations. (W N , I.X .C .24.)7 Smith is saying in effect, that the socio-economic context in which the individual labours, largely determines his intellectual and cultural development, and the increasing simplification which the division of labour produces, results in a severe restriction of that context. He is thus cut off from the full range of experience that is necessary for him to develop his full potential. The reference to ‘those who live by labour’ is important; the vast majority of the people are shaped and developed by their employment, but there are other ways of providing the stimulus that promotes intellectual development. One of the most im portant of these, as we shall see, is education. However, one of the problems of the increasing simplification of labour is that education tends to be neglected ... where the division of labour is not far advanced, even the meanest porter can read and write ... A boy of 6 or 7 years of age at Birmingham can gain his threepence or sixpence a day, and parents find it to be in their interest to set them soon to work. Thus their education is neglected. (LJ: 1766, p. 541.) This not only cuts off the growing child from sources of ‘thought and speculation’ but also has detrim ental effects on parental authority. T he end result of this process of intellectual and cultural deprivation is that the grown man has no interests outside of work and drunken debauchery. The increased wages that higher pro­ ductivity from specialisation makes possible, ensures that ... their work thro’ half the week is sufficient to maintain them, and thro’ w ant of education they have no amusement for the other but riot and debauchery. So it may very justly be said that the people who clothe the whole world are in rags themselves. (LJ: 1766, p. 541. See also WN, V.I.f.52.) T he same themes of fragmentation and contextual impoverish­ ment are to be found in Smith’s discussions of the migration of rural workers into the growing towns. As the division of labour increases, the prospect of higher wages in the towns causes labour to leave agriculture and domestic service and enter manufacture. 96

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While he remains in the country village his conduct may be attended to, and he may be obliged to attend to it himself ... But as soon as he comes into a great city he is sunk in obscurity and darkness. His conduct is observed and attended to by nobody, and he is, therefore, very likely to neglect it himself, and to abandon himself to every sort of low profligacy and vice. ( W N , V.I.g.12. See also TM S, I.iii.2.1.) Further, the pernicious effects of the increasing division of labour are not confined to mental, cultural and moral impoverishment, for it also, ... corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and persever­ ance, in any other employment than that to which he has been bred. (W N , V.I.f.50.) And this results in a loss of ‘m artial spirit’ and in cowardice, so that, in the absence of corrective action by the state he becomes ... a man incapable either of defending or revenging himself... He is as much mutilated and deformed in his mind, as another is in his body, who is either deprived of some of its most essential members, or has lost the use of them. (W N, V.I.f.60.) Taking Smith’s discussions of the ill effects of specialisation in their entirety, it seems that he presents a fair summary when he says that: ‘His dexterity at his own particular trade seems ... to be acquired at the expense of his intellectual, social and m artial virtues’ and that, ‘... in every improved and civilised society this is the state into which the labouring poor, that is the great body of the people, must necessarily fall, unless government takes some pains to prevent it.’ (W N , V.I.f.50.) To this we can add the ‘estrangem ent’ of the individual, in the Hegelian sense of the word, in that, as his work becomes more specialised, he is unable to comprehend his role in society, or his active part in creating social structures. As Smith puts it: But though the interest of the labourer is strictly connected with society, he is incapable either of comprehending that 97

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interest, or of understanding its connection with his own. His condition leaves him no time to receive the necessary information, and his education and habits are commonly such as to render him unfit to judge even though he was fully informed. In the publick deliberations, therefore, his voice is little heard and less regarded ... ( W N , I.X I.P.9. See also V.I.f.50 and V.I.f.61.) We can now generalise all of this by relating it to the interpretation of Smith’s model already developed. The individual is formed by a process of sympathetic interaction which takes place within a progressively developing material context, which is specified by the level of the division of labour. As the division of labour proceeds, what was a more or less universal context within which all men interacted, becomes increasingly fragmented into a num ber of sub-contexts. This results in a narrowing of the range of formative experience and the development of the indivi­ dual is thus distorted resulting in his mental, moral and physical ‘m utilation’. He is cut off from im portant aspects of hum an cultural, moral and political activity, and his potential, measured relative to the overall level of hum an development in his society, is not fully realised. So far we have only examined the effects of this process upon the formation of the individual, but as we would expect, given the dialectical nature of Smith’s model, they have analogous effects at the macro-social level. It is to these that we now turn. Here again we will find a firm linking of the stage to which the division of labour has progressed, and the degree of social estrangement to be expected. As the division of labour proceeds, so there is a progressive fragmentation of the population into more or less discrete sub-sets. In part, this is a consequence of the resultant demographic changes for whilst: ‘The inhabitants of the country, dispersed in distant places, can not easily combine together’ ( W N , I.X.C.23) this is not the case when they have been attracted to the towns, where, because of the possibility of greater specialisation: ‘Industry ... must be better rewarded, the wages of labour and the profits of stock must evidently be greater ...’ ( WN , I.X.C.21). Here: The inhabitants of a town, being collected into one place, can easily combine together. The most insignificant trades 98

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carried on in towns have accordingly, in some place or another, been incorporated; and even where they have never been incorporated, yet the corporation spirit, the jealousy of strangers, the aversion to take apprentices, or to commu­ nicate the secrets of their trade, generally prevail in them, and often teach them, by voluntary associations and agree­ ments, to prevent that free competition which they cannot prohibit by bye-laws. (W N , I.X.C.22.) In addition to these demographic changes, we find that there is an increase in the num ber of trades and specialisation into which the business of the towns is divided, for: In all commercial countries the division of labour is infinite and everyone’s thoughts are employed about one particular thing. In gold trading towns, for example, the linen merchants are of several kinds; for the dealing in Hamburg, and Irish linens are quite distinct professions... Each of them is in great measure unacquainted with the business of his neighbour. (LJ: 1766, p. 540.) or again, ‘Country gentlemen and farmers dispersed in different parts of the country, cannot so easily combine as merchants and m anufacturers collected into towns’ ( WN , IV .II.21. See also IV.V.b.15 and IV .V III.34). The increasing division of labour thus fragments the contextual framework within which sympathetic interaction takes place, and since the ideas and actions of men are largely shaped by that context, there is a corresponding social fragmentation. The rules, conventions and habits of specific groups no longer reflect the interests of society as a whole. The interactive process which had previously enabled practical reason to form institutional structures which reflected the interests of a whole society, now functions in a restricted and distorted context. In short, in the absence of corrective action there will be a loss of generality, simplicity and coherence; what in this context I have called social estrangement. This will manifest itself in many different ways. Perhaps most obviously, there will be a tendency to form monopolies and engage in restrictive practices. ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices’ (W N, I.X.C.27). 99

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Smith, on numerous occasions makes an explicit linking between the level of the division of labour, and the tendency to place restrictions upon free competition. Thus: When manufactures have advanced to a certain pitch of greatness, the fabrication of the instrum ents of trade becomes itself the object of a great num ber of very im portant manufactures. To give any particular encouragement to the im portation of such instruments would interfere too much with the interests of these manufactures. Such im portation, therefore, instead of being encouraged, has frequently been prohibited. (W N, IV .V II. See also I.X I.P.10.) This discussion of the detrim ental effects of partial interests is typical of many such treatments in the Wealth o f Nations; a similar line is taken concerning the activities of corn merchants (IV.V.a.22), woolen manufacturers (IV .V III.17) and merchants in general (IV .V III.51 et seq). The tendency to strive for a monopoly situation also manifests itself in the way that Britain’s colonies are administered. In the case o f ‘our American and West Indian colonies’ ...: A great empire has been established for the sole purpose of raising up a nation of customers who should be obliged to buy from the shops of our different producers, all the goods with which these could supply them. (W N , IV .V II.53. See also WN, IV .V II.C . 62-63.) Smith goes on to point out that over two hundred million pounds of public money has been spent on this enterprise, and huge public debts incurred to protect the interests of a minority group of ‘... our merchants and manufacturers [who] have been by far the principal architects’ (W N , IV .V III.54). As the division of labour proceeds, social estrangem ent also manifests itself in the formation of different ‘orders’, or ‘subaltern societies’ whose interests do not always reflect those of society as a whole. As the editors of the ‘Glasgow’ edition of the Wealth o f Nations have pointed out ... Smith spends a good deal of time in describing the ‘subaltern’ societies which comprise the state and the loyalties which they attract; an interesting emphasis when 100

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we recall that Part V I was the last major work Smith completed, together with the emphasis given to the economic pressure groups, especially in the Wealth o f Nations, Book IV .8 Often the interests of such groups distort the formation of legal and political structures. Thus ... Whenever the legislative attem pts to regulate the differences between masters and their workmen, its counsellors are always the masters. ( WN , I.X.C.61.) and W henever the law has attem pted to regulate the wages of workmen, it has always been rather to lower them than to raise them. (W N , I.X.C.34.) and he goes on to show that the law can be far from im partial because of this. He takes a similar approach when discussing the opening of home markets to foreign competition, where he writes: The legislature, were it possible that its deliberations could always be directed, not by clamorous importunity of partial interests, but an extensive view of the general good, ought to be particularly careful neither to establish any new monopolies of this kind, nor to extend further those which are already established. (W N , IV .11.44. See also IV .V II.C .63.) The same forces which call forth these pressure groups also result in a growing inequality of income, and the increasing subordination of the poor by the rich: Civil government supposes a certain subordination. But as the necessity of civil government gradually grows up with the acquisition of valuable property, so the principle causes which naturally introduce subordination gradually grow up with the growth of that valuable property. (W N, V.I.b.3.) and In a society of a hundred thousand families, there will be 101

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perhaps one hundred who don’t labour at all, and who yet, either by violence or by the orderly opposition of the law, employ a greater part of the society than any other ten thousand in it. The division of what remains too after this enormous defalcation is by no means made in proportion to the labour of each individual. O n the contrary those who labour most get least. (‘Early draft’ of The Wealth o f Nations , p. 327.) The process of fragmentation which accompanies an increase in specialisation is also to be found in the formation of moral rules and principles. Here again the contextual framework within which sympathetic interaction takes place is restricted, and less than universal structures emerge. In the Theory o f Moral Sentiments, he contrasts the ‘uncorrupted’ morality of the lower orders with that of the people of rank (I.iii.2.4 et seq and V.2.5), whilst in the Wealth o f Nations, this uncorrupted morality becomes the ‘austere’ morality of the lower ranks. Thus: In every civilised society, in every society where the distinction of ranks has once been completely established, there have always been two different schemes or systems of morality current at the time; of which one may be called strict or austere; the other the liberal or if you will the loose system. (W N , V.I.g.10.) Finally, the effects which the division of labour has upon the individual’s ability to defend himself have their counterpart at the macro-social level. Smith in fact provides a long discussion of this issue at the start of Book V of the Wealth o f Nations, showing that whilst it is the ‘first duty of the sovereign’ to protect society from external aggression by means of a military force, ... the expense both of preparing this military force in time of peace, and of employing it in time of war, is very different in the different states of society, in different periods of improvement. (W N, V .I.a .l.) and he goes on to give an account of this development, beginning with a nation of hunters. In commercial society, he says, the division of labour causes two specific problems: Firstly, whilst the agricultural worker can leave his land for a considerable period, 102

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without any substantial loss of revenue, ‘... the moment that an artificer, a smith, a carpenter or a weaver, for example, quits his workhouse, the sole source of his revenue is completely dried up’ (W N, V.I.a.9). Secondly, the art of war itself is subject to specialisation and it becomes necessary that ‘...it should become the sole or principal occupation of a particular class of citizens, and the division of labour is as necessary for the improvement of this, as of every other art’ (W N , V .I.a.14). It is, therefore, necessary to have either a militia, or a standing army (or both)9 and, despite his being a founder member of the Edinburgh Poker Club, which actively promoted the opposite view, Smith, in the Wealth o f Nations, makes it clear that a standing army is to be preferred (W N, V.I.a.23). The reasons he gives for this preference are again expressed in terms of the division of labour; greater specialisation will give greater skill in the management of arms (W N , V.I.a.24) and ‘the habit of ready and instant obedience’ (W N, V .I.a.25).10 This then is social estrangement. The problems discussed have in common that they are all aspects of the tendency towards an incomplete universalisation of society, that follows from the increasing division of labour. Their apparent heterogeneity tends to conceal the fact that they have underlying similarities, being derived from the same model, and being closely linked to his underlying epistemological approach. Smith’s presentation of the negative aspects of the division of labour is unambiguous, and his treatments of the topic are exten­ sive. We cannot dismiss such discussions as being merely ad hoc observations based upon his keen empirical study of eighteenthcentury society, for, as I have tried to show, they are logical implications of the assumptions and formal structure of his model. However, discussions of the potentially detrimental effects of the division of labour are balanced in Smith’s work, by rather more frequent reference to the advantages of specialisation. We must take at least a brief look at such statements, and it will again be convenient to make a — somewhat artificial — distinction between the ‘individual’ and the ‘macro-social’ effects of the division of labour. We can begin with the individual, as formed by society, and look at two aspects of his condition, one being his material welfare as measured in terms of the goods and services provided for a given expenditure of labour, and the other being his non­ material welfare, moral, aesthetic and intellectual. 103

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For the first, a single quotation will serve to illustrate a theme which is pervasive in the first two books of the Wealth o f Nations. In Book I, C hapter I, Smith says, when discussing the effects of the division of labour ... without the assistance and co-operation of thousands the very meanest person in a civilised country could not be provided, even according to, what we very falsely imagine, the easy and simple manner in which he is commonly accom­ modated. Compared indeed, with the more extravagant luxury of the great, his accommodation m ust no doubt appear extremely simple and easy; and yet it may be true, perhaps, that the accommodation of a European prince does not always so much exceed that of an industrious and frugal peasant, as the accommodation of the latter exceeds that of many an African king, the absolute m aster of the lives and liberties of ten thousand naked savages. (W N , I.I.l.) As implied in this quotation, Smith holds that wealth, originally acquired by the ‘superior’ ranks of society, will, despite the problem of social estrangement, filter down to the lower ranks gradually raising their standard of living. Thus: It is the great multiplication of the products of all the different arts, in consequence of the division of labour which occasions, in a well governed society, that universal opulence which extends itself to the lowest ranks of the people ...’ [Because of this] ‘...a general plenty diffuses itself through all the different ranks of society. (W N , I.I.l 1.) Smith does not work with a subsistence theory of wage determ ination11 since tastes are socially defined, both relatively and absolutely, and there is therefore a progressive growth in workers’ expectations and attainm ents as the division of labour proceeds.12 As long as the division of labour is increasing, the standard of living will tend to rise and as we have seen, this ‘advancing’ society is the standard case in Smith’s dynamic model. There is thus a clear implication that the m aterial welfare of all classes in society will increase as the division of labour proceeds; an implication that seems strongly opposed to the negative impli­ cations, discussed above. Smith however explicitly rejects the view that the ultimate ‘good’ lies in the m aterial prosperity of the 104

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individual.13 It is true that he values an increase in aggregate wealth, but as Viner has pointed out, this is ... because it makes possible an increase in handsome buildings and great avenues in the towns, the ‘magnificence’ so extolled by the writers of classical antiquity and of the Renaissance, but he treated these as public rather than individual riches.14 The ultimate good here lies not in the wealth itself, but in the aesthetic and cultural improvements that it makes possible.15 Ju st where final values do reside is not entirely clear, for Smith never really provides us with a definitive statem ent upon the subject. Indeed, it has been claimed that this is one of those areas where his tendency to introduce theological (or perhaps, Stoical) platitudes at crucial moments, prevents him from pushing his analysis as far as he might otherwise have done. However, taking the totality of his discussions on the subject of final values, and bearing in mind the criteria that he uses in his basic epistemology, it seems highly probable that he saw them as being bound up with moral, aesthetic and intellectual progress, as well as with the quasi-stoical conception of ‘propriety’, or fitness for a given end (see C hapter 7). Fortunately, for our present purposes, he does make it clear that material progress — and thus the division of labour — is a precondition of the sort of non-material progress that we have been examining. For instance, he is reported as saying: Tis the Introduction of Commerce, or at least of opulence that is commonly the attendant of Commerce which first brings on the improvement of Prose — Opulence and Commerce commonly precede the improvement of arts and refinement of every Sort. I do not mean that the improvement of arts and the refinement of manners are the necessary consequences of Commerce — the Dutch and Venetians bear testimony against me — but only that [it] is a necessary requisite. (.L R B L , p. 137.) O r again in the Theory o f Moral Sentiments, he says: Before we can feel much for others, we must in some measure be at ease ourselves. If our own misery pricks us very 105

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severely, we have no leisure to attend to that of our neighbour; and all savages are too much occupied with their wants and necessities to give much attention to those of another person. ( TM S , V II.ii.2.5.) These passages are characteristic of many of Smith’s discussions of the effects of the division of labour, and again their tone is in apparent contradiction to his more negative discussions, which although they are in a minority, are still numerous enough to be significant. Turning to the macro-social level we again find that the majority of Smith’s pronouncements on the implications of the division of labour are favourable. He frequently contrasts the honest and sober frugality of the new commercial order with the dissolution of the spendthrift landowning order that had preceded it, and he holds that commerce and m anufacture will inculcate habits of thrift, punctuality, discipline and industry in the lower classes of society, whilst those m aintained by the ‘expense of revenue’ are ‘corrupted’ by their mode of existence. Indeed, he goes so far as to say that ... commerce and manufactures gradually introduced order and good government and with them the liberty and security of individuals, among the inhabitants of the country, who had before lived almost in a continual state of war with their neighbours, and of servile depending upon their superiors. This though it has been the least observed, is by far the most im portant of their effects. (W N , 111. IV .4. See also I I I .I V .ll e ts e q .y 6 Smith’s normal position is that division of labour brings steady improvements to society in its morality, laws and institutional structures, and that increasing specialisation is of advantage to all (W N , I I I .I .l etseq). We have then, both at the level of the individual and at the macro-social level of Smith’s model a series of apparent contradic­ tions between its ‘negative’ and its ‘positive’ implications, and these occur in connection with both the material and the non­ material aspects of a developing society. Both sets of implications are the logical outcome of his metascientific world-view, being the product of his synthesis of aspects of rationalism and Associationist empiricism; neither consists merely of ad hoc 106

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empirical observations. T hat Smith himself saw the contradiction is made clear by this passage from the ‘early draft’ of the Wealth o f Nations: The poor labourer who has the soil and seasons to struggle with, and, who while he affords the materials for supplying the luxury of all the other members of the commonwealth, and bears, as it were, upon his shoulders the whole fabric of society, seems himself to be pressed down below ground by the weight and to be buried out of sight in the lowest foundation of the building. In the midst of so much oppressive inequality in what m anner shall we account for the superior affluence and abundance commonly possessed even by this lowest and most despised member of civilised society, compared with what even the most respected and active savage can attain to. (Early draft of the Wealth o f Nations, p. 328.) The apparent contradictions outlined above have led numerous writers to suggest that there is a fundamental dichotomy in Smith’s work. West for example, distinguishes between Smith the sociol­ ogist, and Smith the economist, and says that: ‘Proceeding from the different starting points the sociological and economic methods thus yielded different results.’ (West, 1964, p. 31.) 17 W ith the economic method producing optimistic conclusions, whilst the sociological method led to the opposite view, West considers that: Smith’s selection ... on one causal condition — the division of labour — was perhaps a hasty and rather doctrinaire attem pt to apply a contemporary behaviouristic philosophy to a problem which sociologically was much more complica­ ted than he imagined. Confronted with large groups of apparently stupid people, his sense of outrage led him to overstate his case against the factory system so wildly as to contradict the more objective findings of the economic analysis of the division of labour. (Ibid.) This passage is highly interesting, in that West explicitly interprets Smith as working within a causal-deterministic (‘behaviourist’) methodology, and then, unable to reconcile Smith’s apparently contradictory conclusions with this structure, 107

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introduces the economic-sociological distinction to explain the dichotomy. His distinction must, I think, be held to be an anachronism of the type discussed above (Chapter 3). There is no convincing evidence that Smith, explicitly or implicitly, worked with different methodologies in his Wealth o f Nations analysis of concrete socio-historical situations; in fact, as has been dem onstrated above, his work is remarkable for its homogeneity of approach. West has not seen that Smith’s conclusions, both ‘optimistic’ and ‘pessimistic’, are logical implications of the one set of assumptions. This is made very clear by his assertion that Smith’s view of the inferiority of town people compared with country people ‘... may well have been prejudice, but there is no doubt that Smith treated it as established fact.’ (Ibid.) — when in fact Smith’s conclusion is a direct implication of his interactive model. A similar charge o f‘dualism ’ is levelled against Smith by Lamb. He criticises West, who he says: In his efforts to compartmentalise the various aspects of alienation into ‘powerlessness’, ‘isolation’ and ‘self­ estrangem ent’ has lost sight of their interaction in the total system of Smith’s moral theory. (Lamb, 1973, p. 281.)18 But despite this, Lamb says that the explanation of the contradictions in Smith’s treatm ent of the division of labour ... would appear to be that Smith’s statements about the socialising effects of the division of labour are based on his abstract model of society built up from conjectural individual propensities originating in m an’s innate tendency to truck, barter and exchange. O n the other hand, his critique of the division of labour’s effect on detail factory labourers is drawn from observations of the real social effects of such institutions on individuals. (Ibid., p. 278.) so that there are ‘... two methods employed by Smith: one leading to an abstract theory of capitalism; the second to socialist criticism of existing society.’ (Ib id .)19 O n this interpretation, Smith’s ‘abstract’ model seem distinctly inadequate, since it yields implications that are apparently opposite to empirically observed conditions. Lam b’s position is in many respects very close to that of West; 108

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the essential difference between them being confined to the relative weighting they give to Smith’s positive and negative discussions of the effects of the division of labour. West concludes that ‘...o f the three aspects of alienation so far outlined only the third (self­ estrangement) could have possibly been intended in Smith’s writ­ ing.’ (West, 1969, p. 7; see note 17) — and that, in any case: In his ‘alienation passage’ Smith seems in fact to be giving us no more than his own impressionistic view of what workers are like in factories, together with his own personal view of what they ought to be like. (Ibid.)

Lamb, however, believes that Smith considered that ‘... workers in some ways were self-estranged, powerless, and isolated.’ Two points can be made in criticism of this whole debate: Firstly, it is unfortunate that West (in his 1969 paper; see note 17) suggests that ‘... alienation from work includes especially feelings of powerlessness, isolation and self-estrangement’ ... and then proceeds to, more or less, confine his discussion to these three, somewhat arbitrary, categories. Lamb tends to accept these categories, and to dispute W est’s interpretation within the same framework. In fact as a definition of M arxian (or indeed ‘Smithian’) alienation these categories are severely inadequate; in particular they reduce drastically the portions of Smith’s writings that seem relevant to alienation. It is for this reason that West claims there is only one ‘alienation passage’. West also has a thoroughly mistaken interpretation of M arx’s prescriptions for the removal of alienation, and couples him with Rousseau in urging a return to ‘organic primitivism’ (West, 1969, p. 20; see note 17). Secondly, West and Lamb have focused their attention on opposite sides of Smith’s model, with West giving most weight to its ‘positive’ implications, and Lamb, its ‘negative’ aspects. This polarisation is a direct result of their interpretation of Smith’s methodology; they see him as doing social science within the causal-determinist perspective, that is now standard. Given this interpretation, there is no possibility of reconciling his apparently contradictory statements. The interpretation presented in the present work yields very different conclusions, which can be presented as follows: At the level of his ‘special theory’ of the exchange economy, 109

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Smith’s dialectical m aterialist model takes on a great deal of institutional content, which is not present at the level of the ‘general theory’. His treatm ent does not simply involve drawing out the implications of a causal-deterministic theory and testing them against empirical observation, as West and Lam b tacitly assume; it is much more ‘rich’ in the sense of incorporating actual historical content into its dynamic concepts. The central division of labour model is, at this level, a highly complex construct designed to explain — to reflect, or make comprehensible — the actual course of development (as perceived by Smith) of commer­ cial society. It is a crucial feature of such constructs, that in so far as there are considered to be contradictory tendencies in the actual social world, they should be mirrored within the model, which should in turn provide a theoretical explanation for them .20 Provided the model does offer an internally consistent theoretical resolution of actually existing contradictory trends depicted by it, such contradictions are surely not a weakness in the model, but a strength. T hat such a theoretical resolution exists in Smith’s model, becomes clear if we consider its overall structure.21 For it is one of its central features that there is, in the interaction between individual and society, a process of ‘creative destruction’ during which socio-economic institutions can evolve in response to the needs of a progressively developing society. Skinner puts the point rather well in his introduction to the 1970 edition of the Wealth o f Nations:

O n Smith’s argument, the existence of selfish (or at least self regarding) propensities suggests that those facets of hum an nature which incline m an to the social state cannot be sufficient to sustain it in any degree of harmony or order. In other words certain sources of control are required over the self regarding activities of individual men; sources of control such as the rules of justice and morality ... and further: Smith’s discussion of the necessity and origin of those general rules which guide the activities of men is of great importance ... briefly stated it may be said that some aspects of hum an nature require certain sources of control, while others ensure that they do in fact develop.22 110

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This interpretation is broadly consistent with the present perspective, which can now be further developed by looking at the measures Smith proposes to alleviate the negative effects of the division of labour. It has been argued above that social estrangement in his model results, in every case, from a fragmentation or distortion of the contextual framework within which the attributes of the individual are formed. To further support this view, it must now be shown that each of the remedies that Smith proposes can also be interpre­ ted from this perspective, as measures aimed at providing an adequate context for the formative dialectical interaction. We can now begin by noting that whilst specialisation results in the individual being confined within a highly restricted context, the range of experience available to society as a whole is greatly increased. As Smith puts it: Though in a rude society, there is a good deal of variety in the occupations of every individual, there is not a great deal in those of the whole society ... In a civilised state, on the contrary, though there is little variety in the occupations of the greater part of individuals, there is an almost infinite variety in those of the whole society. ( WN , V.I.f.51.) The social context, taken in its entirety, is thus much richer in range and content, as the division of labour proceeds, and the collective knowledge of its specialists will increase. Further, because of the growing division of labour, some individuals will become specialists in studying society in its entirety. For such people: The contemplation of so great a variety of objects necessarily exercises their minds in endless comparisons and combina­ tions, and renders their understandings, in an extraordinary degree, both acute and comprehensive. ( WN , V.I.f.51.) Rosenberg has, in fact, made both these points, in a valuable contribution to the W est/Lam b debate discussed above.23 He says,24 concerning the effects of the division of labour on the lower classes: There are, however, im portant forces working in the opposite direction, for the collective intelligence of society grows as 111

Riot, Debauchery and the Science o f a Legislator a result o f the very process which causes the understanding of

the ‘inferior ranks of people’ to become increasingly defec­ tive. For the increased productivity resulting from specialis­ ation and division of labour is evident too in those trades which are concerned with the production of new knowledge. And in an advanced society: Although then the model level of understanding is very low, the highest levels of scientific attainm ent permitted by the extensive specialisation in the production of knowledge are quite remarkable. The collective intelligence of the civilised society then, is very great and presents unique and unprece­ dented opportunities for technical progress. Whilst agreeing that this interpretation squares very well with what Smith has to say on the subject, I would want to go somewhat further than Rosenberg, and add this: Given the overall structure of Smith’s model, it is clear that if the collective intelligence of society is growing, then there is potential for the individual, who is formed within the social nexus, to develop along with society. This is why Smith sees education as being so crucial. Its role is to break through the barriers of social estrangement that tend to form as the division of labour progresses, and which divide society into, more or less, discrete sub-sets, and to im part some of the knowledge gained by society as a whole, to even the meanest labourer’s child. In short, education is seen by Smith as another aspect of ‘labour’, which is capable of making its contribution to the formation of the individual, outside of the restricted framework of his increasingly specialised working environment. Education thus provides the stimulation and variety that is denied to the industrial worker, and can be regarded as a vehicle for transm it­ ting the better aspects of a developing society to the individual. This interpretation rather neatly explains Smith’s frequent criticisms of the universities;25 since they continue to transm it outmoded forms of knowledge and morality, they fail in their central function of combatting social estrangement in the society of 1776. Indeed they are not ju st behind the times; it is rather that they are appropriate to the previous stage of social develop­ ment and not to commercial society. Smith recognises that the ‘common people’ have little time, money or even inclination for education, but holds that: ‘For a 112

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very small expense the public can facilitate, can encourage, and can even impose upon almost the whole body of the people, the necessity of acquiring those most essential parts of education.’ (W N , V.I.f.54.) He takes a similar line concerning the loss of m artial spirit and physical fitness which tend to follow from the impoverishment of context that the division of labour engenders, holding that these effects will follow unless the government, ‘takes proper pains to support’ military exercise ( WN , V.I.f.59). Such a policy, whilst it would not eliminate the need for a specialised standing army, would supplement it with a well-trained populace, from which a militia could be raised. A smaller standing army would, therefore, suffice. Further, a well-trained populace would also reduce the dangers of political corruption, implicit in a standing army. As it would very much facilitate the operations of that army against a foreign invader, so it would obstruct them if unfortunately they should ever be directed against the constitution of the state. (W N , V.I.f.59.) However, these effects, though welcome, are secondary to the contextual enrichment that government action can promote, for: Even though the m artial spirit of the people were of no use towards the defence of the society, yet to prevent that sort of mental mutilation, deformity and wretchedness, which cowardice necessarily involves in it, from spreading them­ selves through the great body of the people, would still deserve the most serious attention of government. (W N, V.I.f.60.) The deleterious effects upon the morality of the lower orders which follow from specialisation, and its associated demographic movements, also require the attention of the state. The ‘profligacy and vice’ to which the town dweller tends follow from the distorted contextual framework within which the sympathy mechanism has to function. The anonymity of the specialised worker in a large town causes an attenuation of the process which should confine his behaviour within socially acceptable limits, and the state must seek to remedy this defect. It is for this reason that Smith holds that the state should promote competition amongst the churches, 113

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in the belief that this would persuade people to become members of religious sects (W N, V.I.g.8 et seq). The town dweller ... never emerges so effectively from this obscurity, his conduct never excites so much the attention of any respectable society, as by his becoming the member of a small religious sect. He from that moment acquires a degree of consideration which he never had before ... In little religious sects, accordingly, the morals of the common people have been almost always remarkably regular and orderly ... (W N , V.I.g.12.) Indeed he considers that such a strengthening of the framework within which sympathetic interaction can function might result in morality being too ‘rigorous and unsocial’, and that the state, therefore, has a further role in promoting ‘painting, poetry, music (and) dancing’ and in encouraging the study of ‘science and philosophy’ (W N , V.I.g.13 et seq.). The measures discussed above have several things in common. Each is addressed at combatting some aspect of social estrange­ ment as it affects the individual; each requires the intervention of government, and, each involves a deliberate ‘enrichm ent’ of the environment within which the increasingly specialised worker functions. Upon the present interpretation we can see these measures as attem pts to restore the generality of the contextual framework within which the process of sympathetic interaction functions. Both problems and solutions are closely linked to Smith’s fundamental model of socio-historical development, and are in no sense ad hoc. Upon this view M arx’s statem ent that: ‘For preventing the complete deterioration of the great mass of the people by division of labour, A. Smith recommends education of the people by the State, but prudently, and in homeopathic doses.’26 — severely underestimates the im portance of the measures proposed by Smith, and m isunderstands the grounds upon which they are based. We must now turn to the macro-social aspects of social estrange­ ment. It was argued above that the fragmentation of society, which follows from the increasing division of labour, leads to partial interests entering into combination against the rest of society, and thus to monopolies, restrictive practices, faction etc. Unchecked, such forces would seriously affect the process by which 114

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universal and coherent structures should be evolved, and thus distort the long-term working of practical reason. W hat checks are in fact available, within Smith’s model, to ensure that these problems do not become too severe? Let us begin with a distinction that Smith makes when discussing retaliatory restrictions on foreign trade in Book IV of the Wealth o f Nations. Such retaliations may on occasion be of value, in forcing foreign powers to repeal their own restrictive measures, he says, and ... to judge whether such retaliations are likely to produce such an effect, does not, perhaps, belong so much to the science of a legislator, whose deliberations ought to be governed by general principles which are always the same, as to the skill of that insidious and crafty animal, vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs. ( WN , IV .II.39.) The same distinction is implicit in his discussion of the colonies, where he says: Such statesmen, and such statesmen only, are capable of fancying that they will find some advantage in employing the blood and treasure of their fellow citizens, to find, and to maintain such an empire. (WN> IV.VII.c.63.) The legislator then, as opposed to the statesman, is he who can abstract from day-to-day events to discern the underlying general principles by which long-term development should be regulated. But at least on the present interpretation, these general principles can be nothing less than those produced by the working of practical reason, and to the extent that he is capable of comprehending them, the legislator is in fact fulfilling the role of the impartial spectator. This point has been well made by Knud Haakonssen who has said: There is no sharp distinction between moral and legal terminology. The spectator is an ‘impartial judge’ and ‘the magistrate ... acts in the character of an im partial spectator’. This makes it even more obvious than it might otherwise have been to see the principles of practical reasoning employed by the im partial spectator as at the same time the principles of legal reasoning.27 115

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and further, The most obvious of these principles is naturally the principle of impartiality, which really amounts to a principle of universality ... Closely connected with the requirem ent of universality are two others which we might call consist­ ency and coherence. (Ibid.) This seems to me to be a sound interpretation. To the extent that it is accepted we can, in the present context, now see that it is a key role of the legislator to prevent the formation of social structures which reflect only partial interests, and thus preserve the generality of the institutional framework. The judgem ent involved is contextually based; the legislator must apply the rules derived by the interactive process of practical reasoning to specific situations, by assessing their adequacy or ‘fitness5 for the specific purpose in hand. An implication of the present interpretation here, is that the legislator makes minor modifications to an existing body of laws and rules, so as to deal with new problems, or adapt to new situations, seeking at all times to preserve the generality, coherence, simplicity and familiarity of the whole. The careful, piecemeal, approach of the legislator can then be contrasted with the ‘man of system’ who seeks to remodel society from first prin­ ciples, and without due regard to the existing conventions and laws. In this respect the ‘science of a legislator’ is like that of the scientist in physics or astronomy; both seek to adapt their model to an external reality, whilst preserving its overall coherence. The analogy can be pushed a little further, for, as the division of labour proceeds, we have qualitative change in society, so that both the contextual framework within which decisions are taken, and the standards by which they are evaluated must also change. To the extent that this interpretation really does represent Smith’s approach, it can be claimed that the criteria by which the acts of the legislator must be evaluated, are, like those that apply in science, contextually based, and, in the ultimate analysis, aesthetic (see C hapter 3). This view also helps to explain the limitations of the legislator, and thus of effective government intervention, for he can fulfil his proper function only when he has a detailed knowledge of the contextual framework within which a decision must be made. He is thus well suited to make decisions of national policy, but lacks 116

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the detailed information which would, for example, enable him to regulate the usage of capital, which may safely be left to the informed self-interest of the merchant: ... the law ought always to trust people with the care of their own interest, as in their local situations they must generally be able to judge better of it than the legislator can do. (W N, IV.V.b.16. See also WN, IV.II.10.) Indeed, it seems to me that most of Smith’s discussions of self-interest fit in well with such an interpretation, and that it also provides a theoretical underpinning for his views on the proper limits of government. W hat is beyond dispute is that he sees the legislator as having a role in preventing what I have called social estrangement. Thus ... the mean rapacity, the monopolising spirit of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind, though it cannot perhaps be corrected, may very easily be prevented from disturbing the tranquility of any body but themselves. (W N, IV .III.c.9.) However, the same fragmentation of society which causes monopoly and restrictive practices to flourish, also creates pressure groups who will seek to defend their partial interests, so that there is an ever-present danger of political and legal corruption. This monopoly has so much increased the num ber of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature. (IV.II.43. See also WN, I.X I.p.10 and I.X.c.61.) For the same reason, he considers that prevention is better than cure, since existing monopolies and restrictive practices are exceedingly difficult to remove. Not only are private interests damaged, but there can also be a considerable loss of dedicated fixed capital. He is at his most cynical when making this point. The legislature, were it possible that its deliberations could always be directed, not by the clamorous importunity of 117

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partial interests, but by an extensive view of the general good, ought upon this very account, perhaps to be particu­ larly careful neither to establish any new monopolies of this kind, or to extend further those which are already estab­ lished. (W N , IV .II.44.) Similar problems confront the legislator when he seeks to remove those institutions and laws which, although they were appropriate to earlier stages of development, have been rendered obsolete by qualitative changes in the social context. Thus, for example, he holds that protection of some trades against competi­ tion was necessary, ... in the first stages of the arts to bring them to their proper perfection ... But as this end is now fully answered, it were much to be wished that these as well as many other remains of the old jurisprudence should be removed .(L J 1762-63, p.83) Smith clearly regards the corrupting effects of partial interests upon the legislature, as the most serious aspect of social estrange­ ment, and the one most likely to hold back the natural course of the division of labour. Laws frequently continue in force long after the cir­ cumstances, which gave occasion to them, and which alone could render them reasonable are no more. ( WN, III.II.4 .) and, The capricious ambition of kings and ministers has not, during the present and preceding century, been more fatal to the repose of Europe, than the im pertinent jealousy of merchants and manufacturers. (W N, IV .III.c.9.) This opens up interesting questions concerning the role of hum an agency in Smith’s model. We can have both good and bad legislators, and social estrangement can distort the process of im partial judgem ent so that institutional structures can be formed that reflect only partial interests. There is thus a clear implication that the actual course of hum an history will be influenced by factors external to the dialectical interaction 118

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depicted by the model. As Haakonssen puts it: Since each individual’s motives, ... are formed through the volatile medium of m utual sympathy with the motives of other people in more or less similar situations, we can see how the motivational factor in the shaping of behaviour really forms a huge social network which both influences and is influenced by the external world — but in each individual instance of behaviour is neither completely determined by, nor completely determining for, external 28 events. I accept that this is indeed Smith’s position and that this presents a challenge to the view expressed above that Smith’s model is, in a significant sense, ‘m aterialist’. However, I would offer the following points in defence of this position. Firstly, as has already been argued the range of possible individual responses is restricted by the level of specialisation that has been reached. It is thus the material side of the dialectic that defines the limits of the possible. Secondly, Smith’s model is designed to depict the ‘natural’ course of events which can be roughly equated with the optimal. This can be contrasted with ‘actual’ events which can, and do, deviate from this path, especially when social estrangement permits the creation of inadequate structures. Consider for example: The order of things which necessity imposes in general, though not in every particular country, is, in every particular country, promoted by the natural inclinations of man. If hum an institutions had never thwarted those natural inclin­ ations, the towns could no-where have increased beyond what the improvement and cultivation of the territory in which they were situated could support. ( W N , 111.1.3.) or again ... According to the natural course of things, therefore, the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufacturers, and last of all to foreign commerce ... But though this natural order of things must have taken place in some degree in 119

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every such society, it has, in all the modern states of Europe, been in many respects, entirely inverted ... The m anner and customs which the nature of their original government intro­ duced, and which remained after that government was greatly altered, necessarily forced them into this unnatural and retrograde order. (HW, 111.1.8/9.) The contrast between the optimal ‘natural’ and the distorted, and therefore, sub-optimal ‘actual’, is clear in these passages. Smith is doing real empirical history, within a taxonomic frame­ work provided by the model he uses. The model depicts the optimal path for socio-economic evolution, but real history follows this path imperfectly. Thirdly, Smith’s model is not only descriptive, but also pre­ scriptive — and what it prescribes is that we should stay as close as possible to the path depicted by the model. Further, contained within the model, as a logical development of its dialectical m aterialist structure, we have a specification as to how and why deviations from the natural path (social estrangement) occur, together with a prescriptive statem ent of the forces that will tend to alleviate their worst effects. Fourthly, the model provides us, at least in principle, with criteria by which to evaluate specific social institutions, or indeed specific acts of the legislator. They are to be judged by the standards of generality and coherence. When evaluating, say, a new law, we must ask if it promotes universal interests, rather than those of some faction, and we must assess its coherence relative to the overall institutional framework. It must not contradict existing laws, it should as far as is possible be based on familiar principles, and it should be simple in that it does not require numerous exceptions and qualifications. Whilst these general, ‘aesthetic’, principles remain unchanged, the context in which they are employed is undergoing qualitative change as the division of labour proceeds. The adequacy of any specific decision must, therefore, be assessed relative to the socio-economic context in which it is taken. In short, the material context not only defines the limits of the possible, but also supplies the standards by which that action must be evaluated. Whilst these standards fall short of a full ‘ex-ante’ specification of which sorts of social institution will be ‘adequate’, they do provide a means of evaluating specific measures in their empirical context. It can, of course, be argued that the criteria are somewhat vague, and that any specific appli­ 120

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cation of them will be very much a m atter of interpretation. Smith, however, with his belief in the possibility o f‘impartial judgem ent’ clearly thinks they are adequate, and indeed that it is precisely the role of the social scientist to apply them. Given the above points it seems to me that the label of ‘materialism’, whilst in need of heavy qualification, can be applied with propriety to Smith’s model of social interaction. Before concluding this chapter, a num ber of closely related points need to be made, concerning the relationship between Smith’s formal model and some aspects of the cultural and philosophical environment in which he was writing. Firstly, there exists a considerable volume of contemporary literature which examines the political dimensions of eighteenth-century thought from what might be termed the ‘civic hum anist’ perspective. The work of John Pocock is both central to, and in some ways typical of, this perspective. Pocock traces the progress of the civic hum anist tradition from its origins in the thought of Machiavelli and his Florentine contemporaries (notably Savonarola, Guicciardi and Giannotti) through to its developments in eighteenth-century British and American thought. In the process of this extensive study, he has argued that the early civic humanist confrontation of ‘virtue’ with ‘fortune’ was still very much a ‘vital problem’ in the eighteenth century, but that: The role of ‘fortune’ was increasingly assumed by the concepts o f ‘credit’ and ‘commerce’ ... and ... while this led thinkers to perceive secular time more as dynamic and less as merely disorderly, the antithesis of ‘virtue’ with ‘corruption’ — or ‘virtue’ with ‘commerce’ — continued to operate as the means of expressing the quarrel between value and personality on the one hand, history and society on the other, in its first modern and secular form.’29 O n this view, much of what I have called social estrangement is contained within eighteenth-century views on corruption, and the associated perception of a tension between Court and Country, and thus continues a theme which has clear British antecedents in, say, Harrington, Shaftesbury and, of course, Ferguson. Pocock’s thesis has not gone unchallenged; most radically, it 121

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has been attacked by Alan M acfarlane30, who in explicit contradiction to Pocock holds that the origins of many of the concepts of ‘civic hum anism ’ are to be found in English thought as early as the thirteenth century. In fact: We could describe thirteenth-century England as a capitalist market economy without factories, (p. 196) and When Jefferson wrote, ‘We hold these truths to be sacred and undeniable; that all men are created equal and indepen­ dent, that from that equal creation they derive rights inherent and unalienable’ he was putting into words a view of the individual and society which had its roots in thirteenth-century England or earlier, (p. 203.) However, it seems to me that M acfarlane’s basic position is untenable, and that he fails to establish his specific case on anything other than the most superficial level.31 Pocock’s work is grounded on a depth of scholarship which is not susceptible to such attacks and offers a much more cogent explanation of eighteenth-century political attitudes and perceptions. For the present purpose, let us accept Pocock’s general line of argument, and specific conclusion that: ... Scottish and French conjectural historians continued to employ the language of virtue and corruption — to employ, that is, the language of civic humanism in that English form which since 1698 had been a means of stating the quarrel between value and history.32 Given this position I would also wish to m aintain that Smith is well aware of this ‘quarrel between history and value’, and, accepting that corruption is an ever present danger in commercial society, builds it into his model. If, as argued above (Chapter 2) the function of a dialectical model is to reflect the actual progress of society, and if, as Pocock argues, Smith considers that corrup­ tion is a ‘vital issue’, then it follows that his model must depict the dynamics of corruption, and its alleviation, if it is to be adequate. Further, it is clear that Smith’s treatm ent of corruption, despite apparent similarities, is very different from that provided 122

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by his contemporaries of the Scottish Historical School, precisely because Smith does present corruption as part of an overall model which is scientific in intention. In Smith’s work, the civic hum anist concept of corruption has been translated into the scientific concept of social estrangement, the difference between his treatm ent and that of, say, Ferguson, is one of qualitative difference. A very similar point can be made concerning Smith’s treatment of militias and standing armies. This too (in ways that will not here be considered) is very much bound up with the civic humanist conception of corruption, where we find a clear implication that loss of martial spirit, and the hiring of others to fight on one’s behalf, involves a substantial loss of civic virtue. This perspective is also incorporated into Smith’s scientific model as an aspect of social estrangement. O n this view Smith’s apparent ambivalence on this issue stems from the fact that his basic model yields both the implication that a specialised army is essential for adequate defence, and the view, derived from civic humanism, that this involves ‘mental mutilation, deformity and wretchedness’. We have already seen that he reconciles this apparent contradiction by advocating both a militia and a standing army and imposes upon the legislator the task of seeing that this is the case.

Notes 1. In addition to the works cited later in this chapter, see R.L. Meek, ‘The Scottish contribution to Marxist sociology’ in his collected essays Economics and Ideology (Beekman Publications, London, 1973); F. Papperhoim, The Alienation o f Modem Man (Monthly Review Press, London, 1959) and W.F. Campbell, ‘Adam Smith’s theory of justice, prudence and benevolence’, American Economic Review (1967). 2. ‘Genius is more the effect of the division of labour than the latter is of it. The difference between a porter and a philosopher in the first four or five years of their life is, properly speaking, none at all.’ (LJ: 1766, p. 493.) 3. Cf. also WN, I.VIII.48; WN, I.XI.p. 8; WN, V.I.f.52; E P S , p. 221. 4. Smith discussed the implications of feudalism at WN, lll.lW .lO e ts e q . 5. His most famous illustration (which in fact he borrowed from the Encyclopedists) is to be found at WN, 1.1.6: ‘The different operations into which the making of a pin, or a metal button, is subdivided, are all of them much more simple, and the dexterity of the person of whose life it has been the sole business to perform them is usually much greater.’ 6. Marx was to quote this passage in D as Capital (3 vols., Lawrence & Wishart, London, 1974), Vol. 1, p. 342. He adds a rather curious

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Riot, Debauchery and the Science o f a Legislator footnote: ‘Being a pupil of A. Ferguson who showed the disadvantageous effects of the division of labour, Adam Smith was perfectly clear on this point.’ The odd notion that Smith was merely a ‘pupil’ of Ferguson in this respect is also present in much of Marx’s writing. Marx on occasion seems to give Smith much less credit than is his due, particularly when ‘anticipations’ of his own historical perspective are involved. 7. See also L J : 1766, p. 539: ‘Where the division of labour is brought to perfection, every man has only a simple operation to perform. To this his whole attention is confined, and few ideas pass in his mind but what have an immediate connection with it. When the mind is employed about a variety of objects it is somehow expanded and enlarged ...’ A similar line is taken by Ferguson: ‘Manufactures ... prosper most where the mind is least consulted, and where the workshop may ... be considered as an engine, the parts of which are men.’ A. Ferguson, An Essay on the History o f the Civil Society (1793) (Edinburgh University Press, Edinburgh, 1966), p. 306. 8. R.H. Campbell, A.S. Skinner and W.B. Todd (eds), The Wealth o f Nations (Adam Smith) (Clarendon Press, Oxford, 1976). 9. For an early, but still relevant discussion of Smith’s views on militias and standing armies, see J. Rae, Life o f Adam Smith (1895) (Kelly, New York, 1965). 10. There is in fact a degree of ambivalence in Smith’s discussion of this topic, as for example, when he points out that a militia which ‘has served for several successive campaigns in the field, becomes in every respect a standing army.’ ( W N , V.I.a.27.) This issue is discussed in some detail in D.M. Winch, Adam Smith’s Politics (Cambridge University Press, Cambridge, 1978), Chapter 5. 11. Nor for that matter did Ferguson: ‘7"he necessary o f life is a vague and relative term: it is one thing in the opinion of the savage; another in that of the polished citizen: it has a reference to the fancy, and to the habits of living.’ A. Ferguson, An Essay on the History o f the Civil Society (1793) (Edinburgh University Press, Edinburgh, 1966), p. 142. 12. This is again the result of ‘sympathetic interaction’ — note the implicit existence of social estrangement in that the tastes of the inferior ranks are determined in a different sphere of interaction from that of the superior ranks, despite the fact that both sets of tastes are, in a sense, endogenous variables in his model. 13. This is not, of course, to say that Smith regards such material progress as unimportant. See for example WN, I.XI.C. Cf. also J.M.A. Gee, ‘Adam Smith’s social welfare function’, Scottish Journal o f Political Economy (1968). 14. J. Viner, ‘Adam Smith’, International Encyclopedia o f the Social Sciences, Vol. 14, p. 325. 15. See D.M. Winch, Adam Smith’s Politics (Cambridge University Press, Cambridge, 1978) (p. 134). Winch holds that: ‘The entire argument, from the denigration of the satisfactions derived from individual wealth, to the laudatory references to aggregate wealth ... conforms ... to a classical renaissance view of communal enrichment.’ See also J. Pocock, The Machiavellian Moment (Princeton University

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Riot, Debauchery and the Science o f a Legislator Press, Princeton, N.J., 1975), p. 246, for a discussion of the probable origins of this view. 16. Smith follows this passage by paying a rather strange tribute to Hume as being ‘... the only writer who, so far as I know, has hitherto taken notice of it.’ The notion is indeed explicit in Hume’s work but there are clear anticipations in Montesquieu with which Smith was undoubtedly familiar, and by 1776 the idea was almost commonplace in the writings of the Scottish Historical School. 17. Cf. E.G. West, ‘The political economy of alienation’, Oxford Economic Papers (1969); ‘Adam Smith’s two views on the division of labour’, Economica (1964); ‘Adam Smith and alienation — a rejoinder’, Oxford Economic Papers (1975); and his paper ‘Adam Smith and alienation’, in A.S. Skinner and T. Wilson (eds), Essays (Clarendon Press, Oxford, 1980). In the same work, see R.L. Heilbroner, ‘The paradox of progress’. 18. R. Lamb, ‘Adam Smith’s concept of alienation’, Oxford Economic Papers (1973), and also his ‘Adam Smith’s system: sympathy not selfinterest’, Journal o f the History o f Ideas (1974). 19. Lamb goes on to label these ‘two methods’ the ‘positive’ and the ‘normative’ theories; in fact, in so far as the labels are applicable, both Smith’s optimistic and pessimistic conclusions are ‘positive’ in Lamb’s sense, and the normative content of his model is strictly confined to his metascience. 20. Clearly Smith did regard both the growing stupidity of the lower classes, and the overall progressive nature of society, as objective empirical data. He was probably right in this, but the issue need not detain us since we are here concerned with the structure of his theoretical work; rather than the accuracy of his empirical observation. But see A.W. Coats, ‘Changing attitudes to labour in the eighteenth century’, Economic History Review (1956), and R. Koebner, ‘Adam Smith and the industrial revolution’, Economic History Review (1959). 21. Marx disputes this; he says: ‘Adam Smith’s contradictions are of significance because they contain problems which it is true he does not solve, but which he reveals by contradicting himself. His correct instinct in this connection is best shown by the fact that his successors take opposing stands based on one aspect of his teaching or the other.’ K. Marx, Theories o f Surplus Value (Lawrence & Wishart, London, 1971), p. 151. I fully accept the second sentence, but dispute the first — Smith’s solution was radically different from Marx’s, but a solution it remains. 22. A.S. Skinner, The Wealth o f Nations (Adam Smith) (Clarendon Press, Oxford, 1976). 23. N. Rosenberg, ‘Adam Smith on the division of labour: two views or one?’, Economica (1975). 24. Both views expressed here are from N. Rosenberg, ‘Some institu­ tional aspects of the Wealth o f N ations\ Journal o f Political Economy (1960), p. 136-7. 25. ‘The improvements which, in modern times, have been made in several different branches of philosophy, have not, the greater part of them, been made in universities; though some no doubt have. The greater part of universities have not even been very forward to adopt those

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Riot, Debauchery and the Science o f a Legislator improvements that were made; and several of those learned societies have chosen to remain, for a long time, the sanctuaries in which exploded systems and obsolete prejudices found shelter and protection, after they had been hunted out of every other corner of the world’ ( W N , V.I.f.34.) 26. K. Marx, D as Capital (3 vols., Lawrence & Wishart, London, 1974), vol. 1, p. 342. 27. K. Haakonssen, The Science o f a Legislator (Cambridge University Press, Cambridge, 1981), p. 137. The rest of this chapter owes a considerable debt to Haakonssen’s work, which enabled me to see substantial errors in my initial presentation of the issues involved. Despite Haakonssen’s use of the term ‘practical reasoning’ in this context, I am not, of course, claiming his support for any use I have made of the concept in other parts of the present work. He does not, in fact, make central use of the concept. 28. K. Haakonssen, The Science o f a Legislator (Cambridge University Press, Cambridge, 1981), p. 187. 29. J. Pocock, The Machiavellian Moment (Princeton University Press, Princeton, N.J., 1975), p. ix. 30. A. Macfarlane, The Origins o f English Individualism (Blackwell, Oxford, 1978). 31. Although he bases his arguments on a great deal of empirical material, Macfarlane makes some highly dubious extrapolations in order to reach the position he wishes to justify. In addition there is a lack of logical rigour in some of his interpretations, and many major anachronisms (as the passage first quoted tends to show). 32. J. Pocock, The Machiavellian Moment, Princeton University Press, Princeton, N.J., 1975), p. 498. Pocock also holds that ‘specialisation, in short, was a prime cause of corruption’ and that ‘once land and commerce were placed in historical sequence, civic man found himself existing in a historical contradiction.’ (Ibid., p. 499.)

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7 Purposive Action and Unintended Consequences

This chapter, like that which precedes it, will take the interpretation of Smith, as presented so far, as being established, and will apply it to a specific aspect of his work. The subject here is his treatm ent of ‘unintended consequences’ and the associated theme of ‘deception’ which finds frequent expression in both the Theory o f Moral Sentiments and the Wealth o f Nations. Before commencing an examination of Smith’s views on this issue, two caveats are in order: Firstly, in the process of seeking to establish his position we will be led into a discussion of ‘ultimate values’ and teleology, and thus to that vaguely defined boundary where metascience merges into metaphysics. Since the realm of metaphysics has been explicitly renounced, no attem pt will be made to evaluate the adequacy of Smith’s treatm ent of ultimate values, or to compare it with alternative perspectives. For the present purpose I am only interested in his views in so far as they appear to find expression within the context of his scientific model. Further, since Smith himself declines to cross the boundary in question, his discussions of the issue are far from explicit and this, together with the complexity of the subject results in this chapter being considerably more tentative than those which precede it. Secondly, we will also be involved in an examination of Smith’s ‘invisible hand’ metaphor, which, it will be suggested, is representative of his overall position on unintended consequences. This aspect of his work has been extensively explored by those working within the perspectives of standard economics, who have tended to see it as an early anticipation of the homeostatic proper­ ties of ‘tattonem ent’ within a competitive market. Blaug for example has concluded that the invisible hand is: ‘... nothing 127

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more than the autom atic equilibrating mechanism of the competi­ tive m arket.’ And that it is ‘... the central theme that inspires the Wealth o f N ations ' 1 W hilst I would agree that some clear anticipations of aspects of our contemporary general equilibrium theory can be found in Smith on ‘unintended consequences’, their examination is outside the scope of this book, and they will not be further considered. Before coming down to detail, let us identify the problem of unintended consequences in general terms. It has been established that in Smith’s model, individuals are shaped by a process of sympathetic interaction which is located within a dynamic socio­ economic context (Chapter 5). The workings o f ‘practical reason’ ensure that the social structures which are also formed during this interactive process are (within the limits imposed by social estrangement) appropriate to the particular stage of economic development. This is true not only of morals, laws and institutions, but also, as we shall see (Chapter 8) of subjective perceptions of utility. But, as the division of labour proceeds, the contextual frame­ work undergoes qualitative change. It follows that social struc­ tures which were appropriate to a given context, can become inappropriate in later periods. This, as we have seen, is an im portant theme in Smith’s writing. Further, the criteria by which the adequacy of specific laws, customs and values is evaluated — the measure of their fitness or propriety — are largely internal. They are standards which are derived from, and which function relative to, a specific contextual framework. Given this interpretation, the individual within a special social context can have no criteria for evaluating the long-run process of socio-historical development. Indeed, as already suggested in C hapter 6, he may well be unaware of his part in this process, and regard the social structure he helps to create as determ inate and objective. It follows that the long-run effects of individual actions, must be, in a fundamental sense, ‘unintended conse­ quences’. This seems to me to open up two closely related questions: Firstly, how is it that individuals who are pursuing their own self-interest within a specific short-run setting and who are constrained and motivated by rules and values appropriate to that context, can unconsciously further the course of long-run social evolution? Secondly, given that there is an apparent inconsistency between 128

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reason guided purposive, hum an action, and this notion of un­ intended consequences, how, if at all, is a reconciliation to be achieved? In an effort to answer these questions, let us come down to detail, and look at what Smith has to say about unintended con­ sequences. O ur starting point is almost mandatory — this worldfamous passage from the Wealth o f Nations — Smith’s one and only explicit discussion of the invisible hand in that work. It reads as follows: As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestick to that of foreign industry, he intends only his own security; and by directing that industry in such a m anner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which is no part of his intention. ( WN , IV .II.9.) The passage concerns the activities of merchants, who, Smith claims, will tend to employ their capital ‘as near home’ as they can. Taken in this context it can be seen as a part of Smith’s attack on ‘mercantilist’ restrictions on trade. Indeed the chapter in which it occurs is entitled ‘O f Restraints upon the Im portation from foreign Countries of such Goods as can be produced at Hom e’ and Smith, true to form, is against such restraints. Now taken on its face value, this passage does not seem particu­ larly im portant. W hat we have is a highly specific statement to the effect that merchants (who Smith regards as being ‘selfinterested’ to a, perhaps excessive, degree) in fact promote the public good en passant when seeking to maximise their own advantage. Considering that this is the only mention of the invisible hand, in a book of some 950 pages, one might well wonder why it has attracted so much attention. The reason is, of course, that this passage is the most explicit — and most striking — illustration of a theme that runs throughout much of the Wealth 129

Purposive Action and Unintended Consequences o f Nations, and indeed in the Theoiy o f Moral Sentiments as well; the

notion that men, if unconstrained by artificial restrictions, will, in furthering their own self-interest, tend to promote socially beneficial consequences.2 The invisible hand passage, is in fact merely an example of a much wider theme — that men are unconscious of the consequences of their actions, and indeed are frequently deceived as to the actual outcome of those actions, but that this deception tends, by and large, to promote social welfare. The whole notion is on occasion — but by no means always — couched in the quasitheological terminology of an anthropom orphic ‘N ature’. I shall call this more general theme the ‘deception theory’, and will attem pt to elucidate the meaning of the invisible hand m etaphor in this wider context. Let us broaden out the discussion by looking at the invisible hand passage in the Theory o f Moral Sentiments. There Smith says: The produce of the soil maintains at all times nearly the num ber of inhabitants that it is capable of maintaining. The rich select from the heap only what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of their improvements. 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, advance the interest of the society, and afford means to the multiplication of the species. ( T M S , IV.i.10.) and Smith goes on to say that real hum an happiness depends upon ‘ease of body and peace of m ind’ so that ‘the beggar who suns himself by the side of the highway possesses that security which kings are fighting for’. The element of deception is much more obvious in this passage; the rich strive for wealth and all that it can buy, but because of purely physiological limitations can consume little more than a beggar. Even more im portantly, the satisfaction they seek is, at 130

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least on one level, illusory. True hum an happiness does not depend upon riches and material goods, but upon leisure and contempla­ tive activity. In so far as the rich actually increase their ‘utility’, it is in terms of vanity — the satisfaction they derive from what we would now call ‘conspicuous consumption’. It is im portant to note here that Smith seems to work with two scales of value. O n the one hand we have a subjectivist approach where the value of commodities to the rich is measured in terms of their individual valuation. There is an element of illusion here because one component of their utility often fails to materialise; once a basic subsistence is assured, goods do not yield the utility they promise. The ambitious man strives to obtain the conditions of the rich but: ... in the first month of his application [submits to] more fatigue of body and more uneasiness of mind than he could have suffered through the want of them. In old age he discovers that: ...wealth and greatness are mere trinkets of frivolous utility... more troublesome to the person who carries them about with him than all the advantages they can afford him are commodious. ( T M S , V I.1.8.) However, the rich do at least gain the subjective satisfaction resulting from conspicuous consumption, and this is highly im portant to them: ‘The rich man glories in his riches, because he feels that they naturally draw upon him the attention of the world ...’ (TM S, I.iii.2.1). But, as the above ‘invisible hand’ passage shows, there are also strong implications of an objective scale of value, upon which can be measured ‘real’ hum an happiness. Indeed, the same dichotomy between subjective and objective values is to be discerned in Smith’s presentation of the water/diam ond ‘paradox’.3 Thus he says that scarcity is the basic reason why people desire diamonds (LJ: 1766, p. 487) but that they are of less use than iron, or water (W N , I.IV.13). The implication seems to be that the desire to possess an article because of its scarcity is not a ‘genuine’ or fully rational need, which seems at odds with Smith’s view that the need for social acclaim (rather than utility) is the central motive for effort and acquisition. 131

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John Laird, in discussing this point has said th at Smith was ‘... thinking biologically, and forgetting perhaps the importance of ornaments in sex-attraction.’4 By ‘thinking biologically5 Laird means that Smith has an objective scale of values, based upon hum an needs. W hilst agreeing with this, I find it hard to accept that Smith merely ‘forgot5 about the role of ornament, which figures quite prominently in both the Theory o f Moral Sentiments and the Wealth o f Nations. W hat is clear, however, is that there are two aspects to the deception theory. Firstly, part of the anticipated utility fails to materialise, and secondly, the part that does materialise which is measured in terms of vanity, can be, in some sense, illusory. I will call the first of these effects ‘utility illusion5 and the second the ‘subjective/objective dichotomy5. Further use will be made of these concepts in C hapter 8, but for the present purposes the argument needs further development. Firstly, an examination of the two invisible hand passages will show that they are in fact specific instances of the more general deception theory. In each case we are presented with a-picture of narrow self-interest promoting a hidden public good and if the element of deception is less obvious in the Wealth o f Nations passage, that is only because Smith does not there ‘unpack5 the concepts of ‘produce5 and ‘consumption5 as he does in the Theory o f Moral Sentiments passage. The general theme can be further analysed in terms of another example. In the opening book of the Wealth o f Nations Smith discusses the apparently high fees earned by lawyers, and concludes that their fees are in fact, too low. The argum ent proceeds as follows. First, Smith says: Put your son apprentice to a shoemaker, there is little doubt of his learning to make a pair of shoes: but send him to study law, it is at least twenty to one if he ever makes such proficiency as will enable him to live by the business. (W N , I.X.b.22.) and he goes on to suggest that in a fair lottery, those who win should receive all that is lost by the others. But in the case of lawyers, this is not so, and thus: The lottery of the law, therefore, is very far from being a perfectly fair lottery; and that, as well as many other liberal and honourable professions, are, in point of pecuniary gain, 132

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evidently under-recompenced. (Ibid.) We thus have a situation in which lawyers do not receive the proper market price for their labours. This is in part because ‘public adm iration’ makes up a considerable part of the total reward they receive. In addition men are over-confident, not only in over-rating their ability, but also in over-estimating their chances of success. Thus: The over-weening conceit which the greater part of men have in their own abilities, is an ancient evil remarked upon by the philosophers and moralists of all ages. Their absurd presumption in their own good fortune, has been less taken notice of. It is, however, if possible, still more universal. (HW, I.X.b.26.) Now if we compare the form of this argument with that of the invisible hand passages the structural similarity is clear. Here again we have the self-interested actions of individuals furthering the social purpose, and here again we have the element of deception where people over-estimate the value of the rewards they strive for. As before, this illusion is partly recompensed by the non-pecuniary gains derived from public acclaim. Such acclaim appeals to the vanity and can, on occasion form the major part of our total reward; for example, ‘in poetry and philosophy it makes almost the whole’. There is, of course, nothing ad hoc about the role vanity plays in the deception theory. As we saw in C hapter 2, the vanity-pride-magnanimity sequence is one of the two links between the individual and the social, and as such is a fundamental part of Smith’s metascientific world-view. This being the case, there is nothing surprising about the fact that he should hold that a substantial part of our subjectively perceived ‘income’ should accrue in terms of public acclaim. The element of deception is not confined to wage and salary earners; the owners of capital are similarly prone to illusion, for: The apparent difference, besides, in the profits of different trades, is generally a deception arising from our not always distinguishing what ought to be considered as wages from what ought to be considered as profit. (WW, I.X.b.34.) Further, we do not only tend to over-estimate the rewards from 133

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a particular employment or venture, but also to under-estimate the associated dangers. This, says Smith, is why most people do not insure their houses against fire, and it is also why young men join the army, for they ... figure to themselves, in their youthful fancies, a thousand occasions of acquiring honour and distinction which never occur. These romantick hopes make the whole price of their blood. Their pay is less than that of common labourers, and in actual service their fatigues are much greater. (W N , I.X.b.30.) This passage shows again that ‘vanity’ makes up a substantial part of their reward, but that even this is largely illusory.5 This then is the deception theory, and I think that enough has been said to show that the invisible hand m etaphor is merely an illustration of this more general theme, and not in itself a separate principle, or mechanism.6 This view finds further support when we come to examine the one other explicit reference to the invisible hand that Smith made in his surviving written work. It is worth quoting at length: Hence the origin of Polytheism, and of that vulgar superstition which absorbs all the irregular events of nature to the favour or displeasure of intelligent, though invisible beings, to gods, daemons, witches, geni, fairies. For it may be observed, that in all Polytheistic religions, among savages, as well as in the early days of H eathen Antiquity, it is the irregular events of nature only that are ascribed to the agency and power of their gods. Fire burns, and water refreshes; heavy bodies descend and lighter substances fly upward by the necessity of their own nature; nor was the invisible hand of Ju p iter ever apprehended to be employed in those matters. But thunder and lightning storms, and sunshine, those more irregular events were ascribed to his favour, or his anger. M an, the only designing power with which they were acquainted, never acts but either to stop, or to alter the course which natural events would take if left to themselves. Those other intelligent beings whom they imagined, but knew not, were naturally supposed to act in the same m anner ... (EPS: Astronomy, pp. 49-50.)

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This passage is rich in meaning and appears to have close links with Smith’s epistemological perspective (Chapter 3). For the present argument, however, two points seem to be of relevance: Firstly, the role of the invisible hand depicted here is diametrically opposite to that of the invisible hand of the Theory ofM oral Sentiments and the Wealth o f Nations. There it is presented as a permanent, if recondite, law of nature, that steadily guides the overall actions of men. Here it is the irregular events of nature that are explained by reference to the invisible hand.7 Smith has thus used the same m etaphor in a distinctly different way, which tends to support the view that the m etaphor itself has little significance for him. Secondly, the appeal to the invisible hand is seen by Smith as being the result of ignorance and superstition, and, as the rest of the essay makes clear, he sees its role diminishing as men learn, through experience, to subsume more and more of natural phe­ nomena, under general laws. This passage is of crucial importance in that it has strong implications concerning the status of the other two invisible hand passages; is it likely that Smith, who here says clearly that explaining natural events in terms of the invisible hand, is the result o f‘vulgar superstition’ and inadequate science, would himself employ exactly the same metaphor in a key position in his own work? If this line of argument is accepted, we can ignore the metaphor itself, and analyse the mechanism it is intended to illustrate as part of Smith’s overall treatm ent of unintended consequences, in what has here been called his deception theory. W hat then, is the relationship between Smith’s deception theory, and his scientific model? One possible interpretation is to see the deception theory as an ad hoc, and largely metaphysical mechanism, which is brought in to support Smith’s scientific analysis, in an effort to remedy some of its defects. Such a view has been taken by Macfie,8 who has argued that there is a conflict in the Theory o f Moral Sentiments between the optimism of the progressive dynamics implicit in Smith’s system, and the harsh facts of eighteenthcentury British society. In his view Smith saw that the ‘self-love’ of the Theory o f Moral Sentiments and the ‘self-interest’ of the Wealth o f Nations were both too strong for the social checks which his model proposed, and he thus introduced an additional safeguard.9 This mechanism, says Macfie, unlike the rest of Smith’s work, does not have (inductive) scientific status — it is a deductive argument, and as such does not (and cannot) receive any logical

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justification. The consequences are unfortunate in that the balance of Smith’s ethical system, and to a lesser extent his economic system, is badly affected, and further, ‘theistic platitudes’ replace what should be a systematic analysis of ultim ate ends. This interpretation seems to me to over-emphasise the effects of the deception theory on Smith’s scientific perspective. His model provides us with a detailed specification of the forces that will keep self-interest in check and there seems to be no reason why Smith should have felt them to be inadequate. Indeed, the decep­ tion theory does not seem to me to be something additional to these forces, but rather a series of statements to the effect that men are unaware of them, so that they are, in this sense, unintended consequences. Further, whilst it is true that Smith does on occasion resort to ‘theistic platitudes’ — a not uncommon convention in British eighteenth-century writing10 — there is little evidence to support the view that they interfere with his scientific analysis. It is also of significance that, in his final revision of the Theory o f Moral Sentiments, Smith reduces considerably the incidence of such platitudes, with no loss to the overall cogency of his system. It is possible that Macfie has modified his position on this issue, for when we turn to the discussion of ‘deception’ presented by Raphael and Macfie, in their Introduction to the Moral Sentiments,11 we find that they lay considerably less stress upon the effects of the deception theory on Smith’s science, than Macfie did in his earlier work. They hold that Smith’s introduction of the invisible hand, ‘... may have sprung from an uneasiness about the reconcili­ ation of selfishness with the perfection of the system’ (p. 8), but also that: In itself the idea of deception by an invisible hand is unconvincing. It gains its plausibility from the preceding account of aesthetic pleasure afforded by power and riches, a pleasure that is reinforced by the adm iration of spectators. Smith himself clearly set most store by the psychological explanation. (Ibid.) They hold that: Stoic philosophy is the prim ary influence on Sm ith’s ethical thought, [and that] it also fundamentally affects his economic theory (p. 5).

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On this view, ultimate values for Smith are bound up with Roman interpretations of the Stoic conception of cosmic harmony, and the associated theme of hum an universalisation within a system of natural law. The influence of Stoic philosophy upon Smith seems beyond dispute, and one could indeed argue that the criteria by which he evaluates both scientific models and social institutions — coherence, generality etc. — have clear antecedents in the writings of M arcus Aurelius and Cicero. Take, for example, Cicero on this theme: ... everyone ought to have the same purpose: to identify the interest of each with the interest of all. Once men grab for themselves, hum an society will completely collapse. But if nature prescribes (as she does) that every hum an being must help every other hum an being ... then all men have identical interests.12 Given this argument, we could then push the interpretation a little further by arguing that the im partial spectator, in applying these criteria is in fact making ultimate reference to a system of natural justice, which transcends the limitations of context and is in this sense universal. This would seem to imply that in as much as there can be a long-run, objective scale of values, it is that of God, or Nature, and not that of m an.13 Smith’s dynamics would then seem to have much in common with those of Hegel, where the long-run objective values are grounded in a Reason that, whilst embodied in hum an society, has an autonomy that transcends context. Smith’s deception theory would then be the analogue of Hegel’s ‘cunning of Reason’, which holds that men are deceived into accepting as objective, structures which they themselves create, and that such deception promotes the ultimate development of Reason. This view would seem to offer an answer to the first of the questions that was raised above and at least the beginnings of an answer to the second. Such an interpretation has plausibility and in the absence of any strong counter evidence, can certainly not be rejected out-ofhand. There is indeed, some textual support for the position, in that Smith on occasion makes use of the concept of natural justice that would seem to imply some transcendental objectivity. For example, when discussing the issuing of promissory notes by bankers, he says

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... to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty which it is the proper business of law, not to infringe, but to support. (fVN, I I .11.94. See also I.X.c.59 and IV.IX.51.) Despite such support, I have reservations about this perspec­ tive, mainly because it seems to imply that Smith has an overall view of nature that is distinctly at odds with his detailed mode of scientific explanation. The main point of the Theory o f Moral Sentiments is to establish a system of ethics that is man-centred, being rooted in concrete explanations of hum an interaction. As K nud Haakonssen has pointed out: Nothing hinges on teleological explanations and thus on the guarantor of teleological order. I think it is safe to say that wherever a piece of teleology turns up in Smith, it is fairly clear where we have to look in order to find a ‘real’ explana­ tion in terms of what we might broadly call efficient causes.14 Whilst it is possible to offer a detailed explanation of hum an institutions which is based upon anthropocentric efficient causes, and at the same time accept a transcendental system of natural justice, it is at best an uneasy juxtaposition. Cam pbell15 has taken a somewhat different perspective of the role of ultim ate values in Smith’s work. He holds that Smith’s teleology is a form of utili­ tarianism, in that the overall functioning of the system is evaluated in terms of its contribution to hum an happiness. This, says Campbell, is the ‘... metaphysical belief which lies behind his science of society ...’ (p. 206), so that: Utility is ... very much the meta-principle for Smith. It is to be found at the basis of his whole moral outlook, but it operates most typically at the level of contemplation when men adopt a God’s-eye view of society ...’ (p. 219.) However, Smith himself explicitly rejects the view that utility is a ‘principle source of our approbation and disapprobation’ and gives two reasons for doing so. Firstly, that ... it seems impossible that the approbation of virtue should be a sentiment of the same kind with that by which we 138

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approve a convenient or well contrived building; or that we should have no other reason for praising a man than that for which we commend a chest of drawers.16 ( TM S, IV.ii.3.4.) and secondly, that, as a m atter of fact ‘... the sentiment of approbation always involves in it a sense of propriety quite distinct from the perception of utility.’ (TM S, IV.ii.3.5.) Whilst I accept that Campbell is using the notion o f‘utilitarian­ ism’, not to describe Smith’s view of the grounds of our ‘approba­ tion of virtue’ but rather to describe the way in which Smith makes judgem ents as to the adequacy of our moral and political principles I still find it hard to reconcile his claim with the quoted passages. T hat is to say, it seems improbable that Smith would adopt as his ‘m etaprinciple’ the same standard by which he would ‘commend a chest of drawers’. This is not, of course, to claim that utility has no role to play in Smith’s model. He in fact links utility to aesthetic satisfaction, holding that ‘... utility is one of the principle sources of beauty ...’ (TM S, IV .i.l) and that, ‘... the fitness of any system or machine to produce the end for which it was intended, bestows a certain propriety and beauty upon the whole ...’ (Ibid.) One could interpret this as implying that, when we take what Campbell calls a ‘God’s-eye-view’, we can evaluate the overall long-run development of hum an society in terms of its ‘fitness5 to promote hum an happiness. This could in turn be taken as imply­ ing some sort of Benthamite metaprinciple, with hum an happiness being the ultimate goal. Such an interpretation does not, however, appear to stand up to close scrutiny. For a start, Smith makes it clear that the ‘fitness’ is more valued than the end that it promotes (TM S, IV. 1.3) and he illustrates the point with two everyday examples, before asking ... How many people ruin themselves by laying out money on trinkets of frivolous utility. W hat pleases these lovers of toys is not so much the utility as the aptness of the machines which are fitted to promote it. (TM S, IV .i.6.) and he goes on to point out that this is also true of the ‘most serious and im portant pursuits’ (TM S, IV .i.7). If this is so, our utilitarian metaprinciple appears to be relatively unim portant, and the aesthetic standards of propriety and beauty become the key issues. 139

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Further, Smith further illustrates the theme by giving one of the classic illustrations of his deception theory; the poor m an’s son ‘... whom heaven in its anger has visited with ambition ...’ He devotes his life to attaining wealth and power, only to find in old age that their benefits are largely illusory. We are charmed, says Smith ‘... with the beauty of that accommodation, which reigns in the palaces and economy of the great ...’ But: If we consider the real satisfaction which all these things are capable of affording, by itself and separated from the beauty of that arrangem ent which is fitted to promote it, it will always appear in the highest degree contemptible and trifling. ( T M S , IV.i.9.) It is again ‘beauty of arrangem ent’ that is central, and the utility which was the goal of all the poor m an’s son’s endeavour, is shown to be not only trivial, but illusory. All of this would seem to lead us to the conclusion that, in so far as there are, for Smith, any m etastandards of evaluation which transcend the limitations o f ‘context’, they are the aesthetic criteria of fitness and propriety. If the analogy holds, the ‘end’ — be it hum an happiness, Reason’s self-realisation or the fulfilment of N ature’s plan — would appear to m atter little. This seems rather strange, but the perspective has, in fact, a close analogy in Smith’s treatm ent of social structures. As we saw (Chapter 5), it is not any particular set of institutions and conventions that makes society possible, but the process of sympathetic interaction by which such structures are formed. In so far as standards of evaluation are available, they are aesthetic, being expressed in terms of coherence and generality. In the present context, we seem to be saying that it is not any specific ‘end’ of hum an evolution that is im portant, as much as the aesthetic qualities of the overall process by which such evolution takes place. If this is correct, then we would appear to be justified in claiming that, as far as his scientific perspective is concerned, Smith does not have a teleology. If this view is accepted, however, we are still faced with trying to answer the two questions raised at the beginning of this chapter concerning links between the short-run and the long-run in Smith’s model. In the remainder of this chapter, I shall apply the overall interpretation of Smith as presented so far in an attem pt to provide some tentative answers 140

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to these questions. Let us begin with rationality. In C hapter 4 it was argued that Smith rejected the reified Rationality o f ‘ethical rationalism’, and worked with a much more restricted conception of reason, which sees it as the act of low-level judgem ent implicit in sympathetic interaction. This process of judging, which I have called ‘practical reasoning’ is responsible for the progressive element in sympathe­ tic interaction, and guides the qualitative transition from one contextual framework of social structures to the next. For the present purpose it is crucial to recognise that it is firmly rooted both in hum an nature, and in the nature of hum an social inter­ action. Smith has thus denied the duality of reason and the passions by providing a dialectical model of how they are related in the process of sympathetic interaction, which is itself located in a progressively developing context. This means that not only self-interest but also the changing institutional structures which will restrain and channel it, are located firmly in hum an nature and hum an rationality. This seems to me to provide the beginnings of an answer to the questions with which we started, in that there is no inconsistency between self-interest and long-run social evolu­ tion. They shape and support each other, and have common roots. It is, in fact, possible that underlying Smith’s scientific model, we have a metascientific view of hum an potential. If so, the long-run can be seen as the process during which this potential can be realised. T hat is to say, a society which develops along the ‘natural’ path will, as the division of labour proceeds, provide a vehicle for the realisation of the best that hum an beings are capable of achieving, given the nature of both their passions, and their rationality. Such a process should not be seen as deterministic; there is a broad range of alternatives within ‘the natural’, and social estrangement, individual peculiarities, and the vagaries of ‘fortune’ can all hinder, if not prevent, potential being translated into actual. Nor can we identify the full realisation of potential with perfection; Smith is too cynical of hum an frailty to have made such an identification, and it seems probable that he would regard hum an potential as somewhat limited. If this view is accepted, Smith’s model appears to have rejected any form of teleological explanation, in so far as this is taken to mean that a specific goal is postulated. Instead he works with explanations in terms of efficient causes, but there is an implicit metascientific assumption to the effect that society should be allowed to develop so as to realise hum anity’s full potential. It is 141

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not any particular end that is im portant here but rather the process of development, and much of Smith’s work can be interpreted as being aimed at ensuring that this process is not artificially restricted. This whole interpretation is highly speculative, but if we accept it for the moment, it has some interesting implications for Smith’s distinction between ‘actual’ and ‘natural’. Natural can now be taken to mean not ju st ‘optimal’ but rather ‘consistent with the unrestricted development of long-run hum an potential’. This view finds some support in the fact that Smith very frequently presents his accounts of violations o f ‘natural liberty’ when he is discussing artificial restrictions on the development of the division of labour.17 Further, we frequently find a similar linking of ‘natural price’, with the optimum development of the division of labour, as, for example, in the Lectures on Jurisprudence (1766) where he says ... W hen men are induced to a certain species of industry rather than any other they must make as much by the employment as will m aintain them while they are employed. (LJ: 1766, p. 494 et seq.) and, A man then has the natural price of his labour when it is sufficient to m aintain him during the time of labour, to defray the expense of education, and to compensate the risk of not living long enough and not succeeding in the business. When a man has this, there is sufficient encouragement to the labourer and the commodity will be cultivated in propor­ tion to the demand, (ibid.) Whilst I would not wish to push this interpretation too far, it seems to me that most of Smith’s discussions of ‘natural’ and ‘actual’ can be fitted rather well into its general perspective. It also enables the deception theory to be restated in terms which avoid at least some of its apparent contradictions. Smith can then be seen as saying that the nature of hum an passions and propen­ sities, together with the interacting nature of hum an rationality, will, if allowed to follow their natural path, as the division of labour proceeds, produce a society that gives full realisation to hum an potential. In any specific short-run setting, the individual, motivated by the passions, will be largely unaware of his role in 142

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creating the social fabric that translates his self-interest into socially beneficial activity. The passions are strong, and immedi­ ate, in each individual, whilst his contribution to the totality of the long-run process is minute. The m erchant who employs his capital so as to maximise his own security, is well aware that this will further his own selfinterest, but is, in general, unaware of his contribution to the long-run evolution of hum an society. But he, like those that went before him, has helped to construct the social order that renders his actions beneficial in their short-run setting, and his interaction with his fellow men will continue the process of long-run develop­ ment. It is in this sense that reason-guided, purposive, hum an action is consistent with the notion of unintended consequences. Further, since the overall process is not goal directed, there can be no ex ante specification of ends. The average man cannot, therefore, see the shape of the overall process, and has in any case, no metacontextual standards by which to assess its adequacy. Even those whose task it is to legislate, must evaluate their efforts in terms of their coherence relative to an existing network of social structures and thus make decisions which are unintended conse­ quences as far as long-run processes are involved. It seems probable, however, that Smith sees the role of ‘philosophy’ as transcending some of these limitations. By taking a ‘philosopher’s eye’ view, we can discern the overall process, and evaluate its aesthetic qualities. The philosopher does not have any special access to criteria that will enable ‘ends’ to be specified or evaluated, but has the detachm ent to see the ‘fitness’ of the system as a vehicle for hum an self-realisation. This interpretation tends to raise more questions than it answers, and I suspect it also imposes upon Smith a spurious concreteness of approach in that it tends to make explicit notions that are only implicit in his treatment. It is, therefore, offered not so much as a resolution of the problems in Smith’s treatm ent of deception, but rather as a tentative suggestion as to how these problems might usefully be approached.

Notes 1. M. Blaug, Economic Theory in Retrospect (Irwin, Homewood, 111., 1962). See also J.J. Spengler, ‘The invisible hand and other matters’, American Economic Review (1977).

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Purposive Action and Unintended Consequences 2. Indeed, if we examine the quoted passage more closely, we can detect its generality, for Smith says that not only in this case, but ‘in many other cases’ the individual is led by an invisible hand. Interestingly, a similar perspective is to be found in Gibbon, who writes: ‘... in the present imperfect condition of society, luxury, though it may proceed from vice or folly, seems to be the only means that can correct the unequal distribution of property. The diligent mechanic and the skillful artist, who have obtained no share in the division of the earth, receive a voluntary tax from the possessors of land; and the latter are prompted, by a sense of interest, to improve those estates, with whose produce they may purchase additional pleasures.’ E. Gibbon, Decline and Fall o f the Roman Empire (1776) (Chatto & Windus, London, 1960), p. 28. 3. The ‘paradox’ itself was not original to Smith, and was in fact something of a commonplace in eighteenth-century writing. 4. J. Laird, The Idea o f Value (Cambridge University Press, Cambridge, 1929). 5. A similar deception is to be found in the exaggerated respect we have for the great and powerful — cf. for example: T M S, I.iii.2.4 et seq; I.ii.3.3 et seq; and IV.I.8. Also L R B L , p. 124, where Smith says: ‘... we are apt to pay great respect and attention to our superiors, however unworthy.’ 6. The metaphor itself has however captured much of the attention of commentators on Smith, as the editors of the Glasgow edition of the T M S point out. D.D. Raphael and A.L. Macfie, Theory o f M oral Sentiments (Adam Smith) (Oxford University Press, Oxford, 1976), p. 7 et seq. 7. P.L. Macfie makes this point in his paper, ‘The invisible hand of Jupiter’, Journal o f the History o f Ideas (1971) where he says: ‘... the capricious role of the invisible hand of Jupiter is quite different from that of the order preserving invisible hand of the two books ...’ 8. A.L. Macfie, The Individual in Society, op cit. A similar view has been expressed by Walton and Gamble, From Alienation to Surplus Value (Sheed & Ward, London, 1972). 9. Homa Katouzian supports this view. He sees inconsistencies within the Wealth o f Nations, and says that: ‘... even a cursory study of The Wealth would reveal the indispensability of the “invisible hand” to its main arguments,’ and that: ‘the absence of restraint uniformly promotes the good of the society in all aspects of production; but conflicts arise when the product is shared out.’ H. Katouzian, Ideology and Method in Economics (Macmillan Press, London, 1980). 10. Indeed, even David Hume, who was as clear an atheist as the eighteenth century ever produced, was not above the occasional theistic platitude. Gay, for example, has pointed out that in his Natural History Hume ‘pretends to subscribe to the argument from design’ when he writes, ‘... a purpose, an intention, a design is evident in everything.’ P. Gay, The Enlightenment, An Interpretation (2 vols., Wildwood, London, 1970), vol. 1, p. 413. 11. D.D. Raphael and A.L. Macfie (eds), The Theory o f M oral Sentiments (1976), op cit. See note 6. 12. Cicero, Selected Works (Penguin, Harmondsworth, 1960), p. 168. 13. Werner Stark has claimed that: ‘The eighteenth century as a whole

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stood half-way between theism and atheism. On the one hand, it was not yet willing to abandon the faith in a beneficent divine order, but on the other it was no longer satisfied with proofs which ended in the transcendental. Tangible arguments were demanded and tangible arguments were supplied.’ W. Stark, The Ideal Foundations o f Economic Thought (Kelley, London, 1976). 14. K. Haakonssen, The Science o f a Legislator (Cambridge University Press, Cambridge, 1981), p. 77. 15. T.D. Campbell, Adam Smith’s Science o f Morals (Allen & Unwin, London, 1971). 16. There is a note of irony in this passage which appears to be directed at Hume, who claims that the source of approbation of ‘a convenient house, and a virtuous character’ is the same even though our feelings of approbation may seem to differ. D. Hume, A Treatise o f Human Nature (Penguin, Harmondsworth, 1969), p. 617. 17. Consider, for example, the whole sequence in the Wealth o f Nations, from I.X.c.40 to the end of the chapter where Smith discusses restrictions o f‘the free circulation of labour from one employment to another’.

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8 Economic Concepts and Historical Dynamics

In this chapter we return to rather more concrete matters, the aim here being to use the interpretation as so far developed to provide a detailed re-evaluation of Smith’s handling of some specifically ‘economic’ concepts. We will, therefore, be looking at his treatm ent of topics such as the formation of factor prices, capital accumulation, profit, innovation, tastes and utility. In the process of this examination it will be suggested that, if the present perspective is accepted, the meaning of many of Smith’s economic ideas undergoes a subtle but extremely im portant transformation. It will be convenient to approach these topics by using the distinction developed above, between Smith’s ‘general theory’ of historical evolution and his ‘special theory’ of the development of a commercial market economy. The broad outlines of his approach can be sketched in at the level of the general theory, and the fine detail and institutional content added at the level of the special theory. We can begin therefore by looking at what he has to say about the first of the ‘four stages’ of historical development; the stage of hunting and gathering.1 Here the inhabitants ‘... would support themselves by the wild fruits and wild animals which the country afforded.’ (LJ\ 1762-63, p. 14.) In this type of society there is little scope for the division of labour, firstly because it is a subsistence economy with little or no surplus produce, and secondly because the size of the market is extremely limited in that: ‘The precarious subsistence which the chase affords could seldom allow a greater num ber [than two or three hundred] to keep together for any considerable time.’ (W N , V.I.a.5. See also L J : 1762-63, p. 213.) 146

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If we recall that the division of labour is limited by the extent of the market, it becomes clear that there is little possibility of specialisation at this stage so that there is a strong tendency for all the inhabitants to perform similar tasks. There is no capital at this stage of development and no private property in land, so that the only ‘factor income’ is that of the hunter himself who receives the whole produce of his labour with no deductions to cover rent or profit ( WN , I.V I.4). In so far as there is any exchange (which of course implies some degree of specialisation) it is by barter, and the ‘prices’ of commodities are directly proportional to the labour embodied in producing them.2 There will be no taxation other than the sharing of any small surplus with the chief, who will normally be democratically elected, and there will be virtually no ‘government’ intervention. (LJ: 1762-63, p. 201.) Given this economic structure, it is not surprising that: ‘Universal poverty establishes there universal equality, and the superiority, either of age, or of personal qualities, are the feeble but sole foundation of authority and subordination.’ (W N, V.I.b.7.) Because of the effects of their relatively varied occupations within the narrow limits generated by the specific form of economic organisation (see C hapter 6 and also WN, V .I.f.51), its inhabitants will be sharp-witted and well suited to the challenges offered by their precarious way of life. Clearly, ‘tastes’ in such a society will be heavily conditioned by the near subsistence living standards, and there will be little room for any form of discretion as to choice of goods. Whilst Smith does not make the point explicit, from a purely logical point of view we may presume that, because of the binding scarcity constraint, the exchange values of goods will be closely related to the ‘objective’ long-run scale of values. T hat is to say, that the subjective valuation of goods which permits exchange to take place3 will be biologically based, rather than shaped by the customs and fashions which become im portant in a more advanced society. Smith considers that such a society will have institutions and laws, generated by, and appropriate to, its level of economic organisation. There will be little government activity, property laws will extend only to those goods in an individual’s possession at a given time (LJ: 1762-63, p. 107-8) and there will be no system of inheritance. ‘In the age of hunters there could be no room for succession as there was no property. Any small things 147

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such as bows, quiver etc., were buried along with the deceased’ (.LJ : 1762-63, p. 40). This then is the static depiction of a society in the very early stages of hunting and gathering; it is now necessary to add the dynamic element and to trace (still at the level of the general theory) the evolution of such a society through the stages of pastur­ age and agriculture and on into a market economy. As a first step it should be noted that (unlike M arx), Smith does not postulate a sudden transition from one stage to the next. His model is best regarded as a taxonomic representation of gradual qualitative change in which each static historical stage is an ‘ideal type’ which will be encountered in reality only on rare occasions. The typical society will be in a gradual process of transition from one stage to the next, and to the people living in that society the dynamic process will be almost imperceptible. We must also remember that the model presents us with the natural, or optimal, path of development, but that, because of the presence of social estrangement, and the varying political and legislative responses to it and because of the more or less random effects of fortune which may only be partly countered by wise statesmanship, the actual path followed by any particular society will, typically, diverge from the natural. W ith this in mind we can introduce the dynamic element by looking at what Smith says about how one stage gradually evolves into the next. As the age of hunters develops the population will gradually increase until — in what might be called the late hunting stage — the pressure of numbers on limited natural resources becomes too great for subsistence. Then: ... they would be necessitated to contrive some other method whereby to support themselves. (LJ: 1762-63, p. 14—15) and The most naturally contrivence [sic] they would think of, would be to tame some of those wild animals they caught, and by affording them better food than what they could get elsewhere they would enduce them about their land them­ selves and multiply their kind. Hence would arise the age of shepherds, (ibid.) The animals chosen for domestication will obviously be those 148

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most useful to man and will include sheep, horses, oxen and camels (LJ: 1762-63, p. 202). In its early stages such a society would still be nomadic, moving on as the grazing became exhausted, but in its later stages, where some agriculture was being introduced, the shepherds, whilst still primarily dependent upon their flocks, would occupy a more or less fixed area of land. During the age of shepherds the concept of private property is considerably widened. Previously it referred only to resources actually in one’s possession, the only extension being to animals that were being chased under conditions of hot pursuit. Now, however, the existence of large, domesticated flocks and herds makes an extension of ownership essential and: They considered, therefore, all animals to remain in the property of him to whom they appertained at first, as long as they retained the habit of returning into his power at certain times. (LJ: 1762-63, p. 20.) However, the concept of private property was not at this stage extended to land, which was still regarded as being held in common, and Smith explains that this was due to the fact that the shepherds, even when they ceased to be nomadic, moved their flocks from time to time as the pasture became exhausted. For this reason, land tenure, as far as it existed at all, did not extend beyond the actual occupation of a given pasture. No land rent would be paid at this stage of development, but in the natural course of events, some individuals would accumulate large flocks, whilst others would own none. This inequality of fortune resulted in the poor being dependent upon the rich for their subsistence and: ‘The rich therefore, as they maintain and support those of the poorer sort out of the large possessions which they have in herds and flocks, require their service and dependence.’ (LJ: 176263, p. 202-3) and Smith makes it clear that the power of the rich over the poor is greater during this historical stage, than at any other; indeed the coming of the exchange economy, by replacing outright dependency with the market mechanism in large measure gave a degree of emancipation to the poorer classes (LJ: 1762-63, p. 202-3). This inequality of fortune is im portant in the context of Smith’s overall perspective because, by concentrating the fruits of the increased division of labour, it creates the potential for capital 149

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accumulation, but the existence of a wealthy, property-owning class makes it possible. Indeed it is this potentiality that makes Smith regard the inequality of wealth as being socially acceptable in the long run, in that it contains the seeds of progress. For this reason there is no real conflict between his view of the oppressive nature of property laws, and his overall optimism concerning social progress. At this stage, however, the surplus is used unproductively, to m aintain dependents, rather than to reproduce itself with a surplus. This accumulation in turn makes possible a further extension of the division of labour, for: As the accumulation of stock must, in the nature of things, be previous to the division of labour, so labour can be more and more subdivided in proportion only as stock is pre­ viously more and more accumulated. ( W N , Book II, Introduction, Section 3.) Smith also links the form of government to this system of economic organisation, considering that it will be a democracy, but that the rich, by virtue of their power over their numerous dependents will have effective control. The legal system will also have been modified to suit the chang­ ing needs of the new form of economic organisation in that the right to property will now be firmly reinforced by law for ‘... when in the m anner above mentioned some have great wealth and others nothing, it is necessary that the arm of authority should be continually stretched forth ...’ (.LJ : 1762-63, p. 208) to protect the property of the rich from the poor, and: ‘Laws and government may be considered in this and indeed in every case as a combination of the rich to oppress the poor, and preserve to themselves the inequality of the goods’ (L J : 1762-63, p. 208-9). In addition, laws of inheritance are introduced, although of a somewhat rudim entary nature. As Smith puts it: In the age of hunters there could be no room for succession as there was no property ... In the age of shepherds when property was greatly extended, the goods the deceased had been possessed of were too valuable to be all buried along with him. (LJ: 1762-63, p. 38-9.) However, despite the relative sophistication of the legal frame­ work in the age of shepherds, there would not yet be any written 150

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code of laws. Laws would be customary and subject to variation as circumstances made it expedient. He holds that a written system of law requires great authority on the part of the government, in that it lays down absolute standards which must be enforced without regard to particular circumstances. Such authority is lacking in the age of shepherds, and is only to be found after the ‘appropriation of lands’ (LJ: 1762-63, p. 213) — i.e. well into the third stage of historical evolution when agriculture becomes the dom inant mode of production. It is partly because of the need for the enforcement of property laws that government activity becomes much more im portant at this stage, so that: ‘The age of shepherds is where government properly first commences.’ (LJ: 1762-63, p. 202) — but it is also, in part, a response to the increased interdependence of individuals within society. The division of labour has progressed a little and specialisation implies a degree of dependence upon others, so that the more or less self-sufficient hunter has been replaced by the dependent herdsman or labourer, and the equally dependent property owner, who relies upon the labour of others for his subsistence. In such a society there is no need for any formal system of taxation; the rich administer the law to suit their own purposes, and defray any incidental expenses out of their own pockets. It is only after the appropriation of land that the expenses of government attain such a magnitude as to make a formal system of taxation necessary (LJ: 1766, p. 309). At this stage of development tastes still play a minor role in the production and allocation of goods, although they now have more importance in determining which services are to be produced. As Smith puts it: ... in the early periods, when arts and manufactures are not known and there is hardly any luxury amongst mankind, the rich man has no way of spending the produce of his estate but by giving it away to others, and these become in this m anner dependent upon him. (LJ: 1762-3, p. 202.) Further, we see that in the age of shepherds there was no need for the social institution of money. In the absence of any general­ ised system of exchange, and given that the division of labour has not progressed so far as to make barter (or the allocation of goods by custom) unwieldy, cattle themselves are an adequate measure 151

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of value. In the development of this dynamic process of social evolution from the late hunting stage to the late pastoral stage, population has again increased, and towards the close of the era is again pressing urgently upon resources. This pressure is alleviated by a further qualitative transition, for when society found ... a difficulty in supporting themselves by herds and flocks ... they would naturally turn themselves to the cultivation of land and the raising of such plants and trees as produced nourishment fit for them. (L J : 1762-63, p. 15.) — in short, society would enter the third stage of historical development; that of agriculture. In this era there are very great extensions to the notion of property (LJ: 1762-63, p. 20) and, in particular, land comes to be regarded as private property. The inequality of fortune established in the age of shepherds persisted, and indeed was in some cases extended, for even those who owned cattle had to get ‘... liberty to pasture them from some great lord.’ (LJ: 1762-63, p. 245.) This ‘liberty’ would only be granted upon paym ent of rent, so that for the first time we have a land-owning class living upon the proceeds of their property. One result of this appropriation of land was that there were further changes in the institutional framework of society so that, for example, the laws of inheritance were extended and strengthened, and similar changes took place with the laws of accession, for: Tho the opportunities of accession are but very few in the age of shepherds, yet they multiply to a num ber almost infinite when agriculture and private property in land is introduced. (LJ: 1762-63, p. 27.) Further, at least in the later stages of agricultural society, this extended legal infrastructure becomes formalised into a body of written law, binding upon all irrespective of circumstances (LJ: 1762-63, p. 213). The increased division of labour possible in a settled agricutural community resulted in a greater volume of surplus produce, and this in turn led to an extension of the system of exchange, although this was still localised, for the agricultural worker requires

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... little more than the custom of one, two, or, at most, of four families as his own, in order to dispose of the whole produce of his own labour. Agriculture, therefore can support itself under the discouragement of a confined market, much better than manufactures. ( WN , IV.IX.45.) Despite this, however, there are limitations upon how far the division of labour can be pushed in an agricultural society since the seasonal nature of the employment means that each labourer must in turn be ‘... plower of the land, sower, harrower, reaper and thresher of the corn [which] renders it impossible that the improvements in agriculture should ever keep pace with those in the manufactures.’ (L J : 1762-63, p. 211.) During this period, despite the greatly increased surplus, capital accumulation is very slow: only towards the end of the era does it accelerate, and then it accumulates, not in the hands of the land-owners, but in those of the new class of capital-owners. Smith holds that land-owners are by nature profligate, this being largely due to the fact that: They are the only one of the three orders whose revenue costs them neither labour nor care, but comes to them, as it were, of its own accord, and independent of any plan or project of their own. ( WN , I.X I.p. 10.) and since, like all the other members of society they are shaped to a considerable degree by the nature of their labour, they become indolent, ignorant and incapable o f‘applying their minds’ (ibid). Along with these changes we find that the government plays an ever-increasing role in regulating the activities of society. In discussing government expenditure Smith puts it thus: There are many expenses necessary in a civilised country for which there is no occasion in one that is barbarous. Armies, fleets, fortified places and public buildings must be supplied, and if they be neglected, disorder will ensue. (LJ: 1766, p. 310.) In the early stages of agriculture the expenses of government could be met by setting aside a proportion of the land for ‘the m aintenance of government’ (ibid., p. 309) but Smith considers

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that such a policy becomes severely inadequate in the later stages of agriculture, since he holds that government-farmed land, lacking the discipline of competition, would be less productive than that in the hands of private land-owners, and thus ‘one cause of the slow progress of opulence’ (ibid). As the division of labour is gradually extended in the agricul­ tural stage, there is a considerable improvement in productivity so that it is no longer necessary for the majority of the population to work on the land. The workers thus released specialise in various branches of manufacture and construction, becoming ‘... smiths, carpenters, wheel-wrights and plough wrights, masons and bricklayers, tanners, shoemakers and tailors’ (W N , 111.1.4) — who enter into reciprocal trading with farmers. In the natural course of events, such artificers tend to collect together, their hamlet becomes a village. Then later: ‘The butcher, and the baker, soon join them, together with many other artificers and retailers necessary or useful for supplying their own occasional w ants’ (ibid.) — so that the village becomes a town. We thus have a two-sector economy in which basic subsistence is produced by the country and exchanged for the ‘convenience and luxury’ of manufactured products produced by the towns. This qualitative transition benefits all, says Smith: The gains of both are m utual and reciprocal and the division of labour is in this as in all other cases advantageous to all the different persons employed in the various occupations into which it is subdivided. (fVN, I I I.I .l.) There is, towards the end of the agricultural stage, a significant quickening in the pace of development; prior to the growth of manufactures the limitations upon the division of labour imposed by the seasonal nature of agriculture constituted a brake upon its progress. But in the manufacturing sector no such check existed and the division of labour could thus proceed at an ever accelerat­ ing rate. The products of the towns in turn improved th e per capita output of the land, facilitating the further migration of potential craftsmen to the towns, and these, by swelling the market for town-produced goods, enabled specialisation to be pushed still further. The passages describing this whole process are amongst the clearest examples of Smith’s dialectical approach, with the division of labour being shown to be both cause and effect of the dynamic development. 154

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Once the towns are well established we are at the stage of an embryonic market economy and an analysis of this fourth stage requires a shift of perspective, from the level of the general theory to that of the special theory. Before making that transition however, one task remains, which is to examine the role of demand forces in shaping the pattern of development. In the early stages of agriculture surpluses had been used by the land-owners to m aintain an ever-growing army of servants, quite literally because there was no other way in which the surplus could be consumed ( W N, III.IV .5). This labour was ‘unproductive’ in Smith’s sense of the word, but served the longrun development of society by establishing a pool of landless wage-earners from which potential artificers could be drawn. W ith the gradual rise of manufactures, there is an interesting change in the consumption patterns of the wealthy land-owners, for we see a strong shift towards expending surpluses on manufactured goods. Initially, this ‘... taste for finer and more improved m anufactures’ was developed by their introduction from abroad, but in the natural course of events, domestic products soon developed to rival these imports. It is here that the subjective/ objective dichotomy appears to become im portant for the land­ owners proceed to trade their birthright ... not like Esau for a mess of pottage in time of hunger and necessity, but in the wantonness of plenty, for trinkets and baubles fitter to be the play things of children than the serious pursuits of men. (W N , II I.I V .15.) This gap between the subjectively perceived utility of the land­ owner and an implicit long-run scale of values is also clear in a passage which occurs a few pages earlier, where Smith says of the proprietors of land that: For a pair of diamond buckles perhaps, or something as frivoless and useless, they exchanged the maintenance, or what is the same thing, the price of the maintenance of a thousand men for a year, and with it the whole weight and authority which it could give them. (W N, III.IV .10. See also L J : 1762-63, p. 50.) The deception theory is clearly im portant here, for, in seeking to maximise their short-run subjective utility, the land-owners are also, unknowingly, furthering the long-run development of 155

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society. Four aspects of this development can be identified in Smith’s discussion. Firstly, there is a shift in the pattern of demand, away from services and towards manufactured goods. Since the division of labour is limited by the extent of the market, specialisation is promoted in the emergent manufacturing sector, where the potential rewards are greatest. Secondly, men who were previously employed as servants become unemployed, and attrac­ ted by the possibility of work, join the migration from the land to the developing towns. Thirdly, in order to obtain the money to purchase the useless trinkets they crave the land-owners encourage, or at least permit, improvements in agricultural effi­ ciency and there follows a series of legal and institutional changes. For example, in order to persuade the tenant to invest in land improvements, which would permit higher rents, the owners granted longer leases so that there would be time for the capital invested to show a return. The fourth point is more subtle, but is im portant. If we remember that Smith regards the basic wants of men as being easily satisfied, then we can see that demand related to a strictly ‘biological’ set of values would be inadequate to create markets for the potentially enormous flows of m anufactured commodities, implicit in the growth of the towns. The upward shift in the land-owners’ consumption functions is based upon a severely distorted perception of utility, but this divergence from ‘objective’ values is a vital step in the evolutionary process. W hat we see here is in fact an im portant instance of the qualita­ tive change that takes place in Smith’s model as we move to the special theory of market economies. In the earlier stages of society there was little necessity for the various consumption illusions; the need to survive was an adequate spur to effort, and the basic demands of the community could mop up all its output. W ith increased specialisation, however, the rapidly increasing output of society makes necessary the illusions that will ensure an ade­ quate short-run demand, and also motivate people to labour on, once their basic needs are satisfied. This point has been made by Rosenberg, who, writing in 1968, said: It is worth noting that Smith treats taste itself as a phenomenon which becomes im portant only in civilised societies where subsistence is easily acquired. His treatm ent of the conduct of people in savage societies, which are pre­ occupied with producing a bare subsistence, suggests that 156

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they are controlled by social values and attitudes which provide as little scope as possible for the expression of personal tastes.4 Given the present interpretation, we can say that once specialisation is well established, the deception theory becomes a crucial part of Smith’s model; from now on, the long-run evolution of society will depend upon the existence of short-run illusions, which are necessary to motivate the individuals living in any given period. It is worth noting here that tastes are not exogenous, in the usual sense of the word. Here, as always in Smith’s model, there is a dialectical interaction, in that the progressive division of labour in providing the manufactured ‘trinkets’ calls forth a shift in consumption patterns, but, that shift in turn pushes the division of labour even further. Putting that another way, changes in tastes are both induced and autonomous, depending upon which side of the interaction one focuses. This seems odd, if not indeed contradictory, by the standards of contemporary social science but is fully in accord with Smith’s historical dynamics. This transition in the nature of Smith’s model is but one example of a wide range of changes that takes place as his analysis begins to focus on the market economy. As suggested above, what in effect happens is that the division of labour concept picks up a lot more institutional content, so that, what has hitherto been a somewhat skeletal treatment, now takes on a much richer, but correspondingly more complex, form. This I interpret as being quite deliberate; Smith is seeking to depict a qualitative transition to a society which has itself become more complex, and given the nature of his model, it too must change to reflect this fact. One consequence of this enrichment of context is that the range of individual responses is widened, so that any tendency towards economic determinism that has been present in the general theory is dispelled, and the model takes on the full richness of a dialectical interaction. Putting that another way, the constraints implicit in a near subsistence society are removed, and in the process the range of possible responses which is ‘appropriate’ to a given contextually located situation is correspondingly greater. The political dimension thus takes on an increased importance, as the science of legislation grows in complexity. We can begin our examination of the special theory with an examination of the concept of ‘capital’ as it functions at this level 157

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of the model. As mentioned above (Chapter 5) Smith holds that the accumulation of capital is a precondition for extending the division of labour, and we have seen that a precondition of such accumulation is the existence of an agricultural surplus.5 Initially this surplus was in the hands of the land-owners who used it to maintain unproductive labour, but they gradually modified their expenditure pattern, to create effective dem and in the new m anu­ facturing sector. The problem with this arrangem ent was that land-owners are by nature profligate and wasteful, being formed in this somewhat disreputable mould, by the inadequacies of their pattern of labour. It follows that, although they served a useful purpose in stimulating manufacture, they were less than adequate custodians when it came to the long-run accumulation of capital, for: Parsimony, and not industry, is the immediate cause of the increase of capital. Industry indeed, provides the subject which parsimony accumulates. But whatever industry might acquire, if parsimony did not save and store it up, the capital would never be the greater. ( W N , I I .I I I .16.) Fortunately, as the growth of the manufacturing sector proceeds, we find a new breed of wealth-owners emerging; the abstemious and industrious owner of capital. His emergence is itself an effect of the division of labour, for specialisation in the employment of stock becomes a discrete trade, like any other,6 and his thrift, astuteness, and industry are the inevitable results of the nature of his employment. In short, once the division of labour has proceeded far enough, it not only brings into existence the entrepreneur, but also broadly defines his characteristics; classic Smithian dialectics. In turn, the new class of wealth-owners was to have a marked effect in increasing the speed at which the division of labour could proceed, since accumulation was accelerated by the frugality of the capital-owner, who also ensures, by his astuteness and frugality, that capital was employed where it was most productive. Interestingly, we have here a further instance of the distorting effects of monopoly on the progress of the division of labour, for Smith says that monopoly results in a high rate of profit, and this is ‘fatal5, for: The high rate of profit seems everywhere to destroy that 158

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parsimony which in other circumstances is natural to the character of the merchant. When profits are high, that sober virtue seems to be superfluous, and expensive luxury to suit better the affluence of this situation. ( W N , IV.VII.c.61. See also I.IX.24.) Smith makes a distinction between fixed and circulating capital, and between both of these and capital reserved for consumption, which yields no profit. O f circulating capital he says: ... it may be employed in raising, manufacturing or purchasing goods, and selling them again with a profit. The capital employed in this m anner yields no revenue or profit to its employer, while it either remains in his possession or continues in the same shape ... His capital is continually going from him in one shape, and returning to him in another, and it is only by means of such circulation, or successive exchanges, that it can yield him any profit. Such capitals, therefore, may very properly be called circulating capitals. (W N, 11.1.4.) Included here are capital employed in distribution, and inventories of input materials, intermediate goods and finished stock. But the most im portant point is that it also includes the wages fund set aside to m aintain productive workers in agriculture and industry, but not any funds used to maintain servants.7 This type of capital is to be contrasted with fixed capital which is used for: ... the improvement of land, in the purchase of useful machines and instruments of trade, or in suchlike things as yield a revenue or profit without changing masters, or circulating any further. (W N, 11.1.5.) — and, as Smith makes clear later in the chapter, this category includes commercial buildings (but not dwelling houses, which count as consumption) and what could fairly be called ‘human capital’ in the form of education and training.8 The third category, which is not of direct relevance to our present purpose, is that of consumption capital and is somewhat heterogeneous, comprising items like clothing, furniture, food and housing. Smith’s presentation is somewhat m arred by the lack of 159

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a clear distinction between stocks and flows, but that need not detain us here. His discussion of the way in which circulating capital interacts with fixed capital in the production of the national product ( W N , 11.1.23 et seq) is a good illustration of the richness of content possessed by the division of labour model at this level; great stress is laid upon the generalisation of exchange in the market economy (W N , II.1.28) and on the interdependence of the specialised producers. It should be noted at this stage, that whilst Smith makes numerous explicit references to possible variations in the ratio of fixed to circulating capital between industries and between individual firms, he does not employ this distinction as part of his formal analysis. As Hollander puts it: ... in the formal treatm ent of the employment generating capacity of alternative investments, Smith neglects to make use of his recognition of empirical differences between fixedcirculating capital ratios from product to product within industry, or differences in factor proportions generally within agriculture.9 The reasons for this apparent ‘neglect’ are complex, and are bound up with the fact that Smith’s perspective is that of long-run historical dynamics, rather than short-run general equilibrium. As a first approximation it can be said that he behaves as if the social average ‘organic composition’ of capital was more or less fixed in the long run, so that in concentrating on the growth of the (productive) wages fund of circulating capital, a given quantity of fixed capital could be assum ed.10 There may be qualitative improvements in fixed capital, through the process of simplifica­ tion, but its quantity will still be roughly constant per worker employed. The central point to grasp here is that the general perspective of Smith’s division of labour model (what was above called his labour theory of value in dynamic presentation) sees the produc­ tivity implicit in specialisation as being embodied in labour not in capital, be it circulating or fixed. It follows directly from this that the main function of capital is to permit more labour to be set to productive work; we have seen this already in the link between capital accumulated and the extent of the division of labour. Further, the purpose of short-run variations in the return to capital 160

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in specific industries is to encourage the owners of capital to put labour to work where the rewards from its specialisation are greatest.11 It is thus the entrepreneur who controls the allocation of resources, but it is not the productivity of capital that he is regulating at the margin, but the productivity of labour. This can be illustrated by following the progress of this labour ‘transfer m echanism’, beginning at the point where there has been an increase in the extent of the market. Let us assume that in a growing town, population moving in from the country has created the potential for a further division of labour. Existing workers cannot take advantage of this situation since they do not have the requisite (fixed and circulating) capital. The entrepreneur however has a flow of new capital, which he saves, as a result of his frugal consumption patterns, from the profits on his existing stock of capital, which is invested at the ‘social average’ rate of profit. Since Smith assumes diminishing returns to capital in any specific branch of trade, the opening of a new specialisation will create the opportunity for profits higher than the average, and the entrepreneur will, therefore, direct his newly accumulated capital into this new channel. In order to attract the necessary labour the ‘projector’ ... must at first entice his workmen from other employments by higher wages than they can either earn in their own trades, or than the nature of his work would otherwise require, and a considerable time must pass away before he can venture to reduce them to the common level, (fVN , I.X.b.42.) Once specialisation in the new trade has proceeded as far as the extent of the market will allow, profits and wages fall to roughly the social average. However, in the course of this extension of the division of labour an increase in productivity has taken place and effective dem and has increased, so that the cycle can begin again. In the course of his discussions of this topic, Smith makes frequent warnings against the distorting effects of partial interests; in this as in the other processes of the division of labour model, there is a danger of disturbing or shortcutting the mechanism. Thus, for example, he says: The statesmen, who should attem pt to direct private people 161

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in what m anner they ought to employ their capitals would ... assume an authority which could be safely trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. (W N y IV .II.10.) and he goes on to suggest that monopoly has similar ill effects and is indeed a very similar distortion. He is against duties on imports for precisely the same reason, considering that ‘... the natural balance of industry, the natural division and distribution of labour ... is always more or less disturbed by such duties’ (W N y IV.IV.14) and holds that the United Kingdom should be a free port. Indeed it is the pressure of partial interests that distorts the relationship between the rate of profit in the country and that in the town. This should normally be about the same, except for a slight increase in the towns due to the existence of new opportunities for specialisation, but in fact the close proximity of individuals in the same trade in the towns makes restrictive prac­ tices easy to arrange. As a consequence, says Smith, there has been a significant distortion in the actual development of town and country, with the former having gained at the expense of the latter, to the detrim ent of both. In other words, social estrange­ ment has resulted in the actual progress of development being suboptimal in that it has diverged from its natural path (see C hapter 7). Smith has a very similar view of the ill effects of restrictive practices in respect of trade with the colonies, and his discussions of this issue prom pted Governor Pownall to remon­ strate that Smith had given only ‘probable reasons’ for his belief whilst presenting it as if it were backed by ‘absolute proof’.12 It is frequently claimed by modern commentators on Smith that his handling of the productivity of capital (and the associated concept of profit) was inadequate, in that, he either failed to recognise its existence entirely, or, if he recognised it at all, failed to deal with it consistently. Schumpeter, for example, says that: ‘So far as Smith can be credited with having a theory of “profit” at all, it must be pieced together from the indications, mostly vague and even contradictory, that are scattered over the first two Books.’13 whilst Hollander takes a very similar line when he discusses Smith’s ‘neglect’ of capital.14 Certainly, if we are seeking an explanation of profit in terms of a rudim entary theory of marginal productivity, we will be 162

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disappointed, for Smith’s presentation does not contain the concept even in embryonic form. Further, he is quite explicit in denying that profit is a return for bearing risk, for, whilst holding that the profits of stock tend to rise with the degree of risk, he also claims that ‘... the ordinary profit of stock, though it rises with the risk, does not always seem to rise in proportion to it’ (W N , I.X.b.34). Clearly we are left here with the basic problem as to what determines the ‘ordinary’ profits of stock, that are then varied disproportionately with the degree of risk. Koebner15 has suggested that Smith was lacking in an under­ standing of the entrepreneurial spirit and its role in stimulating innovation, and thus under-estimated the role of risk in the formation of the return to capital. It is true that Smith does not regard the owner of stock as being particularly enterprising; his predom inant characteristics are frugality, prudence and caution and these are traits that fit in badly with the more usual picture of aggressive business dynamics. W hat Koebner has missed, however, is the fact that the owner of stock has a much more passive role in Smith’s model. It is the advancing division of labour that creates the openings for the profitable employment of capital, and capital’s role does not extend beyond moving labour, the one creative and innovative factor, into the appropriate employment. The owner of stock must be shrewd enough to see an opportunity for the profitable employment of capital, but that is all. Interestingly, Smith says rather more about what does not determine profit. For example, in Book I of the Wealth o f Nations (in a passage that clearly displays the passive role of the entrepreneur), he writes: The profits of stock, it may perhaps be thought, are only a different name for the wages of a particular form of labour, the labour of inspection and direction. They are however altogether different, are regulated by quite different principles, and bear no proportion to the quantity, the hardship or the ingenuity of this supposed labour of inspec­ tion and direction. They are regulated altogether by the value of the stock employed, and are greater or smaller in proportion to the extent of this stock. ( WN , I.V I.6.) Marx, interpreting this passage from his own perspective, was 163

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to write ... the law of profit, that it is in proportion to the magnitude of the capital advanced — this prim a facie contradicts the law of surplus value or of profit (since Adam Smith treats the two as identical) that it consists purely of the unpaid surplus labour of the workman. Adam Smith puts this down with quite naive thoughtlessness, without the faintest suspicion of the contradiction it presents.16 However, M arx is wrong here; given the implicit Smithian assumption of a more or less fixed ratio of capital to labour, there is no contradiction, even on a M arxist interpretation, for the ‘unpaid surplus labour’ will then be shared out pro rata to the quantity of capital employed by the entrepreneur. Only when the ‘organic composition’ of capital varies between trades or industries — a fact which Smith recognises at an empirical level, but excluded from his long-run theoretical dynamics — is there a problem in explaining how surplus value is allocated to each unit of capital. In fact, once we put the ‘problem ’ of profit into the context of Smith’s theoretical model, it ceases to be a problem at all. Seen from Smith’s perspective, labour is the one productive ‘factor’, and the way that labour is organised and sub-divided determines overall productivity. Capital is, therefore, treated as stored up labour that facilitates the employment of the productive factor. It is an essential coefficient in the transformation of labour into profit, but it does not have for Smith anything akin to a ‘m arginal productivity’ of its own. It is for this reason that Smith always speaks of capital as ‘putting into motion’ a quantity of labour — that is, releasing the potential productivity inherent in the labour process.17 Given this perspective, his view that profit is a legitimate deduction from the produce of labour is quite consistent, and more importantly, we can see that the size of the return to capital is not of any real relevance to the overall dynamic process. All that is necessary is that there should be a ‘norm al’, socially defined, rate of profit, and that the opening up of new areas of specialisation should offer a rate slightly above this, in order to attract new capital which will make the necessary transfer of labour. In the absence of monopoly, or other restrictive practices, competition will keep the normal rate of profit relatively low, and since entrepreneurs, like workers, suffer from risk-illusion, this rate will 164

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be perfectly adequate to induce them to employ their capital to the full. In fact, his treatm ent of capital is closely analogous to his treatm ent of wages, which, since they contain a progressively increasing, socially defined component, are fixed by reference to the social nexus, rather than in terms of any simple ‘economic’ mechanism. This, of course, is fully consistent with his underlying epistemological perspective. Given this interpretation, Smith’s ‘wages fund’ view of capital becomes much more cogent, as does his emphasis on circulating capital, from which the subsistence of labour is drawn, and his corresponding neglect of fixed capital. Smith’s handling of interest follows a similar pattern, in that he treats it as socially defined, rather than trying to explain it in terms of abstinence. As Hollander says: ... interest was not regarded by Smith as a ‘necessary’ payment; in particular there is little to suggest a conception of interest as a reward for abstinence from present consump­ tion.18 Indeed, we find a statem ent within the Wealth o f Nations to the effect that the disposition to save is, of itself, as powerful (if not more so) as the disposition to consume ( WN , II.III.2 5 et seq). It was this perspective that led Smith, despite his dislike of unnecessary state regulation, to advocate an upper limit for interest rates — a view that was to prom pt Bentham to strong disagreem ent.19 It is also worthy of note that this treatm ent of capital as a merely passive agent in the transformation of labour into output, neatly avoids the problem which has caused much debate within the Neo-classical tradition, of how to find a unit which will simultaneously measure capital seen as physical goods, and also capital seen as a value to which income in the form of profit can accrue.20 Spengler,21 seeing the lack of emphasis that Smith places upon fixed capital, has suggested that it was this that led him to under­ estimate the role of innovation in developing the productive forces of an economy. Since innovation tends to be embodied in fixed, rather than circulating capital, Smith’s emphasis on the latter prevented him from seeing its importance. In similar vein, M itchell22 has claimed that Smith’s apparent neglect of innovation as being embodied in fixed capital was due to his own historical situation. Living in a ‘pre-factory’ age, he naturally tended to 165

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under-estimate the role of engineering technology. This, however, does not square with the facts. One could argue at considerable length about the appropriate dates to use when defining the industrial revolution,23 but it is beyond dispute that it was clearly in evidence by 1776 when the Wealth o f Nations was published. Indeed, the period 1760 to 1776 had seen major techno­ logical innovations introduced by men like W att, Hargreaves, Arkwright and Brindley.24 Further, the curious link between non­ conformism and industrial innovation had resulted in much of this work being done in, and around, the Scottish universities. For instance, much of the development of the steam engine took place at Glasgow University in the mid-1760s,25 where Jam es W att was working with university members like Joseph Black and, by 1774, W att had entered into his world-famous partnership with M atthew Boulton. Given this background,26 is it probable that Smith was unaware of the role of technological innovation in the progress of the division of labour?27 Such evidence is, of course, largely biographical but there is also textual support for the argument, for, as even a casual reading of the Wealth o f Nations will confirm, he makes frequent reference to the topic; what he does not do is link it explicitly to the formation of fixed capital. Again, however, the application of the present interpretation dissolves the problem for, seen in terms of Smith’s division of labour model, innovation is not embodied in capital but in the productive factor, labour. Innovation is a function of hum an knowledge, not of the machinery which that knowledge creates. This is one reason why Smith sees machinery as becoming simpler as it develops; increasing knowledge can render a machine more fit for its purpose by improving the economy of its design (Chapter 5). Put more abstractly, in the dialectical interaction between man and nature, it is hum an rationality that evolves, and the improvements to machinery are merely reflections of that evolution. This is surely why Smith nearly always discusses inno­ vation in terms of what people know, rather than what machines can do. For example, writing on improvements in dyeing tech­ niques, he speaks of: ‘A dyer who has found the means of producing colour with materials which cost only half the price of those commonly made use o f ...’ Here:

His extraordinary gains arise from the high price which is 166

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paid for his productive labour. They properly consist of the high wages of that labour. But as they are repeated upon every part of his stock, and as the whole amount bears, upon that account, a regular proportion to it, they are commonly considered as extraordinary profits of stock. ( WN, I.V II.22. M arian Bowley has noted this tendency to discuss innovation as being embodied in labour, rather than capital, but has inter­ preted this as evidence of confusion on Smith’s part, and criticised ... his continuation of writing in terms of changes in the productivity of labour when he really meant the productivity of labour and capital combined [but this] was however, a natural consequence of his approaching the theory of capital via the division of labour.28 However, she is here tending to view Smith’s approach from the standpoint of standard economics, and thus, whilst, in my view, correctly identifying his position, she sees it as ‘confused’ rather than as being a logical entailment of his dynamic model. A further aspect of Smith’s treatm ent of innovation is that its development is linked to the division of labour (see C hapter 5), for as specialisation increases, attention can be given to each aspect of manufacture. This is true of each factory, but also: W hat takes place among the labourers in a particular workforce, takes place, for the same reason, among those of a great society. The greater the number, the more they naturally divide themselves into different classes and subdivisions of employment. More heads are occupied in inventing the most proper machinery for executing the work of each, and it is, therefore, more likely to be invented. (W N y I.V III.57. See also I.I.8.) In short, innovation is yet another example of the dialectical interaction between the division of labour, and purposive human activity, in that, as the division of labour proceeds, innovation increases and this in turn drives forward the further division of labour. Indeed, once specialisation has progressed far enough, innovation can itself become a separate trade, with all that this implies for productivity. 167

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There are interesting parallels with Schumpeter here, for he too sees innovation as being in ‘dialectical’ interaction with the level of economic development,29 and suggests that the progress of this interaction will bring about a qualitative change in the economic organisation of society. True there is a difference of emphasis, in that Schumpeter tends to treat innovation as the dynamic force, whilst Smith lays most stress on the level of specialisation attained, but there are substantial formal similari­ ties between the two models. The crucial difference is, of course, to be found in their respective treatments of monopoly, with Schumpeter seeing its formation as a precondition of the process of ‘creative destruction’, whilst Smith in general regards it as a distortion which will impede the process of innovation. In fact, even here, Smith on occasion departs from his usual condemnation of monopoly, to concede that it may be of value under certain circumstances. Such departures are rare, but they are perhaps worthy of illustration; a passage from Wealth o f Nations (V.I.e.30) will suffice. Here Smith says: When a company of merchants undertake, at their own risk and expense, to establish a new trade with some remote and barbarous nation, it may not be unreasonable to incorporate them into a joint stock company, and to grant them, in case of their success, a monopoly of the trade for a certain num ber of years. and A temporary monopoly of this kind may be vindicated upon the same principles upon which a like monopoly of a new machine is granted to the inventor, and that of a new book to its author. (Ibid.) Such passages, however, are merely incidental qualifications to Smith’s general approach to both innovation and monopoly. A further example of the institutional content picked up by the special theory version of the division of labour concept, is to be found in Smith’s handling of ‘tastes’ at this level. For the first time, he draws an explicit distinction between different classes in society; between the ‘lower orders’ and the ‘higher ranks’. As we saw in C hapter 6 the sympathy mechanism tends to create two distinct groups in society, with different moral codes, and, more 168

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importantly for the present purpose, different scales of value and consumption patterns. It is here that the subjective/objective dichotomy really comes into its own, for there is a clear supposition that the utility functions of the lower orders are close to the objective scale, whilst the higher ranks are much more affected by the various illusions. Further, to the extent that the rich do achieve the expected utility from a particular commodity or service, much of it is in the form of ‘attention’, of ‘approbation’, which appeal to the vanity of the consumer. Why, asks Smith ... should those who have been educated in the higher ranks of life, regard it as worse than death, to be reduced to be, even without labour, upon the same simple fare with [the labourer] ... to dwell under the same lowly roof, and to be clothed in the same humble attire? Do they imagine that their stomach is better, or that they sleep sounder in a palace than in a cottage? ( T M S , I.iii.2.1.) Smith thinks otherwise — it is the adm iration of the world that the rich man seeks, and obtains, and ‘... at the thought of this ...’ says Smith, rather poetically ‘... his heart seems to swell and dilate itself within him, and he is fonder of his wealth, upon this account, than for all the other advantages that it affords him .’ (Ibid.) In as far as the lower ranks share in this somewhat ephemeral scale of values, it is in that they provide the necessary admiration, and look with longing at the possessions of the rich. Here, however, there is again a strong element of illusion, for they regard the consumption patterns of the wealthy as providing much more utility than is in fact the case: W hen we consider the condition of the great, in those delusive colours in which the imagination is apt to paint it, it seems to be almost the abstract idea of a perfect and happy state. (TM S, I.iii.2.2.) In reality of course, it is nothing of the sort, and excepting the gratification of the vanity by ‘conspicuous consumption’, much of the apparent utility proves to be illusion once the goods are obtained. This delusion is necessary ‘... both to establish and to m aintain the distinction of ranks and the order of society’ (TM S, 169

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I.iii.3) ... and is in fact a clear example of the ‘deception theory’ at work; the illusion maintains social stability thus permitting the long-run evolution of society to stay somewhere near its optimum path. Short-run delusion results in long-run optimisation. Despite this disposition on the part of the lower orders to over­ estimate the condition of the rich, and despite the risk-illusions to which they are prone, Smith clearly believes that they are a great deal closer to the objective scale of values than are the higher orders. The position is, however, somewhat complicated by the fact that, in the standard case of an ‘advancing’ state of society (where the division of labour is increasing faster than population growth) working-class living standards will rise ( WN , I.V III.22) as the socially determined component of the basic wage increases. Smith goes to considerable length in both the Lectures and the Wealth o f Nations, to show that in such a society, wages will be well above bare subsistence (see for example, WN, I.V III.27 et seq.), and is also explicit in showing how improved living standards will ‘filter down’ from the rich to the poor. The subjective/objective dichotomy is very clear in Smith’s presentation of this topic so that, for example, clothing and furniture bought by the wealthy for the purpose of conspicuous consumption so as to gratify their vanity, are purchased secondhand by the poor, when they have lost their novelty, even though they are still serviceable and can, therefore, satisfy the needs of the labourer. Smith clearly believes that the ‘objective’ definition of ‘subsistence’ changes as society advances. This is quite explicit in Wealth o f Nations, Book V, where, in his treatm ent of taxation, he writes: By necessities I understand, not only the commodities which are indispensably necessary for the support of life, but whatever the customs of the country renders it indecent for creditable people, even of the lowest orders, to be without. (W N , V .II.k.3.) and he goes on to illustrate by reference to linen shirts and leather shoes. This increase in living standards, together with the population increase that it helps to stimulate, will ensure that effective dem and tends to keep pace with the increased output generated by specialisation, the discrepancy implicit in the dynamic nature of the model being made up by the conspicuous consumption of the rich. Given such an assumption, it is not 170

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surprising that Smith virtually ignores the possibility of cyclic under-consumption. Indeed, this optimal utilisation of resources is not even disturbed by the long-run secular decline in the rate of profit, for whilst Smith holds that as capital accumulates its average return will decrease, he does not see any problem with capital investment. In fact, it is difficult to see why he believes that the rate of profit will decline. Since his model implies that new openings for investment will constantly occur, one might well assume that the long-run rate of profit would stay constant. Smith is notoriously vague on this point, seeming to imply on occasions that the increase in real wages will ‘eat up’ the profits of stock, whilst on other occasions it is competition by the owners of stock in commodity markets that pushes down profits.30 Although it is true that a secular decline in profit is fully consistent with his dynamic model, it is certainly not a necessary implication of it, so that it is not easy to see why Smith was insistent on this point. The difficulty is in fact compounded in that he frequently speaks of total profit increasing as the division of labour proceeds. Again, it is not that there is any fundamental inconsistency — a declining rate of profit could occur even though total profits were increasing — it is rather that his treatment seems somewhat arbitrary in the context of his overall model. It is, of course, possible that this aspect of Smith’s work is ‘merely’ empirical, in that it is not an implication of the model which he uses to depict society, but rather an observation that is consistent with it. If we accept the interpretation of Smith’s epistemological position (presented in Chapter 3), and also that it applies to his own work, then he is doing ‘real’ empirical history within the perspective of a particular world-view. T h at is to say, his ‘system’, like any other, is a taxonomic framework within which empirical observation is interpreted and rendered coherent, not a substitute for such observation. Returning to the theme of the subjective/objective dichotomy, the application of the present interpretation to the Wealth o f Nations would seem to reveal a fascinating (although unsuccessful) attem pt to construct a numeraire upon which the objective scale of values can be based. We can begin to ‘reconstruct’ this attem pt by recalling that, for Smith, labour, which is productive of all value, has a more or less constant disutility. However, because of the deductions made from its product by rent and profit, and because of the socially defined component in the subsistence wage 171

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(not to mention the possibility of market distortions), labour embodied, although the theoretical determ inant of value, is not acceptable as a practical numeraire. It is possible that Smith was very well aware of this, and, therefore, attem pted to use com as the numeraire upon which an objective scale of values could be constructed. This seems in fact to be quite explicit in the following passage: The nature of things has stamped upon a corn a real value which cannot be altered by merely altering its money price ... Through the world in general that value is equal to the quantity of labour which it can maintain in the way, whether liberal, moderate or scanty, in which labour is commonly maintained in that place. Woollen or linen cloth are not the regulating commodities by which the real value of all other commodities must be finally measured and determined. Corn is. The real value of every other commodity is finally measured and determined by the proportion which its average money price bears to the average money price of corn. (W N , IV.V.a.23) add to this his view that ... equal quantities of corn will, in every state of society, in every stage of improvement, more nearly represent, or be equivalent to, equal quantities of labour, than equal quan­ tities of any other part of the rude produce of the land. ( WN, I.XI.e.28) and we have our numeraire. The transformation of labour into corn requires (more or less) constant inputs of labour (of equal disutility) per unit of output, and this is reflected in its ‘real’ value, independent of money prices, and automatically adjusted to allow for the socially determined margin between bare subsistence and the actual standard of living enjoyed. Given that capital and land are only passive agents in this transformation we can assume away the problem of profit and rent by postulating a ‘norm al’ rate for each, and this together with the assumption of a fixed labour/capital ratio avoids most of the problems inherent in expressing ‘real’ commodity values in terms of corn equivalents. Corn can thus be used as a basis for the objective comparison of values, and is a 172

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real numeraire, independent of money prices. If this was indeed Smith’s objective, it explains why he spent so much time in the Wealth o f Nations discussing the production and exchange of corn, and it also explains the otherwise rather odd ‘digression concerning the variations in the value of silver’ which occupies 67 pages of Book I. Upon close examination, it turns out to be nothing less than an attem pt to establish the objectivity of the corn measure, and to provide a theoretical explanation of the corn-silver exchange rate, thus linking his numeraire to money prices. It goes without saying that this whole edifice is fundamentally unsound; quite apart from the fact that the long-run price of corn in terms of labour embodied does vary considerably with agri­ cultural improvement, the existence of different capital/labour ratios, and different degrees o f‘roundaboutness’ in the productive process are fatal to any attem pt to construct such a numeraire, at anything other than the most abstract theoretical level. As Ricardo was to put it: Adam Smith, who so accurately defined the original source of exchangeable value, and who was bound in consistency to maintain, that all things became more or less valuable in proportion as more or less labour was bestowed upon their production, has himself erected another standard of value ...31 This of course being corn, but ... .after most ably showing the insufficiency of a variable medium, such as gold and silver, for the purpose of deter­ mining the value of other things [he] has himself, by fixing upon corn or labour, chosen a medium no less variable. (Ibid., p. 58.) Smith himself was apparently uneasy about the adequacy of his numeraire, for he makes numerous attem pts to shore it up, most of which have a distinct tinge of ‘ad hocery’ about them. For example, when discussing the tendency of raw materials to get dearer as the pressure of population increases their relative scarcity, he makes the following qualification: If we except corn and such other vegetables as are raised 173

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altogether by hum an industry ... all other sorts of rude produce, cattle, poultry, game of all kinds, the useful fossils and minerals of the earth etc., naturally grow dearer as society advances ... (W N , I.X I.i.3.) Fortunately, however, the failure of his numeraire does not detract a great deal from the overall adequacy of his model. The division of labour interaction provides a theoretical explanation of qualitative social evolution, and does so adequately at both the general level of the Tour stages’, and at the special theory level of the market economy. It is true that the implicit postulation of a long-run objective scale of values is, in the absence of a definition of such a scale, less than satisfactory. Smith is left in the ultimate analysis with only his own scale of values against which to measure the degree of ‘subjective’ illusion. His best defence of its objectivity would thus be to claim that the dispassionate analysis of a social scientist can best reveal the pattern of a long-run scale of values; a position which he seems on occasion to take. This chapter has not attem pted to provide a comprehensive discussion of Smith’s economics. Its purpose has been the much more limited one of showing that the somewhat abstract recon­ struction of Smith’s methodology presented in the early chapters can be ‘brought down to earth’ and used to illustrate the workings of some of his more concrete economic concepts. In doing so, it has been a central objective to show that there are fundamental differences between the meanings and functions of Smith’s economic categories and those of contemporary theory. Because terms such as ‘labour’ or ‘capital’ are common to both Smith’s world-view and our own, it is easy to make the false assumption that they mean much the same thing to us, as they did to him. Any interpretation of Smith which proceeds from such an assumption runs serious risks of an anachronistic ‘reading backwards’ of meaning, and thus of significant misinterpretation. The main conclusion of this chapter is that Smith’s economic concepts function only in the context of his dynamic perspective, and their meaning is only comprehensible if interpreted within that framework. This is another way of saying that his use of economic concepts is fully consistent with his epistemology, in that their meaning is contextually defined. They cannot stand in isolation from his dynamic scientific world-view, and cannot be interpreted from the perspective of a different world-view without serious loss of richness, and distortion of meaning. An obvious

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example of such systematic misreading is to be found in the mainstream of M arxist interpretation, which tends to analyse Smithian concepts, in the context of M arxian dynamics, finding in the process both confusion and ‘bourgeois’ apologia. If we are seeking to understand the meanings that Smith’s concepts had for Smith, as opposed to seeking anticipations of meanings implicit in later scientific perspectives, then we can only recover such meanings by locating his concepts in the context of the world-view which generated them.

Notes 1. It is worth noting here that the 1762-63 student’s notes of Smith lectures on jurisprudence, which are much fuller than those dated 1766, also reveal the dynamics of his model much more clearly. The 1762-63 notes were not discovered until 1958, and were not generally available until first published in 1978, so they have yet to be fully assimilated into the mainstream of Smithian scholarship. Since their stress on historical dynamics has direct relevance to the present study, considerable use has been made of them in this chapter. We should, however, keep in mind the point made by Donald Winch, which is that the subject of both sets of lecture notes is law and government, not the four stages theory. D. Winch, Adam Smith’s Politics (Cambridge University Press, Cambridge, 1978), p. 57. 2. Cf. WN, I.VI.l for the famous deer and beaver example. Note that Smith qualifies this (at WN, I. VI.2) to allow for the severity of labour; in other words, he is working with ‘standard labour-hours’. 3. The actual exchange value will be proportional to the standard man-hours embodied in the production of the goods, but a precondition of any exchange taking place will be an adequate subjective valuation of the goods in question — to expand Smith’s example, if the subjective appraisal of 2 deer was less than that of 1 beaver then (given the labour embodied equivalence and assuming that the marginal cost of catching beaver remains unchanged with an increased cull) deer would not be caught at all. 4. N. Rosenberg, ‘Adam Smith — consumer tastes and economic growth’, Journal o f Political Economy (1968), p. 372. 5. See L J : 1766, p. 287, for an illustration of this process which well displays the implicit dialectical tension: ‘... till some stock be produced there can be no division of labour, and before a division of labour takes place there can be very little accumulation of stock.’ 6. There is of course more to it than this, for what we have here is not ju st the emergence of a new ‘trade’ but also of a new ‘class', and of a new class-income in the shape of profit. Despite some partial anticipations, Smith is the first to see this clearly. 7. Cf. C. Napoleoni, Smith , Ricardo, Marx (Wiley, London, 1975) for a good discussion of Smith’s distinction between productive and 175

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unproductive labour. To be productive, says Napoleoni, labour must produce a value over and above the cost of subsistence (p. 40 et seq.). However, this should perhaps be qualified by adding that ‘subsistence’ is a dynamic concept and as such is, in part, socially determined. 8. Smith of course sees that dwelling houses may yield a rent to the owner, but he regards this as being derivative from some other source of revenue, so that ‘... the revenue of the whole body of the people can never be in the smallest degree increased by it’ ( W N , II.1.12.) 9. S. Hollander, The Economics o f Adam Smith (Heinemann, London, 1973). 10. For example, he says: ‘Whatever obstructs the free circulation of labour from one employment to another, obstructs that of stock likewise; the quantity of stock which can be employed in any branch of business depending very much upon that of the labour which can be employed in it.’ (W N , I.X.c.44.) 11. It is this same perspective that prompts Smith to assume away the possibility of idle capital: ‘A man must be perfectly crazy who, where there is tolerable security does not employ all the stock which he commands’. (W N , II.I.30.) 12. Letter, 25 September 1776, Richmond. (Correspondence, edited Mossner and Ross, op cit, Letter No. 338). Interestingly Pownall clearly recognised the dialectical nature of Smith’s division of labour model, for he speaks of his work as analysing ‘... those laws o f motion, which are the source of, and give direction to, the labour of man in the individual; which form that reciprocation of wants and interconnection of mutual supply that becomes the creating cause o f community; which give energy, motion, and that organised form to the compound labour and operations of that community, which is government ...’ 13.J.A. Schumpeter, History o f Economic Analysis (Allen & Unwin, London, 1954), p. 190. 14. S. Hollander, The Economics o f Adam Smith (Heinemann, London, 1973), p. 196 et seq. 15. R. Koebner, ‘Adam Smith and the industrial revolution’, Economic History Review (1959). 16. K. Marx, Theories o f Surplus Value (Lawrence & Wishart, London, 1971), p. 92. 17. See for example, WN, I.IX.10: ‘It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operations of labour ...’ 18. S. Hollander, The Economics o f Adam Smith (Heinemann, London, 1973), p. 168-9. 19. See Correspondence, edited Mossner and Ross, op cit, intro, p. 7. 20. Cf. J. Robinson, ‘The production function and the theory of capital’, in his Collected Economic Papers (Blackwell, London, 1965) and also K.R. Bharadwaj, ‘Value through exogenous distribution’, reprinted in Harcourt and Laing (eds), (1971) op cit. 21. J.J. Spengler, ‘Adam Smith’s theory of economic growth’, Southern Economic Journal (1959). 22. W.C. Mitchell, Types o f Economic Theory (2 vols., Norton, New York,

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N.Y., 1967), vol. 1. 23. There is a considerable literature on this topic. See for example, P. Mantoux, The Industrial Revolution (Routledge & Kegan Paul, London, 1961) and T.S. Ashton, The Industrial Revolution (1760-1830) (Oxford University Press, Oxford, 1968). 24. Cf. D.C. Coleman, ‘Technology and Economic History’, Economic History Review (1959). 25. Cf. H.W. Dickinson and R. Jenkins, James Watt and the Steam Engine (Kegan Paul, London, 1927). 26. As further evidence, one has only to look at the statistics for agricultural enclosure, to see how rapidly the old feudal structures were breaking down. In the ten years from 1740 there were 38 major acts of enclosure, from 1750 to 1760 there were 156, whilst from 1760 to 1770 there were 480. Cf. T.S. Ashton, The Industrial Revolution (1760-1830), (Oxford University Press, Oxford, 1968). 27. Indeed his knowledge in this field was such that in 1782 he was adviser to the Earl of Dundonald who built a factory at Culross to produce coal by-products. 28. M. Bowley, ‘Some Aspects of the Treatment of Capital in the Wealth o f Nations', in Essays on Adam Smith, edited A.S. Skinner and T. Wilson (Clarendon Press, Oxford, 1976). 29. J. Schumpeter, Capitalism, Socialism and Democracy (Allen & Unwin, London, 1954). Schumpeter describes his own perspective very clearly when he says of Marx: ‘Through all that is faulty or even unscientific in his analysis runs a fundamental idea that is neither — the idea of a theory, not merely of an indefinite number of disjointed individual patterns or of the logic of economic quantities in general, but of the actual sequence of those patterns or of the economic process as it goes on, under its own steam, in historic time producing at every instant that state which will of itself determine the next one.’ (p. 43.) 30. Hollander correctly points out that: ‘While rising wages are a probable concomitant of the process of expansion they do not represent a necessary condition for the decline in profits.’ S. Hollander, The Economics o f Adam Smith (Heinemann, London, 1973), p. 182. Indeed as we have seen, Smith’s formal model implies that rising real wages are provided by increased productivity. 31. D. Ricardo, Principles o f Political Economy and Taxation (Penguin, Harmondsworth, 1971), p. 57.

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9 Conclusion

In this book I have attem pted to provide a cogent re-interpretation of the socio-economic methodology of Adam Smith, by a detailed examination of his scientific model. The methodological equip­ ment developed in C hapter 2 was used to provide a set of organis­ ing principles, which were then applied to Smith’s work, in an attem pt to elucidate its meaning. This perspective was intended to serve as a vehicle for textual exegesis, by suggesting how the various aspects of Smith’s highly complex and wide-ranging discussions of society might be related to form a coherent whole. In other words, the Lakatosian schématisation of science, modified to allow for the depiction of qualitative social change, was aimed at providing a ‘way in’ to Smith’s writing, primarily by suggesting ways in which his own epistemological and methodological dis­ cussions might be interpreted. This equipment was then used to ‘reconstruct’ Smith’s scientific model (in Chapters 4 and 5) and the full model, as thus interpreted, was put to work (in Chapters 6, 7 and 8) in an attem pt to articulate some of the meanings implicit in his work, and resolve some apparent paradoxes. In the process of this examination a num ber of conclusions have been argued for, and these can now be summarised. It was argued in C hapter 3 that Smith has a fundamental epistemological perspective, which sees man as being in a dynamic process of interaction with a recondite nature. In this interaction the mind plays an active role in ‘working u p ’ the raw material of sense experience, and seeks to impose order on an otherwise chaotic flow of information by devising classificatory systems and relational analogies. Observation is interpreted in terms of this nexus of preconceptions and postulations, and the world-view is modified as necessary in order to preserve its overall coherence. 178

Conclusion

The criteria used to assess the adequacy of our world-view as an analogue of reality, function in the context of its overall perspective and are, in this sense, internal, and in the ultimate analysis aesthetic. Smith uses close analogues of this epistemology to explain all aspects of m an’s interaction with nature. Language, art, social institutions and systems of scientific interpretation are all seen as conforming to the same pattern of dialectical interaction, and the same aesthetic criteria are used in evaluating constructs, in each of these areas of hum an action. Smith’s own scientific system is profoundly influenced by his epistemological position. His model seeks to depict the process of socio-historical evolution by giving speculative development to concepts which are intended to mirror the essential principles of dynamic change. In other words, it attem pts to represent social change by providing an analogous representation of the factors which are seen as bringing this change about. Social development is conceived of as being a qualitative transition from one contextual framework to the next, and it follows from this that the evaluation of social structures is always contextual. Their adequacy is assessed in terms of their generality, familiarity, simplicity and overall coherence relative to the social context within which they function. It was also argued (Chapters 4 and 5) that Smith’s metascientific world-view is a dynamic synthesis of elements of Associationism and some aspects of the more ‘rationalist’ perspec­ tives of the European Enlightenment. These premisses are developed into a model in which individuals, seen very much in terms of eighteenth-century Associationism, interact to form social structures. The process of sympathetic interaction involves an element of judging, or practical reasoning, in which the adequacy of any specific action is evaluated relative to the existing frame­ work of social structure. These structures are, in turn, modified by the results of sympathetic interaction, so that practical reason­ ing is reflected in the developing social contextual framework. The division of labour provides the dynamic factor in this process. Individuals, motivated by self-interest, engage in greater specialisation, thus increasing the efficiency of m an’s interaction with nature. The degree of specialisation attained defines the m aterial context within which social structures function, and their relevance and fitness for their purpose is assessed relative to that context. The role of practical reasoning is thus to ensure that the

179

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institutional framework within which sympathetic interaction takes place, is appropriate for a given stage of economic development. The links with Smith’s epistemology seem clear, in that the degree of specialisation specifies the framework of interpretation within which social institutions have their meaning and relevance. As the division of labour proceeds, so we have a qualitative transi­ tion of this interpretive framework, and one result of this is that structures that were appropriate to an earlier period may become outmoded. It was further argued in this connection that Smith sees the growing interdependence, which is a defining feature of commercial society, as being a major qualitative change of the sort we have been discussing, and that his model reflects this, so that it functions both as a ‘general theory’ of historical develop­ ment, and as a ‘special theory’ of change within commercial society. At the level of the special theory, Smith identifies a wide range of potential and actual imperfections in the dialectical interaction between individuals and social structures. I have called these imperfections ‘social estrangement’ and argued that they have in common that they result from a distortion or fragmentation of the contextual framework within which sympathetic interaction functions. This interferes with the working of practical reasoning and results in the formation of social structures that are lacking in generality, and in the cultural and intellectual impoverishment of the individual. Smith holds that social estrangement will tend to intensify as the division of labour increases, but that the capacity of government to alleviate its worst effects will also increase. Part of the science of legislation is to ensure that this potential is translated into effective action. The legislator has a key role in Smith’s model in that it is his task to adopt the position of the impartial spectator so as to ensure that those structures which are actually formed are fully ‘universal’, in that they reflect the general interest of society. He makes piecemeal modifications to an existing social framework, in order to deal with new situations, whilst attem pting to preserve the coherence and generality of the overall system. He can be contrasted with both the ‘statesm an’, who is governed by short­ term expediency rather than general principles, and the ‘man of system’ who rejects the piecemeal approach in an effort to remodel the social framework. This latter task would require a degree of rationality that is denied to us in practice, and is well beyond the limits of the power of practical reasoning.

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Here, as always, Smith presents his explanations in terms of individual actions rather than social wholes. It is not abstract historical forces that call into being new social institutions, but the specific actions of individual legislators. The science of a legislator lies in seeing that modifications to the social framework are appropriate to a specific historical context, but there can be good and bad legislation, so that the actual progress of society will typically deviate from its natural path, as depicted by the model. It is this stress on individual response to qualitative change that gives Smith’s model a semi-autonomous political dimension, and a richness of explanation that is lacking in economic determinist interpretations of historical development. In this connection, it was also argued that since an evaluation of the ‘propriety’ of political action makes ultimate reference to the level of economic development, Smith’s model can fairly be called materialist, but that the label is in need of heavy qualifica­ tion. The four stages theory is best seen as a heuristic device which illustrates the underlying dynamic model, rather than a fundamental organising principle in its own right. Some conclusions have also been offered as to the nature of Smith’s ‘deception theory’. Here it was suggested that there is no fundamental incompatibility in his model between short-run action based upon self-interest, and long-run social evolution based upon reason-guided sympathetic interaction. Both are rooted in the dialectical interplay between hum an passions and hum an rationality, and they shape and support each other. More tentatively it was argued that Smith does not have a conventional teleology, but sees society as a process in which hum an potential can be realised. T h at is to say, that hum an rationality, if uncon­ strained by social estrangement and other deviations from the natural path (‘fortune’) can, as the division of labour proceeds, produce a society which gives full realisation to hum an potential. O n this view, the deception theory is connected with the fact that the overall pattern of this development is not visible in any parti­ cular short-run setting, partly because there can be no ex ante specification of ends. Whilst such an interpretation seems to me to be consistent with the general tone of Smith’s published work, and also to resolve some of the apparent difficulties in his use of ‘actual’ and ‘natural’, in the absence of firm textual support, it m ust remain very much a m atter of speculation. The penultimate chapter examined the way in which Smith’s detailed discussion of, what we now call, economic concepts, is 181

Conclusion

related to his overall model. The central conclusion was that his economic concepts function in the context of a dynam ic model of qualitative change and cannot be fully comprehended in isolation. A concept such as ‘capital5 has a dynamic historical dimension, and any attem pt to treat it in isolation from that dimension will fail to capture the meaning that it had for Smith. To the extent that this view is accepted, it follows that those who have held that the historical dimension in Smith’s work is not necessary for an adequate understanding of his economics, have been thoroughly mistaken. It also follows that the gap between Smith and Ricardo is even wider than is commonly supposed. It is not simply that Ricardo re-worked Sm ithian concepts by purging this historical and philosophical dimension, but rather that they were engaged in a fundamentally different type of scientific activity. Indeed, if the interpretation I have presented is accepted, then, in so far as such periodisations are meaningful, Smith is better seen as standing at the end of an epoch, rather than at the beginning of one. His work is a brilliant synthesis of aspects of eighteenth-century thought rather than a seminal contribution to that of the nineteenth century, and has no counterpart amongst the work of political economists writing after the Napoleonic Wars. It is also clear that the Smith I have depicted bears little resem­ blance to the champion of free markets and perfect competition beloved by our contemporary advocates of laissez-faire. If Smith’s discussions of competition and free trade are taken in the overall context of his model of institutional evolution, they yield prescrip­ tions for social development that are notably interventionist. The Smith of the ‘Adam Smith Institute’ is the product of a ‘reading backwards5 that is both anachronistic and reductionist. Finally, whilst my objective has been to provide a possible reconstruction of Smith's model, in order to understand its mean­ ings, rather than to evaluate its adequacy, it can now be said that the model does seem to me to fulfil its task exceptionally well. It is, of course, true that Sm ith's model is lacking in predictive power, in the sense of being able to suggest how and when social structures will change, but if my arguments concerning his epistemology are accepted, this is not in any case his central concern. Scientific systems, for him, are constructs of the imagination which seek to render reality coherent. T heir task is to generate explanations of observed events so that they can be assimilated into our world­ view without loss of generality or simplicity; without, in short, 182

Conclusion

occasioning surprise and wonder. On this view the importance of the American Revolution for Smith lay not in the fact that his model could have predicted it, but in that its causes, developments and possible remedies could be given a coherent explanation and articulation within the perspectives of his world-view. This inter­ pretation would also help to explain why he should retain his discussions of the issue in later editions of the Wealth o f Nations, long after any predictive power they might have had, would have disappeared. Epistemology aside, the flexibility of individual response that Smith’s model allows in the face of new situations, renders anything approaching rigorous prediction impossible. The existence of a semi-autonomous political dimension in his model, whilst it adds greatly to its overall richness and explanatory power, also removes the possibility of the precision that is claimed by economic determinist interpretations of history. Such a trade-off would only represent an overall loss, if one believed that hum an social evolution was indeed amenable to predictive scientific analysis.

183

Index

absolutism 2 Adam Smith Institute 182 admiration desire for 60-1 of sentiments of another 65 American Revolution 183 analogy and reality 16, 29 contextual nature of 32 criteria of adequacy 41-7 in science 34-47 mechanical 29, 46 relationship to language 29,46 role in perception 32 see also interpretive systems, language approval - and disapproval 61, 67, 71N23 Aristotle 16, 44, 86 arithmomorphic concepts 13-16 Arkwright 166 Ashton, T.S. 177N23 associationism and Smith’s model 83, 179 formation of human nature 53-6, 58-9, 61 implications of 27, 54 language of 27 morality 54, 63 self-interest 68 similarity in men 53

Campbell, N.R. 22N6 Campbell, R.H. 74, 90 Campbell, T.D. 6N9, 46, 63-4, 71N21, 138-9 Campbell, W.F. 123N1 Cantillon 4 capital as a wages fund 80, 165 capital-labour ratio 81,160-1 dynamics of accumulation 81, 146-7, 149-50, 153, 156-8, 161-8, 182 fixed and circulating 159-61 Carnap, R. 24N26 causality 18, 35, 48N8 Cicero 56, 137 Coats, A.W. 22N14, 125N20 Coleman, D.C. 177N24 Collingwood 20 Condorcet, (Marquis de) 57 contract theory of society 54, 70N7 Copernicus 35 corruption 93, 121-3 Cropsey 39

Bacon, F. 56 Baird, G. 49N10 Beckett, S. 16-17 Bennett, J. 23N21 Bentham, J. 165 Bharadwaj, K.R. 176 Bitterman 27 Black, J. 166 Blanchard, B. 69 Blanchfield, W.D. 90N10 Blaug, M. 5N4, 127-8 Bloor, D. 22N10 Bodin, J. 70N14

Descartes 45, 51 dialectics and sympathy 83-4, 141 concepts 14—15, 17-18 definition 13 in social science 13, 18 in the division of labour 59, 75, 82-5 materialism 1,19-20, 78,84—5 qualitative change 42 tastes endogenous 86-7 see also division of labour, materialism

Bonar, J. 71N19 Boulton, M. 166 Bowley, M. 167 Brindley 166 Bury, J.B. 70N13

184

Index

theory ofvalue, materialism Dobb, M. 91N16 Doreian, P. 23N17 Dubin, R. 23N16 Dundonald, (Earl) 177N27

Dickinson, H.W. 177N25 division of labour 3, 69, 72 accounts for diversity in men 94—5 and exchange value 95, 160 and legislation 101-2, 115-16, 123, 150-3, 157, 180 and social structures 76-80, 83, 89, 147-8 as a dialectical concept 75-8, 83, 89, 94-7, 142-3, 157, 176N12 as special and general theory 79-82, 95, 109-110, 146, 155 cause of economic growth 72-9, 154, 158 creates imperfections 92-3, 102, 128 determines social development 43, 73, 142-3, 148 dynamic element 69, 72-9, 92, 148, 179-80 focuses the imagination 80 forms the understanding 94-8 four stages theory 74, 146-54, 174 fragments society 98-103 impact of militia 102-3 impoverishes the individual 95-8 improves welfare 103-7, 170 limited by the market 82, 147, 156 model resolves contradictions 109-15, 123 natural price of labour 142, 171-3 not mechanistic 84 pin factory example 73, 123N5 premises 60-2 role of education 96, 112-14 role of government 112-14, 116-18, 150, 153-4 technological innovation 79-81, 164-8 time scale 82 see also dialectics, labour

Edinburgh Poker Club 103 empiricism 15-19, 27, 43, 52 Encyclopedists 56, 123N5 Enlightenment 55-8, 69, 179 falsification 6-7 Ferguson, A. 121, 123-4, N6N7N11 Feyerabend, P. 24N27 Fichte 19 Forbes, D. 89N4 four stages theory described 74-9 explicit in the lectures 74 fundamental principle 50N24, 74 Fromm, E. 71N19 Gamble, A. 7INI7 Gay, P. 144 Gee, J.M.A. 123N13 generality 31 geneticism 51, 55-6, 58 Georgescu-Roegen, N. 13-15,18 Gibbon 144 Goldman, L. 6N8 Gordon, D.F. 5N5, 22N14 Groenwegen, D.D. 70N9 Haakonsen, K. 48N14, 66, 69N6, 84-5, 115-16, 119, 126N27, 138 Habermas, J. 6N9, 24N29 Hacking, I. 23N17 Hargreaves 166 Harrington 121 Harrod, R. 82 Hegel 17, 19-20, 24N28, 137 Heilbroner, R.L. 125N17 Helvetius 20 Hesse, M.B. 22N6 Hilderbrand 49N21 Hirshman, A.O. 7INI9 185

Index

historicism 56 Hobbes 20, 71N24 Hollander, S. 86, 160, 162, 165, 177N30 Howson, C. 22N10 Hume, D. 26,48N3,52,144N10 impressions 26-7, 52 Smith on 125N16, 145N16 Hutcheson, F. 89N1 Huxley 13

20, 72, 160 as a fundamental principle 20, 72 embodies technological change 79-81, 160-1, 164-8 measure of value 53, 85-8 Scottish Historical School 57 subjective value 86-7 use and exchange value 86-9 see also division of labour Laird, J. 132 Lakatos, I. 7-12, 17-18, 21, 40-2, 178 Lamb, R. 108-11 125N19 language and reality 16, 26, 29, 46, 68 contextual 32-3 development of 26-30, 80 role of the mind 30-3 Latsis, SJ . 22N9 Leibniz 51 Leijonhufvud, A. 22N9 Lindgren, J.R. 33, 46 Locke, J. 27, 48N3N6, 52 logical positivism 16-17 Lovejoy, A.O. 23N18 Lucacs, G. 24N29 Macfarlane, A. 122 Macfie, A.L. 68-9, 70NI0, 71N17, 135-7 Mach, E. 11 Machiavelli 121 Machlup, F. 6N8 Mandeville 37 Mandlebaum, M. 51-2 Mantoux, P. 177N23 Marcus Aurelius 56, 137 Marxist interpretations 1, 175 Marx, K. 1 and Hegel 20 critique of Smith 83, 88, 114, 123-4N6, 125N21, 164 on alienation 93, 109 materialism 20 and Scottish Historical School 56-8 in Smith’s work 78, 84, 119— 21, 157, 181 see also dialectics Medio, A. 17N17

imagination 34, 66 impartial spectator and legislation 115-16 and natural justice 136-8 coherence of 45, 64 judgement of 45, 62-7, 92 role in social evolution 59-62, 67-9 see also sympathy induction 63-9, 83 interpretive systems 32 and propriety 65-6 criteria for 41-7, 67 role of analogy 34—47 see also analogy invisible hand 59, 86, 127-37, 144N2N9 Jefferson, T. 122 Jenkins, R. 177N25 judgement contextual 32, 64—6 in general rules 63-9 in language 30-3 Kant, I. 12, 26, 28, 48N5, 59 Kaplan, A. 23N17 Katouzion, H. 22N14, 144N9 Kenny, A. 23-4N24 Kepler 45 Knight, F.H. 5N4 Kobner, R. 125N20, 163 Korsh, K. 24N29 Kries 49N21 Krimerman, I. 23N22 Kuhn, T. 8-12 labour theory of value and the division of labour 186

Index

prices factor 146-8, 161-75 passim natural 142, 175N2N3 profit 146, 158, 161-3, 166-7, 171, 176N17 progress 57-8, 68, 83 propriety 61, 64—5 Ptolemy 9, 35

Meek, R.L. 4, 12, 24N30, 50N24, 75, 90, 123N1 Meinecke, F. 70N11 merit - and demerit 61-2 Mesaros, I. 5N1 metaphysics 10-11, 25-6, 127, 135 metascience 10-12, 21, 47, 54, 127, 141 Michelson-Moreley experiment 9 Mill, J.S. 70N11 Mirabeau 4 Mitchell, W.C. 165-6 Mizuta, H. 90N14 monopoly aspect of estrangement 93, 99-100, 117-19 defended 168 interferes with the division of labour 78, 11&-19, 158-9, 162 Montesquieu 4, 56-8, 125N16 morality 3, 54, 63, 76-8, 93 Morrison, J.C. 70N12 Myers, M. 90N8

Qualitative change aesthetic criteria 42 and general rules 67-8 and the division of labour 75-9, 128, 154 and verification 16 concepts of 14—19, 21 discontinuity 42, 47, 68 from general to special theory 78-30, 154, 156-7 improvement as simplification 80, 95, 166 in society 42-3, 47, 67-8, 116, 180 slow rate 82-3 qualitative residuals 2, 15 Quesnay 4 Quine, W. 24N26

Napoleani, C. 135-6N7 Napoleanic Wars 182 Newton, I. 10, 37, 41, 44, 46 48N6, 56 Nicholas of Cusa 56

Radnitzky, G. 24N27 Rae, J. 124N9 Raphael, D.A. 70N10, 136-7 rationality - and reason 141 and associationism 51-4 and Scottish Historical School 53-4, 57-9 cunning of reason 137 ethical rationalism 63, 66, 69, 141 in science 8-12 practical reasoning 67, 179 and impartiality 115-16 builds social structures 89, 128, 141-3 contrast with associationism 83 imperfections 93, 99 role in forming general rules 63-9, 78, 83 Reformation 57 relativism 2

O’Driscoll, G.P.J. 90N13 Olsen, R. 48N9 O’Neill, P. 23N22 Osner, J. 90N10 Papperholm, F. 123N1 paradigm 8, 12 Physiocrats 87 pietism 57, 70-1N 14 Plato 16, 40 Pocock, J.G.A. 7IN 15, 121-2, 126N32 Popper, K. 8-12, 21N21 Pownall, (Governor) 162, 176N12 Price, H.H. 23N21 Price, L.L. 89N4 187

Index

and general rules 62-9, 83—4 and social estrangement 93, 99-103, 124N12, 162, 180 imperfections 93-8 process crucial 67-9, 92 role in social evolution 43, 59, 61-8, 73, 79-80, 83 social and unsocial passions 71N20

research programmes 7-12, 17-21

Ricardo, D. 20, 82-3, 173, 182 Robinson, J. 176 Roche, M. 6N7 Rosenberg, N. 111-12, 156-7 Rousseau 109 Ryle, G. 24N26 scholasticism 25 Schumpeter, J. A. 5N4,11,17,39, 73-4, 83, 89N2, 162, 168, 177N29 Science - see analogy, interpretive systems Scottish Historical School 4 economics fundamental 56-8, 72 Enlightenment 69 influences on 55-8 treatment of corruption 122-3 Shaftesbury 121 Skarzynski 49N21 Skinner, A.S. 6N11,48N23,74-5, 90N9, 110 Skinner, Q. 5N6 Smith, A. anticipations of his work 4, 175N6 homogeneity of his work 4—5, 37-40, 43 interpretations of his work 15, 83, 86, 107-12, 127-8 scientific nature of his work 4,15, 17 scope of his work 3-4 sophisticated methodological falsificationism 9-12, 41-2 Spengler, J.J. 143, 165 Spinoza 51 Sraffa, P. 91N17 Stark, W. 5N3, 144-5N13 Stigler, G.J. 22N14 Stoicism 56, 70N10, 105, 136-7 Strauss, L. 6N8 subsistence 72, 146-7 socially defined 81,104,171-2 surprise - and wonder 31-2, 34, 41, 64—5, 182-3 sympathy 128 188

Tarlton, C.D. 5N6 tastes 146-8, 151, 157, 168-9 teleology 68,105,127,138,140-2 Todd, W.B. 74, 90N9 transformation problem 20, 88 trucking urge 60-2 Turgot 4, 56, 58, 70N9 uniformity 31 unintended consequences 68, 127 and the invisible hand 128-35 and purposive action 128-9, 143 crucial to Smith’s model 157 material gains illusory 130-5 role of vanity 131-4 self-interest 128-30 subjective-objective dichotomy 132, 155-6, 169, 171-2 utility illusion 132, 140, 156, 169-70 see also invisible hand, vanity universities transmit outmoded knowledge 112, 125-6N25, 166 Urbach, P. 22N11 utility 146 and aesthetics 139-40 as central principle 13&-40 theory of value 86 vanity cause of long leases 77, 156 conspicuous consumption 130-1, 169-70 pride-magnanimity 60-1 role in social evolution 59-61, 67, 133

Index

self-love 60

Wager, W.W. 70N13 Walton, P. 7IN 17 Watkins, J.N.N. 23N22 Watt, J. 166 Weber, M. 6N8 West, E.G. 39, 107-11 Winch, D. 40, 48N20, 90N6, 124N10N15, 175N1 Winch, P. 6N7 Wittgenstein, L. 16, 23N23 Woolf, H. 22N17

see also unintended

consequences verification 15-19, 29, 43, 182-3 Vickers, D. 59 Vico 56, 70N12 Viner, J. 39, 105 Voltaire 56 Von Leyden, W. 2, 23N21

189