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The Reckoning · Season 1

The Reckoning: Lesson Three

In this lesson, you’ll learn:

  • How best to understand Adam Smith’s writings
  • The problems that arise without moral objectivity
  • The three elements required for a well-functioning free market

Read the Transcript

Hello and welcome to Part III of our series on The Reckoning; the coming battle between socialism and the practice of virtue in business.  In the prior sessions, we explored the current state of our culture in America, the state and perception of business therein, and the root cause of the rising movement toward socialism in America.  This gives the proper and relevant context for considering the reckoning that is on the horizon. But it only gives one side of the battle so far and neglects some of the opposing causes and effects.

 

To give justice to these other forces, it is necessary that we understand the foundations of a free-market, the origins of limited or laissez-faire government, and the moral implications considered when the widely-accepted father of these concepts, Adam Smith, penned his thoughts in his books, the most famous of which is his classic, An Inquiry into the Nature and Causes of the Wealth of Nations (more commonly known as The Wealth of Nations).

 

Many people are surprised to learn that Adam Smith was a Scottish moral philosopher, not an economist. Prior to concerning himself with what makes nations wealthier than others (i.e. the division of labor and laissez-faire government among other causes), Smith attempted to answer the question, “How do inherently self-interested people form objective moral judgments?”  Remember, Adam Smith is writing in the 18th Century, post-enlightenment.  The moral compass heading offered by the Church was no longer relevant to most of the institutions of society.

 

Ten years prior to writing The Wealth of Nations, Adam Smith wrote a book entitled, the Theory of Moral Sentiments.  In this book, Smith attempted to define how morality absent the influence of the Church is defined in society.  It’s difficult to understand all of Adam Smith’s implications in his famous and later book, if you don’t understand the prism through which Smith views morality. We won’t make that mistake here.

 

To avoid too much detail, Adam Smith suggested that morality absent other rules or canons (which he believes are not necessary), is determined by the desire for mutual sympathy in sentiments.  That is, moral judgments are settled where two of us can agree to common sentiments, as governed by an impartial spectator.  This impartial spectator could be God, our conscious, or some other ghostly being.

 

Robert Heilbroner, an author and student of Smith, summarized Smith’s theory of moral sentiments this way, “Morality is not reducible to a fixed set of rules. It is always mediated by the empathetic properties of human understanding.  Morality is not given to us, but made by ourselves.” – think again of the historical period known as The Enlightenment.  Sounds like relativism today, doesn’t it?!  This was prophesied in the mid-to-late 1700’s!  It’s also the moral foundation informing Smith as he wrote The Wealth of Nations.

 

One of these foundations is the idea of mutual benefit in sentimental exchanges.  This mutual benefit foundation is implied as a significant element of healthy free market exchanges . . . with some significant cautions and admonitions found only in his book, Theory of Moral Sentiments.  These cautions and admonitions, not the least of which are the extravagant passions coined by Smith (greed, vanity, and ambition) lead us to some powerful questions.

 

Can a society built on morality of one’s own choosing, underwritten by society untethered from any moral truth be stable enough to create an economically successful society?  Robert Heilbroner suggests that, “A socially stable society is a prerequisite for an economically successful one.”  Rhetorically, how stable is our society today with moral relativism as its guidepost?

 

While Adam Smith believed man’s self-interest was a dominant force on one’s will and temperament, he did acknowledge some primitive force in man’s nature that tempers man’s self-interest.  In the opening sentence of the Theory of Moral Sentiments, he establishes, “How selfish so ever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.”

 

Smith concerns himself, even using his own moral philosophy, with things that can corrupt morality of one’s own choosing.  He states, “This disposition to admire, and almost worship the rich and the powerful, and to despise, or, at least, to neglect the person of poor and mean condition . . . is the great and most universal cause of the corruption of our moral sentiments.”

 

As a philosopher, Smith attempted to be fair and balanced.  He offers these human inclinations that serve to pollute the morality of one’s own choosing.

Through his dance of sentiments, we all seek to be loved and “lovely.”  The question is what are you willing to give up to be “lovely?”  Your beliefs?  Your values? Your principles?

While the “impartial spectator” informs our sentiments, we too often don’t listen well to these promptings and instructions.  In other words, we are prone to self-deceit.

 

Morbidly, Smith also considered our mortality a great tempering factor for determining morality and justice, and I quote

“. . . the dread of death, the great poison to the happiness, but the great restraint upon the injustice of mankind, which, while it afflicts and mortifies the individual, guards and protects society.”

I can’t help but wonder how the length and luxury of life today makes any fear of death less a motivator for justice than in the 18th Century when Smith wrote his books.

 

There’s a lot here to consider from Smith’s theory of moral sentiments and related cautions, yet these are foundational to truly understanding the mutual benefit and moral underpinnings of a free market.  Today, where are these admonitions as we consider the practice of business in an environment of laissez-faire government and morality of one’s own choosing?

 

The bottom line is this, Adam Smith did not see us as saints, but he saw us extraordinarily clearly.  His considerations of things that can impair our moral judgments and hinder a well-functioning free market are prophetic centuries later.

 

Morality of one’s own choosing, renders an ill-functioning free market.  Adam Smith’s amorphous morality, while prophetic, was also his folly.

A well-functioning free market requires these three elements:

The rule of law.

Rights to private property, protected by the rule of law.

And a fixed set of moral rules.

Would you care to imagine from where this fixed set of moral rules or laws comes?

 

Join us for Session IV in this series, The Reckoning, as we explore what the Church has to say about free markets, capitalism, and morality. Yes, the church has a lot to say!  I promise you; we will get to answers and solutions by the end of this series that will compel you to carry forward the flag of freedom in America with truth as its mast.  You play a heroic role in this work as a business leader.  Until then, blessings as you pursue that which is higher still, in and through your business.