Is Adam Smith Partly an Economist, or Wholly a Moral Philosopher?

Guest Author: Brad DeLong, professor of economics at U.C. Berkeley, chair of the Political Economy of Industrial Societies major, and a research associate of the National Bureau of Economic Research.  Full bio.  He blogs at delong.typepad.com.

Tiago, at History of Economics Playground, reacted very negatively to an AEA Annual Meeting presentation by Robert Shiller and Virginia Shiller. He wrote:

Bad job « History of Economics Playground

Imagine I write a paper on Behavioral Macroeconomics making off the cuff observations about the latest financial products and how my bank manager frames that information, and noting my friends and neighbors’ flight to safety or to risk on the flimsiest of whims. Imagine I make no reference to secondary literature or to methodology as I approach the questions. Were I then to submit this piece to general appreciation, say get Robert Shiller to referee it. How do you think he would assess my effort?

I am sure we would be fast and dirty in telling me to do something else with my time.

I have not written a paper on Behavioral Macroeconomics and have no intention of doing so. But Shiller has written a working paper, kind of on the history of economics (Cowles Foundation Discussion Paper No. 1788 – Economists as Worldly Philosophers). There is no thread to the argument, no understanding of context, and zero references to the vast body of work by historians on his subject. The working paper, I am sure, will get plenty of readers, downloads and comments. But were I ever to referee it, I would be fast and dirty in telling him to do something else with his time.

I read this as Tiago policing the sub-disciplinary boundaries: nobody working in the history of economic thought has any business writing about finance or behavioral macro, and nobody working in finance or behavioral macro has any business talking about how looking at the history of economic thought informs what the future of economics should be.

So I asked:

So what is it in the working paper by Robert Shiller and Virginia Shiller that you think is wrong?

Tiago responded:

You want me to referee it? Someone missed the point of my post.

Economics appears somehow ready formed and fully bounded from the beginning. Take this: “Adam Smith was a professor, not of economics but of moral philosophy. His The Theory of Moral Sentiments, first published in 1759, was a mixture of philosophy, psychology, and economics.” — the anachronism of the statement makes me cringe.

A reference to a Baltimore Sun article to announce the emergence of economics departments? What about saying something about the importation of the German Research University or the context of the Progressive Era shaping standards of expertise and advocacy and trust in numbers.

And then the whole thesis is pants. Economists never stopped being “worldly philosophers” even if the public sphere has changed and become less accepting of certain brands of generalists — vide a forthcoming conference and special issue of History of Political Economy on Public Intellectuals in Economics (shameless self-plug).

I could go on ad nauseum…nearly sentence by sentence.

I think this deserves some additional reflection.

First, start with Tiago’s:

You want me to referee it? Someone missed the point of my post.

He is talking to me. But he is wrong. I am not stupid. I did not miss the point of his post.

I do maintain that if Tiago dislikes Shiller and Shiller enough to trash the piece, he owes people who inquire an explanation of why he dislikes it–rather than a further policing of sub-disciplinary boundaries. Moreover, I think that when Tiago does try to lay out his complaints about Shiller and Shiller he does not do particularly well. The first thing he complains about is the claim by Shiller and Shiller that:

Adam Smith was a professor, not of economics but of moral philosophy. His The Theory of Moral Sentiments, first published in 1759, was a mixture of philosophy, psychology, and economics…

And his only complaint about it is:

The anachronism makes me cringe…

But when you look at what Shiller and Shiller are saying in that paragraph, you see that they are correct:

• Adam Smith was a professor of moral philosophy.
• His Theory of Moral Sentiments was published in 1759. The *Theory of Moral Sentiments indeed does contain a braided mixture of ideas that we would now classify as being ideas that belong to the disciplines philosophy, society, and economics.

The only just complaint I see against the Shiller and Shiller claim is that it should have read:

Adam Smith was a professor, not of economics but of moral philosophy. His The Theory of Moral Sentiments, first published in 1759, [contains ideas that we would now classify as] a mixture of philosophy, psychology, and economics…

That hardly seems cringe-inducing.

Definitions Depend on Time Perspective

Second, I would in fact go considerably further.

I would say that the claim that TMS (and much more so The Wealth of Nations) is not “a mixture of philosophy, psychology, and economics” is more false and misleading than the claim that TMS is “a mixture of philosophy, psychology, and economics.” You can look back into the past before 1759–in which case TMS is not “a mixture of philosophy, psychology, and economics” but rather one of the culminating works of the “moral philosophy” episteme, to use a Foucaultian term. You can look forward into the future from 1759–in which case TMS is indeed a mixture of philosophy, psychology, and economics as some pieces of it are thereafter read as foundational discussions of issues that the two new disciplinary epistemes were to pick up and run with, and some pieces remain in the ongoing tradition of philosophy. A good historian of thought would look both ways: neither denying that TMS can be and has been fruitfully read as a work of “moral philosophy” rather than as a braided combination of philosophy, psychology, and economics; nor denying–as Tiago appears to wish to–that TMS can be and has been fruitfully read as a braided combination of philosophy, psychology, and economics.

The reason that a good reading of TMS is Janus-faced–rather than the exclusively past-faced reading that Tiago wishes to impose on us as the only legitimate way to read TMS–is the reason that we return over and over again to TMS and even more so to WN: Adam Smith is not just another moral philosopher working within the tradition of moral philosophy. Adam Smith wants to do much more. Adam Smith wants to change the game. And Adam Smith succeeds.

If I may crib from my own contribution to John Holbo, ed. (2007), Framing Theory’s Empire (West Lafayette, IN: Parlor Press)

I first ran into these ideas of anachronism in the reading of Adam Smith when Associate Professor of Social Studies Michael Donnelly recommended that I read an excellent book by Keith Tribe, Land, Labor and Discourse.  Tribe, writing in a Foucaultian frame, introduced me to the idea that the Theory of Moral Sentiments and the Wealth of Nations that contemporary economists read was not the Theory of Moral Sentiments and the Wealth of Nations that Adam Smith had written. This was especially true for the Wealth of Nations. The Wealth of Nations that economists read was made up of two books: Book I on markets, Book II on capital, and there they tended to start. The Wealth of Nations that Adam Smith wrote was made up of five books: Book I on the “system of natural liberty,” Book II on accumulation and the profits of stock, Book III on the economic history of Europe and why the empirical history of its economic development had diverged from its natural history, Book IV on the mercantile and physiocratic systems of political economy, and Book V on the proper management of the affairs of the public household by the statesman.

“The Economy” Did Not Exist in 1776

The Wealth of Nations, Tribe claimed, could not be a book of economics because a book of economics had to be about the economy. And there was no idea of “the economy” back in 1776 for a book of economics to be about. What was there? There was the undifferentiated stuff of the mixed social-cultural-political-trading system that governed production and distribution: material life. There was the study of the management of public finances. This was conceived in a manner analogous to the domestic-economic management of household finances. Just as–to Robert Filmer and others–the King was the father of the people, so the King’s household–which became the state–had to be properly and prudently managed.

Political Oeconomy Did Exist in 1776

In the words of James Steuart, who wrote his Principles of Political Oeconomy (Volumes 1, 2 and 3) and  nine years before the Wealth of Nations, in 1767: “Oeconomy, in general, is the art of providing for all the wants of a family, with prudence and frugality. What oeconomy is in a family, political oeconomy is in a state.” It is managing affairs to make the people prosperous and the tax collections ample by governing “in such a manner as naturally to create the reciprocal relations and dependencies between [inhabitants], so as to make their several interests lead them to supply one another with their reciprocal wants.”

There wasn’t, Tribe argued, an economy that an economist could write a book of economics about until the 1820s or so.

Strip Tribe’s (and Foucault’s) arguments of their rhetoric of apparent contradiction and you can understand that within the mystical shell there is a rational kernel. It is–or, at least, I read them as–an injunction to analyze a school of thought in more-or-less the following way:

1. Read not just one or two important books, but a whole bunch of books that talk to our past each other and use the same or similar vocabulary in order to identify the school you will look at.
2. Strip your mind of what they must be talking about, and look with fresh eyes on what they are talking about.
3. Examine what rhetorical, conceptual, and intellectual moves are common within the examples you have of this “discursive formation.”
4. Think hard about what rhetorical, conceptual, and intellectual moves you would think you would find in these books–but don’t.
5. Think hard about what rhetorical, conceptual, and intellectual moves you do not expect to find prominently in these books–but that you nevertheless do find.
6. Present to the world, in as clear and straightforward a way as you can, what this particular form of discourse was–what it thought the world was like, what it saw as important, what its particular blindnesses were, what its particular sharp points of insight were.
7. Do not, ever, grade a discursive formation of the past by how much it falls away from the ideas of the bien-pensant of today. The past is another country.

And I became convinced that Tribe and Foucault were at least partially right.

It was, indeed, only with Ricardo that the operation of what we now say is the economy–the production, exchange, and distribution of goods and services all mediated through market exchange–was seen as something that was important enough, or separate enough, or coherent enough to be something that it made sense to write books about, and, indeed, something that it made sense to be an expert in. David Ricardo was a political economist. Adam Smith was a moral philosopher. To try–as somebody like Joseph Schumpeter was–to grade Adam Smith as if he were engaged in the same intellectual project as Schumpeter was somewhat absurd.

Tribe applied this methodology to Adam Smith, his predecessors, contemporaries, and successors. What they were doing, before Ricardo, was Political Oeconomy–writing manuals of tactics and policy as advice to statesmen, although manuals restricted to what Adam Smith would have called (did call) a subclass of police: how to keep public order and create public prosperity. Hence for Adam Smith Book V of Wealth of Nations is the payoff: it tells British statesmen what they ought to do in order to make the nation prosperous, their tax coffers full, and thus the state well-funded. Book IV is a necessary prequel to Book V: it tells the statesmen in the audience why the advice that they are being given by others [exists] in other books of Political Oeconomy–by Mercantilists and Physiocrats. Book III is another necessary prequel: it teaches statesmen about the economic history of Europe and how political oeconomy of various kinds has been practiced in the past.

Out of Smith’s Genius:  Economics

But Tribe’s (and Foucault’s) methodology, while it is partially right, is also partially wrong. Their theoretical framework collapses when we work back to Books II and I of the Wealth of Nations. For Adam Smith is not the prisoner of the discursive formation of Political Oeconomy. He is not the simple bearer of currents of thought and ideas that he recombines, as other authors do, in more-or-less standard and repeated ways. Adam Smith is a genius. He is the prophet and the master of a new discipline. He is the founder of economics. And he knows that he is a genius. And he wants to change the game.

Adam Smith is the founder of economics because he has a great and extraordinary insight: that the competitive market system is a remarkably powerful social calculating and organizing mechanism, and that the sophisticated division of labor to which a competitive market system backed up by secure and honest enforcement of property rights give rise is the key to the wealth of nations. Some others before had had this insight in part: Richard Cantillon wrote of how, once you have specified demands, the market does by itself all the heavy lifting that a central planner would need to do; Bernard de Mandeville [wrote] that dextrous management by a statesman can use the power of private greed to produce the benefit of public utility. But it is Smith who sees what the power of the “system of natural liberty” that is the market could be–and who follows the argument through to the conclusion that it forever upsets and overturns the previous intellectual moves made in and conclusions reached by the discursive formation of Political Oeconomy.

And once I had worked my way through to this conclusion, Tribe’s and Foucault’s ideas of “discourse” and “archaeology” were not my masters, but my tools. I needed to supplement their ideas with another set of ideas–call it Thomas Kuhn’s idea of “scientific revolutions” or Louis Althusser’s idea of “epistemological_breaks.” Adam Smith intended the Wealth of Nations to be read not as a contribution to but as a transformation of the discourse of Political Oeconomy. And it was–to an extent he could hardly have imagined.

Thus it is not “anachronistic,” or it is not only “anachronistic” to write that Smith’s corpus is a braided mixture of what we now call philosophy, psychology, and economics. If it were only anachronistic to write that, we would not now be reading Adam Smith at all any more than we are now reading James Steuart at all: we simply would not care. The fact that we do care about Adam Smith is what tells us that Tiago’s dismissal of the Shiller and Shiller claim cannot be fully right.