Political Economy and Smith’s Wider Thought
At first glance, Smith’s political economy project, aimed at understanding production, distribution and growth, with a view to generalized high and rising consumption, might appear narrow, but ultimately, the factors relevant to that purpose embrace everything which shapes the two narrowly “economic” factors that are the proximate causes, labour productivity growth and capital accumulation.
This includes, for example, political governance and the forms of legal regulation (especially property rights); the particular histories of nations for which policy is being formulated; and the “moral sentiments” which form the social framework of norms and conventions within which production and exchange take place. The moral sensibilities of peoples have a history too (TMS: V, VII. iv.36-7). There is a legitimate and fruitful intellectual division of labour which enables a “narrow” political economy to proceed in WN, by taking various factors as given; but there is also a larger frame of reference pointing to the possibility of a unified science of society. (Further to Smith and political economy as a distinct science, see Winch 1978: 6, 184-7; 1996.)That larger frame of reference for the political economy is evident in other of Smith’s writings. The lectures on jurisprudence are in large measure devoted to the history and theory of property rights. The theory of justice to be found there, and in TMS, underpins the economic liberalism of WN by defending private wealth and incomes against any possible justifications for redistribution by policy. In a very real sense, for Smith, justice is laissez-faire: people are literally to leave each other alone (TMS: II.ii.1.9, II.ii.3.3, III.6.10-11). The lectures also provide substantial illustrations of the strong historical sensibility Smith brings to bear in all his intellectual endeavours, with respect to all variety of human phenomena.
Most notable in relation to economics is his recourse to a four-stages theory of the history of human economic and wider development, an approach to history with a strongly “materialist” character, though not mechanically deterministic (WN: V.i.a.1-10, V.i.b; LJA: 14-16, 200-244; LJB: 404-17, 459-60).Much more could be said (and has been) about the relation between Smith’s two books, an issue taken up also, a little further, in the next section. Suffice it to add one key point here. It would be a misleading presumption to suppose that Smith’s conception of self-interested behaviour versus moral behaviour can be understood in terms of a dualism or dichotomy in which the former as egoism (or vice) and the latter as altruism (or virtue) are mutually exclusive phenomena. There is conflict between self-interest and virtue, with Smith supposing principles intrinsic to human nature (notably, ‘sympathy’, though understood in a particular, technical sense) which incline human beings to act sociably. Hence the very first sentence of TMS (I.i.1.1): “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him”.
Sociable or moral behaviour is not merely an artificial imposition on natural self-interestedness. It is this which inclines humans to a natural self-restraint of their pursuit of their own interests. Indeed, Smith, much influenced by Stoicism, comes to regard self-command as the primary human virtue (Raphael and Macfie 1976: 6). However, a certain self-regard is an element of virtue for Smith too, an expression of a sensibility more humanist than Christian. He speaks at one point of our negative moral judgements upon those who neglect their own well-being. This is not a grave moral defect, but it is nevertheless a moral defect (TMS: VI.i.14, VII.ii.3.16, VII.ii.4.8). More generally and more importantly, the “virtue” of “prudence” is precisely the characteristic which epitomizes the savers who drive capital accumulation in WN (TMS: VI.i, VII.ii.3.16-17; Raphael and Macfie 1976: 8-9).
Smith’s famous (or infamous) “invisible hand” metaphor also is best understood in the context of his disposition in favour of historical analysis. The term appears only three times in his writings (EPS: 49; TMS: IV.1.10; WN: IV.ii.9). While three references are not suggestive of an important role for the notion, at core, the invisible-hand metaphor expresses a concept of unintended system-consequences of individuals’ behaviours, where those system-effects are usually socially beneficial, though they need not be so in all cases. This generic idea finds much more frequent application in his writings. See, for example, the historical argument concerning political power ceded away as a result of economic forces (WN: III.iv.9-17); the discussion concerning the profound consequences for history and civilization of “a mere accident”, the invention of gunpowder (WN: V.i.a.43); and the analysis of the decline in the temporal power of the clergy, due to economic development (WN: V.i.g.21-30).
Perhaps the most important narrowly economic instances of such unintended consequences are the tendency for profit maximization under free competition to eliminate above- and below-normal profits; and for high rates of accumulation and growth, together with technical change, to lead to high and rising real wages. Smith also more than once appeals to “invisible chains” of causal explanation in the “History of Astronomy” (esp. EPS: 45-6, 48; the EPS: 49 invisible-hand instance is really a case of this, albeit involving spurious explanation). Smith’s political economy, similarly, is intended to grasp and reveal that which is invisible to the individual participants in society, as individual participants: the system-consequences of individual behaviour, including the feedbacks of such systematic forces upon individual behaviours. Notably, with regard to feedbacks, individuals’ pursuit of material self-betterment generates competition as a system-consequence, and also technical innovation to improve productivity; but competition in turn drives innovation (e.g., WN: V.i.e.26).
Smith’s wider set of writings beyond WN can serve to enhance our understanding of his political economy project, and how it was conceived of by him as part of an even more ambitious, larger species of social science (not Smith’s term). Skinner (1987: 358) and Winch (2004: 16-17, 19), drawing on the contemporaneous account of John Millar (reported in Stewart 1811 [1980]: 273-6) have both drawn attention to how three of the four parts of Smith’s early lectures are reflected in elements of the corpus of Smith writings and lecture notes: the lectures dealt successively with natural theology, ethics, jurisprudence and political economy; and subsequently, we have TMS, LJA/LJB and WN. (No written Smith texts survive that particularly concern the first part, natural theology.)
However, these do not constitute the limits of his intellectual ambition. In a prefatory note to the 1790 sixth edition of TMS (p. 3 of the Glasgow edition), which appeared shortly before his death, Smith draws attention to a promise he had made in the last paragraph of the book, in all five previous editions, to publish “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”, covering both “justice” (or “jurisprudence”) and political economy. WN had fulfilled the latter part of that promise but Smith admits to little hope of completing the former. The lecture notes on jurisprudence give us some idea of what such a work might have looked like. Smith writes also in 1785: “I have... two other great works upon the anvil: the one is a sort of Philosophical History of all the different branches of Literature, of Philosophy, Poetry and Eloquence; the other is a sort of theory and History of Law and Government’ (Corr: 286-7). As the editors of the correspondence point out (Corr: 287n), elements of all this are preserved in EPS, LRB and LJA/LJB. In the same letter Smith admits the unlikelihood of his plans being brought to completion.
In this wide-ranging, even comprehensive, ambition one sees Smith’s vision for achieving that unified social science to which the eighteenth century aspired, a “science of man”. Indeed, a good part of the fascination in recent decades with the whole corpus of Smith’s writings, and their interrelations, is perhaps due to our seeing in the comprehensiveness of Smith’s treatment of the human condition something latter-day social science has lost as a result of disciplinary and sub-disciplinary specialization. There is an irony here, since Smith is famous for his division of labour doctrine, and himself explicitly applies this principle for labour productivity growth to science (for example, WN: I.i.9). The irony is compounded by the fact that his own intellectual labours did not prove productive enough to succeed in achieving a projected outcome, the pursuit of which amounted to a refusal to acquiesce in intellectual specialization. (For a wide-ranging collection of essays covering all aspects of Smith’s thought see Berry et al. 2013.)