In 1776, Adam Smith published the book, An Inquiry into the Nature and Causes of the Wealth of Nations. The Wealth of Nations established a reputation for Smith that lasts to this day. Smith has become known not just as the father of economics, but as the defender of free trade and an advocate for limited government in economic affairs.
In The Wealth of Nations, Smith takes human beings as self-interested and explores the implications for commercial life when self-interested people “truck, barter, and exchange, ” Smith’s phrase for trading locally and globally—our search for a good deal. Unfortunately, some have misinterpreted Smith as saying that greed is good and that selfishness (and not just self-interest) underlies our economic system.
Smith would be horrified to hear himself portrayed as a defender of greed. Smith’s first book, published in 1759 was The Theory of Moral Sentiments. In that book, Smith explored how it is that self-interested individuals who naturally want to put themselves first, can put the feelings and desires of others before their own and act altruistically. He argues that we care deeply about what other people think of us: “Man naturally desires, not only to be loved but to be lovely.” By “lovely” Smith meant respected, honored, admired, and praised. Smith’s perspective on human motivation creates a world of insights into how we treat others and what leads to true serenity and happiness. He deals at some length with various virtues. Greed is not on the list.
In my new book, How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness, I explore the implications of Smith’s neglected masterpiece for modern life. Smith has timeless insights into celebrity, technology, family, and how to deal with the turbulence of life—it’s successes and tragedies—when interacting with those around us. At the end of my book, I look at what Smith has to say about how to make the world a better place. And in the last chapter, I look at the connection between Smith’s two great books.
One, The Wealth of Nations, takes us as self-interested and deals with grand themes such as trade policy, monetary policy, and the sources of prosperity. The other is about how we treat our friends, relatives, and colleagues and takes a more expansive view of what we care about beyond ourselves. At some level, these two books seem at best unrelated to one another, at worst, contradictory. In this excerpt from the last chapter of my book, I try to reconcile Smith’s views of humanity in his two masterpieces.
Before Einstein discovered relativity, before Rodin sculpted The Burghers of Calais, before the Eiffel Tower and the Chrysler Building, before Brutus of Troy founded London, before the first human being realized you could plant a seed and wait for it to grow, before the ambition deep within us caused all these changes in the human condition, we were, it appears, hunters and gatherers in small bands and clans. Subsistence was the most one could hope for, and it was not easy to achieve. Life was fragile; death came early and often.
In such a world, how we interacted with those around us made the difference between life and death. There was no insurance company to insure your spear. There was no government to provide disability payments if you broke your leg chasing dinner. People must have leaned heavily on each other. Trust was essential. Failure to chip in, to help out, to do your share must have been punished relentlessly and cheaply, through shame and anger the first time, but eventually with expulsion and exile if such behavior continued. Every family, every extended family, and maybe every band and clan shared what they had with each other out of necessity.