|Beyond Economics: Intersections and Opportunities with Adam Smith in the Writing and Rhetoric Classroom page 6 of 8|
Close Analysis and Correction: Laissez Faire and the Invisible Hand Theories
Another research opportunity involving Smith is to explore some of the primary terms associated with him that are incorrectly appropriated, for example, the term “Laissez Faire.” While often this term is connected to him through the idea that business endeavors should be free of government intervention, nowhere in Wealth of Nations or The Theory of Moral Sentiments is the term employed by Smith. While Smith does invoke the French idea of “let things go their own way” or “leave alone,” he is not referring to governmental oversight, but rather to the idea of “Nature.” In Adam Smith’s Lost Legacy, Gavin Kennedy notes that it was not in Wealth of Nations where this theory resides, but rather Smith’s work entitled “The Principles Which Lead and Direct Philosophical Enquiries: Illustrated by the History of Astronomy” (141). Time and time again references to Smith as a proponent of laissez-faire slip into capitalist dialogue, but as far back as the 1930s, economists assert the term did not come from Smith. The central concern of Wealth of Nations may have been economics, but it did not contain an assertion that the government should stay completely out of the business operations of the country nor fail to provide for and respond to the social needs of its citizens.
In the same vein, Edwin G. West asserts: “The modern advocate of laissez-faire who objects to government participation in business on the ground that it is an encroachment upon the field reserved for private enterprise cannot find support for this argument in Wealth of Nations (167). Smith was an advocate of personal gain, but also giving back to the government in the form of taxes, which would allow checks and balances to remain in place. His work supports government and public programs that provide subsidies when necessary. In fact, he felt that those earning the most needed to help provide for those who could not provide for themselves. These positions are evident throughout Wealth of Nations, most directly in connection particularly with labor and education. Giving students an opportunity to define the term and then connect it to Smith gives them an opportunity to employ a variety of research tools. Students seem to enjoy the opportunity to uncover the true meaning of the term.
Another opportunity to use Smith for a research assignment is in connection with idea of the “invisible hand.” John D. Bishop, in his article “Adam Smith’s Invisible Hand Argument” found that Smith only used this term three times throughout the body of his life’s work. While the term can be found once in Wealth of Nations, it is also included in The Theory of Moral Sentiments, and the essay referenced previously, “The Principles Which Lead and Direct Philosophical Enquiries: Illustrated by the History of Astronomy” (Bishop 166). Greenspan and others have adopted this term positing that it means that workers do not have to concern themselves primarily with the interests of those less fortunate, giving rise to a principle that seems to provide ethical and moral permission to pursue individual business interests above all else. This is not what Smith put forward in Wealth of Nations or The Theory of Moral Sentiments. According to Bishop, close reading beyond the passage cited above shows that Smith sees a moral problem with ignoring public interests, more specifically, the needs of the workers, but this is not the contemporary application of this term.
Twenty-first century scholars see the invisible hand as the means for providing for those less fortunate—society therefore does not have to deliberately provide support. Bishop’s research revealed that sixty top managers reported that they relied upon the invisible hand theories of Adam Smith to “justify the morality of pursuing self-interest” (169-170). Bishop, however, contends that Smith’s idea of the invisible hand simply puts forth an empirical form of this argument, not a moral one. Smith was only applying this principle to certain economic activities such as investing capital in one’s own country and maximizing that return, which would, in turn, benefit the citizens there (177). He did not assert that self-interest without government involvement or regulation is always the best practice. The idea that Smith’s invisible hand theory means to focus on one’s personal priorities because by some natural order, individual success will be sufficient for the prosperity of society is simply false. Smith makes it very clear in The Theory of Moral Sentiments that we have a responsibility to consider others; Smith wants society to imagine the “place” of others’ lives and feel sympathy and compassion towards them (3).
Smith, as a moral philosopher, saw the flaws of our humanness and believed that pursuit of individual success would raise national revenues, which would generate funds that could be used to support those less fortunate. Smith also recognized the general motivation of all in the pursuit of wealth is rooted firmly in human nature: “he intends only his own gain” (Smith Wealth 572). He goes further to see the possibility of corruption by business leaders, a group he refers to as the “third order,” recognizing that they may not act in the best interest of others because they are focused on personal gain:
The interests of the third order [those who live by profit] . . . have not the connection with the general interest of society as that of the other two [labourers and landlords] . . . the proposal of any new law or regulation of commerce which comes from this order [those who live by profit], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the publick, who have generally an interest to deceive and even to oppress the publick, and who accordingly have, on many occasions, both deceived and oppressed it. (Smith Wealth 209)
Consideration of these two points suggests Smith was putting forth an argument far more complicated than one simply providing an avenue for personal pursuit of wealth without respect to others. Student projects that allow them to move from primary texts to secondary sources to the mainstream media, and then their own analysis consistently reveal a different Adam Smith than students thought they knew. This prompts an awareness of the need for deeper consideration of complex problems and connections of business to history, philosophy, and psychology.
Krueger saw Smith in this way: “He clearly had a big heart and much compassion for the disadvantaged. This generated inevitable conflict in his own thinking. One must decide how much efficiency should be sacrificed to improve the lot of those who feed, clothe, and lodge the rest of society, if that is the goal of economic policy . . . Smith wrestled with this dilemma” (xviii-xix). Smith places himself in a more compassionate place within society, recognizing there are those less fortunate, yet no less able to learn and be productive members of society. In fact, in line with the economic changes during the Scottish Enlightenment period, Smith specifically cites in Wealth of Nations, “Every man too is in some measure a statesman, and can form a tolerable judgment concerning the interest of society, and the conduct of those who govern it . . . Every man does, or is capable of doing, almost every thing which any other man does; or is capable of doing” (Smith Wealth 988).
Smith argues the government should provide funds for education, religious instruction, and maintenance of public works (highways, bridges, post offices, public mint, etc.). Gavin Kennedy calls these facets of Smith’s principles “Smith’s Immodest Proposals for Public Expenditures” (219). Kennedy posits Smith’s mention of public health concerns and the government’s role to protect its citizens from disease shows even greater social concern, “In the same manner as it would deserve its most serious attention to prevent leprosy or any other loathsome and offensive disease, though neither mortal or dangerous, from spreading itself among them” (Smith 1039). While Kennedy and other Smith scholars would not go so far to say Smith is the proponent of socialized medicine, these examples clearly demonstrate that Smith believes that the government has a role in looking after the welfare of its citizens--especially if failure to do so could impede the productivity and financial success of citizens and the nation as a whole. Students consistently state that these points often seem lost in contemporary society and provide for a consideration of the types of changes and ideas that were moving in the 18th-century by the man who is considered so very influential in the formation and evolution of today’s marketplace.