Adam Smith on Society’s Exploitation of the Rich

Donald Trump ascribing responsibility for his first two failed marriages to working “like, twenty-two hours a day” brought to mind Adam Smith’s invocation of the “invisible hand” in his 1759 work, The Theory of Moral Sentiments. There, the invisible hand is not quite the same general economic principle identified in introductory economics. To be sure, according to Smith, entrepreneur are still lead by “an indivisible hand” to provide for the public good, but the self-interest they pursue in doing so, Smith argues, is based fundamentally on self-deception. Their labors provide more for the happiness of others than for their own happiness, despite intending their own happiness rather than that of others.

I don’t know whether I buy it, but it is a striking argument.

Smith starts the chapter discussing how people sometimes enjoy an object more because of its “fitness” for attaining a “conveniency or pleasure” than for the convenience or pleasure itself. A modern example of what I think Smith means might be any one of many different apps for cell phones: Often times an “app” may not particularly useful or valued in itself, but the fact that you can do whatever the app does on your phone makes the thing amazing, and serves as its main attraction.

Smith lays out a cost, however, for this type of attraction. He argues in his time some folks “walk about loaded with [such] a multitude of baubles” that the “fatigue of bearing the burden” is greater than whatever enjoyment they receive from the objects themselves. While not explicit at this point, Smith seems to suggest a sort of self deception in which the object’s clever design or fitness works a sort of charm, inducing some individuals to misperceive their true interests. Perhaps in today’s context we might point to phones so overloaded with marginally-useful apps as to impair the work of the phone itself or of the more-useful apps.

Smith turns the discussion, however, applying it to weightier matters of economic and political behavior. “Nor is it only with regard to such frivolous objects that our conduct is influenced by this principle; it is often the secret motive of the most serious and important pursuits of both private and public life.”

Smith considers the case of “The poor man’s son, whom heaven in its anger has visited with ambition.” The boy pours himself into his work, intending short-run sacrifice for long-term gain. But it’s all for naught; he has been deceived. “It is then, in the last dregs of life, his body wasted with toil and diseases, his mind galled and ruffled . . . that he begins at last to find that wealth and greatness are mere trinkets of frivolous utility.”

But this deception, this self-deception, serves to promote the common good. Smith writes, “it is well that nature imposes upon us in this manner,” because “it is this deception which rouses and keeps in continual motion the industry of mankind.” While the successful business person need have no thought “for the wants of his brethren,” his activity nonetheless provides for society.

The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements.

Smith here invokes the invisible hand:

They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society. . . In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.

I do not know how seriously Smith intended the “poor-little-rich-man” aspect of his argument. Perhaps at this time he was enthralled by a doubly ironical sort of Mandevillian “virtue out of vice” story, in which not only does private vice generate social good, but those who generate the social good do not realize the private good that spurred their achievements in the first place. In effect losing one’s soul while not even gaining the world.

A couple of thoughts, however, if we take Smith’s argument seriously. First, entrepreneurial sacrifice, whether induced by self-deception or not, provides for the possibility for most of us “not [to be] worried about your life, as to what you will eat or what you will drink; nor for your body, as to what you will put on it.”

For those then who are not self-deceived in the way Smith describes, there must then be a frank recognition of the hard work and sacrifice to provide goods and jobs to others by creating business enterprises. People who create jobs and produce goods and services feed people, clothe people, and house people. That is no mean feat even when it is “business” rather than “charity.” Indeed, given an option, business would hands-down be preferred, because in employing individuals gainfully entrepreneurs provide goods and services to society as well as providing for employees.

Finally, I connected Adam Smith’s description of sad, restless entrepreneurs with Tocqueville’s description of Americans when the latter wondered why Americans seem so “restless in the midst of their well-being.” One could perhaps style Tocqueville’s argument as one in which America’s accomplishment is to have democratized the life trajectory of Smith’s entrepreneur: that of unfulfilled desire in the midst of abundance.

James R. Rogers is Associate Professor of Political Science at Texas A&M University.