A number of the Tea Party candidates elected on November 2, such as Rand Paul from Kentucky, are libertarians who believe that markets are best left alone to work their magic. Government interventions to correct for supposed problems merely make things worse. They see themselves following in the footsteps of the father of economics, Adam Smith.
However, Smith has more in common with the Catholic social thought of Pope Benedict XVI than with the philosophy of Tea Party devotees of the free market. The popular version of Smith that represents him as arguing that the so-called invisible hand of the free market and the pursuit of self-interest by individuals drives the economy to achieve the social good is a caricature of the real Adam Smith.
A more careful reading of Smith’s writings, especially his Theory of Moral Sentiments (1759) suggests that he had a much more nuanced understanding of human beings than the one which assumes that individuals are driven solely by self-interest. In fact he would appreciate Pope Benedict XVI’s views in his recent encyclical, Caritas in Veritate. Although Smith argued that self-interest has a strong influence on people’s behavior, he had a pluralist view of human nature, in which what he called sympathy — the ability to perceive things from another person’s perspective — has an important role.
Moreover, his views on the role of self-interest leading to the common good are not so clear-cut either. He thought that “humanity, justice, generosity, and public spirit, are the qualities most useful to others” (Smith, 1759, 190), and seems to have believed while self-interest is useful in certain situations, these other virtues are useful in others. Especially toward the end of his life he began to have doubts about the role of the invisible hand of competition and self-interest in yielding the common good.
In the “Additions and Corrections” (which is the only major revision of the text) to the Wealth of Nations, published in 1784, he discussed how the mercantile system was distorting commercial society. In his revision of the Theory of Moral Sentiments in 1789 (a book which had seen no earlier revisions), he added “a compleat new sixth part containing a practical system of Morality, under the title of the Character of Virtue” (Smith, 1976a, 319-20). In this revision he argues that society is comprised of a layered web of communities with divergent interests, and that these can result in the creation of destructive factions. He appeals to all people to place the well-being of society as a whole above that of their own factions, and stresses especially the role of statesmen in constructing such a moral society through their actions and by setting examples for others.
Indeed, for Smith virtue serves as “the fine polish to the wheels of society” while vice is “like the vile rust, which makes them jar and grate upon one another.” (Smith, 1789, 244) Clearly, Smith sought to distance his thesis from that of Mandeville and the implication that individual greed could be the basis for social good. As Jerry Evensky argues, for Smith “ethics is the hero — not self-interest or greed — for it is ethics that defend the social intercourse from the Hobbesian chaos.”
So Adam Smith, economist and philosopher, would be quite comfortable reading in Caritas in Veritate, Benedict’s statement that: “Economic activity cannot solve all social problems through the simple application of commercial logic. This needs to be directed towards the pursuit of the common good, for which the political community in particular must also take responsibility. Therefore, it must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution.” (§36)
Charles K. Wilber is a Notre Dame professor emeritus of economics and fellow of the Kroc Institute for International Peace Studies who has written widely on Catholic social thought and economic theory. Email him at cwilber@nd.edu.