David Hume and Adam Smith

Anthony Gottlieb reviews a new biography of the British philosopher Hume in Who Was David Hume? New York Review of Books 05/26/2016.

David Hume (1711-1776)

He relates this story early in the piece:

Hume the philosopher did have his early admirers, but they had to be careful what they said about him. Six months after Hume’s death, one of his closest friends, Adam Smith, implicitly likened him to Socrates, which caused a scandal. Smith had recently published a controversial treatise on economics, The Wealth of Nations, yet his eulogy of Hume, and especially his account of Hume’s composure in the face of death, “brought upon me ten times more abuse than the very violent attack I had made upon the whole commercial system of Great Britain.” [my emphasis]

That is particularly interesting for me for what it says about how Adam Smith saw his famous work on economics in the context of the British mercantalist system of the time.

Despite the tremendous influence Hume's empiricism had on other major philosophers like Kant, Gottlieb writes that Hume's reputation in the philosophy profession has generally not been so good. But that there is a newfound interest in his work:

... it is probably the rise of so-called “naturalism” in philosophy that best explains Hume’s newfound appeal. Naturalism has several components, all of which were prominent in his work. Hume stressed the similarities between people and other animals: a century before Darwin’s Descent of Man, he argued that there is no great difference between the minds of humans and the minds of some creatures in zoos. (Hume also anticipated Darwin in implying that certain mental traits function to aid reproduction.) He treated religion as a natural phenomenon, to be explained in psychological and historical terms — which tended to annoy the pious — and he argued that the study of the mind and of morals should be pursued by the same empirical methods that were starting to cast new light on the rest of nature. Philosophy, for Hume, was thus not fundamentally different from science. This outlook is much more common in our time than it was in his.

Philosophers now regard Hume’s account of reason not as a mischievous plot to undermine it but as an attempt to explain how it works. As Harris puts the matter, he was developing “an entirely new theory of rationality.” Hume treats humans as clever animals whose beliefs about most things are based on “custom,” in the form of a propensity to expect the future to resemble the past — a propensity, he argued, that is essential for the conduct of life, but cannot be provided with any sort of independent justification. This thesis has come to be known as “the problem of induction,” though Hume himself did not regard it as presenting much of a problem. He played up the importance of what he called “experimental” or “probable” reasoning in human knowledge, and played down the significance of mathematical and quasi-mathematical deductions. This was a considerable novelty after some two thousand years in which philosophers, still enthralled by Greek geometry, had mostly done the opposite. Hume’s emphasis on the sort of empirical and fallible beliefs that humans share with some lesser creatures was all too easily interpreted as a denigration of the powers of the human mind. [my emphasis]

Gottlieb is particulary interested in what he takes to be a kind of coy, discreet atheism on Hume's part.

But he also takes note of Hume's contribution to economic theory:

An Enquiry Concerning the Principles of Morals ... was, in Hume’s view, “incomparably the best” of his works, but the public, in both Britain and France, was more taken by his Political Discourses, a set of essays mostly on economic topics that followed a year later in 1752. Adam Smith wrote that Hume was, so far as he knew, the first writer to argue that manufacturing and commerce tend gradually to produce greater liberty and security for citizens. Hume’s economic essays were particularly acute on monetary theory and on trade. He was insistent about the mutual benefits of international trade, wary of national indebtedness, and dismissive of mercantilist obsessions with gold. It has been said that if only Hume had laid out his arguments more systematically, the birth of modern economics would be recorded as 1752, instead of 1776, when Smith’s Wealth of Nations was published.

Hume and Adam Smith were friends, and they had significant mutual influence on each other's philosophical thinking, as Henry Bittermann noted (Adam Smith's Empiicism and the Law of Nature. I Journal of Political Economy Aug 1940):

... the argument of historical continuity is particularly deceptive when applied to the development of ideas, for it tends to neglect a host of other influences on the thinking of any one man. In Smith's case it neglects the influence of Hume, whom he called "by far the most illustrious philosopher and historian of the present age"" and from whom, he said, he differed "a little." While the critics have often noted Hume's influence on specific points, they seem to have neglected Hume's philosophic influence on Smith. Yet Hume's achievements as a philosopher were to upset a rationalist epistemology involving self-evident ideas, to question the assumptions commonly made about causation, and to attack with telling blows the arguments of natural theology. His political theories were directed against natural law and natural rights. It is, of course, quite possible that Smith completely refused to accept his closest friend's conclusions, but he could scarcely have passed over the published arguments without comment, and, in fact, in several places he points out his express disagreement with Hume. The high praise of Hume would probably not have been applied to an author whose conclusions he thought were erroneous. Likewise Hume, though he criticized various points of Smith's ethical and economic theories, did not charge him with adherence to notions which he himself had refuted. Their silence cannot be regarded wholly as friendly forbearance; rather it indicates considerable agreement on fundamental issues.

Confederate "Heritage" Month 2016, April 22: Slavery and classical liberalism

I posted in a previous year's series on how classical liberalism viewed slavery, Confederate "Heritage" Month 2010, April 3: Slavery, race and classical economics.

Sen. Charles Sumner in his famous Barbarism of Slavery speech speech of 1860 from which I've been quoting in several posts, also noted a couple of examples in addition to Thomas Jefferson who criticized the institution of slavery. One was John Locke:

Next comes the Philosophic Authority; and here the language which I quote may be less familiar, but it is hardly less commanding. Among names of such weight, I shall not discriminate, but shall simply follow the order of time in which they appeared. First is John Locke, the great author of the English system of Intellectual Philosophy, who, though once unhappily conceding indulgence to American Slavery, in another place describes it, in words which every slave master should know, as--

"The state of war continued between a lawful conqueror and his captive. ... So opposite to the generous temper and courage of our nation, that 'tis hardly to be conceived that an Englishman, MUCH LESS A GENTLEMAN, should plead for it."

Then comes Adam Smith, the founder of the science of Political Economy, who, in his work on Morals, thus utters himself:

"There is not a negro from the coast of Africa who does not possess a degree of magnanimity which the soul of his sordid master is too often scarce capable of conceiving. Fortune never exerted more cruelly her empire over mankind, than when she subjected these nations of heroes to the refuse of jails of Europe, to wretches who possess the virtues neither of the countries which they came from, nor of those which they go to, and whose levity, brutality and baseness so justly expose them to the contempt of the vanquished." -- Theory of Moral Sentiments, part 2. Chapter 2.

This judgment, pronounced just a country ago, was repelled by the Slave-masters of Virginia, in a feeble publication which attests at least their own consciousness that they were the criminals arraigned by the distinguished philosopher. This was soon followed by the testimony of the great English moralist, Dr. Johnson, who, in a letter to a friend, thus shows his opinion of Slave-masters:

"To omit for a year, or for a day, the most efficacious method of advancing Christianity, in compliance with any purposes that terminate on this side the grave, is a crime of which I know not that the world has had an example except in the practice of the planters of America, a race of mortals whom I suppose, no other man wishes to resemble." -- Letter to William Drummond, 13th August , 1766. (Boswell's Life of Johnson, by Corker.)

The New York Times has the text of the speech online. I rely here on the text from the version published in 1863 as Barbarism of Slavery.

Adam Smith on war and the homefront

A sadly still-timely observation from Scottish moral philosopher and pioneering political economist Adam Smith:

In great empires the people who live in the capital, and in the provinces remote from the scene of action, feel, many of them, scarce any inconveniency from the war; but enjoy, at their ease, the amusement of reading in the newspapers the exploits of their own fleets and armies. To them this amusement compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace.

- from An Inquiry into the Nature and Causes of the Wealth of Nations (1776) Part 4, Chapter III, Of Public Debts

Tags: adam smith, war

Somebody else pickin' on the pore billionaire Job Creators

"With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches, which in their eye is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves." - Adam Smith, The Wealth of Nations (1776)

Tags: adam smith

Ethics, incentives and inequality

Joe Stiglitz digs out a quote from Adam Smith, the great classical liberal theorist of capitalism, and uses it in an op-ed piece, In No One We Trust New York Times Opinionator 12/21/2013:

The undervaluing of trust has its roots in our most popular economic traditions. Adam Smith argued forcefully that we would do better to trust in the pursuit of self-interest than in the good intentions of those who pursue the general interest. If everyone looked out for just himself, we would reach an equilibrium that was not just comfortable but also productive, in which the economy was fully efficient. To the morally uninspired, it’s an appealing idea: selfishness as the ultimate form of selflessness. (Elsewhere, in particular in his "Theory of Moral Sentiments," Smith took a much more balanced view, though most of his latter-day adherents have not followed suit.)

AS it happens, I just finished reading Smith's Theory of Moral Sentiments (1759). He took fellow Dutch philosopher Bernard de Mandeville (1670-1733), whose most famous work was The Fable of the Bees, to task for his philosophy that asserted a radical version of a sort of invisible hand that bring virtuous results out of selfish actions:

It is the great fallacy of Dr. Mandeville's book to represent every passion as wholly vicious, which is so in any degree and in any direction. It is thus that he treats every thing as vanity which has any reference, either to what are, or to what ought to be the sentiments of others: and it is by means of this sophistry, that he establishes his favourite conclusion, that private vices are public benefits. [my emphasis]

Smith was specifically rejecting this Ayn-Randian philosophy of Mandeville's. Contrasting the "love of glory" to "the love of virtue," he argues for the virtue on conforming to the moral standards of the community: "The man who acts solely from a regard to what is right and fit to be done, from a regard to what is the proper object of esteem and approbation, though these sentiments should never be bestowed upon him, acts from the most sublime and godlike motive which human nature is even capable of conceiving."

Stiglitz' op-ed emphasizes the need for a minimum level of trust in the functioning of a country's banking system, referring to the crisis that began in the US in 2007:

One of the reasons that the bubble’s bursting in 2007 led to such an enormous crisis was that no bank could trust another. Each bank knew the shenanigans it had been engaged in — the movement of liabilities off its balance sheets, the predatory and reckless lending — and so knew that it could not trust any other bank. Interbank lending froze, and the financial system came to the verge of collapse, saved only by the resolute action of the public, whose trust had been the most abused of all.

There had been earlier episodes when the financial sector showed how fragile trust was. Most notable was the crash of 1929, which prompted new laws to stop the worst abuses, from fraud to market manipulation. We trusted regulators to enforce the law, and we trusted the banks to obey the law: The government couldn’t be everywhere, but banks would at least be kept in line by fearing the consequences of bad behavior.

Decades later, however, bankers used their political influence to eviscerate regulations and install regulators who didn’t believe in them. Officials and academics assured lawmakers and the public that banks could self-regulate.

But it all turned out to be a scam. We had created a system of rewards that encouraged shortsighted behavior and excessive risk-taking. In fact, we had entered an era in which moral values were given short shrift and trust itself was discounted. [my emphasis]

He discusses a critically important issue, how supposedly performance-based incentives have in practice contributed to reckless behavior that can be rational for individual CEOs but destructive to the society at large and to their own corporations:

So C.E.O.’s must be given stock options to induce them to work hard. I find this puzzling: If a firm pays someone $10 million to run a company, he should give his all to ensure its success. He shouldn’t do so only if he is promised a big chunk of any increase in the company’s stock market value, even if the increase is only a result of a bubble created by the Fed’s low interest rates. ...

In practice, the right’s narrow focus on incentives has proved inimical to long-term thinking and so rife with opportunities for greed that it was bound to promote distrust, both in society and within companies. Bank managers and corporate executives search out creative accounting devices to make their enterprises look good in the short run, even if their long-run prospects are compromised.

And he explains how the staggering levels of inequality in American society corrode the basic levels of trust within society.

Tags: adam smith, inequality, joseph stiglitz