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Summary: Emma Rothschild, Economic Sentiments   Post comment Printer friendly versionMore notes

Summary: Emma Rothschild, Economic Sentiments
(Cambridge: Harvard University Press, 2001)
Adam Smith, economics, freedom
Saturday, August 02, 2003 00:26 GMT

Adam Smith as historicised in contemporary political and economic debates is seen as the great theorist of free markets and thus the intellectual grandfather of Thatcher, Reagan and contemporary "market fundamentalism". To the generation that followed him he was a theorist of freedom and equality, and even a revolutionary, applauded by the French revolutionary government and mistrusted by his native Scotland and England.

Rothschild tries to map the universe of the late C18 which she says is not available for easy categorisation within the language of our time. The coalition of free market liberalism and conservative politics that formed in response to the French Revolution was still to come.

In particular, the notion of human beings divided into various different functions was alien to Smith. Thus the title of Rothschild's book: Smith's economics is built on a particular, modern notion of human sentiment, one in which human beings break through ignorance and stand "unfrightened" on the stage of the world, eager to learn about it and to interact with their fellow human beings. Part of this desire to interact is the desire to "truck" or "barter", and these activities are understood through the language of "conversation". Economic life is "a sort of discussion" (8). This "discussion" is one that can happen on equal terms between individuals because of the common currency of money, and replaces the "servile and fawning attention" of relations between unequals (8).

The freedom of commerce is thus only part of the project of Condorcet and Smith: the other part is the maturing of sentiment. Both were interested in a history of human sentiment, and this history would be about the microrealities of individuals rather than institutions and contexts: a history of "the law as it is written and the law as it is enforced; the principles of those who govern and the way in which they are modified by the spirit of those who are governed; institutions as they emanate from the men who shape them, and institutions as they are realised; the religion of books and the religion of the people; the apparent universality of a particular prejudice, and the real adherence it receives" (9).

The mature human being enjoys a "heroic disposition", and is able to give space to their feelings and thoughts. Society must provide space for such a disposition: and thus rehabilitate the human. "'You exaggerate the stupidity of the people,' [Condorcet] wrote ... It is not "alms" that they want, but good laws. Until Turgot's economic reforms, Condorcet wrote, 'no one had yet deigned to treat the people as a society of reasonable beings'" (23).

The antipathy towards the regulation of human affairs (e.g., but not only, commerce) must be seen in the historical, pre-welfare state, light: an antipathy towards all institutional understandings of human beings and a support of liberty. Economic man was not separable from the other human faculties, just as the market was only one face of the state, not separable from its other functions. Smith and Condorcet's views cannot be mapped onto a contemporary rightist agenda of unfettered corporate capitalism. This antipathy is directed equally towards all state regulation - religious, moral and political. Contemporary conservative thinkers found this to be a barren universe of absolute individualism. Burke: "'The provision and distribution of the public wealth' were essential for the 'prosperity and improvement of nations.' A society which destroys the fabric of its state would soon be 'disconnected into the dust and powder of individuality.' It is the poor, above all, who would suffer most, for the state 'nourishes the public hope. The poorest man finds his own importance and dignity in it.' The 'truly public' state should be looked on 'with pious awe and trembling solicitude.' But the fiscal state is itself an object of reverence. 'The revenue of the state is the state ... [F]rom hence not only magnanimity, and liberality, and beneficence, and fortitude, and providence, and the tutelary protection of all good arts, derive their food, and the growth of their organs'" (30).

The Enlightenment position denied the availability of such certainties and created a position of deep uncertainty, in which the final "truth" of a situation would always be elusive because of the multitude of understandings (38). But this is a crucial challenge to the arrogance of what we would call "the manager." "Smith ... says, of the 'man of system,' that 'he seems to imagine that he cn arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that ... in the great chess-board of human society, every single piece has a principle of motion of its own'" (49).

(This is the argument taken up by Friedrich von Hayek, Thatcher's guru, who wrote in the 30s and 40s about the theoretical impossibility of the kind of knowledge necessary to manage a system for best outcomes. "Managed" systems were always going to be inefficient because the manager could never have as much knowledge as the network. This was a theoretical critique of socialist economies; indeed his critique predicted that all attempts to concentrate economic knowledge would always lead to "serfdom.")


Rothschild: Smith has been hijacked and diminished by conservative economists. Beatrice, 1886: "The Political Economy of Adam Smith was the scientific expression of the impssioned crusade of the 18th century against class tyranny and the oppression of the Many by the Few. By what silent revolution of events, by what unselfconscious transformation of thought did it change itself into the 'Employers' Gospel' of the 19th century?" (67).

Rothschild: "Freedom consisted, for Smith, in not being interfered with by others: in any of the sides of one's life, and by any outside forces ... Interference, or oppression, is itself an extraordinarily extensive notion; Smith at times talks of inequality as a form of oppression, and of low wages as a form of inequity. But it was just this multiplicity which was lost after his death. By the end of the 1790s, the freedom of noninterference had become something very much less, at least for political economy. It was little more now than the freedom not to be interfered with in one side one's life (the economic), and by one outside force (national government)" (71).


Detailed analysis of how Adam Smith's most obviously "free market" opinions - that all regulation of the corn trade should be removed, and that statutory apprenticeship should be abolished - had completely different significance in C18 context.


Commentary on Smith's most well-known concept, the "invisible hand" of the market. Rothschild: this was barely a concept in Smith's writing, and the three uses he made of the phrase in his career are all probably ironic.

First use in History of Astronomy, talking about credulous premodern people who ascribe irregular events in nature to the power of gods. Normal events, however, they do not imagine require divine support: "Fire burns, and water refreshes, heavy bodies descend, and lighter substances fly upwards, by the necessity of their own nature; nor was the invisible hand of Jupiter ever apprehended to be employed in those matters."

Second in Theory of Moral Sentiments: nasty rich people who are unconcerned with humanity or justice are still obliged to employ poor people and pay them a wage: "They are led by an invisible hand to ... without intending it, without knowing it, advance the interest of the society."

Third in Wealth of Nations. If import restrictions are lifted merchants will still by domestic products in order to protect their own security. "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."

In all cases Smith is cynical or mocking towards the people who are led by the invisible hand. In general, however, Smith's theories of enlightenment would contradict the uses to which the invisible hand phrase has been put: subjects of invisible hand explanations are blind and unenlightened, and it is only the system that has intelligence. This is not a Smithian position (though it is a Hayekian one). Rothschild gives a lot of literary "invisible hands" to support her opinion that it is mainly a negative concept, used ironically by Smith.

"Invisible hand" did not make its way into summaries of Smith's thought until recently.