Adam Smith and the Economyof the Passions

The fertility of Adam Smiths work stems from a paradoxical structure wherethe pursuit of economic self-interest and wealth accumulation serve widersocial objectives. The incentive for this wealth accumulation comes from adesire for social recognition or sympathy the need to recognise ourselves inour peers which is the primary incentive for moderating and transformingour violent and egotistical passions. Adam Smith thus examines in detail thesubliminal emotional structure underlying market behaviour.

This new book by Professor Jan Horst Keppler presents an Adam Smith forthe twenty-rst century, more sceptical, searching and daring than he has everbeen portrayed before. Without disputing its benets, Professor Kepplers ori-ginal contribution explores the anarchic passions constantly threatening todestroy all social bounds, and how the overarching desire for love and socialrecognition provides the Smithian individual with the incentive to transformhis unsocial passions into a desire for social advancement and economic wealthwith the view to gaining the vital approbation of his peers. One of the moststriking results of this new reading of Adam Smith is the latters insistence onthe primacy of exchange value over use value. In other words, the quest forwealth is exclusively driven by the value it represents in the eyes of othersrather than by any value in individual use.

At a moment of crisis, where the link between true economic values andvirtual nancial values is more fragile than ever, Adam Smiths work is aprofoundly contemporary reminder that in the absence of personal, ethicalgroundings our economic actions are only grounded in the game of mirrors weplay with our peers. This book will be of interest to postgraduate students andresearchers in the History of Economics, or indeed any reader with an interestin the psychological foundations of a market economy and its theoreticalrepresentations as developed by Adam Smith.

Jan Horst Keppler is Professor of Economics at the UniversityParis Dauphine and Senior Researcher at PHARE Institute on the Historyand Epistemology of Economics at the University Paris I Pantheon Sorbonne.

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116. Adam Smith and the Economy of the PassionsJan Horst Keppler

Adam Smith and the Economyof the Passions

Jan Horst Keppler

First published 2010 by Routledge2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN

Simultaneously published in the USA and Canadaby Routledge270 Madison Avenue, New York, NY 10016

Routledge is an imprint of the Taylor & Francis Group,an informa business

2010 Jan Horst Keppler

The English version was established by the author on the basis ofthe French original, LEconomie des passions selon Adam Smith: lesnoms du pre dAdam (Editions Kin, Paris), and reviewed byRobert Chase, translator

All rights reserved. No part of this book may be reprinted orreproduced or utilised in any form or by any electronic, mechanical,or other means, now known or hereafter invented, includingphotocopying and recording, or in any information storage orretrieval system, without permission in writing from the publishers.

British Library Cataloguing in Publication DataA catalogue record for this book is available from theBritish Library

Library of Congress Cataloging in Publication DataKeppler, Jan Horst

[conomie des passions selon Adam Smith. English]Adam Smith and the economy of the passions / by Jan HorstKeppler; edited by Robert Chase.

p. cm.Includes bibliographical references and index.1. Smith, Adam, 17231790. 2. EconomicsSociological aspects.I. Chase, Robert. II. Title.HB103.S6K4813 2010330.15'3dc22 2010001793

ISBN: 978-0-415-56986-6 (hbk)ISBN: 978-0-203-84756-5 (ebk)

This edition published in the Taylor & Francis e-Library, 2010.

To purchase your own copy of this or any of Taylor & Francis or Routledgescollection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.

ISBN 0-203-84756-3 Master e-book ISBN

In memory of my father

Contents

1 Introduction: personal ethics and social morality 11.1 Reading Adam Smith 11.2 An economy of the passions in a double system

of coordinates 31.3 The horizontal principle: sympathy, exchange

and the market 71.4 The vertical principle: the impartial spectator 91.5 The paradoxical synthesis 121.6 The stakes of a well-established problem das

Adam Smith problem 15

2 Sympathy, communication, exchange: the horizontal world 212.1 Self-interest in the service of sociability:

the world of sympathy 212.2 Codication and the reduction of transaction costs:

from sympathy to the market 34

3 The vertical world of the impartial spectator 653.1 The names of Adams father: looking for the

impartial spectator 653.2 The economic passion 95

4 The paradoxical synthesis 1224.1 Ecient causes and nal causes: the working

of the invisible hand 1224.2 The invisible hand and the cunning of reason 130

5 Conclusion: the ethics of morality 138

Notes 148Bibliography 155Index 159

xviii Contents

In ease of body and peace of mind, all the dierent ranks of life arenearly upon a level, and the beggar, who suns himself by the side of thehighway, possesses that security which kings are ghting for.

Adam Smith, The Theory of Moral Sentiments, IV.1.10

1 IntroductionPersonal ethics and social morality

1.1 Reading Adam Smith

Do you know Adam Smith, the man, the myth, his work? Certainlysomewhat, rather well perhaps. So the answer is yes. Adam Smithremains one of the most inuential, the most commented on andeven and this is far from obvious one of the most read authors inthe history of economic thought and even the general history of ideas.Unfortunately, however, this eort often results in the citation ofsome well-known phrases, which, read out of context, provide morequestions than answers.Readers seeking to go beyond the xed ideas, the standard opinions

and the stock quotations will easily be disoriented by the complexitiesof a protean work characterised by strong internal tensions and anoverabundant secondary literature, unied only by its desire to smoothand simplify this work. For want of being understood, Adam Smithfascinates, but the majority of commentators never feel the needto look into the sources of this fascination. This is unfortunate. TheAdam Smith Problem, the allusion of a number of diligent nineteenthcentury academics to a major faultline in Smiths work, is no longerfashionable.Today, the vast majority of commentators on Adam Smiths

major works, The Theory of Moral Sentiments and The Wealth ofNations, seek to attribute to them one sense, one well-specied linearinterpretation. Most of these contributions are diligent, well-informedand well-intentioned explorations of particular aspects of the work.They may consist of a careful historical or philosophical contextualis-ation, the recognition of an earlier source of a particular concept, or aclassication of modern economic concepts contained, explicitly orimplicitly, in Smiths work. Such partial investigations sometimes leadto surprising results. Liberal and anti-liberal economists thus both nd

support for their positions in a dense and complex work. Neithergroup, of course, bothers much to search for a fuller truth in the textsbeyond the conrmation of conventional positions, most of them well-known in advance.However, one does not approach a work that has maintained its

fascination for more than 200 years, with the intention of silencing itforever. On the contrary, it is necessary to understand the undimin-ished fertility of the tensions and the wide-ranging implications of thetenuous synthesis that characterise Adam Smiths work. Each genera-tion of scholars and policymakers needs to face these tensions andformulate the resulting synthesis anew to make it pertinent for theirtime. After all, with Adam Smith we stand both at the dawn of a newscientic discipline and at the beginning of the social organisationwhich is ours today. For a fuller understanding of Adam Smith, thereis only one way: to trust the texts, in particular those of The Theory ofMoral Sentiments and The Wealth of Nations. One needs to approachthem with respect, certainly, but with eyes and ears open and with theleast amount of prejudice possible.Very few critics one may think of David D. Raphael, Vivien Brown

or even Jacob Viner have had the courage to approach Adam Smithswork with a mind suciently open to appreciate its heterogeneouselements and its contradictions, all of which contribute to the sameradical project. That project is, of course, structured by the con-vergence of the individual and the general interest, of conscious humanintentions and a universal plan of perhaps divine nature. The key issueis that most critics take this convergence as a given, as a hypothesisformulated a priori. They are thus satised by commenting on itsimplications, frequently from an entirely personal perspective. Thereare not many who have dared, with Adam Smith, to explore theorigins of this very particular self-interest, which are hidden in acomplex economy of the passions but perfectly elaborated in all theirdetails.Reading Adam Smiths major works can reserve many a surprise for

the amateur as well as for the professional of the history of thought:the apparent lack of any systematic organisation and its tightcoherence, its restless and heterogeneous nature, the vast, eclectic andcapricious erudition of its author, its pragmatism and its syncretism, itsoccasional aloofness and its passionate commitment, its literary gemsand its set-piece formulas, its humour and its ruthless dedication to acontradictory project and its successful conclusion.Additional pleasure is provided by Adam Smiths English, which is

elaborated with great care. This results from the great prudence with

2 Introduction

which Smith advances and the underlying tension that characterises hisargument. This tension also shows up occasionally in a punctuationwhich is dense and little orthodox, even by the standards of histime. The organisation of Smiths major works does not follow anydiscernible system. Books, chapters, sections, parts, articles,introductions and conclusions alternate without any systemic ambi-tion. Their length and the number of textual hierarchies vary greatlyaccording to the need of the specic argument being treated.The work of Adam Smith resembles one of those fractal designs,

where the same gure is repeated from the smallest to the largestscale, thus creating an image that is utterly devoid of any linearsystem and yet displays a profound coherence. This essay aboutthe structure, the informational assumptions and the ethical aspirat-ions of Adam Smiths work draws the attention of the reader to itssingularity and even strangeness, in order to better understand theongoing fascination it exerts and to appreciate the lasting importancethat it still has today. The objective is to allow us to regard the originaltexts with a fresh view. We propose a new reading of the work ofAdam Smith

1.2 An economy of the passions in a doublesystem of coordinates

Such a new reading requires clear indications in order to avoid beingdistracted either by the multiple secondary threads weaving themselvesthrough the central narrative of the work or by the cacophony of voicessurrounding it. To facilitate orientation, it is best to reveal the principalargument immediately. Without further ado, we will thus present,in the following, the central theses of this essay, foregoing the usualpreliminaries concerning the general importance of the work and therespect we owe to the man, founder of a new discipline, which a morecomplete work would have required.1

The Theory of Moral Sentiments, the rst major work that AdamSmith published in 1759, relies on two dierent processes (which are, aswe will show further below, orthogonal to each other) to generatenormative rules of behaviour. Both of these processes will remainidentiable, although in dierent forms, in The Wealth of Nations. Therst process is well known, even though its implications, in particularits implications for the working of a market economy, have not alwaysbeen fully grasped. This is the sympathy mechanism, a self-reinforcingfeedback process through which the individual seeks the recognitionof his own feelings by his peers, as well as the identication of their

Introduction 3

feelings within himself. This process is ultimately founded on theneed to feel liked and even loved. The phrase humanity does notdesire to be great, but to be beloved (Smith 1759 (III.5.8): 194)expresses perfectly this essential motivation of human behaviouraccording to Adam Smith.2

While the sympathy process is treated regularly in the secondaryliterature, with more or less precision, the second process capableof setting behavioural standards is evoked by commentators moresparingly. This second process is concerned with the development of apersonal ethic, dened by the desire to do good and to act in a justand virtuous manner. It relies heavily on individual introspection,structured around the notion of an abstract authority with divinecharacteristics the impartial spectator. This gure of the impartialspectator is present in the work of Adam Smith under a multitude ofdesignations, such as the great judge, the Director of nature, thedemigod within the breast and many others. This proliferation ofthe names of the impartial spectator will in itself be a theme for dis-cussion further on.To facilitate the representation of these two processes, one may

associate the rst process with a horizontal dimension referring tonotions of equality, of the market and of lateral communication. Onemay associate the second process with a vertical dimension referringto notions of authority, of hierarchy and of communication betweendierent levels. Inspite of certain attempts to link them and certaincontact points, the two processes are essentially incompatible and arepresented as such by the author of the Theory of Moral Sentiments.Each one of the two processes constructs a distinct set of rules capableof generating a system of coherent behaviour with clearly identiedobjectives. Adam Smith himself expresses the incompatibility of thetwo processes the following way:

In estimating our own merit, in judging of our own character andconduct, there are two dierent standards to which we naturallycompare them. The one is the idea of exact propriety andperfection The other is that degree of approximation to thisidea which is commonly attained in the world, and in which thegreater part of our friends, and companions, of our rivals andcompetitors, may have actually arrived at The wise and virtuousman directs his principal attention to the rst standard It is theslow, gradual, and progressive work of the great demigod withinthe breast, the great judge and arbiter of conduct.

(Smith 1759 (VI.3.2325): 29192)

4 Introduction

At the beginning of the book, he had already underlined in a moregeneral manner:

To deserve, to acquire, and to enjoy the respect and admiration ofmankind, are the great objects of ambition and emulation.Two dierent roads are presented to us, equally leading to theattainment of this so much desired object; the one by the study ofwisdom and the practice of virtue; the other, by the acquisition ofwealth and greatness.

(Smith 1759 (I.3.2): 73)

In both cases, Smith identies as the force inciting individuals tofollow one or the other of the two normative principles, the mostintense of the human passions, that is to be beloved. The subject ofthe thus desired love is, however, very dierent in each case. In the rstcase, the subjects of love are the others, the equals, the friends, thepeers, the competitors, the neighbours, in short society. In the secondcase, it is the gure of the impartial spectator. The desire to obtainthe love, either of the impartial spectator or of ones peers, is su-ciently strong to ensure the control of all other passions, which areconsidered as violent and as incompatible with social life. Self-controlis thus, according to Smith, an indispensable and highly prized virtuefor the establishment of any sociability.Adam Smiths entire project of exploring the forces that structure

society begins with the question How can one control the violentpassions in order to render social life possible? Today, one wouldspeak about impulses rather than passions. The fundamentalproblem is that of an innate and inevitable violence manifesting itselfalready in childhood, a condition that has been referred to for the past100 years as the Oedipus complex. Adam Smith refers explicitly to theunfortunate king of Thebes, distinguishing however between hisresponsibility and his culpability, declaring him responsible but notguilty given that his crime was committed unconsciously, a distinctionthat is, as we shall see, crucial for Smiths concept of practical morality.One should not forget either that Adam Smith, the man, lost his fatherbefore birth and lived with his mother all his life, except for his lastsix years. The control of the passions was no anodyne subject for theprofessor of moral philosophy.One needs to understand the parallel development of two competing

mechanisms developing normative frameworks from the point of viewthat both serve to control the passions. In spite of their shared purpose,The Theory of Moral Sentiments shows that the two principles clash

Introduction 5

directly on the level of individual decision-making. At the end of TheTheory of Moral Sentiments, two possible extensions thus presentthemselves. The rst is a work on the auto-organisation of individualsculminating in a state whose normative justication is intrinsicallylinked to self-interested, individual decision-making based on thesympathy mechanism. The publication of The Wealth of Nationsin 1776 masterfully realises this option. In Chapter 2 of this essay,Sympathy, communication, exchange the horizontal world, wewill analyse this rst normative principle based on the sympathymechanism in The Theory of Moral Sentiments and The Wealth ofNations. This, by the way, allows us to answer conclusively the questionabout the much discussed relationship between the two books: TheWealth of Nations constitutes a direct, but partial, extension of TheTheory of Moral Sentiments.We can only guess at the analogue development of the second

option, although Adam Smith refers explicitly to it. At the end ofThe Theory of Moral Sentiments, he thus announces the forth-coming publication of a History of Natural Jurisprudence, which wouldexplore a normative framework whose origins would be exogenousto the processes of individual decision-making by individuals.This announcement is maintained throughout all of the six editionspublished during his lifetime, even though Smith remarks in theforeword of the sixth edition of 1790, the year of his death, that thecompletion of this work is no longer on the agenda. Without disposingof the relevant textual evidence, we may legitimately suppose thatthis History of Natural Jurisprudence constitutes the second extensionof The Theory of Moral Sentiments, the systematic developmentof a normative framework based not on the auto-organisation ofindividuals but on autonomous principles that, at the same time, aremore universal and more personal, than the conventional decreesof society.John Rae, Smiths biographer, tells us that a handwritten version of

this History of Natural Jurisprudence was burned, by Smiths order, afew days before his death. In Chapter 3, The Vertical Worldof the Impartial Spectator, we will identify the principal character-istics of this second normative principle governed by the impartialspectator and will explore its implications for the understandingof Adam Smiths complete work. Although The Wealth of Nationsmainly develops the rst principle, it contains clearly identiabletraces of the second principle, particularly in the passages concerningthe notion of justice, which is closely associated with the impartialspectator.

6 Introduction

1.3 The horizontal principle: sympathy, exchangeand the market

The Wealth of Nations provides us with a vision of a world built on aform of a shared rationality shaped by the sympathy mechanism. InChapter 2, Sympathy, communication, exchange the horizontalworld we will determine the nature of this rationality developed in TheTheory of Moral Sentiments, where it is opposed to an individuallydened ethic structured by the impartial spectator. We will see thatthis rational sympathy is at the origin of the notion of a sociallydetermined self-interest. This notion of a self-interest formatted bysocial processes (in the literal sense of shaping it into a specic form) isat the heart of Smiths theory of society, and later, of the economy. Itreceives its logical coherence and theoretical tractability through thechronological separation of the process of preference formation, basedon social processes, and the actions based on these preferences, whichare individual.The detailed rendering of these individual actions based on the

values established by the sympathy mechanism is the great theme ofThe Wealth of Nations. It thus advances the investigation of thisimportant aspect of The Theory of Moral Sentiments. (Some of themisunderstanding of the work of Adam Smith stems from the fact thatthe readers of The Wealth of Nations look to The Theory of MoralSentiments for further detail and precision. Instead, they only ndfar broader preparatory deliberations.) All the while, self-interest, thecornerstone of all human behaviour in The Wealth of Nations, remainsclosely linked to social functions. Not only has self-interest beenstructured by a process of social emulation, but it also preserves, fromThe Theory of Moral Sentiments, a double teleology: wealth acquisi-tion is but a means to a higher appreciation by ones peers and, as iswell known, realises general welfare in the process.With Adam Smith there is never a contradiction between the pursuit

of this self-interest, which is very specic and highly codied, andsociability. On the contrary, we shall see that the adoption of this self-interest, as opposed to the anarchic expression of ones untutoredpassions, is the very basis of social life. The formation of rst general,then economic, values through the sympathy mechanism and thebehaviour that stems from them eventually creates the system of socialorganisation we call a market society today. A liberal economic orderis for Smith not an assumption formulated a priori. It is the result of awide-ranging exploration of the anthropological and psychologicaldeterminants that allow social life to arise and to prosper.

Introduction 7

The transformation of a world ruled by the desire to be lovedby ones peers into a system of markets is accomplished by the radicalreduction (ultimately, elimination) of all informational transactioncosts. This reduction is due to the qualitative standardisation, thecodication, of preferences. The establishment of an unbreakablelink between all goods and their value allows the establishment of apervasive system of exchanges, which evolves into a system of compe-titive markets in The Wealth of Nations (see section 2.2). This freezingof the informational units ensures, together with the division of labour(which depends in itself on this codication) and the vigorous rejectionof all forms of economic monopoly, a structure of production thatis characterised by constant returns to scale and establishes perfectcompetition as the horizon of the economic process.Just like submitting to the demands of the impartial spectator,

economic behaviour based on the sympathy mechanism is part of alarger concern, the control of the original, egoistical and antisocialpassions. In a paradoxical manner one may say that, for Adam Smith,self-interest, as long as it is shaped by the sympathy mechanism, guar-antees the social bond. Contrary to a generally accepted idea, the homoconomicus is an intensely social being (see sections 2.2 and 3.2).The image of the invisible hand starts from the same paradox and

pushes it even further. The sympathy mechanism turns socially harmfulindividual passions into sentiments that can be shared and into adesire for social recognition through the acquisition of wealth andhence engagement in economic activity. Together, these two processesform the foundations of social life. Based on these foundations, theinvisible hand will ensure the realisation of general welfare, for whichthe control of the passions is a necessary but insucient condition.For example, following the injunctions of the impartial spectatorequally ensures the control of the passions, but it is unable to guaranteegeneral welfare despite the fact that the latter is explicitly part of hisobjectives.In Ecient causes and nal causes: the working of the invisible

hand in Chapter 4, the precise function of the image of the invisiblehand will be examined. Contrary to what is implied by its numerousmetaphorical interpretations, the invisible hand introduces no exogen-ous, additional elements into the economic system devised by Smith.This system, based on the preferences shaped by the mechanismof sympathy, not only allows, but implies, the achievement of generalwell-being. Economic order and general welfare are the inevitableconsequences of the initial conditions dened by the sympathymechanism and the desire to be loved: the codication of preferences,

8 Introduction

the division of labour and consequently, competitive markets. Thesethree initial conditions, however, are not of the same logical order.We will see below how the codication of preferences, through thesympathy mechanism, will enable the division of labour and will thusprepare for the elimination of monopolies and the establishment ofcompetitive markets.The alignment of individual interest and general interest thus

proceeds according to a prior and deep-seated design, which is part ofhuman nature and its desire for social participation, and not accordingto a new, supplementary design, which was added ex post. We will seethat in Adam Smiths work, all the conditions for the concurrence ofindividual and general interest are already given with the peculiarinformational structure that determines individual behaviour.This logically inevitable, and hence automatic, convergence of the

pursuit of private prot and general welfare is protected rather thancreated by the invisible hand. In the pursuit of its function, the invisiblehand does not add anything to the behaviour of the individual agentsinterested only in maximising their wealth. Instead, it removessomething. The invisible hand removes the agents knowledge of theoriginal plan of the Director of nature, in which he is taking part.This ignorance ensures that he will not perturb the deployment of thesocially benecial programme inscribed in his socially constructedselshness. The invisible hand is not only invisible itself. It also veils,renders invisible, the existence of the creator and his plans. Thisremoves the danger of a direct pursuit of the latters objectives throughmisplaced ambition driven by speculative thinking, which according toAdam Smith is always a perturbing inuence.The invisible hand thus guarantees that the intrinsic qualities of

the behaviour dened by the horizontal principle of the sympathymechanism can ourish without hindrance. Paradoxically andthis paradox is at the very foundation of Smiths teleology the verylimitation of any direct inuence of the impartial spectator guaranteesthe achievement of his original design of general welfare (see alsoChapter 4, The paradoxical synthesis).

1.4 The vertical principle: the impartial spectator

Throughout the text of The Theory of Moral Sentiments, a secondprocess capable of establishing norms of human behaviour weaves itsway in counterpoint. This second process no longer originates in theinter-subjective relationships between individuals of equal standing. Itconstructs itself on the basis of individual introspection, philosophical

Introduction 9

cogitation and the study of historical examples. This process andthe values and norms it establishes all revolve around a gure thatis conventionally referred to as the impartial spectator, althoughAdam Smith rarely uses this expression. Those values imply ethicalactions which will nd approval in the eyes of a superior authorityindependently of and sometimes in contradiction to the socialvalues established by the sympathy mechanism. Adam Smith under-lines throughout The Theory of Moral Sentiments that men ndthemselves constantly in conict between the noble pursuit of theexpectations of this higher authority and the temptation to abandononeself to comfortable sociability established by the sympathymechanism.As much as Adam Smith is adamant about the existence of this

second principle, he is vague about its precise nature. This explains, inpart, the diculty that many commentators have to accord the impar-tial spectator the status of an autonomous normative reference. Thechoice of the appellation impartial spectator, whose continued use inthis essay is only justied by its historical role, is in itself a sign of thisdiculty. Chapter 3 of this book, The vertical world of the mpartialspectator, shows to what extent the expression impartial spectator isa source of misunderstanding and presents the long list of alternativetitles that Adam Smith employs to designate this higher authority.These expressions make various references to a divine presence, apaternal function or an undisputable higher Law. The diculty ofnding a denitive name for this entity that combines features of god,conscience or a father-gure, with which the Smithian individualmaintains a constant interior dialogue, is part of the dening aspects ofThe Theory of Moral Sentiments.Contrary to the values established by the sympathy mechanism, the

values established in the interior dialogue with the impartial spectatorare not codiable. They vacillate between highly abstract aspirations the common good, social utility and perfectly individual ones denedby a persons history and character. They provide a personal identityrather than a socially recognised position. On the level of his psycho-logical economy, an individual searching to satisfy the expectations ofthe impartial spectator is looking for inner peace and an identity basedon universal ethical principles.Adam Smith stages the conict between the two principles through-

out the better part of The Theory of Moral Sentiments. This conictarrives at a culminating point when he evokes the notion of moralsense developed by his professor, mentor and predecessor at the chairof moral philosophy of the University of Glasgow, Francis Hutcheson.

10 Introduction

Following an enthusiastic, but general eulogy of his contribution,Smith mercilessly deconstructs the pertinence of the notion of moralsense and ultimately rejects its existence (see section 3.1 The names ofAdams father: looking for the impartial spectator).However, the function of Hutchesons concept of moral sense was

precisely to provide the ability to sustain the interior dialogue with theimpartial spectator, to be able to distinguish between right andwrong, independently of social conventions. Moral sense is supposedto be innate and independent of any social intermediation. RefusingHutchesons concept, the principal mode of communication with theimpartial spectator, Adam Smith, relegates the vertical principle tosecond place behind the horizontal principle organised by the sym-pathy mechanism. This relegation was prepared, albeit in less drasticform, in the discussion of the two tribunals. The tribunal of inten-tions, which is presided over by the impartial spectator, is consideredto be the highest in principle; for all practical purposes, however,the tribunal of men, which judges only veriable facts, is the onlycompetent institution to judge human aairs in everyday life (seesection 3.1).And yet, a residual of the vertical principle and the demands of the

impartial spectator survive in the notion of justice, and this in bothThe Theory of Moral Sentiments as well as in The Wealth of Nations.Justice, which is always administered by the state, never by themarket, is for Adam Smith a defensive notion, dened more easily byits absence, which implies a state of lawless chaos, rather than by itspresence the violation of justice is what men will never submit tofrom one another (Smith 1759 (VII.IV.36): 402). The rules of justicehave no positive content and thus cannot by themselves constitute acomplete normative framework for human behaviour. Instead, theyprovide and protect the space in which such frameworks can develop.Adam Smith compares them to the laws of grammar which arenecessary to write correctly but are insucient to write well:

There is, however, one virtue of which the general rulesdetermine with the greatest exactness every external action whichit requires. This virtue is justice The rules of justice may becompared to the rules of grammar; the rules of the other virtues,to the rules which critics lay down for the attainment of whatis sublime and elegant in composition. The one, are precise,accurate, and indispensable. The other are loose, vague andindeterminate

(Smith 1759 (III.6.1011): 2035)

Introduction 11

The very precision of the rules of justice demands that they be voidof any positive content. Submitting to justice alone can never sucefor the organisation of social life, for which justice is a necessary butnot a sucient condition. Once the vertical principle has been rejected,the horizontal principle with its gradual convergence towards sharedvalues through reciprocal observation will thus remain indispensable toestablish a complete framework for human behaviour.

1.5 The paradoxical synthesis

The eviction of the impartial spectator and the establishment of thesympathy mechanism as the principal regulatory principle of sociallife at the end of The Theory of Moral Sentiments are conrmed in TheWealth of Nations, where all human action reposes on values basedexclusively on generalised social approbation. Section 2.2 will showhow the sympathy mechanism sets in motion a highly specic processof preference formation, which in turn is decisive for the formation ofa market society. Attempts to identify a contradiction between themarket-oriented behaviour presented in The Wealth of Nations and thenotion of sympathy are inevitably the result of a supercial readingof The Theory of Moral Sentiments (see also later the comments ondas Adam Smith Problem).The elimination of the impartial spectator as a directly active force

in the regulation of human aairs should not be seen as a peacefulsuccession of dierent normative principles, both of which aim atthe control of socially harmful passions. On the contrary, one principleis substituted for another, which is diametrically opposed to the rst.Nor is Adam Smith passing from a general discussion of social life,characterised by the active presence of the impartial spectator to thespecic discussion of economic life, which would be characterised byhis absence, as maintained by Daniel Diatkine, for example (Diatkine1991: 28). Smiths own style is, in fact characterised by an unusualverbal violence when he refutes Hutchesons notion of moral sense,which was the principal channel of communication with the impartialspectator.The exclusive dominance of the horizontal principle based on the

sympathy mechanism that follows from this operation is a generalphenomenon, which is not restricted to any specic area of social lifesuch as economics. Adam Smith rather elevates a form of interactionthat lends itself naturally to the establishment of a market society to anexclusive form of social interaction thus economising the whole ofsociety. The radical nature and the specicity of Smiths approach are

12 Introduction

precisely based on the theoretical motivation of the all-pervasivenessof the sympathy mechanism whose essence is the exchange of looks,words, values and goods. Smith forcefully insists on the innate, uncon-scious and inevitable nature of the human tendency to engage inall forms of exchange as in the famous passage that introduces thedivision of labour:

The division of labour, from which so many advantages arederived, is not originally the eect of any human wisdom, whichforesees and intends the general opulence to which it givesoccasion. It is the necessary consequence of a certain propensityin human nature the propensity to truck, barter, and exchangeone thing for another.

(Smith 1776 (I.I.2): 17)

Adam Smith subsequently presents this inclination as a fundamentalprinciple of human nature and as a consequence of the capacity tothink and speak. The quoted passage underlines the fact that thebenets derived from the propensity to exchange are not a consciouslyformulated objective but the result of abandoning oneself to a constantof human nature. This is a theme Adam Smith comes back to repeat-edly, occasionally underlining the benets of a certain ignorance orintellectual modesty (see also Chapter 4 The paradoxical synthesis).This renouncement of an active, constructively creating approach tosocial matters is part and parcel of institutionalising market exchangeas the predominant form of social interaction (see also section 2.2).And yet, Adam Smiths nal vision of society is far more sophisti-

cated than an unconditional eulogy of the surviving normative frame-work, which we refer to as the horizontal principle. In fact, alreadythroughout the text of The Theory of Moral Sentiments, the oppositionbetween the two principles varies (see also Chapter 5 The ethics ofmorality). In particular cases, identical outcomes can even resultfrom alternatively following one principle or the other, even though thestructural incompatibility between the two is never in doubt: thevirtues of prudence, justice and benecence may, upon dierent occa-sions, be recommended to us almost equally by [the] two dierentprinciples (Smith 1759 (VI.Conclusion.2): 310).The particular role of justice in linking the two axes has already

been mentioned. The Wealth of Nations also contains remnants of aworld organised according to principles other than that of generalisedmarket exchange (see, for instance, Smiths remarks concerningnational defence, slavery or primary education). Most importantly,

Introduction 13

however, a market society ensures the attainment of the ultimateobjective of the teleology structured around the impartial spectator general welfare and this far better than their direct pursuit wouldhave ever permitted (see Chapter 4).3

At least in The Theory of Moral Sentiments, the notion of generalwelfare is closely linked to the propagation of the species. While itmay come as a surprise for an author associated with the benets ofthe pursuit of individual self-interest, there can be no doubt that Smithfrequently pursues a Darwinian logic, in which the survival andthe well-being of the species, or of society as a whole, is of higherimportance than the survival of the individual. General welfare andpropagation of the species can be pursued following two dierentroutes. The rst would imply following the injunctions of the impartialspectator to pursue the common good after a preparatory phase ofintense introspection. Following the second, indirect, route consists, ofcourse, of letting oneself be guided by the sympathy mechanism. Thissecond approach will usually function better, even though, or ratherbecause, each individual believes subjectively to be working only for hisown personal benet (see Chapter 4 Ecient causes and nalcauses: the working of the invisible hand).Paradoxically, the indirect route which relies on the sympathy

mechanism to trigger the appropriate eective causes is consideredthe safer choice for satisfying the ultimate objective of the impartialspectator. Trying to identify with the will of the Creator directly isperhaps a noble enterprise for small elites, but it is also a hazardousenterprise fraught with danger. Unmitigated and absolute adherence tothe high demands of a divine authority can render one proud, exactingand asocial or even antisocial. Pursuing ones self-interest, as long as ithas been formatted by social interaction, is far less risky, in particularfor the great majority of average men. The common good is thusborn from the naivety of men and their search for love in each otherscomplicit looks.In The Theory of Moral Sentiments, pursuing the vertical orientation

directly is still considered a noble choice for a small group of selectmen. In The Wealth of Nations this option is now rmly rejected ashypocritical and dangerous:

By pursuing his own interest he [the individual] frequently pro-motes that of the society more eectually than when he reallyintends to promote it. I have never known much good done bythose who aected to trade for the public good.

(Smith 1776 (I.IV.2): 477)

14 Introduction

It is the task of the invisible hand to organise this paradoxical logic:largely ignorant individuals who subjectively pursue their self-interest,having liberated themselves from the direct imperatives of the impartialspectator, objectively ensure the common good and thus the impartialspectators most important objective. Men thus remain guided by theirdesire to be loved, their thirst for social recognition that derives from itand hence the drive to maximise their wealth, which remains the surestway to gain the esteem of ones peers.The codication of their preferences through the sympathy mechan-

ism ensures that their actions, which can be characterised with thehelp of a small number of parameters, are compatible. This in returnensures the form of highly developed auto-organisation typical of eco-nomic equilibria. Maximising their own prots, men thus promote ageneral economic well-being, which plays no role in their calculations(see Chapter 4 Ecient Causes and Final Causes: The Workingof the Invisible Hand).

1.6 The stakes of a well-established problem dasAdam Smith problem

The sophistication and originality of Adam Smiths approach owemore to his capacity to sustain a tension between opposing poles thanto any systematic linear development of a single unied proposition.This sophistication has occasionally induced even the most diligentreaders to identify contradictions in Smiths work (less diligent readerscontent themselves with a partial reading that satises their a prioriprejudices). A typical example of the rst type of reading is the carefuland well-documented study by Franois Dermange, Le Dieu duMarch. Dermange in fact concludes with the failure of Adam Smithsphilosophical project, which he claims to have consisted of unifyingeconomic behaviour with a moral aspiration. Having been unable tond eective and appropriate moral imperatives capable of puttinglimits to economic behaviour, Smith supposedly abandoned his projectand concentrated thereafter only on economics (Dermange 2003: 15,186 and 198).In broader terms, Albert Otto Hirschman had already said that

Smiths proposition [that the pursuit of personal interest contributes togeneral welfare] turned out to be riddled with so many intellectualpuzzles that sorting and solving them occupied generations of econo-mists (Hirschman 1997: 112). Even Jean-Pierre Dupuy, perhaps themost profoundly innovative contributor to the secondary literature onAdam Smith in recent years, is not above identifying contradictions in

Introduction 15

Smiths work after having rejected his key notion of the social functionof wealth (Dupuy 1992: 98).Generally speaking, the venerable notion of an Adam Smith Problem

refers to the fact that commentators nd it dicult to establish onelinear sense in Adam Smiths work. The diligent, if uninspired,German university professors of the second half of the nineteenthcentury who coined the now standard expression were the rst to rea-lise that searching for one single development in The Theory of MoralSentiments and The Wealth of Nations posed a number of questions.Since then many contributions to the secondary literature have placedthemselves, implicitly or explicitly, in a perspective of providing anongoing commentary to the Adam Smith Problem.However, identifying a failure or a contradiction in the wake of

a renewed setback following the attempt to nd a single uniedproposition in Smiths work contains its own implicit contradictions.If the failure in question is really the result of a logical inconsistencyor another major aw in the argument, how then does one explainAdam Smiths singular position in the history of ideas? One doesnot build a new discipline and a formidable intellectual inuence onintellectual failure or on contradictions, except, of course, if they aremade fertile in the sense of a dialectical process. One does not discussfor 250 years a non-issue. Even the most aggressive critics bear witnessto the ongoing attention consecrated to the work, the man and themyth for over 200 years. Each contradiction they identify is a proofof the continuing force and interest of the ideas they are trying toneutralise.Yet an essay on the history of thought needs not only to defend

the interest of its subject but also needs to go beyond a Darwinistapproach, in the sense that every piece of thought that succeeds inretaining the attention of a sucient number of commentatorsis necessarily coherent. This contribution strives to show that theparadoxical structure of Adam Smiths work not only corresponds to acoherent project of its author but is also responsible for the intenseinterest of successive generations of readers. This paradoxical structureis based on the conict between the two normative principles thatstructure The Theory of Moral Sentiments, the socialising force ofthe sympathy mechanism and the loyalty to objectives of the impartialspectator.Adam Smiths project comes to fruition with the paradoxical

synthesis provided in The Wealth of Nations. The paradox consistsof the fact that the normative principle which dominates at the endof The Theory of Moral Sentiments and which determines the

16 Introduction

microstructure of human behaviour in The Wealth of Nations is ulti-mately used to advance the objectives of the alternative principle,which had been discarded as a directly active inuence on humanbehaviour. The paradox thus resolves into an intricate synthesis, whichis more than a simple compromise, since both principles remain fullydistinct and fully realised, albeit on dierent levels of the argument.The extraordinary fertility of das Adam Smith Problem stems

primarily from the desire of readers to nd one single, linear argumentper book and the fact that this desire is necessarily thwarted given thateach work elaborates distinct partial aspects of the double structure,which dominates them both. The nave idea that Adam Smith simplyrenounced The Theory of Moral Sentiments to write The Wealth ofNations is untenable. On the biographical level, Adam Smith continuedworking on his rst published work well after the publication of TheWealth of Nations. The sixth and last version of The Theory of MoralSentiments that includes major revisions dates from 1790, the year ofhis death.At the level of the texts there is no contradiction between the two

books but a double development common to both, of which each bookelaborates dierent aspects. On the one hand, there is solid continuitybetween the two as the sympathy mechanism provides the preferencestructure at the basis of the economic behaviour spelled out in TheWealth of Nations. This process of social communication is motivatedby the emotional need of each individual to recognise himself and hisfeelings in those of his peers in order to satisfy his desire to be loved.On the other hand, the impartial spectator who had an important andexplicit role in The Theory of Moral Sentiments has almost no activepart in The Wealth of Nations, where he is present only behind thescenes as the Director of nature who put the determinants of humanbehaviour in place and dened the basic teleology of the work the achievement of general welfare. The solution to the Adam SmithProblem is thus the following: given that the two normative principlesthat were opposed in The Theory of Moral Sentiments are taken up ina strongly dierentiated manner in The Wealth of Nations, the latter isthe direct but partial continuation of the former.Adam Smith himself highlights this continuity when he notes in the

foreword to the sixth edition of The Theory of Moral Sentiments thatThe Wealth of Nations had kept the promise made at the end of therst edition of The Theory of Moral Sentiments to develop an accountof the general principles of government regarding civil justice, taxesand defence. The fact that this continuity develops on two dierentlevels the level of the motivations and the underlying economy of

Introduction 17

the passions on the one hand and the level of the resulting actions orfacts on the other does not prevent characterising this continuityprecisely.Bringing out the internal coherence of Smiths work, and with it the

absence of major contradictions, does not, obviously, do away with theneed to continue questioning its specic hypotheses and underlyingassumptions. To give but one example: concerning the sympathymechanism, the neat separation in time between the formation ofpreferences and their realisation in economic action that Smith pre-supposes seems empirically dicult to justify. (On this point see latersection 3.2 where we discuss Adam Smiths theory that the rst mani-festations of the sympathy mechanism take place at a very young agein primary school). Despite his great diligence, the author Adam Smithoccasionally displays a certain predilection for formulaic expressionswhich underline the paradoxical character of his approach while con-cealing the links between dierent statements. Notwithstanding, it ispossible to show clearly the fundamental coherence of his vast projectof translating the results of a philosophical inquiry into the anthro-pological and psychological bases of life in society into a theory ofeconomic exchange and auto-organisation.Ultimately however, the genius of Adam Smith, his singular con-

tribution guaranteeing his place in the history of ideas, does not residein the diligent elaboration of this project but in the synthesis of the twonormative principles, structured by the sympathy mechanism and theimpartial spectator respectively, which he establishes. This synthesisis not realised on the basis of an arbitrary mix of ethical directivesand explicit interdictions stemming from both principles in equalmanner. Such a middling solution would have satised many of thecritics discovering contradictions in Adam Smiths work. Exogenousinterdictions are neither necessary nor useful in a Smithian world,once the direct role of the impartial spectator has been terminated. Theunassuming pursuit of a kind of self-interest shaped by social processesand in scrupulous observance of the laws of the land will realise all theobjectives associated with the ethical authority embodied by theimpartial spectator. One cannot emphasise strongly enough the factthat the self-interest of the Smithian individual, which is the expressionof the original passions transformed into socially acceptable senti-ments, is a very particular and highly codied self-interest. This processis the great theme of The Theory of Moral Sentiments. Ultimately, thepursuit of this highly formatted self-interest must attain general wel-fare. Revealing the sophistication and profoundness of this operation isa key ambition of this essay.4

18 Introduction

Last but not least, the diculties of interpreting Smiths workresults also from the disciplinary issue at stake. Given that the mostadvanced expression of this work is The Wealth of Nations, it is naturalthat economists should be amongst those primarily interested. Givenits origins in The Theory of Moral Sentiments it is equally naturalthat historians of thought and philosophers have studied it and com-mented on it. The contingencies of the dierent elds of researchhave often helped little to advance the understanding of the linksthat Adam Smith constructed between the two worlds. Economistsusually approach The Theory of Moral Sentiments after having readThe Wealth of Nations. As a result of their economic training, theytake as given the specic mental and emotional processes, whichestablish the peculiar modes of thinking and communicating thatdene market society. Discovering the problematic development ofthese modes of reasoning and communicating in the tension betweencontrasting normative references usually provokes more puzzlementand questions than satisfying answers. On the other hand, historians ofthought have often been unconcerned about the formal implicationsthat result from Smiths conclusions and are content to pursue partialenquiries of textual and historical references.It is, however, the linking of a model of human psychology and the

highly codied individual behaviour that results from it with a socialteleology which is the most original and inuential contribution ofAdam Smith. The connection between these poles is ensured by amodel of communication and social interaction, whose psychological,moral and ethical foundations are explored in The Theory of MoralSentiments and whose economic, political and social implications areexplored in The Wealth of Nations.This model is based on the clear separation in time of the formation

of preferences and their realisation in economic activity and thepotential for static codication that such a separation permits.Adopting it, economic science began to gain its autonomy from theother social sciences. The process of ever greater autonomy was drivenby the gradual advancement of technical and mathematical sophisti-cation and abstraction, with which economists have carried on thework and spirit of Adam Smith. The fact that the analysis ofbehaviour, which we refer to today as economic, ultimately takes adominant place in this work is not due to a wanton choice after theconclusion of his rst book. The study of economic behaviour is theinevitable consequence of the development of a precise model of socialinteraction that implies economic behaviour as a particular form ofsocial behaviour.

Introduction 19

The coherence of Adam Smiths work reveals itself in the con-tinuous interest in this propensity of human nature to exchange andcommunicate of which he speaks at the beginning of The Wealth ofNations (Smith 1776 (I.I.2): 17). The exchange of goods remains in itsstructure and implications the direct consequence of the exchange ofthe looks, sentiments and values that Adam Smith presents in TheTheory of Moral Sentiments An act of exchange always supposes thecoincidence of two mental universes around a given notion of value,which is precisely the result an individual participating in the sympathymechanism hopes for. Adam Smiths vast and lasting inuenceultimately relies on the profound coherence of the universe heproposes: the benets of a distinct form of social organisation based oncompetitive markets are the originally aimed-for result of a compre-hensive deliberation about human psychology, communication, socialinteraction, morality and ethics.

20 Introduction

2 Sympathy, communication,exchangeThe horizontal world

2.1 Self-interest in the service of sociability: the worldof sympathy

The exchange of looks

No reader of The Theory of Moral Sentiments can overlook the sym-pathy mechanism which is presented with force and clarity at the verybeginning of the book. It establishes a central theme in the longreections that follow about the conict between the ethical obligationsemanating from the impartial spectator and the behaviour suggested bya set of more conventional moral injunctions. Adam Smiths remarksabout the sympathy mechanism are straightforward and precise. This,however, does not mean that their implications in particular theirimplications for the development of an autonomous theory of eco-nomic behaviour with scientic aspirations have always been fullygrasped.1

The sympathy mechanism is, in fact, at the origin of the formationof an economic rationality. Once this fact is understood, the internalcoherence of Smiths oeuvre becomes apparent. The sympathymechanism creates this economic rationality by codifying in a recipro-cal social process a system of values, preferences and intentions thatpermits the organisation of coherent and consistent individual actionsin the light of one single, explicit objective the maximisation of indi-vidual wealth. Each and every action contributing to utility max-imisation must beforehand pass the test of that inter-subjective processwhich is the sympathy mechanism.To clarify one thing once and for all: sympathy is not altruism. It is

in fact quite far from it. First of all, sympathy is a positive notionand not a normative one. The normative notion of altruism is calledbenecence by Smith and is orthogonal to sympathy in the sense that

its observation is implied by a radically dierent normative reference.Benecence is, in fact, closely associated with the impartial spectator(see Chapter 4.1 Ecient causes and nal causes: the workingof the invisible hand) and plays no role in establishing the pleasingconcurrence of feelings between equals, which is at the heart of thesympathy mechanism.The horizontal sympathy mechanism organises the mutual percep-

tions between peers, neighbours or friends, all of whom are char-acterised by their likeness to each other. The image of the mirror thatSmith uses to symbolise the relation between the individual and thesociety that surrounds it, perfectly captures this reciprocal formation ofone individuals preferences by those of the others, who do the samewith him. Concerning an individual having grown up outside of civi-lised society Smith says, for instance Bring him into society, and he isimmediately provided with the mirror which he wanted before (Smith1759 (III.I.3): 129).2

The visual perception of the other (the peer, the neighbour, thefriend, the equal, the competitor ), which works like a mirror image,serves as a point of reference for the Smithian individual, who knowsno other way to establish his own identity. An identical mechanismwas later theorised under the heading of the stage of the mirror (stadede miroir) by the French psychoanalyst Jacques Lacan. In connectionwith a theory of the establishment of the self, Lacan maintains thatchildren in their narcissistic phase develop a sense of their unity andtheir own ego with the help of their own mirror image (Lacan 1966).This mechanism is doubled and reinforced by the perception of otherchildren who are like me.Adam Smith oers us a rst, very far-reaching version of this

theory of the stage of the mirror. In fact, all sentiments of pleasureor displeasure the Smithian individual may feel must rst pass thetest of whether other people around him have the same feelings.Sentiments or feelings always require reciprocal verication throughthe sympathy mechanism. The sensation of sympathy thus remainsfor Adam Smith the precondition for any emotional reaction a well-socialised individual would allow himself. And sympathy is thatpleasant feeling which arises when one discovers ones own sentimentsin others:

In every passion of which the mind of man is susceptible, theemotions of the bystander always correspond to what, by bringingthe case home to himself, he imagines what should be the senti-ments of the suerer Sympathy may now, without much

22 Sympathy, communication, exchange

impropriety, be made use of to denote our fellow-feeling with anypassion whatever.

(Smith 1759 (I.I.1.45): 13)

The impetus to search for this harmony of sentiments springs fromthe desire to be understood, accepted and loved the ultimate motorof human actions for Adam Smith. Ones pleasure is thus primarilyprovided by the discovery that others have sentiments identical or atleast similar to ours, since this is the precondition for any appreciativefeelings they may have for us:

But whatever may be the cause of sympathy, or however it may beexcited, nothing pleases us more than to observe in other men afellow-feeling with all the emotions of our own breast

(Smith 1759 (I.I.2.1): 17)

Sympathy and the harmonisation of perceptions

The pleasure to be had from the feeling of mutual sympathy is con-siderable, yet it is not easy to come by. The reason is the following.An individuals feelings, or sentiments as Smith would have calledthem, originate in nal instance from his inner passions. Yet una-dulterated passions are asocial for Adam Smith and due to theirintrinsic violence even antisocial (see section 3.2). The originalfeelings based on individual passions thus need to be transformed intosentiments that one can communicate and share, which demandsa strong and sustained eort of self-education and moderation. Theoriginal passions or impulses need to be made communicable, whichrenders their momentum orthogonal to its original direction. Thevertical passions are thus transformed into horizontal sentiments,which can be fed into a process of establishing sympathy betweensimilar individuals.The control and transformation of the original passions are indis-

pensable to be able to participate in the sympathy mechanism. This is ahard and laborious process. Achieving perfect sympathy remains anideal to strive for rather than a daily reality:

Mankind, though naturally sympathetic, never conceive, for whathas befallen another, that degree of passion which naturally ani-mates the person principally concerned The person principallyconcerned is sensible of this, and at the same time passionately

Sympathy, communication, exchange 23

desires a more complete sympathy To see the emotions of theirhearts, in every respect, beat time to his own, in the violent anddisagreeable passions constitutes his sole consolation. But hecan only hope to obtain this by lowering his passion to that pitch,in which the spectators are capable of going along with him. Hemust atten, if I may be allowed to say so, the sharpness of itsnatural tone, in order to reduce it to harmony and concordwith the emotions of those who are about him. What they feelwill, indeed, always be, in some respects, dierent from whathe feels, and compassion can never be exactly the same withthe original sorrow These two sentiments, however, may, itis evident, have such a correspondence with one another, as issucient for the harmony of society. Though they will never beunisons, they may be concords, and this is all that is wanted orrequired.

(Smith 1759 (I.I.4.7): 2627)

In the passage just cited Adam Smith seems to indicate that estab-lishing sympathy, so to say, only requires the qualitative harmonisationof the sentiments of various agents. That is, sympathy would onlyrequire that the feelings of the various participants be on the samewavelength as other universally recognised and communicablesentiments attached to the same arguments. As in music, it would notbe necessary for two notes to be identical (unison) to create a harmo-nious accord. The sentiments and perceptions established by the sym-pathy mechanism need to become isomorphic to use the expression ofJean-Pierre Dupuy.The relevant analogy in economic theory would be a demand curve

where the various preferences for a given good are all organised inthe same price quantity plane. The qualitative specication of pre-ferences would be common to all, without these preferences needing tobe of an identical quantitative measure. Other passages in The Theoryof Moral Sentiments, however, go further and require precisely thequantitative harmonisation that was not considered indispensable inthe passage quoted above. In this second case, the transformation ofthe original feelings must be advanced until it achieves the perfectcoincidence of sentiments in both quality and quantity. At that point, acommon interpersonal value is achieved that has the potential toestablish a new social norm (propriety):

The propriety of every passion excited by objects peculiarly relatedto ourselves, the pitch which the spectator can go along with, must

24 Sympathy, communication, exchange

lie, it is evident, in a certain mediocrity This mediocrity inwhich the point of propriety consists

(Smith 1759 (I.II.12): 32)

The term mediocrity is not at all derogatory. For the veryAristotelian Adam Smith mediocrity is a quality of virtue itself:

Virtue, according to Aristotle, consists in the habit of mediocrityaccording to right reason It is unnecessary to observe that thisaccount of virtue corresponds too pretty exactly with whathas been said above concerning the propriety and impropriety ofconduct.

(Smith 1759 (VII.II.1.11): 319)

The mediocrity of sentiments does not result from lack of care orweakness. On the contrary, it is the fruit of the sustained eort toproject oneself into the imagined perception that ones peers mighthave of oneself. The mutual reection that results from this eortwill transform the original incommunicable passions into universallyaccessible sentiments:

In order to produce this concord, as nature teaches the spectatorsto assume the circumstances of the person principally concerned,so she teaches this last in some measure to assume those of thespectators As their sympathy makes them look at it, in somemeasure, with his eyes, so his sympathy makes him look at it, insome measure, with theirs, especially when in their presence andacting under their observation: and as the reected passion, whichhe thus conceives, is much weaker than the original one, it neces-sarily abates the violence of what he felt before he came into theirpresence, before he began to recollect in what manner they wouldbe aected by it, and to view his situation in this candid andimpartial light.

(Smith 1759 (I.I.4.8): 27)

In the spectral virtuality of this mutual reection the passions losetheir original dangerousness. Completing the sympathy process requiresself-control and the adaptation of ones passions to a middling levelthat can be grasped and shared by all. Propriety and prudence thusbecome the cardinal virtues of the Smithian individual since theyare most apt to further such self-control. The desire to be loved which is temporarily satised if the sympathy process is successfully

Sympathy, communication, exchange 25

completed is so strong that the individual identies himself com-pletely with the supposed sentiments of his peers. References outside ofthe social values conveyed through the sympathy mechanism simplycease to exist. Jean-Pierre Dupuy formulated the implications of thisstate of aairs in the following way:

You sympathise with yourself only to the precise degree that theothers sympathise with you. In other words, you love yourself onlyto the precise degree that the others love you.

(Dupuy 1988: 81, our translation)

The limits of sympathy

Despite its power and despite the important benets it is able to gen-erate be it at the level of the individual or at the level of society asa whole the sympathy mechanism never works automatically. It is aprecious achievement, which always remains exposed to destabilisingforces. It demands constant eort to make two mental universescoincide, which are a priori alien to each other. The mediocrityof sentiments, the linear combination of two interior worlds, needsto overcome the double challenge of the muteness of the passionsand the personal isolation of each individual that stems fromthem. This isolation is never overcome completely, as direct commu-nication about ones inner state is impossible. Smith states somewhatbleakly:

Every faculty in one man is the measure by which he judges of thelike faculty in another. I judge of your sight by my sight, of yourear by my ear, of your reason by my reason, of your resentment bymy resentment, of your love by my love. I neither have, nor canhave any other way of judging about them.

(Smith 1759 (I.I.3.10): 23)

The very positive view that Adam Smith holds of the role ofexchange and commerce stems also from his pessimism concerning theexistence of an easy and natural sociability allowing a more directcommunication of the original, unadulterated passions.Preparing oneself for the process of sympathy requires rst of all the

control of ones own original sentiments or passions. Of course,the sympathy mechanism will further the convergence of the sentimentsof dierent individuals, but these will always be derived sentiments, or

26 Sympathy, communication, exchange

secondary sentiments as Adam Smith calls them, shaped by self-control, which remains the basis of all sociability:

The man of the most perfect virtue, the man whom we naturallylove and revere the most, is he who joins, to the most perfectcommand of his own original and selsh feelings, the mostexquisite sensibility both to the original and sympathetic feelingsof others.

(Smith 1759 (III.3.35): 176)

Note the dierence! Original feelings need to be distinguished fromsympathetic feelings. In the process of establishing mutual sympathy,which is the only means for social communication, there is noautonomous role for original, untransformed feelings, which Smithcharacterises here and elsewhere as selsh. The latter include, inparticular, all the feelings linked to physical sensations. Physical pas-sions always constitute for Adam Smith a dangerous threat to thesocial bond. Only mediated and communicable passions are sociallyacceptable:

And this [absence of sympathy] is the case of all the passions whichtake their origin from the body: they excite either no sympathy atall, or such a degree of it, as is altogether disproportioned to whatis felt by the suerer.

(Smith 1759 (I.II.1.5): 35)

Adam Smith speaks briey about sexual desire (the passion thatunites the sexes), without prudishness but also without enthusiasm.Given that this particular passion is primarily a physical phenomenon,it remains incommunicable and is thus lost for establishing generalsociability. For Smith, spectators in the theatre can therefore feel nosympathy for Phaedras passion for her stepson Hippolyte in Racineseponymous tragedy. Her original passion is not communicable. Theycan exclusively sympathise with Phaedras derived passions, her socialpassions: her fear, her shame, her regret, her horror and her despair.Smith calls these the secondary passions which arise from thesituation of love (Smith 1759 (I.II.2.4): 40).Contrary to appearances, it would be wrong to conclude at this

point that the Smithian world is based on banning all human passionwith the result of creating a bleak sociability t for domesticatedandroids. Non-mediated passions, in particular primary physicalpassions, are certainly considered antisocial. Of course, the interests

Sympathy, communication, exchange 27

stemming from the sympathetic sentiments are more apt to guaranteecommunication, exchange and social cohesion (see section 2.2, TheEconomic Passion, for an in-depth discussion of the link betweeninterests and sentiments). And yet, the passions survive. Withoutprimary passions, there can be no secondary passions. With AdamSmith, the passions are neither denied their existence, nor are theysimply suppressed. They are instead transformed, adapted anddisplaced into the economic sphere in order to allow social life todevelop. One should not forget that the control of the passionsonly results from the strongest of them all: the desire to be beloved,which remains for Adam Smith the motor of the process of socialconstruction.

The social function of wealth

In The Theory of Moral Sentiments, the principal objective ofmankind is thus to be loved and respected or, at the least, not tobe despised. The great paradox of Adam Smiths work, whichconstitutes a major obstacle to its full understanding, is that thiseminently social motivation of being loved and accepted is at theorigin of an economic self-interest that critics often consider as anti-social. We have already shown earlier that the control, moderationand transformation of the passions results in broadly shared andaccepted sentiments, perceptions and values. From the assemblage ofsuch shared values stems the social function of wealth, which assumes akey role in Adam Smiths vision of the working of a harmonioussociety.In numerous passages of The Theory of Moral Sentiments, Smith

stresses that the true value of wealth, whose accumulation is of coursethe aim of economic self-interest, does not reside in the comfort,physical well-being or security it can provide. This attitude occasionallyincludes the open disdain at rst degree of economic well-being andwealth. One example is the following quotation, which will also playa role below in connection with the discussion of the invisible hand(see section 4.1):

In ease of body and peace of mind, all the dierent ranks of lifeare nearly upon a level, and the beggar, who suns himself bythe side of the highway, possesses that security which kings areghting for.

(Smith 1759 (IV.1.10): 216)

28 Sympathy, communication, exchange

At second degree, however, economic wealth has tremendous value.This value is inherent in the respect, esteem, and appreciation itprocures its owner in the eyes of his peers.

Nothing is so mortifying as to be obliged to expose our distress tothe view of the public, and to feel, that though our situation isopen to the eyes of all mankind, no mortal conceives for us, thehalf of what we suer. Nay, it is chiey from this regard to thesentiments of mankind, that we pursue riches and avoid poverty What is the end of avarice and ambition, of the pursuit of wealth,of power and pre-eminence? Is it to supply the necessities ofnature? The wages of the meanest labourer can supply them From whence then arises that emulation which runs through allthe dierent ranks of men, and what are the advantages which wepropose by that great purpose of human life which we call better-ing our condition? To be observed, to be attended to, to be takennotice of with sympathy, complacency, and approbation, are allthe advantages which we can propose to derive from it.

(Smith 1759 (I.III.2.1): 61)

The word emulation, which refers to both competition andmimesis, assumes a special signicance in this context. Accumulatingwealth is not only a movement of social dierentiation but also ofsocial mimesis. A rich man engages in the process of social emulationprecisely in the same manner as his less fortunate peers, only thatquantitatively he advances further. Of all the positive attributes of aman, material wealth is the one most easily perceptible and compre-hensible, whose experience can be most easily shared. Since it consistsentirely of exchangeable goods whose value is evident for all, materialwealth becomes the ultimate social quality of the Smithian individual.In acquiring wealth, men do not seek comfort or physical satisfac-

tion but the emotional convergence, the sympathy, which arise from theshared understanding concerning the value of their wealth. A rich manreceives satisfaction from his wealth only when experiencing the sym-pathy his wealth is able to generate. Given that it is easy to sympathisewith him, the social appreciation of his wealth as valuable is trans-ferred through metonymic extension to its owner. With Adam Smith,the principal use value of a good is its exchange value. To its owner, aneconomic good is worth precisely what it is worth in the eyes of others,not more, not less.A frequent misunderstanding maintains that pursuing individual

wealth is an act of selsh nonconformity that dees shared social values.

Sympathy, communication, exchange 29

Quite the opposite applies in Adam Smiths world. Consenting tosocially shared perceptions of what is desirable as established by thesympathy mechanism, the Smithian individual joins the race for protsand thus becomes a useful member of the social order. It is thus logicalthat in Smiths work the pursuit of self-interest always demands theunconditional observance of the rules of the game. Disregarding theserules would eliminate any progress towards greater social esteem,which remains the essential motivation behind the pursuit of economicself-interest:

In the race for wealth, and honours, and preferments, he [theindividual] may run as hard as he can, and strain every nerveand every muscle, in order to outstrip all his competitors. But ifhe should justle, or throw down any of them the indulgence of thespectators is entirely at an end. It is a violation of fair play, whichthey cannot admit of.

(Smith 1759 (II.II.2.1): 97)

Observing that the principal use value of an economic goodconsists in its exchange valu