Adam Smith: invisible hand or moral sentiment?
Posted by Matt Walker on September 21, 2009
Whilst studying Heywood’s Political Ideologies last week, one of my A2 students drew attention to the author’s view that unlike neo-liberals, Adam Smith “certainly did not subscribe to a crude utility-maximising model of human nature.” What does this actually mean? There’s no simple answer to this!
Adam Smith is a very famous exponent of the free market. Indeed, the right of centre Adam Smith Institute is a major proponent of free markets and does so in the great Scot’s name. Smith’s metaphor of the invisible hand suggests that social wellbeing is achieved by allowing utility-maximising individuals to pursue their own personal gain. If we all pursue our own profit, then we will have a profitable economy. The best thing that government can do is to liberate the economic capacity of the individual by removing itself from economic activity.
The neo-liberals of 1980s British Conservatism claimed to be the inheritors of Adam Smith. In fact, Thatcherites married Benthamite utilitarianism with Smith’s invisible hand to suggest that the free market would result in a better, perhaps morally superior society. For neo-liberals, human beings are primarily economic agents.
However, according to Professor Iain McLean of Oxford University, an alternative view of Adam Smith is possible, something which Heywood alludes to when discussing neo-liberalism. Professor McLean argues that Smith’s Theory of Moral Sentiments, marks the latter out as a man of the Left, not the Right. Smith was in fact well aware that markets fail and that selfishness is not the prime motive of human behaviour. Furthermore, when market outcomes fail to produce ‘the good society’, the state has a role in correcting it, suggesting that those in need require a helping hand. This is quite different to the neo-liberalism of Thatcherism, which has more in common with Samuel Smiles’ notion of self-help.
Interestingly, according to Simon Lee in Boom and Bust Gordon Brown has tried to reclaim Adam Smith from the Conservative Party, by emphasising how the invisible hand should cross palms with the moral sentiments of government support for the disadvantaged.