The 'New' Economic Thinking on Adam Smith of Vines and Morris Leads to the Same Old Errors About Adam Smith

Abstract

The belief that the Utilitarianism of Jeremy Bentham is an outgrowth of Adam Smith’s approach in The Wealth of Nations is a contradiction in terms, given that the Wealth of Nations and The Theory of Moral Sentiments are both based on Smith’s Virtue ethics approach, which completely and totally rejects any role for the utilitarianism of Jeremy Bentham or any other kind of utilitarianism. The term "self interest" in the Wealth of Nations was called "prudence" in the Theory of Moral Sentiments. Prudence is that virtue involving individual human behavior that was circumspect, judicious, thrifty, frugal, careful, patient, and hardworking. The prudent or self-interested person developed his talents and became a financial success or was well off. However, this was only the first step in a process aiming at moral perfection that would culminate in the virtue of beneficence. Only at this stage in a person’s life would real happiness emerge. Smith’s views on economic growth have to do with justice and his application of Aristotle’s Golden Mean. Smith never viewed commercial society (capitalism) or economic growth as a path leading to happiness for the greatest number of citizens as the amount of material and consumer goods increased over time. This view was Bentham’s, not Smith’s.Finally, there never was an Adam Smith problem except in the minds of economists intent on foisting Bentham’s hedonic-hedonistic calculus onto Adam Smith. However, there is another, much more severe problem. The problem is that, since the 1790’s, the vast majority of economists, who are utilitarians, have been constantly trying to redefine Smith as a utilitarian and "read into" the Wealth of Nations their own utilitarian ethics and approach to probability and decision making. The remaining economists can be categorized as nihilists, such as the Post Keynesians and Institutionalists. Nihilists find no role for probability analysis in economics. Both approaches lead to myths, such as (a) the existence of some "Invisible Hand" force that coordinates the conflicting microscopic, price expectations-plans of market participants in such a manner so that a socially optimal, macroscopically, stable equilibrium is obtained over time; (b) Smith believed in Laissez faire; (c) Smith believed in a 100% Free Trade policy or (d) Keynes was an anti-mathematical, anti-formalist who realized that mathematics and statistics played no role in a world of Shackle-Davidson uncertainty. None of these myths has any support in the Wealth of Nations or in any of Keynes’s works