Academic journal article
By Wilson, David; Dixon, William
History of Economics Review , Vol. 40
Abstract: The idea of a 'natural harmony' in human affairs runs like a leitmotif through Adam Smith's work. Naturally enough, modern economics has read into this allusion its own preoccupations with the coordination of the strategic decisions of essentially egoistic actors. We will want to argue here, however, that for Smith and his disciple, Thomas Chalmers, successful human interaction is founded on a yet deeper competence and a more complex form of selfhood than conventional economic analysis has been able and/or willing to admit. We try to explicate that irreducibly social self that Smith and Chalmers have in mind by drawing on the philosophy of the act that characterises the work of the social psychologist, G.H. Mead.
The idea of a 'natural harmony' in human affairs runs like a leitmotif through Adam Smith's work. Unsurprisingly, given Smith's own predilections, his allusions to this 'harmony' or 'concord' are typically interpreted as the possibility (and desirability) of a liberal political economy. Such allusions, according to Arrow and Hahn, would then make Smith the first in a 'long and fairly imposing line of economists ... who have sought to show that a decentralised economy motivated by self-interest and guided by price signals would be compatible with a coherent disposition of economic resources that could be regarded ... as superior to a large class of alternative[s]' (1971, pp. vi-vii). Or again: 'Adam Smith's "invisible hand" is a poetic expression of the most fundamental of economic balance relations, the equalisation of rates of return, as enforced by the tendency of factors to move from low to high returns' (1971, p. 1).
Now, as Khalil (2000) points out, Smith's explicit references to an 'invisible hand' apparently bear little or no relation to the coordinational properties of prices and markets. But there is a more substantive issue at stake here. Let us pause for a moment to consider how the science of economics is in fact constituted. So, for example, this is Edgeworth in Mathematical Psychics: 'the first principle of Economics is that every agent is actuated only by self-interest' (1881, p. 16). Or again, Irving Fisher, in his Mathematical Investigations in the Theory of Value and Prices, specifically excludes all social-psychological inquiries save for the simple postulate that 'each individual acts as he desires', a postulate that then serves as the basis for an ideal social equilibrium, 'correspond[ing] to the mechanical equilibrium of a particle' (1925, p. 11).
We have no wish in this paper to take issue with the way in which the science of economics defines itself, excluding as it does any consideration as to how self-interest is constituted. But we do want to point out that this is a serious attenuation of Smith's project. For Smith it is clear that it takes a certain form of self-interest to sustain liberal political-economic arrangements, and thus the analysis and explication of this form becomes a matter of some concern. But then this should (and does) lead Smith into a more fundamental investigation of the human self and its actions--an investigation primarily carried out in The Theory of Moral Sentiments (henceforth TMS).
There is now widespread agreement that something important in Smith is overlooked in the modern-economic appropriation of his work; that there is more to Smith than the founder of a tradition which works outwards from an unexplicated (simple) view of the self and its interests in order to demonstrate the possibility of a liberal-economic order. But we feel that what that something is seems to move in and out of focus. So, for example, Rosenberg's (1982) Smith wants to emphasise the necessity of socialisation in the liberal-economic process, and in the same context Evensky (1987, 1992, 1993) sees Smith as recognising the need for ethical foundations. Likewise, Tribe writes of 'the division of labour ... [and] . …