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January 30, 2010 CURRENTS

Selling Short a Humanistic Economist


By ANAND GIRIDHARADAS

CAMBRIDGE, MASSACHUSETTS One evening late last year, the conservative American television personality Glenn Beck was venerating capitalism once again. He pointed to one of the folds under his jaw. If I could sell sponsorships on this chin right here, I would, he said. It would just say, Third chin sponsored by Goodyear. He called himself the most enthusiastic capitalist since Adam Smith. Not long before, on the floor of the House of Representatives in Washington, Steve King, an Iowa Republican, had similarly resurrected the Scottish philosopher. On this side of the aisle are the people that believe in free enterprise, the invisible hand, Adam Smiths vision, Adam Smiths dream, he said. You folks, he told his Democratic colleagues, do not. Adam Smith, free-market partisan: this image dominates, even in market-weary times. Politicians invoke him as a near-deity. Think tanks and consulting firms use his name as a synonym for free-market policies. So dogmatic is he imagined to be in his famous book The Wealth of Nations that the feminist writeractivist Riane Eisler not long ago wrote a corrective titled The Real Wealth of Nations: Creating a Caring Economics. The implication that his economics was uncaring might have disturbed Adam Smith, for he was hardly the man that many now think him to be. While he believed that markets could channel self-interest into efficient aggregate outcomes, he argued that this was no excuse for selfishness: When the happiness or misery of others depends in any respect upon our conduct, we dare not, as self-love might suggest to us, prefer the interest of one to that of many. That quotation is not from The Wealth of Nations, Smiths best-known work, but from The Theory of Moral Sentiments, his lesser-known opus. It was republished by Penguin this week to mark its 250th anniversary, and it offers a reminder that Smith was a subtle, complex thinker whose ideas about markets and those who use them would embarrass many of his present-day devotees. The Theory of Moral Sentiments is about human nature, not markets. It was published before The Wealth of Nations, but brought out by Smith in several editions after that other book was published. Yet the humanistic book fell into obscurity in the 19th century, and Smith became singularly known for his economic doctrines, and above all for his assertion that it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. Today, according to data from Google, people look up The Wealth of Nations 120 times more often than The Theory of Moral Sentiments. While some men are born small and some achieve smallness, it is clear

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Currents - Selling Short a Humanistic Economist - NYTimes.com

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enough that Smith has had much smallness thrust upon him, Amartya Sen, a Harvard economist and Nobel laureate, writes in the introduction to the new edition. (Disclosure: Dr. Sen is one of my teachers at Harvard.) Smith is often treated like the philosopher of the Goldman Sachs bonus, as the defender of an anything-goes capitalism. But in Moral Sentiments he tartly criticizes the idea that self-interest is enough. A healthy society, Smith believed, requires trust, so that bankers lend. It requires care for the poor. It requires sympathy: the books first words extol the feelings in every person that interest him in the fortune of others. It requires prudence: simplicity, honesty, thrift, the deferral of gratification, industry, a refusal to risk fortune and tranquillity in quest of new enterprises and adventures. And it requires regulation, transparency and other mechanisms of fair play. In Smiths vision, greed is socially beneficial only when properly harnessed and channeled, Alan S. Blinder, a Princeton economist and former vice chairman of the Federal Reserve Board, wrote recently in The Wall Street Journal. When these conditions fail to hold, he added, greed is not good. But Moral Sentiments does more than just balance our understanding of Smith. It is also a thorough analysis of money and the human character. If The Wealth of Nations was Smith the economist describing the workings of the market, Moral Sentiments is Smith the social psychologist describing how humans actually employ that market. In it Smith serves as a kind of economic Tocqueville, offering sharp insights into the behavior behind the present economic crisis. To what purpose is all the toil and bustle of this world? Smith asks. We ever insist on bettering our condition, he writes, not out of necessity, not to feed or clothe ourselves, but for vanity: To be observed, to be attended to, to be taken notice of with sympathy. Even as Washington and other capitals speak of tightening the regulation of banks worldwide, Smith reminds us of the mingling of economic and noneconomic desires that makes banking culture so hard to change. His words seem strangely relevant to this age of elusive dinner reservations and fractional jet ownership and nightclub bottle service the outward trappings of a banking culture that seems, on Smiths view, to mask a lonely burning for validation underneath. Smith saw, as well, how the powerful think Tiger Woods or the nameless bankers once adulated as masters of the universe are encouraged in their vanity by the rest of us: how we puff them up, hang on their deeds, pay more attention to them than to the unfortunate, and gradually make them sense that they can get away with anything. The ambitious man, Smith writes, comes to believe that the lustre of his future conduct will entirely cover, or efface, the foulness of the steps by which he arrived at that elevation. It is this sense of impunity that worried Smith about the wealth pursuit. And he wrote in Moral Sentiments of a rage and resentment that rise from such behavior not unlike the feelings now stirring in the ailing, job-shedding, bonus-giving countries of the West. If you have either no indignation at the injuries I have suffered, or none that bears any proportion to the resentment which transports me, we can no longer converse upon these subjects, he wrote. We become

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Currents - Selling Short a Humanistic Economist - NYTimes.com

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intolerable to one another. I can neither support your company, nor you mine. You are confounded at my violence and passion, and I am enraged at your cold insensibility and want of feeling. E-MAIL: pagetwo@iht.com

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