1776: The Ideas that Made the Modern World, Part 11: Downsides of Markets

Episode Topic: Downsides of Markets

What does the tension between economic prosperity and moral character tell us about the profound intersection of liberty and human flourishing?  Envision a society where justice protects every person, property, and promise.

Featured Speakers:

• James Otteson, University of Notre Dame

Read this episode's recap over on the University of Notre Dame's open online learning community platform, ThinkND: https://go.nd.edu/bf2cdd.

This podcast is a part of the ThinkND Series titled 1776: The Ideas that Made the Modern World.

Thanks for listening! The ThinkND Podcast is brought to you by ThinkND, the University of Notre Dame's online learning community. We connect you with videos, podcasts, articles, courses, and other resources to inspire minds and spark conversations on topics that matter to you — everything from faith and politics, to science, technology, and your career.

• Learn more about ThinkND and register for upcoming live events at think.nd.edu.
• Join our LinkedIn community for updates, episode clips, and more.

Transcript

Welcome

Alex 0:07

Congratulations for making it to the end. I'm glad you made it here tonight. Now you're gonna get all the answers, all the questions. Final lecture on Adam Smith and his enduring significance, and I will talk a little bit, especially towards the end, about why we had this course. So I'll put, if I can, try to put the two things that we studied together into one. So this is our final class. Let me begin with a quick little recap from last week for those of you who weren't able to be here, or just remind you of what we talked about. we were talking about Adam Smith's Theory of Moral Sentiments. I had you read a little selection from the Theory of Moral Sentiments where Smith talks about justice. That's key to understanding the argument that he makes in the Wa- in the Wealth of Nations. So Smith says that there are three rules of justice, and those are the laws that guard, and I gave you the n- mnemonic device to remember it forever, the physical person, body, and person of each person in society. That's number one, and they go in lexical order or in order of importance. number two, the property and possessions that people have must be protected. And number three, what he calls their personal rights or, what's owed to them by people, by contracts, voluntary promises and contracts into which they've entered. The implication of all-- So those are the three Ps: person, property, promise. The implication of all that is that the first duty, not necessarily the only duty, as we talked about last time, but the first duty of government is to protect justice for all of its citizens. That's gonna be the first duty. Well, what does he say in The Wealth of Nations? The argument he makes there is consistent with that. He actually employs that conception of justice. So in the, in The Wealth of Nations, he says what we need is, what, in order to have the growing prosperity that we desire, people need to be secure, have the certainty of security in their persons, their property, and their promises. In order to have that, we need to have a couple-- a government that does a few things, three things in particular. These are the first two. So protect everybody's person, property, and promise from foreign aggression, that's number one, and protect it against domestic aggression or internal aggression, that's number two. Both of those are... And by the way, I'm sometimes asked, "Well, is Adam Smith a conservative? Is he a liberal? Is he a libertarian? What is he exactly?" There's Smith's term for-- That's how he describes his system of political economy, the obvious and simple system of natural liberty. So I don't know. That's not very catchy. it's hard to put that into a left, right, but that's his de- that's his description. And then the third, and we spent some time talking about this. So the first two duties are to protect justice against foreign and domestic aggression. The third duty is for the government to provide public works that meet these two surprisingly stringent criteria. So first, it has to be something that cannot be provided by private enterprise or by private initiative, for-profit, not-for-profit, civic groups, religious groups. If private groups can't-- cannot do it, and if it would benefit substantially everybody in society, not just, one person or one group at the expense of any other person or group. And we talked a little bit about what some of those examples might be. This was Smith's conclusion. If you have a society in which justice is protected, people feel secure in their possessions, and if they're allowed the liberty to do so, they will begin to find ways to improve their own conditions. And when they're doing that... Now, remember, if I can't-- if I want to get something from you, and I cannot get it by stealing it from you or by enslaving you or by conquering you, all that's left to me then is to make you an offer which you are free to accept or decline. If we execute a transaction, if we execute a trade, if we execute an exchange, that means that you must have thought you benefited from it, and I thought I benefited from it. That's why we both said yes. In which case, who are the winners? Both of us. Not one at the expense of the other, but both of us are benefiting. Because of that, even if I don't intend to, or maybe I don't know anything about you, I don't even-- maybe I don't even like you. If in order for me to get what I want, I'm gonna have to offer you something that you want, which means even potentially unintentionally or unwittingly, I'm gonna be benefiting you as well. And that way-- and that's the way in which we're driven as if by a, an invisible hand to find ways that we can develop our own skills, abilities, et cetera, to benefit other people. That's the Smithian argument, and I suggested somewhat cheekily that maybe he was onto something, and I gave you a little bit of, some data, some, some historical and some contemporary data that s-- was suggestive that maybe he was onto something. that's part of it. Do you remember that? That's a version of a graph I showed you. But that's total wealth in the world that began to increase, first in some places and then in other places, and now every place, just about every region of the world is increasing in wealth, not all to the same degree because

Is the Case Closed

Alex 4:55

they didn't all start at the same time. Well, does that close the case? And I want to raise this as a question. So there are some people who argue that settles the argument. Was Smith right or was he wrong? That settles it. There's no more question. We don't need to think about it anymore. The case is closed. Well, okay. and there are lots of reasons you might give that support that view. So for example, it's consistent with a conception, a certain conception anyway, of natural rights. Does Smith himself rely on a conception of natural rights to defend what he, argues for in the Wealth of Nations? No, he doesn't. Was he aware of the natural rights tradition? Yes, he was. So we know from students' lecture notes, note what I said, students' lecture notes, that Smith lectured many years on s-- a topic he called jurisprudence. That was the name of the lectures that he gave. He did it for many years at the University of Glasgow. Stu-- His lecture notes we do not retain. They're gone. We retain two different sets of student notes from his complete lectures, and in them, take them for-- with a grain of salt, but in them, there's a lot of discussion of people like Grotius, Pufendorf, John Locke, etc., where he's talking about the natural rights tradition. So he was certainly aware of it, but he didn't employ it to defend his position. So the most we can say, I think, is that his position is consistent with it, not necessarily dependent on it. So it's consistent with natural rights. At least on Smith's view, it encourages efficient use of our scarce resources. So we find ways to use what little we have, however much we have, to benefit ourselves and others. Rewards innovation, discovery, etc. and it coincides with, note I don't say causes, it correlates with, coincides with what has been called the Great Enrichment. So Smith beget, was publishing-- published his book in seventeen seventy-six, and it was shortly thereafter that the Great Enrichment, took place. Okay. Well, if the case is-- if that's it, if the case is closed, why hasn't everybody done that, adopted Smithian recommendations? Why hadn't, why hadn't people done it before Smith? Why did it take Adam Smith in the eighteenth century to figure it out? Why hadn't the really smart people who'd been thinking about these things for centuries before that, why didn't Plato or Aristotle figure it out? Why didn't anybody else figure it out? Why Smith? And one reason might-- is the last bullet point there. Are there some potential downsides? Are there some potential worries or criticisms or objections? And of course, the answer to that is yes, there are worries and criticisms and objections that are raised. And so maybe we can spend a few minutes. And I asked you to read, did you read the little excerpt from Marx? Did you soldier through reading Marx? Marx is not easy. that's, that's not for the uninitiated. So we'll talk a little bit about it. It was just a few pages, but it's, it's tough slogging. So we'll talk a little bit about Marx today. So what I'd like to do is to, review one of the key dissenting figures, that'll be Karl Marx, and then consider how Smith might respond. Okay, so that's our agenda for today. So let's talk about Karl Marx. Here he is. This is Karl Marx, born in Trier, Germany, which is near Luxembourg. part of his background, I think, is important to remember. So he was born and raised in a kind of rural pastoral area, rolling hills, trees, lakes, and then he went to London. He went to London in eighteen forty-nine. London was nothing like the rolling hills and the bright sunshine and the clean air. It was a very different world that he saw when he got there. so a little bit about Marx's, background. He got a PhD in philosophy at the age of twenty-three, at the very tender age of twenty-three. Never served as a, as a professor. he was a writer, activist, et cetera. Published his now most famous single work as the Communist Manifesto with, Friedrich Engels, came out in eighteen forty-eight. and it's really hard to overstate how influential he has been. Interestingly, it turns out that his influence didn't really... It, it wasn't extremely influential in the nineteenth century or during his lifetime. it really started to pick up at the beginning of the twentieth century and then just took off in many disciplines. So, it-- the influence, interestingly, sort of coincides on or about October of nineteen seventeen. Does anybody know what happened in October of nineteen seventeen? Yes, Seydala. The Russian Revolution happened. And who was one of the leaders or the leader of the Russian Revolution, sort of the philosophical leader? Lenin. Lenin. Lenin started-- So the Russian Revolution happened in October of nineteen seventeen. Lenin s-- was citing Marx and claiming Marx as an authority for what they were doing. That really launched, Marx's fame, and it hasn't, abated since.

Marx in Industrial London

Alex 9:40

Okay, here's a little bit of background. I mentioned the, what Marx was seeing in, when he was growing up as a boy in the rolling hills of Western Germany. This is what he would have seen when he came to London. So there are a little-- a couple of facts about London. So in 1800, London was the largest city in the world with a population of one million. It was the first city to top one million since ancient Rome, since first century ancient Rome. So first century ancient Rome, had a million people in it. we think it had around a million people for a couple of centuries after that, then it started declining, and then of course, it fell. but no city for something like fifteen hundred years was that as big as London became. So London became the largest city in the world, a million people in 1800. look at the numbers. In 1850, it had almost tripled in size, and by 1900 it had almost doubled again. it was growing rapidly. It was extremely crowded. So not just the number of people, but London was a fairly small physical space, and the density of London was incredible. So there were some areas of London that had as many people as a hundred and fifty thousand per square mile That's twice the density of Manhattan today. So it was very crowded. You had hundreds of thousands of people coming into London continuously every year, were coming in from all over, from other areas of the British Kingdom, other places in the, including Ireland, especially during the famine in the 1840s. also coming from the continent. It was flooding in there. The infrastructure simply could not keep up. Why were they coming? Because they were getting those factory jobs, and that's what's represented there. So what did London look like? Well, one thing it had was a, an overarching stench. People at the time talked about how much it stank. Why would it stink so much? Well, not just because of that, the factories, but also because there was almost no sewage treatment, almost-- there was no indoor plumbing. Where do you think people disposed of their waste? In public areas. You can imagine what they-- would slaughter animals in the same place where they would live. Uh, you can-- throwing the offal out just right on the streets. You can just imagine what that would have smelled like. It wasn't good. So Marx came to London, saw that, and he thought, "This is the thing that's bringing millions of people in. Why are they coming here?" But he didn't just notice that. He also noted the last thing there, enormous inequality. So in some areas of London, the poorest areas, the working class areas, you had people who were packed in. You would have large numbers of people in single-room, abodes, no running water, heating by open flame inside a room with no windows or ventilation, living like that. And sometimes literally across the street, you would see people living in mansions being served their meals w-- by servants with white gloves. Marx would look on one side, look on the other, and say, "What kind of a system could give rise to this? What could possibly justify this kind of inequality?" That's what was motivating him. He thought any system, whatever it is, that would give rise to this kind of inequality has to have something unjust about it. That began his inquiries and his investigations. So what was his question? What could explain this kind of inequality? And then what could possibly justify it? The answer to the second question was nothing. We'll get back to that. But what could justify or what could explain it? So here was Marx's diagnosis. Won't go too far into this. Marx thought that what happened under a system, the system he saw, called it capitalism. That was his term, by the way. I think I mentioned Adam Smith never used that term. That was his term, capitalism. what went on in capitalism? Well, society was increasingly divided into two groups, the bourgeoisie and the proletariat. These are his terms. Who were the bourgeoisie? They were the owners of capital. They were the people who owned the factories, who owned the capital. They were the ones who lived in the mansions being served their meals with white gloves. They were a very small group of people, proportionally a very small number. Who was everybody else? The proletariat. They were the ones who worked. They were the ones who worked in the factories, who supplied the-- who brought in the, the food for the bourgeoisie. What distinguished them was not just their level of wealth, but what they owned. The bourgeoisie owned capital. They owned property. The proletariat didn't. They worked for wages. In fact, he called them wage slaves. They did not have the ability or the means to actually generate, to save, invest, build up something they owned. They were living week to week, day to day, week to week, month to month, trying to save, trying to feed themselves and their families. This is what gave rise to this, he thought. And how do we understand it? Class conflict and exploitation. So Marx thought that all of human history, including what he was seeing in London at the time, but all of human history is really under, is really explained by those two things, class conflict and exploitation. He thought economic class was really the central explanatory factor for any society. If you want to understand a society, understand the economic classes. Who is exploiting whom? And so Marx had this idea that in almost every society, maybe literally every society, you always had one small group of people who were exploiting everybody else. In, under capitalism, who are those people? The bourgeoisie exploiting the proletariat Okay, so let's take a look at and think about this little essay I had you read called Estranged Labor. Estranged labor. another word for that is alienation or alienated labor. just a note about that essay. So, Marx was reading on his own. He was reading the great political economists of the past. These were people like Adam Smith, so he read Adam Smith. he was also reading James Mill. That's the father of John Stuart Mill, if you've heard of John Stuart Mill. His father, James Mill, had written a treatise on political economy. Marx was reading that, and what he was doing was creating notebooks. So he would read, and he would write in notebooks, and the notebooks themselves are what this is taken from. They were preserved, published later, called the Economic Manuscripts of 1844, when he was working his way through and writing these things. That's where this comes from. Okay, so these are his thoughts about other political economists, including in particular Adam Smith. So just a couple of preliminaries. First of all, when he refers to political economy in this essay, he's thinking about Smithian commercial society. So he calls it political economy because that's what Smith called it, but that's what he has in mind. He's addressing himself to, commercial society described by Adam Smith, what he would lat-- what Marx would later call capitalism. He thinks that the competition that's described in those works was actually a war of the avaricious. It was a zero-sum game, not a positive-sum game where both sides win. It was a zero-sum game where the greediest are the ones who won by exploiting the others who weren't quite as greedy Now, this wasn't just a description for him, it was also an explanation for what happened to people in these systems. So even if you weren't greedy already, you get into a system like this, what happens? You realize the only way I'm gonna get ahead is by figuring out who to exploit, and so that's what you do. It encourages, it breeds avariciousness, a, war of the avaricious. And so he thought that there was a deep and even essential, this is his term, essential connection between private property on the one hand and greed Why is that? Insofar as people have private property, own private property, can do things with private property, can get ahead with more private property, what's that gonna encourage them to do? Gain ever more in any way they possibly can. So he thought that was an instigator, a fillip for more greed. Those are just some preliminary

Worker Gets Poorer

Alex 17:58

claims, okay? Here's the central claim he makes, or a central claim he makes, and maybe you think this is a little paradoxical. The worker becomes poorer the more wealth he produces. So that's what Marx says. The worker becomes poorer the more wealth he produces. Maybe that seems counterintuitive to you. If you had just read Adam Smith, you might think, "No, isn't it the opposite?" The more you produce-- You remember the pin factory? Produce a lot of pins, you sell those pins, produces-- So it increases, not just the production, but also will increase your revenue. It seems like you'd get wealthier, wouldn't you? Not on, not on Marx's view. Why? Okay, so what is Marx not thinking about what you or I might be thinking about today is stuff like this. Okay, so what I'm showing you there is what happened to GDP per capita on the left, and those arrows point to eigh- between eighteen fifty and nineteen hundred, and you can see United Kingdom is the purple line. So is it increasing between eighteen fifty and nineteen hundred? It is increasing. Maybe it doesn't look like it's increasing very much to you, but it was increasing at an unprecedented rate historically. So it was increasing much more quickly than it had in, previous years, and you see what happened after that. What's happening to the poor? Well, the rates of extreme poverty are going down. So this is-- those arrows again point to eighteen fifty and nineteen hundred. Well, is that what's M- Marx is talking about? No. Now, it's not clear whether Marx was aware of this. He might have been aware of this, but this is not what he's talking about. He's also not talking about this. I apologize for how bright that is. This is a very bright DiamondVision, so I hope you appreciate the bright, very bright DiamondVision screen. What do I have there? Now, this is just England. This shows you from the period of eighteen fifty to nineteen hundred, and what you see, the blue line is the real wage index, meaning the purchasing power, which is, so you look at the nominal prices of things. That's the green line, I think. Yeah, that's the green line. and then, the falling prices. So what the real, the rapid re- the real wage growth shows you is that throughout that period People were able to afford much more in goods and services. That's effectively what that means. It's purchasing power. Their purchasing power was going up. Is that what Marx has in mind? No. So this is true what was going on. Hard for people to see. Why didn't people appreciate it? Partly because, well, they were focused not on their own lives, but they're seeing those people in the mansions who have yet way more. So even if I, on a year-to-year basis, am able to afford m- marginally more each year, it's very hard... And you can think, relate this to your own life. It's very hard to think about, well, what was my life like ten years ago? What kinds of things could I afford? We don't really think about the difference between now and ten years ago or twenty years ago. We think about, what are other people affording around me? And if somebody around me is in a mansion and I'm not, that tends to draw our, our focus and attention. So we don't think about the marginal, even if real increase, we tend to think about still the differences. So what was Marx thinking about? That wasn't what he was thinking about. And what I'd like to suggest to you is that he had a deeper concern that was not an economic concern. Yes, he does say things like this, that what he calls political economy or capitalism produces palaces, but hovels for the workers. by the way, that wasn't unique to London in the n- nineteenth century. That would have been true, for example, in Rome in the first century. think about the small group of, of the elite in Rome in the first century living in villas with gardens and baths, and then you had all of these other people stacked in, you know, the, the lower class stacked in. So that's not, entirely unique. This is what I think he thinks the real problem is, and this is something I'd like you to think about. The deeper problem is a moral one, not an economic one. What is the deeper problem? Alienation. That's the main subject of that essay that I asked you to read. Alie-- what he calls alienation. What exactly is alienation? Now, he says a couple... It's a tough essay, and I understand that. Reading Marx is not easy. but I'm gonna pull out a couple of things he says and tell you what I think he means by them. So first, look at that first bullet point. The more man puts into God, the less he retains within himself. here's an in-class quiz. Do you think Marx was a theist? The answer is no, he was not. Why not? What's wrong with religion? Well, what's... part, part of, for Marx, what's wrong with religion is that people think about the next life, not this one. They work for something else, not for themselves. They give themselves to God instead of giving themselves to themselves, their families, their communities here. Marx was interested in improving the lives of human beings right now, and he thought that to the extent that people were worried about the next life, to that same extent, they weren't worried about making the proper changes here and now. So the more we give to God, the less we retain themselves. He makes the same claim about working Makes the same claim. The worker becomes a slave of his object. How does that happen? What does it, exactly did he mean?

Alienation at Work

Alex 23:00

Here's why, because of this concept of alienation. What happens in a market economy? Marx says what happens in a market economy is first of all, and remember that he's t- he's looking at 19th century, the mid- 19th century London, factories. What are the workers doing? They go into these factories, they turn a screw. They put in one little piece. They're a tiny little element in a much larger project. What does that mean? Well, it means that whatever it is they're doing, their work, what happens to it? It immediately goes away from them. Maybe it's easier to think about, you know, a contemporary, factory line. Suppose you're making something complicated like a, a diesel truck engine. Thousands of parts, hundreds of people on a long line who are doing little bitty pieces as they move from one spot to another. Each of those individuals is doing something, and what happens the minute they do it? It goes away. It's gone. Do they ever see it again? No. Do they see even the completed project, the p- product? No. Do they see where it goes or what it does? No. They don't see any of that. So their work and the product of their work is immediately taken away and sold That's the alienation from the product of one's labor. It's severed from you as a human being, sold on an open market. You never see it again. It's as if part of you is constantly being taken from you and sold. We become alienated from the product of our work. We also become alienated from the act of production. Again, I invite you to think about whether you think this is true, if you've seen this or experienced it yourself. He thinks people become disengaged from whatever they're doing. They don't care about it. Yeah, they'll do it. You're paying them to do it, and if they're hungry or they need to feed their kids, okay, yeah, they'll do it. Do they love what they're doing? Do they see themselves as growing as human beings or human persons as they're doing it? Marx's answer is no, none of that. So the actual activity of work is something that they feel distanced from, divided from. And in fact, he says the only place they really feel at home, the only place they really feel themselves, it's not at work, it's when they're doing something totally different. That's why they hate work and they love going... And, and, now, this is Marx, don't shoot the messenger. What do workers do when they get off work? They immediately go get drunk, or they go gamble. Why is that? Because they need to recover from what they were doing while they were working. So work seems like something that's not just onerous and onerous drudgery, but something hateful. They hate it. The minute people s- can stop working, they do. They go off and do something else. They're alienated from the act of production. The third one is a little bit more complicated. Marx thinks that we are actually, not just that we're social creatures. Other people have said that we're social creatures. Adam Smith thinks we're social creatures. Marx thinks we're something a little bit even, more communal-oriented than that. He says we are a species being. In other words, what, contrary to what capitalism tries to convince us of, we are not individuals. We are a group of a species. We are different members of the same single species. And if we could engage in free production, his term, free production, what we would do is produce for the species. We would see our identities as connected with, maybe even unified with, the entire species. Unlike other creatures, he thinks human beings are a species being. But what capitalism does is it encourages you to think of yourself as an individual, as unconnected from other people. You should only think about you and what's in it for you and not worry about anybody else, not even think about anybody else. So it's severing you from what your real essence is, which is a species being, he thinks. And then finally, the last one. We're also alienated from other people We come to see the other, our c- our coworkers. We're at the factory. What do we, how do we view our coworkers? We view them as enemies because each of us is trying to get ahead, and if they get ahead, that means you can't get ahead. Remember, this is the zero-sum world in which if one person gets ahead, that has to come at the expense of somebody else. So we come to view other human beings as not our friends or colleagues. We're not in solidarity with them. Instead, what we are is we're in a competition with them, a competition which is a war of avariciousness. So I wanna get what, something for me, and if that means I have to take it from you, that's what I'll do, which means I'm not even united to you. So we're alienated in all of these ways, created to see ourselves or bred, to, trained to see ourselves as if we were these atoms fl- free-floating in the world that have nothing to do with anybody else, no care or concern with anybody else except instrumentally. T- other people matter only insofar as they can benefit ourselves

Marx Versus Smith

Alex 27:51

That's his main concern. Here's an interesting piece of that. Suppose Adam Smith said to Karl Marx, "Well, but in a mutually voluntary and mutually beneficial transaction, both sides are getting better." Suppose Marx-- Suppose Adam Smith showed Marx those graphs I just showed you. "Look, we're getting, you know, more prosperous. We're, wages are going up." what would Marx say? Marx would say, "Yes, but look at the price we're paying. The price we're paying is we're losing our humanity. We're losing our identity. We no longer think of ourselves as united in a joint product of creating a better world. All we're are, are these, it's this war of all against all," to borrow a Hobbesian phrase. The price isn't worth it. So that's something I'd like you to think about. And then Marx says this The more intelligent the work, the duller the worker, and the more he becomes a slave. Holy cow. Okay. The more intel... Now, that does seem a little bit paradoxical, doesn't it? The more intelligent the work, the duller the worker. You might think, "Well, wouldn't it be the reverse?" The more intelligent the work, the, the more intelligent the worker. You ha- if it's complicated stuff, you're learning more things. not for Marx. Why not? Okay, second in-class quiz. Do you remember Adam Smith, the key, according to Adam Smith, to, to the universal opulence in a phrase? I won't wait for you to say it. Division of labor. Remember the division of labor? That was the key according to Adam Smith. Okay, think about that for a second. What happens in the division of labor? As that proceeds and grows and develops, labor gets more and more divided, so people generate expertise. That's true, but the expertise, as it spreads through society, gets actually narrower and narrower for any individual human being. So what do you get? As the division of labor proceeds, you get ever greater specialization. That's true, and Smith says, "Look at all the productivity you get from that." Okay, fair enough. But what else do you get? You get people spending more and more time on less and less, and it can even come to be the case that it, that the individual worker might spend the majority of his time working on a tiny little fraction of something, which means if... And if you accept the claim, and I think even Smith would accept this claim, you are what you do. What are you? It's what you, what you do is what you become, and that is who you are. If that's all you're doing, then that's all there is to you. That's the problem here. The worker's humanity gets reduced as prosperity goes up. So Marx is predicting that what's gonna happen is that people will have more and more comforts, they'll have more and more goods and services, and their humanity will be reduced further and further. It will be reduced down to a tiny little sliver of what they might otherwise have been. That's the real problem. So that's the sense in which the more intelligent the work, the duller the worker, and he becomes a slave, slave to whatever that thing is he's doing because that's all he can do. That's all there is to him. So is he reading books and poetry and philosophy and going to Notre Dame and taking a class like this? No. That's all he's doing, and if that's all you're doing, that's all there is to you Okay. What would Smith say to all of this? Well, we don't have to wonder because Smith actually brings it up. In the final book of The Wealth of Nations, Smith addre- this is the last book, book five. Towards the end of the book, he'd been writing, working on it for years and years now. He finally gets to talking about the effects of the division of labor on workers. Smith says this, and I apologize for the long text, but I felt like I had to give you a lot of it so you could see the real power of it. It's in your, in your workbooks, but just take a look at this and think about what he says. This is Adam Smith talking, not Karl Marx, Adam Smith. "In the progress of the division of labor, the employment of the far greater part of those who live by labor," which is most people, "comes to be confined to a few very simple operations, frequently to one or two." Let me pause for a second. He must have in mind his own pin factory example. So the pin factory example came at the beginning of the book. It was just a few pages in. There, he talks about the different operations that you engage in. He talks about people who specialize in just one of those operations. Now, a thousand pages, well, nine hundred pages later, he comes to this, and he says, "Okay, some of those people might-- that might be all they do." But the understandings of the greater part of men are necessarily formed by their ordinary employments. Your cognitive understanding is formed by what you do all the time. The man whose whole life is spent in performing a few simple operations naturally loses, therefore, the habit of exertion, mental exertion, and generally becomes as, and I've bolded this for you, maybe you can commit it to memory, as stupid and ignorant as it's possible for a human creature to become. Okay, that's, those are pretty strong words. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. His dexterity, remember when we talked about the division of labor, why does the division of labor lead to increasing production? Number one thing was, or the first thing he mentions was increasing dexterity. We get better at stuff. His dexterity at his own particular trade seems in this manner to be acquired at the expense of his intellectual, social, and martial virtues. Okay, that's bad. What are martial virtues? Well, this is the eighteenth century. What did people do? how do we defend, how would Scotland defend itself from external attack? Well, workers would have to take-- they, we had standing, we had militias. So adults, adult males were supposed to fight. He thought this even affected your physical ability to do that.

Speaker 34:05

The more you do one thing only, not only does it cramp and cabin your mental capacities, but it even renders you weak, unable to defend your country should that you be required to do so. That's all pretty bad, isn't it? But he's not done. One more, last one. Smith asks us to note also the gross ignorance and stupidity, which in a civilized society seems so frequently to benumb the understandings of all the inferior ranks of people. A man without the proper use of the intellectual faculties i- of a man is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Oh, okay. All right. now one question to think about is h- how do we put-- how do we find those two claims in the same book? At the beginning of The Wealth of Nations, the division of labor is the key to prosperity. It seems all wine and roses. It's a wonderful thing. Prosperity, you remember the recipe, increase in production, prices come down, people can afford more and more. It's the wonderful, great thing. If you only read twenty pages into The Wealth of Nations, you, you would think, "Okay, why do I need to keep reading?" And then all of a sudden at the end, you get this. Well, that sounds almost like Marx, doesn't it? So maybe Smith was a proto-Marxian? Dun-dun-dun Okay, so here's the question. Is that price worth paying? And that's a question that cannot be settled, I put to you, ladies and gentlemen, can't be settled just by economic charts. I'm happy to show you economic charts. But that's really a moral question. Suppose it's true that what we're doing is we're getting increasing production, but at the price of mutilated and deformed characters. Suppose that's the case. Is that a price worth paying? Now, this isn't just Smith versus Marx, because you see, this is Smith too. So where does Smith come out on this?

Smiths Triage Strategy

Speaker 36:15

So that seems pretty bad. Here's what Smith thinks. Extreme poverty is even worse So is the mental mutilation that can ensue from spending your life doing just one thing over and over again, is that a bad thing? Yes. Is extreme poverty even worse? Yes, according to Adam Smith. And there some statistics do matter. Remember me showing you the proportion of people that were living at two dollars or less per person per day? Something like ninety percent of people. That was basically everybody. So here's what I would propose to you is what Smith's argument is. He recognizes and acknowledges that these are dangers, grave dangers for our characters, but we need to proceed in steps. So here's what I think the steps are for Smith. First step, if you want whatever state your society is in, if you want to improve, first thing you do is establish his conception of justice, protecting everybody's person, property, and promise. If you do that, what comes next? Well, the security people have, once they enjoy that security and believe in that security, once they actually think they are secure in their persons, their property, et cetera, they'll begin to find ways to develop whatever talents they have so that they can increase production of whatever good or service they're able to do to benefit not only themselves, but others That will generate prosperity. It will generate material prosperity. Keep, let's keep, you know, the, the m- the mental or the spiritual prosperity to one side for just a second. It will generate material prosperity which will enable more people to rise out of the miseries of extreme poverty Once you get that happening, now you see the next step. Can you guess what the next step is? As we're able to get more and more people out of extreme poverty, then we can start turning our attention to, or they can start turning their own attention to other things, social challenges they might face, which might include things like education, genuine human fulfillment, and maybe even the worries or concerns about inequality, material inequality. So what I think Smith is arguing is that we can't solve all problems at once. So what we have to do instead is think about what are the most pressing problems we have, address those first, then once we've addressed them, we can proceed to other kinds of problems. So we triage our priorities. What is the most important thing? And for Smith, what's the most important thing is food, clothing, shelter. So that's not to say that those other things aren't important. They are. But if people don't know whether they can eat today, if people don't know-- if people don't have clothing to keep them warm from the elements, none of the rest of it is gonna matter. So you have to do that first. So education, personal fulfillment, worrying about, inequality, these are real concerns, but they come secondary to food, clothing, shelter. That comes first. Here's the good news. Smith thinks that if we do number one, that will lead to increasing prosperity, which means we'll be able to address progressively more other problems in time. We can work our way up sort of the, the pyramid of needs. The most basic needs first. Once those are met, then we can start turning our attention to other things that go into making a full life of human fulfillment, et cetera. So here are his predictions. If we do number one, prosperity will go up, especially for the least among us. That's his claim, his prediction. And then we will, as we become progressively more able, as prosperity increases, we become progressively more able to address other concerns, such as number four. Okay, now I'm gonna leave to you to decide whether you think this is, A, whether he, his predictions are true, and B, whether this is the right way to think about it. But I do want you to, to understand what his approach to this is. We don't want the perfect to be the enemy of the good. So if we can solve some problems, our most pressing problems first, let's do that first. Not to say other problems aren't also problems, but then we'll solve the other problems, and so on down the line. Okay. So We've had 250 years What did Smith get right? Have we made the progress that he thinks, that he predicts? And what remains to be done? Now, I'm gonna leave this a bit to you, but I would like to give you two final points. and that'll be the end of our day today, and alas, our time together.

Natural Rights And America

Speaker 40:57

two final points for your consideration. First point Suppose for a second, let's just stipulate for the sake of argument that you're willing to entertain that Smith's are, that Smith's claim that the first step is actually the first step. so we wanna protect justice for all of our citizens. Let's suppose that's the first step. what would be a promising way to actually make that happen? So suppose we became intellectually convinced that, okay, the first thing a government should do or a society should do is to protect justice for all of its members, person, property, promise. How would we actually spread that idea? How would we get other people to believe it? Well, how about this as one promising way? Maybe what we could do is claim that all human beings have what we might call natural God-given rights Natural, God-given rights And what are those rights to? To their lives, to their honestly acquired property, to their liberty. That's a way of saying person, property, promise. I'm putting a bit of a gloss on person, property, promise, but that's a way of saying it. Suppose we made that claim. Suppose we started out, we said we-- let's write a document, and in that document we said, "Okay, for the sake of argument, we're gonna hold the following claims to be the case Is that ringing any bells with you? What would that mean? What could we d-deduce from those claims? God-given rights. Well, if they're endowed by God, then we possess them inalienably. They cannot be taken away from us because they're endowed by God. Okay? If we're created in the image of God, then all human beings deserve a s- respect for being created in the image, and likeness of God f- out of something we might call human dignity, right? What is the image of God? It is the beginnings of dignity for us, and maybe therefore the government's first duty, whatever else the government should do, would be to protect those rights. Does that sound familiar to you, ladies and gentlemen? Okay, so what I'm suggesting to you is that perhaps this is part of Adam Smith's strategy. Now, do you remember me saying, early on that Smith made this claim that one day those Americans might figure it out and they might actually surpass England? here's the actual quote in case you didn't believe me. He says, or part of the quote, "But though North America is not yet so rich as England, it is much more thriving and advancing with greater rapidity." Much more thriving and advancing with greater rapidity. Note the yet. North America is not yet so rich. That word yet got him into a lot of hot water in Britain. Yet, as if, what are you trying to say? Well, it was clear what he was saying. Perhaps this is why. So this is something I'm offering to you as a suggestion, a potential argument. Why did Smith think that the Americans might be figuring it out? Because that's the claim they were making. That's what they were saying. That's what they were going to be putting into their founding documents. They were trying to convince maybe themselves and others. Now look, Professor Munoz is the expert on the declaration. When I read the declaration and it says, "We hold these truths to be self-evident," what I hear, you know, in my philosophical training, I hear something like, "Okay, knock it off, everybody. We disagree about everything. Let's just stipulate this for the sake of argument." Okay, we hold these truths? Okay. In other words, we're not gonna get anywhere if we don't agree on something. What can we agree on? Well, we can agree on that. And Smith might have been seeing that being discussed in the Americas and saying, "Oh, you know, if they actually make some headway in getting people to believe that, if people actually believe that, maybe they'll figure this out." And this might be a way to get exactly the thing that Smith says is the most important thing. Duty number one of the government is to protect those rights, which will be what he considers justice. And by the way, was Smith right about, America one day surpassing? There are a million things I could show you, but I just couldn't resist. I apologize. I couldn't resist showing you this. Hat tip to my, colleague, Professor, Gregory Rob- Robson, who was reading this book. This is a, a book that just came out in twenty twenty-five. what I'm showing you there, this is a picture from that book. this is the major inventions by country of origin. Look at the-- So this is from seventeen seventy-six to nineteen twenty-six. In the first fifty years there, seventy-six to eighteen twenty-five, what do you see? The dark line on the left there is Britain. So about-- This is the proportion of major inventions or major innovations that were going on anywhere in the world. Over forty percent of them are coming out of Britain. Where's America? It's the next one, seventeen seventy-six, so we're about twelve percent. So it's almost four times as-- The proportion's almost four times as high. What happens in the next fifty years? Well, things start to even out just a tad. America might actually be nosing them out. And then what happens in the next, fifty years? We swamp them. We reverse. Total reversal. Now we're four times as much. So maybe Smith was right about that. All right, here's my last point. Last passage from Adam Smith. Said I was gonna make two final points. Here's the second one. This is what, by the way, I was foreshadowing at the end of last week, if you remember me at the end of last week, and I said I was gonna say some super cool thing. Here it is. One last passage from Adam Smith, maybe the second-most famous passage in the book. First most famous is the invisible hand passage. Second most famous passage is this one. This was also in your readings. You remember this passage? Very famous. Marx read at least this far in the book. Well, I don't know. We don't really know how far he read in The Wealth-- It's a long book. He-- We don't know how far he read in The Wealth of the Nations, but he read this. "It's 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. We address ourselves not to their humanity, but to their self-love. Never talk to them of our own necessities, but of their advantages." Now, look at the phrases that I bolded, if you can tell. their own interest, self-love, their own advantages. Now, what do you hear when you read that passage? What does that sound like to you? Is it-- Does it sound like greed? Does it sound like self-interest to you? In other words, does it sound like what Smith is describing is that maybe the normal or natural way we i- interact with other human beings is through self-interest, maybe even self-love, which sounds kind of worse than self-interest? maybe not just describing, is he actually advocating that? Is he saying that's how you should behave in a market economy? You shouldn't think about humanity. You should think about self-love. What's in it for you? What's in it for me? That's what we should think about. Is that what you hear Smith describing? That's what Marx thought. In fact, Marx thought there it is. It's like the smoking gun in the urtext of capitalism, the ve-- you know, the founding document of capitalism, smoking gun. It's in the second pa-- second chapter. It's only twenty pages in. There it is. Capitalism is all about what's in it for me, looking out for number one. So I would like to leave to you to think about is that the, the correct interpretation. I will offer you an alternative, interpretation. I think that what I think Smith thought he was advocating was not selfishness and greed, but rather mutual respect. That's a very different thing. Why would it be mutual respect? Well, because when you're addressing someone else, making an offer to someone else, what you don't do is say, "Give this to me because I really need it." If you said, "Give it to me because I really need it," then what are you implying? On Smith's view, what you're implying is that my needs are more important than yours. But Smith says you shouldn't think that. A, you don't know. You don't know what the other person's needs are. You do-- Because it's a person, you know they have needs, and you know they have interests. Maybe they're trying to support a family in the same way that you're trying to support your family. You shouldn't presume that your interests are more important than anybody else's interests. And if you don't presume that, then what should you do? You make them an offer that they're free to accept or decline What that can be is a way of showing mutual respect. It's saying, "I understand you as my moral peer. I'm gonna try to persuade you. I'm gonna try to reason with you. But if you say, 'No, thank you,' I'm gonna go away, and you're gonna do the same with me." So this is a way of describing what I would call equal moral agency. It's recognizing the people you interact with, exchange with, trade with, partner with, or propose to do any of those things are themselves moral agents equal in dignity, equal in, r- deserving of respect to you. You don't make a demand. You don't make a command. You don't force anybody. You just make an offer. That's a way of showing respect to other people. And if they say no, you respect their no, and respecting their no is, again, a way of respecting them. So that's a different way of thinking about this. You have interests. I have interests. Your interests are just as important to you as mine are to me. They are equal in that respect. That's a kind of

Mutual Servants Solidarity

Speaker 50:38

equality of moral agency. What evidence do I have that Smith actually conceived of this in this way? Well, he also says this: What happens in a commercial society is we become mutually the servants of one another. That's kind of a beautiful turn of phrase, isn't it? Mutually the servants of one another. now, I think he's kind of appropriating this word servant. Servant is used in other contexts as a derogatory term. What he's seeing this as, and, this is my suggestion, is that what happens in a commercial society is we have a vast and ramified network of cooperation. We come to depend on an innumerable number of people we don't know. In turn, they are dependent on us as well. We are mutually interdependent with one another. That means that we are-- in order to get anything we want, to accomplish anything in life we want, we must serve other people, and that's true for everybody else, too. That's how we become mutually the servants of one another. Smith saw this as a great, good thing. This was not a degrading thing. It was an important thing, so we would be induced in a commercial society to think about other people and serving other people. You might call it cooperative interdependence. Here's another word we might use for it. What about solidarity? Now, that's a nice Catholic term. Smith doesn't use that term. My suggestion is that maybe what he had in mind was something like your fate gets intertwined with mine. In a society like this, we all rise together, maybe not in the same ways, but the fate of any one of us is gonna affect the fate of others. So we become interested then and have reason to think about the well-being of others around us. Hmm.

Hot Take Final Synthesis

Speaker 52:27

Okay. I'm gonna conclude, and I'm gonna give you one last provocative claim that I hope maybe it will offend you a little bit, and then you can, go off with something to complain about. so let me give you my s- my conclusion of, Adam Smith's argument. Here's Smith's worldview. On Smith's worldview, perfection is not on, not on offer. We will never have a perfect system. There is no such thing as utopia. There's no such thing as a perfect system. Why not? Because we live in a fallen world with imperfect creatures. System-- Societies, systems of economic, systems of political economy are created, maintained, administered by fallen human beings. They will all be imperfect. So what should we strive for instead? Improvement. Not perfection, improvement, with a preferential concern for the least of our brethren. Here's a controversial claim he makes: Some improvement is better than none. So even if we can't have everybody improve all at the same time, having some improve, and then maybe later some others improve, and then yet further, that's better than having nobody improve. As long as we're making steady progress, more and more people are improving, more and more people within their own lives are getting better, and then more people, in society are improving as well. So we shouldn't let perfection be the enemy of the good. Here's my big provocative claim. This is what the kids these days might call a hot take. Here's my hot take. Why? Wait, before I show you Why do we have this course, ladies and gentlemen? We ask you to look at two things, the Declaration of Independence, Wealth of Nations. Why do we put these two things together? Just because they happen by historical happenstance to be published in the same year? That might-- That's true, but if that's all it is, that's not very interesting. Here's my hot take. I wanna suggest a reason why we might put those two things together, and you might think about them together as elements, separate elements of a single project. Here's why. If you take the Declaration of Independence and the Wealth of Nations and combine them and put them together, what you might get is something like a moral assertion of h- universal human dignity on the one hand, plus what appears to be the greatest poverty relief program that has ever been discovered in humanity. And if those two things go together, then it's hard to know or hard to imagine what more you might want out of a system of political economy than those two things. If that's true, that gives us a pretty good reason, I think, to study both of them. And with that, thank you very much, ladies and gentlemen. Thank you for the course. Thank you for being here. Thank you.