Posted: August 15, 2019
he explosion of Adam Smith scholarship in the last two decades has generated new comprehension, but also more confusion. Readers have gotten to know Smith as a left-winger and right-winger, a thinker ancient and modern, radical and cautious.
Amidst this proliferation, Jesse Norman, a Conservative member of the British Parliament and author of the well-received book Edmund Burke: The First Conservative (2013), has produced Adam Smith: Father of Economics. His immediate goal is to refute those, Left and Right, who consider Smith a narrow advocate of self-interest and laissez-faire. Smith, Norman argues, is much more than an economist and his economics differs substantially from today’s highly abstract and mathematical academic discipline.
The idea that Smith is prudent rather than zealous is not a bold insight. What is distinctive about Norman’s interpretation is the way he applies Smith to 21st-century controversies. Anxious to absolve Smith from any responsibility for the 2008 global financial crisis, Norman argues for a free-market conservatism. Neoliberalism is dead, he declares, an increasingly transparent apology for a crony capitalism that produces slow growth, increasing inequality, volatility, and popular resentment. What is needed is a new “master-narrative for our times,” grounded in a return to Adam Smith and the “dawn of our economic modernity.”
* * *
Like all Smith biographers, Norman faces the difficulty that his subject’s life was rather dull. He worked as a professor, tutor, and tax collector, discharging his duties diligently, successfully, and without scandal. He never married and lived most of his life with his mother.
If Smith’s life wasn’t interesting, his times were. Lowland Scotland was enjoying an extraordinary century, its economy booming, its universities and school system far superior to England’s. Smith’s closest friend, David Hume, became one of the world’s most eminent philosophers. The context for these developments was Britain’s attempt to consolidate its place as a world power, vanquishing France but then being thwarted by America’s colonists. Throughout his life Smith assessed the progress and upheaval taking place around him judiciously and dispassionately. Even when participating in events, he displayed the extraordinary equanimity befitting a “solitary philosopher,” as he described himself in a memorandum to the British government on the American Revolution.
Norman tells Smith’s life briskly and well, with a keen eye for political details. Along the way, he argues that Smith’s overarching project was a “science of man” that could take its place alongside Newton’s science of nature, a “unified and general account of human life in its major aspects” that would be a “naturalistic, empirical theory.” Smith did not—and, Norman ventures, probably could not—complete the project. What he left us with was a book on moral theory, another on political economy, and some shorter but provocative writings on science, the arts, and the origin of language.
* * *
Norman identifies two controlling ideas that undergird Smith’s ambitious project. The first is a radical egalitarianism. What differences we see between “a philosopher and a common street porter,” Smith argues, are due to education rather than nature. According to Norman, Smith “appears to have disliked hierarchy in any form,” a dislike that showed itself in his attacks on restrictive guild and apprenticeship laws, feudalism, imperialism, mercantile special interests, and capitalists’ collusion against workers.
The other crucial tenet is that human life progresses through a process of evolution. Smith was a proto-Darwinian: repeated iterations lead to change and gradual improvement. (Darwin did indeed read Smith carefully.) In Smith’s evolutionary story, the struggle for survival is replaced, in most cases, by incentives built into greater economic efficiency and a more complex cultural life.
Norman considers The Theory of Moral Sentiments a work of social psychology explaining how moral norms emerge out of repeated interactions between human beings seeking approval. It is “not first and foremost a work of moral philosophy” in the Kantian mold. Similarly, The Wealth of Nations is not an “economic textbook” but one about “economic processes and economic development.” Smith’s blistering attack on mercantilism stems from his belief that it distorts the natural process of economic development, creating both inefficiencies and injustice.
* * *
Had Norman stopped here he would have written one of the better short introductions to Adam Smith’s life and work. He aspires to more, however, attempting to ground a new free-market conservatism in Smith’s thought. The argument meanders through a history of economic thinking, an assessment of recent economic developments—especially the crash of 2008—and a critique of neoliberalism. In the process, we become less clear about Smith’s thinking without necessarily becoming clearer about Norman’s.
He does have interesting and important things to say, showing for example that Smith often anticipated recent findings in behavioral economics, neuroscience, and experimental economics. He also makes clear that Smith’s “followers” deviate from his broad vision of political economy. Mainstream economics became increasingly abstract, both in terms of its substance (the behavior of homo economicus) and presentation (mathematical models). Growing hubris went along with these developments. Some thought that markets could never be wrong, others that they could correct for every market failure, real or imagined.
Norman is on his firmest ground in exonerating Smith from responsibility for the 2008 crisis. The banking and finance sectors were exceptional for Smith, who treated the way that money deceives us as a great theme in Wealth of Nations. When coupled with our propensity to overrate our chances of success, an observation that Smith shares with today’s behavioral economists, such delusions are apt to lead us to ruin. Thus, he favored regulations that restricted access to credit by the poor, enforcing measures designed to keep banks from over-lending, and even a maximum rate of interest to channel investments away from “projectors” and into the hands of the “sober.” One can only imagine the prudent Scotsman’s horror at the thought of a no-down-payment, no-documentation mortgage loan.
From this exception Norman draws a very interesting general point: not all markets are the same. Each has its own history, legal requirements, and purposes. Markets do not exhibit the uniform equilibrium-seeking processes described in textbooks. Expanding on this axiom, Norman argues that because of asymmetries of power and information, not just the financial sector but high tech, social media, and utilities now all require government intervention, as do the problems of inequality and climate change. He justifies this regulative tilt in terms of the need to overthrow crony capitalism and the neoliberal ideology on which it was built.
* * *
Norman’s argument is problematic in two ways, one intellectual, the other political. First, it’s one thing to say that Adam Smith is not Milton Friedman but quite another to say that he is not Adam Smith. Concluding his chapter on banking, Smith remarks that once a small number of regulations are in place, the banks “may, with safety to the public, be rendered in all other respects perfectly free.” His overall message is the superiority of competition to regulation, even in sensitive areas such as the grain trade and foreign trade.
Norman doesn’t think much of Smith’s “invisible hand,” mentioned just once in The Wealth of Nations’s 900 pages. He concludes that “there is no theory of the invisible hand as such in Smith’s work.” Yet Smith follows up his one mention with a crucial explanatory statement: “What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him.” This thought, running through the entire Wealth of Nations, constitutes a powerful argument for markets and explains how the “system of natural liberty” promotes the common good.
The second problem is that Norman’s narrative seems to have been overtaken by events. The outrage at crony capitalism now comes from a nationalist and populist direction. Aware of these trends, he interprets Smith as posing an alternative version of their antipathy to neoliberalism. The resulting argument shows more fervor than discernment. Was neoliberalism, outside of some parts of academia and among libertarians, ever the monolithic, totalizing ideology Norman would have us believe? Who has ever met a neoliberal who self-describes as a neoliberal? Were Ronald Reagan and Tony Blair really members of the same economic church?
Jesse Norman has posed vital questions in a way politicians rarely do. And no one ever loses by reading Adam Smith. But Norman’s free-market conservatism is irresolute and vague. Contrast his with Margaret Thatcher’s famous closing argument, “There is no alternative.” Norman’s conservatism invites many alternatives and endless qualifications.