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Published by EH.NET (April 2004) 
 
James R. Otteson, _Adam Smith's Marketplace of Life_. Cambridge: Cambridge 
University Press, 2002. xiii + 338 pp. $26 (paperback), ISBN: 
0-521-01656-8. 
 
Reviewed for EH.NET by Jeffrey T. Young, Department of Economics, St. 
Lawrence University. 
 
For too long Adam Smith has been viewed almost exclusively as the 
intellectual property of economists. Economists, I would guess, have 
written most of the secondary literature. His work has, of course, always 
been available to the philosophers, but since the publication of the Wealth 
of Nations there has been a feeling about that Smith was a first rate 
economist, but a second rate philosopher. The Wealth of Nations was 
foundational in economics for nearly one hundred years, as the great 
classical economists forged economic theory from its raw material. Such was 
not the case in philosophy, as the Theory of Moral Sentiments was little 
read. Even in recent years as the publication of the Glasgow Edition of 
Smith's works has helped spark renewed interest, it has been primarily 
historians of economics who have taken up an interest in Smith's 
philosophy. As might be expected, an over-riding concern has been to 
discover what a reading of the Theory of Moral Sentiments, along with the 
rest of his output, can tell us about the Wealth of Nations. There have 
been significant exceptions to this pattern, but book-length treatments of 
Smith's body of thought taken as a whole written by professionally trained 
philosophers have only very recently begun to emerge. Charles Griswold's, 
_Adam Smith and the Virtues of Enlightenment_ (1999) led the way, and James 
R. Otteson's book is a very welcome addition to what I hope is a growing 
interest in Smith among philosophers. 
 
The author, an Associate Professor of Philosophy at the University of 
Alabama, reports that his initial encounter with the Theory of Moral 
Sentiments was an eye-opening experience. (p. ix) It was an interest in 
Hume that led him to Smith, and what he found there was a solution to 
Hume's problem of how humans could non-rationally invent the virtue of 
justice, which exists solely for its social utility. This is the theory of 
unintended order, which is suggested in Hume, but is fully worked out in 
the Theory of Moral Sentiments. Furthermore, Smith extends the theory to 
economic life in the Wealth of Nations and to the formation of language. 
Indeed, Otteson claims Smith believes it explains the origin of all human 
institutions. Since the theory receives its most powerful and well known 
expression in economic theory, Otteson refers to it throughout as Smith's 
"market place" model, hence the title of the book. 
 
The book is based on the author's doctoral dissertation plus three 
previously published articles. It consists of seven chapters, an 
introduction, and a conclusion. The first three chapters lay out the market 
place model as it appears in the Theory of Moral Sentiments. The next two 
chapters present and partially solve the Adam Smith Problem. The last two 
chapters respectively take up the issue of the objectivity and 
historical/cultural transcendence of Smith's moral standards and the 
extension of the model to other aspects of social life: language, markets, 
and morals. 
 
As might be expected, given the historical lack of interest among 
philosophers in the Theory of Moral Sentiments, a philosophical reading of 
the book today, can have a large marginal product. Such is the case with 
Otteson's book. That Smith developed a theory of unintended order is hardly 
surprising. However, Otteson's claim that it was the central insight that 
united all of Smith's social theory and its roots in Hume's problem of 
invoking utility as the explanation for according virtue to socially 
constructed rules of justice is not so well known. With philosophical 
precision, Otteson takes us through the intricacies of Smith's use of the 
concept of sympathy and his explanation of moral judgment in the impartial 
spectator procedure. In this way he is able to convincingly argue that 
Smith's theory shows how utility enhancing behavior and moral standards 
emerge out of a process in which no one could have the knowledge to foresee 
the connection between these values and the resulting social utility. 
 
Having established the workings of the procedure which leads people to 
adopt socially useful moral standards, Otteson revisits the Adam Smith 
Problem and the question of whether Smith's theory is meant to be purely 
descriptive or prescriptive. Otteson's treatment is respectful, yet 
critical of the major modern writings on Smith. He shows that many of us 
have been too quick to dismiss the Adam Smith Problem. While it is true 
that the original statements of the problem may have arisen out of 
misunderstanding, he points out that there are real problems in reconciling 
the Theory of Moral Sentiments and the Wealth of Nations. Why, for example, 
does the Wealth of Nations make no mention whatsoever of the Theory of 
Moral Sentiments? Why is there no recognition of the principle Smithian 
virtues other than prudence in the Wealth of Nations? Where is the 
impartial spectator? Why is the desire to improve our condition viewed 
differently in the two books? Why is benevolence almost completely absent 
in the Wealth of Nations? In offering what he claims is a partial solution, 
Otteson shows the unifying element of the market place model. He is also 
able to show that the impartial spectator will approve of an agent 
approaching transactions with strangers out of a self-interested desire to 
better one's condition, while expecting the same agent to act out of 
benevolence when dealing with family and close friends. 
 
On the whole I found the book insightful and persuasive, but I would raise 
two objections before giving it a whole-hearted endorsement. First, I was 
perhaps previously disposed to find his argument persuasive, because I have 
been trying to say many of the same things for quite a few years, but none 
of my work appears in the book's references. It is probably bad form to do 
this, but I think in this case there is some justification. Second, while I 
agree that the theory of unintended order is the central, unifying insight 
of Smith's theory, it is not the whole story. There is also a line of 
argument, admittedly less well developed, that lays a foundation for 
selective intervention on the part of government. This is what we now call 
the theory of market failure in economics, which is present in Smith and 
can be seen in his according the government the duty of providing public 
works that have net social utility, but negative private utility. In the 
larger context, what is going on here is that Smith recognizes that at some 
point philosophical (or scientific) knowledge will develop to the point 
where governmental action can intentionally promote social utility, and 
that such action may be necessary to correct cases where private 
self-interested action fails to do so. This supports what economists have 
known for a long time: Smith was no doctrinaire advocate of laissez-faire 
policies. Otteson nowhere suggests that Smith was such an advocate, but 
such a conclusion would seem quite appropriate if there is no mention of 
the exceptions to the market model that Smith himself recognized and 
discussed. 
 
Now for the whole-hearted endorsement. This is an excellent book. It 
raises, and offers answers to, all the "standard" questions about Smith. 
While it may not always be original, it is always insightful and 
provocative. This is also an extremely well written book. Otteson's prose 
is clear, smoothly flowing, and engaging. His explication of Smith is 
masterly. It should be essential reading for Smith specialists, as well as 
the general historian of economics. 
 
Jeffrey T. Young is the A. Barton Hepburn Professor of Economics at St. 
Lawrence University. His work in progress includes: "Unintended Order and 
Intervention: Adam Smith's Theory of the Role of the State" and "The Humean 
Foundations of Adam Smith's Theory of Property." 
 
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