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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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([log in to unmask]; Telephone: 513-529-2229). Published by EH.Net (April
2004). All EH.Net reviews are archived at http://www.eh.net/BookReview.
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