Business Ethics and the Origins of Contemporary Capitalism: Economics and Ethics in the Work
of Adam Smith and Herbert Spencer
Author(s): Patricia H. Werhane
Source: Journal of Business Ethics, Vol. 24, No. 3 (Apr., 2000), pp. 185-198
Published by: Springer
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Business Ethics and the Origins
of Contemporary
Capitalism:
and Ethics in theWork
Economics
of Adam
Smith
and Herbert
and Herbert
Both
Adam
Smith
ABSTRACT.
in
albeit
quite different ways, have been
Spencer,
influential in what we today take to be
enormously
it is
of modern
capitalism. Surprisingly
philosophies
not
is the individualist, perhaps
Smith, who
Spencer,
an egoist, and supports a "night watchman"
theory
is
of the state. Smith's concept of political economy
a notion
that needs to be revisited, and Spencer's
offers
theory of democratic workplace management
a refreshing twist on contemporary
libertarianism.
Adam
and the later nineteenth-century
I have chosen
Herbert
thinker,
Spencer.
English
as I shall demon
these two for focus, because,
influenced
much
their
has
strate,
thinking
of what
take to be the relationship
today we
in the form
of capitalism
origins
can
commerce
and free enterprise
started
But
century
Scottish
I shall
not
I shall dwell
thinkers,
economist
the
and
views"
"popular
the full body
views
have had
popular
represent
in economics
eighteenth
philosopher,
Patricia H. Werhane is the Ruffin Professor of Business
in the Darden School at the University
Ethics
of
Virginia and Senior Fellow of the Olsson Center for
Issues
Applied Ethics. Her works include Ethical
in Business,
edited with Tom Donaldson
(5 editions),
Smith
Capitalism,
and Private Languages.
She is
Skepticism, Rules,
on the Executive Committee of the Society of Business
Business Ethics Quarterly,
Ethics, Editor-in-Chief,
and on the editorial boards of Journal of Business
and
Ethics, Journal of Value Based Management,
Public Affairs Quarterly.
?*
r"
yet
political
defenders
these
profound
implications
in applied ethics. At the same
reads their work,
each has
carefully
new
to
importantly
the
Revolution,
economist,
of private
and
first
one
to
contribute
be
Industrial
call
not
do
in applied
ethics.
contemporary
analyses
Adam
Smith has been called the father
there.
begin
on the work
Adam
I shall
their writings
of their texts;
and
of one
of the
neo-classical
of
the
earliest
inter
Yet,
enterprise.
his death
there has devel
free
almost
since
estingly,
a caricature
of his best-known
treatise on
oped
the
Nations
Wealth
economy,
(WN).
political
of
Beginning
has been
Hobbes'
in the early nineteenth-century
read as having
promulgated
Smith
Thomas
of
motivation
and Corporations,
Persons, Rights,
and His
for Modern
Legacy
of
something
era when
to a prehistoric
began
people
each other. Ethical
issues in business
trading with
arose simultaneously
or soon after. As early as
we find worries
for example,
about
1800 BC,
in
traders
and
the
the ethics of
merchants
Code
in this paper
Rather,
recent
of two more
to ethics. What
economics
the
of
traced
of Hammurabi.
Smith,
between
time,
The
PatriciaH. Werhane
Spencer1
human
egoistic
picture
allegedly
in the WN,
and as having
solved the
of the dichotomy
between
the so-called
problem
natural selfish passions and public
interests. When
are
individual
human beings
Smith
granted what
calls
the
interests,
therefore,
"natural
where
to pursue
their own
liberty"
...
"all systems
of restraint,
thus completely
taken away"
being
WN,
(Smith,
iv.ix.51)
vidual
pursuits will,
often
the harmony
of these indi
unintended
by the actors,
and economic
good. This
social
produce
to this reading
is because,
of Smith,
according
actors in free compe
economic
self-interested,
create a
tition with
each other unintentionally
fournal of Business Ethics 24: 185-198, 2000.
? 2000 Kluwer Academic Publishers. Printed in theNetherlands.
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186 Patricia H.
system.
self-constraining
ible hand" which
functions
both
to produce
such that no
actor
of other
take advantage
system, the "invis
market
transactions,
and
these self-interests
1878.
Skarzynski,
Interestingly,
scholars
century
See
a number
of workplace
Amatai
and founder
erected
the granite
upon
1971, p. 265).
How
did what
WN
a theory of bio
proof for
biological
but the theory, albeit unproved,
logical evolution,
the
of the Beagle
and the 1859
voyage
predates
of
the
the
Species. Spencer
Origin
of
publication
who
of
was
Smith
the writings
Darwinism
social
late
writes,
more
about
have
(Stigler,
that
famous
turned
Spencers
shall
conclude
cerning
modern
how
with
some
of Smith's
the original
work
text.
Darwin
a
was
the very simple to the increasingly
complex.
to
is
"a
continuous
evolution
Spencer,
According
incoherent
from indefinite
homogeneity
change
from
I shall spend some time delin
a
I shall then present
thinking.
interpretation
nonSpencerian,
resembles
that more
closely
it
of Synthetic
1862).
(e.g., Spencer,
Philosophy"
of
natural
the
basic
outlines
principles
Spencer
of natural
the evolution
selection:
phenomena
Spencer's
Spencer.
some of the
influenced
twentieth-century
thinking
in this century
and may
enterprise
as well.
tainted the reading of the WN
eating
and
Spencerian"
"biological
1983, p. 107f).
conceives
is a systemic
thinker who
Spencer
as constructed
in all its diversity,
the universe,
in his case, the prin
from one set of principles,
He
calls
this set of principles
evolution.
of
ciples
of this system as the "System
and his depiction
free
follows
proponents,
who
Darwin,
(Turner,
libertarian
In what
articulate
before Darwin's
work
and essays were
published
came out. According
to one sympathetic
inter
a
was
not
it
social
that Spencer
is
preter,
rather one should more
Darwinist;
say
properly
palace
of Herbert
has
of its most
not Charles
coined
Spencer,
of the fittest."
the term,
"survival
Spencer
on Lamark
for the
rather than Darwin
depends
a
number
and
of his books
basis of his system,
that
for arguing
into public virtues
But
such
1988, pp. 23-24).
1732,
(Mandeville,
an interpretation
arisen
from
also
have
may
a certain understanding
Smith
through
reading
of
one
of
I take to be amisreading
of the
in part, a confu
have been,
Bernard
with
his predecessor,
was
who
Mandeville,
be
vices
could
private
gave
was
view
It may
occur?
sion
of self-interest"
In nineteenth
century
declared
1977; Stigler,
1971). A. O. Hirschman
of
The
Wealth
that "the main
impact
of Nations
a
was
to establish
economic justification
powerful
of individual
self
for the untrammeled
pursuit
the
of Social Darwinism.
Europe
evolutionary
theory was not the
of Charles
but was part of
Darwin,
monopoly
of the time. It was Darwin
thinking
speculative
Etzioni,
Albert
1977, p. 100).
(Hirschman,
summarized
is nicely
Stigler,
by George
who
economist
Nobel
Prize Chicago
a
Nations
is
"The Wealth
of
stupendous
capitalist
the great British
nineteenth
Spencer,
and
radical liberal,
century
sociologist,
political
as the father
to
is
referred
usually
philosopher,
1853;
This
in mature
democracy
Herbert
Friedman,
Frank,
and
Hirschman,
George
Stigler have adapted this
as well
of
Smith
1988; Frank,
(Etzioni,
reading
1962
and 1976, Hirschman,
1988; Friedman,
interest"
free enterprise.
Surpris
to Spencer's
libertarianism
for a model
Social Darwinism
and
can look
economies.
also Buckle,
1861).
of late twentieth
including
Milton
Robert
ingly,
and evolutionary
or take advantage
for very long (Hildebrand, 1948; Knies,
von
too, we
and well-being
or group
of actors can
actors
commerce
about
This
governs
to regulate
economic
growth
one
Werhane
I
con
speculations
and Smith have influenced
Spencer
ethics.
and applied
economic
theory
to
for
Smith
economists
Neo-Classical
appealed
a
and
for
laissez-faire
capitalism,
justification
a "night watchman"
to Spencer
for grounding
we
can appeal to
theory of the state. However,
to
tell
different
of
Smith
another
story
reading
of structure
heterogeneity
successive
differentiation
and function,
through
and integration"
1985,
p. 88). For
(Hudson,
we find the universe
from a
evolving
example,
to definite
coherent
mass
to a highly
complex
simple homogenous
solar and galactic
system.
biological
Similarly,
amoebae
evolution
simple single-cell
begins with
and
evolves
to
a
collection
of
increasingly
that can
where
those species
organisms
complex
and global
environmental
best adapt to changing
less fit, and least
survive. The weak,
conditions
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Business
and
Ethics
the Origins
In this process
of complexifi
from
evolve
cation,
simple,
fairly
organisms
to
differen
undifferentiated
phenomena
highly
tiated,
organisms.
specialized,
heterogeneous
as well
as the
"The
of society,
development
die
flexible
off.
of man
development
be described
and of
life generally,
to individuation
as a tendency
become a thing"
of differentiation
may
- to
Because
1851, p. 408).
(Spencer,
and specialization,
individual
on other
dependent
species, and
become
species
human
later, individual
beings
on
dent
other human
beings.
become
linear.
in the development
of organisms.
As new
and
others
with
each
evolve,
devolve,
species
most
iteration
the
and the
species,
adaptable
sion
in each
individuals
survive
the
species,
of their surround
increasingly
complexification
In this
interdependence.
ings and the increasing
and devolution
process of evolution
spontaneous
is exhibited
the law of the survival
of the fittest.
tions
1872,
The
under
which
are
they
placed
. . .
is a state of equilibrium
each species, each planet,
organism,
each galaxy
where
each
each
star and
is in stasis with
its surroundings
and
in
the
evolu
example,
other
For
phenomena.
tion of the universe,
the revolution
of the planets
sun
a
state of fairly stable
around the
has reached
for
the
time
and,
equilibrium
being at least, is no
longer
This
natural
with
subject
change.
is not merely
process
one. Rather,
in accordance
enterprise
liberty as well
as industrialization,
the idea of democratic
political
become
increased
and eventually,
As
development.
more
there
complex
differentiation
parallel
and
differentiation,
mutual
dependence
complex
ferentiated
systems. Private
of economic
the notion
introduces
at
same
the
exhibited
by
between
interrelationships
and specialized
is evidence
to
time
species
greater
increasingly
dif
highly
institu
individuals,
and
between
tions,
and,
sometimes,
society,
societies.
these
Like
social
natural
evolution,
are spontaneous
processes
and like natural evolution
there are periods
linear;
when
societies
particular
and economic
political,
pp.
unless
tampered with,
are not
these processes
as well,
of devolution
revert
to simpler
arrangements
social,
(Spencer,
8-62).
"survival
of the
the term
Spencer
applies
to
fittest,"
alternately
particular
political
or societies or to individuals
economies
(Spencer,
A society
is most
1886, pp. 389-466).
likely to
more
survive
if it is constantly
developing
itself to
systems, and adapting
encounters.
it
The
that
changes
society
to evolve
is independent
in its
that is allowed
own way - is most
to develop
its own
likely
economic
survival
and
mechanisms
adaptability
it
is
that
immoral
thought,
Spencer
with
this process.
Spencer
so that,
to interfere
writes,
[t]o interfere with this process [of spontaneous evo
in
premature
lution] by producing
development
to
is
direction
disturb
the
any particular
inevitably
true balance of organization by causing somewhere
else a corresponding
atrophy (Spencer, 1851, pp.
290-291).
Spencer's
interactions.
The
evolution
of individuals
in their
and of cultures,
and political
relationships,
as
a part of
is
and
social
much
societies,
systems
as are biological
the evolutionary
and
process
social
or military
military
to more
then
thence
systems,
and economic
political
complex
a
of Synthetic
System
Philosophy,
to all phe
of evolution
the principles
apply
nomena
human beings and their social
including
to hierarchical
and gatherers
like political
to drastic
evolutionary
or biological
phenomena.
complex
whatever
(Spencer,
I, pp. 379-380)
ideal
society
analogizes
Spencer
traces
of
the history
and
organism,
as an evolutionary
humankind
from
process
hunters
informal
between
arrangements
simple
1857,
. . .
The law is the survival of the fittest.
[T]he law
or
is not the survival of the "better"
the "stronger,"
if we give to those words
like their
anything
is
It
which
the
survival
of
those
meanings.
ordinary
are constitutionally
fittest to thrive under condi
187
Capitalism
an
to
of
process
simple
and the
of matter
the indestructibility
Despite
at various
in motion,
fact that it is continually
of devolution
and regres
stages there are periods
fittest
natural
societies
depen
nor
is neither
This
of Contemporary
A particular
come
to
society should look after itself, but
the aid of its neighbor
for two
reasons.
such aid reduces
the strength,
First,
or resources
of the aiding
thus
capital,
society,
own
its
for
chances
diminishing
evolutionary
not
development.
Second,
each
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society
should
be left
188 Patricia H.
to make
alone
of
process
with
that
Interfering
to
that
be
harmful
may
or it may
it less independent,
its way.
evolution
or make
society
a
assist weak,
society
devolving
with
the
interfering
principles
is
an
interesting
aggressive nature
ited from other
"in
the earlier
effect
to continue,
of evolution.
again
War
Our
for
anomaly
Spencer.
is obviously
inher
evolutionary,
animal
he
writes,
and,
species,
war has the
states of civilization,
the weaker
of exterminating
societies,
out
members
the weaker
of
of weeding
and
the
societies"
1873, p. 346). Still,
(Spencer,
and democ
industrialize,
evolve,
a
sense
there develops
of individual
strong
stronger
as civilizations
ratize,
Werhane
to Spencer, we
seek our own pleasure
according
or happiness
and try to avoid pain. However,
entails
the
the evolution
of the human
being
abilities. Along
of complex mental
development
we have devel
development
we
are able to
free
thus
of
will,
oped
our
own
If particular
direct
individual
destinies.
or
to evolve
be
left alone
societies
should
with
a notion
as they are fit, so too, the individual, who
should
makes
up the basic unit of any society,
resources
to develop
be
left alone
and
her
devolve
strengths.
This
Spencer
stated as,
calls
the principle
that it is wrong
morality
including
to interfere with
others. War depletes
capital and
as
immoral
behavior.
Thus
cultivates
anti-social
societies
evolve,
rather
"wars" will
be
industrial
to
refer
Spencer
primary
made up
or
societies.
Nevertheless,
society
The
is a methodological
individualist.
are
unit out of which
social organisms
is the individual
human
being.
ideal just
not
course,
of
It
is,
system.
the principles
how
of societies
evolution
synthetic
Spencer's
to envision
difficult
evolution
drive
social
of
are merely
and
of individuals,
aggregates
answer
not
criticism.
that
does
fully
Spencer
that
never relinquishes
this problem,
Spencer
Despite
to the general
of
his individualism
principles
social
1960,
pp.
(Simon,
theory
evolutionary
294-299).
In the Social Statics
Spencer
lutionary
applies
his
principles
and in his political writings
its evo
system with
synthetic
to individual
human
devel
opment.
Spencer parallels individual development
to natural development
and social development,
more
one
Like every organism,
factor.
adding
what
Freedom,"
Equal
claim
the
fullest
society
right to be left alone,
equal natural
or interfered
not
to be harmed
with
the
the
out
of
upon
grants and protects
equally
and indeed,
the Law of
these negative
rights,
the basis for Spencer's
forms
Freedom
Equal
individual
of
commutative
justice. Every
theory
The
right
others
core
of
p. 46).
evolve,
interrelationships,
complex
they develop
rela
and they affect and are affected by individual
are merely
But
societies
aggregates,
tionships.
albeit complicated
often constructed
aggregates,
of impossibly
interrelationships.
complicated
in this case, the individual
It is the individual,
human
that is the basic unit and at the
being,
"Law
to
liberty
with
the
posses
compatible
sion of like liberty by every other man
(Spencer,
1851, p. 35), [or,] [e]very man is free to do that
which he wills, provided he infringes not the equal
freedom of any other man"
(Spencer, 1892b, II,
has
Societies
is based
conclusion
the
"[e]very man may
exercise his faculties
com
result
battles. The
than physical
petitions
the
without
will
be
similar
accompanying
and
side-effects.
moral
financial
negative
appears holistic,
Spencer's
synthetic philosophy
to
and he often uses the term "social organism"
this mental
by
have
society. As a result, individuals
their own ends as they
the equal liberty to pursue
so long as they do
are able and desirous
of doing,
or by
with
interfere
is the
freedom
right
pursuits.
Importantly,
not
self
of restraints,
not
to
be
the natural
right
Thus
determination.
interfered
others'
absence
with
allows,
one's
to pursue
but does not require,
own
ends
(Doherty
If left alone some of us
p. 484).
and
others
mature,
contribute;
develop,
or wither
Thus
the
away.
strongest
atrophy
most
and
both
mentally,
physically
adaptable,
Gray,
and
1993,
survive
should
noninterference,
create
viduals will
quite
and flourish.
a collection
the fittest
radical
where
have
not
private
will
will
and
will
a result
the fittest
of
indi
is not
society. This
because
Spencer
differentiated
highly
individualism,
that as complex
we
live in and must
recognizes
individuals,
social structures.
we
of
As
the
and
work
within
This is always a struggle because
a stage in evolution
yet reached
and
social
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interests
coincide.
It is
Business
to
not
hard
same
time
One
of
interfere
ical
or
Law
the
how
sense within
makes
istic hedonism.
finds
Spencer
seeks its happiness
Spencer's
that each
Spencer
for
is valued
happiness
At
1904, II, pp. 88-89).
(Spencer,
he argues, because
human beings
cannot
utilities
always maximize
can
even
or
are,
orchestrate,
we
preoc
be
left
of Equal
natural
own
its
only
sake
the same
time,
are fallible, we
nor be sure that
our own
happi
for the
happiness
the greatest
number.
Thus,
greatest
by granting
to pursue
is
each
individual
free
equal freedom,
own
or
her
his
ends and achieve
(or fail to
ness,
much
less
the greatest
the Law
of Equal
Thus
happiness.
the "greatest
of each
allows
happiness
and everyone"
409;
1851, pp. 60-62,
(Spencer,
see also Weinstein,
II, pp. 62-63;
1990,
1892b,
achieve)
Freedom
pp.
140-142).
that, along
Spencer
theory
adopts Lamark's
with
human
inherited
characteristics,
beings
on
as
of
traits
well.
So
children
passed
acquired
inherit those
smart, strong, adaptable parents will
traits. However,
children
of a lazy or slothful
most
for example,
would
person,
likely inherit
those
as
parental biological
if those of us less able
traits as well
teristics.
Thus
we
reproduce,
will
to
add
charac
to adapt
of
number
the
of Contemporary
laws
against
poor houses,
tution
that requires
ment
intervention,
themselves,
then,
is antithetical
community,
ciples
and
interferes
will
with
to evolutionary
its spontaneity.
suffer both
generations
from
deflected
aiding
because
capital was
to help
those
means
productive
who
could
and because
themselves,
help
will have to deal with
increas
future generations
are
who
inca
numbers
of
individuals
ingly large
Thus
devolve
will
that
society
eventually
pable.
not
and disappear
Spencer
prevention
fire fighters,
regulations
(Spencer,
1851,
pp.
59-65).
vaccinations,
be helping
themselves.
since that abets sloth
inheritance
argues against
in children
and grandchildren
of the rich. Note
is not in favor of genocide;
that Spencer
rather,
it
is
that
each
of us
argues,
Spencer
imperative
to try to survive,
on our own.
in the economy,
should
will
have
wither
their demise.
form
not
both
Those
away, neither
helped
But social interference
with
interfere
and
physically
who
cannot,
nor abetted
in
in the
either
or taxation
of governmental
charity
tolerated.
Government
should
intervention
be
and
natural
selection,
they
regulation
are a costly
tax burden
to the rich
and unfair
and the working
the rich of
poor,
depriving
earned capital for reinvestment
and the working
to improve.
poor of opportunities
The
quality
of a society
intellectually,
are
least
by artificially
to
able
take
and
is lowered morally
those who
preserving
care
of
themselves
to
and
to
if the inferior are helped
them from that mortality
increase, by shielding
which
their inferiority would naturally entail, the
behave
well.
For
is to produce,
effect
after
generation
From diminished
inferiority.
faculties already deficient,
conserving
greater
result,
in posterity,
still
faculties
serving
smaller
(Spencer,
amounts
a
generation,
use of self
there must
of
self-con
1873, p. 339).
the same
At
claims that private
time, Spencer
so
as
donors
the
charity
long
selectively
as
choose
their
The
poor
deserving
recipients.
result of noninterference
and personal
altruism
is fine
with
be
survive,
that
31-70).
community
for factories.
Spencer
laissez-faire
(Spencer,
the
achieve,
of
society
a
healthy
is outspoken
against
of cattle disease,
sewers,
municipal
laws, or safety
hygiene
He
rails against
labor
govern
who
people
of
another
prin
Future
funds,
government
and helped
He also questions
that
the
taxation,
poor,
arguing
particularly
the deserving
poor should be given an opportu
to
and support
and he
work
themselves,
nity
should
and eventually
affect the
individuals,
who
of
those
To
protect
society.
development
or
own
cannot
their
ends
pursue
independently
protect
or pro
days or hours of work
or children
He
from
laboring.
education,
compulsory
orphanages,
insti
libraries, or any sort of public
women
fights
devolving
like
189
Capitalism
that restrict
scribe
biolog
or pleasure
and
that
agrees with Mill
species
to avoid pain.
tries
at the
while
others
in a community.
interrelating
the issues raised by Spencer's
to
with
the natural
right
cupation
is whether
alone
Freedom
with
and the Origins
Ethics
and most
fit will
strongest
in a
and reproduce
resulting
and
entrepreneurs
adaptable,
strong,
industrial
1851,
pp.
concludes
private
and
278-363;
that
enterprise
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technical
1884,
the best
political
economy
1982,
society
pp.
is a
economy
190 Patricia H.
with
no government
almost
us
to protect
except
or interfering
with
from
deliberately
harming
other. A laissez-faire
best permits
economy
economic
individual
entrepreneurial
develop
can control
ment
where
each
individual
her
Werhane
modern
as
corporation,
hierarchies.
military
of
iterations
earlier
writes,
Spencer
each
economic
life and receive
the full benefits
of her
out,
pointed
to the
and contributes
social evolution
of a political
economy.
positive
he
Indeed,
argues,
super
community
priorities
are
sede those of individuals
only when
rights
violated
or
money,
should
mail
all
in
services,
Robert
of
1982,
In
pp. 31-70;
Nozick,
Spencer's
in Social Statics,
suffrage, thinking
the rights
protects
each of us a voice.
be
the
a phrase from
should be in the
(Spencer,
1884,
1974).
particular,
for universal
Spencer
argued
that a participatory
of each
individual
democracy
and allows
later writings
he retracts
was
He
worried
suffrage.
In his
idea of universal
workers were
able to vote, we
that if propertyless
which
itself
would
have the rule of the majority
or
against private
enterprise
equal
women
were
was
not
He
that
afraid
fully
liberty.
or educated
to be able to exercise
developed
were
in voting.
These worries
proper judgment
decide
could
on his view
based
best means
dation
that
for equal
that
is the
liberty
and thus the foun
economic
freedom
did
of political
liberty.
Spencer
more
as women
educated
became
should
be able
to vote. His
theory
believe
they
about worker'
as we
shall
is more
complicated,
rights to vote
see in the next paragraphs
and Gray,
(Doherty
Paul,
1982, pp. 499-514;
1993, pp. 475-490;
Francis,
Given
1978, pp. 317-328).
his night watchman
a strong
theory and
does
criticism
of any form of socialism,
Spencer
state to be that
not envision
his ideal industrial
of
late nineteenth-century
because
of active
merely
England.
is not
This
and
leg
governmental
in place nor the exis
that were
processes
tence of complicated
bureaucracies
governmental
structures.
More
that mimicked
impor
military
islative
tantly, Spencer
the joint-stock
sees
of Parliament,
their
tion
our
of
.
.
member
. falls
of
and in particular
industries,
was
to become
the
that
company
their
purely
directors,
. . . the
form
very
demo
remaining nominally
as to become
so remodeled
constitution.
national
under
superior
almost
elect
. . .Yet
chairman.
of government, while
cratic, is substantially
a miniature
the administra
are
companies
public
. . . Shareholders
democratic.
the
The
control
one
or wealth,
will,
cunning,
direc
some
of
to
so subordinate,
the majority
that
becomes
on every question
on
the decision
the
depends
whom
course
he
the
chic,
. . .
takes
. . .
is repeated
Democratic
a mixture
thus,
and
aristocratic,
the
the monar
elements
III, pp. 52-53).
are nonexistent
practices
in joint
of monarchy
a
better
describes
the mix
and
companies,
and hierarchical
of
democratic
1892a,
(Spencer,
stock
in
writings,
early
schools,
and utilities
to borrow
Nozick,
government
a "night watchman"
form
Roads,
land, parks,
taxes
should
be
private;
and,
possible,
minimum
the
of war.
times
by Act
our
of
directors
as Smith
labor, and industrialization,
creates economic
growth
[a] s devised
tions
bureaucracy
form of governance
that precedes
demo
military
in the social evolutionary
cratic industrialization
in a democracy
Only
her freedom without
process.
explore
and within
politically
Worse,
Spencer
system depreciates
for herself.
The
does,
factory-hand
he
notice,
indeed,
in so far that,
labour,
and able to break them
is free
to engage
with
whom
soever he pleases and where
he pleases.
amounts
to
in
little more
practice
liberty
ability
to
both
interference,
enterprises.
the British
argues,
factory
to think
the worker's
ability
wage-earning
short
individual
economic
free
entirely
exemplify
contracts
at
will
making
after
can each
one
exchange
for
slavery
But this
than the
since,
another;
fit only for his particular occupation,
he has rarely
an opportunity
of doing anything more than decide
in what mill he will pass the greater part of his
dreary
The
day.
circumstances
of
coercion
often
bears more hardly on him than the coercion of a
master does on one in bondage
(Spencer, 1896, III,
part 8, p. 516).
Trade
are
unions
but
conditions,
is because
This
attempts
they are not
their
claims
to ameliorate
universally
to be democratic
and union
leaders
usually untrue,
rather than consult with workers.
that we
concludes
Spencer
reached
a
high
stage
of
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these
effective.
social
tend
have
are
to control
not
development.
yet
If
Business
or
with
the Origins
individual
includes
evolutionary
development
right not to be interfered
next
and
Ethics
the
coerced,
communal
be
that of cooperative
committees
by worker
governed
where
and
decision-making,
stage will
enterprises
democratic
with
pay is
to ability and difficulty,
and
according
assigned
are
Each
the
workers.
shared
among
profits
with
will
the others,
worker
cooperate
produc
and individuals will
increase,
actually
tivity will
at
work
exercise
their natural
liberty
(Spencer,
8, pp.
504-509,
1896,
III, part
559-563).
is not specific,
it surely follows
Although
Spencer
that
if workers
they will
control
become
both
companies,
joint-stock
into democratic
educated
From
and antisocialists.
processes
economic
this exercise
of
sense.
of Contemporary
is
that the best society
"Cowboy
Capitalism"
so
one in which
each of us, on our own horse,
to speak, works
for her own ends. This
is partly
an accurate
but Spencer
also argues
attribution,
though
individuals.
of
the best will
succeed and
of interference,
a
true
will
be estab
rewarded;
meritocracy
and
of
liberty
precedes.
are reverberated
of Spencer
by those
about
welfare,
worry
decry
regulation
in business,
and
involvement
government
is a
taxation. The
themes
that taxation
question
should
form of slavery and that those who work
not have to bear the burden of those who
do not
abound
that gov
today. Arguments
interference
and regulation
only deflect
ernment
[t]he ultimate
requirements
be
the manner
man
will
be
coincide
with
of man,
who,
one whose
private
ones. He will
public
in
ful
spontaneously
the
filling his own nature, incidentally
performs
functions of a social unit; and yet is only enabled
so to fulfill his own nature, by all others doing the
rpt. in Spencer,
like (Spencer, 1851, p. 417,
III, part 8, p. 601).
1896,
economic
The
development
transformation
recent
of Spencer
influences
no
almost
one
or
reads
because
is subtle,
Even
a pure Spencerian
has never
been
though
ical
economy
"night watchman"
to
refers
him
any
What
industrial
more,
or not
yet they are clearly
important. Whether
is or should be sponaneous,
evolution
Spencer's
an
enormous
of
evolution
has
had
social
theory
influence
in the social
describe
social
Social Darwinism
genocide,
a welfare
poverty,
sciences
and
development
is often equated,
with
but
correctly
is immoral,
and that it is unfair
state
themselves
support
cannot.
those who
as a framework
with
wrongly,
that
the argument
that it encourages
can
to tax those who
and must
to
devolution.
bear
the burden
of
of bureau
critique
Spencer's
is still apt today in describing
government
or large organizations.
individ
American
North
roots
its
in
has
ualism
thought.
surely
Spencer's
cracies
Along
times
with
this
attributed
individualism
what
is
Spencer
sometimes
is some
called
and destroy
incentives.
of the national welfare
States to a workfare
system in the United
on
is justified
would
Spencer
grounds
idea
is celebrated
The
suc
is reiterated
concludes,
Spencer
the most
be
Echoes
because
Freedom,
should
Sometimes
cessful, and thus the most
deserving.
to imagine
have
that those who
this is translated
most
in
The
succeeded
fact the
are,
deserving.
least adaptable
and
laziest,
should,
weakest,
remain unrewarded
and fade away.
deservedly,
who
where,
economic
the best
lished where
are
concepts
as part of a society
succeed
only
an aggregate
is merely
that society
In any society, when
there is an
absence
be
are
dependent
of Equal
can
that one
even
liberty, universal
suffrage makes
economic
and
Thus
political
liberty
liberty
not two distinct
but rather they
principles,
mutually
the Law
191
Capitalism
by leading
is less celebrated
hierarchies
is not
system
admire.
laissez-faire
polit
the
established,
dead, and indeed,
intellectual
libertarians.
is Spencer's
of
critique
and his idea that coopera
tive
industrial
best
self-managed
enterprises
true evolutionary
In
social progress.
exemplify
to be consistent,
order
libertarians
and others
who
in
the
of
role
government
question
economic
and private affairs, need to think care
and the
fully about the lack of democratization
in private institutions
of coercion
such
prevalence
as the church
and the corporation.
is
Spencer
a
of
form
self
suggesting
truly revolutionary
that is decoupled
management
from
socialism
and
Marxism.
Because
of
influence
and that of
Spencer's
one
to
of
liberals
his ilk,
tends
read Smith
as an egoist,
a
in the way
I described
earlier:
as
as
at
laissez-faire
least
and
economist,
implying
other
that a night
watchman
political
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economy
is the
192 Patricia H.
are a number
ideal. As
a result,
ences
Spencer's work
that have trickled
from
of Smith
sical
economics
there
and
of
not
influ
and from
this reading
into neo-clas
down
twentieth-century
about
markets
and
First, there
thinking
morality.
a preoccupation
is sometimes
with
the individual
actor both
in economic
economic
and
theory
In business
in business
ethics.
times
on dilemmas
focus
of
ethics
some
individual
managers
vacuums
in autonomous
they operated
rather
than in corporations
for
(See
example,
at least
Donaldson
and Werhane,
1977). Second,
some neo-classical
economic
theory appears, now
as
if
to be preoccupied
or self-interested
and again,
non-tuistic2
as the
paradigm
of economic
purveyor
is often
linked
value
imizer
gious
corporate
motivated
primarily
rational moments,
utility maximizer
the individual
utility max
choice
and
rational
of economic
economic
where
value,
to preferences,
however
and
(Sen, 1987; Hausman
or defined
qualified
McPherson,
1996). Thus
on
her
own, without
acting
or
with
the
individual,
social, cultural,
is naturally
influences,
in
self-interests;
by
this individual
as
if
reli
and
cool
is a non-tuistic
or consid
of her preferences,
ered preferences.
Smith appears to separate
Third,
actor in the WN
the economic
from the ordinary
to whom
he devotes
his earlier
person
Sentiments.
The Theory
work,
of Moral
Spencer
as the primary
actor in
focuses on the individual
an evolving
Government
economy.
political
moral
issues arise only
and ethical
be minimal,
one
is
individual
the
when
(or
government)
or govern
another
individual
with
interfering
should
ment.
So,
too,
it would
appear,
and economics
ethics, politics,
in academia)
such
fairly
Balkanized
that they
tantly,
and create
distinct
approaches
view
that
translated,
are three
needs
moral
straighten
result
politics,
public
separate
can
one
(as we
separate
have done
only are these three
but more
impor
disciplines,
are different
mental
models
that not
distinct
Such
approaches.
?
the
in The Separation
Thesis
economics
ethics
policy,
endeavors.
philosophers
out managers
and
ethics
in a Kantian
lost
of what
into
we
Werhane
(or,
and
business)
one
Therefore,
to
and public
policy
and companies
when
one needs managers
they go astray. Conversely,
to
and management
tell us how it "really
theory
are
is" so that the practicalities
of doing business
should
or Aristotelian
nor
be,
are
(See Freeman,
regulation
to suggest
Iwant
What
the popular
interpretation
At
1994).
in what
the WN
careful
Smith's
idea of political
economist.
a different
paint
economy.
Economic
laissez-faire
by
is that
follows
of
reading
Smith's
can
undermined
least one
of Smith.
texts
ideal world
is a mis
reading
of
of
picture
is not
Smith
exchanges
to
efficient,
according
non
we
are
not
because
precisely
merely
on what
and economic
growth
depends
occur
are
and markets
Smith,
tuistic,
call
today we
maximization
the
rule
of
law.
Individual
utility
criterion
for
only
a
is not
choice.
Smith
Indeed,
pure util
are not merely
and values
individual
rational
itarian,
is not
nor
preferences,
erences. Moreover,
Moral
Philosophy
even
the
individual
considered
was
Smith
the Professor
pref
of
at Glasgow,
and argues pre
even imagined,
not
and
have
may
cisely against,
a separation
from
of ethics
ethics
economics,
or
from his idea of a
from commerce,
ethics
So a careful reading of
viable political
economy.
or, at least, one kind of careful reading,
Smith,
at odds with
finds Smith
and such a
Spencer,
can produce
some insights
to
into how
in
that
issues
business
avoids
ethical
approach
a preoccupation
forms of radical individualism,
with
and the Separation
Thesis.
egoism,
Let us now turn to Smith's work
and examine
reading
a notion
devel
self-interest,
The
Moral
earlier
work,
oped
Theory of
Sentiments
(TMs). The first thing that is striking
on the social
in the TMS
is Smith's
emphasis
notion
Smith's
of
in Smith's
nature
of human
beings.
Early
on he proclaims,
[m]an, who can subsist only in society, was fitted
by nature to that situation for which he was made.
All the members
of human society stand in need
of each others assistance, and are likewise exposed
to mutual
Thus
injuries
it is hard
vidualist
Hirschman
the TMS
as
(Smith,
to portray Smith
of his later
some
do
with
1759,
1976,
II.ii.3.1).
as a radical
readers
(Hirschman,
1977).
this statement:
Smith
indi
such
as
begins
there
[h]ow selfish soever man may be supposed,
some principles
are evidently
in his nature, which
interest him in the fortune of others, and render
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Business
their happiness
from
nothing
. . .
At
(Smith,
same
the
1759,
1976,
time,
Smith
I.i.1.1).
is, no doubt,
recommended
by nature,
to his own
1976,
Smith
argues,
"Every man
first and principally
care"
1759,
appear to be
his analysis
(Smith,
what
explains
statements
through
contradictory
of motivation.
that
While
all one's
recognizing
in a trivial
self-interested
are
motivations
and the Origins
to him, though he derives
the pleasure of seeing it
necessary
it except
II.ii.2.1).
Ethics
sense
that they originate
in, and are interests of the self,
he goes on to claim that not all our interests are
interests in the self. That is, the self is the subject,
of all our passions
and
but not
the object,
interests.
and
is highly
infamous
Smith
Smith's
Mandeville
critical
both
of Hobbes
Bernard
predecessor,
1759, 1976, Vll.iii.i).
Indeed,
not Smith, who
that
argued
(Smith,
it was Mandeville,
vices
could
private
be
into
transformed
public
1732,
1988).
(Mandeville,
are moti
to
human
Smith,
beings
According
or natural
vated by three sets of passions
affec
others;
envy
are directed
which
and
to
compassion
and the unsocial
such as hate and
passions
are negative
to others.
which
reactions
for
Importantly,
dominates
others
none
of the passions
Smith,
so that most
of us are as natu
in others as we are in ourselves.
rally interested
are derived
Interests
from, but are not iden
are akin to natural
tical to, the passions.
Passions
are
interests
and emotionally
drives;
cognitively
from
the
Like
the passions,
passions.
developed
each of us self-interests
we
the passions,
operations
self-interest
others,
Smith.
of each
have
egoism
and social
distinct
a
or
greed.
unlike
interests.
Since
objects
are not
and altruism
are individuals
Egoists
all of the self as object,
evil. Virtuous
self-love
avarice
interests;
and vices
assign virtues
of the sets of
So
one
Even
but
whose
(the
opposites
interests
this is not
is prudence;
can
be
a selfish
to the
self
or
for
are
necessarily
is
its vice
a virtuous,
passions
and
of benevolence,
altruism, and/or
or
in
vices
the
that
include
others
justice
harming
or injustice.
in the forms of malevolence
Smith
spends some time explaining
Although
i.e.,
is not
person
egoist.
prudent,
she harms others or treats
evil unless
necessarily
others
in the pursuit
of her interests.
unfairly
can be exhibited
in the excel
interests
Social
created
or
Smith
preferences,
we
between
what
distinguish
to
and
what
be
approve of,
ought
criteria
for either of the latter
we
because
argues,
prefer, what
are not
values
interests,
interests
from
merely
we
approved of. The
do not consist merely
own
of one's
considered
does not
may
preferences.
one
tests one's own
of, and
approve
constantly
I and others approve of
values against both what
to be approved of,
and what
deems
society
ought
One
is, what
So,
society values.
a society
are what
values
finds
praiseworthy.
also
Smith
in an appeal
In the TMS
one
prefer what
that
and
set of objects:
the selfish
tions,
is interests, pleasures,
and
passions, whose
object
as
the
such
of
the
social
self;
pains
passions
altruism
or virtues
at a minimum,
admirable
and
of his
grounds many
to warmed-over
conclusions
natural
law theory.
uses expressions
sometimes
. . .". In both the TMS
by nature
uses
terms
Smith
such as "the
Smith
as, "men
the WN
natural
its own
193
Capitalism
lences
such
virtues3
each with
of Contemporary
"natural
jurisprudence,"
dence as justification
and "natural
liberty,"
to
natural
jurispru
appeals
for his theory of justice, and
in the unpublished
Lectures
order,"
he
explicitly
adopts
on
he
Jurisprudence
notion
of natural
Pufendorf's
rights (Smith, LJ, 1762-1764,
So Smith
1-16;
[B] pp. 1-10).
to some nonrelative
how
his writings.
In the WN,
with
and
basic
to societal
relate
those
look
[A] pp.
to appeal
principles,
although
in
is unclear
values
is usually
equated
one's condition
self-interest
desire to better
after one's own welfare.
the natural
commentator
1976;
appears
So at least one
contends
that "[in the WN\
Smith
to greed and a new sanctifica
gave new dignity
tion to the predatory
(Lerner, 1937, p.
impulses"
Part
in
of
the
is that
ix).
reading Smith
difficulty
he is both descriptive
and despite
and normative,
the fact that he was a student of David
Hume,
famous
for instigating
the fact/value
distinction,
Smith
tinction.
is notoriously
So Lerner
of
description
his admonitions
Smith
with
repeatedly
competition,
economic
growth,
in making
slipshod
have
confused
may
and
concerning
that
hoarding
and greed
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Smith's
in commerce
self-interest
argues
that dis
greed
avarice
with
avarice.
interferes
slows
capital
is antithetical
down
to the
194 Patricia H.
ideal of a free political
sions it (e.g., Smith,
So even as we
II.ii.36).
the demands
dition,"
a
of
free exchange
and
prudence
desires.
as Smith
economy
1776,
strive
1976,
II.iii.25?26,
to "better our con
of morality
political
parsimony
envi
and
the
ideal
economy
require
economic
of one's
But what
is the role of the social passions
and
in the WN?
One
of the most
famous
interests
in the WN,
quotations
[i]t is not from the benevolence
or
brewer,
the
baker,
is:
of course,
of the butcher,
we
that
our
expect
the
dinner,
regard to their own interest. We
not to their humanity
address ourselves,
but to
their self-love, and never talk to them of our own
but
from
their
but of their advantages
I.ii.2).
necessities
1976;
(Smith,
1776,
"
says further,
ordinary mortals who
and virtues?
interests,
tions out of context,
conclusion.
However,
notions
important
two
a variety
of passions,
with
these
quota
Dealing
one might
be led to that
have
such
a conclusion
that play
commerce
and in any political
and justice.
even
Economic
exchanges,
ignores
roles in
central
economy:
coop
eration
between
the most
are not merely
parties,
competitive
to Smith. We
adversarial,
according
selfish
purely
a natural
"propensity
.
to
.
.
truck,
barter,
nor
have
and
"The division
of labour
and indeed,
exchange"
...
is a necessary,
though very slow and gradual
in
of
certain
consequence
[this]
propensity
nature"
human
I.ii.5).
(Smith, 1776, 1976, I.ii.l,
us to
to cooperate
motivates
natural desire
our
and specializing
by dividing
together
Our
work
labor.
It also motivates
appeal
to self-interest
us
to barter, where
the
of others as well as to their
in
in honoring
results
the exchange
good will
and reciprocal"
"mutual
1776,
(Smith,
gains
in cooperative
Do we participate
1976,
Il.i.l).
to do so,
ventures
it is our self-interest
because
arise out of our
social
cooperation
two
cannot
For
be
these
Smith,
sepa
passions?
to
It is both
natural
and an advantage
rated.
or
does
cooperate
in economic
and baker,
do not give away
brewer,
on mutual
meat,
beer, or bread, but they depend
in
fair
the
of
business,
respect,
play
honoring
even
to
and
contracts,
indeed,
stay
cooperation
butcher,
in business
together
what
about
But
One
beggar?
virtues
of
affairs. Our
friends,
the
will
in the
same
town.
and the poor
benevolence,
remember
that there are two
social
the
interests:
turn
and
benevolence
is the most
that justice
justice.
essential virtue both in the TMS and in the WN,
as natural
and it will
also turn out that justice,
It will
will
jurisprudence,
ideal of a political
of what
out
a critical
play
role
s
in Smith
as well.
economy
to the TMS,
the notion
of justice
the social passions
and is the virtue
According
arises from
Justice
1759,
but a beggar
[njobody
to depend
the
benevolence
chiefly upon
of his fellow-citizens"
(Smith, 1776, 1976; I.ii.2).
Has
man"
from
"economic
Smith
divided
he
Indeed,
chuses
Werhane
Smith
interests.
calls impartial
social
is the "consciousness
of ill-desert"
(Smith,
an impartial
It is what
1976,
II.ii.3.4).
would
spectator
as unfair
classify
in social
even
rela
a
among
strangers.
that
negative
proscribes
principle
deliberately
another and includes
the positive notion
harming
of fair play4
II.ii.i.9
and
1759,
1976,
(Smith,
tionships
Ii.ii.l).
virtue
pillar
It
In the TMS
is both
justice
as natural
and,
that upholds
jurisprudence,
the whole
edifice
beneficence;
utterly
a
personal
"the main
[of human
1976, II.ii.3.4).
"Society
in the most
comfortable
1759,
(Smith,
society]"
subsist, though not
may
state, without
injustice must
is both
but
destroy
the prevalence
it"
(Smith,
of
1759,
1976,
II.ii.3.3).
In his unpublished
on Jurisprudence
Lectures
to clarify his notion
of justice.
means
not
he
distribu
commutative,
By justice
to Smith,
tive justice.
it is always
According
to
to violate
harm
others,
wrong
deliberately
is careful
Smith
their personal
societally
rights
to liberty, property
not
and reputation,
defined),
and contracts,
(however
to honor
or to act unfairly. Thus
promises
one has
duties,
perfect
always to be just; that is,
to violate
it is always wrong
the principles
of commutative
other
virtues
justice. While
such
as benevolence
enforceable
be moral.
for which
since
one
are desirable,
they are not
to
need not be benevolent
Justice, Smith argues, is the only virtue
one my use force
to ensure. While
the beggar
has not claim on our benevolence,
and
he does have a claim on equal opportunity
fair treatment.
of distributive
justice
Principles
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Business
are not
like benevolence,
is conceptual
disagreement
fairness
Because
between
a viable
essential
and the Origins
Ethics
since there
enforceable,
about the extent and
of such principles.
are
often
economic
exchanges
a
in
role
central
strangers, justice plays
are
Laws of justice
economy.
political
not only to restrain overindulgent
self
but
interests,
or
cooperate
Smith writes,
also
because
we
with
collude
often
each
other.
unfairly
Thus,
[e]very man, as long as he does not violate the laws of
free to pursue his own
justice, is left perfectly
. . . (Smith, 1776, 1976,
own
interest in his
way
IV.ix, 51, my
But
remains
there
Smith
italics).
the
invisible
hand
question.
wrote,
[The man of commerce] generally, indeed, neither
intends to promote the publick interest, nor knows
it. . . . By directing
how much he is promoting
a
as
manner
its produce may be
industry in such
of the greatest value, he intends only his own gain,
and he is in this, as in many other cases, led by an
an end which was no
invisible hand to promote
is it always the worse
part of his intention. Nor
for the society that itwas no part of it. By pursuing
that of
his own interest he frequently
promotes
he really
than when
the society more effectually
to promote
intends
or continually
either perfectly
tending
equal
to equality"
is
This
1776, 1976, I.x.a.l).
(Smith,
actors con
to conclude
that economic
neither
be
are always prudent,
or intentionally
fair,
nor
act
that
markets
independently.
cooperative,
and
works most
the market
Rather,
efficiently
sciously
actors
when
parsimonious
prudent
competitively
act fairly in competitive
and cooperative
ventures,
or not they deliberately
intend to do so.
whether
that we are
But
still, could we not conclude
it is in our
because
fair, and cooperative
prudent,
to
at
least
self-interest,
self-interest,
long-term
answer
would
be "yes" and "no."
be so? Smith's
to
course
it is in my
thus rational,
Of
interest,
act accordingly.
On
the other hand,
according
commerce
is
each
some of us do not play fairly
nature, even though
are virtues
and parsimony
all the time. Prudence
and
of us try to emulate,
sloth and greed,
many
a rational person
are not admired.
So for Smith,
is prudent,
and fair "by nature,"
cooperative,
this is admirable,
to be so.
because
advantage
Smith was
it is to her
and because
a purist, nor was he naive about
was
He
critical
of
highly
problems.
agency
not
writing,
companies",
"joint-stock
it.
arguing
obviously
tend to act in their
that
own
in
people
self-interest
trade of a joint
tors
and
work
cooperative
best when
in political
that enforces
economy
and fair
contractual
human
agreements,
rights,
so far as to claim that the ideal
play. Smith goes
- a
climate where
is a "level playing field"
"[t]he
and disadvantages
of the
whole
of the advantages
. . .
of labour and stock
different
employments
of
a court
such
stock
of
of
other
lance
with
which
the
nery
frequently
and
Negligence
more
prevail,
affairs
of
such
or
watch
however,
a company
the
being
money
in a private
own.
their
therefore,
in
direc
than
of
that they
be expected,
the same anxious vigi
partners
over
profusion,
less,
. . . The
people's
their own, it cannot well
should watch over it with
is always
company
directors.
companies,
rather
managers
in the context
of the rest
this quotation
Putting
is arguing
that markets
of the WN,
Smith
(the
condi
best under
famous
invisible
hand) work
in commu
tions of economic
liberty grounded
when
"rule
tative justice
of
law"),
(the
people
are parsimonious
and prudent,
as competitive.
as well
Markets
by
managed
But
this
economic
seek personal
(i.e.,
gain).
commerce
means
of
that people
neither
are, or
nor is
selfish or greedy,
should be, necessarily
markets.
laissez-faire
Smith
purely
proposing
embedded
of us
in
interested
is naturally
to be cooperative.
thus it is also rational
others,
is part of human
of ill-desert"
"Consciousness
to Smith
[t]he
Smith
195
Capitalism
of Contemporary
must
the management
(Smith,
copart
. .
always
of
1776,
the
1976,
V.i.e.18).
at least part of this criticism
is leveled because
in Smith's
there were
few corporations
time, the
most
notorious
East
the
India
Company
being
which,
despite mercantile
regulations,
exempli
to
fied managerial
greed
perfection.
Yet
On
political
creates
a macro
level, Smith argues that the ideal
is one that protects
its citizens,
economy
conditions
for well-being,
including
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.
196 Patricia H.
economic
and provides
services
growth,
public
in the context
of personal
of
liberty, protections
and
of
enforcement
of
laws
(Smith,
rights,
justice
1776,
1976,
a
economy,
A viable
political
without
justice,
economic
is hardly
the
economy
and it cannot
in
the
political
to Smith.
traced
cannot
development
in
Thus,
commerce.
of
theory
sometimes
a position
and IV.ix.51
[A] i.9). This
1978,
watchman"
"night
IV.vii.c.44
Introduction,
and 1762-1764:
exist
prosper
the form
Smithian
for
long
without
of
free
well-func
ethics
economy,
(as prudence
tioning
political
economics
and personal
fairness),
(the enhance
ment
of each citizen)
of economic
well-being
from
this reading of
Smith creates
is that the "popular view"of
a questionable
and is not the only way
paradigm
to think about politics,
and ethics.
economics,
as
one
set
in partic
of
economists,
Just
political
to
economic
ular, neo-classical
theory, appealed
so
for their conclusions,
Smith for some ground
we
can
to
to
tell
Smith
another
too,
story
appeal
about commerce
and free enterprise.
This
story
Smith
include:
the range and scope
and agency
theory,
questioning
choice
theory
to the normative
and
aspects of positive
about
the
economics,
raising questions
of markets
autonomy
(e.g., the "market
might
of rational
pointing
welfare
alleged
for corporate
control"),
kinds
of stories one can
prise
if ethics,
economics
Since
exploring
about free
what
cannot
a rule
School
limitations
Hausman
and
modeling
criteria
be
flounder.
Sen, in his book, On Ethics and Economics
(1987)
in
and Michael
and David Hausman
McPherson,
a newer
and Moral
Economic
book,
Analysis
Philosophy,
positive
focus
economics
on
the
and,
normative
in the
case
aspects
of Sen,
of
of
function
kinds
theories
of
will produce.
particular model
been
attention
is the
less
given
are
If ethics
and economics
Thesis.
has
costs go
transaction
ethically,
1985, p. 170). The bad news
cannot use the excuse,
"We
even
on
moral
reasons,
though,
is that management
it for business
did
the behavior
grounds,
If ethics
dependent
that
company
"good"
IBM in the late 1980s)
the unethical
behavior
Ivan
(e.g.,
company
questionable
tionable
of
activity
in Nigeria)
behavior
cessful.
mental
between
company
is economically
level,
suc
is to
the
as a positive
construct
that makes
as part of their competitive
formulated
sense
that
challenge
to create new
business,
model
wherein
the
interrelationships
are
commerce,
ethics, and public policy
a new
tell
a morally
or a ques
(Shell Oil's
Boesky),
(e.g., Bre-X),
a
a practical
story about
On
questions."5
are mutually
and economics
a manager
of
some
raised
then a morally
constructs,
fails in the market
(e.g.,
is really no better
than
to management
advantage.
Spencer's
is even
challenge
democratic
conceived
even
and
democracy,
more
difficult.
has
self-management
as part of libertarian
is
employee
ownership
from employee
control. Will
usually
decoupled
we see the growth
of truly cooperative
employee
as we
economic
democratic
enterprises
managed
Agency
capitalist
choice
of
theory and rational
theory are objects
econo
some by eminent
a number
of attacks,
Frank and Amartya
such as Robert
Sen.
mists
without
in economics
the
Separation
not easily compartmentalized,
that is both good
news
and bad news. The
is that, as
good news
if
Oliver
Williamson
has
noticed,
recently
and
where,
economies
frame
a
What
move
capitalism"
one uses
to
normatively
outcomes
of
"cowboy
law, new
the Chicago
Criticizing
out
Sen
the
Smith,
points
rational
choice
and
theory,
McPherson
that
the
argue
of
reading
of
Corporate
seldom
been
enter
is already under
project
seen examples
have
of
we
1989,
tell
and politics
compartmentalized.
neatly
Much
of this critical
way.
and
economics.
welfare
behave
managers
down
(Williamson,
and politics
of rights
(in the form of protection
and commutative
the
laws and
justice
through
are
all
of
the system)
interrelated,
guardians
a
for
and
necessary
inseparable,
well-functioning,
economy.
just, political
can be concluded
What
Werhane
into
the next
aristocracies
tions
century? Or will monarchies
in the world's
corpora
prevail
despite
the contrary?
political
Rereading
Smith
question
democratic
to envision
well-defined
of political
some
democratic
and
Spencer
traditional
to
tendencies
forces
us
to
about
assumptions
free enterprise.
Such analyses help us
not as a static
democratic
capitalism
system but rather
economies
where
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All use subject to JSTOR Terms and Conditions
as an evolving
set
a particular
pre
Business
vailing
model.
Ethics
the Origins
and
view
is not
Smith
each in quite different
and Spencer,
can work
to
how free enterprise
ways,
create
and
suggest
viable fair, or democratic
tutions
that protect
and even
we
liberty. While
conclusions,
not
should
be
insti
human
enhance
all their
may not agree with
are at
not
to
take
them
peril
we
seriously.
Capitalism
fair play, which
sole
the
economic
of Contemporary
197
they cannot
admit of (1759,
1976,
II.ii.2.1).
5
That is almost a direct quotation
from the former
CEO
of Lockheed
in
1977, he paid $12
when,
to Japanese government
in extortion
million
agents in
order to get the Lockheed
1011 contract he wrote,
"From a purely ethical and moral standpoint Iwould
have declined
such a request. However,
in this case I
most
would
have
sacrificed
commercial
certainly
success."
(Kotchian,
1977, p. 11.)
Notes
1
An
earlier and somewhat different version of the
Smith portions of the paper appeared in Adam
Smith andHis Legacy for Modern Capitalism (New York:
Oxford University
Press, 1991) and in a paper, "Adam
References
Adam
Smith's Legacy
Paper WP20/97,
for Ethics and Economics," Working
The Judge Institute of Management
on
of Cambridge.
Research
University
Studies,
I was the Arthur
Herbert
Spencer was done while
at the Judge
Andersen Distinguished
Scholar
Visiting
Institute. See also, "Adam Smith's
Invisible Hand
in the Journal
Argument"
by John D. Bishop
of
Business Ethics 14 (1995), pp. 165-180
and G. R.
Bassiry and Marc
of Contemporary
"Adam Smith
Jones,
and the Ethics
Capitalism," Journal of Business Ethics
some of
Both articles deal with
12, 1993, 621-627.
same
the
issues, although each postdates my earlier
work on Smith.
2
of
others
that
of,
object
3
are
"Non-tuists"
interests
Mandeville
unconcerned
persons
except
person's
as
relate
they
interests.
with
or
to,
1732:
(Mandeville,
4
is not
"Fair play"
Smith writes,
[If one is just] he would
tial spectator may enter
and
...
In
nerve
every
. . .
and
1988, f 23-24)
In the TMS
is
entirely
at
for wealth,
and
run
as hard
as he
every
muscle,
in
an
Joseph: 1977, Polity and Economy (Green
Press, Westport,
Conn).
Tim
and
Gray: 1993, 'Herbert Spencer
Doherty, Gary
and the Relationship
Economic
between
and
Political Liberty', History
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