Saving Adam Smith by Jonathan

Saving Adam smith "by Jonathan Wight

Saving Adam Smith: A tale of wealth, transformation, and virtue

Saving Adam Smith: A tale of wealth, transformation, and virtue

It is everyone's fantasy during a political debate to be able to channel a famous figure from the long-ago past and get him or her to justify your ideals. This is the premise of the 2002 book Saving Adam Smith: A tale of wealth, transformation, and virtue by Jonathan B. Wight. In Wight's novel, Rich Burns, an economics graduate student writing his thesis under the watch of a cruel dissertation adviser, Professor Lattimer, gets advice from the real Adam Smith. Smith speaks through the persona and voice of an Eastern European auto mechanic. In contrast, Lattimer, who in his capacity as the Adam Smith Chair of Economics gives advice to former communist economies, advocates a zealously free market approach and claims to be the true voice of free enterprise. Lattimer wants Burns to use his dissertation to justify a self-interested act by a large corporation to take over the Russian aluminum industry and thus privatize the formerly state-run enterprise in a swift fashion that will not necessarily be beneficial to the Russian people. In Lattimer's view, so long as something is pro-privatization, it is good.

But the 'real' Adam Smith advocated a much more morally complex and nuanced view of economics, according to Wight, and would demand a more sensitive approach to the immediate needs of the people. Paradoxically, today's zealous defendants of capitalism are trying to 'out-Smith' Adam Smith. Smith was a philosopher as well as an economist, and also advocated a theory of justice as well as profit. In bringing Smith back to life, Wight suggests that students of economics have lost their moral 'centers' and instead lapsed into calculus and numerical jargon. But economics is about human behavior, not just facts and figures. At the beginning of the tale, Burns admits he never even 'cracked' Smith's seminal work an Inquiry into the Nature and Causes of the Wealth of Nations, during any of his graduate school classes, and instead focused on calculus and matrix algebra (Wight, 2002, p. 36). No one has even checked out Smith's the Theory of Moral Sentiments from the library at Burns' prestigious university.

This is meant to be symbolic of the fact that while Smith's name (as in the case of the Department Chair title) is often used as a defense of pure free market economics, in actual practice, Smith's theory of economic morality is ignored by the current academy. "While modern economic theories exhibited logical elegance, did they address the interconnectedness of one to another, in social and moral ways" (Wight 2003, 233). Mainstream economics has made a virtue out of selfishness, to the exclusion of all other social values. Smith could never have foreseen how his theory would have been used, nor would he have endorsed this reasoning.

Wight's critique of contemporary economics is two-fold: first he criticizes economics for being overly mathematical. Economics is a social science, and is part of 'real' human existence. Human behavior can be unpredictable, and cannot be reduced to a series of facts and figures. Wight's idea seems prescient given the influence of 'quants' or quantitative mathematicians hired by many Wall Street firms who provided advice to investment bankers right before the recent credit crisis. Despite all of their mathematical knowledge, they seemed unable to spot the obvious, namely that it was unwise to extend mortgages to individuals who could ill-afford these loans, that an economic bubble eventually bursts and that housing prices cannot increase indefinitely. In the real world, economic decisions are made by humans rather than formulas, or, as one observer said: "As a result the odds of game-changing outliers like Bill Gates'fortune or a Black Monday are actually much greater than the quant models predict, rendering quants useless or even dangerous…I think physicists should go back to the physics department and leave Wall Street alone" (Overbye 2009, p.2). Although Wight wrote his book in 2002, long before the current recession took hold, his observation about the state of modern economics is apt -- it is all about the numbers. Yet those who claim to be the modern incarnations of Adam Smith do not remember that Smith wrote in words, not functions, and Smith was a philosopher of humanity, not a student of functions and statistics.

Wight's second main critique of modern economics is the worship of the idea of free market values in the name of Adam Smith, has created a morally bankrupt vision of 'Smith' who never existed. Modern capitalist philosophy has been advanced in a way that has little to do with what Smith really thought and taught. Smith believed that the invisible hand operated in a societal context. The reason Smith had such a positive philosophy of freedom was that he believed that human beings, would behave best if not compelled to merely serve the personal interests of a sovereign. Humans had a right to self-determination and to serve their own interests. However, when competition was threatened -- for example, when individuals by fair means or foul gained too much market power and created monopolies -- then it was appropriate for the government to step in. Smith believed that self-interest could prove to be beneficial to others but he did not believe that selfishness was an end in and of itself.

Justice and democracy are necessary for capitalism to function, but the rampant selfishness and lack of compassion advocated by current free market zealots is antithetical to democracy. Smith's Theory of Moral Sentiments, stresses that "justice is the pre-condition for social order. Upon that foundation you will build commerce" (Wight 2003, p. 85). This is a radical notion because right-wing economists have tended to stress that capitalism is what is important, and democracy will 'take care of itself,' contemporary example of China notwithstanding. This was one of the defenses of 'looking the other way' regarding the brutality of fascist and right-wing dictatorships during the Cold War -- it was assumed that there was more hope for democratic development in these nations than in the communist world. The so-called Kilpatrick Doctrine of the Reagan Administration openly stated that it was better to support brutal right-wing dictatorships than left-wing dictatorships, because at least they were capitalistic, and thus were more likely to eventually liberalize (Bodenheimer & Robert Gould 1989). But according to Wight, no system, capitalist or Marxist is bigger than the moral heart of its people: "Institutions don't survive simply because they work, and even work well. Institutions reflect the circumstances of society, and they survive because they're defended by an underlying fabric of moral support" (Wight, 2003, p.54).

The construct of the book is undoubtedly funny. However, to some extent it is also unsupportable -- the Founding Fathers would be horrified if they returned to America today and saw women voting, but that would not justify their antiquated point-of-view. Sigmund Freud's theories are no longer used in the discipline of psychology, which he helped found, because now psychology has more information about the biology of the brain than Freud could have ever known in the 19th century. It is impossible for economists to go back to pre-mathematical models. Smith was writing to defend capitalism and condemn state intervention in the economy by dictatorial monarchs. He cannot be faulted for not conceiving of the more complicated global economy in which we live, but the fact that linear algebra and graphs are used by contemporary economists is not necessarily something to be parodied, as Wight sometimes implies.