A Reviewer's Notebook - 1978/12

Ethics and Economics

Economics did not begin as the "dismal science." It began, in Adam Smith’s The Wealth of Nations, as a grand essay on the consequences of human choice, sometimes statistically predictable, sometimes not, in a field that presumes a framework of law, culturally determined habits, and common notions of justice and morality.

Smith, whose first interests were ethics and jurisprudence, knew that an economist must use deductive logic as much as arithmetic and algebraic thinking if he is to make sense of his subject. It was for a very sensible reason that Ludwig von Mises, reverting to the Smith practice, put his own study of economics into the wider, and eminently Smithian, perspective of "human action," a subject of such vast scope that it brings everything from ethics to physiology, psychology and politics into the picture. The good economist must be a learned man, versed in general history as well as statistics, and with a wary eye for what judges, legislators and bureaucratic administrators do to hobble or direct the choices of millions of marginal bargainers they have never seen.

Smith, the learned Eighteenth-Century man par excellence, backed into his study of economics by way of ethics and jurisprudence, which were the general substance of many of his lectures and of his book on the theory of the moral sentiments. It was the "policeman’s" duty, he observed, to provide cleanliness, safety and a cheap access to economic goods to the members of a society. (By "policeman" Smith meant the politician, or the statesman.) It was only as an afterthought, which came to him when he observed the workings of the mercantilist system of state intervention, that Smith decided the proper way for a policeman to provide for "plenty" or "opulence" was to get out of the way of the producer.

Natural Liberty

Force was necessary to the happiness of human beings when it came to providing for the safety of the realm, and for preventing plagues. Force was necessary to restrain human viciousness—hence the desirability of the common law and a court system. But force, in the marketplace, was an inhibiting thing. "Natural liberty" was the key to the "wealth of nations." The Eighteenth-Century mercantilists, who persisted in using the state to coerce traders, were anti-plenty—and therefore morally delinquent in their approach to the third duty of the policeman to see that people were as affluent and well-nourished as their industry and aptitudes could make them.

The ethical cast that Smith gave to his economics colors most of the bicentennial essays, assembled by Fred R. Glahe for his book, Adam Smith and the Wealth of Nations (Colorado Associated University Press, Boulder, Colorado 80309, 172 pp. 1978, $12.50). For one example, James M. Buchanan of Virginia Polytechnic Institute is preoccupied with "the justice of natural liberty."

If a man’s aptitude is for driving a truck or a taxicab, Buchanan asks, is it just to exclude him from competing for the trade of carrying goods or human beings from here to there? The answer must be that excluding men from markets is immoral. Natural liberty implies equal liberty, and if the "policeman"—i.e., the State—is arbitrary in prescribing licensing processes it must indeed be called unjust.

In his essay on "Smith Versus Hobbes," Joseph J. Spengler of Duke University observes that, in theory, justice may flourish under the ideal collectivist state or under a free economy "buttressed in a minor degree by collectivist supplementation when pronounced externalities are involved." But in reality, so Spengler avers, when the state mixes into economic matters those who control the government apparatus get the cream while the underlying population must be content with the thinnest of skim milk. This is palpably unjust. The market system is much more just in that it tends to promote a high degree of correspondence between individual performance and reward.

Two Views of Man

The difference between Smith’s view of human nature and Hobbes’ view is rooted in a theory of man. Hobbes thought the uncoerced human being would soon revert to the law of the jungle. He therefore supported the leviathan state as a restraining influence. But Smith, according to Thomas Sowell of the University of California in Los Angeles, another contributor to the Glahe book, thought that man, though a striver for self-interest, could be counted on to be held in check by public opinion, the law, and other representatives of morality. The Smith view leads to the limited state as the just state, with the "policeman" exercising his Hobbesian nature only in fighting crime and in defending the realm at its borders.

Another Glahe contributor, Professor William J. Baumol of Princeton and New York University, deals with "Smith Versus Marx on Business Morality and the Social Interest." Curiously, Smith had a much lower opinion of the morality of businessmen than Marx, who tended to see the capitalist as an individual beyond good and evil who served something called the "historic process." Smith trusted the market mechanism to keep the businessman from achieving the monopoly for which his greed might hunger. The "invisible hand," in providing for competition, dictated a moral outcome despite the natural propensity of some businessmen to conspire to limit the market and raise prices. Marx, who thought monopoly was inevitable, was not concerned with individual morals. His "invisible hand" worked through classes, and the end—the seizure of the monopolies by the proletariat—was decreed in the stars no matter how individual capitalists behaved.

The Morality of the Market

Leonard Billet of the University of California in Los Angeles endorses James Buchanan’s ethical choice of subject by calling his contribution "Justice, Liberty and Economy." What particularly impressed Billet about Smith’s The Wealth of Nations is its concern with the immorality of Britain’s treatment of its North American colony, where the "rights of Englishmen" were ignored by the mercantilists of London working in cahoots with a stupid government. Smith’s economic principles, says Billet, "are fundamentally moral principles. They are favorable neither to robbers nor to barons."

Ethics plays a less prominent part in the essays contributed to Glahe by Milton Friedman, Harry G. Johnson and Ronald Max Hartwell. Friedman writes eloquently about the relevance of Adam Smith to the modern day. Johnson is less impressed with Smith’s value to moderns now that the "corporation in its internal activities is organized in a non-market, bureaucracy-like fashion, with decision-making by committee and consensus procedures."

As for Ronald Max Hartwell, he is primarily interested in Smith’s relation to the industrial revolution, which was hardly begun in 1776. Whether Smith foresaw the economic effects of the steam engine seems to Hartwell to be beside the point. Smith certainly knew that the England and Scotland of his time were in a take-off phase in growth.

Man of Letters and Economist

Adam Smith was not only a moralist, he was also a man of letters, an educator, and a clubbable man in a clubbable society. In a fascinating book, Adam Smith: Man of Letters and Economist (Exposition Press, Hicksville, New York 11801, 297 pp., $10.00), Clyde E. Dankert deals, among other things, with Smith as a literary stylist. He remarks in particular on Smith’s fondness for triplicates, such as the "butcher, baker, and brewer" and the tendency of man to "truck, barter, and exchange." The triplicates not only achieved balance, they provided for nuances. Dankert also notes Smith’s ability to combine indignation and elegance of diction, as when he spoke of "that insidious and crafty animal, vulgarly called a statesman or politician." Always the ethical man, Smith believed in "just indignation," which he sometimes tempered with humor and sometimes did not.



(Harvard University Press,

79 Garden Street, Cambridge,

Mass. 02138)

483 pages n $15.00

Reviewed by L. Edward Robbins

RAOUL BERGER, renowned constitutional historian, charges that the United States Supreme Court—a presumed fount of constitutional wisdom—is itself acting unconstitutionally by sitting as a "continuing constitutional convention," revising the Constitution at will. Such action transforms our government from one of several coordinated branches, each equally capable of checking abuses by the others, to a government by the judiciary.

The consequences are ominous. Judges are no less fallible than other men, no less ambitious for power. Their unchecked authority is as antithetical to liberty as that of anyone.

Originally, judicial review was "divorced" from policy-making. It was merely a process through which the Court might void legislative or executive action deemed unconstitutional, and the Constitution’s meaning was determined not by judicial whim or fancy but by looking to the intent of its framers.

Judicial review has now become a power through which the Court participates actively in policy-making. The question posed by the Court on review is no longer whether a particular policy is constitutionally permissible, but whether such policy corresponds to judicial notions of societal "thoughts." Such review infringes the democratic prerogatives of this nation.

Revisionists cry that the Constitution must be continually modified to meet the exigencies of governing a changing nation such as ours. Berger replies that liberty can be enjoyed only through a fixed Constitution which places specific limitations or "chains" on ambitious, self-interested individuals. Further, the Constitution provides expressly for its amendment as exigencies demand. Revisionist interpretations render these provisions a nullity. Thus recourse to amendment is both sufficient and mandatory.

Berger builds his case against revisionism through a detailed analysis of the Fourteenth Amendment. Drawing extensively on legislative history, he argues that the amendment was originally intended to compel the states to secure, through the privileges and immunities clause, only those rights traditionally understood as "fundamental" or "absolute," excluding such matters as legislative reapportionment and school desegregation. He then traces the imposition by the Court of these and other unintended measures through a misplaced emphasis on the equal protection clause.

Needless to say, Berger’s work has not endeared him to many of his onetime liberal fans who relied heavily on his Executive Privilege: A Constitutional Myth (1974) and Impeachment: The Constitutional Problems (1973). They would have preferred that a more lenient standard be applied to the judiciary. But Berger’s scholarly integrity precluded such duality. He has judged the executive and judiciary by the same standard—the framer’s intent—and found them both wanting. 

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