Re: [OPE-L] SV: [OPE-L] Smith's socio-economic thought (a reply to Nicky)

From: Dogan Goecmen (Dogangoecmen@AOL.COM)
Date: Thu Nov 30 2006 - 05:41:48 EST

Hi Martin
Thank you for your question and encouraging comments. The concept of  
alienation is a core theme that runs through the all major writings of Scottish  
philosophers. Especially, in the works of A. Smith (TMS and WN), A. Ferguson  
('History of Civil Society'), Th. Reid (esp. 2nd volume of his works) and J.  
Millar (Distinction of Ranks) it occupies a central place.
May I ask you to explore how Schumpeter draws the distinction between the  
history of economic ideas and the history of economic thought. My choice was  
made very consciously because the major Scottish philosophers were very  
skeptical about the concept of ideas.
Best regards
In einer eMail vom 30.11.2006 11:23:14 Westeuropäische Normalzeit schreibt  

Hi Dogan!
I'm just curious, exactly where can we find concepts of  alienation in 
Scottish thought? You wrote:
"Smith and other Scottish  philosophers employ in this connection the concept 
of alienation that needs to  be overcome in social relations;"
I  also agree with your interpretation of Smith, which is very close I 
believe to  the original texts. However, one should always remember the important  
distinction between history of economic ideas, and history of economic  
thought, as Schumpeter pointed out. Many aspects of the Smithian intellectual  
heritage are not obvious if one knows only the ideas.
Many kind  regards,

 Från: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU]  För Dogan Goecmen
Skickat: den 30 november 2006  10:53
Ämne: [OPE-L] Smith's  socio-economic thought (a reply to Nicky)

Hi Nicky, I have changed the heading of our discussion. I hope this is  okay.
What is your response to what you describe? Is it
really as value  neutral  as
you describe or there are some normative aspects  in
this, which we can use to
evaluate whether it is really rational how  these
entrepreuners accumulate
their  individual capitals? As a  reply to this
question Adam Smith does not look
at  what is  necessary from an individual
entrepreneur's point of view.  Rather
he  prefers to look at it from general interets of
sicety's  point of view:
satisfaction of the needs of people and  progress.

Dogan you are right that Adam Smith begins with  the
question of what is socially desirable; however, he
rapidly  concludes that the pursuit of individual
interest leads *naturalistically*  to a socially
beneficial outcome so long as *social* institutions
don't  interfer with the invisible hand of the market.
In conjuring up an  invisible hand as a social metaphor
for the associative mechanism in a  disasssociated
community Smith effectively errects a protective  wall
around the concept of self-interest.  Post-Smith
economists no  longer weighed individual interest
against other social ends.  What is  rational for
individuals is also, miraculously, taken to be
rational for  societies. Indeed, the so-called
value-neutrality of mainstream economic  theory depends
upon the assumption.

Unfortunately, to challenge the  value-neutrality of
self-interest economics from Smith to the present  is
not enough because, as Jerry rightly points out,
modern neoclassical  and new classical theories have
their own critiques of irrationality  inbuilt.  Any
theory of imperfect competition (into which my  Nike
example fits perfectly), or divergence from
equilibrium solutions,  is by definition a theory of

Imo, Marx's enduring  contribution lies in his
alternative conception of the logic of capital  driven
by the value form (money) and, as a result of the
existence of  this *social* form, capital's unique
relation to wage labour.  There  is nothing 'ethical'
in this alternative conception of capitalist logic  as
Marx's investigation concerns what CJ Arthur has
called the 'spring'  or motive force behind capital's
reproduction (and not it's social  desirability, or
otherwise).  In explicating contradictions in  the
development of capital's logic Marx's goes far beyond
any critique  of individualist rationalism, imo.  But I
will have to leave it  there.
Nicky, lets put what you say about Marx and  Neoclassic for the time being 
aside and (bearing our question in mind)  concentrate on Smith, because there is 
lots of clarification necessary as to  how interpret Smith's work. But let me 
remind you that Marx is as much  concerned about the freedom of individuals 
as anybody else in western social  and political thought.
You seem to accept the mainstream interpretation of Smith's work as  offered 
by people like Milton Friedman and F. A. Hayek. But I think that this  
approach fails to grasp the complexcity of Smith's teaching. 
Just some methodological remainders: Smith was and is one of the greatest  
historians of society and the state and as such he approached social  formations 
historically. The main question he poses in this connection is  this: what is 
more advanced and, if you like, better - feudalism or  "commercial society" 
(what we call capitalism today)? He definitely sees  capitalism more advanced 
than feudalism. He wrote the 'Wealth of Nations' long  before the French 
Revolution of 1789.  Therefore, everything he  wrote he wrote also with the aim to 
highlight the advantages of capitalism  compared to feudalism. He uses his 
famous "invisible hand" in this context.  (He uses this metaphor only three times 
in his whole work: once in the Theory  of Moral Sentiments to criticise land 
lords, once in his philosophical essay  on Astronomy and once in Wealth of 
Nations.) In Wealth of Nations when he uses  this metaphor the main question he 
has in mind is this: who do administer  social wealth in feudalism and in 
capitalism? In Feudalism it is adminstered  by land lords, in capitalism, by 
contrast, it is administered by  manufacturers. Now according to Smith Landlords make 
up an idle class because  they waste social wealth. They do not invest it. 
Rather they consume and waste  it for luxary. Manufacturers, by contrast, have 
to invest it because they are  permanently under the pressure of competition. 
In this connection he uses the  metaphor of invisible hand and says that 
manufacturers are lead to contribute  to the benefit of society. They do this not 
consciously, this is not their aim  at all, they pursue their own benefit, 
namely to make profit, but because they  have to invest they necessarily contribute 
to the benefit of society.
Please note that he does not speak of individuals here. He speaks of  
Now, the other aspect you refer to in this connection is the notion of  free 
trade. He explicitly says that free trade is impossible not because the  state 
interfers with the invisible hand of the market but because  manufacturers 
want to defend and expand their monopolies and therefore put the  state under 
pressure to do so. So, Smith says that the greatest enemies of  free trade are 
manufacturers whose interests are always against the general  interets of 
society. This leads him to the famous concept of the night-watch  state. If the 
state is strong that would put manufacturers in a much stronger  position in 
relation to society than they are anyway because of their economic  position.
In your email you refer to the concept of self-ineterst. Again, here I  think 
some clarification is in order. In his work Smith uses the concept of  
self-interest in various ways. One meaning may be called what we refer to as  'life 
project'. The other meaning has indeed to do with economic interest.  This 
distinction is very important to understand what Smith teaches us.
As to the first meaning. Indeed, in this connection, that is, in the  
connection that individuals pursue their life projects, social institutions  should 
interfer as less as possible, because individuals know it better than  anybody 
else what is in their own interests. Smith employs here a different  social 
theory than commercial society. The foundation of social relations when  he 
refers to the concept of life project is mutual sympathy, support, respect  and 
recognition. In short, it is a social theory which envisages a society in  which 
everybody is everyboy's neighbour, in which everybody sees everybody  else as 
his/her second self.
As to the second meaning: However, as soon as economic interests come  into 
play there occurs what he calls corruption of moral sentiments, power  
relations and mutual negation. Market society according to Smith is, then, a  morally 
corupt and is therefore a irrational society.
Smith works then out all sorts of contradictions in commercial society  that 
need to be overcome to turn it into a rational or, if you like, into an  
ethical society. What are these contraditions?
First, structural problems arising from the technical and social division  of 
labour; Smith and other Scottish philosophers employ in this connection the  
concept of alienation that needs to be overcome in social relations; second,  
the dichotomy between use-value and value in exchange (paradox of values),  
that occurs in commercial exchange relations; third, the contradiction of  
interests between different social classes; fourth, the dichotomy that occurs  in 
the relationship of the state and society.
This is the political programme that Smith puts before us if we want to  
establish a rational or an ethical society based on the principle of sympathy.  To 
understand what Smith means by ethical society one has to analyse the  
mother-child relationship. 
I think this indicates also as to how to assess in the case of Nike and  
other companies.
I am sorry if it is too long. But this is the only way to reply to what  you 
say in one passage about Smith's socio-economic and political  thought.
Best regards


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