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

From: Martin Kragh (Martin.Kragh@HHS.SE)
Date: Thu Nov 30 2006 - 06:22:58 EST

Hi Dogan,
Basically, as I recall it, the distincion Schumpeter makes is between the factual text, which is thought, and the way these thoughts were conceived by their contemporaries or followers, which is ideas (or as the French say, discourse). 
When it comes to the concept of alienation I admit that your knowledge in Smith is way more advanced than mine. However, in the Wealth of Nations, as I recall it, the concept of alienation only appears a few times, and this is when he is speaking of juridical property, and how it is, or is not, alienated (in different juridical forms). Here the concept is not used in the way you refer to it, as man being alienated in commercial society. In Theory of Moral Sentiments I cannot find the concept at all, even though I haven't studied it so carefully. Perhaps he is using another terminology? If you can direct me to the pages you refer to I would be very grateful.
I have not read the other titles you refer to.
Kind regards,


Från: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU] För Dogan Goecmen
Skickat: den 30 november 2006 11:42
Ämne: Re: [OPE-L] SV: [OPE-L] Smith's socio-economic thought (a reply to Nicky)

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 Martin.Kragh@HHS.SE:

        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 manufacturers. 
        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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