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CHAPTER 5: Economic Scientists and Skeptical Theologians * - Paul Heyne, “Are Economists Basically Immoral?” and Other Essays on Economics, Ethics, and Religion 
“Are Economists Basically Immoral?” and Other Essays on Economics, Ethics, and Religion, edited and with an Introduction by Geoffrey Brennan and A.M.C. Waterman (Indianapolis: Liberty Fund, 2008).
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Economic Scientists and Skeptical Theologians*
How far should theologians trust economists? That is the question to be pursued but never quite caught in the essay that follows.
As economic issues have taken on a greater perceived importance in public life, theologians have become increasingly eager to discuss them.1 In doing so, they inevitably rely in part on the work of economists. By carefully selecting the economists whom they consult, however, theologians become their own economists to a very large extent. What criteria are they using to pick and choose? How are the theologians deciding which economists to trust?2
Theology and Mathematics
“One suspects sometimes,” the economist Kenneth Boulding observed more than thirty years ago, in a debate with the theologian Reinhold Niebuhr, “that there are only two rational sciences, theology and mathematics, and that all differences arise from the first and agreements from the second.”3 A substantial number of economists today would give a hearty second to the thrust of Boulding’s comment.
Many contemporary economists see their discipline as a branch of mathematics, in the enlarged sense intended by Boulding. They believe that the systematic, logical procedures of science are gradually producing a body of reliable knowledge about economic processes that deserves public acceptance. They also believe that the introduction of theological considerations, again in Boulding’s enlarged sense of the term, into the discussion of economic policies is more likely to confuse than to advance the cause of understanding and consensus. Milton Friedman spoke for many contemporary economists when he wrote:
I venture the judgment . . . that currently in the Western world, and especially in the United States, differences about economic policy among disinterested citizens derive predominantly from different predictions about the economic consequences of taking action—differences that in principle can be eliminated by the progress of positive [i.e., scientific] economics—rather than from fundamental differences in basic values, differences about which men can ultimately only fight.4
Friedman did not mean to say that values cannot be rationally discussed, since he has himself often argued on behalf of particular values. It is “fundamental differences in basic values” about which Friedman says we can “ultimately only fight” if we disagree. Since we always seem to be able to find further arguments to support any values we’re defending, we may never reach the point at which fighting is our only remaining recourse. Nonetheless Friedman and Boulding are advancing a significant claim, which we might state as follows: Debates about economic policy are likely to proceed more satisfactorily if they focus on “the economic consequences of taking action,” or the causal connections that the science of economics can establish, than if they wander off into theological issues or questions of basic values.
Science and Ideology
Boulding and Friedman both published the comments quoted in 1953, a decade before Thomas Kuhn published The Structure of Scientific Revolutions.5 Kuhn’s influential account of the role that paradigms play in the practice of any science raises serious questions about the sharp distinction between “theology” and “mathematics.” Widespread acceptance of Kuhn’s analysis has made it much more difficult for economists to ignore or dismiss charges of ideological distortion at the root of their work. The objectivity and value neutrality of properly conducted economic inquiry has had to be defended in recent years against the claim, coming from many directions, that economics is an ideology as much as it is a science. And theologians, upon being told that they are ignorant of economic science, can now more effectively reply that economists are in turn unaware of the hidden “theology” undergirding their scientific claims.6
Whether economics is a science, an ideology, or something of both, this much is clear: the conclusions that economists reach in the course of their inquiries must be believed if they are to be acted upon. And since economists are seldom kings, even the most solidly-established conclusions of economic science will have to be accepted by a large number of non-economists if they are to have any effect on public policy. People will have to be persuaded that what economists say they know is both true and relevant to the issues at hand.
When it comes to persuading theologians, mainstream economists operate under a severe handicap. By “mainstream” I mean those economists who believe that price theory, now often called microeconomic theory, is a powerful aid toward understanding the social interactions that we refer to as “economic activity.” The handicap under which mainstream economists labor in their efforts to persuade theologians is the basic hostility of the theologians toward what they take to be the micro-economist’s presuppositions. What seems initially plausible and, in some cases, almost undeniable to the mainstream economist will frequently strike the theologian as either immoral or absurd and possibly both. As a result, theologians tend to support or construct their positions on economic issues by consulting primarily economists who reject price theory or make little use of it.
The Influence of Adam Smith
Adam Smith is at the root of the problem. It is his conception of the way that economic systems work which modern theologians find objectionable when they encounter it in the analyses of contemporary economists. Smith taught that economic systems are coordinated by the pursuit of self-interest, and that they actually function more satisfactorily when participants aim at their own advantage than when they intend to pursue the public interest. Government direction of economic activity is neither necessary nor desirable, according to Smith, and it is seldom successful when it tries to divert resources away from the applications to which their owners prefer to put them.
Theologians object to the individualism and selfishness that seem to be assumed and endorsed in the Smithian approach. They are not willing to grant that social systems can be effectively and satisfactorily coordinated by the interplay of self-interested actions. They believe that a morally acceptable social system must offer a larger role for altruism, benevolence, and public-regarding actions. The Smithian system is condemned in their eyes by its rejection, as unnecessary and even counterproductive, of conscious efforts to promote the public interest. “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner,” Smith writes, “but from their regard to their own interest.”7 And again: “I have never known much good done by those who affected to trade for the public good.”8 The statesman, moreover, who would attempt to tell private people how they ought to use their resources, would be assuming an unnecessary and dangerous authority, Smith says, and one “which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”9 All this is a scandal to the modal theologian of today.
The Smithian perspective nonetheless lives vigorously in the work of mainstream economic theorists. It is sometimes suggested that Adam Smith is alive and well only at such outposts as the University of Chicago. It would be more accurate to say that Smith lives almost anywhere that economists congregate. The exception would be those circles in which microeconomic theory is deliberately denigrated, or where economists are in conscious rebellion against the mainstream tradition. Unfortunately, many of Smith’s supporters help to perpetuate an erroneous notion of the Smithian vision.10 Their misrepresentations may have contributed to the rejection of both the Smithian view of society and the insights of economic theory into social processes. A re-examination of Smith’s actual doctrines might therefore go some distance toward overcoming the difficulties that economists currently experience in their efforts to communicate with theologians and other cultured despisers of economic theory.
The Smithian Perspective
In the first place, it isn’t selfishness but self-love that motivates people in the Smithian world. While self-love or self-interest is certainly capable of producing selfish behavior, it need not do so. Self-interested behavior is morally neutral, embracing as it does acts of laudable generosity as well as despicable greed. In the Smithian world, people aim consistently at the accomplishment of their own purposes.11 Whether those purposes are commendable or contemptible will vary from person to person and case to case. To condemn self-interested behavior, as Smith uses the concept, amounts to condemning purposive behavior. All purposive or “rational” behavior is self-interested; the moral quality of that behavior depends largely upon what purposes people find it in their interest to pursue.
Adam Smith believed that most people wanted above everything else to “better their condition.” The desire to better our condition, Smith says, “comes with us from the womb, and never leaves us till we go into the grave.” It is “uniform, constant, and uninterrupted,” so that “there is scarce perhaps a single instant in which any man is so perfectly and completely satisfied with his situation, as to be without any wish of alteration or improvement of any kind.” Moreover: “An augmentation of fortune is the means . . . the most vulgar and obvious” by which to better one’s condition, and so the means that most people choose to employ. Consequently, most members of all classes in society work diligently and attempt to save and prudently invest some of the income that their efforts produce. This dominant behavior on the part of the members of society promotes the division of labor and hence an expansion in the per capita production of the “necessaries and conveniences” of life.12
The desire to better our condition thus advances the welfare of others, and especially of the large majority, the laboring classes, who through this process come to be more adequately fed, clothed, and lodged.13 But the nagging question remains, is not this urge to better our condition, whatever its effects, excessively individualistic in intention and therefore in moral quality?
From Vanity to Virtue
It is not, at least not in Smith’s view. It is fundamentally a social urge, to begin with, because its final object is enhanced standing in the opinions of those whose opinions matter to us. Our ultimate concern, in short, is with status. It is true that this concern will often be no more than vanity; but it can also express itself as a love of true glory, or even, among the best of us, as a love of virtue. Vanity prompts us to appear praiseworthy even when we are not. The love of true glory, however, prompts us toward behavior that genuinely merits praise. And those who love virtue will do what is praiseworthy even if, because of the ignorance or misunderstanding of other people, they expect it to bring them unmerited condemnation. The opinion that matters to those who love virtue is the opinion of “the impartial spectator.” There would not seem to be anything inordinately individualistic or selfish in this view of human nature and social action.14
The claim that Adam Smith defended a society based on “unrestrained individualism” is wholly misleading. In any society, the freedom and power to act is always restrained by the freedom and power that others have. The issue is never whether individuals should be unrestrained, but rather what restraints ought to operate. A respect for justice is one restraint. When Smith argued that everyone should be “left perfectly free to pursue his own interest his own way,” it was only on the important condition that “he does not violate the laws of justice.”15
The Significance of Justice
The Wealth of Nations is peppered with condemnations of those who perpetrate injustice by violating the rights of others. Most of these indignant outbursts are directed against businessmen—“merchants and manufacturers”—who use their knowledge and influence to secure inequitable legislation. Legislation is unjust, in Smith’s view, when it promotes the interests of one group of citizens by imposing unequal restraints on the actions of other groups. “To hurt in any degree the interest of any one order of citizens,” Smith says, “for no other purpose but to promote that of some other, is evidently contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subiects.”16 The “invisible hand” will not extract the public good from the pursuit of private advantage when private advantage is pursued by means of unjust laws and regulations. The Smithian system is fundamentally misunderstood by anyone who ignores the role Smith assigns to “the laws of justice” in shaping legislation and restraining self-interested behavior.
Contemporary economists in the mainstream tradition are generally much less interested than Adam Smith was in questions of justice. It is nonetheless the case that supply curves and demand curves, the basic all-purpose tools in the economist’s analytical kit, presuppose an extensive consensus on rights and obligations.17 This consensus is usually taken for granted in expositions and applications of economic theory, and attention is focused on people’s responses to changing relative prices. The essential background of stable, agreed-upon values is simply regarded as given. It is easy to lose sight of what we take for granted; but it would be a serious error to claim that conceptions of fairness make no important difference to the way an economic system functions.
From Moral Philosophy to Economic Science
It did not take long, however, for Adam Smith’s successors to filter out the explicit ethical and political concerns that mark The Wealth of Nations. Within fifty years from the time of his death in 1790, the moral philosophy of Adam Smith had been thoroughly transformed into the science of political economy.18 Such typical Smithian terms as “generally,” “I believe,” “it seems,” and “perhaps” disappeared in favor of sharply etched postulates, principles, and laws. Adam Smith reasons with the reader; his successors, the political economists of the nineteenth century, are more eager to enunciate the truths that science has discovered.
Adam Smith, it is interesting to note, never thought of himself as laying the foundations for a new science of economic systems. He never even recognized the existence of any “economic” system that could be distinguished from the total social system in order to discern the laws governing its operation.19 Economic goods, economic motives, economic problems, economic factors—these are all anachronisms when we use them to interpret social thought prior to the nineteenth century. Smith does not speak of economic goods, but of “necessaries and conveniences.” He knows nothing of “economic motives,” though he does recognize such desires as those to better our condition, to augment our fortune, to advance complex projects, or to domineer over others. His book is not about economic factors and economic growth, but an inquiry into the nature and causes of the wealth of nations.
Whether or not economics today can properly be called a science, it is certainly a specialty. It was not a specialty in Adam Smith’s way of thinking. It became a specialty, with practitioners who claimed for themselves a superior knowledge, at the beginning of the nineteenth century. And in the last quarter of the nineteenth century, economics was academicized, acquiring its own professors and an accepted place in the structure of universities. The inevitable consequence was accelerating esotericism: economics grew steadily more technical, and its research results became ever more inaccessible to the non-specialist, except through faith.
That brings us back to the question with which this essay began: Why should theologians (or anyone else) have faith in economists?
The Problem of Credibility
This question has bothered economists almost since their specialty was born. Convinced that their gnosis includes vital truths, knowing that these truths have to be accepted by persons in power if they are to affect public policy, and aware of all the interests and prejudices eager to refute their doctrines, economists have frequently worked at enhancing their credibility.
The strategies have varied. Some have opted for rigorous deductions from undeniable axioms in order to construct irrefutable conclusions. Ricardo and his friend James Mill took this approach early in the nineteenth century,20 and Ludwig von Mises used it in the twentieth century.21 Though the preference of economists today for rigor over relevance is primarily a response to professional pressures, it has roots in the desire to construct arguments that produce inescapable conclusions. It doesn’t succeed as a strategy for authenticating economists’ results for the simple reason that non-specialists, being in no position to appreciate a rigorous argument, cannot be demolished by one.
In recent years a substantial number of economists have employed a “testable implications” doctrine to secure credibility for their views amid the clash of opposed opinions. According to this doctrine, competing claims can be judged by extracting their implications and comparing these implications with what we actually observe.22 This is certainly a commendable scientific procedure. But it rarely succeeds in settling policy disagreements, because there is always enough uncertainty and ambiguity in the application of the procedures to justify continued skepticism on the part of those who find the results unpalatable.23
Our question remains unanswered. When can theologians have confidence in economists? How are non-specialists to determine which, if any, of the contending claims that economists put forward are sufficiently well established to warrant acceptance?
The Concern for Policy
The question would appear to be most urgent for those who want to affect legislation or otherwise change the course of public policy. Shall we deregulate taxicabs in our cities? Remove price controls on natural gas? Bring the unemployment rate down below four percent? Impose restrictions on imports in order to reduce the international trade deficit? Put the Federal Reserve under tighter political control? Adopt an industrial policy in imitation of (or in defense against) the Japanese? What is the actual status of the social security system, and what should we do about it? How should health care costs be contained? What ought we to do about the “feminization of poverty”? Should we legislate equal pay for work of “comparable worth” as we legislated “equal pay for equal work”? What would be the probable consequences of various tax reform proposals?
Probable consequences—those are what we would like to learn about, and what the science of economics should be able to predict. “Different predictions about the economic consequences of taking action” are, according to Milton Friedman, the basic cause of disagreements about economic policy and also differences that economic science is capable of resolving—at least in principle. But can it do so in fact? The evidence that it can is extremely weak.
There are a handful of public policy issues where one might argue that economists’ predictions determined the outcome. The progressive deregulation of commercial airlines in the United States and the abolition of the Civil Aeronautics Board at the beginning of 1985 would be a prime exhibit. But even in this case one could also make a good argument for the essential irrelevance of economists’ predictions to the outcome, and the importance of fortuitous political factors. A decision that is based on scientific analysis ought to be firmer and less easily reversible than this decision would seem to be. (While the CAB has been abolished, most of its powers are latent in the hands of still-existing agencies, such as the FAA and the Department of Transportation.) In the city of Seattle, economic analysis led a few years ago to the deregulation of taxicabs. The cabs have recently been extensively re-regulated, against the nearly unanimous advice of economists.
There is a sizable set of policy issues on which something close to consensus exists among economists, but without any noticeable effect on policy outcomes. Farm price supports, rent controls, and legal restrictions on speculators of various sorts are regularly discussed in economics textbooks, because they are such clear examples of policies that fail to produce the consequences used to justify them—and because the policies conveniently remain in place, thereby illustrating both the applicability of economic analysis and the inability of that analysis to affect policy.
Who Cares What Economists Say?
Perhaps we should alter our original question. What difference does it make whether theologians trust economists, or what criteria theologians use to choose the economists on whom they rely? If it only matters because theologians want to affect policy outcomes, then it wouldn’t seem to matter much at all. Public policies don’t depend to any noticeable extent on the predictions that economists make about the consequences of taking action, or, for that matter, on the policy manifestos that theologians compose after consulting the economists of their choice. Public policies in a democracy grow out of a complex process of interaction among many people’s interests and values, a process that no one really controls and which even the most powerful political figures in the society can usually affect only marginally.
It isn’t that the opinions of economists don’t matter. They obviously matter to those in business and government who seek economists’ advice and pay for it, in the hope that economists can tell them things they want to know. Economists’ opinions also matter to their peers, because economics is played by the rules of the game of science, which call for specialized research within a fairly well-defined framework plus evaluation of the results by other members of the specialty. But if the opinions of economists shape the course of public policy, they would appear to do so only in a very slow and indirect way, and not at all in a way that could arouse legitimate fears of technocracy.
Much of the concern that one encounters today about economists as potential technocrats is a hangover from the 1960s, when economists were claiming to have discovered the secret of uninterrupted economic growth with perpetual high employment and no serious inflation. Those were the days in which many economists saw themselves as philosopher-kings, or at least as philosophers who had the ear of kings. The actual record of the U.S. economy with respect to growth, employment, and price stability since the 1960s would be grounds for an anti-technocrat revolt if economists actually possessed even a fraction of the influence they claimed to have.
The Primacy of Politics
The partially-comforting truth is that politicians only heed economists when doing so is likely to serve the politicians’ interests. It matters very little whether our elected officials find Keynesian or monetarist theories more convincing; whatever their theoretical convictions, the actions they actually take will be aimed at the next election. This is not said in any spirit of contempt for politicians, who are constrained by the system in which they find themselves. That system is one in which politicians cannot survive except by paying attention to the interests of those who are paying informed attention to the politicians’ decisions.
There is a “logic of collective action” that constrains the political process in a democracy, and it does not seem to produce a defensible version of the public interest from the welter of self-interested decisions that people make.24 That is one major reason why the analyses of economists have so little effect on policy. It is also a cogent reason for doubting that the inadequacies of the economic system can be corrected by the political system.
The Problem of Credulity
Why, then, should theologians trust politicians? Perhaps they don’t. They do, however, reveal a quite remarkable degree of confidence in “government.” One could easily compile a long list of statements by theologians, issued steadily over the past century and more, in which the deficiencies of the “economic” system are presented as conclusive arguments for government action. Is it by definition or by divine ordination that government always promotes the common good? Theologians have often ridiculed the “faith” of mainstream economists in the “invisible hand,” largely ignoring the actual analysis in which economists have specified the process by which, the circumstances under which, and the extent to which the pursuit of private interest promotes an efficient allocation of resources. By what process, one wonders, do these theologians suppose that government officials are constrained to promote a just assignment of tasks and benefits?
One of the principal criteria which theologians seem to use in selecting the economists to whom they will listen is the degree to which the economist exalts political processes over “economic” ones. If there is a persuasive rationale for this preference, it is never spelled out. The moral preference of many theologians for community over individualism seems to predispose them to favor “government” over “business,” without much regard for the ways in which governments and businesses actually perform.
The manifest failures of twentieth-century governments to produce results commensurate with their rhetoric has had an astonishingly small effect on theological ethics and church pronouncements. Even the murderous tyrannies that have been constructed in our century by governments acting in the name of noble ideals seem to be regarded by leading church officials more as aberrations that will be corrected next time than as evidence of some fatal flaw in the social vision of those who want a further politicization of contemporary social life.
It takes more than evidence to refute an ideology, and contemporary theologians who write about economic issues are almost always in the grip of a recognizable ideology. Since that word has so many pejorative connotations, however, let’s substitute “social vision,” and say that contemporary theological pronouncements on economics tend to reflect a particular social vision, one that is favorably disposed toward “government” and suspicious of “business.”
The pot is not trying here to lecture the kettle on its blackness. The policy-relevant work that economists do also reflects a particular social vision or ideology. Because economists generally want to be mathematicians rather than theologians (in Boulding’s sense), they are usually less willing or able to recognize ideological elements in their own work. A definite social vision does nonetheless inform economic theorizing and its empirical applications. Among mainstream economists, that vision is still in large part the social vision of Adam Smith, in which “society” is the product of many people’s intentions but not of anyone’s design.
None of us can reflect intelligibly upon the social order without the aid of such an informing vision, a set of preconceptions that pose the questions we will ask and that answer the questions we haven’t thought to ask. Mathematics, we might say, will always have its theological foundations. Moreover, the way in which economists influence the formation of social policy is primarily through their elaboration of a vision that proves attractive and compelling, rather than through their specific research output. Economists read and respond to “mathematical” studies; but citizens consult the “theology” which they find these studies expressing or supporting.
It is difficult to evaluate and discuss competing social visions. That is why it sometimes seems that “theology” is the source of all our differences and that we could come to agreement if only we resolved to focus exclusively on “mathematical” issues. But this is an illusion. Our “mathematical” discussions progress only insofar as they take place within a common, accepted “theological” framework. Absent this consensus, our progress will be largely toward mutual incomprehension.
Toward Choosing a Social Vision
A compelling social vision will be one that both explains and inspires. It will be able to account satisfactorily for the flow of events; but it will also give adequate weight to the values that emerge from those events. The Marxian vision survives and often prospers among theologians, despite its well-known explanatory and predictive failures, largely because it seems to give such vigorous support to the values that they cherish. The considerable explanatory power of the Smithian vision, by contrast, is generally not recognized among theologians, largely because they don’t give it a sympathetic hearing. They are prejudiced because of the support which it seems to offer to individualism, selfishness, and materialism—not a highly respected trio in most theological circles.
The Smithian vision deserves a more attentive hearing. The units of analysis in Adam Smith’s social vision are individuals; but the object of understanding is the cooperation that occurs among them. Self-love is assumed; but so is respect for the laws of justice. The Smithian vision tells us how the supply of “vendible” goods increases in a society; but it also explains the social origins and effects of government, churches, universities, and vocational associations. Human projects, great and humble, are acknowledged and honored in the Smithian vision; but the dangers of pride, pretension, and hypocrisy are also kept in mind, and their manifestations are exposed. The Smithian vision allows for extensive and fundamental social changes over time; but these changes are explained as the product of evolution within a stable framework, and are not assumed to require revolutions more likely to produce disruption than progress.
Most important of all, perhaps, for any dialogue between economists and theologians is that no one is in control in the Smithian vision. Everyone chooses, but all choices are constrained by the freedom and power to choose that others retain and exercise. There is no superior class with a special destiny, no elite ordained to guide the course of history, no secret gnosis to which the uninitiated must bow. In the Smithian vision, no human can prescribe the outcome.
Why is that vision generally so unattractive to theologians in our day? If it could be made more compelling and attractive, at least relative to the available alternatives, perhaps theologians would be willing to trust economists more than they currently do.
[* ] Unpublished typescript, reprinted by permission of Mrs. Juliana Heyne.
[1. ] For a widely publicized recent example, see Bishops’ Pastoral on Catholic Social Teaching and the U.S. Economy, released on November 11, 1984, and second draft, released October 7, 1985.
[2. ] For example, why was Charles K. Wilber, co-author of a recent book titled An Inquiry into the Poverty of Economics (University of Notre Dame Press, 1983), the only professional economist among the consultants to the Ad Hoc Committee on Catholic Social Teaching and the U.S. Economy?
[3. ] Kenneth E. Boulding, The Organizational Revolution: A Study in the Ethics of Economic Organization (Harper, 1953), p. 245.
[4. ] Milton Friedman, “The Methodology of Positive Economics,” in Essays in Positive Economics (University of Chicago Press, 1953), p. 5.
[5. ] Thomas Kuhn, The Structure of Scientific Revolutions (University of Chicago Press, 1962).
[6. ] Theologian J. Philip Wogaman, for example, has tried to describe the ideology that he thinks informs each of the principal schools to be found in contemporary economics, and then to criticize the economics by assessing the ideology. See J. Philip Wogaman, The Great Economic Debate: An Ethical Analysis (Westminster Press, 1977).
[7. ] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, book I, chapter II, pp. 26-27 in the Glasgow Edition of the Works and Correspondence of Adam Smith (Oxford University Press, 1976; Liberty Fund, 1981).
[8. ]Ibid., book IV, chapter II, p. 456.
[10. ] Economists who intend no particular criticism of Smith persist in stating that his analysis presupposes universal selfishness, an inaccurate assertion that rouses immediate moral objections among many people. For example, the eminent British theorist Frank Hahn, in writing a layperson’s account of general equilibrium theory in economics, begins with Adam Smith. He says that Smith tried to explain how order rather than chaos emerged from the actions of “millions of greedy, self-seeking individuals.” Frank Hahn, “General Equilibrium Theory,” The Public Interest (Special Issue, 1980), p. 123. A new book by an economist appraising the market system asserts on the second page: “Adam Smith claimed that nothing more than selfishness is necessary for society to achieve optimal social outcomes.” Andrew Schotter, Free Market Economics: A Critical Appraisal (St. Martin’s Press, 1985), p. 2. Emphasis added in both quotations.
[11. ] F. A. Hayek recommends this way of characterizing the Smithian actor, and points out that freedom to pursue one’s own purposes is as important to the altruist as it is to the egotist. Friedrich A. Hayek, Law, Legislation and Liberty, volume I: Rules and Order (University of Chicago Press, 1973), pp. 55-56.
[12. ] The quotations are all from Adam Smith, op. cit., book II, chapter III. The core of Smith’s argument is presented in pp. 337-46.
[13. ] Smith differed from many of his contemporaries in the great importance he assigned to “improvement in the circumstances of the lower ranks of the people.” Ibid., book I, chapter VIII, p. 96.
[14. ] This summary of Smith’s views is based primarily on arguments presented in The Theory of Moral Sentiments, especially part I, section III, chapter II and part VII, section II, chapter IV. See pp. 50-58 and 306-14 in the Glasgow Edition (Oxford University Press, 1976; Liberty Fund, 1982).
[15. ] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, book IV, chapter IX, p. 687.
[16. ]Ibid., book IV, chapter VIII, p. 654.
[17. ] A vast and instructive literature on the importance to economic processes of clearly-defined rights and obligations has grown up in the past quarter century. The seminal article is Ronald H. Coase, “The Problem of Social Cost,” Journal of Law and Economics, Vol. III (October 1960): 1-44.
[18. ] In France and England, writers could refer without explanation to “the science of political economy” by 1803 or 1804. For instances, see J. B. Say, Traité d’économie politique (1803), J. C. L. Simonde de Sismondi, De la richesse commerciale: Ou, principes d’économie politique (1803), and James Maitland, Lord Lauderdale, An Inquiry into the Nature and Origin of Public Wealth (1804).
[19. ] Thus Karl Polanyi properly (but not consistently) exempts Adam Smith from much of the indictment he levels against the classical political economists for transforming Aristotle’s zoon politikon into Homo economicus. See Primitive, Archaic and Modern Economies: Essays of Karl Polanyi, edited by George Dalton (Doubleday Anchor, 1968), pp. 127-29.
[20. ] T. W. Hutchison, “James Mill and Ricardian Economics: A Methodological Revolution?” in Hutchison, On Revolutions and Progress in Economic Knowledge (Cambridge University Press, 1978).
[21. ] See the methodological discussions at the beginning of Ludwig von Mises, Human Action: A Treatise on Economics (Yale University Press, 1949).
[22. ] The definitive exposition of the doctrine is the essay by Milton Friedman cited in note 4 above. Though identified particularly with the “Chicago School,” the doctrine has had a wide influence on economists’ methodological pronouncements.
[23. ] The deficiencies of the doctrine have often been pointed out, but seldom more concisely and cogently than by Ronald H. Coase in his lecture How Should Economists Choose? (American Enterprise Institute, 1982).
[24. ] The classic text is Mancur Olson, The Logic of Collective Action (Harvard University Press, 1965).