Our friends at the University of Louisville's McConnell Center launched an interesting program this year in which they are asking authors and experts to tell us why WE should read the books that helped shape them or those that have significantly impacted human history. Through YouTube video lectures and podcasts, these experts will give us core synopses of major works, help us comprehend what we might get out of reading them ourselves in the 21st century, and inspire us to pick up a great book or two this year and see where the adventure takes you.

Recently, Amy Willis visited the center to talk about her favorite thinker. Check out the video of her talk below, along with a lightly edited transcript of her lecture.

Good afternoon. My name is Luke Taylor and it's my pleasure to introduce our guests, Ms. Amy Willis, who will discuss why you should read Adam Smith. Ms. Willis is a senior fellow and director of the online libraries and programs at Liberty Fund Incorporated, where she leads efforts to make the ideas of Adam Smith and economics both accessible and engaging to broad audience. This includes overseeing Liberty Fund's newest online project, AdamSmithsWork.org. She also serves as producer for the popular podcast EconTalk and The Great Antidote that develop innovative resources for both students and educators teaching economics at many levels from high school to graduate programs. Ms. Willis enjoys facilitating engaging dialogues based on liberty markets and civil society. Please join me and a warm welcome to Ms. Willis.

Thanks, Luke. Hi everybody. How you doing on a Friday afternoon? You look pretty bright-eyed and tailed for a Friday, and please, thanks very much for having me. So here we go. You think Adam Smith, it's just about capitalism and the invisible hand. If you do, I'm going to ask you to think again. Perhaps you think about him as just another dead white guy. I mean that is true, but that doesn't mean that he has nothing to say to us today. Maybe you don't know anything about Adam Smith at all, and that's okay too. Smith was a moral philosopher, a critic of centralized power and a believer in virtue and human flourishing, and he still matters. Today I want to reacquaint you with someone you've probably heard of but maybe haven't met on his own terms, and that's my good buddy Adam Smith. I also want to make the case that his work remains very much worth reading today.

Now, if you've ever taken an economics class or you pay any attention to political debates, you've probably heard Smith invoked as the father of capitalism, the prophet of greed, or that dude who talked about the invisible hand. Well, there's a lot more to it than that, and what you've heard may not be exactly true. So in digging into this a little bit, I want to suggest that Smith deserves a place at the table, not just in economics departments, but in literature, history, philosophy, political science, and in the hearts of curious minds everywhere. Let's start with the basics. Who was Adam Smith? He was born in 1723 in a small town called Kirkaldy in Scotland during a time that we now know of as the Scottish Enlightenment. It's an extraordinary era that gives us thinkers like the philosopher David Hume, the natural scientist, James Hutton. It also coincided with the American founding, and these Scots had a considerable influence on this side of the pond as well.

Smith in particular was suggested as regular reading by folks like John Adams and Thomas Jefferson. Most of the founders had Smith's works in their personal library, but that's a bit later in his life. When Smith was young, he studied at the University of Glasgow and later at Oxford, and he had a lot to say about his professors there. Let's just say they would've been very happy that there was no such thing as rape my professor in those days, his criticisms of his professors weren't personal attacks, but they were part of a broader argument about incentives, institutions, and educational quality, a criticism that was emblematic of much of his work. Smith argued that many of the university's professors were paid fixed salaries regardless of whether students ever showed up for class or ever learned anything. This meant they had little incentive to be engaging or effective. Smith suggested that things would work a lot better if students paid their professors directly after each lecture based on how good they thought it was.

Try that out on some of your professors someday; I'll be really interested to hear how that goes. But he wasn't just a bookworm, he was a deeply curious person. He was fascinated by morality, human behavior, institutions, and just how societies work even when no one's in charge or directing them. He spent much of his days just wandering about and observing people keenly in their many interactions, whether in the marketplace, in schools, in churches, in public houses, wherever he could find people. So eventually Smith two becomes a professor and he subsequently writes two major works, The Theory of Moral Sentiments in 1759 and The Wealth of Nations in 1776, a date that may ring some bells. Here's the first surprise. He considered that first book, The Theory of Moral Sentiments, which I will generally refer to as TMS as his more important book. He was much prouder of that.

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He revised it six times over the course of his lifetime. He thinks that's the better book, and I agree- you should start there. But the second one, the Wealth of Nations is much better known today and that's just the first surprise. What most people know about Smith today is rife with misconceptions. So let's tackle a couple of those first. First, let's start with the biggest one. I saw some nods earlier, so I know you've heard this before, that Smith is the father of capitalism. Well, this one really misses the mark. First of all, the word capitalism doesn't even appear in the English language until about a hundred years after Smith is dead. Now, it is true that Smith described and defended market economies, but he spoke of the market-based society as what he called a system of natural liberty, not capitalism, which wasn't even a word.

He was deeply interested in ethics and in the moral foundations of society, and that's the subject of his first book. While he's most commonly known today as the father of economics, even that's not quite true. As I mentioned earlier, Smith was a professor of moral philosophy, never a professor of economics. In fact, like capitalism, there really was no such thing as economics in Smith's day. As his career progressed over the years, and particularly with the publication of his second book, the Wealth of Nations, the field of political economy began to emerge. This was more of a broad interdisciplinary approach that combined economics, politics, philosophy, history, and ethics to study how society organized production, distribution, and power. That's where his head was, not in micro or macro models, financial markets, business cycles, anything like that. That doesn't mean economics today doesn't have anything to learn from Smith, which brings us to the next big misconception that I tend to encounter- that Smith was all about selfishness or greed.

So here's the thing, Smith barely mentioned “selfishness” anywhere. You may have heard the term homo economicus, which is a simplified model of human behavior that we use in economics today to describe individuals as rational, calculating and self-interested agents who make decisions only with gain in mind, whether that's satisfaction, whether that's profits, whatever their motive. This homo economicus dude sounds like kind of a jerk, and I think Smith would actually agree with that. Smith didn't talk about selfishness, but he did talk about self-interest and even more importantly, what he called self-love. So let's see how Smith used selfish where he does, which as it happens, occurs in the very first line of his very first book, which opens as follows: 

So Smith says that a fundamental part of our nature is our concern for the plight of others- even, and perhaps especially, when it has no bearing on our own situation whatsoever. Later in the TMS, Smith uses the term self-love rather than selfishness as a broader term for our natural concern, for our own wellbeing. Again, he says, “every man is no doubt by nature first and principally recommended to his own care.” That means that the only person who really knows what's best for herself is herself, and it's only natural to care about yourself in that way. First, in the Theory of Moral Sentiments, he argues that humans are driven not just by self-interest but by sympathy- what today we might call empathy, another word that didn't really exist in the lexicon of Smith's Day. We care about others and we want their approval. We're social beings.

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You might think about Smithian sympathy in terms of concentric circles. It begins with your regard for your own self-care, as I just mentioned, and then your circles of sympathy extend outward, reaching out next to your immediate family, then to your friends, then to your classmates, then to your community, and so on and so forth. But there is a bit of a tension there when you think in terms of circles. If you follow that circle analogy, you see that your sympathy for others is diminished the further out in the circles that you go. It's not that we don't care about people who are further away from us in sympathy, but it's hard and it's unnatural to care for them as much as you care for the people closer within. But this also means that one should have mutual sympathy with anyone and everyone they encounter within those circles.

It's just a matter of degree. So while Smith is focused solely on our moral lives in this book, the TMS, it's important to understand this. When we start talking about our economic lives, which is the subject of the second more famous book, the Wealth of Nations, those with whom we engage with in markets also have a place in our circles of sympathy and their happiness will concern us as well. Some of them may be closer. When you go to the farmer's market and you know the farmer from whom you buy vegetables or fruits. They may be further away, they may be Amazon or Walmart or wherever you're ordering something from, and you may not have personal contact with them at all, but the same rules of behavior Smith thinks would apply even though that behavior is tempered by some sympathetic distance as we get further out in our circles.

So let's move from self-love to self-interest again. Smith is exceedingly careful with the terms that he used. Self-interest is not selfishness and he doesn't use that term again. So in the Wealth of Nations, this is probably the most famous quote from Adam Smith of all he says: 

So many people misinterpret this as well. They don't care anything about you. They just want to sell their goods so that they can make their own living. So here, self-interest does mean individuals pursuing their own goals, and that can include economic ones like that within the framework of voluntary exchange. This form of self-interest drives mutual benefit through trade and cooperation, but not selfishness or greed. For Smith, self-interest is a natural and productive motivator in markets, but also in non-market interactions.

It's simply the idea that people purposefully go for their own individual ends and act with those ends in mind and that only the individual has the complete knowledge of what those ends might be. Those ends might be monetary in nature. It might be the case that the butcher really only does care about getting money for his meat, but to Smith giving money to your favorite charity, for example, is just as self-interested as paying for goods and services in the market. But he also says it's only in free markets that this level of mutual benefit can occur because again, only the individuals involved can know their ends and Smith wants them to be able to pursue those ends in the way they best see fit. While Smith argued for fewer restrictions on commerce, he also recognized there was a need for the government to provide some essential services to enforce contracts.

What if the beef that you buy is bad, right? Maybe there might need to be recourse for that. He believes in all of that. He wants to maintain the rule of law so that markets can flourish. But this nuanced view, which is not typically attributed to him, excuse me, accepts that some regulation and some work on the part of the state as necessary to ensure fairness and stability in markets. But we still can't forget about sympathy. It keeps coming up because sympathy is what makes markets work well. Smith emphasizes that our self-love must be tempered by our capacity for sympathy. And sympathy, again, think more like empathy in today's parlance, is our ability to imagine and care about how others feel. He warns against unregulated self-love and stresses the importance of social norms and moral judgment. So for Smith's self-love is our natural concern for ourselves, which includes our emotions, our desires, our dignity, our self-interest, which again is natural we all have, is the practical pursuit of advantage in markets, but also in interpersonal relationships and any sphere of human interaction.

Neither are inherently selfish and Smith's view, but they must be balanced by moral awareness and social interaction by sympathy. The good news is Smith believed that we have within our own breasts the great arbiter of sympathy. He calls him the impartial spectator. Some people think of the impartial spectator as like a conscience, like the little gal sitting on my shoulder, which tells me when I'm making a good choice and when I'm making a bad choice. But I think it's a little bit more than that. Your impartial spectator is a little bit more like a moral mirror. Say that three times fast. I'm glad I got it out. Once the moral mirror reflects thoughts and actions back at you in the way that you think others are likely to see them, the impartial spectator also learns along with you. It internalizes this imagined viewpoint of others.

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So you're constantly imagining what other people would think of your actions, your speech, your motivations. The more you engage with others, again, whether it be in the market, in the classroom or in the pub, the more social cues and moral norms your impartial spectator picks up, and that makes you better able to do or act or speak appropriately in your next interaction. It helps you temper your self-love with sympathy and direct your self-interest toward morally and socially acceptable ends. Think of it as the Scottish Enlightenment version of a large language model. It will build with repeat interactions. Okay, so back to the wealth of nations and the butcher, the brewer and the baker. They do not need to care about you for the system to work, but they might. It's also likely that when they see they've made you happy via an exchange, they'll feel happy in turn.

Likewise, if you're unhappy with your interaction with them in the marketplace, they'll probably be unhappy as well. So in other words, yes, people pursue their self-interest; the butcher, the brewer, and the baker need to feed their families or earn money for their vacation or whatever it is. Their own motivations may be, but they also want to be seen as good. They want not just to be loved but to be lovely. That's another little tension at the heart of Smith's work. To be loved to Smith is just as it sounds- to be liked, to be praised, to be admired by others, but it's not enough just to be loved. People also want to be lovely, to actually deserve that love through virtue, integrity, and proper conduct. In other words, we don't just want to approval, we want to earn it by being the kind of person who ought to be approved of to be loved isn't enough.

You want to aspire to be lovely. So in fact, I would argue that you can't understand the motivations of the butcher, the brewer, the baker, or the entire Wealth of Nations for that matter, without understanding what Smith says about sympathy in the Theory of Moral Sentiments first. Okay, one more big confusion about Smith. Smith as the champion of unfettered free markets or the profit of greed. You've probably heard people say that markets when guided by the invisible hand will naturally lead to the best outcomes. That's true, but again, it's also more than that. Smith only uses the phrase the invisible hand two times in all of his works once in each book, and then very carefully. That's actually a really good trivia question if you're ever having nerd trivia sometime, because people will assume that the invisible hand being so closely associated to Smith shows up everywhere. Twice.

People usually talk about the invisible hand in reference to the Wealth of Nations. But remember that the TMS came first, and that's also the first place where he uses it. So let's take a look at how he uses the phrase the invisible hand. I'm going to go backwards in the Wealth of Nations. Smith shows how individuals when pursuing their own self-interest can unintentionally promote the public good without ever meaning to or even thinking about it. Think back to the butcher or the brewer and the baker. They sell you their steaks, their suds, their sourdough, all out of their own self-interest. In turn, they get money to buy sweaters, shoes, and soap from other people all with much less effort than if each of those people had to produce all of those things themselves. That's the easy part, right? That makes sense. So here the invisible hand refers to the unintended economic benefits that emerge when individuals follow their own interests in a system of voluntary exchange and cooperation.

Okay? Market efficiency, division of labor. That part's easy to understand. In the TMS, the context is a little different. It's more about morality and unintended social order, not efficiency or market or commercial order. So here's one example. Smith argues that the rich pursue luxury. They pursue status, they pursue their own pleasures, but in doing so, they inadvertently are supporting others. They create demand for labor, for services and so forth that ends up resulting in a distribution of resources that benefits many, excuse me, especially poorer people, even though no one intended that outcome. So here the invisible hand represents the idea that self-interested behavior when constrained by social norms and institutions can lead to outcomes that benefit society even if the individual has no awareness or no intention of that goal. In the TMS, the invisible hand refers to moral and distributive consequences. In the Wealth of Nations, it's more about economic coordination and market efficiency.

But in both cases, the invisible hand shows how individual actions driven by self-interest can produce social benefits even when not intended. So I offer all of that by way of explanation of how we should view Smith's corpus. That's a shockingly short period of time for many thousands of pages, but perhaps as yet I've not answered the most important question. Why should you care and why should you read Adam Smith today? 

I'm going to give you three reasons. First, as I've already mentioned, Smith was first and foremost a moral philosopher. His starting question was, what makes a good society? What makes for good relationships, both personal relationships and relationships in a market setting? What are the circumstances that allow humans to flourish and pursue their own happiness? Again, some familiar 1776 words. Also, that's the question that's at the heart of all the humanities and social sciences.

Smith's answer wasn't just about wealth. It was about how we live together, how we judge each other, and how we navigate our desires for success and our need for moral approval. When Smith does talk about wealth, he's inquiring into the nature of wealth and the wealth of the nation, not the individual. We often, myself included, don't use the full title of that second work, which is An Inquiry into the Nature and Causes of the Wealth of Nations. Note, he titles his project an inquiry, not a treatise. He's concerned about wealth in terms of what we would think of as standards of living today. He hopes for a higher standard of living for everybody, especially the poorest among us, and he has some rather grave concerns about too much personal wealth. In the TMS for example, he says he offers praise for people because we admire the rich and the great.

We see aristocrats with their trinkets of frivolous utility, and we want them; we admire the standard of living that they enjoy, but he cautions that that admiration can turn into envy. So it can be a motivational force, but if we let it go too far, it becomes a destructive force, a happy medium, if you will. For example, he tells a really moving story in the TMS, excuse me, about a poor man's son. The poor man's son has been enchanted by riches all his life, and he dreams of rising up to become the richest among his fellows through hard work and ambition the right way, if you will. He sacrifices comfort and peace to chase success during long hours anxiety and much toll to attain that level of luxury. But when he finally achieves his goals, he realizes that the rewards are hollow, the comforts he long for bring him little true happiness, and he is left weary and disappointed.

Another happy medium. But this is definitely not a story glorifying greed when it comes to the wealth of the nation. Smith is offering a blistering critique of mercantilism, which was the popular economic policy of the time, which suggested that what made a nation wealthy was how much money it had, how much gold and silver. Smith said, that's ridiculous. Smith said, the wealth of the nation is in its people, not in the amount of gold and silver. It can amass, and as a nation's people learn to cooperate and to trade with one another. Harnessing the power of division of labor, specialization, and exchange. We can all enjoy more, and that is what will make a nation richer for all its inhabitants. He offers a caveat here too. Life isn't all working, no play for Smith, he worries about the potential deleterious effects of the division of labor, which he describes in many, many pages in a depiction of a pin factory.

Think of the dull, the dull workday today of an assembly line worker doing the same thing over and over again all day every day. He wants these workers to have educational programs and leisure time provided so that they can enjoy one another, build their interpersonal relationships, and attain the happiness that they're looking for, and the government might have to step in to provide some of that if necessary. Admittedly, I will suggest that Smith thinks that state provision of such programs as a last resort, but that's a topic for a different talk. We could do that another day, but I would leave you with his perspective invites a balanced discussion of efficiency versus human fulfillment and human flourishing. The second reason I think you should care about Smith and perhaps read him today is he helps us think critically about institutions, markets, governments, education systems. Smith didn't take any of those for granted.

He was one of the keenest observers of institutions that history has ever seen. He wanted to understand how they work, why they fail, and how they could be made better. Think back to the story about his professors. It's a bold move. I think on Smith's part, he was deeply skeptical of concentrated power, and he always asked, who benefits from having power? That's a question any critical thinker should learn to ask. And let's be honest, today's debates about capitalism and equality, regulation, freedom, they can be a lot more insightful if you let Smith into the room, and especially if you keep his moral guidance in mind. And finally, Smith offers a humane version of freedom. Freedom for Smith wasn't just about doing whatever you want, it was about creating space for human flourishing, materially yes, but also morally and socially, and always orbited by sympathy. And our impartial spectators, Smith's insights into human motivation, our desire for approval, our tendency towards self-interest, and the need for moral norms to act as a guide rail continue to help us better understand how we can relate to each other, both personally and interpersonally.

He believed in the power of voluntary exchange, of education, of free markets, and of mutual sympathy. His vision of a system of natural liberty was grounded in virtue and responsibility, not rampant individualism that makes him incredibly relevant in an age when we're asking tough questions about justice, about community, and what it means to live a good life. Smith is often quoted but rarely read, and that's a shame because he is one of the most thoughtful, humane and insightful voices we have when it comes to understanding how the good society works. So if you've dismissed him as just a market guy or as an economist, I encourage you to take a second look. You'll find a philosopher who understood people deeply care deeply about justice, and believe that ideas when guided by reflection and humility, could help us build a better world. Thanks.