Wednesday, November 17, 2010

Economics: Even Smith Knew...

TORONTO, ONTARIO - Those on the political left often decry the consumer culture of North America (and, for that matter, most of the world). They point out that wealth--at least above a certain threshold associated with rising out of poverty--does not correlate with happiness. Capitalism, they argue, does not serve to foster human happiness.

What I somehow missed in my education is that the oracle of capitalism, Adam Smith himself, actually acknowledged that free market economics does not lead to happiness. I only learned that from reading Daniel Gilbert's "Stumbling on Happiness." Granted, Smith's analysis of happiness was not in "Wealth of Nations" but in "The Theory of Moral Sentiments," a document I had never read. However, it is pretty stunning prose:
In what constitutes the real happiness of human life [the poor] are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.
Not only did Smith recognize that happiness was not correlated with wealth, but he actually believed that people needed to be deceived into consumerism in order to create a sustainable economy.
The pleasures of wealth and greatness... strike the imagination as something grand and beautiful and noble, of which the attainment is well worth all the toil and anxiety which we are so apt to bestow upon it... It is this deception which rouses and keeps in continual motion the industry mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which ennoble and embellish human life...
Contrary to what some on the left might prefer, I don't see this as hypocrisy or as an argument to do away with free market economics. Instead, it demonstrates to me that Adam Smith was an even wiser individual than I already believed, and more important to me, a very human one with more than a reductionist view of human behavior. It doesn't diminish his economic theories, but rather puts them in the appropriate context of advancing technology and standards of living, rather than as an end to happiness.

Rather than indicting Smith, I see these statements as indicting those who take a fundamentalist stance on Smith's theories. Smith understood that free markets were not the most efficient way to happiness--just the theoretically most efficient way to organize an advancing economy. Realizing this leaves room for society to value something besides that advancing economy while still pursuing that growth. Market fundamentalists can't seem to countenance that there is anything other free market principles that might matter. Everyone should learn Adam Smith's economic theories--and learn that he understood they weren't linked directly to happiness, and then reach their own conclusions about how they want to see that reflected in their own lives and in society around them.

No comments: