Most people are familiar with Adam Smith’s book An Inquiry into the Nature and Causes of the Wealth of Nations, more commonly referred to as simply The Wealth of Nations. But seventeen years earlier he published his first and less famous book The Theory of Moral Sentiments. This is the book that Russ Roberts sets out to summarize and modernize in his book How Adam Smith Can Change Your Life.
One of Smith’s key ideas that Roberts emphasizes is the idea of the “impartial spectator”, what we might today call a conscience. The concept is that we all operate with this spectator in our heads, judging us, telling us what to do. It is this “impartial spectator” that keeps us on the straight and narrow even when no one is looking. Ultimately, we all want to be seen as good and this is the tool by which we do so.
The book applies this thinking to other concepts like knowing yourself, how to be happy, and how to not fool yourself. I found that all the concepts really struck home for me. They rang true. And I found myself feeling like Adam Smith’s first book is the missing companion to his second.
There is much criticism in the world today for capitalism and markets. They are cold and have led to tremendous inequality. We lament that this system only sees people for their utility. Where is the humanity? It is in the first Adam Smith book! And in the last chapter, Roberts even touches on this.
At the end of the book Roberts points out that Smith’s first book is about the people close to us while Smith’s second book is about strangers. We need to learn to live with both, but in order to get much past subsistence living, we need a way to reliably work with strangers. Markets are how we rely on self-interest to direct public good among strangers. But for those we are close to it isn’t markets or money but culture and the “impartial spectator” that comes from shared culture that directs us. Perhaps the solution here is to combine what we learn from Smith’s two great works about how to deal with both strangers and our loved ones.