Adam Smith Quotations

Jonathan Schwarz writes in “A Tiny Revolution” (HERE)

“Once Again Adam Smith Betrays the Principles of Adam Smith”

“Several finance professionals just co-wrote a column for the New York Times saying this:

American workers are overpaid, relative to equally productive employees elsewhere doing the same work. If the global economy is to get into balance, that gap must close...the recession shows that many workers are paid more than they’re worth.

Here's Adam Smith, describing columns like this in The Wealth of Nations in 1776:

"In reality high profits tend much more to raise the price of work than high wages. Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

Comment
I agree with Jonathan Schwarz that many people who write on Adam Smith are highly selective in their quotations from him, and also apparently unaware of the context in which his quotation appears.

This suggests that Adam Smith is more often quoted than read in the original from which they quote. Jonathan concludes: “I assume these people just never read anything”, and I agree.

It is not clear from Jonathan’s piece exactly on what grounds the “finance professionals” who contributed to the New York Times piece made their assertions about US productivity. However, it is not clear to me on what grounds Jonathan makes that particular quotation from Wealth Of Nations. *

From memory Smith's reference to the failure to mention the role of higher profits in determining high prices is part of his analysis of higher monopoly profits imposed on consumers by the colonial trade, a most protected business in British affairs, due to the imposed monopoly on the carriage trade (shipping) under the Navigation Acts and the application of marchnats' monopoly trade to and from Britain and Europe.

These monopoly practices enabled Britain to export to the British colonies in North America a wide range of consumer and producer commodities and to charge high monopoly prices in the absence of competition from European rivals.

Moreover, as all colonial exports had to be shipped in British ships with British crews, on the same monopoly basis, the same British traders were able to pay lower prices for colonial goods (nobody else was allowed to compete with them by paying higher prices), and, then charge British consumers high prices to buy the imports once landed in Britain (and other European consumers had to pay higher prices on goods off-loaded and transhipped to the continent).

Adam Smith exposed this highly-profitable, extended monopoly racket in Book IV of Wealth Of Nations. British and colonial consumers both lost out in the racket, though British ‘merchants and manufacturers’ gained from it.

That was Adam Smith’s point about the merchants saying “nothing concerning the bad effects of high profits” and for them blaming the fact of the relatively high wages of labour in the Colonies (compared to wgae sin Britian) on the high prices the merchants charged to British consumers for colonial imports.

It was a con, but Smith saw through it.

Therefore, I don’t think we can use these historical facts to justify, though perfectly warranted, criticism of the “finance professionals” who described US workers today as being “overpaid”. They may well be wrong, but so to Jonathan Schwarz may be wrong too, in selecting Adam Smith’s quotation to justify his criticism of the “finance professionals”.

Incidentally, this foreign-trade racket was highly profitable for thos merchants who risked the perils of the 18th century sea-trade. But some British merchants preferred not to take on the risks, despite the profits, and preferred for "their own security" to stick exclusively with domestic UK trade, which led Smith, having explained these circumstances clearly in Book IV, Chapter ii, paragraphs 1-9, to use the popular 18th-century “invisible hand” metaphor for those merchants who opted out of the colonial trade.

[Apologies for not supplying all the references here, but my Adam Smith library (Glasgow edition of the Works and Correspondence of Adam Smith, Oxford University Press) is in another place, temporarily].

Markets and Panglossian Invisible Hands

Scott Cooney, author of Build a Green Small Business: Profitable Ways to Become an Ecopreneur (McGraw-Hill) writes a slanted piece in Triple Pundit (‘people, planet, profit’) HERE: “Paul Hawken on the State of the Markets”:

“To those that argue the efficient market hypothesis, based on Adam Smith’s theory that the ‘invisible hand’ of the markets will right our course and get us on a path to clean energy, Hawken responded that not only has this not occurred, but that the theories of the free market are even arguable at best. “Markets prove most of the people wrong, most of the time,” he said. Otherwise, they wouldn’t function. It’s a bit like Vegas.”

Comment
Scott’s article primarily is about environmental change, of which I have no comment, and while I have no particular sympathy with the “efficient market hypothesis”, or the rest of the apparatus of the omaginary mathematical markets without humans – a successor to the imaginary market beliefs of something vague called “Providence” inhabited by invisible gods and other superstitions – I am fairly certain, as I can be, that Adam Smith had little to do with any of them.

He certainly did not associate the invisible-hand metaphor with “markets”.

By observation, people make mistakes. Some people are sometimes “wrong” – have to be, otherwise how would a market work if everybody made the “right” decision, perfectly adjusting their efforts with infinite velocity to ever changing signal?

Adam Smith recognized these actualities in noting that ‘projectors’ who make mistakes and lose their capital (or anybody else’s) are in the same unproductive role of the prodigals. Losers of their capital do not reproduce their costs plus a profit, that is, they are unproductive.

Paul Hawken makes his case against markets by misquoting Adam Smith and attributing to him views out of context, which he did not hold. Paul believes certain of Smith's epigones, who justify their fantasy world of mythical general equilibrium outside of any known society of human beings, by trying to give their fantasies authority by linking them to the wholly innocent Adam Smith. They might as well call in Dr Pangloss for support.

[Apologies for not supplying references here, but my Adam Smith library (Glasgow edition of the Works and Correspondence of Adam Smith, Oxford University Press) is in another place - temporarily].

Announcement V

Five Topics

1 First of three moves today (Move 1): Transferring basics and temporary office to my daughter's today and tomorrow (may work on-line between old home and my daughter's for a week or two). Hence, very busy with 1st move boxes and some furniture.

2 From the above event there may well be interruptions to Lost Legacy - please have patience.

Move 2 is when our old house is cleared into temporary storage on 14December (old house changes hands on 18 December).

Move 3 is from our temporary abode with my daughter (her second baby due - imminent this week!) of our furniture and my library from the storage people on 4 February to our new house, a couple of miles away.

3 The need to moderate comments continues - the Chinese spammers continue to make 'comments' (about what I do not know) in Chinese - but the Moderator system on Blogger is 'suspect'. I post to publish and they disappear!

Please could potential commentators post their comments via the email address at the top of the home page?

4 Work proceeds slowly on the 'metaphor in the middle' riddle but it is proceeding very slowly. This is most frustrating.

5 My review/discussion of Murray Wilgate and Shannon C. Stimson, After Adam Smith: a century of transformation in politics and political economy, 2009, Princeton University Press, is held up until at least 14 December, for which my deeply-felt apologies. It is worthy of notice by all Smithian scholars.

Thank you

Gavin

Adam Smith on "Ruin of a Nation"

Ben Stein writes on “Four lessons from the recession” in (19 November) in Fortune HERE which includes this observation:

“And another little note ... my much-missed father used to tell me with great approval Adam Smith's famous quote regarding prophecies of doom for America, "there is a lot of ruin in a nation."

Comment
Another example of a famous quotation from Adam Smith being misapplied in meaning and, in this case, in its location too.

Smith was not writing of “prophecies of doom for America”, a country that did not yet exist when he penned his observation, which was a mild rebuke in fact to an excitable young correspondent overreacting to British reverses in the war of independence waged by the British colonists in North America.

The then young man was John Sinclair (1754-1835) of Ulbster and Thurso Castle, Caithness (in northern Scotland), educated at Edinburgh, Glasgow and Oxford, and called to the English Bar in 1775, aged 21. Sinclair wrote to Smith in 1782 (aged 28, I think, from memory), in a not auspicious year for the King’s course:

“If we go on at this rate, the nation must be ruined. Smith replied: “Be assured, my young friend, that there is a great deal of ruin in a nation” (Adam Smith, Correspondence of Adam Smith, 1977): p 262, note 3, from Sinclair, Corr., i. 390-1).

It most certainly was not a prophesy “of doom for America” – it was a young man’s ill-informed mood-panic about military reverses for the British (particularly the British surrender at Saratoga (Ian Ross, The Life of Adam Smith, 1996, 327; new, second edition about to be published by Oxford University Press).

The only thing likely to be ruined by the end of the war was the British monopoly of colonial trade, a prospect about which Smith was not worried at all. His Wealth Of Nations. Book IV, is a polemic against mercantile political economy, the central idea behind England’s (after, 1707, Britain’s) foreign policy in the colonies.

Ben Stein (and Fortune's sub-editors) slipped up in his attributed meaning to Smith’s wiser words to young Sinclair.

The Very Best Short Summary of Adam Smith's Life and Work (Longish Post)

Chris Berry, Professor of Political Theory at University of Glasgow is a leading expert on the life and work of one of the University of Glasgow's most famous academics, Adam Smith.

He has created a 10 minute talk (HERE), published by the University of Glasgow, that describes the making of the man, the global significance of his writing and explains why Smith's work still resonates with us today:

“ADAM SMITH IN 10 MINUTES”
“Adam Smith was born in Kirkcaldy in 1723. He entered Glasgow University at the early - but for the time not unusual - age of fourteen.

He studied logic, metaphysics, maths and later Newtonian physics and moral philosophy under some of the leading scholars of the day. In 1740 Smith was awarded a Snell Scholarship (which is still in existence today) to study at Balliol College, Oxford. Smith preferred Glasgow, however, because Oxford’s curriculum was antiquated and he thought the teachers were lazy since, in contrast to Glasgow, their salary did not depend on the number of students taught.

After a period of freelance lecturing, Smith returned to Glasgow University, first as Professor of Logic in 1751 and then a year later as Professor of Moral Philosophy, a post he held until he left academia in 1764.

The mid-eighteenth century saw a period of intense intellectual activity, known as the Scottish Enlightenment. Universities were key players in this outburst of enquiry, with Glasgow a major force. Smith himself is of course the figure of overwhelming historical significance. But he was not alone. Smith’s fellow professoriate included pioneering chemists William Cullen and Joseph Black, as well as engineer and inventor James Watt who also worked at the University). Another historically important figure is a pupil of Smith’s, John Millar. Who became Professor of Jurisprudence and the author of a key work in what we would call historical sociology.

The seeds of Smith's two great books were sown in his professorial years. The Theory of Moral Sentiments appeared in 1759 and drew on his lectures. It went through six editions in his lifetime. Smith’s intellectual range as a lecturer was extensive. Beyond courses in philosophy and jurisprudence he also discussed history, literature and language. He maintained his interest in science and wrote an essay on the history of astronomy. This is notable not only for the breadth of Smith’s knowledge but also as an attempt to link the development of different astronomical accounts to a basic human propensity to seek order.

Although his second great book the Wealth of Nations was published in 1776 we know that he had already considered many of its leading themes at Glasgow as he lectured on as he put it: 'those arts which contribute to subsistence, and to the accumulation of property, in producing correspondent movements or alterations in law and government'. In 1787 Smith was elected Rector of the University and in a letter of thanks remarked that he remembered is professorial days as 'by far the most useful and therefore as by far the happiest and most honourable period of my life'.
If Smith of popular repute is the ‘father of capitalism’, the advocate of ‘market forces’, the enemy of government regulation and believer in something called the ‘invisible hand’ to produce optimum economic outcomes then he would be a disappointed parent. All his work is deeply steeped in moral philosophy. Indeed the simple fact that the final edition of the Moral Sentiments containing extensive revisions appeared in 1790, the year of his death, tells us is that Smith’s commitment to the moral point of view endured alongside and beyond the publication of the Wealth of Nations.

The Moral Sentiments is a leading example of a particular approach to moral philosophy – one that regards it not as sets of rationally or Divine ordained prescriptions but as the interaction of human feelings, emotions or sentiments in the real settings of human life. In many ways it is a book of social and moral psychology. What we can call economic behaviour is necessarily situated in a moral context. But more than that the key theme of the book is an opposition to the view that all morality or virtue is reducible to self-interest. Indeed his opening sentence declares that everyday human experience proves that false, he writes: "How selfish soever a man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others, and render their happiness necessary to him, though he derive nothing from it except the pleasure of seeing it".
Our morality is founded on certain truths about human nature. Everyone is capable of sympathy, or fellow-feeling, and that ability enables us to imagine what we would feel if we were in the situation of another and, once we have made that imaginative move, we can then judge whether those feelings are appropriate. We have to learn about ‘situations’ but Smith believes that happens because humans are social creatures.

Smith illustrates the natural fact of human sociality by likening society to a mirror. It is this responsiveness to others - pleasure in their approval, pain in their disapproval - that Smith used to explain why the rich parade their wealth while the poor hide their poverty. The rich value their possessions more for the esteem they bring than any use they get from them and it is this disposition to "go along with the passions of the rich and powerful" that establishes the foundation for distinctions of status. And it is this desire for esteem that explains the incentive, we all possess, to better our condition. This is one of the links between the Moral Sentiments and the Wealth of Nations. In many ways the moral interactions Smith describes in Moral Sentiments bear on the practices that characterise his contemporary commercial society. The very complexity of that society meant that the bulk of inter-personal dealings were with strangers.

A ‘society of strangers’ is a commercial society which Smith identifies in the Wealth of Nations as one where 'everyman is a merchant'. A commercial society's coherence - its social bonds - do not depend on love and affection. You can coexist socially with those to whom you are emotionally indifferent. As Smith famously said:

“it is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self-love and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens”

Nothing in this means that Smith is denying the virtuousness of benevolence. When Smith came to write the Wealth of Nations he made it clear that the ‘wealth’ lay in the well-being of the people. This covered not only their material prosperity but also their moral welfare. Accordingly he thought to be in poverty is to be in a miserable condition and commerce is to be praised for improving human life.
The great achievement of the Wealth of Nations was to discern the principles of order in the seeming chaos of commercial or market behaviour – it wasn’t random, it could be reduced to some simple principles. It was for this reason that Smith was described as the Newton of political economy. It is no idle fact that the full title is Inquiry into Nature and Causes of the Wealth of Nations.

He identifies basic principles such as the human propensity to ‘truck, barter and exchange’ that he argues underlies the division of labour but says that this depends on a market and that requires some institutional structures like those that uphold justice such as government and how that in turn mutually relies on principles of public finance.

All of this is placed by Smith into a historical narrative. In his Glasgow lectures he had outlined an account of four stages of social organisation focused around the characteristic form of economic endeavour – hunter-gatherer, herder, farmer, commerce - and in the Wealth of Nations he gives a set-piece account of the transition from the farming to commerce. This process of social change was not brought about by deliberate human policy. This fact reveals for Smith a general truth about social life, namely, that it is pervaded by unintended consequences. This supports the widely-held view of Smith as an opponent of attempts to direct ‘the market’ but, in fact, what he really opposes is the attempt to direct individual’s activities, their ‘natural liberty’ to pursue their own ends in their own way. This is itself a ‘moral’ position and Smith never abandons that perspective.
In the opening chapters of the Wealth of Nations, he celebrates the productiveness of the division of labour with the example of pin-makers but later notes that those whose lives were spent performing a "few simple operations" were rendered "stupid and ignorant" and were incapable of "forming any just judgment concerning many even of the ordinary duties of private life". The 'morality' into which these individuals are socialised is defective; the 'mirror' in which they see themselves reflects back to them to their "mutilated" condition. This is the probable course of events, says Smith, unless "the public" takes remedial steps by instituting a subsidised system of elementary schooling. This example clearly illustrates how Smith's social and moral theories cannot be fully understood in isolation and must be seen as a whole.
Adam Smith’s legacy has had global impact and it is fitting that the work of a world-historical figure was forged in this world-class University.”

Comment
This short article is a measure of the quality Professor Chris Berry’s intellect and balance. He is without doubt the clearest scholar writing on Adam Smith today. He covers all of Smith’s scholarly range and shows its continuity and cross-linkages. What a breath of fresh-air is in Chris Berry's treatment of the "invisible hand"!

Professor Berry is the director of the Adam Smith Research Foundation at Glasgow University, which aims to promote and sustain research within the UK, European and international arenas. The Foundation promotes the engagement of staff in key policy debates and in shaping policy for the future. It provides the environment in which to foster further links between the Faculty's disciplines and supports the development of interdisciplinary research both within and beyond the University.

The Foundation seeks to honour the Enlightenment legacy of Adam Smith (1723-1790) with independent, original research that impartially advances utility and enhances social happiness or well-being in the Information Age.

The Foundation's five research themes are:
• Public policy, governance and social justice
• Work, ethics and technology
• People, places and change
• Macroeconomics, business and finance
• Legal and political thought

Professor Berry’s commitment to both the historical scholarship of the Scottish Enlightenment and to modern applications of moral and social science to contemporary issues, problems and situations,is a great credit to his and Scottish scholarship. If his approach and understanding of Adam Smith’s Legacy was the general approach across academia, and predominant among Smithian scholars, then Adam Smith’s Lost Legacy would have less to do.

Adam Smith on Government Roles

By Dr Bharat Jhunjhunwala writing (22 November) in Organiser (HERE):

“Economy Watch - In defence of regulation of markets”

“This veneration of free markets was first propounded by famous economist Adam Smith about 200 years ago. He said that competition in a free market establishes public good as if an invisible hand was guiding the businessmen. There was no need to separately worry about public good. His logic was like this. Competition in the market pushes the businesses to produce goods at a lowest cost. This leads to cheap goods being made available to the people. For example, I had brought an electronic calculator from United States for my father in 1973 for 100 dollars or about Rs 1,000 at that time. Today, a much better calculator is available for Rs 50 because of the improvements brought about by competition. The slum-dwellers today have the pleasure of watching the TV and drinking cold water from the refrigerator because of the steep reduction in the price of these goods. Thus Adam Smith suggested that the government must not interfere in the market.”

Comment
Question to Dr Bharat Jhunjhunwala:

Exactly where does Adam Smith makes the statement: “that competition in a free market establishes public good as if an invisible hand was guiding the businessmen. There was no need to separately worry about public good?”

This is a paraphrase at best and a distortion of Adam Smith.

He never used the words “as if and invisible hand was guiding businessmen”. The addition of “as if” to his use of the metaphor of an invisible hand is fairly common among those who have not read Wealth Of Nations in general and the single paragraph in Book IV (chapter 2, paragraph 9: page 456) in which he uses the metaphor of ‘”an invisible hand”.

He most certainly never linked the metaphor to “competition” (which he discussed in Books I and II). He expressed reservations about leaving all decisions to “merchants and manufacturers” and such personages as bankers and their clients, especially where this “might endanger the security of the whole society” (WN II.ii.94: 324).

Nor did Adam Smith suggest such an extreme view “that the government must not interfere in the market”.

He saw a role for government, or public agencies, in stamping cloth and conducting assay tests on precious metals, to ensure that they been inspected for quality, that it should manage the currency and coinage, run the post office and general supervise markets and contract-making through an independent judiciary, and provide wholly or in part a national education system – and make a start on dealing on palliative care with “obnoxious diseases” like leprosy. All this, plus “facilitating commerce” by public works.

Adam Smith On Education and the Division of Labour

Michael Robbins writes in digital emunction (“I refer to largesse in thought HERE:

“Best books of the year. A mug, a game. Benjamin Schwarz predictably plumps for biographies & Alice Munro, while Amazon readers appear to be, in Adam Smith’s words, “as stupid and ignorant as it is possible for a human creature to become . . . not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life.”

To which I was about to leap in and place Smith’s assertion in context by providing the full paragraph from Wealth Of Nations:

“In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expence of his intellectual, social, and martial virtues. But in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it” ((WN V.i.e.50: 782).

Moreover, to understand what Smith was up to it is necessary to see his comments on the effects of the division of labour as in reality as part of his belief in the importance of education provision, especially of the children of the poor majority of the families of labourers and their wives. So many speedy readers of Wealth Of Nations, searching for ammunition against the division of labour and commercial society, link the above paragraph directly to the division of labour and assert that Smith had reservations about the phenomenon of the division of labour that had raised living standards and technology well above those experienced by the remaining peoples in the Americas, Africa, and parts of Asia, who were limited to living of the fruits of the forest and small animals that lived there. But read this paragraph from the summary of the need for a nationwide programme on education:

“The same thing may be said of the gross ignorance and stupidity which, in a civilized society, seem so frequently to benumb the understandings of all the inferior ranks of people. A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it” (WN V.i.f.61: 788).

In this light, Smith addresses his readers – the educated minority in 18th-century Britain, mainly in the ‘middling’ and ‘superior’ ranks of society – with, in effect, a final reason if they remain unconvinced of the case he has made on its own merits, for which the government would have to udnertake substantial expenditure, with a final reason for agreeing to action now:

‘your safety in turbulent times depends on your having provided for the education of the ‘inferior’ ranks as a barrier to these people being led astray by ‘enthusiasts’ and malcontents.’

However, I casually read the comments below Michael Robbins’ post and found, first, this comment from “Henry”:

“I take it the Adam Smith quote is something of a joke. But why does the discussion of what people read so often have to start off on this note of snobbery & disdain? It turns me off immediately, so that I no longer care what you like to read.”

Plus a correct response from Michael Robbins:

“Well, now, Henry, if you’d read the Smith in question, you’d know he’s not being snobbish at all, but denouncing the conditions that lead to such ignorance. I don’t see how regretting that people read Dan Brown & Glenn Beck is snobbish, either: it simply is a regrettable fact, objectively.”

To which I can only say: it pays to read the whole article and any associated comments, before assuming that their authors have got it wrong!

Michael Robbins hasn’t got it wrong. He was using his selection from Smith’s quotation to provoke a post like that of “Henry”, which worked.

Well done, Michael!.

[I hope my additional selection from Wealth Of Nations added some value to Lost Legacy readers.)

Self-Interest is Not Selfishness

In a post I made on 10 November (see below), Greg Baldwin posted a comment. I would normally just reply to the comment. However, I consider the exchange of wider interest and importance, and to avert it being missed by those who do not search for the rare comments Lost Legacy receives, I post the exchange of comments for wider readership:

“Greg Baldwin said...

Thanks for the comment. Secretly I want to believe that self interest and selfishness can be neatly distinguished, but I'll confess quotes like this from our friend Mr. Smith have not helped me to find the clear distinction:

"It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."

`Adam Smith, Wealth of Nations’

I'm not sure I fully understand everything Smith is trying to say here, but self-love + self interest do seem to be at least the basic ingredients for selfishness...no?

What am I missing?"

To which I replied:

Hi Greg

Thanks for your comment.

Many people quote the “Butcher, Brewer, Baker” example from Smith’s Wealth Of Nations (WN I.ii.2: 26-27) without appreciating exactly what he was saying. He advanced the same example in the 1762-3 lectures (23 March, 176: vi.46: 348) that he gave in Glasgow University (Smith, Lectures On Jurisprudence, Oxford University Press/Liberty Fund: 1978), hence it was an early part of his oeuvre long before he wrote Wealth Of Nations.

‘Self-interest’ and ‘self-love’ in 18th-century discourse did not mean selfishness and were clearly distinguished.

Bernard Mandeville (1724) celebrated selfishness as a virtue (as did Ayn Rand in the 20th century). Smith regarded Mandeville’s teachings as “licentious” (Moral Sentiments, 1759: TMS VII.ii.4: 306-14)).

Examine the quote: we expect our dinner “from their regard to their own self interest”. But there are two people in each transaction: the hungry would-be diner and the shopkeeper potentially supplying the meat, beer, or bread.

Smith excluded the virtuous motive of their “benevolence” as too weak to rely upon regularly (as common sense suggests it would be, except at the margin). So how is the transaction to be conducted?

“We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

We don’t talk of our necessities in the transaction but address “their self-love” - they are self-interested too! They have gone to the trouble of securing supplies of “meat, beer, and bread” and offering them for sale to potential customers.

The earlier transactions of the “butchers, brewers, and bakers” to secure their supplies (from farmers and those along the supply chain) involved multiple transactions on the same basis. All suppliers need access to freely bargained exchanges to supply their families with their needs from others.

In the sentences immediately preceding the ones you quote, Smith wrote:

“But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.”
(WN I.ii.2:26)

This is a clear description of the bargaining processes by which we obtain “those good offices which we stand in need of”.

Each party is self-interested in the outcome, but (and it is an important ‘but’) neither can obtain what they want without addressing what the other wants in voluntary exchange transactions. Two utterly selfish egoists would seldom, if ever, come to a voluntary agreement – neither would give up anything in place of demanding their price “or else”.

As Smith put it, in social converation we “persuade” to get what we want. Highlighting why something (what we offer to give) is good for someone is often a good place to start when seeking what we want to get.

That is the meaning of the paragraph from which you take the well-known quotation (in the process of which you elide from the 18th-century meaning of self-interest and self-love to a later meaning).

To read this as Smith advocating selfishness is quite different from the intended and explicit meaning of Smith's moral philosophy, as expressed in that paragraph.

And that Greg is the answer to you question: “What am I missing?”