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Adam Smith On Prudence

Updated: Mar 6

Seeking Own-interest was all about Prudence, not Maximizing Self-interest


Review of Vigano, Eleonora. 2017. "Not Just an Inferior Virtue, nor Self-interest: Adam Smith on Prudence.”  Journal of Scottish Philosophy 15 (1):125-143. (Note: A colleague, Michael Nill, pointed me to this article. Nill has wide and deep knowledge of the classics, on such matters as the historical understanding of prudence. Moral education is essential: people need to understand the content of the virtues, the history and evolution of their role, and work to keep the virtues in play. Highly recommend reading Nill, Michael. 2021. Nurturing Decent Human Beings:  The Case for Moral Education in Our Schools. St. Petersburg, FL: BookLocker).

 

Mainstream economics, as represented by Single Interest Theory (SIT) in Microeconomics, with SIT detailed in every Microeconomics text used to teach the typical Econ 101 course, sees Prudence as identical in content to Self-interest.  The Econ who does max U (and max Profit to buy max U) is Prudent to do so.  In effect, SIT removes all consideration of the ethic of consumption and production, demand and supply, as the Human is reduced to an Econ. The economists need moral (about the role of the virtues, the ethics) education, the kind Nill (2021) knows well.

 

Unfortunately, such an economics --- SIT in mainstream (Micro)economics --- is devoid of consideration of the virtues, the ethics, the moral dimension. SIT is not an economics about the Human with their ethics left in (and, one is needed, as in the Humanomics called for by McCloskey and Carden 2020; Lynne 2020): The ethics have been extracted to focus only on the Econ. The Vigano (2017) paper explores how Adam Smith framed the matter of Prudence as a virtue, an ethic with many dimensions, and not just something describing the self-interest of greed-only. Adam Smith would not be happy with SIT, as Smith never said that greed is good.  The ethic, as represented in the Moral Sentiment, to include prudence, matters to a good Human, a person who tempers excessive greed (as made clear in Lynne 2020 https://www.metaeconomics.info/post/just-in-time-for-xmas-presents ). Also, see the Review of McCloskey and Carden (2020) at https://www.metaeconomics.info/post/leave-me-alone-and-i-ll-make-you-rich .


To help frame Vigano (2017), it is essential to understand that while Adam Smith focused primarily on self-interest in On the Nature and the Causes of the Wealth of Nations (WN, Smith 1776/1789), the focus shifted to the shared other-interest in The Theory of Moral Sentiments (TMS, Smith 1759/1790), which brought prudence (and the other 6-virtues) representing the ethic into play. Smith saw the own-interest achieved by striking good balance in the joint self & other -interest, joint incentives & ethics (with prudence a key virtue within the best ethic), joint Wealth & Sentiments.

 

Key parts of Vigano (2017) which catch the MetaEcon eye include (and, using the Dual Interest Theory, DIT styled Figure 1 and Figure 2 to make Metaeconomic common sense of it all: see What is Dual Interest Theory https://www.metaeconomics.info/what-is-dual-interest-theory , with a more formal version at Profane & Sacred https://www.metaeconomics.info/profane-sacred-and-the-law ):  


“… narrower understanding… enlightened self-interest … when prudence is understood in the latter meaning, it becomes very similar to the rational behaviour typical of a self-interested economic agent and ceases to be a virtue in any possible sense (Vigano 2017, pp. 1-2).”  Yes, as represented in SIT in mainstream economics.  The Econ is only prudent in said narrow sense. The Econ operates only on path 0Z in a DIT styled Figure 1, focused on the Profane F with little to no concern for the Sacred S represented in a DIT styled Figure 2


“… several scholars of Smith's economic thought equate prudence with a clever self-interested motive for action. For instance, George Stigler assumes that prudence is self-interest without demonstrating this identification (Stigler 1971: 265); Samuel Hollander contends that prudence is a synonym of selflove, which is, itself, a synonym of self-interest (Hollander 1977: 138-139) (Vigano 2017, p. 2).”   Yes. Stigler is of the Chicago School of Economics, a Libertarian Economist to the core, which also means being opposed to ethical reflection. It is all about max U on path 0G in Figure 1. It is also about max Profit (again on path 0G, but now in input-input space) to help produce income to then max U. Prudence as virtue has no meaning, other than in the sense of greed is good on some Profane path 0G. And, yes, the need to temper the arrogance of self-love, as Adam Smith claimed essential, is ignored.


“… prudence is the factor that overcomes two types of opposition that every moral theory has to face, namely the opposition between the self and the other, and that between partiality and impartiality … (and) prudence is an overarching norm of conduct for the agent's moral and economic decision-making. This means that prudence avoids the division of the agent into a moral agent and an economic actor who have little in common (Vigano 2017, p. 2).”  Absolutely.  It is resolved in DIT by path 0Z outcomes, the Economic & Moral – agent, Prudence & Other Virtues – integrated.


“Smith (speaks to)  inferior prudence and defines it as 'The care of the health, of the fortune, of the rank and reputation of the individual, the objects upon which his comfort and happiness in this life are supposed principally to depend'  …  a self-regarding or self-centred virtue because its objects are one's own personal interests and well-being, which are part of happiness (Vigano 2017, p. 3).”  Inferior prudence is the focus of SIT, illustrated on path 0G in the frame of DIT. It is the only path one can see using SIT. Self-interest only reflects inferior prudence.


“…  a psychological mechanism that enables human beings to overcome the separation of their bodies: sympathy  …  defined by Smith as the fellow-feeling with an agent's passions, and it is experienced by the individual who is observing the agent …  called observer or spectator - through an imaginary change of place between the spectator and the agent…  (Vigano 2017, p. 4).”  Sympathy comes out of the mirror neurons of the Human (mammalian in general) brain, the mindful empathy-with the other the starting point to sympathy-with, and, perhaps compassion-for, the other.   


“… prudence would seem a self-interested attitude, which reflects how humans generally behave. The normative element that elevates prudence to the status of a virtue is self­command (Vigano 2017, p. 6).” Yes.  As Adam Smith saw the matter, confirmed in modern behavioral science, self-command is key to bringing all the virtues to bear on the matter of economic choice. Another way to frame it:  Self-interest must be subjected to temperance, said temperance reflecting self-command. Self-interest must be tempered by the shared other-interest, the latter representing all the other virtues, especially justice.


“Smith's portrait of the prudent man shows that this individual is completely unlike the self-interested and calculating agent who was attributed to Smith's model of agent and has been considered responsible for the excesses of capitalism (Vigano 2017, p. 8).”  Path 0G people drive the excesses of capitalism.  Path 0Z people temper same, bringing it down to what the other can go along with. 


And, then, on superior prudence:   “…superior prudence excites admiration from observers…  maintains the same components of inferior prudence: patience, long­ sightedness, aversion to hazards, and the adoption of the other's perspective… is constituted of virtues that are greater and more splendid than inferior prudence… is combined (quoting Smith) 'with valour, with extensive and strong benevolence, with a sacred regard to the rules of justice, and all these supported by a proper degree of self-command'  … characterises the great general, the great statesman, and the great legislator … the best head joined with the best heart, and as the most perfect wisdom combined with the most perfect virtue … does not need an economic justification, whereas inferior prudence is the only virtue with an economic justification … (Vigano 2017, p. 9).”  Yes: Again, superior prudence on path 0Z with economic justification in inferior prudence on path 0G. Inferior prudence is mainly about the Profane (albeit some attention to the Sacred as path 0M considerations play a minimal role even on path 0G). Easily explained using DIT.

 

“…prudence represents one of the strongest common and cohesive points between the TMS and the WN. …  prudence is one of the soundest pieces of evidence against the Das Adam Smith Problem (Macfie 1967: 73-75) …  prudence is also one of the strongest elements that demonstrate that Smith's prudent man is not the homo oeconomicus of mainstream economics … (Vigano 2017, p. 11).”  Absolutely. It is about Wealth & Sentiments, striking good balance in the Profane & Sacred, on path 0Z.

 

On the tension between the self and the other, and the notions of self-preservation (like taking care of mind and body, seeking health), self-interest, and self-love: “Smith does not explicitly distinguish self-love and self-interest, and in some places he seems to use them interchangeably… (Vigano 2017, p. 13).”  Yes. Absolutely.  As in tempering the arrogance of self-love, tempering the self-interest only by what the other can go along with.

 

“Smith seems to use (self-love and self-interest) as synonyms when he describes the moral systems of other philosophers. Yet when he illustrates his own system, 'self-love' has a different nuance: There is always an explicit or implicit comparison between the self and the other … when Smith uses the term 'self-interest' there is no reference to the other…  (Vigano 2017, p. 14).”  Yet, it seems Smith only uses self-interest once, in the entirety of TMS, so, not sure what the Vigano observation really means.  Smith was more about the own-interest which in generally meant each person paying attention to the joint self & other, not just the self-interest.

 

On partiality (to own-self) and impartiality (with the other):

 

“… even though prudence is based on self-preservation, self-interest, and self-love, it has a normative side because it represents a regulation of those natural tendencies, in the sense that the prudent agent takes care of herself under a constraint that she deliberately imposes on herself through self-command. Constrained by the sense of justice…  prudence modifies both self-interest and self-love, because it opens up self-interest to the comparison with the other and prevents self-love from always prioritising the self in the relation between the self and the other…  compared to self-interest, prudence includes the consideration of others; compared to self-love, prudence is a type of consideration of others that aims to be impartial (Vigano 2017, p. 15).”  DIT styled Figure 1 captures the concern here, as the own-self is represented with two domains of interest, the self and what is shared with the other, yet internalized.

 

“…several scholars of Smith, prudence as a virtue is problematic because of its irreducible self-centredness; being self-regarding is the essential trait of prudence, but it is precisely this trait that prevents prudence from opening up to the care of others …  according to this interpretation, prudence produces a tension between the care of oneself and the care of others (Vigano 2017, p. 16).”  Well, sure, self-centeredness of DIT styled Figure 1, as everything is internalized within the own-self, including the impartiality of the Impartial Spectator.

 

“…the impartial spectator introduces an impersonal trait into Smith's ethics that competes with a virtue - prudence - that is personal and particular (Vigano 2017, p. 16).”   Well, the personal ---- person partial to own-self --- is on path 0G.  The impartial spectator --- projection of own-self into conversation with said spectator ---  is on path 0M. The partial & impartial is resolved on path 0Z.

 

Adam Smith sums it up nicely, from TMS:  “ 'In the race for wealth, and honours, and preferments, [the individual] may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should justle, or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play (Smith 1759/1790, TMS II.ii.2.1: 83) (Vigano 2017, p. 17).”  Yes.  The race is on path 0G.  Going too far without attention to path 0M is to throw away the other.  Fair play arises on path 0Z. 

 

In the conclusion, Vigano says:

 

“With regards to the opposition between the agent's economic and moral sides, this opposition is usually treated in economists' critical literature on Smith by conflating the prudent man with homo oeconomicus. In this paper, I have demonstrated that the two characters do coincide but in a different sense. This is because, in making any economic decision, Smith's prudent man takes his moral side into account, and is thus an economic agent and a moral agent simultaneously…  have shown that Smithian prudence is a norm of conduct harmonising first-order partiality connected with the agent's own interests with impartiality owed to other individuals … within such a moral system, the agent never risks alienating herself from her identity when practising prudence (Vigano 2017, p. 18).”  Absolutely.  Ego-based economic agent & Empathy-based moral agent are internal to the Human, as represented in a DIT styled Figure 1.  Each is essential to, and inextricably intertwined with, the other.  And, yes, no alienation, because the economic & moral, the self & other, reside within the own-self.


References

Lynne, Gary D. 2020. Metaeconomics:  Tempering Excessive Greed, Palgrave Advances in Behavioral Economics. New York: Palgrave Macmillan.

McCloskey, Deidre Nansen and Art Carden. 2020. Leave Me Alone and I'll Make You Rich:  How the Bourgeois Deal Enriched the World. Chicago: The University of Chicago Press.

Smith, Adam. 1759/1790. The Theory of Moral Sentiments. Edited by D.D. and A.L. Macfie Raphael. Indianapolis, Indiana: Liberty Fund, Inc.

Smith, Adam. 1776/1789. An Inquiry into the Nature and Causes of the Wealth of Nations. Edited by E. Cannan. New York: Random House.

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