 Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I'm Aaron Ross Powell, editor of Libertarianism.org and a research fellow here at the Cato Institute. And I'm Trevor Burrus, a research fellow at the Cato Institute Center for Constitutional Studies. Our guest today is Russ Roberts, his research fellow at Stanford University's Hoover Institution and host of the very popular podcast, Econ Talk, which was, I should add, the inspiration for Free Thoughts. But today we're talking about his new book, How Adam Smith Can Change Your Life, An Unexpected Guide to Human Nature and Happiness. I guess let me start by just asking, why did you write this book? Well, I wrote it for a couple reasons. One is kind of strange. It's a feeling of indebtedness to Adam Smith. I've learned a lot from him and it really makes me sad that people associate his name with greed, which comes from a misreading of his famous book, An Inquiring to the Nature and Causes of the Wealth of Nations. That book is about the effects of self-interest, which we all are self-interested, every human being, every creature is self-interested. But that doesn't mean we're greedy, which has, I think, an important pejorative tone to it. So one of the reasons I wrote this book was to let people know about Adam Smith's other book, which is The Theory of Moral Sentiments. The Theory of Moral Sentiments is all about the fact that we're not so greedy and how do we understand that? How do we explain it? What are the implications? So one of the reasons I wrote it was to help correct the record on what I think is a misunderstanding of Smith's thought and his importance. The second reason is that I think people associate economics with money, which is a reasonable association, but I think they associate it incorrectly, not unrelated to the Adam Smith misunderstanding. They associate it with acquisitiveness, acquiring stuff with getting rich, with playing the stock market, with strategic tax practice. And that's part of economics, some of that a little bit. But what economics is really about is about how to get the most out of life. And it's about making choices. It's about the fact that our time is precious and scarce and finite. And I think what Adam Smith's other book, The Theory of Moral Sentiments, is really about deep down, is about how to use our lives and our time wisely and in ways to bring satisfaction and happiness and good to the world. And I see that as a fundamentally economic oriented activity, and I wish more people did. I wish more people understood that economics isn't just about money. It's about choices. It's about complexity. And those themes run through both of Adam Smith's books actually, but particularly in The Theory of Moral Sentiments. The other thought I have is that people often talk about what's good for the economy as if somehow the economy is independent of us. It's a separate entity. And I hate that idea. I think we are the economy. Those of us acting through our individual choices by joining with others at times in commercial ways but also in non-commercial ways in ways to help other people and to volunteer. And I think all of those things are important for understanding how to make the world a better place. I think economics has an important set of insights into that. And so in writing this book, I really wanted to bring those lessons home through understanding Adam Smith's theory of moral sentiments. Do you think that Adam Smith or would he have called himself an economist? That's what everyone thinks of him now, but it seems kind of weird that he wrote these two books that are very different, not exactly economics or one of them at least. But there was a lot of economics in Smith's day and there was actually a lot of economics before Smith. And people have correctly observed that a lot of Smith's famous insights weren't particularly novel at the time. They were understood and known by others and written about by others. But I think the reason Smith's often called the first economist is he really laid out a research project for, not literally a research project, but he saw his scholarship as a research project in understanding how the world works and how people, when they get together in national ways and in economies and in trade, how those actions affect people's lives. So in that sense, he was the first economist in that he had a broad interest in a lot of those activities. And he's also the first economist because he wrote a book that was so well written and so insightful that people remember it even though there are other people in his day who wrote economics that are mainly forgotten. So in that sense, he was an economist. We didn't see himself as that because it really wasn't a genre of scholarship per se at the time. He really saw himself as a moral philosopher, which is what his first book, The Theory of Moral Sentiments, is about. That was written, by the way, in 1759. The Wealth of Nations was published in 1759. The Wealth of Nations was published in 1776. So he saw himself as a moral philosopher, which I think most economists today are, but they don't see themselves that way. They see themselves as scientists. I think a mistaken self-identification, I don't think economics is very scientific and I think pretending it is is dangerous and unhelpful. And often what we are, for better or worse, is ideologues. Smith was an ideologue, but not like most modern ideologues. He was interested in a certain moral way of looking at the world. He did have a certain belief in the power of liberty, which I think he was correct about. But he was a preacher in many ways. And his book that we're talking about today, The Theory of Moral Sentiments, that my book is based on, is really a former preaching. It's a mix of how the world works and how Smith thinks it ought to work. It's a mix of, here's how I think you behave and here's some advice on how you'd be happier if you did this, that and the other. And that's, modern economists do that too, but they don't like to think of that. And they likely think of themselves as these sort of sterile lab technicians in white coats planning what's good for the economy. Turning dials and shifting levers. Turning dials, twisting them and lifting levers. And number one, they don't know exactly how the dials are connected to the real economy. And number two, more importantly, is that they're doing things that are good for some people, not for others, but they pretend that they're doing them for the good of the economy or for the good of society. And again, I think that's a very dangerous mode. Smith was very focused in the theory of Moral Sentiments on personal behavior, which I think is a pretty safe place to go. You begin your discussion of Smith's book with this really vivid thought experiment that he uses about an earthquake in China and our little finger. Can you tell us a bit about that? Sure. So it's always been one of my favorite examples. I think most people haven't heard of the theory of Moral Sentiments. Probably most economists haven't heard of it. And certainly most people and most economists haven't read it. If they know anything about it, they might know this example. And one of the reasons I write about it in the beginning and one of the reasons I write about it in a little bit of depth is because it's misunderstood and often quoted out of context, I think to paint a particular, a particularly inaccurate picture of what Smith's about. What he says is, imagine you get news of an earthquake in China and millions of people are dead. And remember, his time, we're writing in the 18th century, there's no internet, there's no TV, there's newspapers, there's telegraphs, I think, maybe? Not quite. No telegraphs. I don't know how long it takes news of an earthquake in China that kills millions to get to your desk. But Smith says, when you hear that, you're going to show some concern, and he said you might, if a business colleague approached you and told you they might wonder about your business enterprises that might be nearby if you have any. And I write about it in a modern context, even though we have the internet and even though we find out about it incredibly quickly, we have a very similar reaction, which is, wow, that's awful. Maybe I should give some charity to help people who are there. Gee, I wonder if our production facility is going to be like this. And he said, then, very shortly after that, you forget about it. It's a tragedy. Horrible, unimaginably horrific tragedy, but you're thousands of miles away and you go to bed that night and sleep just fine. I give the example, Smith doesn't, but I give the example of your wife says, oh, terrible that earthquake. And you say, yeah, it is. It's so sad. And then you go back to bed and sleep fine. He says, contrast that with how you'd feel Oh my gosh. Well, now it's only your little finger. Smith deliberately chooses a part of her body that's not that crucial to daily life, but it still doesn't matter. It's an unpleasant thought that your little finger might be gone tomorrow, even if you're not a guitar player or a piano player. And so he says, you'll toss and turn. You'll sleep badly. And that's where most people end the story. They end the story saying, see how callous and heartless we are. We care more about our little finger than millions of Chinese deaths. But that's not what Smith says, actually. It's not the point of the story. It's absolutely the opposite of what Smith says. What Smith says is that this creates a puzzle. How is it that given on the surface, it certainly appears as if you care more about your little finger than millions of Chinese people. But if you're given the option of saving your little finger by killing millions of people, you would never, ever do it. And that's the paradox. How could it be that as someone said, you know, you've got the surgery tomorrow. I can get you out of it, but millions of people are going to die and say, what are you crazy? I'm not going to do that. That's disgusting. And yet your feelings are clearly your insides, your emotions, clearly value your little finger more than those lives in some dimension. So Smith says, how is that? How do we understand that our emotional response is incredibly self-centered, incredibly self-interested, incredibly focused on our own daily life? And yet when we make choices, when we act, we often act dramatically more charitably toward others than it appears we actually feel. And to explain that, Smith invokes what he calls the impartial spectator, which is an imaginary figure that you think of hovering and over you and watching, judging your behavior. And I, in the book, I have no idea whether that's what people actually do. I don't have any idea. We don't have any empirical evidence whether people worry about their, the way that other people think of them as the way that guarantees good behavior and socially beneficial behavior. Is this the same as a conscience, would you say? Well, it's like a conscience, but I'd argue that Smith's contribution to a conscience is thinking about where it comes from in a very unusual way. So when we think of why we do the right thing or where our conscience comes from, most people would say, well, you know, we learn it from our parents or we learn it from religion or we learn it from our culture. And what Smith's saying is actually not those things. Those are not what drive us to do things that are not always in our self-interest. What drives us to act charitably toward others to make sacrifices for others, to do the right thing in certain situations is the feeling that we will be judged, not by God, not by our parents, but by our peers and those who hear of our behavior. And so our reputation, our self-respect, come is what drives our desire or our actions to do the right thing. And that's a very novel idea and it's a very provocative idea and as I said, I don't know if it's true, but what I think is interesting about it's a very useful way to improve your own behavior if you'd like to, which is to stop sometimes and pause and think about, gee, if an impartial person, not me, not my spouse even sometimes because she can be pretty partial toward me, usually, we hope, but somebody else, somebody doesn't have a stake in the matter, somebody who is just watching from the side and I think that's a very powerful way to think about how we should make our choices and it's very useful. How do we get the standards that this impartial spectator holds? Because I'm thinking this, what you're describing sounds a lot like other ethical traditions that we've talked about in Free Thoughts, specifically like the Greek tradition and its modern forms have this sense that we try to imagine the most virtuous person possible and then live up to their standards. In fact, modern virtue ethics says the right action is whatever a fully virtuous person in this position would do, which sounds quite similar to this impartial spectator, like how would you be judged by this person if they were watching you, but how do we fill in that impartial spectator? Because if it's just like what I would imagine myself watching me, then if I have terrible standards More sociopaths and impartial spectator might be very different. And so do we have something to give that content besides just what we would imagine like the people immediately around us who might themselves be pretty awful people? Well, there's a lot there. That's a great question. First of all, you mentioned a virtuous person when Smith talks about the impartial spectator. He doesn't mean that you're thinking about a particular impartial spectator. Having said that, as a writer, I always think about the reader over my shoulder. Sometimes I have a particular person in mind that helps me think about, gee, that's confusing to this friend of mine or my relative or somebody who might read this and that sometimes helps me write. But I don't think that's what Smith has in mind. Smith isn't thinking, in fact, I really don't think this is what Smith's thinking at all. When he talks about the impartial spectator, he means anybody from your circle of peers. He doesn't mean a particular person. And in particular, he means your circle of peers that have a set of cultural attitudes toward all kinds of things. Business, family, friends. I use a lot of examples of trade-offs we face all the time about how to spend our time at the office versus with our kids or advancing a project that might have symmetrical issues about it versus saying no. These are decisions we make all the time in our daily lives. And what I think Smith is saying is that when you try to just think about whether you should do these things or not and how you should do them, you should think about somebody who is, we watch them from the outside who would judge you. Now, it's certainly true that those people could be really not so good people. You get a bad culture. But what Smith, I think, has in mind, I think he has two things in mind. One is this is a statement about how the world works. It's not a statement about the ideal world necessarily. It's a statement of the fact that this is how people behave. They look at their circle of acquaintances and friends and family and they tend to get their judgments about what's right and wrong from those people. Not learning from them. Not listening to them being lectured by them as you might be by your parents say. But by watching what they do, thinking about how they'd look at what you're doing and making judgments accordingly. So that's what he means by the impartial spectator. But you're absolutely right. It could be a really unpleasant world. Smith's writing about a time, of course, and living in a world of civilized, educated society in the United Kingdom. Moving back and forth between England and Scotland and occasionally Europe. And he is swimming in a very particular set of circles. Highly educated people. Very thoughtful people. His best friends, David Hume. David Hume's a pretty ethical guy and a good friend and embodied a lot of virtues that Smith respected. And so that's who his circle of friends were. But of course if your circle of friends is something different, you will find yourself in a culture making decisions that maybe are not so healthy either for yourself in the long run or the short run or for the people around you. And so I think that raised the question how do you get a good set of ethical judgments? How do you get a good culture? And I write at length in the book about the fact that some cultures don't seem so healthy and things are acceptable that are not so nice. And other cultures integrity and honesty are honored and respected and that encourages more honesty and integrity. And it's good to be in a culture that has I think those virtues and Smith encouraged those but he understood he wasn't overly optimistic about humanity. He was very realistic about it and he said that sometimes people around people aren't so pleasant. How do we get from this idea because on one level we have almost it seems like the most absolute base level live in order to please other people's image of you which could seem selfish but then we get this quote which you write about at length in the book which I think addresses this point man naturally desires not only to be loved but to be lovely because on one level you could say well I'm just going to do whatever everyone else around me thinks is a good thing to do which would be just to appease them but also to be worth their evaluation as the other part. Right and I think it's worse than just being sounding selfish. It's actually I think healthy to be constantly thinking about are other people going to approve of this. I don't think Smith had that model in mind. I don't think he thought you should go around always worrying what other people thought about you. He had a slightly more I think subtler understanding of what it meant and the quote you bring out I think highlights that. So the quote again is man naturally desires not only to be loved but to be lovely and by loved and lovely doesn't mean the literal modern uses the word he means loved respected, admired, honored talked about in a nice way and lovely doesn't mean that's a lovely outfit you're wearing. He means lovely in the sense of being worthy of love. Being a person who deserves through one's own actions and one's behavior love who deserves to be respected deserves to be honored who deserves to be admired. So he writes at length about people who earn respect and honor dishonestly either because they deceive people or they're wealthy and powerful which he points out people pay attention to the wealthy and powerful. He has a lot to say about celebrity and very modern insights into the fact that it's very pleasant to be admired and his theme in much of the book is there's good ways to get there in bad ways. The not so good way is to be famous and wealthy and powerful that does get you a lot of love. People want to know what you think and they care about what you wear and when you walk into a room all the heads turn but he says it's a better way to be loved and that's to be lovely and the way to be lovely is to be virtuous and to be the proper thing and the virtuous thing and his point is that a lot of people fool themselves about whether they're lovely because we want to be lovely. We deep down Smith believes that we want to do the right thing and when we don't we pretend that we did sometimes and that's another whole set of insights he has about ourselves that I think is very deep and important. There's a really interesting part in the book that I was hoping you could talk about a bit where you talk about so we can deceive ourselves about how lovely we actually are and how respected we are but there's this idea that we can deceive others. We can not do things that we didn't actually do the thing that was worthy of respect but we tricked people into thinking we were and that somehow when we get praised for something that we didn't deserve that actually cuts deeper or is worse than getting criticized for not doing something we should have. I give the example in the book of Bernie Madoff who every night knew his investors didn't know but he knew that they weren't really earning their returns through his wisdom. They were earning through his ability to attract new investors in what was a Ponzi scheme so that the returns weren't his sage advice or insights they were just a lie. Now, I don't know how he slept at night maybe slept fine maybe he deceived himself that the people who he was giving money to were doing good things with that money he raised a lot of money for charities that way then lost a lot of money and it's very sad but what Smith would say I think is that it must have been very painful for him when he was forced or confronted by the fact that he was not lovely he was loved, incredibly loved people thought he was a genius they respected him, they were grateful to him for the returns that they thought he was earning for them but he knew they thought he was lovely because they thought he was wise and sage and prudent in fact he was none of those things he was a dishonest person and as a result he was not lovely and although he may have deceived himself from time to time he probably had pain about his lack of loveliness and that that's a deterrent not as efficient in his case tragically but for many people that discourages us from doing the wrong thing the idea that we are not going to respect ourselves because we're getting a claim that we don't deserve and he really makes the point that it's not only the fact that it's dishonest it reminds us of what we could have been we could have done the right thing it's bad enough that we get credit for something we didn't correctly do but it's worse than that because we could have actually done something productive or compassionate and we miss that opportunity so fooling people to think that we did is grotesque it's very judgmental about these kind of things I think in the modern era we're a little more tolerant of that kind of dishonesty and slipperiness but Smith felt that at least in his time or maybe for himself personally he wanted to earn his praise honestly and I think most of us do too and the self-deception part comes in interesting on that too because although Madoff may have again been self-deceiving or not, Smith has a lot of interesting insights about how much you can consistently deceive yourself into thinking you are lovely and that I think at one point there's a line that you referenced that Smith says that half of the world's ills are due to self-deception and you say that might be underestimating it yeah, that's right once you start to think about self-deception it kind of haunts you because self-deceptions are a protective mechanism we have for our self-esteem for lots of reasons it can be good to deceive yourself but a lot of reasons it's not good and once you start thinking about it once you can step back and be that impartial spectator over your own shoulder and realize, wait a minute I don't have a justification for that I did the wrong thing and if I'd asked someone outside of my circle outside of my who had a stake in it they'd say, yeah, that was Toddry behavior once you start doing that you start worrying, wait a minute maybe I'm doing more of this than I ought to be doing and so again I think it's a really wonderful self-improvement mechanism and it's good for the world I believe which encourages good behavior the one quote you had which I think you referenced to a student of yours or a reader of yours that the universe is full of dots and anyone can draw any picture they want but the question is, why did you ignore all the other dots goes back again to the world view and how you can self-deceive yourself in that way yeah, and we've been talking about personal decisions whether I stay late at work with kids or whatever is the example that we might want to think about but when we think about ideology or politics generally or religion there's a terrible temptation to only pick the dots that confirm your world view and ignore those other dots and we have a lot of romance about how we come to our views and thinking about Smith and these issues for us to realize that maybe you're not quite the truth seeker than you thought you were and that leads to a less comfortable life but I think a richer one so I'm all in favor of it despite being a pretty ideological and religious person but I think it's really important to keep it in perspective well that's an interesting sort of segue because as you have talked about in the book and as you've even talked a lot about on econ talk at the end of the day there's just a lot of complexity in the world and we don't know a lot about it and the hard thing about self-deception is you can say well those guys are self-deceived and I'm not and then you say well that's its own form of self-deception but then you have to figure out some reason why you hold your beliefs and not their beliefs correct and you don't want to I think you don't you don't want to go too far you don't want to say well the world's complex place you can't know anything that's not the world I want to live in it might be a it's not a bad starting point but I think that makes it difficult to live in the world it makes it hard to to vote it makes it hard to decide what you want to do with your life in many aspects so I think what I try to make a case for in the book in that chapter is humility so it's not that I don't have any views about what the right principles are I try not to fool myself about the empirical evidence say that supports those principles I try not to fool myself about whether those principles would would work 100% of the time so just to take an example free trade so I'm a big believer in free trade big believer in in commerce between consenting adults so let's take an example it's in the news lately which is the sharing economy so Airbnb and Uber are cases where the regulatory apparatus is hard to stump them out or make it harder for them and my view is generally leave alone people seem to be perfectly capable of getting into a stranger's car with the help of the app that says this person's been very reliable before they're perfectly capable of renting their home to a stranger and the stranger who rents the home is perfectly capable of deciding whether it was clean or not not based on a team of government inspectors but on the fact that past users have given this that system works really well so I'm a big fan of that and most free marketers are but it doesn't work perfectly so for example if I rent my apartment to a stranger and that stranger then makes an enormous amount of noise while I'm out of town bothering my other neighbors then all of a sudden the consenting adults there were some adults in there who weren't consenting who got stuck with some of the costs so the non-free marketer says see Airbnb doesn't work well I don't say that I don't pretend that these kind of things don't happen though so we need a story to tell about how that kind of problem gets solved and that problem gets solved without government through the laws of how an apartment building treats its tenants whether you're allowed to sublet your apartment or not apartment buildings can choose to not allow that they can choose to allow under certain situations to allow it and you can be sued for damages that your renters tenants did as they partied and burst through a wall that imposed costs on others so the legal system can be used to solve that as well so I think it's really important when we talk about exchange like that or we talk about say at a larger level free trade when we buy stuff from China there's some people in America who lose their jobs I don't want to pretend that trade's great for everybody that's a lie so I think what this viewpoint says about self-deception don't deceive yourself about that your views are perfect don't deceive yourself that there's tons of evidence that your side's always right and the other side's always got bad evidence be open-minded about the truth hold fast to your principles hold fast to your principles not to your this particular study or this empirical evidence because those they seem to come and go very often with great speed so now your principles can be wrong too but I think I'm more comfortable with my principles which in this case for example means decentralization of power away from government because of the incentives that governments face and because the incentives for power to be abused that's what I'm going to stand by that's what I'll defend that's what I'll fight for and that's what I have to say I'm pretty confident in so the fact that I'm aware of self-deception doesn't rule out the possibility that I can feel strongly about certain things let me ask a question that may tie much of what we've been talking about into Smith's other work The Wealth of Nations which takes a seemingly on his face kind of a different view of human nature or the way we behave when we're suddenly in the market which is the self-interestedness that so let's take your Airbnb and Uber example the condemnation that these places when the Uber drivers get or the Airbnb people get that we need to stamp this out with regulation I mean obviously a lot of that is motivated by wanting to stand by competition for traditional businesses. Purely self-interested by the part of the existing hotels and taxi cabs. Rarely do they that's not the expressed reason. No would be. And so it seems like a lot of these things that you can't it's there's something wrong about giving a stranger you know driving around picking up strangers and giving them rides or giving your apartment to someone in other circumstances we would find those morally praiseworthy acts. My neighbor gave me a ride to the metro the other day or you know someone like you know desperately their house burned down and they really you know you don't know this person at all but you offer them your apartment we would praise those sorts of acts right and but it seems like so suddenly when I'm going to offer you my apartment but I'm also going to ask for some money which is often very small compared to how much you would pay for a hotel or something else to stay in it then suddenly this is there's something wrong with this it's wrong to get something out of the deal and that seems like the leap from the moral sort of right that's the market economy right because the wealth nations is basically saying we get all of this great stuff that the market economies give us is from people not doing this out of the kindness of their heart I mean this is the famous line the benevolence of the butcher and the baker right so is that is that a misreading of Smith or how do we how do we tie these things together well that's it's a great insight that the things that we see Uber and Airbnb and these other companies doing and facilitating better works companies don't do it all they do is facilitate it they're not I think of Airbnb as the world's largest hotel chain they have 800,000 rooms which I think makes them the world's largest but of course they're not their rooms they have a lot of about 800,000 franchises their feminist transaction yeah it's an extraordinary thing you make a great point that that these companies are doing what what people would normally applaud yet somehow we got to protect them so if my brother is driving me to the airport no one says did you check his driver's license as he passed his is carbon inspected like we just say well that's fine his brother's taking the airport somehow when money is involved we start worrying about now one reason as you point out is that well it starts to affect other people's money they've got a vested stake and cronies can use the political process to protect themselves but of course the other reason is that we have a lot of suspicion about the profit motive so if money is at stake as opposed to love then I might drive recklessly because I don't love you when I take you to the airport because all I care about is the money it's the claim and what that misses by the way is a combination of Smith's two books which is I really don't want to hurt you I might be in a hurry and I might as a cab driver drive too quickly for your taste but generally I don't want to hurt you and more importantly to get bring in Smith's other book the Wild Nations I want to get repeat business so I want a good reputation I want to be thought of as lovely not just for my own self-esteem but because I want to get customers again and in fact I've argued it really goes the other way many times you know if do I want my brother now I happen to have a particularly trustworthy brother but do I want my brother does everyone out there want their brother driving the airport or to have Uber show up Uber is incredibly reliable when I was in San Francisco recently interviewing a co-founder of Airbnb I finished the interview I'm in Airbnb's headquarters I turned to the co- the assistant who's helping with the interview and I said is it easy to get an Uber X ride around here and she said oh yeah it's pretty easy so I pulled out my cell phone and I pushed that I wanted a ride to a particular place and I got a message back almost immediately your driver is two minutes away I stepped out of the conference room and my phone rang here where are you said my driver now my brother might not reach that level of customer service so I what I advocate for it I don't know I suppose this is Smithian I don't see any reason why my Uber driver that day who turned down the music when I had to call my wife who chatted with me in delightful ways about his life in his home country who took a shortcut to beat traffic so I wouldn't miss the train I was on my way to and did it in a way that wasn't dangerous I assume he got satisfaction from giving me a ride and not just the pleasure he got from the couple of bucks that he made off me that ten minutes so I don't know why we can't have both motives involved a caring motive and a profitable motive they're both important and I come back full circle to the way you asked the question initially the the wealth of nations is about self interest because we can't we can't love the stranger the way that we might want to or that we might think we could someday in a different world most of us our circle of care is very tight we care about our brother our sister our parents or children maybe a few close personal friends maybe a few friends not so close not so personal but we don't care so much about the Chinese earthquake victim care a little bit not zero but we don't care a lot enough to make huge sacrifices for them because if we did we wouldn't have any time in the world to do anything other than that and most of us aren't built that way so what I think I say in this book or I've said it elsewhere is that you know if you're only going to trade with people you love you're going to be very poor so what Smith cares about he cares about two things and I think they're things that we should all care about which is the larger circle of strangers we trade with that sustains our lifestyle and prosperity and standard living and our health which is the incredible trade world trade of the last specialization that's unimaginable fifteen hundred years ago but at the same time we care a lot about the people right close to us and near us and those are two things that are not exactly the same and we shouldn't pretend that they are and we have to treat them a little bit differently and that's a great point connecting those two worlds that it's almost as if the personal world the social world is what Smith is concerned of their moral sentiments and then trying to figure out how to make that broader because there's an actual trade off between broader trading possibilities wealth but you can't know everyone that you possibly can trade with and so you can kind of choose one or the other you can live in a closed society where everyone is really caring about everyone else for the purposes of that person because they care for that specific person not in a general way and be poor or you can live in a broad society where you have different things it made me think that in Uber in the sharing economy you really are bridging them in a very fundamental way and almost the impartial spectator is the rating system something that tries to convey that kind of care you need to have for everyone else You're spreading the market economy so in the argument I go in an ideal world we would care about everyone in the same way that we care about those close to us but for all sorts of reasons that's just not possible and the consequences might not even be desirable but that so some caring though for other people is better than none at least and what the market economy does is encourages us to be interested even if it's at this minimal level in other people the Uber driver if he wasn't out there selling rides would have had no contact and no interestedness in you at all but at least now he had some and at least now we have reasons to say care about those people in China even if it's as customers we want them to contribute to our lives and we want to contribute to theirs I wish I had the quote in front of me but Dennis Robertson British Economist in the early 20th century I think said it very well he said I'm not going to get it right but basically what markets do is they economize on love because there's not enough love to go around and so what a market does and this is the way I think of I don't know if Dennis Robertson thought about this way but what a market does when it works well is it lets me it lets me act as if I were loved and as if I loved other people so that when that cab driver asked me how I'm doing the way my brother would right he's there for those 5-10 minutes in the car in the full sense of that word my brother now maybe he's just doing it to be polite maybe he's just doing it because he thinks it's good business but the best cab drivers do it because they actually care and I like the example of of Southwest Airlines and when Herb Kellacher used to when he was the chair CEO would go work the baggage claim on Thanksgiving and Christmas day and he'd go down to this would be in Dallas he'd go down to the Dallas airport and he'd go work the baggage claim to be with the people who weren't with their families and he went away from his family and he supposedly had a great time you know he enjoyed it it was fun he had a camaraderie with them I'm sure he learned something about his business at the same time but mainly he felt he was doing a good deed that was good for his company and it always raised the question why don't other CEOs do things like that and I think the answer would be is that they wouldn't enjoy it they'd have to fake enjoying it wouldn't be very good at faking it and it wouldn't be so good for morale and the company and so they don't bother but if you can fake if you don't have to fake it if you really genuinely care a little bit about the people who work for you it's an incredible thing it's not a publicity stunt it's just part of what it is to be a to do the right thing as the CEO and so I think that's Smith definitely believed that commerce was civilizing that commerce encouraged us to treat other people well and actually not just pretend to to actually treat them well and care about them a little bit not as much care about yourself but a little bit of course love has to be economized on because you have inflationary concerns and then the diminishing each unit of love of you worth would be less if you loved everyone equally well I don't know about that and then your wife would wonder what the heck that cab driver well that's it that's an interesting that's I like that it's interesting part of love's value is the fact that it's scarce whether the world be a better place with a lot more love or a little more is I guess a tough question changing a little bit of the tracks here but I think it's still the same the same topic a very important point we haven't touched on yet which is who is the man of the system and possibly how does he work into the system of love and respect for the people that he's dealing with so I said early on that there are a couple things that economists know about the Theorem once they might know the earthquake example which is I think of a misinterpreted but they've at least heard of it and then there's this other famous quote from this book which is the man of system and the quote is that the man of system thinks he can this is not verbatim but the man of system thinks he can move the pieces of society's chessboard as if they had no independent movement of their own and that when the man of system forgets that and tries to move them against their natural motions you get chaos and disorder and as long as the man of system takes into account that these pieces have their independent motion things work much better and what he has in mind there I think is there are a lot of different men of system a lot of different systems but what he's saying about is the person quote knows what's best for society whether it's the drug should be illegal whether it's we should invade this country whether it's how this our health care system should be organized that we need a plan and of course F.A. Hayek said the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design and the man of system is big into designing and not so big into understanding and knowing and so is often either oblivious or wants to be oblivious to the fact that their underlying market forces are going to offset sometimes some of these desires and goals but this image of a chess board of human society is a chess board where we have our own patterns of motion is and of course the real chess board of society is infinitely more complex than a chess board but this idea that somehow a great hand can come down and move this piece from Knights Row 3 to over here is a nice metaphor for thinking how dangerous and destructive utopian theories are and some people say to me oh but you're a man of system you want freedom that's just a different system you're a libertarian, you're a classical liberal and I guess it's some rhetorical sense that's true but my system is I don't want a man of system so if you call that if that still makes me a man of system I confess I am a man of system but my system is a world without people of system people who decide what's best for everybody and I think that's that would be a better world it also seems like the man of system is missing some of the insights of sentiment and fellow feeling that the theory of moral sentiments would give him if he believed that everyone was as competent out there as he believes he is or at least had the impartial spectator to check his biases and respect other people as equally worthy of respect as he gives himself that's the tyranny of experts that's the experts know what's best for us, know what's best for you they want to impose their vision, their system on other people and I think 20th century was a terrible terribly tragic manifestation of the dangers of that of that world view So how do we take all of this everything we've discussed today to get to our political system what does it mean for the way that we should approach government Well a couple things just as an aside those of us who like freedom and who want to be more or less left alone and restrict and reduce the scope of government's intervention or lives I think one of the lessons from this book is that it helps to be a good person if you want other people to think the way you do that you should be a good person that makes it more likely they want to be part of your team and I think those of us who care about liberty have not done the best job at that at times and we made it harder for people who are skeptical of our viewpoint to join our team so I'd encourage everybody out there who cares about freedom to be a good person I think it probably is the single best thing you can do to advance libertarian ideas classical liberal ideas but I think there's a much bigger lesson which is Smith is really one of the great expositors of and understanders and users of the concept of emergent order this idea that certain patterns and certain problems get solved through decentralized bottom up activity rather than top down centralized activity and ironically perhaps the theory of moral sentiments I think has one of his best explications of this idea and he's talking about morality he's talking about where morality comes from and he's really saying it doesn't come from the top down it comes from the bottom up comes from our own actions and what that leads to and where I think about it is that each of us has a role to play in helping to make the world a better place through our private small individual actions and they add up to a lot much in the same way that market forces aggregate to say determine the price of apples or the cost of a haircut that there are a web of interactions that we all have and what Smith is talking about in the moral areas that when I do a good deed I earn the respect and love of people who see that and who know about me and I am lovely as a result and I am loved as a result and I add to the impact of those kind of decisions being made in good ways because people say oh yeah that was good and so we self monitor and we monitor others through our approval and disapproval of their actions and it's not very far from a perfect system but what Smith is saying there is that morality and culture merge through the hundreds and thousands of interactions we have with each other what we approve of and what we disapprove of and I think that's a very powerful way to think about how to make the world a better place it puts a little burden on us because it says free riding which is often I think justified by economists as quote rational free riding is a bad thing when you take advantage of the fact that other people are doing the right thing and you then do the wrong thing because they are doing the right thing because they give to charity so you don't have to oh yeah they'll take care of it you are degrading the world it could be rational to do that because other people are still going to give charity but you are degrading the world and Kant, Emmanuel Kant I think was influenced by Smith and talk about a little bit in the book Kant talked about morality is doing what when you are making a decision you should say well what if everybody did this and making a decision that's moral in that way called it the categorical imperative when you make a decision that's moral in that way it may be irrational because you could skip out on this opportunity you could skip out on this obligation but what I think one way to understand what Smith is saying is that when you don't do that when you do what is right I hope the self-regulating part of our world and I want to expand the self-regulating part it's gotten very small in modern times I want it to be bigger I want the government to let us judge that Uber driver and not judge it with a government inspector who does not have my interests at heart and we shouldn't pretend that that inspector does so for me the lesson of Smith is we want to expand the scope of bottom-up opportunity through emergent actions that we take voluntarily not coercively from the bottom-up and not the top-down so we want to expand the charitable sector we want to help people who are suffering and who have tough times through voluntary actions not through government aid not through international aid for example which is horribly misspent but we pretend that it's making a difference let's find legitimate ways that we can join together and actually make a difference in the world and I think there's a it's very very easy to rationalize either of those extremes oh government will just solve it because government does the right thing that's what they're about or the other extreme which is we're all individuals well Smith was not an individualist he believed in the power of individuals he believed in individual liberty but there's nothing in Smith and there should be nothing I believe in modern classical liberal libertarian thought that says on their own that's what a libertarian believes there's no reason that we join together in all kinds of ways we form businesses partnerships new companies new ideas we party together we merge together on the web we do all kinds of things together the key is not whether we do them as individuals or as groups the key is whether we do it freely or whether we're forced to do and when we do it freely it works a lot better and what I think the lesson for political philosophy that comes out of Smith is that we ought to expand the scope of those kind of freely made choices to help people act individually when they want but to join together with others and do things that are glorious when they choose to do that it seems that government intervention in the moral emergent moral system can distort it almost as much as intervention in the emergent price system for example sapping people's ability to be good when it takes over the welfare state and charitable functions and it takes over trust by saying we're going to regulate this now and license so it actually sucks that down which some of Pete Becky's work for example on the Soviet economies had those societies very bereft of fellow feeling after the government took everything over and I think of it as being an adult versus a child being an adult means making choices in an uncertain world child we don't let them do that because they don't have very much information they don't know much about the world and so we keep them from crossing the street in traffic and we keep them from touching the stove when it's on and we regulate their behavior from the top down but once you get outside the family because there isn't enough love to go around I would rather see people act like adults and once they become adults be treated like adults we make our own decisions about who to trust and who to be kind to and who to help with our charity and whether to be nice to our parents and our siblings understanding it doesn't always work perfectly but it's that's the world I think more people would want to live in if they could see that's potential Thank you for listening to Free Thoughts if you have any questions or comments about today's show you can find us on twitter at Free Thoughts pod that's Free Thoughts P-O-D www.libertarianism.org and the Cato Institute produced by Evan Banks to learn more about libertarianism visit us on the web at www.libertarianism.org