God and the Economists

Some time ago I was asked by my friend Larry Kudlow to appear as a guest on his show to debate libertarian economist Don Luskin on the subject of Ayn Rand’s atheism. Luskin made the mistake of opening the debate by quoting Adam Smith’s famous statement about “the invisible hand.”

The problem there is that although Smith was indeed an advocate of the idea (which Rand also embraced) that self-interest can promote public good, Smith believed that this unexpected relationship is the result of divine design, not of random occurrence. Smith also rejected the idea that selfishness is a virtue and strongly endorsed the idea of altruistic empathy, in fact writing an entire book, The Theory of Moral Sentiments, to defend virtues such as altruism.

About 4 minutes into the exchange, Luskin went off the wheels. “That is not what [Adam Smith] said, Jerry. Jerry, you are a religious man and you will try to make this case. But that is not what he was talking about. The Invisible Hand Adam Smith was talking about was a metaphor. It was that entrepreneurs and capitalists and laborers produce goods ‘as if’ an invisible hand were guiding them to do so.  ’As if,’ quote unquote–go back and read it. That invisible hand in Adam Smith was not God’s hand. You may be a religious man, you may not, but let’s not distort the record.”

I agree, let’ s not distort the record, but unfortunately Luskin was so flummoxed by that argument that he falsified a quote from Smith, adding the words ‘as if’ to Smith’s quote to imply that Smith did not believe in Divine Providence and was using the idea as a mere metaphor. That quote is false. Here’s what Smith actually said:

By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention… By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

Interestingly, Luskin has posted the video on his YouTube site, but edited out the misquote, without however acknowledging the error.

So whose invisible hand was Adam Smith talking about? Smith mentioned God frequently in The Wealth of Nations and in the book for which he was already justly famous, The Theory of Moral Sentiments. In good 18th century style, Smith refers to God as “the Deity” or as “Providence,” but make no mistake about it: God was an extremely important idea in the origins of classical economics, and Mr. Luskin’s ignorance of history need not be our own.

So what is the “invisible hand”? God’s providence. Smith made this clear in his Theory of Moral Sentiments in which he first introduced the idea of an invisible hand (bold emphasis is mine.):

The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition.

The “invisible hand” is the hand of “Providence” (note Smith’s capitalization). Elsewhere in Moral Sentiments Smith pointed to private virtue and its social benefits as a way in which we “cooperate with the Deity”, linking the Deity, Providence and God in one statement:

But by acting according to the dictates of our moral faculties, we necessarily pursue the most effectual means for promoting the happiness of mankind, and may therefore be said, in some sense, to co-operate with the Deity, and to advance as far as in our power the plan ofProvidence. By acting other ways, on the contrary, we seem to obstruct, in some measure, the scheme which the Author of nature has established for the happiness and perfection of the world, and to declare ourselves, if I may say so, in some measure the enemies of God.

It’s well neigh impossible for a serious student to deny the existence of God in the writings of Adam Smith. Serious thinkers who want to deny Smith’s theism assert that Smith just didn’t mean it. Perhaps, but that leaves us wondering why he mentioned God so often. There were plenty of anti-Christian thinkers writing at the time: this was, after all, the eve of the French Revolution.

Smith’s friend and colleague, David Hume, published openly atheistic books. There was obviously not some overwhelming social pressure to add theistic language to one’s works, and even if there were, Smith’s stance for economic freedom against the contemporary policies of the Crown showed him to be a man willing to say what he really thought. And if somehow he became suddenly cowardly and felt the need to mention a God in whom he did not believe, he could have put a nice little piece of pious gush into the front matter of the book and been done with it. Instead he laces his works throughout with theistic references. It seems clear that Smith really believed what he wrote.

The point of my writing is not to settle a score with Mr. Luskin (though rewatching the video of our encounter left me with a conspicuously Randian shortage of altruism), but to put classical economics in proper context, which we began here, and Providence willing, will continue in a future column.