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Friday, October 15, 2010

Wen Jiabao, Adam Smith and Marcus Aurelius

I was amused to read the following in a recent Fareed Zakaria interview of Chinese Premier Wen Jiabao. ***

Is there a book you've read in the past few months that has impressed you?

The books that are always on my shelves are books about history, because I believe history is like a mirror, and I like to read both Chinese history and history of foreign countries. There are two books that I often travel with. One is The Theory of Moral Sentiments, by Adam Smith. The other is The Meditations [of Marcus Aurelius].

Below is my favorite quote from Marcus Aurelius, which I've mentioned before on the blog, here and here.

Marcus Aurelius

"Or does the bubble reputation distract you? Keep before your eyes the swift onset of oblivion, and the abysses of eternity before us and behind; mark how hollow are the echoes of applause, how fickle and undiscerning the judgments of professed admirers, and how puny the arena of human fame. For the entire earth is but a point, and the place of our own habitation but a minute corner in it; and how many are therein who will praise you, and what sort of men are they?"

It has often been remarked that there is some tension between Adam Smith's Theory of Moral Sentiments (TMS) and Wealth of Nations (WN). Here are the key excerpts:

WN: 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 ... This division of labor ... is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.

TMS: How selfish soever 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 derives nothing from it except the pleasure of seeing it.

See this lecture by our man Vernon Smith for a nice discussion of this tension. (I highly recommend the whole lecture!)

The juxtaposition of these two statements lays bare what would appear to be directly contradictory views of human nature held by Adam Smith. This has long been noted and perhaps helps to account for the greater notoriety of the Wealth of Nations in both popular and academic discourse. Thus, as observed by Jacob Viner, “Many writers, including the present author at an early stage of his study of Smith, have found these two works in some measure basically inconsistent.” (Viner 1991, 250).

These two views are not inconsistent, however, if we recognize that a universal propensity for social exchange is a fundamental distinguishing feature of the hominid line, and that it finds expression in both personal exchange in small-group social transactions, and in impersonal trade through large-group markets. Thus, Smith had but one behavioral axiom, “the propensity to truck, barter, and exchange one thing for another,” where the objects of trade I will interpret to include not only goods, but also gifts, assistance and favors out of sympathy, that is, “generosity, humanity, kindness, compassion, mutual friendship and esteem” (Smith 1759; 1976, 38). As can be seen in both the ethnographic record, and in laboratory experiments, whether it is goods or favors that are exchanged, they bestow gains from trade that humans seek relentlessly in all social transactions. Thus, Adam Smith’s single axiom, broadly interpreted to include the social exchange of goods and favors across time, as well as the simultaneous trade of goods for money or other goods, is sufficient to characterize a major portion of the human social and cultural enterprise. It explains why human nature appears to be simultaneously self-regarding and other-regarding.

*** Of course, I am old enough to remember that before KGB director Yuri Andropov succeeded Brezhnev as leader of the USSR, Soviet intelligence planted fabricated information about him with the Western press, portraying him as a cosmopolitan intellectual. I doubt Wen is playing this game. However, he did, probably, deliberately mention books that would be familiar to Westerners as opposed to whatever Chinese books he travels with.

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