Smith's View of the Role of Government in the Economy

Samuel Gregg:

Hello. Welcome to Liberty Law Talk. My name is Sam Gregg and I am distinguished fellow in political economy at the American Institute for Economic Research, and I’m also contributing editor at Law & Liberty. Thanks for joining us today. 260 years ago in 1762, a middle-aged professor at the University of Glasgow was delivering as part of his normal teaching load you might say a series of lectures on jurisprudence. And in that audience a number of students were busy taking notes as any good student, I suppose, does even today. One set of those notes, however, was discovered in 1895. So over 130 years later. And it had come into the hands of an Edinburgh lawyer. Now, normally discovery of this type would be neither here nor there, except for the fact that these notes were from lectures delivered by Adam Smith, the great Scottish enlightenment thinker whose Wealth of Nations was a book that literally changed the world.

That book, as well as Smith’s other writings including the book we’re going to be discussing today, Adam Smith’s lectures on jurisprudence, have all been published by Liberty Fund. And I think it’s fair to say that lectures on jurisprudence is perhaps the least known of Smith’s words that have come down to us today. So joining me to discuss lectures on jurisprudence, it’s my great pleasure to welcome to Liberty Law Talk today professor James T. Otteson. He is the John T. Ryan Jr. professor in business ethics at the Mendoza College of Business at the University of Notre Dame. He specializes in business ethics, political economy, history of economic thought, and 18th-century Moral Philosophy. Previously professor Otteson taught at Wake Forest University, Yeshiva University, Georgetown University, and the University of Alabama.

Some of his books include Adam Smith’s Marketplace of Life, 2002. Actual Ethics, 2006. Adam Smith, 2013. The End of Socialism, 2014. And The Essential Adam Smith, 2018. And his forthcoming book, Reexamining The Ethics of Wealth Distribution. He has a BA from Notre Dame and he also has a Ph.D. from the University of Chicago. He’s also, in my view, my humble opinion, perhaps one of the world’s leading Adam Smith scholars today. Today he’s joining me to discuss, as you may have guessed from his bio, Adam Smith and, more specifically, some of his writings that have received less attention—in particular Smith’s lectures on jurisprudence. Jim, welcome to the Liberty Law Talk.

James Otteson:

Thank you so much, Sam. It’s my pleasure to be with you. Thank you for having me.

Samuel Gregg:

So I thought we might begin by putting these lectures of Adam Smith in their context. So, can you tell us a little bit about how it was that Adam Smith came to be giving lectures on legal philosophy in the 1760s?

James Otteson:

I’m happy to do that and you’re quite right. The lectures on jurisprudence are not something that get discussed very much anymore. So Adam Smith was the author of two published books, only two. The first was The Theory of Moral Sentiments, which came out in 1759 in the first edition, and then the now much more famous inquiry into the nature and causes of The Wealth of Nations, which came out in 1776. So rather auspicious year. But those were the only two books that he actually published. They each went through several editions. He was born in 1723. He died in 1790. About a week before he died, he called a couple of his colleagues to his quarters. I guess he had a bit of a notion that it wouldn’t be much longer that he would be alive.

He asked them to burn his manuscripts, and so those colleagues actually burned 16 volumes of manuscripts. We can only guess what was in them, but one set of documents that was probably in those burned manuscripts was what we now have as the lectures on jurisprudence. So these lecture notes, as you mentioned, were first discovered in 1895; they were the student notes from two different years that he had given this course called lectures on jurisprudence. He was teaching jurisprudence at the University of Glasgow. He first started at the University of Glasgow in 1751 as a professor. He was only 28 years old. In 1752 after just one year, the prior professor who had been the Chair of Moral Philosophy at Glasgow passed away and so Smith became the Chair of Moral Philosophy at the University of Glasgow in 1752. He was only 29 years old if you can imagine. And he began giving, among other things, these lectures on jurisprudence and that’s what we have.

Samuel Gregg:

So tell us a little bit about how Smith saw jurisprudence fitting into the wider scheme of university education that he was engaged in teaching.

James Otteson:

Yeah. So as a Chair of Moral Philosophy, so something to note about professorships in the 18th century in Britain and in Scotland in particular, people were considered professors of one of two things. Either you are a professor of moral philosophy or you’re a professor of natural philosophy. So natural philosophy was all of the subjects that related to the natural world, the non-human natural world. So everything from astronomy to what we would now, now that it has been subsequently broken up into disciplines like geology and botany and all these other fields that study the natural world. That was under natural philosophy. And then moral philosophy, which is what Smith was, that was a field that pertained to all of the aspects of the study of human behavior. So everything we would today recognize as being in psychology, in human history, in politics, and also in moral philosophy.

And all of those were fields that Smith was teaching in. So as the Chair of Moral Philosophy in Glasgow, he was teaching a range of courses—everything from logic to natural theology to moral philosophy and then to jurisprudence, which was, at the time and what Smith considered it, he study of the laws and regulations that were required essentially for a successful society. So when Smith was giving lectures on jurisprudence what he was effectively doing is giving kind of two parts of it. One was the history of the development of human societies. So he gave his theory about why you had different kinds of governments and different kinds of laws and regulations in different humans societies. And then also he was making recommendations about, given the kinds of goals that we might have in human society, what kinds of laws, regulations, et cetera, should we have? All of that fell under the topic of jurisprudence as one part of the study of human life and human behavior.

Samuel Gregg:

So clearly jurisprudence in the way it was taught, in the way it was understood in the 18th-century, particularly in the Scottish universities at the time, it clearly embraced a lot more than would typically be put under that type of topic today. So can you tell us something about the actual structure of Smith’s lectures on jurisprudence?

James Otteson:

Yeah. So it was a year long course that typically met every single day. So you would meet once a day for nearly a full calendar year. So it was quite a bit of material. It wasn’t just a three month long course, which you would get in college today, but the structure of it started out with what the subject matter of jurisprudence was and then began working out Smith’s theory as it were of jurisprudence. So everything having to do with, according to Smith anyway and Mr. Smith’s understanding, jurisprudence started with a conception of justice. What actually is justice? What are the different conceptions of justice? Then what are, he called police or what we might call policy today? So what are the rules or regulations or laws that are appropriate to the conceptions of justice? What are the proper objects of justice? Meaning what kinds of things should justice pay attention to and therefore what should the government pay attention to?

But he also, in his course on jurisprudence, went into the area that we would now think of as more appropriate to economics or his Wealth of Nation’s book. He talked about revenue. So where did the government get its money? Where does wealth come from? So he talked about that as well. And then also, how do you protect the government and how do you protect society? So things like military and arms, et cetera. So it was quite a wide-ranging course, quite a wide ranging topic. And he went into enormous amount of detail, both historical—so, descriptive talking about how different times and different places approached these topics, and then also normative or prescriptive. What he thought we should actually have. What would be good for Scotland? What was good for Britain? What was good for Europe? What was good for even the Americas? He was talking about what was going on in the Americas at the time.

Samuel Gregg:

So, I’d like to come back a little later to talk about a few of those things that you just mentioned, in particular, some of the topics that get included under particular parts of his lectures on jurisprudence. But before we do that, I’ve got another question. I imagine that like any professor, there were things that Smith was obliged to teach if only because the people sitting in the class, many of them I suspect would’ve gone on to become practicing lawyers and practicing lawyers need to know certain things that have relatively little to do with the philosophical preferences or interests of a given lecturer. So you do something like contracts or torts or whatever it happens to be. And it’s like a sort of professional training, but that said, I imagine, just any other professor, there were particular emphasis that Smith would have brought to bear, or at least tried to bring into the discussion, during his lecturing. So I was wondering if you could tell us what some of those particular emphasis may have been.

James Otteson:

Yeah. You’re quite right about all of that. I mean, we do have one anecdote about Smith that I’ll just relate to give you a little bit of a glimpse of what seems to have been his personality. When he first started teaching at the University of Glasgow in 1751, he was asked to teach a course on logic. And one of his students, who reported many years later about what that course was like, noted that Smith began the course and spent about the first week or so of the course teaching what he was supposed to teach. And then he immediately started going off onto other subjects, which were much closer to what we might think of in the Wealth of Nations and the lectures on jurisprudence even in his logic course. Even as a young man, he was only 28 at the time, he had a bit of an independent streak, but you’re right.

The course on jurisprudence was in part intended. It was supposed to prepare people for a profession in the law. So many future attorneys would’ve been in the audience. And one of the central subjects, I mean, there are lots of things that were supposed to have been covered, but one of the things, and I think this might be a particular interest and maybe is even behind the question you’re asking, one of the things that Smith would’ve been expected to talk about was natural law. So he would’ve been expected to review Locke and other major figures in the history of, especially British natural law theory and British common law as informed by British by natural law theory. And so in fact, he did do that. And one of the things that’s interesting about it. So he talked quite a bit about Locke and others.

If we’re talking about what constitutes an injury, and there are different theories of justice, what constitutes an injury? Well you can be injured, as Smith said, as a human being, as a man, as a member of a family, as a member of a state. You can be injured in your body, in your property, in your reputation center. So he walks through these things all with this kind of background of a sort of Lockian natural law. One of the things that I think is interesting about this, though, is that if you look at the other works that Smith talked about, that wrote, The Theory of Moral Sentiments or the Wealth of Nations, almost all of that is absent. There’s virtually no talk of natural law, no talk of natural rights. So he did it, he discussed it in his lectures on jurisprudence. So he is obviously aware of the tradition, took it very seriously, but it did not come to inform much of his own theories.

Samuel Gregg:

Well that’s interesting as well because I was going to ask you about that and the way he talks about natural rights. And as you say, he does make reference to people like Locke. Although it’s not entirely clear that he accepts Locke’s own particular thesis, but like any professor, you have to teach things you don’t necessarily agree with because some of these ideas were taken very seriously by judges and lawyers at the time. But there’s two particular influences I’d like to, if indeed they are there, that I’d be interested in hearing you say more about, and that is the two H’s, David Hume and Francis Hutcheson. Do you have any sense of any particular influences of their thought upon these lectures?

Smith suggests that if 20% of the revenue of society [is] being taken by taxation, then citizens should take a long, hard look at whether that’s really benefiting them and enabling the increase of prosperity, or is it just satisfying the needs of people in government.

James Otteson:

Yes. That’s a good question. I think both of them were quite influential on Smith’s thought. And they may help explain why it is that when Smith came to develop his own theories about justice and then ultimately about what we consider economics and the Wealth of Nations, that there’s not a lot of reliance on natural law or natural law theory. I think certainly with Hutcheson and also with Hume, Smith’s takes something of an empirical approach to these questions and he develops a theory, for example, of government. When he’s talking about the origins of government, he explicitly rejects in the lectures on jurisprudence Locke’s theory of a kind of original contract.

Samuel Gregg:

A sort of state of nature.

James Otteson:

Yeah. I mean, it wasn’t only Locke who had this view, but I think here you do see the influence of Hume in particular, but Smith says, now that this is just a fiction. There really wasn’t any original contract. There was nothing like an original contract. There was no state of nature when men came together and decided what the form of government should be. It’s much more of an evolutionary process. So one thing that he gets from Hume I think is something like a developmental process as human society developed through these stages. So he offers a theory of stages of human society; You begin with hunters. Human beings are basically hunting parties where there’s no government at all, according to Smith. They eventually develop into shepherds where they have their own herds of animals. At that point, they develop something of a root. That’s the first stage of actual government according to Smith. They develop something of a rude state of monarchy. Then they develop into farming and agriculture where they have land and property. At that point they need a little bit more sophisticated government that’s going to have conceptions of justice that apply to property in particular. And I think we see some influence from Hutcheson in the importance of property.

The kind of government appropriate there Smith thinks is aristocracy. And then the fourth and final stage, according to Smith, of human, social, or societal development is what he calls democracy. This emerges when human society develops to the stage where commerce becomes the dominant economic activity of society. That’s the highest final stage. So at all of these stages, the applicable conceptions of justice and the right proper sets of laws and regulations or the proper form of government, changes according to human development as Smith argues. And that I think really is a very large influence of this kind of developmental and observational approach that shows the influence of people like Hume in particular, but also Hutcheson.

Samuel Gregg:

You mentioned the civilizational development theory. I imagine this also reflects Lord Kames as well, right, because as I understand it, his thinking about law and society in general is very shaped by this particular type of account of Hume at the development of human civilization.

James Otteson:

Yes. That’s a good observation, Sam. And I think these are elements of what came to be known as, and is sometimes called, the Scottish historical school of social science, which is we’re going to try to apply the approach that Isaac Newton had such great success with for the natural world. We’re going to try to apply that to the human world and what that means is we’re going to try to actually look at various kinds of experiments that human beings have run. And by experiments, different human societies in different times and places.

We’re going to see what kinds of principles we can see might be at work in these things, but it’s not an apriori deduction. It’s not sitting in our offices and trying to intuit or God’s will, for example, and figure out what the essential nature of human beings is. And instead we’re going we’re going to look at the world empirically and I think that is influential, you’re right, Kames. I mean, in others, we’re talking about the development of language, the development of law, the development of governments, all of this was this new way of trying to understand human society as being a process of historical development over time.

Samuel Gregg:

So I’d like to shift the discussion now to a topic which I’m sure you’ve thought a great deal about, which is lectures on jurisprudence and its relationship to the more well-known texts of Adam Smith, specifically The Theory of Moral Sentiment and his Wealth of Nations. So these lectures were, at least the notes that we have of these lectures, were recorded after the publication of The Theory of Moral Sentiments in 1759. So, do you see traces of elements of some of the thought that’s expressed in Smith’s Theory of Moral Sentiments within parts or even sections of his lectures on jurisprudence?

James Otteson:

That’s a good question. I do see a couple. In fact, I see a handful, but I’ll just mention a couple. So first of all in the conception of justice that Smith discusses and lectures on jurisprudence, he had already articulated in The Theory of Moral Sentiments. So as you mentioned, Theory of Moral Sentiments comes out a couple of years before the first report of the lectures that we get on jurisprudence. But right at the beginning of the lectures on jurisprudence, Smith talks about justice being what he calls securing people from injury. So, the kind of justice he’s interested in is protecting people against incursions on their persons, on their property, or on their voluntary contracts or voluntary promises as he said. It’s the kind of negative conception of justice. In other words, you’re acting justly as long as you refrain from imposing harm or injury onto another person. That’s exactly the conception of justice that he had articulated and quite carefully in The Theory of Moral Sentiments.

So in The Theory of Moral Sentiments, this is the development, this is the conception of justice. He says that in all societies, it’s both necessary and sufficient for human society to exist. And all of the positive moral duties of friendship and loyalty and charity, these sorts of things are what he calls the embellishments of society, but they’re not necessary for society to exist. So in the lectures on jurisprudence, he elaborates on exactly that. Why is this negative conception of justice so necessary for the existence of any kind of human society whatsoever? And how does it apply to various aspects of human society from your bodily person to your property? What kinds of property even potentially your reputation, et cetera. So that’s one way where I see a clear connection, but I will mention if you allow me just one other. So in The Theory of Moral Sentiments, Smith develops this claim about sort of the ultimate or final adjudicator of moral propriety is what he calls the impartial spectator.

So if you want to know whether you’re acting rightly or wrongly you imagine what a disinterested person who fully knows your situation, an impartial spectator he calls them, what would such a person think about what you are doing and how would such a person judge your behavior? That notion of the impartial spectator is all over in the lectures on jurisprudence. In particular on what counts as property. So it’s very interesting. I think Smith developed something of an impartial spectator theory of property. So in other words, how long do you have to be farming a particular plot of land in order for you now to have property rights in it? Smith’s answer to that is, “Well what would an impartial spectator think?”

Samuel Gregg:

Does he actually use that expression?

James Otteson:

Oh yes, he does. He does. In fact, quite repeatedly. So he connects it with what he thinks is reasonable. So he says, “What would a reasonable person think is long enough possession to now entail rights to land,” let’s say. Well the impartial spectator is the way you imagine what is reasonable. Or what’s a reasonable contract of employment? Ask yourself what an impartial spectator would think. So that’s a kind of impartial spectator theory of property, of contracts, etc. That’s all through the lectures on jurisprudence and he develops that first in The Theory of Moral Sentiments.

Samuel Gregg:

Well let’s shift to the second and of course the best known of Smith’s works, the Wealth of Nations, published, of course, in that momentous year of 1776. Now, the Wealth of Nations is published after these notes on jurisprudence were taken. And I should mention that it wasn’t very long after these notes on jurisprudence were recorded that Smith effectively retired as professor of Moral Philosophy at the University of Glasgow. So, I guess my question to you is this—In what way do we find particular ideas expressed in the lectures on jurisprudence, in what way do we find some of these ideas manifesting themselves in the Wealth of Nations?

James Otteson:

So in a handful of ways. It’s a good question. So you’re right that Smith actually retired, as you say, from being a professor at the University of Glasgow in 1764. He was the ripe old age of 41, but he left to become a personal tutor to the Duke of Buccleuch. So he did some traveling with the Duke of Buccleuch, became his personal tutor, and it wasn’t until 1776 that the Wealth of Nations was published. And remember, the lectures on jurisprudence, what we have are students notes from his lectures. So we don’t still have Smith’s own lecture notes. We have carefully compiled, in fact extraordinarily carefully compiled notes, but they are students’ notes, not Smith’s own notes. But one aspect of the lectures on jurisprudence, one aspect of the course that he taught and so therefore part of the lecture notes that we have, pertains to what Smith calls revenue. So governments at different stages of their development will have different proper activities and some of these proper activities will require revenue to execute.

So for example, once we’ve gone from say farming to commerce, Smith thinks we’re going to need to have protection against foreign aggression. We’re going to need to have protection even against internal or domestic aggression. And against foreign aggression that requires some kind of military, an army, perhaps a Navy, protecting us against domestic aggression that requires police and courts, et cetera. All of that is pertaining to property. So as human societies develop, they begin to have a much greater dependence on property and property can only serve the function it’s going to serve if it’s protected, if people are secure in their property. So they need police, courts, et cetera, domestically and militarily for foreign aggression. In both of those cases, what Smith is assuming, which will become much more evident in the Wealth of Nations, is that what we want is increasing prosperity for our society.

So we want increasingly to generate revenue that will enable us to alleviate poverty, to increase the resources—what he calls the necessaries and conveniences that are available to people in our society, including in particular the poor—and in order to enable that to happen we need a government that’s going to protect property and that means we’re going to have to think about we, meaning people who are setting policy in the government, are going to have to think about how do we get the revenue that would enable us to support police, courts, military, et cetera? So you get a lot of discussion in the lectures on jurisprudence about what are the best ways to tax? What are bad ways to tax? What are the good things to tax for? What are bad things to tax for? And he’s very sensitive to not allowing taxation policy to actually inhibit the growth and prosperity and vitality of a society.—to serve it rather than for society to serve it.

And I would just mention he, on more than one occasion in the lectures on jurisprudence, talks about the right to revolt. So he does think that onerous taxation can actually justify a right to revolt and a couple of times he says that, if taxation reaches the level of something like half of our revenue, if the government is consuming half of our revenue through taxation, then maybe we should revolt because that means that the purposes it’s serving are the government’s own services rather than the prosperity of society more generally. One place he actually suggests that not just half, but even if it’s a fifth, one fifth, so 20% of the revenue of society, if that’s being taken by taxation, then citizens should take a long, hard look at whether that’s really benefiting them and enabling the increase of prosperity, or is it just satisfying the needs of people in government?

Samuel Gregg:

It sort of reminds me of what you just said. Reminds me of what John Maynard Keynes once wrote in a letter where he said that something like 25% of income is the upper limit he thought was appropriate for the government to take by way of taxation. So we are clearly living in a very different world today by that standard. And that brings me to my next question and you’ve sort of alluded to this. When you read these lectures, what do you think they tell us about Smith’s view of the role of government in the economy? Because you look at part two of the lectures on jurisprudence, which of course is entitled of police, which goes back to something you mentioned before, the way in which this text or this series of lectures were structured. So I’m wondering what you think these lectures tell us, at least at this point of time in Smith’s life and thinking, what he thinks is the proper role of government in the economy?

James Otteson:

That’s a good question. It’s a big question. So, I think what we see here is Smith’s thinking about this probably evolving as a result of his study of the history of human experiments in government and in society. So he is astonishingly learned when it comes to human history and different experiments in human society. And if you read through the lectures on jurisprudence, you see examples drawn from numerous countries, numerous areas, and he’s not just a cursory familiarity. He’s actually done some very careful reading of law books and statutes, et cetera. So he’s very well learned, but I think what we see is his thinking about this is evolving. And what he’s beginning to think is that the proper role of government is to enable people, individuals, human beings, and groups of individuals, to improve their own lives rather than working directly to give them or improve their lives for them.

So I think what he’s beginning to do is to sort invert the classical or at least a very influential classical view about the role of say elites in society where if you think about Plato’s Republic, for example, going all the way back to Plato and the Republic, what’s the role of the intellectual elite in society? Well according to Plato, the philosopher should be kings or queens. They’re the ones who understand the good of society. They should organize society in terms of the good. In the lectures on jurisprudence what I think you see Smith seeing is that there have been so many attempts and experiments at this that so often don’t seem to work out the way we want them to that perhaps what government should do and what elites in government should do is instead lower their aims a bit. Rather than “I’m going to create the ideally good city or the ideally good state or the ideally good country,” instead maybe what we should first try to do is to create conditions in which individuals can improve their own lives. And that’s sort of lowering the sights quite a bit.

You’re no longer the philosopher king who’s going to determine the entire composition of society, but instead I think what Smith thinks is that this is something that might actually be achievable. In other words, in the real world with real human beings facing the cognitive and resource limits that we have, maybe something that’s achievable and would not be such a small achievement.

Samuel Gregg:

So we’re getting close to the end of this Liberty Law Talk podcast episode and I’d like to conclude by asking you the following sort of very generic question, but I think it would be important for our listeners to hear your thoughts about. If there’s any part of the lectures on jurisprudence that you would recommend to those people who are interested in law, politics, political economy, or even just the history of ideas, what would be the parts of the text that you would strongly recommend for our listeners?

James Otteson:

Okay. That’s a great question, Sam. So we have two students’ notes from the lectures on jurisprudence. I think I would look at the second set of notes. It’s the report dated 1766. Sometimes called lectures on jurisprudence letter B. So the second set of notes. I think those are a little bit more comprehensive and a little bit more carefully constructed, but I think really all you have to do is read the first 20 pages or so. So if you just read the part one of justice, you’re going to get quite a bit of the actual meat of Smith’s theory, including his discussion of Locke and the American founding, his rejection of the notion of an original contract.

You’re going to get some of his discussion of the stages of development of society from hunters to shepherds, farming, commerce, and the different kinds of government that he thinks is appropriate to it. And you’re even going to get, even in just the first 20 pages or so, you’re going to get a little discussion of how successful different kinds of government were in, on the one hand protecting the liberty of their subjects and on the other hand, encouraging prosperity. So I would say if you look at say the first 30 or so pages of the second report, that would be the first place I would recommend.

Samuel Gregg:

Well thank you very much, professor Otteson. I know you’re a busy man and you’ve got other things you need to do, but we’re very grateful that you’ve joined us today on Liberty Law Talk to discuss those lectures on jurisprudence, which I suspect you wish more students of Adam Smith and the Scottish enlightenment knew more about. So James Otteson, thank you very much for being with us.

James Otteson:

My pleasure. Thank you very much, Sam.