Adam Smith’s The Wealth of Nations argues for a system of political economy that separates economy – the creation and distribution of wealth – from governmental interference. In Smith’s view, the economy of a nation grows as a direct consequence of private business ventures in the interest of each individual owner. Regulation by the government hurts the economy, and the progress of society is derived from the flow of the market. Things should be left in their natural states, thus maintaining a “natural order” of society. The basis of Smith’s thesis is that this natural order is driven by Man’s self-interest.
Smith presents the first and arguably most important aspect of social organization based upon self-interest as the division of labor. He asserts that the division of labor occurs naturally in society as “the consequence of a certain propensity in human nature … the propensity to truck, barter, and exchange one thing for another” (21). This propensity arises from man’s “almost constant occasion for the help of his brethren,” (21) an idea illustrated by the fact that in both Smith’s and modern times, the number of truly self-sufficient individuals are few. This “trucking disposition gives occasion to the division of labor,” and Smith makes the example of a hunter who, in trading arrows with others, can acquire whatever he needs and will be encouraged to “apply himself to a particular occupation, and to cultivate and bring to perfection whatever talent … he may possess for that … business” (23). At this point, Smith is making an assumption: that men will always choose to do something that will provide them with more over something that would provide them with less, and it is directly from this assumption of self-interest that Smith derives his principles of division of labor.
The next aspect of the “natural order” that Smith derives from self-interest is his ideas concerning the nature of exchange and the theory of value. Smith out rightly declares that the nature of exchange is a combination between the self-interest of two parties, that 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 (22).” Smith believes that exchange takes place when both parties stand to gain, because bargainers “address [each other], not to [each other’s] humanity, but to [each other’s] self-love” (22). Similarly, Smith also bases his theory of value on the assumption that Man will always act in the manner that allows him to gain the most. Smith defines the value of any product as “equal to the quantity of labor which it enables him to purchase or command” (36). By this, Smith is using exchange to define value, and as exchange, according to Smith, is rooted in self-interest, so value is also.
The final aspect of Smith’s system of natural order derived from self-interest is that of the relations between the laborer, the landlord, and the stockholder. Smith writes, “he [the stockholder] could have no interest to employ them [laborers], unless he expected … something more than what was sufficient to replace his stock to him” (46). Here, Smith has assumed that the stockholder will never have relations with laborers unless those relations leave him with more than he had to begin with, an action in the interests of self. This self-driven relationship is identical to the relationship between landlords and laborers, as the landlords “love to reap where they never sowed, and demand a rent even for its [the land’s] natural produce” (47). Again, Smith is assuming that the landlords are acting in their own interest, as they would always demand something from the laborers, even if it is something that is naturally present in the land, one that the landlord had nothing to do with.
The key assumption that Smith makes throughout The Wealth of Nations is that man has a natural inclination to act in his own self-interest, and it is from this assumption that the natural order proposed by Smith comes to bear. However, to what degree one understands Man’s actions as self-interested depends largely upon the degree that one allows cynicism to color his or her perception of those actions. For example, consider a man who donates to a charity. On the one hand, economically he gains nothing from this action, and this action does not contribute to his private opulence, defined by Smith as “originally derived … [from] the uniform, constant and uninterrupted effort of every man to better his condition” (205). On the other hand, a more cynical individual might say that the giver gains some kind of metaphysical or subjective return from this action that contributes to his self-interest. Smith seems to have little faith in the natural goodness of Man, writing “it is in vain for [one man] to expect [help] from [other men’s] benevolence only” (22). This pessimistic viewpoint Smith holds might explain what leads him to see self-interest as the primary factor in the actions of humanity.
Smith, Adam. Wealth of Nations.