Adam Smith’s nexus: why ethics has to play a major role in the economic theory and practice

More and more often we hear that ethics should play a major role in our economic decisions. The modern economic science itself is attempting to enlarge its horizons giving more space to topics such as social preferences, corporate social responsibility, sustainable environment, social justice, and so on and so forth. But why are we taking this direction? Are we suddenly becoming more aware about the ethical dimension of our choices? In my chapter I affirm that ethical concerns in the economic theory and practice should be considered nothing new because Adam Smith, traditionally considered as the father of economics and of the homo oeconomicus, built his well known economic theory on a solid ethical framework. This approach is rooted in the writings of Adam Smith, the Wealth of Nations (WN) and Theory of Moral Sentiments (TMS).

Thus, analyzing in detail these two books and their relationship, I show how the ethical system developed in the TMS constitutes the (moral) ground on which Adam Smith could conceive his homo oeconomicus, seen as the atom of the entire WN. In particular, within the Smithian project, the market mechanism can work on the sole axiom of “self-interest” (WN) if, and only if, we preliminarily assume the ethical capacity of “sympathy” (TMS). Following this reasoning, I reinforce the interpretation according to which the “invisible hand” of the WN, usually meant to merely regulate the market exchanges, has to be interpreted from a broader perspective as the “invisible hand” of the “sympathetic but impartial spectator” that disciplines human (moral) behaviour on a more general level. I conclude claiming that this precise hierarchy assigned by the father of the economic science to the two mentioned dimensions has to be adopted as an enlarged perspective, implying the necessity of a preliminary ethical contextualization in order to have reliable economic theories and practices.

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