Is Adam Smith The Founding Father of Sustainability?

Nils-Michael Langenborg Founder & Executive Director

The Sustainable Adam Smith #GreenAdamSmith

October 19, 2011

Rules of Conduct

This is not about me

This is not about you

This is about all of us

Our Workshop Agenda

Introductions

My talk (w/discussion)

Your thoughts

Sustainability Leaders

The Renewed Invisible Hand

Breakouts – The Necessaries of Life

Final Thoughts

Who is Adam Smith?

Born June 16 1723

Died July 17, 1790 (age 67)

Scottish social philosopher

Collaborated with David Hume

Part of the Scottish Enlightenment

Professor of moral philosophy at University of Glasgow

Pioneer of “political economy” (the study of production)

Lived with his mother his entire life

What did Adam Smith do?

The Wealth of Nations

➡  An Inquiry into the Nature and

Causes of the Wealth of Nations

➡  Four basic principles emerged

“consumption”

“division of labor”

“self-interest”

“the invisible hand”

➡  Foundation of market capitalism

Consumption

“Consumption is the sole end

and purpose of all production;

and the interest of the producer ought

to be attended to only so far as it may

be necessary for promoting that of the

consumer. The maxim is so perfectly

self-evident that it would be absurd to

attempt to prove it.”

Consumption

But in the mercantile system the

interest of the consumer is almost

constantly sacrificed to that of the

producer; and it seems to

consider production, and not

consumption, as the ultimate

end and object of all industry

and commerce.”

Division of Labor

“The greatest improvement in

the productive powers of

labour, and the greater part of the

skill, dexterity, and judgment with which

it is any where directed, or applied,

seem to have been the effects

of the division of labour.”

One pin = 18 different steps One man = 20 pins a day Ten men = 4,800 pins a day/each; 48,000 vs. 200 pins/day

Division of Labor

“This division of labour, from which so

many advantages are derived, is not

originally the effect of any

human wisdom, which foresees

and intends that general opulence to

which it gives occasion.”

Self Interest

“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.”

Self Interest

“But man has almost constant

occasion for the help of his

brethren, and it is in vain for him to

expect it from their benevolence only.

We address ourselves, not to their

humanity but to their own self-

love, and never talk to them of our own

necessities but of their advantages.”

Invisible Hand

“…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.”

Invisible Hand

“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.”

Questions?

The Theory of Moral Sentiments Amaratya Sen* explains:

There are two distinct propositions here:

1. “…human beings are not guided only by

self-gain or even prudence.”

2.  “…there are good ethical and practical

grounds for encouraging motives other

than self-interest.”

These are two distinct points, and, unfortunately, a big

part of modern economics gets both of them

wrong in interpreting Smith.

* Amaratya Sen is Professor of Economics and Philosophy, at Harvard University and was awarded the 1998 Nobel Prize in Economic Sciences for his contributions to welfare economics and social choice theory, and for his interest in the problems of society's poorest members..

The Theory of Moral Sentiments

➡  Published 1759 (17 years before WN)

➡  Four basic principles emerged

“self-love”

“man within the breast”

“approbation”

“the invisible hand”

➡  Might it be the foundation of

sustainable capitalism in the future?

Self-love (the impartial spectator)

“When the happiness or misery of others

depends in any respect upon our conduct,

we dare not, as self-love might

suggest to us, prefer the interest

of one to that of many.

The man within immediately calls to us,

that we value ourselves too

much and other people too little,

and that, by doing so, we render ourselves

the proper object of their contempt.”

Man within the breast (self-command)

“It is reason, principle, conscience, the

inhabitant of the breast, the man

within, the great judge and arbiter of our

conduct.

It is he who, whenever we are about to act

so as to affect the happiness of others, calls

to us, with a voice capable of astonishing

the most presumptuous of our passions,

that we are but one of the

multitude, in no respect better

than any other in it.

Approbation (approval)

“In the steadiness of his industry and

frugality, in his steadily sacrificing the ease

and enjoyment of the present moment for

the probable expectation of the still greater

ease and enjoyment of a more distant but

more lasting period of time, the prudent

man is always both supported and

rewarded by the entire approbation of

the impartial spectator, and of the

representative of the impartial spectator,

the man within the breast.”

The Invisible Hand

“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 society, and afford

means to the multiplication of the species.“

Questions?

The Re-Enlightened Invisible Hand

“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 society, and afford means

to the multiplication of the species.“

Natural Human Financial

The Necessaries of Life

1.  Family (population) 2.  Food & Shelter (the basics) 3.  Contribution (aka “work”) 4.  Capital (natural and human) 5.  Health (personal and environment) 6.  Exchange (currency) 7.  Technology (as enabler of necessaries)

Natural Human Financial

Breakouts

Our assignment: Foods

Natural Human Financial

“To make nearly the same distribution of food had the earth

been divided into equal portions among all its inhabitants and

thus afford means to the multiplication of the species.”

Nils-Michael Langenborg Founder & Executive Director

The Sustainable Adam Smith #GreenAdamSmith

nils-michael@thesustainableadamsmith.org

October 19, 2011

Final Thoughts