Duncan Foley, of New School University, in New York, is very close to being a saint of economics — that is, a holy person, both mild and intense, whose life is animated by deep assurance — in this case, the conviction that the way to grasp the meaning of “capitalist economic life” is to find a place to stand apart from it.

Foley was born in 1942. His father was an industrial physicist, his mother an environmentalist. Foley himself began attending Quaker meetings at age nine and joined the Society of Friends at fifteen.  He graduated from Philadelphia’s famous Central High School in 1960, from Swarthmore College in 1964 and went straight to Yale, where he skipped the core courses and took the qualifying exam instead, obtaining his Ph.D. in mathematical economics in just two years. In 1966, he moved to the Massachusetts Institute of Technology, to teach and do research.

As a young man during the Vietnam War, he told interviewers recently, “I remember almost fainting at times in micro theory course when I started to teach indifference curves and Pareto efficiency theory. I kept asking myself, ÔIs this an honest way to represent society and its contradictions to students?’”

Foley read Marx.  He published mainstream papers: with Miguel Sidrauski, with Karl Shell, with Robert Engle, with Martin Hellwig. He moved to Stanford University in1973, and, after Stanford horsed around on its tenure decision, returned east to Barnard College of Columbia University in 1977.

After 22 years at Barnard, mostly teaching undergraduates, Foley moved downtown to the New School in 1999, replacing Robert Heilbroner as the senior figure there, with a view to building up the economics department. (He had published four ambitious books in those uptown years as well: Understanding Capital: Marx’s Economic Theory; Money, Accumulation and Crisis; Barriers and Bounds to Rationality:  Essays [by Peter Albin and Foley] on Economic Complexity and Dynamics in Interactive Systems; and Growth and Distribution [with Thomas Michl].)

Now Foley has followed still further in his predecessor’s footsteps, writing an alternative version of Heilbroner’s great book, The Worldly Philosophers.

Adam’s Fallacy: A Guide to Economic Theology is a beautiful little book. It contains some of the most lucid exposition of the core ideas of economics that I have ever read. Laid out pretty much on the same plan as Heilbroner, though with none of the attention to history that makes The Worldly Philosophers such a gripping read, Adam’s Fallacy leads the reader through the ideas of Adam Smith (ÔAdam’s Vision”), David Ricardo and T.R. Malthus (“Gloomy Science”), Karl Marx (“The Severest Critic”), Alfred Marshall (who in “On the Margins” rates but a single mention, in contrast to many entertaining pages on Thorstein Veblen), and, finally, of the twentieth century trinity of John Maynard Keynes, Friedrich von Hayek and Joseph Schumpeter (“Voices in the Air”). As a penetrating critic of capitalist economic development, with its “immense opportunities, and its equally immense social and moral stresses,” Foley has few peers.

Yet Adam’s Fallacy seems to me, at least in a certain way, to be profoundly mistaken. The reason is simple to relate.  Foley dwells entirely on what economists have managed to make so far of The Wealth of Nations, and gives short shrift to Smith’s other book, The Theory of Moral Sentiments, and to the relationship of the one to the other. Published in 1759, seventeen years before the work for which Smith is remembered, Moral Sentiments is a compendium of much that today’s economics leaves out — declares “exogenous,” in the argot of the field, “human nature” being quite beyond economists’ models present-day ability to address. 

So what exactly is Adam’s fallacy? According to Foley, it’s “the idea that it is possible to separate an economic sphere of life, in which the pursuit of self-interest is guided by objective laws to a socially beneficent outcome, from the rest of social life, in which the pursuit of self interest is morally problematic and has to be weighed against other ends.” This abstraction of an economic sphere from the messy complexity of real life is indeed the kernel of present-day economics, just as Foley says it is.

“[U]nderstanding the logic of capital accumulation does not require us to surrender our moral judgment to the market, either as individuals or as political actors.  The exploitation of any profit opportunity involves a range of consequences, some good and some harmful. There is no escaping the moral relevance of weighing the good and the harm in each case. The fallacy lies in thinking there are universal principles that short-circuit this process.”

But Smith isn’t responsible for what has happened in the 200+ years since he died, in 1790. He saw the world whole.  And, in the first instance, what he saw was that self-interest was an inevitably complicated matter.  Moral Sentiments begins this way:

“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…. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.” This is the facility that Smith calls sympathy — not just pity and compassion, but fellow- feeling throughout the full spectrum of the emotions. In the jargon of the present day, individual utility functions are interdependent, according to Smith — often highly interdependent.

Thereafter, through 340 pages, Smith’s investigation of psychology, ethics and human behavior sustains a high level of interest in examining the wellsprings of human behavior: conscience and duty, praiseworthiness and blame, gratitude and resentment, justice and remorse, jealousy and envy, custom and fashion.

Here he asserts that “the chief part of human happiness arises from the consciousness of being beloved.” He observes that “…place [status], the great object which divides the wives of aldermen, is the end of the labors of human life.” He avers “there is not in the world such a smoother of wrinkles as is every man’s imagination, with regard to the blemishes of his own character.”

And here he describes “the man of system,” who “seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces on a chess-board; he does not consider that the pieces on a chess-board have no principle of motion besides that which the hand impresses on them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own altogether different from that which the legislature might choose to impress upon it.” He might just as well have called the book An Inquiry into the Nature and Causes of the Well-Being of Individual Human Beings.

At one point, Smith compares competition to a race.  Each person “…may run as hard as he can, and strain every nerve and muscle, in order to outstrip all his competitors. But if he should justle, or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play, which they cannot admit of.” Nor is it simply the worry of being caught by the referee, or scorned by the crowd, that governs the runner.  There is his own sympathetic understanding of the others in the race — the capacity that to put himself in others’ shoes that give rise to the widely-shared sense of the rules of the game. Moreover, Smith says, each person possesses an “Impartial Spectator,” a conscience, whose influence and authority can be quite powerful — not a little like Freud’s notion of the superego.

“What is it that prompts the generous, on all occasions, and the mean, upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is capable of counteracting the strongest impulses of self-love.” A stronger motive than the softer passions is required to restrain our vulgar materialism: “the love of what is honorable and noble, of the grandeur, and dignity, and superiority of our own characters.” (Thanks to Ryan Hanley of Marquette University for shedding light on Smith’s views.)
Many economists have been content to believe that somehow Smith abandoned these views by the time he finished The Wealth of Nations. Their conviction usually rests on a famous passage near the beginning of the book: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard for their own self-interest,” he wrote. But, as D.D. Raphael asked in his introduction to the 1976 Glasgow edition of The Moral Sentiments, who, on the basis of this sentence and a few others like it, especially the image of the Invisible Hand, would think that this meant that Smith had recanted his earlier belief in the existence or the moral value of benevolence?  “Nobody with any sense.”

Foley simply ignores the earlier Smith, and caricatures the latter: “Smith asserts the apparently self-contradictory notion that capitalism transforms selfishness into its opposite: regard and service for others. Thus by being selfish within the rules of capitalist property relations, Smith promises, we are actually being good to out fellow human beings.  With this amazing argument, Smith proposes to absolve us of the moral ambiguity and pain that haunt capitalist reality.”

Certainly it is true that economics has not yet succeeded in incorporating in the scope of its formal reasoning such topics as “the influence and authority of the conscience.” Only recently has it begun to tackle the problem of increasing specialization in its deliberations, despite the abundant clues that Smith gave in the first three chapters of The Wealth of Nations. Interdependent utility functions and persuasive interpersonal comparisons of welfare will be the work of many years.

Nor is it surprising that economic science should proceed this way — modeling what it can at the expense of ignoring what it cannot, in the expectation that better models will emerge in time from the strategy. The year-end edition of The Economist, for example, reports on some recent efforts by “behavioral economists” to grapple with the determinants of human happiness (“Economics Discovers its Feelings”).

Among them are Nobel laureate Daniel Kahneman’s investigations of patients’ memories of their colonoscopies. The Princeton psychologist’s main conclusion:  memories are determined by the procedure’s worst and last moments rather than its duration. Compare the narrow precision of Kahneman’s scientific finding with the generality of Smith’s felicitous observation, “In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar who suns himself by the side of the highway, possesses the same security which kings are fighting for.”

So why wait for science?  Few among us will decide to read The Moral Sentiments on the strength of what I argue here. (Should you want a copy, though, the one to have is the beautifully produced volume from the Glasgow Edition of the Works and Correspondence of Adam Smith available at a bargain price from the Liberty Fund.) A very pleasing alternative is The Authentic Adam Smith, a literate and brisk biography by James Buchan which conveys, in a mere145 pages, the astonishing depth and versatility of the man.  The book, says Buchan, is “designed to draw Smith out of the mystifications of the economists and the simplifications of politicians and place him in view of the public.”

Buchan employs no jargon; he relates a good deal of history. And with dash and daring, he rescues Adam Smith from those, including Foley, who would appropriate him as “a sort of shady Romulus,” legendary founder of an ideology. Economists are in the thrall of any number of fallacies, small and large. Some of them are downright dangerous if taken seriously. Duncan Foley alerts his readers to the worst of them. But they do not owe their existence to Adam Smith.