"Moral y Koncurencia" [Social and Economic Philosophy], Novo Vreme (1991), no. 12, pp. 30-38.

Gordon Welty
Wright State University
Dayton, Ohio 45435 USA

The struggle between progressive forces in the United States and the Reaganites developed during the Eighties. It has continued into the Nineties. It should be stressed that the Bush administration is no less Reaganite than was the preceding administration. While he promised a "kinder, gentler America" during his campaigning in 1987, George Bush has proven to be as strongly opposed to civil rights and other democratic measures in the United States as was Ronald Reagan. Bush's militaristic adventures in Panama and now in the Persian Gulf are no less imperialistic than were Reagan's in Lebanon, Grenada, and Libya.

One of the sharpest struggles in a quarter century, this struggle seems at present to have turned in favor of the progressive forces. Of course there was a political aspect to the struggle -- we can recall the defeats the Reaganites incurred in late 1986, when they lost control of the U.S. Senate, in late 1987 when Robert Bork was decisively rejected for the Supreme Court, and in early 1988 when John Tower was also rejected in his nomination for Secretary of Defense. Political struggles may indeed have been the primary aspect of the entire contestation.

But there was also an ideological aspect which included the attempt on the part of the Reaganites to appropriate elements of the American heritage to their own purposes. We need mention only the phrase "the Reagan Revolution" -- a phrase which has an almost farcical ring about it today -- a phrase which can be taken to symbolize these attempts at ideological appropriation.

One of the primary efforts at ideological appropriation has been the representation of Adam Smith as a laissez-faire economist -- as an ideological forefather, if you will. In part our essay is a response to that effort. We might reflect, for instance, on Ronald Reagan's belief that Reaganonomics derived from Adam Smith (Regan, 1988: 158).

The liberals have capitulated before the political and ideological offensive of the Reaganites. Thus a broad range of liberal thought has been revised in a Rightist direction -- the liberals would perhaps prefer the term `Centrist' here -- in response to Reaganism. One of these revisions has been the promotion of a discipline called Socio-Economics. This has been associated with the person of Amitai Etzioni and seeks "alternative paradigms ... to that of neo-classical economics" (Adams, 1985: 1). But this Socio-Economics assiduously avoids reference to class analysis as such an alternative. In part our essay is prompted by this development, which we see as a retrogression. To anticipate, we hold that Adam Smith was the first socioeconomist and the scientific understanding of society continued to develop for the next century after Smith.

The theoretical inadequacies of the neo-classical notion of perfect competition as well as its unacceptable policy implications have long been recognized in the social sciences in the West. Indeed the continuing viability of the hybrid discipline `socioeconomics' attests to that recognition. It is now acknowledged that the notion of perfect competition is ideal-typical (cf. Hayek, 1948: 47; Machlup, 1967: 131-133) -- it represents a polemical or pedagogical trope, an heuristic device rather than a scientific concept./1/ As a corrective, some socioeconomists have proposed the explicit recognition of the institutional embedding of the economic processes under study (Granovetter, 1985; Welty, 1971: 146). These institutions would of course include class relations.

Such a programme would reject the notion of micro-economic processes isolated by an implicit ceteris paribus clause and would, for example, employ instead the logic of part-whole relations. Thereby the theorizing of economic activities would take into account the embeddedness of these activities as a part in the totality of the societal process (cf. also Georgescu-Roegen, 1966: 109-110). But such a programme does not directly address the ideal-typical status of the notion of perfect competition. To that end, socioeconomists have also proposed a taxonomic approach to the economic processes themselves, whereby the centrality of the notion of perfect competition would be supplanted by the theoretical parity of several forms of economic action and economic relations./2/

Amitai Etzioni (1985) has advanced a conception of "encapsulated competition" which recognizes that the conditions of competitive action depend principally upon three contextual factors: (i) ethical precepts, (ii) group affiliations and social bonds, and (iii) regulation by the state. These three factors serve to restrain competition within a realm of social or economic relations which has been defined as its proper arena by the society. If competitive activities are extended outside that realm, Etzioni argues, they tend to become conflictual. Insofar as the restraining factors intrude themselves into the realm deemed proper for competitive activities, they tend to stifle competition. Emerging from Etzioni's study is an intriguing dialectic of competition and conflict. On the one hand, competition is "contained conflict;" on the other, conflict is "ruinous competition" (Etzioni, 1985: 289).

Two major and closely related shortcomings of his study must be pointed out, however. (a) Etzioni takes for granted that competition is central to economic action./3/ This is evidenced by his concern to formulate conditions for `second-best' states of the economy. (b) Etzioni has overlooked the third kind of social and economic relation -- cooperative interaction. This despite the fact that the `losers' in `competitive' activities rarely withdraw from the economic process after sustaining their loss; their continuance implies a significant commonality of interests between `winners' and `losers.' Very schematically, in the case of competitive and conflictual activities the actors' individual interests predominate; in the competitive case they tend to be mutually independent, while in the conflictual case they tend to be incompatible. In the cooperative case, by contrast, the actors' common interests predominate.

What is required, then, is a socioeconomics which incorporates both individual interests and common interests, the several kinds of social and economic relations -- and all at a theoretically appropriate level of discourse. The elements of such a socioeconomics are to be found, we will argue, in Adam Smith's Theory of Moral Sentiments, first published in 1759./4/ It should come as no surprise that we turn to Smith in our programme. On the one hand, it is an easy step from a concern about the institutional embeddedness of the economic process to the social embeddedness of economic doctrines themselves. And such reflexivity sensitizes one to the historical roots of doctrines -- a sensitivity which leads back to Smith. On the other hand, Smith can be understood as the founder not only in economics but in the field of social psychology as well (cf. Joas, 1985: 47). Thus his writings constitute the locus classicus of socioeconomics./5/

Smith's socioeconomics address all three kinds of social and economic relations. In his Theory of Moral Sentiments, he observes that there are three kinds of association (his term is "society"), each depending upon its own characteristic social relations and each having its own corresponding attitudes (Smith, 1976: 85-86). The first kind of association is characterized by relations of interdependence, and benevolent attitudes. This kind of association "flourishes and is happy." Another kind of association -- more precisely, an anti-type -- is characterized by conflictual interactions, malevolent attitudes and mutual resentment. Its members "are at all times ready to hurt and injure one another." This association is short-lived, as its members tend to be "dissipated and scattered abroad by the violence and opposition of their discordant affections."

A final kind is characterized by relations of independence, and by considerations of "utility." This kind of association, "though less happy and agreeable [than the first type], will not necessarily be dissolved [as was the second type]." This association depends upon "mercenary exchange" on the part of self-regarding actors, exchange which occurs "according to an agreed valuation." In sum, this type of association characterizes the "commercial society" which Smith went on to analyse in such detail in the Wealth of Nations. Competitive activity is thus a limiting case of the broader range of social and economic processes. The restriction of these more general processes to the limiting case is real, the resultant of the metricization effected by "pecuniary valuation" (cf. also Cooley, 1922: 332) -- in and of the objective world rather than the ideal-typical artifact of some observer. Therefore Smith has introduced it in terms of its theoretical parity with the other forms of economic action.

Now we will turn to the bearing which the three factors highlighted by Etzioni -- ethical (and, we might stress, religious) precepts, group affiliations, and state intervention -- have on the several kinds of social and economic relations. In the case of each factor, we will make three points. First, we will note the irrelevance of the factor from the viewpoint of ideal-typical perfect competition./6/ Next we will indicate how the concept of institutional embeddedness considers each factor. Finally, and more extensively, we will review Adam Smith's characterization of that factor and its bearing on the social and economic process. By and large we will restrict that review to The Theory of Moral Sentiments. This is not because Smith overlooked these themes in The Wealth of Nations, the Lectures on Jurisprudence, etc. Quite the contrary. There are several reasons for focussing our attention on this book. Smith's first book set out his socioeconomics, in broad terms. This perspective is perhaps relevant to societies other than capitalist, while the limiting case analysed in Smith's later writing is less relevant to the modern world. Next, this book is somewhat less familiar to social scientists today, and thus warrants our attention. Finally, the refinement of his position in the later lectures and The Wealth of Nations depends upon that earlier work.

(i) Ethical and Religious Precepts
Ideal-typical perfect competition has no place for ethical or religious precepts. Economic actors are assumed to possess only `preferences' which are morally neutral and biographically invariant (Knight, 1965: 78-9; also 156-7, and Etzioni, 1968: 271). By contrast, the notion of an institutionally embedded economic system insists on an attitudinal or valuational category which may include `tastes' but is explicitly social i.e. it is transpersonal (cf. Duesenberry, 1949). Included within this category are attitudes regarding the nature and function of the economic system itself, attitudes which can be organized and mobilized to effect changes in the socioeconomic system itself. Some groups, and even some societies, for example, may judge the economic freedom of the individual to be an essential characteristic of any society worth living in -- while another group or society will judge it to be a form of brigandage and restrict it accordingly. As Etzioni indicates, the point is "not whether these familiar ethical precepts exist, but to what extent they are endorsed and followed" in a given society (1985: 291). We recall the role of ethical and religious precepts in Reaganism -- the shrill and perhaps hypocritical promotion of `family' values, of making America into a `Christian' nation, etc.

Years before he wrote The Wealth of Nations, Smith had lectured on topics of ethics and moral philosophy at the University of Glasgow, and had published The Theory of Moral Sentiments. In his own moral philosophy, Smith had sought to resolve one of the perennial problems -- that of finding a basis for the unity of self- and other-regarding motives. As he expressed it, "the man of the most perfect virtue ... is he who joins, to the most perfect command of his own original and selfish feelings, the most exquisite sensibility both to the original [i.e. selfish] and sympathetic feelings of others" (1976: 152; also 262).

Smith distinguishes three kinds of motives or "passions." The first and second kind consist of an opposed pair, the social and the anti-social passions. Benevolence is an example of a social passion; resentment, an anti-social passion. These kinds are `extra-economic' motives, `other-regarding' attitudes. Third, Smith points out that "there is another [kind] which holds a sort of middle place between them" (1976: 40). This kind is the selfish passions. As we have already observed, it is these self-regarding attitudes which motivate the individual into competition or other economic action. They can be understood as competition-inducing motives. There are some ethical precepts which importantly legitimate these self-regarding motives, for example "every man is by nature, first and principally recommended to his own care; and as he is fitter to take care of himself than of any other person, it is fit and right that it should be so" (1976: 82). But according to Smith's socio-economics, no one can be motivated solely by selfish passions. An individual's motives are in every case bounded by the social (and anti-social) passions, by normative limits established through social interaction. These social passions are thus competition-restraining motives; they may thereby also be, in Etzioni's terms, "competition-sustaining" motives insofar as they serve to contain conflict.

Moreover, self-regarding attitudes vary not only between limits of other-regarding attitudes, limits set through social interaction. They also vary in terms of the significance of their object for the conduct of economic action. Smith distinguished between "common" and "important" objects of self-interest. "The pursuit of the objects of private interest, in common, little, and ordinary cases," he says, should be determined by "the general rules which prescribe such conduct" -- i.e. they are determined by norms, not by valuations (cf. also Knight, 1965: 62,n). In Smith's example, one's parsimony concerning three cents is not appropriately generated by self-regarding concern about the three cents, but must be generated by regard for a general rule of "severe economy."

Smith continues "it is quite otherwise with regard to the more extraordinary and important objects of self-interest," e.g. an estate, an official position, etc. "Those great objects of self-interest, of which the loss or acquisition quite changes the rank of the person, are the objects of the passion properly called ambition." The implications for conduct seem quite straightforward: "a person appears mean-spirited, who does not pursue these with some degree of earnestness for their own sake" (Smith, 1976: 173).

The distinction between "common" and "important" objects is socially established, and Smith cautions that "the general rules of almost all the virtues [such as benevolence, parsimony, ambition, etc.] are in many respects loose and inaccurate, admit of many exceptions, and require so many modifications, that it is scarce possible to regulate our conduct entirely by a regard to them." He concludes that not even interactionally established, but only traditional definitions should prevail. For example, Smith suggests that "the common proverbial maxims of prudence, being founded on universal experience, are perhaps the best general rules which can be given about it" (1976: 174).

Thus Smith's socioeconomic analysis of the significance of ethical precepts recognizes that in general they delimit the sphere of competitive action; in particular they can prescribe the conduct of that action.

Moreover, Smith recognized that these precepts are importantly exogenous to the economic system. Subsequently, in The Wealth of Nations, he interestingly enlarged upon his doctrine of the relationship between the socially established significance of the object, and self-regarding attitudes and economic action. Commenting on occupations in general, he came to hold of the intensity of labor that "great objects are evidently not necessary in order to occasion the greatest exertions [of labor]. Rivalship and emulation render excellency, even in mean professions, an object of ambition, and frequently occasion the greatest exertions. Great objects, on the contrary, alone and unsupported by the necessity of application, have seldom been sufficient to occasion any considerable exertion" (Smith, 1979: 759-760). Thus not even the "importance" of the object is sufficient to exempt it from other-regarding attitudes -- and the concepts of "rivalry" and "emulation" turn our attention to the topic of group affiliation and social bonds, through which these particular other-regarding attitudes are salient.

  (ii) Group Affiliation and Social Bonds
Ideal-typical perfect competition has no place for social bonds. Economic actors are assumed to interact only indirectly, through the medium of markets, including commodities, income constraints, and relative rates of exchange (Knight, 1965: 77-8, also 182). This assumption creates certain anomalies which are accommodated by "heroic abstractions" such as Frank Knight's suggestion that the nuclear family rather than the individual must be taken as the "minimum real unit" for social theorizing (1965: lvi). The conception of an institutionally embedded economic system, by contrast, requires that economic actors' various group affiliations (i.e. their "social bonds," including class membership) explicitly be taken into account (cf. e.g. Hickman and Kuhn, 1956).

Robinson Crusoe was a character of fiction -- and even so, this persona was born and raised in York, England before he was artificially isolated as an adult by a ship-wreck. Only in clearly psychopathological cases such as the mass murderers Ted Bundy (cf. Michaud and Aynesworth, 1983), Christopher Wilder (Gibney, 1984), et al. can social bonds be considered to be "absent or very weak." The question is not whether social bonds are present or absent, but the extent to which existing bonds and group affiliations are relevant in a given interaction -- be it economic or otherwise, competitive or not (cf. Etzioni, 1968: 97). Etzioni surely intends this when he mentions social situations where "bonds are absent or very weak." Consider his examples; very powerful social bonds among workers on the one side and employers on the other side are activated during "long and destructive strikes, shut-outs, wild-cat strikes, etc." (Etzioni, 1985: 295).

It is a Hobbesian atavism to suggest otherwise -- that "all-out conflict" (the bellum omnium contra omnes) results when social bonds are weak. In Beirut after 1975, for example, civil conflict caused some bonds to weaken -- such as patriotic and secular bonds; they were compensated however by the strengthening of other bonds -- such as familial and sectarian bonds (see Khalidi, 1979: 93 ff; also Deutsch, 1969). Since at least the time of Ferdinand Tönnies a century ago, social theory has understood that the range of social bonds is from those of the gemeinschaft-like primary group to those of the gesellschaft-like secondary group. If there is an historical evolution of these forms, it appears to be a development of the Gesellschaft out of, and along side the Gemeinschaft -- bringing groups of traders into prominence -- perhaps to be supplanted in turn by a renewed Gemeinschaft (Tönnies, 1971: 106).

It may be the case that Etzioni means that social bonds will appear to be weak when they are aggregated. But the intensity of group affiliation (social bonds) during such periods of labor unrest and civil strife may still be higher, in the aggregate, than it is during more `harmonious' periods, provided the intensity of the bonds within groups is sufficiently elevated to compensate for the reduced intensity between the groupings of workers and of employers, or between the parties of the Lebanese civil war. This is suggestive that social relations are more fundamental to institutional embeddedness than social bonds, and must be theorized accordingly.

Be this as it may, Smith's socioeconomics is based on the indispensability of social bonds and group affiliations for specifically human behavior. The market is frequently understood to be a medium of communication, whereby social actors transmit information to one another via prices, thereby coordinating their activities. This understanding masks a crucial assumption. Any communicative act presupposes an audience. In the case of the market, the presupposed audience is assumed to be comprised of homines economici -- which is to say one of several kinds of human groups. Smith's socioeconomics is able to examine the validity of this assumption; the doctrines of ideal-typical perfect competition cannot.

This insight became a crucial element in the theorizing of the American social psychologists, Charles Horton Cooley and George Herbert Mead./7/ Group membership and social bonds are necessary for self-cognition, hence are preconditions for economic as they are for any other sort of human action. As Smith has put it, "we can never survey our own sentiments and motives ... unless we remove ourselves, as it were, from our own natural station, and endeavor to view them as at a certain distance from us. But we can do this in no other way than by endeavoring to view them with the eyes of other people" (1976: 110). Even so, self-cognition is limited by the very social conditions established by group membership; Smith acknowledged that "every individual is naturally more attached to his own particular order or society [i.e. the individual's own particular group], than to any other" (1976: 230), whereupon it follows that "a philosopher is company to a philosopher only; the member of a club, to his own little knot of companions" (1976: 34).

It is possible to transcend these limits, on Smith's theory, through the persona of the "impartial spectator." He distinguishes between "real spectators" who represent this or that particular group with which the individual is affiliated, and the "impartial spectator." In the early editions of The Theory of Moral Sentiments, Smith explained that this persona emerges as a result of the individual's inability to resolve the conflicting interests between the several groups, hence his inability to cope with the tension between the "real spectators." Thus for Smith there are always n + 1 viewpoints for each actor in society -- the n groups with which the actor is affiliated, plus that of the "impartial spectator." This "impartial spectator" is conceived of as "a person quite candid and equitable, of one who has no particular relation either to ourselves, or to those whose interests are affected by our conduct, who is neither father, nor brother, nor friend either to them or to us, but is merely a man in general, an impartial spectator who considers our conduct with the same indifference with which we regard that of other people" (Smith, 1976: 129). How does the "impartial spectator" function?

Smith has already indicated that there are two conditions which jointly suffice for the "concord of sentiments" and societal harmony across a broad range of persons and groups. Both conditions involve the role of the "impartial spectator." One condition is that "the spectator must endeavor, as much as he can, to put himself in the situation of the other" (Smith, 1976: 21). The other condition is that the actor must "lower his passion to that pitch, in which the spectators are capable of going along with him." As a result, actor and spectator achieve "fellow-feeling" regarding "these two sentiments," and may "have such a correspondence with one another, as is sufficient for the harmony of society" (1976: 22). It is of some interest that Smith anticipated Mead at this point, when he observed that "if we are at all masters of ourselves, the presence of a mere acquaintance will really compose us, still more than that of a friend; and that of an assembly of strangers still more than that of an acquaintance" (1976: 23). In Meadean terms, it is the Generalized Other which is ultimately normative rather than the more particularistic Significant Other (Mead, 1934: 154 ff).

Thus Smith's socioeconomics recognizes that in general, group affiliations are ubiquitous in social life, and in particular give rise to a persona which functions as `conscience' -- reviewing, judging, and socializing the individual's valuational activities.

Ideally, of course, this "impartial spectator" would find embodiment in the conflict-mediating institutions of society. In reality, however, this is rarely the case. As Smith points out, in civil strife, the persons who could function in the "impartial spectator's" role "seldom amount to more than, here and there, a solitary individual, without any influence, excluded, by his own candor, from the confidence of either party..." In international relations, it is the same: the diplomat who would serve the role of "impartial spectator" is "regarded as a fool and an idiot, who does not understand his business; and he incurs always the contempt, and sometimes even the detestation of his fellow citizens" (Smith, 1976: 155). The fact that the "impartial spectator" did not find its embodiment in regulatory and conflict-mediating institutions is perhaps a reflection of the profound but theoretically unrecognized social antagonisms which characterized the society of Smith's day. Let us now turn to the third factor mentioned by Etzioni -- government.

(iii) Role of Government
Ideal-typical perfect competition has no place for governmental action (Knight, 1965: 181 ff). However, the significance of such action has become increasingly apparent as the capitalist world has been subjected to a series of irreversible transformations -- variously described as the advent of state-monopoly capitalism, the development of the warfare-welfare state, or more succinctly as "the Keynesian revolution." The conception of an institutionally embedded economic system, by contrast to the ideal type, requires governmental action. Once `competition' is recognized as "contained conflict," and conflict is acknowledged to be "ruinous competition," the necessity of mediating action follows. The mediating agent must occupy a terrain which not only differs from, but even transcends that of the economic processes to be regulated. Otherwise its action will degenerate to the level of the competitors, which we have seen in the case of the `Pentagon-gate' military procurement scandals which have been rocking the Reagan Administration in recent months. Some of these state actions may be neutral with reference to the degree and quality of competition, such as regulations which protect the currency (cf. Smith, 1979: 324). Others may be "competition-sustaining," such as laws which protect private property, and still others may be, in Etzioni's terms, "competition-undermining" (1985: 297).

In his socioeconomic understanding, Smith seems to concurwith the mediating and regulative rather than the ideal-typical conception of the role of the state. He maintains that "all constitutions of government are valued only in proportion as they tend to promote the happiness of those who live under them. This is their sole use and end" (1976: 185). Happiness, he informs us, "consists in tranquility and enjoyment. Without tranquility there can be no enjoyment; and where there is perfect tranquility there is scarce anything which is not capable of amusing" (1976: 149). Again we find Smith highlighting context rather than content in his social psychology.

How can tranquility, and thereby enjoyment and happiness be promoted throughout society? The greatest potential resides with the individual. The wise and virtuous person "has at least all the beauty which can belong to the most perfect machine that was ever invented for promoting the most agreeable purpose." Thus Smith appears to favor the `natural' entity -- the virtuous person -- rather than the `artificial' entity -- the institution. This is the part of Smith which the neoconservatives selectively cite (cf. Kristol, 1983: 149-50). But Smith continues. The individual's potential is great -- for evil as well as for good. The rash and wicked person has "all the deformity of the most awkward and clumsy contrivance." Thus Smith seems to favor the `artificial' entity -- the institution -- rather than the evil person.

The three possible sources of societal tranquility and happiness can be ordered. "What institution of government could tend so much to promote the happiness of mankind as the general prevalence of wisdom and virtue? All government is but an imperfect remedy for the deficiency of these." Thus the virtuous person comes first. Furthermore, "what civil policy can be so ruinous and destructive as the vices of men?" Thus the "institutions of civil government" come next, followed by the vicious person. Since wisdom and virtue are not generally prevalent, since society must guard against human mischief, it follows that society requires "the institutions of civil government," according to the socioeconomics of Smith (1976: 187). This conclusion echoes Aristotle's definition of man as "political animal" -- "man, when perfected, is the best of animals, but when separated from law and justice, he is the worst of all ... He who is unable to live in society ... must be either a beast or god" (Politica, 1253 a).

Smith goes on to argue that not only the individual but all groupings in a society, as well as their "respective powers, privileges, and immunities," depend upon the state. This dependency is not restricted merely to the state's "non-economic functions, especially defense," as Etzioni suggests. Smith has a far richer conception of socioeconomics than do "laissez faire conservatives." This dependency of groupings, in his conception, includes their subordination to the state which is the arbiter of conflicts about group interaction (including `competitive' interactions). This is "a truth acknowledged by the most partial members of every one of [these groupings]" (Smith, 1976: 231).

Given the necessity of government, the object of intervention is still to be specified. Smith observes that "the perfection of police [i.e. regulation], the extension of trade and manufactures, are noble and magnificent objects. The contemplation of them pleases us, and we are interested in whatever can tend to advance them. They make part of the great system of government, and the wheels of the political machine seem to move with more harmony and ease by means of them. We take pleasure in beholding the perfection of so beautiful and grand a system, and we are uneasy until we remove any obstruction that can in the least disturb or encumber the regularity of its motions" (1976: 185). Hence tendencies emerged which are conducive to widespread intervention in the social and economic processes.

But Smith was rather disdainful towards the "love of system," towards the "spirit of system" (cf. also 1976: 233-4). Interventions on behalf of a "system" may even decrease tranquility and happiness. "From a certain spirit of system, however, ... we sometimes seem to value the means more than the end, and to be eager to promote the happiness of our fellow-creatures, rather from a view to perfect and improve a certain beautiful and orderly system, than from any immediate sense or feeling of what they either suffer or enjoy" (1976: 185). It would appear that this "spirit of system" could include the advocacy of "free enterprise" as well as any other system.

In The Wealth of Nations, Smith addresses three sorts of system: the "system of commerce" (Mercantilism), the "system of agriculture" (Physiocracy), and finally "the obvious and simple system of natural liberty," i.e. competition (1979: Book IV, esp. 687). He devotes considerable space to his analysis and critique of Mercantilist doctrine and policy; somewhat less to Physiocratic doctrines. But he was also sensitive towards the potentially injurious effects of precipitate intervention on behalf of competition. The abolition of trade barriers, for example, might create massive unemployment for workers in protected industries. "Were high duties and prohibitions taken away all at once ... the disorder which this would occasion might no doubt be very considerable" (Smith, 1979: 469).

Thus Smith's socioeconomic analysis of the role of government acknowledges its indispensability for human society, and even his analysis of its role in the limiting-case of "commercial society" cannot simply be reduced to the policy of laissez faire. 

While Etzioni restricts his study to competition and conflict, Smith's socioeconomics addresses all three kinds of economic relation -- including cooperative activities as well. Smith's socioeconomics thereby unites self- and other-regarding attitudes so that selfish motives are explicitly understood to be bounded by ethical precepts. Thus ethical and religious precepts are theorized as significantly related to any form of social and economic activity. Moreover, the individual is understood to be affiliated with several groups, and can assume the viewpoint of each of these groups through the role of the "real spectator." The different attitudes are associated with each of the different groups. Tension among these "real spectators" reflects conflicting interests of the several groups and is regulated in turn by the action of the "impartial spectator." The unity of self- and other-regarding attitudes thereby is controlled by the norm of "propriety." Hence group affiliation and social bonds are also theorized as being importantly related to economic activity. While the "impartial spectator" would ideally be embodied in the apparatus of the state, Smith observes that this is not actually the case. His socioeconomic analysis of government echoes Aristotle in this respect; humans are "political animals" and therefore the state is a necessary institution. In sum, Smith's understanding of the role of government does not seem to be reducible to laissez-faire.

There are two major implications of our review of Smith's socioeconomics. First, a taxonomic rather than an ideal-typical approach to theorizing of economic processes is recommended by Smith's practice, with due respect for Georgescu-Roegen's expressed reservations. This is especially important in light of the methodological consequences of the impossibility of deducing "second-best" conditions from ideal typical conditions (Etzioni, 1985: 288-9). It follows that the ideal-type does not appear to be subject to the methodological control of "the method of successive approximations" which Knight and others have indicated is the essence of scientific method (Knight, 1965: 8). A taxonomic approach to the theorizing of economic activities does not suffer from this weakness.

The second implication of our review is that we must carefully distinguish Smith's socioeconomics from the doctrines of "laissez-faire conservatives." Needless to stress, the latter seek to identify the two set of doctrines as a means of legitimating their own conceptually thin and morally bankrupt policy proposals. To the extent today's conservatives subscribe to doctrines of ideal-typical perfect competition, however, we have indicated reasons for concluding that they cannot be identified with Smith's much richer and thought-provoking work.

Today, the societies of Eastern Europe are beginning to recognize that the "shock therapy" of M. Friedman's laissez faire economics is more shocking than it is therapeutic. It may come as some solace to realize that the founding father of modern economics would have understood this.

* This is a revised version of a paper which was presented at the Institute of Philosophy, Hungarian Academy of Sciences, Budapest (August 18, 1988)

1. The notion of "ideal type" can be traced back to the middle of the last century (Comte, 1910: 316-7). This notion was popularized early in this century, when the ideal- typical status of the notion of perfect competition came to be widely acknowledged (Weber, 1968: 9, 21).

2. In contradistinction to Georgescu-Roegen (1966: 114-5).

3. We recall Frank Knight's pre-Keynesian definition which highlights this centrality for neo-classical theorizing: "Economics is the study of a particular form of organization of human want satisfying activity... It is called free enterprise or the competitive system" (1965: 9).

Etzioni has not always accorded competition this centrality. In his Active Society he states "the three organizational principles -- the normative, the utilitarian, and the coercive -- are equal in theoretical status. There are no a priori or empirical grounds on which to hold that one of these serves as a more general principle of social organization than the others" (1968: 356). These are the cooperative, the competitive, and the conflictual relations respectively (see Etzioni, 1968: 95-6).

4. The Theory of Moral Sentiments is Volume I and The Wealth of Nations is Volume II (in two parts) of the recent Glasgow Edition of the Works and Correspondence of Adam Smith, Volumes I-VI, published by Oxford University press.

5. We might note the influence of Smith's historical socioeconomics on the great American ethnologist, Lewis Henry Morgan (cf. Trautmann, 1987: 74; 174-5); cf. also Morgan's terms for the "great systems of consanguinity," the Ganowanian Family, the Turanian Family, and the Aryan Family (1877: 386-8; on Morgan's etymologies here, cf. Trautmann, 1987: 125-6) which correspond to Smith's "hunter," "shepherd," and "agricultural" stages of societal evolution, respectively (Smith. 1979: 689 ff; 712-3).

6. We take Knight (1965) as a standard source of these doctrines.

7. Their doctrines came to be known as "Symbolic Interactionism;" see Cooley (1922: Part VI) and Mead (1934: 258 ff.).


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