We examine sustainability through the lens of Adam Smith’s seminal work, The Theory of Moral Sentiments (1759), where he writes, “they are lead by an invisible hand to make nearly the same distribution of the necessaries of life…and thus without intending it, without knowing it, advance the interest of the society.” We will examine how the three forms of capital (natural, human and financial) are put into a new economic equation: Natural capital + Human capital = Financial capital.

1. Is Adam Smith
The Founding Father of Sustainability?
Nils-Michael Langenborg
Founder & Executive Director
The Sustainable Adam Smith
#GreenAdamSmith
October 19, 2011

2. Rules of Conduct
This is not about me
This is not about you
This is about all of us

3. Our Workshop Agenda
Introductions
My talk (w/discussion)
Your thoughts
Sustainability Leaders
The Renewed Invisible Hand
Breakouts – The Necessaries of Life
Final Thoughts

4. 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

5. What did Adam Smith do?

6. 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

7. 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.”

8. 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.”

9. 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

10. 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.”

11. 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.”

12. 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.”

13. 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.”

14. 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.”

15. Questions?

16. 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..

17. 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?

18. 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.”

19. 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.

20. 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.”

21. 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.“

22. Questions?

23. 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

24. 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

25. Breakouts
Our assignment: Foods
“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.”
Natural
Human
Financial

26. Final Thoughts
Nils-Michael Langenborg
Founder & Executive Director
The Sustainable Adam Smith
#GreenAdamSmith
nils-michael@thesustainableadamsmith.org
October 19, 2011