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Fundamentally, law is to society as gravity is to the solar system; it is the invisible force that holds society together and keeps it operating smoothly and productively.1 Law enhances social cooperation, facilitates trade, and extends the market. In these ways, law functions like Adams Smith’s invisible hand, guiding and facilitating the progress of humankind.
Adam Smith’s project of developing a theory of social organization and progress involved a need to understand the world around him. That is, he had to interpret his experiences and his observations of human interaction and organization. Part of his inquiry included the examination of history. He examined peoples and civilizations of the past to determine the fit between the historical record and his developing theory. He used his knowledge of history to populate his writings with numerous examples, and he used these examples in providing commentary on the lessons to be learned from them. Based on his understanding of history, Smith speculated about the underlying ‘mechanism’ propelling human cooperation and progress through time.
In the United States, perhaps more than elsewhere, people continue to reference Adam Smith and his invisible hand. They do this in books, newspaper articles, law review notes, and even in judicial opinions issued by the federal courts. Sometimes Smith is invoked favorably, and other times negatively. Most of the time, however, he is invoked in a one-dimensional and iconic way, with a reference to his famous metaphor of the invisible hand. In these invocations, Smith is typically portrayed as an advocate of unbridled self-interest with little or no regard for the public interest. In this regard, he is often misunderstood as having advocated for self-interest as the primary source of social progress. To the contrary, while Smith recognized self-interest as an underlying force in society, he understood that progress came from directing the forces of self-interest toward the successful promotion of the common interest.
As societies make progress through Smith’s four stages, they become more complex, and as a result more formal institutions arise.1 These institutions develop to assist people in cooperating with one another in their efforts to extend the market and to promote human well-being. Smith identified these institutions as the pillars that hold up society. Among these pillars, Adam Smith identified justice as the main pillar. In so doing he tells us that “justice … is the main pillar that upholds the whole edifice” of society, and if this pillar is removed, the edifice will “in a moment crumble into atoms.”2
Adam Smith’s theory of jurisprudence accounted for informal as well as formal elements of social organization. The informal elements have been with humankind for as long as can be remembered – since the earliest stage of hunting and gathering. Informal arrangements arose out of norms and cultural practices responsive to three underlying human characteristics. These characteristics included: the natural pursuit of self-interest; the ability to sympathize with others; and the ability to be self-reflective in making judgments concerning one’s own behavior and the behavior of others. The formal elements evolved over time as civic institutions. They evolved in response to the rising complexity of human cooperation as society progressed through Smith’s four stages. Formal institutions included those of economics, politics, and law.
A difficulty in understanding Smith’s four stages of progress is that he more or less assumes progress but does not offer any clear theory of how it might take place. Smith almost seems to attribute progress to random events or serendipity, but using contemporary references, we should be able to develop a better understanding of his theory. We know Smith understood that self-interest was related to the natural desire to truck, barter, and exchange, and that he believed in the market as an important vehicle for coordinating cooperation and trade among people. In this regard, he understood that robust markets were decentralized with many producers and consumers. Moreover, Smith believed that progress was linked to the process of extending and diversifying the market. This was because extending and diversifying the market enhanced the opportunity for the further division of labor, and this increased the value of trading networks, which in turn further promoted wealth and asset accumulation. With this in mind, we undertake a closer look at Smith’s theory of progress and put it into a contemporary context by comparing it to market process theory.
In Adam Smith’s theory of jurisprudence, justice involves an interpretation of what is fair and reasonable in a given context and situation. Such judgments are rooted in history and in an understanding of human relationships from the earliest of times. In making judgments about ourselves and others we must interpret the situation confronting us with reference to a referent that provides us with an interpretive “point of view” or lens, and a set of organizing principles. In Smith’s theory of jurisprudence, a generalizable and universal referent is embodied in the metaphorical device of the impartial spectator. There are, however, contemporary challenges to the spectator view.
A key to understanding Smith’s theory of jurisprudence is appreciating that Smith did not equate progress with the unfettered pursuit of self-interest. To the contrary, Smith’s theory turns on understanding the sentiment of common interest and its relationship to justice and the expansion of the market through the facilitation of trade and exchange.
Interpretation is only the first step in understanding the role of the impartial spectator in Smith’s jurisprudence. The second function of the spectator device is that of judgment. Once people can communicate, they are better able to cooperate and to truck, barter, and exchange. They are equipped to enter into contracts and to describe and exchange assets. In doing so, however, they also need to make judgments. They need to make judgments concerning the meaning of words, the terms of a contract, and about right and wrong behaviors. The spectator is the mechanism Smith uses to discuss judgment, to assess the praiseworthiness and blameworthiness of conduct, and to evaluate conformity with the core shared values he has identified for humankind.1
Adam Smith was a distinguished legal scholar and professor of jurisprudence.1 He was a leading figure of the Scottish Enlightenment, a founding figure in the field that has come to be known as economics, and a significant contributor to the field of moral philosophy.2 While many people have written about Smith’s contributions to economics and to moral philosophy, few legal academics have undertaken a serious consideration of his work on law.3 This may be because Smith never completed the book he planned to write on jurisprudence.4 However, even without a completed book by Smith, there is certainly enough in Smith’s writings to merit greater attention from legal scholars.
In the United States, Adam Smith continues to be cited to in legal articles,1 books,2 and court opinions.3 He is also mentioned frequently in newspapers and magazines.4 Many of these citations are limited to a few well-known quotes from Smith’s work and make reference to the benefits of self-interest, private property, limited government, and the workings of the invisible hand. While this literature is of note for the continuing references made to Smith some 250 years after his death, much of this is superficial, and Smith often appears as little more than a trope for positioning one’s political and economic viewpoint. Among the places where Smith is referenced, most interestingly, are the legal opinions issued by the courts of the United States. Court opinions are not like articles and newspaper columns; they are serious matters that have an impact on the law.
Adam Smith’s theory of jurisprudence revolved around the use of his metaphorical device of the impartial spectator. The impartial spectator represented a naturally occurring force within human beings – a force of reasoning, judgment, and justice. The impartial spectator was not a decision-maker acting behind a hypothetical veil of ignorance; the spectator was a disinterested third-party observer capable of sympathizing with people in a given situation.1 In Smith’s theory, the impartial spectator was positioned as a real person who made judgments by drawing on experience and referencing this experience to the core shared values and moral sentiments of the community.2 The goal of these judgments was to make fair, reasonable, and rational decisions that would be understood as just.