The Economic Thought of Sir James Steuart

First Economist of the Scottish Enlightenment

José M. Menudo

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429812033
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

James Steuart published An Inquiry into the Principles of Political Œconomy in 1767, the first systematic treatise on economics, nine years before Adam Smith's Wealth of Nations. Traditional historiography has tended to disregard and even deny Steuart's oeuvre, categorizing him as the last, outdated advocate of mercantilist policies in Britain.

A clear portrait of a modernizing and enlightened Steuart emerges from this book, opening up an alternative approach to many key developments in economic theory. This book brings together a diverse international team of experts to overturn the "advocate of mercantilism" myth and explore different interpretations of Steuart's work within the context of the writings of other contemporary authors. A diverse range of specialists – historians, economists, political scientist, and sociologists – reflecting the diversity of James Steuart's work explore various aspects of the life, works, and influence of James Steuart, including his links to other authors who conceive – as Steuart did – the economic system of "natural liberty" as an artificial creation. The portrait of a demarginalized, modernizing, and enlightened Steuart emerges clearly in this book.

This book is not reduced to old authors whose ideas would be at the Museum of Dead Ideas, it has a very contemporary resonance. The subjects and the way Steuart tackles them could have a big influence on future authors who recognized some advantages of an alternative approach to many key developments in economic theory. This will also be of interest to scholars of history of economic thought, intellectual history, and 18th century history.

Part I
A society without invisible hands

1
James Steuart on the public good¹

Christopher J. Berry

The idea of the ‘public’ or ‘common’ good is a long-standing theme in the history of Western thought, and it is one utilized by Steuart. My aim here is to explore this utilization and assess what significance it has in his thought. To set the scene, I outline three versions of how the idea of a public good has been understood. Steuart’s will be the fourth. In each case the relation between the public and the private is pivotal.

Three versions

The first version I label the ‘objective’. It is characteristic of ‘classical’ thought and its paradigm exemplar is Aristotle. In Book 1 of The Politics, Aristotle distinguishes the economic sphere of the household (oikos) from the ‘political’ sphere within the polis as a whole. This distinction, in line with Aristotle’s teleological philosophy, was determined by their respective functions or ends. The purpose of the household was the procurement and maintenance of what was necessary for everyday life – food, clothing, shelter. Essentially (that is, this is its definitive nature) the household was concerned with the instrumental business of mere living. The purpose of the polis is the realization of the ‘good life’ (eu zen) (Aristotle 1944: 1252b31). This comprises not instrumental activity but what is intrinsically worthwhile. It is in the polis where citizens or free men deliberate on what is for the common good (Aristotle 1944: 1279a23).

There is a clear hierarchy here. Instrumental actions are subordinate to the end to which they are the means. With respect to the household/polis distinction, the former is the realm of particularity, and its ‘good’ is correspondingly specific; the latter is the realm of generality and its corresponding good is what is common or public. This established a moralized context for both ‘politics’ and ‘economics’. This moralization rested on a conception of a worthwhile human (male) life. The public good as a teleological realization, kata phusin, was what benefited the objectively true interests of all. More pointedly, this public good is debased if a human life is spent slavishly pursuing private ends. Within this conception there lay a criterion to identify a source of disorder or corruption, when, that is, private interests subvert the public good. In sum, the public good was the objective end or telos of properly human action and was normatively superior to the pursuit of private interests.

The second version I label the ‘agonistic’. Here the exemplar is Machiavelli, as manifest in his Discorsi sopra la prime deca di Tito Livio (1532). In contrast to the Aristotelian version, Machiavelli does not set up a privileged normative view of the public good as an end to which all virtuous men should subscribe and who, in failing to subscribe, manifest a lack of freedom. Instead, for Machiavelli, liberty is valuable as a means by which individuals can realize their own goals whatever they may be – for some power, for others security or glory, and so on. This is an instrumental view. Liberty can only be attained in a free republic, but for that to happen the correct ordini (or institutions) have to be in place. The Roman republic provided a key precedent. There the common or public good was the offspring of the differing private interests of the nobility (i grandi) and the people (il populo) (Machiavelli 1988: Bk I Ch.5).

These interests more than differ they conflict (hence my label ‘agonistic’). The nobles wish to dominate, the people do not want to be dominated. In early Rome these opposed interests were embodied in different assemblies but for any law to be passed the consent of both assemblies was required. This institutional mechanism was, Machiavelli says, the prima causa of their liberty because it turned individual or private interests into a concern for the commune bene or public good (Machiavelli 1988: I, 4). However, like his classical forebearers, Machiavelli is ever fearful that this structure will be corrupted and the channelled private interests will break their institutional bonds, a fate that befell the Republic when, in the words of Livy, ‘riches brought in avarice and luxury’ to universal ruin (Livius 1925: I, §12). Thus the longstanding antipathy was set up between luxury/commerce/wealth and the common good.

This is not Steuart’s view, nor is it that of my third version, the public good as a mutually beneficial by-product. Smith is the exemplar here. The first impression is that Smith seems similar to Machiavelli. Both seem to say that the common good is the unintentional consequence of private interests. This similarity is, however, misleading. Smith does not present an agonistic picture. For him, mutual advantage is the key. This is a far more reliable interactive base than the uneasy instability in Machiavelli’s version, and, it follows, the common good is thereby more reliably achieved.

The central Smithian version of the public good has both a positive and negative dimension. At the heart of the positive view is Smith’s notion of ‘natural liberty’. According to this ‘system’ (as he calls it), ‘every man, as long as he does not violate the laws of justice is left perfectly free to pursue his own interest his own way’. Smith immediately follows this definition with his threefold identification of the tasks of government; protection from external foes, maintenance of public works and ‘an exact administration of justice’. This leads into the negative view. Government polices any such violations of justice but is ‘completely discharged from a duty … of superintending the industry of private people and of directing it towards the employments most suitable to the interest of society’ (Smith 1982a: IV.ix.51/687). Any such superintendence is not only ineffectual in its deliberate attempt to direct industry in the name of the public good, but it is also dangerous to trust public authority with that task (Smith 1982a: V.ii.9–10/456).

Smith’s prime target here is the policy of the mercantilists, including by implication elements in Steuart.² As is well known, Smith predicts that in the Wealth of Nations, ‘every false principle in it [Steuart’s book] will meet a clear and distinct confutation’ (Smith 1987: 132/164). The outcome of the mercantilist endeavour to force trade into a particular channel is less beneficial than if the trade had been left to find its own course (Smith 1982a: IV.v.a.3, 24/506, 516). It is also contrary to the principle of impartiality by favouring some industries over others. Moreover, this mercantilist aim is delusional because such forced steering is ‘a performance of which no human wisdom or knowledge could ever be sufficient’ (Smith 1982a: IV.ix.51/687). All these are issues where Steuart’s stance is different.

Before turning to Steuart’s version of the public good, an argument implicit in Smith’s version needs briefly explicating. It is a fundamental Smithian axiom that commercial transactions rely on the fact that, as with the beef, bread, and beer produced by the butcher, the baker, and the brewer, each is acting out of their self-interest. These self-interested exercises of private liberty produce universal opulence. This is an undeniable good. In Smith, there is no Aristotelian, Livian, Machiavellian, or even perhaps at times Steuart-ian principled opposition to opulence/luxury.³ Since this good is an unintended consequence of private commercial activity, then invoking a conception of the public good that requires some more overtly political or deliberate superintendence is superfluous.

I will return on occasion to Smith, but now I turn to Steuart’s version of the public good.

Steuart’s version of the public good

I start with two quotations which will serve as the thread to help guide my argument through the self-styled labyrinth of the Principles (I, 21). The quotations both come from the brief introduction to Book II and both feature his central notion of a ‘statesman’.⁴ The first reads: ‘the principle of self-interest … is the mainspring and only motive which a statesman should make use of to engage a free people to concur in the plans which he lays down for their government’ (I, 218). The second appearing a few paragraphs later announces that ‘it is the combination of every private interest which forms the public good, and of this the public, that is the statesman only, can be the judge’ (I, 221).

Two basic claims are here being made. First, individuals are self-interested. This Steuart proclaims is ‘a general key’ and ‘the ruling principle’ of his argument; as he explicitly states in the same chapter, in the actions of individuals any idea of the public good is ‘superfluous’ (I, 220). More strongly, he later affirms that the common or public good is a union of every private interest, and it is the statesman’s task to achieve that unification (II, 212). Thus the Smithian argument that the public good is product of private interactions is not sufficient. Nor is the public good the expression of some transcendent principle. Hence contrary to commentators like S.R. Sen or Robert Urquhart, this is a clear rejection of the Aristotelian objective view;⁵ there is no telos on which all rational men converge. For Aristotle the ruling principle (archē) of human action is subscription to the dictates of logos or right reason.

Steuart does not claim that humans are solely self-interested but states for his purposes it is the universal spring of human actions (I, 219).⁶ This is the sum total of what he says in Principles and his other declaration, in his Considerations on the Interest of the County of Lanark, that in political life private interest is the ‘great spring of all actions’ is equally unelaborated (V, 309). The reasonable conclusion is that in Steuart, self-interest has the status of a scientific axiom or ‘theoretical and methodological’ assumption (Kobayashi 1995: 77). The second claim made in these quotations is that self-interest should not determine the statesman’s conduct, rather, to quote from the same part of the text, the ‘public spirit … ought to be all-powerful in the statesman’ (I, 218) so that ‘self-interest when considered in regard to him is public spirit’ (ibid.). The statesman, as the second of my two opening quotations reveals, embodies the ‘public’.

I now interrogate these claims. In doing so, in addition to reference back to the three other versions, I will make some other illustrative comparisons. This interrogation will address three questions. One, how are the public and private good related or what is the relation between the statesman and the governed? Two, how do the actions of the statesman, as the embodiment of the public interest interact with the private self-interest of the governed or, more precisely, what is the role of the public spirit? Third, what does the statesman do that will bring about the public good? Throughout my enquiry I will try to elicit Steuart’s assumptions as he goes about answering these questions that I have posed.

The statesman and the people

Steuart never articulates the relation between the statesman and those he governs. He does, like Hume, Smith, and other compatriots, rule out a contractual basis. He openly states that the ‘rights of kings’ are not founded ‘upon the supposition of tacit contracts between them and their people’ (I, 320). To clarify, this is not the same as what Steuart terms the ‘general tacit contract’ of ‘reciprocal obligations’ that constitute in a free society the social bond and which it is the statesman’s responsibility to maintain (I, 109 cf. I, 138). The statesman has to combine private and divergent interests to form the ‘common weal’ or to ‘cement his society’ (II, 181; II, 191). Following Hume’s critique, Steuart’s statesman does not have this responsibility because he is contractually obliged. Rather, again like Hume and the others, he makes the claim that the foundation of government is to be ‘sought for in history’ (I, 320).

True to his intent of articulating ‘principles’, Steuart gives no details.⁷ However, just before this statement he had declared that ‘modern liberty’ meant liberation from feudal ties, where the lower classes depended upon their superiors for their subsistence. This liberation had been brought about by the ‘introduction of industry’. Steuart’s story is to all intents and purposes identical to Smith’s in Book III of the Wealth of Nations and is prefigured in outline in Hume’s (1985) Political Discourses of 1752. All three talk of this change from feudal to commercial as a ‘revolution’, and all three characterize this as introducing modern liberty (I, 201, I, 314–315; Smith 1982a: III.iv.16/422, III.iii.5/400; Hume 1894: II, 602–603). The agreed essence of this modern liberty is the rule of law. In a nice turn of phrase, Steuart declares liberty to be precarious when it rested on ‘the ambulatory will of any man or set of men’, where, that is, the laws were liable to changed ‘through favour or prejudice to particular persons or particular classes’ (I, 314–315). In contrast, where people are ‘governed by general laws’, which can only be changed ‘in a regular and uniform way’, and there they are ‘free’ (ibid.).

This commitment constrains the statesman. He must act in a regular way and the particular political or constitutional form that the function of the statesmen assumes is not critically important. This view is consistent with Steuart’s insistence that he is dealing with ‘general principles’ and putting forward a ‘scientific’ or deductive account of political economy and not with a ‘collection of institutions’ (I, xi). Nonetheless the question remains as to the relation between the statesman dedicated to the public good and the private goods pursued by the governed. The relation is identified as a form of subordination (I, 316) and, as a form of ‘political’ dependence, it is authorized by it being proportional to the degree of de...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Dedication
• Contents
• Notes on contributors
• Foreword
• Preface
• Acknowledgements
• Note on citation practice
• PART I A society without invisible hands
• PART II Money, prices, and production
• PART III Readers and readings of James Steuart
• Index