On Adam Smith's Anti-Utilitarianism in the Wealth of Nations
27 Pages Posted: 7 Jun 2015
Date Written: June 5, 2015
Adam Smith completely rejected Utilitarianism in any form in his lifetime in his two major books, the Theory of Moral Sentiments (1759) and The Wealth of Nations (1776). This paper will examine the basis for Smith’s rejection of Utilitarianism in the Wealth of Nations (1776) only. The Virtue ethics approach presented in his earlier The Theory of Moral Sentiments (1759) leads to a clear cut rejection of Utilitarianism in that book and need not be reconsidered in this paper.
Smith’s rejection of Utilitarianism in the Wealth of Nations follows directly from two of the major theoretical advances he made in the Wealth of Nations in decision theory. The first advance was based on his interval valued approach to probability that, in general, rejected the application of the mathematical laws of the probability calculus to most decision making situations in politics, insurance, career assessment, business, economics, finance, and practical everyday decision making. Sharp or Point probabilities were not the general case due to different gradations in the quality of the evidence,data or information. It was simply not possible to make a precise estimate of probability in most cases due to the uneven nature of the quality of the information/knowledge and the overall incompleteness of the relevant evidence.
The second advance made in the Wealth of Nations resulted from Smith’s deep understanding of the role of uncertainty, as opposed to risk, in decision making. The future was uncertain. Doubts about the accuracy and reliability of a decision lingered on and remained long after the decision had been made because most decisions were made on the basis of only partial information, data, or knowledge.
Utilitarianism, be it Bentham’s version or Hume’s version, required both a knowledge of the consequences of one’s actions and an assessment of numerical probabilities that simply was not available. The existence of epistemological uncertainty means that it is impossible to accurately calculate the consequences of one’s actions and apply a Benefit-Cost analysis based on any concept of numerical probability as advocated by Bentham.
Keywords: utilitarianism, interval valued probabilities, uncertainty, risk, median, mode, mean
JEL Classification: B10, B12, B20, B22
Suggested Citation: Suggested Citation