Bootleggers & Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics by Adam Smith Page B
Authors: Adam Smith
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illustrate how humans interact with one another in a community setting. Smith claimed that we all have an “impartial spectator” embedded in our genetic makeup that can be called on to help us understand how our actions will be viewed by others. The impartial spectator is impartial in that no person’s preferences or interests are considered more important than any other’s and is a spectator in that this “man within the breast,” as Smith described it, focuses on the larger community and helps the searching individual figure out what is morally right and wrong.
By appealing to this impartial spectator, we are able to figure out where the sympathies of others truly lie (Adam Smith [1759] 1982, 132). According to Smith, the spectator helps us constrain our actions and offers guidance in what will be met with approval and what with disapproval. This is not to say that the impartial spectator is always accurate, as of course each person has his own underlying bias, or that people always follow what their impartial spectator dictates; we are free to ignore our consciences. But the idea is still a powerful one: the impartial spectator in general exists to ward off disagreeable behavior that could lead us into trouble with others. Think of it as a mental referee, helping people play the game of life.
In evolutionary terms, the impartial spectator can be seen as an emerging means of cooperating with others, allowing us to avoid constant conflict that would reduce our chances of survival. Those who find themselves in conflict with others are not long for this world, because their DNA risks being unceremoniously dumped from the gene pool. Those who survive are likely to have some innate sense of what will be met with approval from society and what will provoke ostracism or punishment.
Of course, the impartial spectator is no fool. Just as it can seek approval and facilitate social cooperation, it can also condemn inappropriate behavior by others. When the actions of others cause the impartial spectator to recoil in disgust, we react with an appropriate response. This mix of cooperation and censure is beneficial, because it ensures that those who do not deserve trust will more often be left out in the cold. As the saying goes, “Fool me once, shame on you. Fool me twice, shame on me.” 1
Our interactions with others thus involve a peculiar form of cooperation, one marked by not only sympathy but also potential hostility. Put another way, this form of other-regarding behavior is intricately related to the notion of reciprocity. How we act toward another person is informed by the other person’s behavior as much as by our own. Please be patient, dear reader. We are on our way to discovering the answer to “Why Baptists?”
Reciprocity Observed in the Laboratory
Adam Smith’s notion of the impartial spectator suggests that we trust others but only so much as this is validated by subsequent actions. That is, trust is guided by reciprocity. Because trust in others is fragile, wealth-accumulating communities must find ways to strengthen the tendency to cooperate. Social norms that embody moral standards such as religious teachings, for example, form an impartial spectator that must be nurtured to sustain cooperation.
A large body of laboratory evidence from experimental economics illustrates the extent to which these norms of cooperation prevail. Vernon Smith (1998), winner of the 2002 Nobel Prize for his seminal work in experimental economics, wrote specifically on the link between Adam Smith’s impartial spectator and the lessons of the laboratory. According to Vernon Smith, our ability to reason what others are thinking is responsible for the community of personal relationships that ultimately facilitate economic growth. By relying on an inherent sense of trust, validated by subsequent reciprocal interaction, people may overcome short-run, selfish tendencies and instead engage in trade.
A set of economic experiments,
By appealing to this impartial spectator, we are able to figure out where the sympathies of others truly lie (Adam Smith [1759] 1982, 132). According to Smith, the spectator helps us constrain our actions and offers guidance in what will be met with approval and what with disapproval. This is not to say that the impartial spectator is always accurate, as of course each person has his own underlying bias, or that people always follow what their impartial spectator dictates; we are free to ignore our consciences. But the idea is still a powerful one: the impartial spectator in general exists to ward off disagreeable behavior that could lead us into trouble with others. Think of it as a mental referee, helping people play the game of life.
In evolutionary terms, the impartial spectator can be seen as an emerging means of cooperating with others, allowing us to avoid constant conflict that would reduce our chances of survival. Those who find themselves in conflict with others are not long for this world, because their DNA risks being unceremoniously dumped from the gene pool. Those who survive are likely to have some innate sense of what will be met with approval from society and what will provoke ostracism or punishment.
Of course, the impartial spectator is no fool. Just as it can seek approval and facilitate social cooperation, it can also condemn inappropriate behavior by others. When the actions of others cause the impartial spectator to recoil in disgust, we react with an appropriate response. This mix of cooperation and censure is beneficial, because it ensures that those who do not deserve trust will more often be left out in the cold. As the saying goes, “Fool me once, shame on you. Fool me twice, shame on me.” 1
Our interactions with others thus involve a peculiar form of cooperation, one marked by not only sympathy but also potential hostility. Put another way, this form of other-regarding behavior is intricately related to the notion of reciprocity. How we act toward another person is informed by the other person’s behavior as much as by our own. Please be patient, dear reader. We are on our way to discovering the answer to “Why Baptists?”
Reciprocity Observed in the Laboratory
Adam Smith’s notion of the impartial spectator suggests that we trust others but only so much as this is validated by subsequent actions. That is, trust is guided by reciprocity. Because trust in others is fragile, wealth-accumulating communities must find ways to strengthen the tendency to cooperate. Social norms that embody moral standards such as religious teachings, for example, form an impartial spectator that must be nurtured to sustain cooperation.
A large body of laboratory evidence from experimental economics illustrates the extent to which these norms of cooperation prevail. Vernon Smith (1998), winner of the 2002 Nobel Prize for his seminal work in experimental economics, wrote specifically on the link between Adam Smith’s impartial spectator and the lessons of the laboratory. According to Vernon Smith, our ability to reason what others are thinking is responsible for the community of personal relationships that ultimately facilitate economic growth. By relying on an inherent sense of trust, validated by subsequent reciprocal interaction, people may overcome short-run, selfish tendencies and instead engage in trade.
A set of economic experiments,
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