MCAT Critical Analysis and Reasoning Skills Practice Test 18

One difficulty in following Adam Smith's account of self-interest is that he had discussed the matter thoroughly in the Theory of Moral Sentiments, and he assumed that the reader of the Wealth of Nations would not think that he, Smith, considered self-interest the only or even the main motive, or virtue, of humanity. His teacher, Hutchenson, indeed, had taught that the only virtue was benevolence; but Smith, while agreeing that this was the major virtue and the one which aimed "at the greatest possible good," felt strongly that the system of benevolent ethics was too simple and left no room for the "inferior virtues." Therefore he devoted himself to a more naturalistic theory of morals, in which man's nature was accepted as it was.

In the Wealth of Nations, Smith combined the two doctrines: God's providential benevolence and man's earthly self-interest. The result is his famous "invisible hand" theory in which the individual, intending only his own gain, is led "to promote an end which was no part of his intention," the well-being of society. The view that personal self-interest is the best regulator of public affairs had been put forward before: it is expressed in Bernard de Mandeville's, Private Vices, Public Benefits. When Smith wrote, this view was already familiar to eighteenth-century thinkers. What Smith did was to give it a reasoned economic exposition which made it acceptable and, so to speak, respectable. From then on, the inevitable benefits of self-interest become a doctrine to which rising manufacturers and owners of newly enclosed land constantly appealed. However, he was constantly inveighing against the farmers, the workers, the manufacturers, and the banks, complaining that they did not understand their own particular interests. He chided the mercantilists that their very cupidity, by imposing a heavy duty on certain goods, called into being a smuggling of the goods which ruined their business. Country gentlemen were told that in their demand for a bounty on corn "they did not act with that complete comprehension of their own interest" which should have directed their efforts.

Smith's method was to form out of experience an abstract principle, to state this as a general rule and to give evidence and examples to support it. Thus, he and his science of economics could show "how" and "in what manner." In order to discover such a science of economics, however, Smith had to posit a faith in the orderly structure of nature, underlying appearances and accessible to man's reason. This, in our judgment, is what Smith really meant by the "invisible hand"; that, so to speak, an "order of nature" or a "structure of things" existed which permitted self-interest, if enlightened, to work for mankind's good.

Man's task, therefore, was to understand the nature or structure of things and to adjust himself harmoniously to the necessary results of this structure. On one level, this might mean the acceptance of a "natural" price of things (reached when the supply, whether of goods or of labor, exactly equaled the demand). On another level, Smith applied his faith in a structure of things when he said: "A nation of hunters can never be formidable to the civilized nations in their neighbourhood. A nation of shepherds may." This is true, he thought, because the nature of hunting is such that large numbers cannot indulge in it; the game would be exterminated. On the other hand, shepherds can grow in number as their flocks grow: and can carry war into the hearts of civilized nations because they carry with them their food supply.

What effect did Smith's work actually have? First, it gave the rising manufacturers and merchants a rationale for their desire to change existing government policy. (Existing policy, as we have pointed out, favored the older trades, methods, and classes against the new "Lunar Society" type of individual and enterprise.) Thus, for example, it helped Pitt to pass a free-trade agreement, the Eden Treaty of 1786 with France, through Parliament.

The second effect of Smith's work was in the shaping of thought. His influence in introducing historical method into political economy was far-reaching. He made the foundation of all subsequent economics the notion that wealth was created by labor. But, more than any of these things, he introduced science into the study of economics. Although he talked much about the "invisible hand" and the "natural course of things," Smith really freed man from the tyranny of chance by forming for him the analytical tools with which he might learn to control his economic activities.

Material used in this particular passage has been adapted from the following source:

J. Bronowski and B. Mazlish, The Western Intellectual Tradition. ©1960 by HarperCollins Publishers.

1. The author states that Smith draws which of the following relationships between nature and economics?

• A. Humans are selfish and always take as much from the marketplace as they can.
• B. Humans are inherently communal beings and share all their resources.
• C. Humans fundamentally act in their own interest.
• D. Humans are generous and act in defense of others.

2. Which of the following statements, if true, would most undermine the author's characterization of Smith?

• A. Smith extrapolated his theories from real-life observations.
• B. Smith's work was wholly theoretical.
• C. Smith based part of his work on an older idea.
• D. Smith's theory influenced the work of later economists.

3. Which of the following items of information from the passage most supports the author's claim that Smith believed that the economy can be not only studied but influenced by human actions?

• A. Smith felt that the system of benevolent ethics was too simple and left no room for the inferior virtues.
• B. Smith combined two doctrines to create his invisible hand theory.
• C. Smith introduced a historical method into the study of economy.
• D. Smith criticized businessmen who did not act in their own best interest.

4. According to the information provided, the attitude of the author towards Smith's theories can best be described as:

• A. exuberant support.
• B. informed approval.
• C. qualified praise.
• D. inexplicable disappointment.

5. A reasonable supposition from passage information about Smith and de Mandeville is that they agreed that:

• A. individual motivation can provide a benefit to society.
• B. benevolence is the only virtue.
• C. a naturalist theory of morals would prove the most accurate.
• D. economics is a science.

6. The term invisible hand in Smith's economic theory is most defined by the principle that:

• A. there is a natural price of things.
• B. individual action can influence society.
• C. economics can be quantified through analytical tools.
• D. manufacturers can change existing government policy.

7. According to the author, Smith's most important contribution to economics was:

• A. identifying benevolence as man's only virtue.
• B. identifying the role of nature in economics.
• C. identifying self-interest as the best regulator of public affairs.
• D. identifying a method by which to analyze economic activity.