prior probability

Alternative title: Review of Chapter 5 of Law and the Invisible Hand

Chapter 5 of Law and the Invisible Hand is the most speculative chapter in Robin Paul Malloy’s new book–and also the most original and creative one. In summary, having identified the main ingredients of “Smith’s theory of jurisprudence” in his two previous chapters — i.e. Smith’s “three metaphors” in Chapter 3 and Smith’s “three pillars of civil society” in Chapter 4 –, Professor Malloy then dons his academic chef’s hat and combines this hodgepodge of ingredients in a new and novel way in Chapter 5 to develop a Smithian-inspired theory of justice. For the sake of brevity, I won’t restate the specific steps of Malloy’s intricate intellectual recipe here; instead, I will limit myself to making the following few observations, criticisms, and suggestions:

1. Stop saying “Smith’s theory of jurisprudence”; Adam Smith did not have one. Although the subtitle of Malloy’s book is “A Theory of Adam Smith’s jurisprudence,” Malloy keeps referring to “Smith’s theory of jurisprudence” and to “Smith’s theory” in each of the chapters of his book when Smith never developed a theory of jurisprudence. In truth, Malloy is just presenting his conjecture of what Smith’s theory of law and justice would have looked like had Smith actually completed his promised book on jurisprudence, which Smith did not. That said, is Malloy’s novel conjecture in Chapter 5 a good one?
2. “Entities are not to be multiplied beyond necessity.” We know from Smith’s early essay on “The History of Astronomy” that Smith himself admired the elegant simplicity of Newton’s three laws of gravity, not the ad hoc or makeshift epicycles of Ptolemaic astronomy. Alas, Malloy’s conjecture, his attempt to formulate a Smithian theory of justice out of a hodgepodge of Smithian concepts, falls more on the Ptolemaic end of the social-science spectrum. To sum up, although Malloy’s efforts are admirable and his guess is a plausible one, my main criticism is that it has too many moving parts to be considered a “Smithian” or Enlightenment theory of justice.
3. It takes a theory to beat a theory. Even if my criticisms above are on point, Malloy still deserves great credit for bringing to our attention a lesser-known aspect of Adam Smith’s work, his lectures on jurisprudence, and for identifying possible connections between these lectures and Smith’s published work. Moreover, Malloy himself, perhaps unwittingly, effectively responds to objection #2 above in the very next chapter of his book, where he presents a simpler and more plausible Smithian theory of justice. I will thus turn to chapter 6 in my next post …

Robin Paul Malloy identifies and describes “three pillars of civil society” (p. 5) in Chapter 4 of Law and the Invisible Hand, three key concepts that appear in various parts of the work of Adam Smith: utility, authority, and justice. In brief, “authority” (pp. 41-44) refers to the power of the sovereign to resolve disputes and protect one’s person and property, while “utility” (pp. 44-49) refers to propriety of the methods used by sovereign to perform these essential tasks (i.e. society as a whole is better off when disputes are resolved peacefully and when everyone’s personal safety and property are protected), but of these three pillars, Malloy devotes the most space to “justice” (pp. 49-57). According to Malloy’s interpretation of Smith, “justice” refers to the protection of one’s person and property and is the most important of these three pillars, the one that holds the edifice of society together (p. 40).

This tripartite picture of “civil society” is no doubt a useful and reasonable one, but is it really the picture that Adam Smith himself would have painted? I pose this key question here because Smith himself never developed a theory of justice. Yes, Smith acknowledged that one of the principal duties of the sovereign is “to protect[], as far as possible, every member of the society from the injustice or oppression of every other member of it.” [See The Wealth of Nations, Glasgow edition, pp. 708-709 (para. 1).] And, yes, Smith defined justice as “a mere negative virtue” (i.e. not harming others) in his treatise on moral sentiments. [See The Theory of Moral Sentiments, II.ii.1.9.] But as I mentioned in a previous post, Smith never completed his promised book about law and justice.

Furthermore, to equate justice with restraint from harming others (justice as a negative virtue), as Smith does in The Theory of Moral Sentiments, or conversely, to equate injustice with oppression, as Smith does in The Wealth of Nations, is not enough to build a full-fledged theory of justice. Why not? Because one man’s harm or oppression is another man’s natural liberty! We therefore need to define what forms of conduct constitute “harm” and what types of acts constitute “oppression”, and we also need to identify the circumstances, if any, in which such harms and acts of oppression can be justified or excused. In short, at a minimum, we need a theory of harm as well as a theory of justification and excuse.

Perhaps, however, we could we use one of Adam Smith’s three metaphors–the invisible hand, the man in the mirror, or the impartial spectator, or some combination thereof–to fill this massive gap in Smith’s work, i.e. to develop “a Smithian theory of justice.” As it happens, this is precisely what Professor Malloy attempts to do in Chapter 5 of Law and the Invisible Hand, his most original and thought-provoking chapter. In the alternative, perhaps this gap in Smith’s work was an intentional one; that is, perhaps Smith came to believe that developing a comprehensive theory of justice would be a complete waste of time! Either way, I will proceed to Chapter 5 in my next blog post.

Before I proceed with my review of the remaining chapters of Robin Paul Malloy’s Law and the Invisible Hand (Chs. 4-12), I want to pose a few additional questions about Adam Smith’s impartial spectator, one of the most compelling and memorable metaphors in the history of ideas, along with Plato’s cave, Schrödinger’s cat, and Rawls’ veil of ignorance. Among other things, at the end of my previous post I identified a fundamental disagreement between Professor Malloy and myself regarding this metaphor. To the point: Malloy models Smith’s spectator after a common law judge, while I would liken him to a theater-goer, i.e. a member of the audience at a theatrical performance. Which of us is right? Either way, Smith’s impartial spectator metaphor also presents a peskier set of puzzles and conundrums, a deep and difficult set of questions that I once posed to Ryan Patrick Hanley (see here) and that I now pose to Professor Malloy:

1. Who is this impartial spectator? First and foremost, what is the ontological status or metaphysical origins of this imaginary being? Specifically, is he (she?) (them?) (it?) an artificial human creation–i.e. something we conjure up out of whole cloth–or is this imaginary being somehow “hardwired” by natural or sexual selection into every human brain–an innate faculty we are born with? (Cf. McHugh 2016.) Either way (human invention or innate faculty), does this abstract entity have an ethnicity, a gender, or a sexual preference? (Cf. Weinstein 2016, p. 356.) [Note: All author and page references are to Volume 13, Issue 2 of Econ Journal Watch (May 2016), which contains a special symposium devoted to Adam Smith’s impartial spectator.]
2. When and how does this spectator come into play? Secondly, and from a purely logistical or practical perspective, when does the impartial spectator, if he (her/them/it) really exists, actually come into play? To the point: if it’s true, for example, that the average person makes up to 2000 decisions every hour (see here), which of these myriad decisions are subject to review by one’s impartial spectator–i.e. actually go up “on appeal”, so to speak. Put another way, if Smith’s impartial spectator operates like a Court of Appeal, what criteria does he (the impartial spectator) use in deciding which of our decisions will be taken on appeal?
3. Is the impartial spectator a moral relativist? Next, what is the moral or normative status of the moral judgements generated by this heuristic, i.e. the decisions or verdicts rendered by the impartial spectator? (Note: I prefer the British spelling of the word “judgement.”) Are these verdicts/judgements fallible or infallible? Final or tentative? Put differently (cf. Mueller 2016), do the judgements and identity of this imaginary entity vary from person to person, or is Smith’s impartial spectator capable of generating universal and timeless moral judgements?
4. How does the impartial spectator overcome its biases? Also, how helpful or reliable is Smith’s imaginary spectator, really? Specifically, can he or she or them transcend or correct our “entrenched cultural biases” (Fleischacker, 2016, p. 278)? By way of example, Walt Disney’s Jiminy Cricket famously admonished Pinocchio to ”let your conscience be your guide.” This is helpful advice if your impartial spectator is able to reliably discern right from wrong, but how reliable is your conscience? Circling back to Smith, since the impartial spectator is not a real person–it is an imaginary being–it is only as reliable as the person conjuring him/her/them up. After all, the impartial spectator, being an imaginary entity, has no store of knowledge beyond that of the person who is conjuring it up.
5. How does the impartial spectator enforce its judgements? Lastly, isn’t Smith’s impartial spectator, assuming it really exists, a superfluous entity? If not, what work does this imaginary being really do? (Cf. Craig Smith 2016.) To the point: if a virtuous person is someone who is guided by the judgements of the impartial spectator, then by definition a non-virtuous person is someone who neglects or ignores these judgements. In that case, the impartial spectator falls into a circular trap; it is the mysterious quality of “virtue” (not the judgements of the impartial spectator) that is doing the heavy moral lifting.

To his credit, Professor Malloy devotes several additional chapters of his book to Smith’s impartial spectator, so we will revisit the questions above in future blog posts. For now, it suffices to say that this imaginary device, which appears over five dozen times in The Theory of Moral Sentiments, is the centerpiece of Smith’s theory of morality (see, for example, the book cover pictured below) and thus deserves careful scrutiny. In the meantime, I will proceed to Chapters 4 and 5 of Law and the Invisible Hand in the next day or two …

Robin Paul Malloy makes two key moves in Chapter 3 of his new book Law and the Invisible Hand. First, he describes three of the most memorable, compelling, and complex metaphors in the writings of Adam Smith: the invisible hand, the man in the mirror (a phrase, however, that Smith himself did not use), and the impartial spectator. Next, he attempts to “connect” these three metaphors, i.e. identify what the common thread among them, if there is one, is. I will explore the connections among these metaphors in a future post; for now I will just say a few words about each metaphor:

1. Invisible hands. Adam Smith’s most famous metaphor has to be “the invisible hand,” a metaphor that appears in three of Smith’s works: in his essay on “The History of Astronomy”; in his treatise on moral philosophy (The Theory of Moral Sentiments); and in “Book I” of his work on The Wealth of Nations. Here, however, Professor Malloy commits a major mistake. Specifically, he fails to mentions that Smith uses his “invisible hand” metaphor in different ways in each one of these three works; as a result, we can’t say that Smith’s “invisible hand” metaphor has a single, stable meaning. (I could go into the nitty-gritty details here (see slide below), but I want to keep this blog post short, so just take my word for it for now.)
2. Adam and the looking-glass. Although Smith never used the phrase “man in the mirror” (this phrase is Malloy’s own invention), he did write about looking-glasses and mirrors in The Theory of Moral Sentiments. Among other things, Smith writes: “Were it possible that a human creature could grow up to manhood in some solitary place, without any communication with his own species, he could no more think … of the propriety or demerit of his own sentiments and conduct … than of the beauty or deformity of his own face…. Bring him into society, and he is immediately provided with the mirror which he [lacked] before…. [I]t is here that he first views the propriety and impropriety of his own passions, the beauty and deformity of his own mind.” [Quoted in Malloy 2022, pp. 27-28.] In other words, for Smith man is a social animal because we care what other people think about us.
3. Impartial spectators. The last of Smith’s three major metaphors is “the impartial spectator,” a term of art that appears over 60 separate times in The Theory of Moral Sentiments. (By contrast, as I mentioned above, Smith used the phrase “the invisible hand” only three times in his entire lifetime.) That Smith employed this theatrical metaphor so frequently in his first magnum opus tells us that the impartial spectator is a crucial part of Smith’s moral philosophy, but who is this impartial spectator, and what is his role in our lives? Alas, Malloy and I have a fundamental disagreement about Smith’s spectator. Malloy, for example, compares the impartial spectator to a common law judge, but in reality the metaphor of a spectator originates from the world of the theater, not law. Also, because the impartial spectator is such a crucial aspect of Smith’s thought, I will say a few more words about this metaphor in my next post.

To celebrate the day the Constitution of the United States officially became the law of the land–i.e., June 21, 1788, the day on which our nation’s charter was ratified by the requisite number of States–, below is a chronological listing of my constitutional law papers:

1. “Comment on Bush v. Gore and the Clemens-Piazza broken-bat incident” (2001) (analysis of Bush v. Gore).
2. “The most senile Justice?” (2007) (stinging critique of David Garrow’s law review article on mental decrepitude on the U.S. Supreme Court).
3. “A stag-hunt model of the U.S. Constitution” (2008) (game-theoretic model of the constitutional ratification process).
4. “Coase and the Constitution” (2011) (analysis of federalism).
5. “Gödel’s loophole” (2013) (analysis of Article V).
6. “Why don’t juries try ‘range voting’?” (2015) (analysis of jury trials).
7. “The problem with precedent” (2017) (review of Randy Kozel’s Settled Versus Right: A Theory of Precedent).
8. “Domestic constitutional violence” (2018) (historical analysis of the president’s authority to use military force inside the United States).
9. “Bitcoin, the commerce clause, and Bayesian stare decisis” (2019) (analysis of South Dakota v. Wayfair).
10. “Lockdowns as takings” (work-in-progress) (analysis of the takings clause).

As I mentioned in a previous post, I have decided to review Robin Paul Malloy’s Law and the Invisible Hand. (Note and full disclosure: I was going to review Better Call Saul and Philosophy, a collection of essays published last month, but I have decided to prioritize Professor Malloy’s work because I haven’t received my copy of the “Better Call Saul” book yet, while Malloy graciously gave me a copy of his beautiful book when we met at the History of Economics Society last weekend.) So, let’s get started with Chapters 1 and 2 of Malloy’s new book, shall we?

Professor Malloy not only quickly introduces his readers to the most compelling and memorable metaphors that appear in Adam Smith’s writings (see p. 5), such as the invisible hand, the impartial spectator, and the man in the mirror; he (Malloy) also identifies perhaps the single-most important question of all time, a paradox that Smith himself spent a lifetime trying to solve: how is it possible to reconcile the pursuit of private self-interest while at the same time promoting the common good?

For my part, however, although I commend Prof Malloy for putting this key question center stage, I am highly skeptical of his attempted solution: his mystical and multiple invocations of the ideal of “justice.” In Malloy’s own words (p. 3, footnote omitted), for example, “Smith subordinated concerns for self-interest to the requirements of justice because he understood that justice was the most important pillar on which civil society rested.” (Malloy repeats this same argument in different ways in Chapter 2 as well.) To the point, Malloy’s justice thesis has a fatal flaw, for what is Adam Smith’s theory of justice? Alas, Smith never developed one, since he ended up abandoning the book he was writing on law and justice in order to write The Wealth of Nations. (Malloy himself acknowledges this embarrassing omission on page 7 of his introduction.)

The best we can do, then, is to try to guess what Smith’s theory of justice — had he ever decided to develop one — might have looked like, and in fairness to Malloy and to his ambitious project, we do have some material to help us make this guess. Among other things, we have Smith’s 1759 treatise on moral philosophy, The Theory of Moral Sentiments, to which he made significant revisions in subsequent editions. We also have Smith’s “Lectures on Jurisprudence,” a set of lecture notes transcribed by one of Smith’s students, and we have the last part of The Wealth of Nations (Book V), which talks about the administration of justice and the proper role of government generally.

As such, like a good Bayesian, I will try to keep an open mind as I read the remaining 10 chapters of his book. Even if we are unable to reconstruct Smith’s theory of justice, this effort is still a worthwhile one, for the tension between the public interest and the private pursuit of self-interest is not only a major theme in Smith’s writings; it is also very much relevant in our times–think of climate change, the proliferation of “fake news” on social media, and NIMBY-hypocrisy, just to name a few contemporary challenges.

I will resume my review of “Law and the Invisible Hand” in my next post; in the meantime, below are some of the pictures my wife Sydjia and I took during our visit to “George Floyd Square” in Minneapolis this weekend.

The first full paragraph of Robin Malloy’s Law and the Invisible Hand reads thus (footnote omitted):

“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. Law enchances social cooperation, facilitates trade, and extends the market. In these ways, law functions like Adam Smith’s invisible hand, guiding and facilitating the progress of humankind.“

Alas, as Brett tells Jake at the end of Hemingway’s novel The Sun Also Rises, Isn’t it pretty to think so? Although I am a law professor, I don’t agree with this “law-centric” view of the world for three reasons. First off, what if the causation between law and markets runs in the opposite direction? That is, are legal institutions necessary for markets to evolve, or is law a by-product of prosperous markets?

Secondly, what about laws that protect monopolies and prohibit free trade, such as zoning and licensure requirements? Also, the existence of too many laws and regulations might actually deter trade and economic growth. As a result, we need some criterion or set of criteria for distinguishing laws that promote markets from those that inhibit trade. (Paging public choice theory!)

Last but not least, even if we could agree on how to distinguish “good” laws from “bad” ones, law’s role in life is often secondary to the role of ethics and morality, to our sense of right and wrong. To begin with, from a purely economic or “rational actor” perspective, the efficacy of law depends on two key variables: p1 and p2, the probability of detection and the severity of the punishment if one is caught, and p1 and p2, in turn, will vary depending on the costs of monitoring behavior and the costs of enforcement. Morality, by contrast, relies on self-monitoring and self-enforcement.

But what is the relationship between law and morality, and what happens when people have different conceptions of right and wrong, different moral codes? I will proceed with my review of “Law and the Invisible Hand” in my next post.

Adam Smith is mostly known as a political economist (The Wealth of Nations) or a moral philosopher (Theory of Moral Sentiments), but did you know that he was also a legal scholar? In fact, Smith was awarded a Doctorate of Law by the University of Glasgow in October of 1762, and he had lectured about law and jurisprudence during the 1762-63 academic year. (Update: Smith’s “Lectures on Jurisprudence” are available here, via AdamSmithWorks. Hat tip: Inverted Logic.)

Although Smith himself promised to write a book about the law, he never completed that work. To help fill this gap, my colleague and friend Robin Paul Malloy, a law professor at Syracuse University, recently published a book on “Law and the Invisible Hand” (the cover of which is pictured below), which explores the legal side of Adam Smith’s thought. I got to see Professor Malloy present his work at this weekend’s History of Economics Society, and I will be reviewing it here soon.