Economics

Russ Roberts: Adam Smith's Surprising Guide to Happiness (But Not Wealth)

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"It's kind of shocking to realize the person known as the father of modern economics, Adam Smith, didn't think the pursuit of wealth was a very good idea," say Russ Roberts. "He thought it was corrosive, thought it was bad for you, thought ambition was bad for you, thought the pursuit of fame would destroy your character and your happiness, your serenity, your tranquility.

Roberts is the author of the just-released How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness, an extended and lively meditation of Smith's classic The Theory of Moral Sentiments, first published in 1759, years before Smith's better-known Wealth of Nations.

One of the most popular explicators of economic thought—and perhaps more importantly, the limits of economic thought—Roberts is a research fellow at the Hoover Institution, the host of the great podcast EconTalk, a regular presence on NPR, co-blogger at Cafe Hayek, and the author of a host of previous books (including three novels: The Choice, The Invisible Heart, and The Price of Everything). He is the co-creator of the wildly popular rap videos illustrating the ideas of John Maynard Keynes and Friedrich Hayek, which have been viewed more than 7 million times on YouTube. His personal website is here.

Roberts sat down with Reason's Nick Gillespie to talk about Adam Smith's relevance in both economic and moral arenas, the hubris of contemporary economists and the politicians who rely on them, the transformation of work from drudgery to a form of self-actualization, and how Adam Smith—a bachelor who lived much of his adult life with mother—just might help you live a happy life.

About 1 hour. Scroll down for downloadable versions and a transcript. Subscribe to Reason TV's YouTube channel to receive automatic notification when new material goes live.

Edited by Todd Krainin.

INTERVIEW CONTENTS

3:44—LOVE: Fame, self-esteem, virtue, and Derek Jeter.
13:16—VIRTUE: Prudence, justice, benevolence, and the iWatch.
17:50—TOLERANCE
19:44—Why do we love the powerful? Hugo Chávez, Lady Di, Charles I.
25:09—Adam Smith's personal life.
27:41—Making the world a better place.
33:05—The heroism of commerce.
38:48—The knowledge problem of economics.
49:20—What do we know about human nature?
52:14—Fundamental principles.

This is a rough transcript. Please check all quotes against video for accuracy.

GILLESPIE: Russ, thanks for talking.

ROBERTS: Always good to be back.

GILLESPIE: Russ is known as the host of the weekly podcast EconTalk, which is one of the most interesting and most followed economics podcasts. Regular guest on NPR, you blog at Café Hayek. You were educated at the University of North Carolina and then got a PhD at the University of Chicago under Gary Becker, the Nobel Prize winner. You've taught at George Mason, Washington University, Stanford, and elsewhere, and you're now a research fellow at the Hoover Institution. Russ, let's get right to it. Your book, How Adam Smith Can Change Your Life, seeks to recapture the energy and the power and the influence—or, what should be the bigger influence of Smith's first great work, The Theory of Moral Sentiments. What brought you to talking about The Theory of Moral Sentiments?

ROBERTS: I opened to the fact, I have to confess, as I do in the book: here I was, an economist for decades, and I'd never read Adam Smith's other book, The Theory of Moral Sentiments, and Dan Klein, at the time was my colleague at George Mason, approached me about doing a podcast episode on the book. I thought this is good, this will give me a chance to read it, and I picked up the book and after about three minutes I put it back down because I couldn't understand what Adam Smith was talking about.  I picked it up again and eventually, I got the hang of it and ended up doing a six part, six hour long series with Dan—a little intense. Because I fell in love with the book—

GILLESPIE: Intense or boring?

ROBERTS: I like to think intense. You be the judge.

GILLESPIE: So it's like Orange is the New Black or something: it gets more and more intense as it goes on?

ROBERTS: I don't know what to do with that, I'll leave that alone. I appreciate the cultural reference. But I started reading The Theory of Moral Sentiments really for the first time only a few years ago and I was totally captivated by many different factors that made the book interesting. One is that Smith is a great writer. He's fun to read, he's charming, he's the Jane Austen of economics—which is maybe damning with faint praise, but I think not. He can really write a beautiful sentence and he had some deep insights into human nature, I thought. And what we're here for and what we're able to achieve and happiness that I thought were worth trying to convey to a general audience.

GILLESPIE: Moral Sentiments, he revised it over the course of his life, but actually he wrote that before The Wealth of Nations.

ROBERTS: I like to think of the book as the book that was ever with him. It was the book he started it, was the book he ended with. It really book ends The Wealth of Nations and it's about a very different set of issues from The Wealth of Nations.

GILLESPIE: Talk about that. Moral Sentiments, it's not about commerce. In a way it's about public life but it's not about mercantile life.

ROBERTS: Correct. It's not about commercial life. Although, it's about dealing with the people around you—both in your business dealings and your personal dealings. The Wealth of Nations is about the wealth of nations: why some nations are rich, why some are poor, is free trade good, is free trade bad, etc. But what The Theory of Moral Sentiments is about is: why do we feel the way we do about other people, given that we're pretty self-interested? In his day that was pretty accepted. Why do we do nice things given that we're self-interested? How much can we feel for other people? What motivates us to do good things for other people? Then the related question is: what makes us happy, what brings us satisfaction? It's kind of shocking to realize that the person who most people would call "the father of economics," Adam Smith, didn't think the pursuit of wealth was a very good idea, thought it was corrosive, thought it was bad for you, thought ambition was bad for you, thought the pursuit of fame would destroy your character and your happiness, your serenity, your tranquility. So, in the two books it seems to be two different people. Some people have suggested there's a paradox here. Here's this guy that writes a book about self-interest and how it makes the world go round. Here's this other book—which you could say he wrote when he was young, but actually he wrote it  when he was young and when he was old—here's this other book that says, actually self-interest isn't the only thing that matters to us because we care a lot about other people.

GILLESPIE: You kind of sum up the main theme or the main message of The Theory of Moral Sentiments in the phrase that "we should seek or strive to love and be lovely." What does that mean?

ROBERTS: That's my favorite sentence in the book. He says man naturally desires not only to be loved but to be lovely. Most of us concede, when we're pushed, that we like to be loved, we like people to pay attention to us. By "loved" he didn't mean romantic love. He included that. But he really meant what we would call "respected," "honored," "admired," "paid attention to." We—like most people—like those things. That's a huge source of our contentment, that we have friends, we have a reputation, etc. Then he takes it a step further. He says we don't just desire to be loved—we desire to be lovely. That is, we desire to earn the respect and honor and admiration of our friends and fellows by being truly worthy of their honor, respect and admiration. That's what he means by lovely. He doesn't mean a nice shirt or outfit or pretty painting.

GILLESPIE: He also means that it has to be legitimate. You talk about it in terms of people like Bernie Madoff or Lance Armstrong. If you seem to be lovely, that means you're a good, well-rounded person, you're successful, you have lots of people around you—but you know that at your core, you're a counterfeiter, you're a fraud that's not going to cut it.

ROBERTS: That's not going to cut it, although you can fool yourself for a long time. You can try to convince yourself that you're lovely when you're not. There's a part of the book—and part of my book—that's about self deception because the idea that we're not lovely is just really painful. We really don't like to see ourselves as others see us. We don't want to. We'd rather see ourselves as we think we might be seen. We have a very, of course, inaccurate—often—portrait of our own self value.

GILLESPIE: For Smith, what takes us out of that?  You talk about it also in terms of confirmation bias: we tend to see those parts of ourselves—and it's interesting because you say we might look in the mirror and say "well, oh my god look at the schnoz on me" or something like that—that we're willing to admit to certain types of failings. But generally we want to see ourselves in the best possible light. We have confirmation bias not just when we see things happening in the world, but in our own lives.

ROBERTS: Absolutely.

GILLESPIE: What takes us out of that?

ROBERTS: He has this wonderful idea called "the impartial spectator," which is this idea that when we act and when we perceive reality, we imagine our actions and thoughts being viewed by someone who doesn't have a stake in the matter. I suggest in the book, I don't know if that's really how we behave. He suggests that's what motivates altruism and compassionate behavior. We want to have an outsider respect us by seeing what we've actually done, someone who isn't blinded by our faults or by our overestimated self esteem. I don't know whether that's true or not. But I suggest in the book that that's an interesting way to think about one's own behavior, to step outside yourself and say, "in this setting, is my outrage really justified when I'm working myself into a state over some inconvenience or some 'injustice,' would an outsider who's not me think that?" I think that's a useful way to step outside yourself and see what's going on.

GILLESPIE: Is that simply for Smith—who's one of the great men of the Enlightenment—is that simply a secularized version of religion? Instead of God is watching us—so I should be good in thought and deed—now it's an impartial observer?

ROBERTS: I think he correctly understood that God wasn't always the most effective restraint on our behavior—even for religious people. He was saying, very, I think, radically, for his time—he talks a lot about God in the book, it's not like a little quiet thing in the corner that this is a secret cover for God—he actually says this is what God put in us because God isn't enough—or fear of the world to come or the afterlife or punishment or hell—might not be enough. We are judged by our fellows and that is a huge brake on our misbehavior.

GILLESPIE: Smith seems to put a pretty high premium—and you agree—a fairly high premium on following customs and etiquette and not rocking the boat in a lot of situations. What's going on there?

ROBERTS: When Smith says that you want to be loved and lovely, he says there are different ways to be loved. You can be famous and everyone pays attention to what you say. You can be rich and people pay attention to what you say and do. You can be powerful similarly people are going to pay attention to you, really want your love and attention. There's a wonderful ad for Gatorade that's on YouTube right now with Derek Jeter—I'm not a big Derek Jeter fan but—

GILLESPIE: If I'm not misremembering you're from the Boston area?

ROBERTS: That's correct. I grew up in Boston so I understand this wouldn't a confirmation bias thing. I understand the weakness of his defensive ability and of course I have to judge him honestly —

GILLESPIE: The impartial observer of you recognizes Derek Jeter as mediocre and he's just been getting away with something.

ROBERTS: Correct, exactly, but as someone who's read The Theory of Moral Sentiments, I'm able to step outside myself—and that might just be the fact that I grew up in Boston—but anyway, there's a scene in this 90 second ad and it's Frank Sinatra singing "My Way" in the background, so it has to be good already, it's a great ad, cinematography—

GILLESPIE: Another self-less, non-self-promoting, anti-ambitious person: Frank Sinatra.

ROBERTS: Exactly, humble. So, in the background is "My Way," which is a very emotional song for a person at the end of their life or the end of their career, and here's Derek Jeter walking through the streets of New York on his way to Yankee Stadium, and he is worshipped.  He's not just "hey Derek." people are in a frenzy over just seeing him. So that's one way to be loved. Derek Jeter is loved in a way that is, as much as we are loved, Nick, it's hard for you and me to imagine—

GILLESPIE: Well, you know, speak for yourself, but yes.

ROBERTS: Derek Jeter is loved. So that's one way: fame, celebrity money, power. But Smith says that's the wrong way to be loved. The right way to be loved is to be virtuous and to be lovely and the way to be lovely is to be proper and virtuous. Proper is the minimum standard, what we would call propriety. To act with propriety is the minimum standard, but you really have to get to virtue if you want to be lovely, truly lovely. And you'll be loved, not in the way that Derek Jeter is loved but you'll still be respected by a smaller circle of friends.  I think he had in mind someone like David Hume, who was his best friend and who he respected tremendously as I suggest in the book—or in the way Hume probably respected him. So let's talk about propriety now. So propriety—the right way to be loved—is to take this first step, this minimum standard of propriety. In our day, propriety sort of means stiff and staying within tradition and custom, as you say. I would give a slightly larger range for that idea. I think it's really about meeting the expectations of the people you interact with: not surprising them, not going off the rails and shocking them in a way that makes it hard for them to interact with you in a normal way. If you have a great success or a great tragedy, you share that with the people around you—and Smith talks about these examples a lot—you share that differently with people you're close to than with people whom you're not so close to. A great success, for example, you might share with your spouse but you're not going to share it with a stranger who's maybe a little bit envious of you, who's having a tough time. That would be improper. People do it all the time, they're insensitive. Similarly, people pour out their hearts sometimes to people who can't empathize. Smith talks a lot about the degrees with which we can empathize with tragedy and success. So propriety, proper behavior, is about meeting those standards.

GILLESPIE: So, it's a fluid change, because you mention in the book we live in a much less formal society—certainly than Smith did, where in colonial America if you didn't doff your hat to somebody above your station you could be put in jail. We're not talking about that kind of very fixed and formal etiquette. This is more about engaging the people around you.

ROBERTS: Correct. This is about: how do you interact with the people around you? Which is really the stuff of life. It's what we do all day. We don't think about it much and I think one of the virtues of Smith's book is that it forces you to think about these kinds of interactions in a way you normally don't—and it's a beautiful thing.

GILLESPIE: But isn't there a role for provocation, even in intimate relations, to get people to think differently and to change in a positive way? That could be in entertainment, a show like Southpark, or somebody like Howard Stern or Lady Gaga. On a certain level, their whole role is to provoke and to transgress certain expectations. It can go badly, but it can also be a source of real delight and entertainment—and knowledge.

ROBERTS: Sure, but of course you interviewing me, it would be improper if you didn't do the Nick Gillespie thing. I expect you to ask off-beat questions about Lady Gaga and to make fun of me being a Red Sox fan, so if you didn't do that that would be improper.

GILLESPIE: I was going to actually ask, is the Sharon that the book is dedicated to, is that the Sharon who you acknowledge at the end of the book is your long-suffering and incredibly helpful wife?

ROBERTS: It could be, I can't speak to that that's—

GILLESPIE: —that's beyond the scope of this thing.

ROBERTS: Exactly.

GILLESPIE: And I felt like if we had had a discussion, that was supposed to be off the table.

ROBERTS: And there you go.

GILLESPIE: Propriety, though, is a kind of a way-station on the way to virtue. Then how is he defining virtue?

ROBERTS: Smith has a lot of different virtues. The big three for him are prudence, justice, and benevolence. These are words that are a little bit old-fashioned. We know what justice is, sort of. Prudence, very old fashioned term. Benevolence—or beneficence, he uses both—are both very hard to understand for a modern ear sometimes. Here's the way I simplify it and I think it captures what he's talking about. With prudence, if you want to be lovely you have to treat yourself well. You have to take care of yourself. Don't become an alcoholic. Don't become a drug addict. Don't be a spendthrift. Spend your money carefully, your time wisely. Don't spend all your time playing video games on the Internet or on your smart phone.

GILLESPIE: I was reading your book as the iPhone 6 came out over this weekend, when ten million iPhones were sold over this weekend. People waited for a day and a half in line and Smith actually anticipated this. Talk a little about that incredibly prescient passage, which was first written in 1759.

ROBERTS: It's kind of stunning. He says, basically, that we fall in love with little conveniences. He calls them "frivolous trinkets of utility," which is really what our gadgets are all about. In particular, of all things, he picks on the watch, which is ironic given that the iWatch has just come out. He makes fun of the fact—and really judges the person who pays a premium for a watch that's a little more accurate, just because it's kind of amazing and wonderful. But it doesn't make the person any more punctual. They're not more accurate, they just know how inaccurate they are. So, he makes fun of the fact that we love these gadgets. And you think, well, what kind of gadgets were there in 1759? And the things he talks about, they're not so attractive, an ear-picker, a machine for cutting the nails—nail clippers.

GILLESPIE: You go on to point out that that on a certain level there was probably a much better utility to that than taking a dull knife to your finger tips.

ROBERTS: Correct, just like my iPhone brings me a lot of legitimate pleasure. But it is interesting—I'm going to confess right here, I have the iPhone 5 and I do have some iPhone 6 envy, even though I can make a perfectly good phone call with the iPhone 5. I mean, what really am I getting that's better?  But we have a craving, which he understood back in 1759, for the latest thing, for the coolest thing—and I think this is part of what we like about gadgets, he understood that people in 1759 liked the way they did their job, the gadget. Not what the job actually was, but just that it was well-constructed. We have almost an aesthetic sense for that, which I think is part of what Steve Jobs was about obviously. And it's part of what we care about with these gadgets.

GILLESPIE: But then you can go overboard, if you're mortgaging everything or you're not saving for retirement or for that operation you need, because you need the next—

ROBERTS: Right, that would be imprudent. Prudence is a virtue. Justice is a virtue. He uses the word in many different ways, but one of the ways he uses it—I think it's the most important here—is don't hurt people. That's pretty straightforward, we understand that. Don't be a bad person. The next one, though, is the challenge because that's beneficence, that's being a good person. And that means not just I'm not going to hurt you—but I'm actually going to help you. And that's harder to do. It's not obvious. I use the example love your neighbor as yourself. That's a good idea, how do I do that? It's hard to do. Emotionally, it's very hard to do. How do I implement that? He makes a contrast between the laws of justice, which are sort of black and white—don't steal, don't bang anybody over the head, don't hurt them—and the laws of beneficence, which he calls loose, vague, and indeterminate. He makes a contrast, an analogy, between grammar, for which we have a set of rules, and composition. The rules of composition are loose, vague, and indeterminate. How to be a good writer is more of a craft than being accurate and speaking English well. Similarly, if you want to be virtuous, being just—that's not so hard. But being beneficent, being helpful to people around you, that's a lot trickier.

GILLESPIE: Let's dilate on that. I'm sure that Hayek, Friedrich Hayek, who is one of your intellectual heroes, as well as mine, wrote a lot about how one of the things that's interesting about grammar is that people learn how to speak a language without ever really necessarily learning the rules of grammar. They just kind of emerge. Is it part of beneficence—and you know, it's also one of the things that's different in our world, I think, than Smith's, is that we recognize there are many different ways out there. He helped create the idea of toleration, not just in a religious sense, but in a kind of lifestyle sense. Wouldn't it be wrong for us to simply say you're speaking broken grammar, bad English, or you have a weird accent, or you use words peculiarly, to just be like well I'm not going to listen to you? There seems to be a tension in Smith between having one set of rules that are kind of universal values, but then also realizing that those really have very clear limits and how you get about in the world.

ROBERTS: I see Smith, as you say, as really an extraordinarily tolerant person. He's very nonjudgmental. He was against slavery, unlike some of the people of his era and later who felt slavery was necessary because there were some people who can't rule themselves, who won't do well with being unconstrained. Smith really was a modern in that sense, that he understood that was really a horrible idea, that people have the right to their own choices and their own lives.

GILLESPIE: And even not just necessarily slavery, he also—

ROBERTS: Irish people.

GILLESPIE: It's not simply slavery but masterless men who were starting to crowd into cities. I don't know that he was particularly advanced on the woman issue, but he was a modern. Specifically in that he thought that we all had a basic humanity and we all should be allowed to make as many choices as possible in our lives. Right? He's a true liberal in that sense.

ROBERTS: I don't think—you know he lived in a time and a culture where propriety and other rules were much more pervasive. I think what was acceptable behavior was much more narrow in his day than in ours and he lived in that time. He wasn't a rebel, but I think, as you suggest, in many ways he laid the groundwork for people to be free in different ways.

GILLESPIE: To follow up, definitely not a rebel. I mean, it's interesting because his thoughts were actually totally revolutionary, but he was not a rebel in any kind of social way.

ROBERTS: Not a social rebel.

GILLESPIE: You talk about his sense of rulers. He talks of, and I'm quoting from The Theory of Moral Sentiments, he goes on to write "the traitor who conspires against the life of his monarch, is thought a greater monster than any other murderer. All the innocent blood that was shed in civil wars, provoked less indignation than the death of Charles I." He's writing about a hundred years–

ROBERTS: Deep, deep insight.

GILLESPIE: And then you update that by saying also that people like to follow rulers because they want to, "think of Chavez or Castro, or even the way many Russian people today romanticize Stalin. People have an admiration for these monsters that's difficult to explain. Logic may decree that a king deserves to be overthrown, but our hearts find it difficult." I want to question that. Is Smith being naive here? He's from a very particular time and place and a class position, where there were lots of people who were happy that Charles I was beheaded and they were right to—he was a despot. The problem is that Cromwell and the Commonwealth that came after became just as oppressive but—

ROBERTS: That's not Smith's point there at all.

GILLESPIE: No, I know, but—also in talking about rulers and the apparent willingness to follow them, is this also missing the fact that rulers—particularly despotic rulers—rule with an iron hand? I mean, Charles I, later Cromwell, Castro, Chavez—it's not that people are happy to follow them. Everybody knows that if you don't follow them, you're going to be killed, you're going to be punished, you're going to be tortured and I guess I raise this on a certain level: is there a naïveté embedded in Adam Smith's thought here?

ROBERTS: Might not be so much a naiveté so much as an unawareness of how monstrous a tyrant could actually be, you could argue. He could not have imagined a Stalin, so maybe it's unfair for me to invoke Stalin there or Hitler. But here's what I think he had right: let's put aside the details of his naiveté for a moment. What I think he had right is that we do care a lot about the rich, famous, and powerful. Many, many people adore them and that's puzzling. What's special about these people that make them worthy of our attention? That's a hard thing to understand, I think, that's a hard thing to write down. It's a hard thing to understand why their death—forget whether they were a tyrant or not—why their death is so emotionally difficult for so many people

GILLESPIE: You talk about this in terms of Princess Diana, Elvis, John Lennon, etc.

ROBERTS: Yeah, these are people that are successful people and Smith tries to say that the reason we find their deaths so tragic—including the rulers and the tyrants—is that they've scripted this glorious epic and it ends unhappily, it ends abruptly. We want it to go on forever. In fact, I think to some extent it's an escape for us that those lives are fabulous. They don't think a lot about what their lives are really like, and I write in the book about how many of these people are not so happy actually day-to-day. Smith says so, he says that this is a very unrewarding way to find to be loved, is to attract this adulation and adoration from the masses. But I think it's striking and I didn't write a lot about this in the book because I didn't want to step on too many toes and get into too much politics, but there are a lot of people who worship the president in the United states, left and right, Republican and Democrat. They put pictures of the president in their house sometimes, right? That's strange to me. They're just politicians. I've met a few, you've probably met a few in your time. They put their pants on one leg at a time—mostly, a lot of them are men. They're sort of everyday human beings. They're not gods and yet we revere them in ways that are so outsized relative to their accomplishments, their personality, their essence.

GILLESPIE: So, what is it then? It's not simply a kind of vicarious thrill. Some of it is entertainment, a lot of people keeping up with the Kardashians or something. It's not like "oh I really care"—some of it is entertainment.

ROBERTS: But I think a lot what Smith says—I don't know if he's right or not—but what Smith says is that we imagine what their lives must be like without the full set of details. We have this very idealized romantic view of what day-to-day life is as Derek Jeter or as Lady Gaga or as President Obama. We think of it with such romance, we stripped away all the pain and the negative and the work that it took to get there and the future that may not be as rewarding, etc. etc and the dark days. And we say wow that's—that's the vicarious part, I think, we say, wow what a beautiful life, what an achievement, and the fact that they are flawed and you can take any American president—you don't have to be a Democrat or Republican—you can take any American president, they're all incredibly flawed. They're just human beings. Why do we give them that love that they seemed to get? I don't think they earned it, but they get it.

GILLESPIE: Let's stick a little bit more on Smith as a life god—guide, rather, life guide. Among the other things that are interesting about Adam Smith: he never married, he was kind of—

ROBERTS: Lived with his mom most of his life.

GILLESPIE: I was going to say, he was kind of like Norman Bates or Rupert Pupkin from the King of Comedy. I don't know if he had his own room in the basement or—

ROBERTS: I don't think so, but whatever.

GILLESPIE: He was described by people like James Boswell, a contemporary, the biographer of Samuel Johnson, as a kind of prototype of the absent-minded professor. He apparently told Boswell that he didn't want to talk about his books in public because he thought it might hurt his sales. So he was not a particularly good conversationalist. He would ask about things he didn't know, but how do we factor that into any kind of evaluation of how far we should take him?

ROBERTS: I'm not going to name names, but we can all think of people we know in our daily lives, as well as in the public space, who are charming by the fact that they're a little bit off or at least off the beaten track. Smith was, I think, quite charming. I think he was quite a good conversationalist—that Boswell story even with that. He went to the Continent, he was a super star. He was a superstar. People wanted to be around him. They were partially impressed by his book, but they also, I think, found him good company.

GILLESPIE: You have a particularly great moment where he's at a dinner. It's kind of like the league of extraordinary gentlemen sitting around a table standing up when he arrived to dinner late. Repeat that.

ROBERTS: At was dinner with William Pitt, Wilberforce, one of the great abolitionists of his day, all these great British luminaries. And he gets there late for whatever reason, and they all rise. Smith, whether he's embarrassed or not or thinks he should be says, oh no please sit down and Pitt says, we're all your students. They were rising for a professor, which doesn't happen very often by the way in the modern times. But in olden times, people would respect the learned because they were rare. That was, I think, in many ways the ultimate compliment: that these extraordinary people were respectful of him. He was loved in that way. By the way there's a debate about whether that story actually happened. It might be apocryphal, but it's a nice story.

GILLESPIE: To kind of fuse that with the over-love or the too much reverence for politicians, you have great chapter in the book about making the world a better place. You have a line in there, which I think I hear in my own head ten times a day, about how politics isn't the place where life happens or something along those lines. Talk about the Smithian vision that you tease out of Moral Sentiments, of how to make the world a better place.

ROBERTS: I do tease it out because Smith doesn't have a chapter in Moral Sentiments called "how to make the world a better place," but what he talks about—which is to me is utterly fascinating—how civilization emerges without top down control. It is the ultimate example of what Hayek called spontaneous order, or what I like to call emergent order: things that occur from the bottom up through the decentralized actions of millions of people. What Smith says is that the author of nature—God—put inside us a worry about what other people think of us that can constrain us from doing what we really want to do, which is often to be selfish. That's a remarkable thing and I watch and I see what other people do, I look at their behavior and I see what's consider gracious, I see what's considered lovely. I express gratitude because people say thank you all the time, so I say "oh people like that." So I learned to say thank you. Of course your parents or my parents help us to do that, but all the little pieces of civilized life which you don't even notice—gratitude, empathy, sympathy, kindness, charity, kind feelings helping someone when they're struggling—all these things, where did they come from? Who said that's a good idea? We have lots of cultural forces, of course, that make those things happen. But what Smith's pointing out is that those things happen at a micro, micro, micro level. They come from all the myriad of encounters we have day-to-day with all the people around us. For a selfish unpleasant person, they don't have so many friends and life's not so pleasant. But if we're a good person and we do the right thing, people honor us and are friendly to us and are nice to us. So Smith, what he's talking about really is that there are these feedback loops built into the world that encourage good behavior and punish bad behavior. They're very imperfect of course. I don't want to suggest this solves all problems. But Smith understood that an enormous sphere of everyday life is outside the legal system, its outside of politics, it's just part of how we interact with each other. That isn't designed by anyone, it emerges. That means that we as individuals have a chance to enhance that or take a step back from it. When we see people doing good things, we should be nice to them and honor them and thank them and tell them. When we see people doing bad things, we should do the reverse and that's one way to make the world a better place. That has a ripple effect—small, but actually maybe real to enforce and enhance this incredible web of interactions that we have that creates civilization.

GILLESPIE: That obviously has analog in market forces, when your decision to buy apples, in the end, does not have that much meaning in and of itself, but it as it gets multiplied throughout an economy things change.

ROBERTS: Any one person's demand for apples doesn't determine the price of apples, but if we all said we're not going to eat apples anymore, that would be the end of the apple market.

GILLESPIE: Is there a continuity, though, between being nice and beneficent and just and moral at the intimate level, at the interpersonal level—how do you eradicate slavery? You talked about Wilberforce the great abolitionist being at a dinner with Adam Smith and they agreed on this. Is there a continuity between these types of behaviors? Because slavery didn't end simply because people started being nice to each other.

ROBERTS: Correct. It's one thing to say well, I'm going to follow the virtue of justice; I'm not going to enslave anybody. That's good, that's a start. But that's not as good as ending slavery. Now, we can debate on whether slavery is the result of, to a large degree in the United States, I think slavery was a result of misuse of the property system and the power of the state. That it would have been much harder to sustain slavery without government power. But it's certainly the case that there are many, many things that cannot be done voluntarily through individual and voluntary collective action. Let me say that a different way. I think there's a lot we can accomplish through voluntary collective action to help fight poverty, to make better schools etc. through our nongovernmental non-top-down actions. But there are some things that are hard to do without the power of the state, there's no doubt about it. I think Smith conceded that. Smith was not an anarcho-capitalist, he wasn't a libertarian. He had what my friend Dan Klein at George Mason calls a "presumption of liberty." He said that's where you start. You want to go away from liberty? You have to make the case for me. I love that way of thinking about politics. I think it's a very healthy way. I'm a little more of an ideologue than Smith that way, but I think that's the way Smith saw it.

GILLESPIE: You also talk about in the book how commercial life needs a romantic vision on some level, because—this is part of the problem—a lot of things Smith was talking about, whether in either of his works, but then in our day it's hard to kind of create a vision of heroism or of even positive thinking about business or commercial life. Talk a little bit about that.

ROBERTS: We live in a remarkable time where a strikingly large group, but not anything close to a majority, but a strikingly large group actually love their work. If you think about human history, this is really rare.

GILLESPIE: We're talking like fifty years ago.

ROBERTS: Exactly, fifty years ago, 90 -something-percent of people hated their work. It was just something you did to bring money into the house to put food on the table. We live in a time now where a lot of people get a lot of meaning, a lot of fulfillment from their work. I think that's basically a good thing and I think it would an even better thing if the people who make that possible, who create the products and the companies and services that we enjoy, were respected a little bit more. A few are. We mentioned Steve Jobs earlier. Steve Jobs clearly is adored by a small group of crazy people. I'm in the group. I love the stuff.

GILLESPIE: And you mention that for long sections of his life he was not particularly admirable—

ROBERTS: He doesn't appear to be lovely, right. He's loved, I think he would confess as much and he chose a biographer who did not white wash his character issues as a father, as a husband, or as an employer.

GILLESPIE: As an intermittent user of deodorant.

ROBERTS: And shoes. There are a lot of things that were different. Not a proper guy and God bless him. Good for him.

GILLESPIE: But he did help to mainstream the idea that work is not drudgery, it can be an expression of who you are and what you believe, what you think.

ROBERTS: I'm not sure that should be our goal—to create a culture like that—but I don't think it serves us well to have the opposite, which is that commercial life is somehow tawdry, it's somehow essentially exploitive, that most people are being abused in the workplace. I think that's just not true, for starters, and I think having that as your sort of other religion is not so healthy.

GILLESPIE: This is the place where Theory of Moral Sentiments merges with or comes into contact with Wealth of Nations. It strikes me as in conversation if not disagreement with one of your great personal mentors, Gary Becker, the Nobel Prize winner: you don't want homo economicus to be running your family life.

ROBERTS: Correct.

GILLESPIE: But by the same token, you also talk about how one of the great values of a global marketplace is that you really don't have to care about where your stuff's coming from. You really don't have to know who's growing the peas that are finally ending up on your plate.

ROBERTS: Correct. And I would suggest that's probably a very good thing.

GILLESPIE: For everybody

ROBERTS: For everybody. Mainly because we're all flawed and if your goal in life is to only interact with flawless people, you're going to be very lonely. If your goal in life is to only interact with people you can verify and vouch for as being lovely people, you're going to be very poor because that's a very small group of people. The way I see the interaction between The Wealth of Nations and The Theory of Moral Sentiments is that Theory of Moral Sentiments is about my day-to-day life with people I see face-to-face. Even by 1776, when Smith was publishing The Wealth of Nations, a lot of your commercial interactions are with strangers and that is a wonderful thing. The reason it's such a wonderful thing, it's great when you know the people who grew your apples and you can chat with them over the fence and all that that's a certain nice poetry to that.

GILLESPIE: Assuming they have good apples.

ROBERTS: Yeah, that'd be a minimum standard, that's correct. There's a certain poetry to that, but if that's what you do, you're going to be very poor because what Smith understood really better than anyone is how specialization and the division of labor drives prosperity. If you're only going to interact with a few people, you can't have a lot of specialization. Smith understood that prosperity really was coming out of this willingness to trade with people you didn't know so well and to offer them, not kindness, but money or something for them. Which is how Smith words it, when you make a deal with someone, instead of telling them why it's good for you, explain why it's good for them on the other side of the deal.

GILLESPIE: And this is undergirding the great line of how it's not from the beneficence of the baker, the butcher, or whatever that you—they prepare your dinner for you.

ROBERTS: Right, they don't do it because they love you. They do it because there's something in it for them and that's not so bad because if it were otherwise you'd be very hungry.

GILLESPIE: I'm paraphrasing here because I can't find the exact line, but you sum up the synthesis of these two works as what I like to think of as "shop globally fuck locally." I believe it was something more like trade globally, live–

ROBERTS: Is that language—

GILLESPIE: No, no I said it was a paraphrase.

ROBERTS: Yeah I'd say that's a paraphrase.

GILLESPIE: And maybe not an accurate one.

ROBERTS: I said it's at the very end of the chapter.

GILLESPIE: This is where I was looking for it before, feverishly.

ROBERTS: It's the last two lines…

ROBERTS: Locally we can love people. I can love people in my circle of friends. I can come to know them, I can respect them. If I only trade with them, I'm going to be very poor. But if I only care about money and how prosperous I am, I'm also going to be poor. I'm going to be spiritually poor. I'm not going to have any friends. So, we don't want to run our family like a business, but we don't want to run our economic system like a family. That comes back to Hayek in The Fatal Conceit, where he says if you try to make your family like the outside world where you trade, you're going to have a very miserable family life. But he said if you try to extend the relationships of the family into the outside world, which is what socialism romanticizes, he says it's going to lead to tyranny. I think he's on to something.

GILLESPIE: Let's talk about that and segue into a larger question that runs through not just this book, but a lot of your work about the knowledge problem—or what Hayek considered a knowledge problem. How do you erect barriers to economic pressures from the outside crushing the family either, in a Marxist sense as a unit of production or as a haven from a heartless world in a way that Victorians would talk about it? Is it really possible to separate these things out?

ROBERTS: What Hayek said is that you have to act as if you were of two minds, you have to have one mind out in the commercial world and one mind set when you're in with your family and your intimates and your friends. That's hard to do and I think that a lot of what's troubling and difficult about modern life, is that those differences are broader than ever. We're trading much more globally and the family is a little more challenged than in the past and it's hard to keep that going.

GILLESPIE: I know that scholars of German history talk about this, you saw this in a really grotesque barbaric light where the commandants of death camps would come home and play with their kids and their dogs and listen to Beethoven—

ROBERTS: Hitler was a big dog lover.

GILLESPIE: It's hard to if you have two separate spheres. Anything goes in one that doesn't go in the other—or it can, in terms of if you're trading with some merchant that you've never heard of or you don't even know who it is, you're more likely to screw them over than you are if it's somebody in your family.

ROBERTS: Correct. That's why repeated dealing is one way. In the most global system there's still repeated dealing. People are aware of the threat of opportunism, so they look for ways to try to restrain that. For me the interesting issues are things like, we don't auction off food to our kids when there's one chicken leg left and both the kids want the leg or the last piece of cake.

GILLESPIE: Although it would be more efficient, wouldn't it?

ROBERTS: It would be more efficient, but efficiency is not a good thing to strive for. I think that's a terrible misuse of economics: that people misunderstand what the price system is supposed to do—and that's not what it's supposed to do there.

GILLESPIE: Let's talk about economics broadly and the knowledge problem. You have consistently throughout a lot of your work brought to bear the fact that if we take seriously the idea that Hayek—Smith gets at it—that Hayek really kind of articulated as the knowledge problem, that we really don't know as much as we know and we certainly don't have independent verification in the realm of economic science—we allow ourselves to be duped by confirmation bias about how lovely we are. You have a great quote from Nassim Taleb, who's using an old Venetian proverb that said "the sea gets deeper as you go further into it." What is the root of the hubris of economists whether they're right wing or left wing, whether they're market based or they're more interventionists? Where is the hubris coming from that they seem to many of them feel that economics is now a full-fledged science and they've got good levers they can spin dials and make everything all right?

ROBERTS: Man naturally desires not only to be loved but to be lovely and that loved part's very powerful. If you want to be loved as an economist, if you want people to pay attention to you, if you want to be invited to the circles of power you have to be confident, otherwise you don't get invited. There's a terrible, I think, tendency in our field to pretend that we know the answers because that's how you get on not just the talk shows, but it's how you get invited to the places where you have control over other people. It's a very tempting human characteristic.

GILLESPIE: Hayek in The Counterrevolution of Science talked a lot about how there was a certain scientistic dimension to the Enlightenment, which he identified—and I think there are reasons to question this—as a particularly continental sensibility. In contemporary times, when people like Bruce Caldwell, the intellectual biographer of Hayek, said the substitution of formulas and of the appropriation of techniques from the physical sciences to social sciences, particularly economics, gives this false sense of certitude.

ROBERTS: Correct.

GILLESPIE: You would agree with that?

ROBERTS: Absolutely.

GILLESPIE: What are the ways to push back on that? Because economics now occupies the place of pride in the social sciences or arguably in the academy. It seems to be economists are rock stars now. They're being called into political situations to say fix things. Janet Yellen the highly respected economist goes on—academic economist—goes into running the Federal Reserve. Greenspan was the Oracle of Delphi. Whenever he picked his nose, markets would plunge. How do we get out of this mindset that economists really are running the show?

ROBERTS: I think a number of people know the emperor doesn't have so much clothing on. All you say is true, economists are highly respected, that's true. We do have a lot of power, that's true, but I think a lot of people are kind of skeptical of us and rightfully so. I think it's important for economists within the profession to admit that sometimes the emperor doesn't have any clothes. We don't know what's going to happen when this tax cut passes or this spending program passes or this law is changed in this particular way. Every time we fail to predict those accurately, I think smart people start to think hey, this isn't science. I like to see us be more like historians, which is what I think is our level of credibility. Nobody pretends to measure the impact of, say, of one of the treaties before World War One on causing the war. We say well, the treaty had something to do with it, these alliances sprung into motion, but they were there for a while and they didn't cause war so why then? Well, there were these forces of nationalism, the Serbian thing, we got the Russian desire for an expansion into a port, and all these things worked together. Well, which one was 27 percent? How much was this a factor? Well, I don't know, it's history. People disagree about what happened. They don't pretend to know what happened. I think we should have that same level of honesty. I invite my fellow economists to join me and every once in a while one of them does. They concede that this is true. I recently interviewed Lars Hanson, Nobel Laureate in economics, and he said, yeah, models about systemic risk are very flawed. I said, well maybe that's inherent in the process. His view is we just need to do a little bit better, we need a better one. I'm hoping someday people will come to the view, which is the Hayekian view, which is you don't need more data points. The problem is inherently unsolvable as he said in his 1974 Nobel Laureate address "The Pretense of Knowledge." You have the pretense of knowledge, you don't have the real thing. You have scientism not real science.

GILLESPIE: As I was researching talking to you, I noticed on your Wikipedia page—which obviously is accurate because its crowd-sourced so it's like a market price, it can't be wrong—but it associated you with the Austrian school of economics. Obviously Hayek is one of the premiere Austrians, but so is Ludwig van Mises. Ludwig van Mises had a notion of extreme a priorism, where he agreed we can't ever get good data, but we also can know things about the outside world and we know certain things are axiomatically true because they must be true. Is that as much as a problem as a matheticization of economics? And I the guess larger question is, you know that you're knowledge is limited or your ability to predict the future or explain the past is limited, you still have predilections and proclivities that you know in your heart of hearts are more likely to be true than not. How do we get out of the prisons of our own makings, whether it's too much math or its too much apriorism, because at the end of the day like you said you have a sense that your knowledge is limited your ability to predict the e future is probably as weak as your ability to really fully explain the past, but you still have policies that you would propose. How do we deal with these types of issues?

ROBERTS: Let me go back a little bit and talk about the Austrian school. I think Don Boudreaux, my friend and former colleague at George mason, used to place me somewhere in the Atlantic or halfway between Chicago and Austria. I think I'm on land now, but I'm moving east, I'm heading toward the continent and away from the United States. I have an Austrian flavor to my work, which comes from my respect for Hayek mostly. I do think there's a danger of being overconfident of your a priori knowledge about how the world works. I don't want to go so far as to say that numbers or data or evidence is irrelevant. We just can't rely on intuition or principles. I think knowledge about data and about how the world works is useful. I just think we often overextend it into areas it doesn't successfully work at and we use statistical techniques that are not as reliable as they appear. I think that's the case. But the real question you ask I think is the hard question, which is sort of embodied in this phrase I'm starting to see more often: "strong opinions weakly held." I have strong opinions, but I concede that I don't really have 100 percent proof that I'm right. I might have some faith, I have some intuition, I have some evidence—and I ignore the evidence that's not going with my side. I should be open about that, but the question is, where does that leave you? How do you advance liberty, say, or the ideas you care about?  I like to think that there are some basic principles that are true. There are implications we can debate about, but they're true and those are things about human nature: that we are mainly self interested.

GILLESPIE: How do we prove that we understand human nature?

ROBERTS: I don't think we can prove it. I do think we have a certain shared reality that we can mostly concede: that we are more self-interested than altruistic, for example. That power corrupts. That knowledge is scarce. It's these principles that I will hold to: those are strong opinions strongly held. I think most people share them. Where we disagree, where an interventionist economist would disagree with me is well how important is that? How important are incentives? If you're arguing about the minimum wage—and I'm happy to have an argument about the minimum wage, about the role of incentives, but I'm really not happy to have it over the latest econometric study, which I know was cooked in a kitchen I really don't want to go back and look into. Because there were 4,000 statistical runs of the data before they found the one that they decided after the fact was probably the right one.

GILLESPIE: Can I ask, just to be specific with something like the minimum wage, I assume that you would say that there's a good chance depending on how big—if the minimum wage goes up modestly, say ten percent, a fair number of people will get a raise of ten percent and then there will be some nontrivial number of people who will lose their jobs. How do we use that to inform policy decisions? Should we raise the minimum wage or not?

ROBERTS: Let's say you and I disagree with this. I suspect we don't,  but let's say we disagreed. I know a lot of people who disagree with me on this. Many of them are economists and two generations ago there was almost no disagreement among economists over this, but now there's some disagreement. It's pretty large, the number of people who think it's probably a good idea to raise the minimum wage. So to me the way you debate that or discuss it is you talk about data, evidence. But not the kind that usually is talked about. The kind that's usually talked about is this study that surveyed 400 restaurants and they showed this, that, and the other. But did you control for this, this, this, and this? No we couldn't, but that's the best we could do. Well, I don't find that so convincing and most people don't. I'm more eager to talk about, again, fundamental principles, which is do you concede that business move jobs overseas because they get a lower rate there? And yet, you don't think they respond to a higher cost of labor domestically to substitute machinery? A legitimate argument coming back is: well, in this particular industry machinery can't substitute very well for people. Okay, I'm open to that, let's talk about that. But I'm not going to prove my point. I think we should be honest, you and I, should be honest. People on the other side should be honest. My dislike for the minimum wage is partly motivated by the fact that I care about poor people. I don't like to see people with the least skills bear the brunt of this so-called great social policy.

GILLESPIE: Which pretty much everybody will agree with. It's a question of how many.

ROBERTS: Magnitude, magnitude. But in the back of my mind,  when I'm honest with myself, part of the reason I don't like the minimum wage is that I don't think the government should be involved in deciding what people earn. I think on the other side there's maybe some idea that that's a feature and not a bug. The real debate that's going on in the background is how much should the government be able to decide what is going on in our lives, because I'm an expert and I can do it better. Versus my view, which says I think we should stand back and let people make their own decisions. That's the real debate.

GILLESPIE: Where do those ideas come from in you? Have you been able to trace back a place? Is that just temperament? Were you born that way? Did you have a particularly strong inner libertarian moment of awakening? You have a great—I was going to call it a digression, it's not quite—that you use. You have an extended critique of the drug war in this book, to talk about how incentives get screwed up and how trying to force people to do things rarely works the way that's intended.

ROBERTS: Smith beautifully said that. He talks about the man of system who thinks that he can move the pieces on the chessboard of life the way he wants them to go. When in fact they have their own independent motion. I think that is a very good lesson when we think about the drug war and many other aspects.

GILLESPIE: So why is liberty so important to you? Why is it so important that the government not do this, that, or the other thing?

ROBERTS: That's a tough question. One thing I have learned is I don't have those views because of what I like to think is the answer, which is: well, I looked out into the world and I saw the evidence and weighed it and then I came to this view that liberty is good. I don't think that's really why I think liberty is good. It has to do partly where I chose to go to school, the jobs I took. Some of us like being like other people. Some of us like pushing back against other people. I know a lot of people in the liberty movement who are not so attractive human beings because they are not the best spokespeople for our cause because they like being antagonistic. There are people on the left like that also, we all know that.

GILLESPIE: To bring it back to Smith: he was one of the people at a particular stage in western development or in world development who was of a privileged class, he was a professor, he was a man, he was a world renowned author at a certain point, and one of the most radical things he said was that—and again, he wasn't rebellious—but he said everybody should have more room to make choices in their life. That's the classical liberal project, really, was to say that even the lowest among us—

ROBERTS: The porter.

GILLESPIE: Might be able to buy whatever they want or to dress how they want or to vote how they want—

ROBERTS: Think how they want.

GILLESPIE: Are we still moving forward on that project or do you feel like things are starting to either soften or plateau or go backwards?

ROBERTS: The most pessimistic thing is that in what you could argue is the world's freest country, which is the United States, government just seems to inexorably get larger and larger. This strange view that somehow the 80s, the Thatcher-Reagan Revolution, the Milton Friedman Revolution, the Hayekian revolution, was this dark moment in the leftist worldview. Where was I? I missed that government just kept getting bigger.

GILLESPIE: I don't disagree with you, but I know I was in college and the drinking age went from 18 to 21 so there was that.

ROBERTS: Well, that's a dark age, there you go. But the claim is that we had all this liberty, this deregulation, when the truth is its very small. In fact, when I interviewed Milton Friedman in 2006 right before he died, he was very sad. It was very poignant because I was talking about how many of his ideas had become mainstream, many of them had come to pass—volunteer army, the idea that maybe we could privatize social security, the idea of flexible exchange rates, all these things, school choice, all these things—that we were making progress on he kept saying the glass is half empty, there's so little we've achieved. So, on the one hand it's pessimistic. We've achieved very little. Government gets bigger. On the other hand, life's pretty good. I wish more people had access to the good life in the United States. I wish more people had access to decent schooling. I think that's the biggest barrier. Somehow despite the size of government—it's like a boulder, it gets bigger and bigger. There is a threat that one day it will dam the river, but most of the time we just run over it.

GILLESPIE: You talk about in the book—and I think you attribute this to Smith as well—you tease into a modern parlance that the best thing we can do for freedom or for progress or moving towards a better world is to really generate more economic growth. What are the large goals of that? Again, you cannot say exactly what policies will do that but what are the general things we're not listening to?

ROBERTS: I'm not sure I came out saying we need to generate more growth. I think what we need to generate is more opportunity. That's related to growth. I think it's clear that there is a large segment of the population that's not part of the incredible economy that's out here. It's an incredible economy with terrible flaws right now. We're not at a great time in the aftermath of the Great Recession. But despite that, if you have a college education and you studied something somewhat valuable, you have a pretty good life in America—really extraordinary life. The number of people enjoying that is growing. I like to see it even wider. I don't mean more people need to go to college, but more people need the opportunity. I'd like there to be a chance for more people to be able to express themselves and to flourish. I want to get the government out of the school system because I think it's done a terrible job. Anybody who disagrees with that, if you ask them should we spend more money on school, they'd all say yes.  I want to say, where is the evidence that that's a good idea? We have a lot of evidence that's a bad idea. So, please join me in trying something different. It doesn't have to be what I want, which is no government schools. I'd get the government totally out of it and rely on private charity to help poor people. You'd say, oh but so many people would get it yeah but right now your system on the other side has poor people suffering horribly and not getting a decent education. Your system is not working. Well, we just have to do it better. That's a nice idea. You have to tell me how you're going to make it happen rather than just desire it. That's not enough. On the other side, on the optimism side, as you say, as you were in college they raised the drinking age on you. I want to ask what year that was but I know that you're old enough that you remember when our views were like kooky, crazy ideas. There was nobody joining us and nobody understood it and nobody read about it. It's ironic that we live in this time, when people complain about how people don't read anymore and they're stuck in front of screens. I hope they're stuck in front of your screen watching ReasonTV because it's extraordinary how many people are interested in liberty, ideas of Hayek and Friedman and other people. It's a glorious time in that way and I'm always optimistic. I always think we can make some progress.

GILLESPIE: Final question. Is there going to be another Keynes-Hayek video?

ROBERTS: I hope so. John Papola, my co-creator, and I talk about it. Some would say two is more than enough. But I would love to have a third one. I think you can't have too many and I'm serious that you can't have too many approaches to economic education and making the case for liberty that go beyond just text and books and other things.

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