Adam Smith’s Theory of Moral Development, Human Nature and Commerce

Adam Smith’s The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776) offer a distinctive perspective on moral development that avoids succumbing to the limitations of capitalism and utilitarianism by supporting both moral agency and the importance of enabling structures and systems in commerce. Corruption of moral sentiments cannot be averted by enforcing only mechanical structures and systems of compliance with governance rules, regulations, and disciplinary processes to control employees. Compliance then follows a means-to-an-end logic for maximising profit, which becomes a barrier for autonomous moral development or is even incapable of moral decision-making, as suggested by Hannah Arendt. Smith’s originality lies in grounding this analysis with an affirmative view of human nature and liberty, which enables him to move beyond purely legalistic or moralistic approaches to understand and counter moral failure. Smith offers a distinctive perspective on moral development in commerce, integrating human cognition, moral philosophy, and enabling structural and systemic design that avoids the displacement of responsibility noted by Albert Bandura. For Smith, the corruption of moral sentiments is distorted by the natural need for praise from others at all costs, as opposed to praiseworthy conduct. His remedy is a two-fold process of moral education in which the impartial spectator extends the natural desire for praise to prioritise honour and integrity in behaviour that is praiseworthy. However, moral education also requires a structural social space that is not prescriptive or legalistic to enhance the freedom to develop morally by exercising the choice to strive towards ethical behaviour. In this manner, self-interest enables moral development through natural means that prioritise honourable conduct and perpetuates sympathetic sentiment in which the well-being of others is considered.