Principles of motion: how should policy-makers think about human behaviour?

Effective policy-making must take account of potential unintended consequences of new measures, rather than presuming that the responses of individuals and organisations will follow a predetermined path like pieces on a chessboard. Adam Smith’s policy advice resonates strongly today.

Adam Smith’s popular reputation is that of the father of economics. But he is often seen as a figure of the political right. Much of this is due to the concerted efforts of the Chicago School of economics – Milton Friedman and George Stigler, in particular – to claim Smith as an inspiration for their brand of free market economics, which came to prominence under Ronald Reagan in the United States and Margaret Thatcher in the UK. That a leading right-wing thinktank is called the Adam Smith Institute adds to this view.

But this picture of Smith was always a simplification. More often than not, it was outright misleading. Modern mantras about ‘rolling back the state’ and advocacy of laissez-faire are hard to square with the glittering complexity of Smith’s writings.

For example, he favoured the rich paying proportionately more in taxes than the poor. He warned that business leaders couldn’t go five minutes in each other’s company without the talk turning to ‘a conspiracy against the public, or in some contrivance to raise prices’.

And he taught his students that ‘Laws and government may be considered in this and indeed every case as a combination of the rich to oppress the poor, and preserve to themselves the inequality of the goods which would otherwise soon be destroyed by the attacks of the poor, who if not hindered by government would soon reduce the others to an equality with themselves by open violence.’

But it would be a mistake to claim Smith as a totem for the political left. In the first place, doing so is anachronistic. Smith died in 1790, just as the French Revolution was getting under way. His socio-political world differs radically from ours, and our categories of contemporary political analysis simply do not map onto his. More importantly, projecting our ideological categories on to him not only distorts his thought, but risks depriving them of their continuing value.

It is better to read Smith as an exemplary guide to how to think responsibly about politics whatever one’s ideological persuasions. A particularly clear example comes in Smith’s final additions to The Theory of Moral Sentiments, his first great book.

Smith there urges us to remember that a true patriot – somebody who genuinely loves their country and wants the best for it – has to balance two things. On the one hand, a desire to preserve what is good about one’s country and ensure it lasts into the future. On the other, an ability to recognise that sometimes reform is essential and that things must change (maybe even radically) if the state and its people are to prosper.

The trouble is that knowing whether a particular moment requires conservation or reform is typically very difficult. Things are made especially dangerous by what Smith calls ‘the spirit of system’. By this, he means the temptation to think that all one needs is a pre-determined plan, which can be imposed on society to make it function better. From the perspective of 'the man of system’, society is just a chessboard, and the ‘pieces’ on it (the rest of us) must simply do what they are told.

But as Smith warns, society is not a chessboard. The pieces on it have their own ‘principles of motion’ and cannot simply be controlled according to the whim of political decision-makers. Politicians are apt to forget this, and the results of them doing so can be calamitous: ‘the game will go on miserably, and the society must be at all times in the highest degree of disorder’.

Of course, politicians cannot simply abdicate from judgements and decisions. They need to make policy as best they can. But they should do so with humility, and in full recognition of the complexity characterising any real-world society. They should, in particular, respect the fact that unintended consequences are inevitable, while the mere possession of good intentions is not enough when people’s lives are at stake.

An illustration of what Smith had in mind took place in the UK in the autumn of 2022. When Liz Truss and Kwasi Kwarteng announced their ‘mini-budget’ of unfunded tax cuts and spending, they seemed to think that the rest of the world would follow their plan. Instead, the predictable spectacle of individuals and organisations following their own ‘principles of motion’ unfolded, leaving the plan – and the UK economy – in tatters.

All of that would have been bad enough, but Truss – a woman of system if ever there was one – later illustrated her failure as a politician. Writing in the Daily Telegraph, she insisted that her plan had been correct all along: it had just been implemented a little too fast. It was, she insisted, still a good plan, and it was the fault of other people, not her, that it all went horribly wrong. The plan wasn’t the problem, the problem was that the pieces on the chessboard hadn’t done what they were told.

Smith’s great lesson is that one should avoid being a person of system. Yet the problem with politics is that it often attracts them. This is one reason that politics is such an extremely difficult, but also dangerous, arena of human conduct. No plan or ideology – either from left or right – can ever be the whole story because society is not a chessboard, and never will be.

So, one lesson from Smith is that whenever somebody is trying to sell you a plan, or even just a slogan, and assuring you that if we just do what they say, then everything will improve, proceed with extreme caution. ‘Take back control’; ‘for the many, not the few’; ‘make America great again’? I prefer ‘caveat emptor’.