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Sympathy and the Wealth of Nations
Published online by Cambridge University Press: 16 December 2025
Abstract
Although the concept of sympathy is absent from the Wealth of Nations, this essay argues that it is the foundation that sustains the free market, gives it its moral limits, and enables its greater efficiency. Recognizing this function, which is not difficult to trace in the Wealth of Nations, allows us to understand why public policies that foster sympathetic relationships lead to greater wealth creation, while those that hinder such relationships impede exchange and reduce wealth. Similarly, when changes brought about by progress or personal ambitions and interests inhibit or distort the free play of sympathetic interaction, the awareness that sympathy is the lifeblood of a free society allows us to adjust public policies and restore the framework of security and order that provides the conditions for prosperity, recognition, and happiness for all.
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References
1 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. R. H. Campbell and A. S. Skinner (Liberty Fund, 1981).
2 In this sense, it is worth reading this essay along with Karen Horn, “The Impartial Spectator’s Counterpart in Adam Smith’s Wealth of Nations,” elsewhere in this volume.
3 Adam Smith, The Theory of Moral Sentiments, ed. D. D. Raphael and A. L. Macfie (Liberty Fund, 1982).
4 Contemporary neuroeconomics research, which uses techniques such as functional magnetic resonance imaging and pharmacological interventions to study how people make decisions when others are affected by the outcome, refers to this ability as “mentalizing” and defines it as “the ability to represent another person’s psychological perspective.” These studies distinguish “mentalizing” from “empathy,” which is more closely related to “the sharing of experience, feelings and goals across individuals.” Frank Krueger, Jordan Grafman, and Kevin McCabe, “Neural Correlates of Economic Game Playing,” Philosophical Transactions of the Royal Society B 363, no. 1511 (2008): 3868–69. Adam Smith does not explicitly distinguish between these two phenomena, but he includes both in his concept of sympathy.
5 Charles L. Griswold, Jr., Adam Smith and the Virtues of Enlightenment (Cambridge University Press, 1999), 84. Griswold also says that
[w]e could not demand anything from each other, though, unless we were somehow aware of each other as subjects of experiences like our own, and Smith thinks we are naturally so aware. … We recognize in others experiences like our own, or like those that we might imagine ourselves undergoing. Conversely, we recognize in ourselves experiences that others have undergone or that we imagine they have undergone.
6 See Samuel Fleischacker, Adam Smith (Routledge, 2021), 104. See also Jacqueline Taylor, “Adam Smith and Feminist Ethics: Sympathy, Resentment, and Solidarity,” in Adam Smith: His Life, Thought, and Legacy, ed. Ryan Patrick Hanley (Princeton University Press, 2016), 368.
7 See Christel Fricke, “Adam Smith: The Sympathetic Process and the Origin and Function of Conscience,” in The Oxford Handbook of Adam Smith, ed. Christopher Berry, Maria Pia Paganelli, and Craig Smith (Oxford University Press, 2013), 177–200.
8 Stephen Darwall describes these relationships in detail in Stephen Darwall, The Second-Person Standpoint (Harvard University Press, 2006); Stephen Darwall, Honor, History, and Relationship (Oxford University Press, 2013).
9 Adam Smith is considered “one of the first philosophers of the ‘second person,’ if not the very first.” Darwall, Second-Person, 46.
10 See James H. P. Lewis, “Varieties of Second-Personal Reason,” Erkenntnis 90 (2025): 2297–317.
11 Darwall, Honor, 98.
12 Darwall calls “second-person competence” the ability to enter into second-person relationships and become mutually accountable. Darwall, Honor, 152. This capacity is closely related to the propensity to “truck, barter, and exchange” and to the capacities for “reason and speech.”
13 Darwall, Honor, 124–25. See also Smith, TMS II.ii.3.2, where remorse is described as “the consciousness of the justly provoked resentment of all rational creatures.”
14 In previous editions of The Theory of Moral Sentiments, Smith had inserted the following passage in various places in TMS III.1: “A moral being is an accountable being. An accountable being, as the word expresses, is a being that must give an account of its actions to some other… . Man is accountable to God and his fellow creatures.” See Smith, TMS p. 111, n. k, for the history of this passage.
15 Resentment is a reactive attitude that seeks to make others respect our dignity. See Taylor, “Adam Smith,” 366; Darwall, Honor, 104. Justice, therefore, implies the protection of every person’s dignity.
16 Justice “protects the liberty and rights of individuals, first and foremost, and makes for the peace and happiness of a society only as a consequence of this concern for individuals.” Fleischacker, Adam Smith, 239.
17 “[Society] is the only looking-glass by which we can, in some measure, with the eyes of other people, scrutinize the propriety of our own conduct.” Smith, TMS III.1.5.
18 See Fleischacker, Adam Smith, 310, 160, respectively.
19 Fleischacker, Adam Smith, 296.
20 Elizabeth Anderson, “Adam Smith on Equality,” in Adam Smith: His Life, Thought, and Legacy, ed. Hanley, 158. Smith believes that “to whatever extent justice is protected in society, to that same extent is extraction disincentivized and cooperation incentivized.” James Otteson, “Adam Smith and Virtuous Business,” in Interpreting Adam Smith: Critical Essays, ed. Paul Sagar (Cambridge University Press, 2023), 102.
21 Paul Sagar defines a commercial society as “an advanced stage of economic interdependence where direct personal toil on the products of subsistence… has been superseded by exchanges in webs of market relations.” Paul Sagar, Adam Smith Reconsidered (Princeton University Press, 2022), 13.
22 See, e.g., Smith, WN I.x.b.19. Smith’s point, Fleischacker explains, is “that human beings can pursue even their individual interests together; that even anonymous society, where self-interest rather than any direct emotional bond to other human beings is the normal source of motivation, need not be a hostile society; that economic exchange, even among self-interested people, is not a zero-sum game.” Samuel Fleischacker, “Talking to My Butcher: Self-Interest, Exchange, and Freedom in the Wealth of Nations,” in Interpreting Adam Smith, ed. Sagar, 63. Note, however, that the utility-driven nature of exchange in commercial society does not exclude the presence of other social bonds or motivations in distinct forms of relationship.
23 Ralph Lingdren, The Social Philosophy of Adam Smith (Martinus Nijhoff, 1973), 23–24.
24 Free exchange is “an act of communication that appeals to self-interest.” Leonidas Montes, “Adam Smith’s Foundational Idea of Sympathetic Persuasion,” Cambridge Journal of Economics 43, no. 1 (2019): 10. See also Smith, Lectures on Jurisprudence, ed. R. L. Meek, D. D. Raphael, and P. G. Stein (Liberty Fund, 1982), where Smith explicitly affirms that “[t]he offering of a shilling … is in reality offering an argument to persuade one to do so and so as it is for his interest” (LJA vi.56).
25 Darwall, Honor, 100.
26 Otteson, “Adam Smith,” 109. I thank David Schmidtz for his comments on this matter. Respecting our right to say no is the fundamental prerequisite of a community that makes it safe for us to go looking for yes. This further reinforces the idea that sympathetic relationships are needed to exchange.
27 See Maria Pia Paganelli, “Commercial Relations: From Adam Smith to Field Experiments,” in The Oxford Handbook of Adam Smith, ed. Berry, Paganelli, and Smith, 333.
28 See, e.g., Smith, WN I.i.11; Maria Pia Paganelli, The Routledge Guidebook to Smith’s Wealth of Nations (Routledge, 2020), 20.
29 See, e.g., Smith, WN IV.vii.c.54, V.i.f.61.
30 This is not to say that sympathy as emotional contagion does not have a significant impact on market phenomena, for example, through fashion (see Smith, TMS I.iii.3.7), or that other effects of sympathy, such as emulation, do not drive the dynamism of the economy. However, projective sympathy is essential for establishing a second-person relationship, such as that of free exchange.
31 Fleischacker, Adam Smith, 257.
32 Fleischacker, “Talking,” 63n2.
33 Fleischacker, Adam Smith, 258.
34 The sympathetic process is well described in Smith, TMS I.i.4.6–8.
35 Fleischacker, Adam Smith, 313; see also Smith, WN IV.ii.9; TMS II.ii.2.1.
36 See Montes, “Adam Smith’s Foundational Idea,” 11: “Our self-interest moves us to persuade for exchange based on the ‘fair and deliberate’ moral framework. When exchange takes place, both sides are satisfied and benefit from the act of exchanging.”
37 The “right to say no” is central. It is what drives the Pareto-improving nature of trade. If trade does not benefit you, you can walk away. I thank David Schmidtz for this comment.
38 Although animals can communicate, their language is limited to expressing internal states. Human language, in contrast, can refer to reality itself. See Aristotle, Historia Animalium, trans. A. L. Peck (Harvard University Press, 1970), 536b1–5.
39 Montes, “Adam Smith’s Foundational Idea,” 9, develops the topic of persuasion in Smith, and points out that the Scotsman “adds a rational and moral basis to exchange and economics that connects the market with sympathetic persuasion.” For Montes, persuasion is the foundation of the division of labor, exchange, and the market. I am sympathetic to this interpretation, although I believe that even persuasion is founded on sympathy.
40 Fleischacker, “Talking,” 72.
41 We know this through “being with” others (awareness of mutual openness) and projective sympathy, which allows us to discern their interests.
42 Maria Pia Paganelli, “Smith at 300: The Dignity of Trade,” Journal of the History of Economic Thought 45, no. 2 (2023): 194. Paganelli notes that in this famous passage Smith contrasts three ways to get our dinner. One is to crawl like a puppy to get its master’s attention, another is to beg, and the third is to bargain. She concludes that “[a]llowing people to trade is to recognize their moral equality and dignity.”
43 Anderson, “Adam Smith,” 158.
44 The same applies to the political sphere. The man of public spirit, “[w]hen he cannot conquer the rooted prejudices of the people by reason and persuasion, he will not attempt to subdue them by force.” Smith, TMS VI.ii.2.16.
45 See Montes, “Adam Smith’s Foundational Idea,” 8: “The word ‘fair’ in WN connects economics with morality and the concept of sympathy.”
46 Fleischacker, Adam Smith, 287.
47 As Smith argues:
The taylor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own cloaths, but employs a taylor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for. (WN IV.ii.11)
48 Otteson, “Adam Smith,” 98–102. Justice, which entails the protection of each citizen’s person, property, and promises (Smith, TMS II.ii.2.2), is contingent to sympathetic relationships. It is “the main pillar that upholds … the immense fabric of human society,” without which it “must in a moment crumble into atoms.” Smith, TMS II.ii.3.4.
49 As concluded by Smith: “Every man, therefore, is much more deeply interested in whatever immediately concerns himself, than in what concerns any other man” (TMS II.ii.2.1).
50 Smith also holds: “Every man is, no doubt, by nature, first and principally recommended to his own care; and he is fitter to take care of himself than of any other person” (TMS II.ii.2.1).
51 Fleischacker, Adam Smith, 286.
52 See Smith, WN IV.ii.4–10.
53 See Fleischacker, “Talking,” 67. Also see Fleischacker, Adam Smith, 317: “The self-distancing process required to navigate market interactions becomes the usual way by which people learn to control their emotions and desires.”
54 Smith explains that, in “middling and inferior professions, … prudent, just, firm, and temperate conduct, can very seldom fail of success,” and that “[t]he good old proverb … [t]hat honesty is the best policy, holds, in such situations, almost always perfectly true” (TMS I.iii.35). Smith also holds: “When the greater part of people are merchants they always bring probity and punctuality into fashion” (LJB 328).
55 Smith affirms that “by far the most important of all [the] effects” of commerce is that it gradually introduces “order and good government, and with them, the liberty and security of individuals … who had before lived almost in a continual state of war with their neighbours, and of servile dependency upon their superiors” (WN III.iv.4).
56 Anderson, “Adam Smith on Equality,” 167.
57 See, e.g., Smith, WN IV.vii.c.53–56, as well as when he says that “nothing gives such noble and generous notions of probity as freedom and independency” (LJA vi.6).
58 Fleischacker, Adam Smith, 299.
59 Paganelli, The Routledge Guidebook, 135. Cf. Smith, WN III.iv.11–12. Or, as David Schmidtz puts the point: “The crucial bottom line is that when people achieve freedom in commercial society, such freedom will involve depending on many yet being at the mercy of none.” David Schmidtz, “Adam Smith on Freedom,” in Adam Smith, ed. Hanley, 211.
60 Paganelli, The Routledge Guidebook, 22.
61 Recall that because of sympathy, community and individual as well as dependence and independence require and strengthen each other. The market amplifies this interaction.
62 Smith states: “Under necessaries therefore, I comprehend, not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people” (WN V.ii.k.3).
63 Ryan Patrick Hanley, Adam Smith and the Character of Virtue (Cambridge University Press, 2009), 18.
64 See Paganelli, The Routledge Guidebook, 136. In wealthy countries, “the happiness of all” includes those who do not work, the sick, the weak, the dependent—those who in poor societies must be left to die. Paganelli, The Routledge Guidebook, 41. As a nation becomes wealthier, it can also afford more “unproductive” (idle) labor, that is, labor that does not reproduce wealth but contributes to society in other ways, such as services, pleasure, culture, security, and so on. Fleischacker, Adam Smith, 281.
65 Jerry Evensky, Adam Smith’s Moral Philosophy (Cambridge University Press, 2005), 112.
66 Paganelli, The Routledge Guidebook, 155.
67 Fleischacker, Adam Smith, 314. See the section on sympathy above.
68 Fleischacker, Adam Smith, 224.
69 “[S]ome interests align with the interest of society, others do not. Avoiding putting obstacles on the path of the interests that align with society’s interests promotes growth. Supporting interests that are opposite to society’s does not.” Paganelli, The Routledge Guidebook, 160.
70 See Paganelli, The Routledge Guidebook, 64–65. Because Smith holds that the “most sacred and inviolable” property of every human being is his or her “own labor,” these are violations of the “just liberty” of the person (WN I.x.c.12).
71 Paganelli, The Routledge Guidebook, 64.
72 Fleischacker, Adam Smith, 303.
73 Two exceptions that prove the rule are national defense, which I discuss in the next section, and equalizing taxes on foreign and domestic products. See Douglas Irwin, “Adam Smith and Free Trade,” in Adam Smith, ed. Hanley, 552. The latter is clearly a leveling of the field, an intervention to make the competition fairer. Cf. Smith, WN IV.ii.31–32.
74 The size of the market need not be limited to the nation. Since no particular connection is required to engage in exchange, it is enough that both parties believe that they will be better off if they participate. This is what happens in foreign trade, with the additional advantage that it provides an opportunity to interact with strangers, to strengthen sympathies, and to create bonds of union and friendship across borders (Smith, WN IV.iii.c.8). The Theory of Moral Sentiments explains how sympathy creates social harmony and trust (TMS I.i.4.7), and the Wealth of Nations shows its practical application in the field of economic relations. Moreover, trade also serves as a mechanism “for allowing the benefits of productivity improvements to diffuse to different countries, thereby raising living standards around the world.” Irwin, “Adam Smith,” 547.
75 This argument complements the obligatory nature of the rules of justice—without which society “must in a moment crumble into atoms” (Smith, TMS II.ii.3.4)—and underscores the primacy of national defense.
76 Dennis C. Rasmussen, “Adam Smith on What Is Wrong with Economic Inequality,” The American Political Science Review 110, n. 2 (2016): 343. See also Paganelli, The Routledge Guidebook, 15.
77 See Eric Schliesser, Adam Smith: Systematic Philosopher and Public Thinker (Oxford University Press, 2017), 199–202. Although experts dispute whether Smith’s proposals can be called “progressive” in today’s sense, the spirit behind them is that “[i]t is not very unreasonable that the rich should contribute to the publick expence, not only in proportion to their revenue, but something more than in that proportion.” Smith, WN V.ii.e.6. See also Evensky, Adam Smith’s Moral Philosophy, 228–29.
78 Schliesser, Adam Smith, 208, explains that one way of correcting known biases is to introduce countervailing biases. This may be Smith’s intention for introducing this general bias toward the interests of the working poor.
79 Rasmussen, “Adam Smith,” 342. See also Griswold, Adam Smith, 85: “Sympathy can be distorted and distorting. It articulates the fundamental fact of our being ‘in’ each other’s world, but of course vanity can distort it.”
80 Rasmussen, “Adam Smith,” 343; Hanley, Adam Smith and the Character of Virtue, 45n44.
81 See Hanley, Adam Smith and the Character of Virtue, 50: “[F]or Smith, the denial of such recognition is … an assault on dignity itself.”
82 Smith laments that, under mercantilism, “[c]ommerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity” (WN IV.iii.c.9). Just as mercantilism fosters hostility and distrust among nations—diminishing trade, contracting markets, and ultimately limiting wealth creation—severe inequality among individuals undermines sympathetic relations and their beneficial effects.
83 Rasmussen, “Adam Smith,” 344, notes that Smith distinguishes between “useful” and “oppressive inequality,” and that for him “a good deal of economic inequality is the natural result of market forces.”
84 See, e.g., Smith, TMS I.iii.2.1; WN V.ii.k.3.
85 “The desire of becoming the proper objects of this respect, … is, perhaps, the strongest of all our desires, and our anxiety to obtain [it]” is greater than that to obtain “the necessities and conveniences of the body, which are always very easily supplied.” Smith, TMS VI.i.3. The goods for social respect include “whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without.” Smith, WN V.ii.k.3.
86 “There is no reason to expect participants in the market to benefit from it who are too generally ill-informed, or incapable of judgment, to bargain intelligently, or who are too pressed by dire need, or threats of harassment by their masters, to bargain freely.” Fleischacker, Adam Smith, 315.
87 Rasmussen, “Adam Smith,” 344. Cf. Smith, LJA iii.139–41.
88 He also adds: “The state … derives no inconsiderable advantage from their instruction. The more they are instructed, the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders.” Smith, WN V.i.f.61.
89 Evensky, Adam Smith’s Moral Philosophy, 103. Cf. Smith, WN V.i.g.12. Evensky further explains: “As people move from the community of a ‘country village’ to the anonymity of the ‘great city,’ they lose the moral reference point of the spectators who know them and can, through approbation and disapprobation, constructively influence their behavior.”
90 To avoid the fanaticism that might arise from these groups, Smith promotes the “study of science and philosophy” and “publick diversions” (WN V.i.g.14–15). See Paganelli, “Commercial Relations,” 343.
91 Kevin McCabe et al., “A Functional Imaging Study of Cooperation in Two-Person Reciprocal Exchange,” Proceedings of the National Academy of Sciences of the United States of America 98, no. 20 (2001): 11834. Regions of the prefrontal cortex are more active when we interact with a human partner, showing that information is processed differently from when we interact with a machine, such as when we shop on an online platform. This provides empirical support for the idea that empathy underlies all our social relationships.
92 See, e.g., Smith, LJA i.95; TMS VI.ii.1.12. See also Hanley, Adam Smith and the Character of Virtue, 46.
93 Paganelli, “Commercial Relations,” 346.
94 In international relations, peace and prosperity also result when countries open their markets and play fair, neither taxing foreign products for being foreign nor subsidizing their own foreign sales. If a country unilaterally restricts or taxes an imported product, “revenge in this case naturally dictates retaliation.” However, Smith recommends it only when “there is a probability that they will procure the repeal of the high duties or prohibitions complained of” (WN IV.ii.39). Once again, we see sympathy at work in the subsoil of trade relations. Indeed, Smith notes that the main purpose of punishment in the face of injustice is “to bring [the wrongdoer] back to a more just sense of what is due to other people, to make him sensible of what he owes us, and of the wrong that he has done to us” (TMS II.iii.1.5), that is, to make him come to his senses and return to the moral community. Similarly, retaliation in foreign trade seeks to make the other nation come to its senses, realize that protectionism is harmful to itself, and return to free and just relations.