Political Economy and the Rise of Commercial Humanism

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Important Points

Historical Attitudes: Early figures such as Aristotle, Tertullian, and Cassiodorus condemned commerce as morally corrupt. Their views deeply influenced Western law and cultural norms for centuries.

Shift in Perspective: In the early modern period, thinkers like Richard Baxter, Richard Steele, and Daniel Defoe redefined commerce as morally acceptable and even divinely inspired. This marked a clear departure from earlier denunciations.

Role of Political Economy: The rise of political economy was pivotal. Scholars including John McVickar, Francis Wayland, and Frédéric Bastiat demonstrated that when property and contract rights secure individual prosperity, it can have widespread, mutually beneficial effects.

Enlightenment Contributions: Enlightenment thinkers such as John Locke, Joseph Butler Francis Hutcheson, David Hume, Josiah Tucker, Adam Smith, and Edmund Burke argued that commerce spurs innovation and productivity through mechanisms like the division of labor, leading to significant living standard improvements.

Commercial Humanism: The synthesis of these insights led to commercial humanism, a view that sees market exchanges and the enforcement of commutative justice as essential to social progress and prosperity. Through individual pursuits of economic gain, the common good is ultimately enhanced.

Political Economy and the Rise of Commercial Humanism

The Western world long held commercial life in disdain. Aristotle understood commercial activity to tend towards vice. The early Christian author Tertullian perceived commerce as a morally degraded undertaking characterized by greed. “Is trading fit for God? Certainly,” he answered, “if greed is absent, which is the cause of acquisition. But if the acquisition ceases there will be no longer the necessity of trading.” The sixth century Christian statesman Cassiodorus declared merchants to be “an abomination because they neglect the righteousness of God for an inordinate desire for money.” Cassiodorus’s declaration found its way into Gratian’s Decretum, the momentous twelfth century work in Western canon law, which influenced the West’s sensibilities for centuries to come.

By the early modern period, however, understandings of commercial life had begun to change. The seventeenth century’s most influential Puritan teacher, Richard Baxter, christianized the pursuit of honest income. Each Christian has a duty to “labour in a manner as tendeth most to [his] success and lawful gain.” The early eighteenth-century playwright and author Richard Steele described the merchant not as an abomination but as the “greatest Benefactor of the English nation.” The journalist Daniel Defoe saw the hand of Providence in eighteenth century international exchange: “There is a kind of Divinity in the Original of Trade…Providence has adapted Nature to Trade, and made it subservient in all its Parts, to the several necessary Operations of Commerce.”  

Changing perspectives on commercial life contributed to cultural and ethical shifts. These shifts in turn, as economic historians Deirdre McCloskey and Joel Mokyr have argued, catalyzed the truly remarkable simultaneous economic and population growth of the last few centuries. McCloskey has appropriately dubbed this episode “the Great Enrichment.” Positive conceptions of commercial life—including entrepreneurship and the pursuit of profit—inspirited the populations of northwest Europe and America, fostering innovation, discovery, and material improvements.

What caused the changing estimations? One important cause, according to the nineteenth century Columbia professor John McVickar, was the development of the science of political economy. Political economic inquiry definitively illustrated, McVickar argued, the great consonance between the material prosperity of the individual and that of the other members of his society. “Every benefit,” as his contemporary Francis Wayland argued, “is mutual; and we cannot…really do good to ourselves without doing good to others; nor do good to others, without also doing good to ourselves.” The French political economist Frédéric Bastiat elaborated the point around the same time, claiming that perceptions of “antagonistic elements in the social order” derive from “erroneous propositions” of political economy. Promulgating such insights surely helped encourage diligent, creative application to commercial endeavors. Individuals came to believe that one could indeed do good by doing well.

The perspectives of McVickar, Wayland, and Bastiat owed a considerable debt to the insights of eighteenth century British—and especially Scottish—political economy. Insights from John Locke, Joseph Butler Francis Hutcheson, David Hume, Josiah Tucker, Adam Smith, Edmund Burke, and William Paley contributed to the ascendance of what the late historian John Pocock described as a “commercial humanism.” Commercial humanism understands the enforcing property and contract rights—the rights of commutative justice—as a mode of serving the common good, the object of general justice. The rules of commutative justice are to be enforced not simply because they correspond to individual rights (which they do), but because their enforcement indirectly serves the good of others to a degree that direct, centralized efforts cannot obtain. Commercial humanism’s understanding has roots in various strands of natural law traditions, and it found partial expression in parts of Aristotle and Cicero. Eighteenth century philosophers brought fresh insights on the matter from the developing science of political economy.

In his Politics, Aristotle argued that an ideal social arrangement is one in which “we own possessions privately, but make them common by our use of them.” He did not mean that property usage ought to be collectively regulated or taxed towards beneficial social ends, but rather that each person should use his property well through generous or liberal giving. Property for Aristotle is in fact a necessary precondition of liberality or generosity: “liberality, he wrote, “consists in the use which is made of property.” Without something that is indisputably one’s own, whether it be possessions, labor, speech, or attention, one has nothing to give.

Francis Hutcheson, the founding father of the Scottish Enlightenment, picked up Aristotle’s classical insight and expanded upon it. General justice is often served effectively as each person practices the virtue of liberality in local context with his or her property. Individuals possess unique insights into their local communities’ needs, beginning with themselves and their families. To believe that collective ownership would affect a more just resource distribution than individual acts of liberality requires unrealistic assumptions about political superiors’ incentives and knowledge. Hutcheson cautioned that “constant vigilance…of magistrates, and such nice discernment of merit, as could ensure…a just and humane distribution, is not to be expected.”

Hutcheson pressed beyond Aristotle to highlight the contribution that ordinary individual efforts—even in commercial contexts—make to the common good, beyond the horizon of individuals’ active awareness. “Worldly business,” he wrote, had long been viewed “inconsistent with the heights of piety.” But mundane activities, including the aspiration for material improvement, are not just consistent with piety: in most instances, they are the means by which we serve the good of our fellow human beings. In expounding this insight throughout his works, Hutcheson drew from themes in the early writings on political economy. His younger contemporary David Hume and his student, Adam Smith made similar points.

Channeling John Locke’s arguments, Hutcheson asserted that we owe “nine Tenths, at least, of the things which are useful to Mankind” to others’ “Labor and Industry.” Without industry, “the earth becomes a barren forest.” Thanks to human application, the earth has become “a joyful copious habitation.” It is the drive for improvement, the drive of each towards his own betterment, that sparks humankind to “cultivate forests, or drain marshes…and provide houses for habitation, and inclosures for their flocks.”  

Adam Smith wrote in a similar mode, in The Theory of Moral Sentiments, that the human drive for improvement and acquisition pushes us to “cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the arts and science.” David Hume foregrounded the spiritual and cultural effects of opportunity. Opportunity, he argues, “rouses men from their indolence…[and] raises in them a desire of a more splendid way of life than what their ancestors enjoyed.” “The minds of men,” he continued, “being once roused from their lethargy, and put into fermentation, turn themselves on all sides, and carry improvements into every art and science.” As a consequence of such changes, as Smith put it, humankind has “obliged [the earth] to redouble her natural fertility, and to maintain a greater multitude of inhabitants.”  

The industrious spark for improvement gives rise to what Smith highlighted, in the opening remarks of Wealth of Nations, as economic prosperity’s proximate driver: the division of labor. Each person’s desire to improve his condition, when it manifests in peaceful exchange patterns, enables specialization. Specialization hones one ability, encourages the discovery of innovative production processes, and fosters—given a sufficiently large product demand—production at scale. The combination yields massive productive improvements and lower consumer prices. A solitary worker, according to Smith, produces twenty pins a day. When the labor of making a pin is divided into ten tasks, and shared among ten workers, 48,000 pins are produced, or 4,800 per worker—a 23,900% increase! Such productive increases and the corresponding price decreases were responsible, Smith argued, for the standard of living improvements ordinary European peasant enjoyed. In addition to a proliferation of new, low-cost consumer goods, the capital accumulation and innovation the the division of labor encouraged affected what Smith described as a “liberal” increase in wages. Technical progress raises labor’s productive contributions, ultimately driving up real earnings.

In his 1751 book Della Moneta, the Neapolitan intellectual and wit Ferdinando Galiani described the remarkable workings of the price system. He offered a thought experiment in which a Muslim country converted to Christianity. Wine consumption, forbidden under Muslim law prior to the conversion, dramatically increases after conversion. The rapidly increasing demand for wine leads to high prices: “now, wine would quickly be rendered dear in price because of its scarcity; and merchants would begin to import a great deal of wine from abroad.” Pursuing profits and responding to the high prices, locals would plant vineyards, increasing the domestic wine supply, until the wine industry’s profit rate was no different from the profit rate elsewhere. Smith may or may not have read Della Moneta; but he offered parallel insights on the coordinating effects price has on resource movements, not just across space but time. Smith’s insights on the matter come across clearly in his discussion of grain speculation. As the wine merchant responds to price movements to bring wine to where it is highly valued, the grain speculator responds to future price movement forecasts to bring grain to the points in time when it is highly valued. The effect is to smooth grain supply over time, withholding some from the market when the price is low and grain is abundant, and providing to the market when the price is high, and grain is scarce. Smith analogizes the speculator to “the prudent master of a vessel.”

The interest of the inland dealer [the speculator], and that of the great body of people, how opposite soever they may at first appear, are, even in years of greatest scarcity, exactly the same. It is his interest to raise the price of corn as high as the real scarcity of the season requires, and it can never be his interest to raise it higher…Without intending the interest of the people, he is necessarily led, by a regard to his own interest, to treat them, even in years of scarcity, pretty much in the same manner as the prudent master of a vessel is sometimes obliged to treat his crew. When he foresees that provisions are likely to run short, he puts them upon short allowance.  

For Smith and many of his contemporaries, the impersonal exchange network that unfolds through the division of labor approaches, more nearly than any feasible alternative arrangement, a resource distribution that might be called “liberal,” were a single mind to implement the distribution. In pursuing their own interests, individuals affect social improvements as they cultivate their own resources and enhance resource value. They participate in and extend the division of labor, which fosters innovation, increases output, bolsters real wages, and lowers prices. In responding to price movements, they move resources to respond to human needs. This commercial-humanist body of insights formed an important part of classical political economy’s insights.  

An important presupposition of these insights is the protection of what Hutcheson called “the rights of commerce” and Hume the “laws of nature”: the right to alienate our goods, and the rights arising from contract and promises. Commutative justice’s object is the respecting of these rights. Without the enforcement of commutative justice’s rules, the prospects of improvement, the division of labor, and the coordinating effects of the price mechanism will not occur. Without an assurance that the produce of our labor—whether wages, rents, or profits—will be uniquely ours, incentive to industry and exchange will diminish. Without such assurances, Hutcheson conjectured, our efforts will be directed away from productive activity and towards “games,” “cabals,” and idle “conversation.” The metaphorical liberality the commercial system brings forth—metaphorical because the liberal distribution is brought about by an invisible hand—hinges, therefore, on private ownership. This understanding is, in fact, not so far from Aristotle’s assertion that “liberality consists in the use which is made of property.” The commercial order’s liberal prosperity consists in property’s productive uses.

Eighteenth century thought’s political economic insights, and the commercial humanism to which they contributed, cooperated with an underlying emphasis in Anglo-American culture on the virtuousness of social usefulness. As Hume wrote, “what praise is implied in the simple epithet useful! What reproach to the contrary!” Cultural forces, including pioneering economic insight, contributed to the spirit that brought forth the enrichment we now so often take for granted.