Philosophical Psychology and Economic Psychology in David Hume and Adam Smith

I am positive you are in the wrong in many of your Speculations, especially where you have the Misfortune to differ from me.

—David Hume, in a letter to Adam Smith, 20 August 1769

Historians of eighteenth-century thought have often treated David Hume and Adam Smith as twin representatives of a particular Enlightenment vision of political economy, a vision sustained by confidence in the broad social benefits of commercial liberalism and grounded in a distinctive analysis of the dynamics of market-driven economic development.¹ There has been some debate surrounding specific differences between Hume's and Smith's analyses, particularly certain differences in their analyses of monetary adjustment.² But these differences have seemed minor in comparison with the apparent depth and breadth of their agreement on the basic premises of political economy.

Some Hume scholars drew attention long ago to a more significant difference. Hume emphasizes the role of luxury consumption in sustaining the process of economic development, whereas Smith has capital accumulation playing a much greater part (Rotwein [1955] 1970; Taylor 1965). More recently, Anthony Brewer (1998, 94–97) has shown how some of the inconsistencies in the Wealth of Nations result from Smith's retention of Humean historical analyses in contexts where the main line of argument clashes with Hume's emphasis on luxury consumption. Others have noticed that the two friends somehow arrived at opposite conclusions about the importance of frugality in permitting growth in investment spending (Hutchison 1988, 214; Rostow 1990, 23). However, since there is no explicit mention of this disagreement in their surviving correspondence, we cannot be sure how it came about that Smith parted ways with Hume on this important set of issues—linking the theory of economic development to economic psychology—while following his lead on so much else.³

The few attempts that have been made to explain this either point to the additional influence of Francis Hutcheson on Smith's ideas, or to that of the physiocrats, whose works Smith read in the 1760s. W. L. Taylor (1965) and more recently Enzo Pesciarelli (1999) show how Smith borrowed some of Hutcheson's ideas on frugality as a virtue, while Terence Hutchison (1988, 366–67) and Andrew Skinner (1992, 231) highlight his exposure to Turgot's theory of capital accumulation. Yet Hume's own reactions to both Hutcheson and the physiocrats would have been known to Smith, so the question remains as to why Smith did not follow Hume in this case.⁴

There is another possible explanation, drawing on deeper differences between Hume's and Smith's philosophical approaches to psychology and human nature. I shall argue that despite numerous points of philosophical agreement, Hume and Smith developed fundamentally different conceptions of the self in their early philosophical writings, and that these may have contributed to the different assumptions about economic behavior that emerge in their economic writings. The crucial difference between them did not concern self-interest per se, which they agreed must be central to explanations of economic phenomena, but the individual's propensity to project his self-interest over time. More specifically, they disagreed on whether there was a psychological faculty, over and above the passions, that could help an individual to assess his long-term interests and to exercise self-control in the face of the “passionate” bias toward near-term gratification. Although we have no evidence that this issue was openly discussed between Hume and Smith, we know from Smith's Theory of Moral Sentiments that he rejected Hume's reduction of all human motivation to various species of passion (and used the terms reason and conscience—albeit unsystematically—to describe our passion-transcending faculty), and it appears that he probably disagreed with Hume's view of personal identity as well. While this was a philosophical difference of opinion, it concerned a point of quite general psychological significance, with...