What Would Adam Smith Say About AI?

The statement the “disposition to admire, and almost to worship, the rich and the powerful ... is the great and most universal cause of the corruption of our moral sentiments” seems like it could have been written by Karl Marx, but he didn't. Adam Smith said it.

While modern capitalism might claim Smith as its philosophical foundation, there is more nuance to his narrative. This nuance in his narrative will be critical as we use Smith as a lens to view the modern developments of AI. Perhaps as machines continue to outperform existing knowledge work in new ways, Smith’s beliefs are no longer relevant. Or, perhaps, he is more important than ever.

Would Adam Smith endorse AI as it shapes our economic landscape? Let's explore.

Smith Was a Philosopher and Economic Storyteller

Smith (1723-1790), often called the father of modern economics, was a Scottish philosopher best known for his seminal tome "The Wealth of Nations." The book is the foundation of ideas such as the invisible hand, the value of division of labor and the societal value of the empowered self-interested individual.

Smith also wrote about morality, “sympathy” and social cohesion, which he covered in his “Theory of Moral Sentiments.” Money was valueless without a corresponding moral society for Smith, “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

As an empiricist, Smith used tangible examples, thought experiments and imagery not abstract theories. While his writing can be dense and academic, his stories translate well across the centuries and across the AI discourse.

Division of Labor is Foundational to Productive Innovation

Smith popularized the idea of division of labor, now a foundational tenet of modern supply chains. He used the metaphor of a sewing pin factory to highlight the advantages of not just dividing labor, but also the benefits that he saw for labor. By becoming experts on a specific craft, labor would gain additional “skill, dexterity and judgment,” resulting in more innovation for the company and success for the laborer.

AI Lens

Increased specialization for companies — especially for chip companies associated with AI — exemplifies the value of innovation from the division of labor. However, if companies replace labor with AI, reduced numbers of workers may reduce the chances of innovation. While many economic studies consider AI-related job loss, measuring future impacts on AI innovation is difficult. However, new experiments and directions begin with having time to be creative, and if AI adoption over-indexes on doing more with less more, then those existing companies will struggle over the innovation timeline.

Individuals Are Better Informed Than Centralized Organizations

Smith observed the factories and commerce of his local Scotland and noted how individual pursuits of self-interest unintentionally benefit the whole economy. He comments, “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest.” This decentralized decision-making, he argues, leads to efficient allocation of resources and overall economic harmony without the need for centralized control.

This libertarian tenet of Smith emphasizes that individuals are the most informed to make their own decisions. However, like many of Smith’s positions, there is additional nuance when considered through a modern lens of AI.

AI Lens

Contextual information was a foundational reason Smith trusted individuals more. However, as one argument goes, AI may accelerate misinformation, preventing contextual understanding. Increased government control may then be needed to ensure rational action — see President Joe Biden’s recent AI actions document. On the other hand, encouraging individual developers — the modern butchers, brewers and bakers — and users to expand the options available through a supported ecosystem may provide a better outcome — resulting in launches, like Meta’s open-source release of Llama and the self-imposed focus on constitutional AI by companies like Anthropic.

See more: How Might Socrates Have Used AI Chatbots?

The 'Invisible Hand' Works Within the Right Context

Through the combination of informed individual actions, Smith intuited an “invisible hand” that allocated resources effectively. Or so the story goes. However, the “invisible hand” in his writing isn’t well-defined and may have been used sardonically by Smith. Its modern usage is primarily from a modern reinterpretation by free trade advocates, like Milton Friedman.

This is not to say that economies don’t have emergent properties or can self-regulate. Instead, the idea of Smith’s invisible hand can potentially be all-encompassing, such as with the idea that no action should ever be taken. However, in Smith's era, the reality was mercantilism — a system where nations hoarded their goods instead of trading. The enemy in Smith’s day was a particular type of policy, while Smith also warned of the growing merchant class as well. Market power of any kind was problematic.

AI Lens

Critics of tech companies building and funding AI across the political spectrum, such as Yanis Varoufakis, Lina Khan and Josh Hawley, often echo Smith’s critiques of globalized companies’ allegedly monopolistic practices that stifle market freedoms.

Furthermore, AI could exert an unprecedented type of subtle market control. IMF Deputy Managing Director Gina Gopinath urges:

“When it comes to AI, we need more than new rules: we need to recognize that this might be an entirely new game. And that will require an entirely new approach to public policy.”

She emphasizes how the new "artificial hand" may alter market dynamics in ways that traditional economic paradigms, such as the invisible hand, did not anticipate. Whether multiple metaphysical hands can effectively guide the economy concurrently remains to be seen.

Moral Action Balances Sympathy and Dispassionate Rationality

Smith writes as a joyful worker, famously stating, "What so great happiness as to be beloved and to know that we deserve to be beloved." This exchange of utility and sentiments lies at the core of his vision for a successful society. For Smith, sentiments — what might today be termed as vibes — facilitated human-human sympathy, akin to what we now call empathy. This social requirement for empathy is fundamental to his concepts of social unity and individual identity. In essence, moral actions for Smith are those that garner sympathy, while those that do not are deemed immoral. Contextual information is paramount.

Relying on the morality of one’s context is the first step on a moral journey. To help go beyond one’s own biases, Smith conceived of an “impartial spectator” writing:

“The community helps us see past our own biases, but when the community is limited by its own institutionalized bias or simply by lack of information, the impartial spectator can override this and allow an agent to find propriety in the face of a deformed moral system.”

Having access to one’s impartial spectator is a prerequisite to systemic change.

AI Lens

AI systems, when tasked to act as coaches or advisors, are impartial, algorithmic-based spectators, offering advice without the biases of human sentiments and sympathy. However, these systems are only as “impartial” as the data and programming they are based upon. Their usage and access will furthermore affect the conception of such personal assistants. Given the potential value to one’s moral development from a Smith perspective, the “impartial spectator” might be an implicit belief within claims that “AI will make us more human.”

Smith's Vision Requires Technology Empower Society

Smith's insights remain relevant as we navigate the complexities of the fourth industrial revolution. His explicit and implicit emphasis on the necessity of contextual knowledge underscores a critical point: Strategies effective in one era or market may not necessarily translate to another. This becomes increasingly important as the scope and impact of global policies and AI development expand.

Just as Smith challenged mercantilism and championed individual decision-making, today’s AI technologies pose new questions about market dynamics and personal autonomy. Are we creating tools that expand our potential or extract additional value? Ensuring that new technologies empower rather than undermine is essential for a flourishing Smith-inspired society.

Learning Opportunities

Webinar