Adam Smith's Warning About Wealth, Fame, and Status (with Ross Levine)

What can Adam Smith teach us today? In this conversation between Ross Levine of Stanford's Hoover Institution and EconTalk's Russ Roberts, Smith emerges as a penetrating psychologist who understood that our deepest hunger isn't for wealth but for respect--and that this hunger, left unexamined, leads individuals and societies alike into serious trouble. The discussion moves from the personal (why do highly successful people keep grinding long after they've "won"?) to the political: Smith's sobering warning that when a society admires wealth and power for their own sake, it breeds servility and undermines freedom. Along the way, there's a Marxist father reading Smith during COVID, a Nobel-adjacent economist who couldn't understand why anyone would bother with a 1759 book, and a childhood story about loyalty and friendship that cuts to the heart of what we may have lost in modern culture. This is a conversation about how to live well--using one of history's greatest thinkers as a guide.

• 0:02Speaker 00

  Welcome to Econ Talk, Conversations for the Curious, part of the Library of Economics and Liberty. I'm your host, Russ Roberts of Shalem College in Jerusalem and Stanford University's Hoover Institution. Go to EconTalk.org where you can subscribe, comment on this episode, and find links to other information related to today's conversation. You'll also find our archives with every episode we've done going back to 2006. Our email address is [email protected]. We'd love to hear from you.

• 0:37Speaker 00

  Today is March 10, 2026, and my guest is economist Ross Levine, the Booth-Derby family, Edward Lazzaro Senior Fellow at the Hoover Institution and co-director of Hoover's Financial Regulation Working Group. Prior to joining Hoover, he was a faculty member at the University of California at Berkeley's Haas School of Business. Ross, welcome to Econ Talk.

• 1:00Speaker 01

  It's great to be here, Russ.

• 1:02Speaker 00

  Our topic for today is Adam Smith. Today is March 10. Yesterday, March 9, was the 250th anniversary of the publication of The Wealth of Nations. And Ross, you decided to honor this anniversary year in an unusual way. Describe the project which you call "From the Hand of Adam Smith."

• 1:23Speaker 01

  So I decided that it was 250th anniversary of the Declaration of Independence, and, more importantly for an economist, the publication of The Wealth of Nations. And so I was asked to write something about the U.S. independence, and I proposed that I write a monthly letter "From Adam Smith to America" in 2026. And so the purpose of the letters is to be very true to Smith, but written in a way that is easy for somebody

• 2:01Speaker 01

  to read when they're waiting online. And as you know very well from your own writings, Smith is oftentimes invoked and simplified and caricatured, but he's such a complex, insightful scholar, psychologist, and political scientist that I thought he would have a lot to offer to many of us today.

• 2:30Speaker 00

  And I love this project. You know, I tried to do something similar with my book, How Adam Smith Can Change Your Life, but these are shorter and they're very readable. And you can find them, we'll link to them, but you can find them at, it's called Freedom Frequency, which is a Hoover channel on Substack. And what we're going to do is talk about the first two letters. So the first one begins this way, and this will give listeners the flavor of the project. "My dear friends, I look upon your age with admiration and astonishment. You enjoy conveniences and comforts that the barons and princes of my time could not

• 3:10Speaker 00

  have imagined. And yet, you track your sleep as if peace could be grafted, chase productivity as if rest were a moral failing, and wake to voices urging you to optimize every hour and maximize every potential. Yet seldom pause to ask why." So I want to start with that. And by the way, what's nice about this writing, your writing, is that there are words that are your own, and they're written in, I would say, a Smithian style, like I just, like I just read. But you also try to quote Smith directly, verbatim, as much

• 3:49Speaker 00

  as possible. And that is a, that's a shtick that can be annoying, but it's not in your case. So I want to compliment you. It's very, very nicely done. So why, you know, why would Smith, what's Smith asking here? What is he saying to a modern, from his perspective of the 18th century? What's he, what's he asking us?

• 4:16Speaker 01

  So the way I understood it and understand it is he's, he's asking, what are you doing? What motivates you? Why do you work so hard? And he comes back to a theme that oftentimes we work hard in order to be admired, in order to be held in esteem, in order to receive praise. And he understands that this is a motivation that has existed over time and across civilizations.

• 4:55Speaker 01

  But he's concerned about that as a motivation because he ultimately views it as leading to an emptiness and a dissatisfaction. And I thought that for today, certainly in the US, that people work extraordinarily hard and starting out to be true to Smith and asking the question, why do you do that? So it seemed it was one of the ways in which Smith opens up the theory of moral sentiments, his first book, and it seemed the right way to engage readers from a very broad, a very broad, a very broad array of readers.

• 5:34Speaker 00

  Now, when you, when you open this way, though, you didn't ask the question directly. You focused on this optimization, maximization, I think of it as sort of the, I think of it as the life hack industry, right? Here's, here's a trick. Here's a trick. You know, here's a shortcut. Here's a fantastic way to, you can only, you only have to sleep four hours and you'll be more, even more rested. Here's a seven-minute workout. I just got my, my second one. I thought I, that, that thought died. It turns out, all I need is a chair and seven minutes and I am gonna look so good. I'm looking at these guys on the web after seven minutes a day. Oh my, it's probably not true. That's what I'm thinking.

• 6:18Speaker 00

  So I'm curious why you picked this focus rather than asking why do you work so hard? Obviously, it's related to it, but you picked a, this focus of optimization.

• 6:29Speaker 01

  So, I live in Silicon Valley, so what you describe as people have sleeping devices and people wear all sorts of complicated watches. Everything is to maximize their productivity and people are very much in a rush to get where they're going. And so you, you look around and you ask why? And then you look around and housing prices here are truly astronomical and there are other really great places in the United States. One can live with just much more reasonable housing prices and a style of life. So there's a question of why we're doing this.

• 7:11Speaker 01

  I think less on the optimization front, there was a personal aspect of this as well. I am sort of reaching an age where I don't really have to work for money. And so there's a question of, okay, I'm working very hard. Why am I doing that? Is this the best way for me to spend my time? So there was both a personal aspect and an aspect of looking at my surroundings.

• 7:37Speaker 00

  Yeah, I've quoted it before. There's a line from the poet George Van Lee Hopkins. "I am my work, for that I came." Meaning, that's what I'm on this earth for, is to do. And it is a very deep question, right? Of how much is too much enough, et cetera? What else you would do at the time? And then the question of motivation. And of course, Smith understood that often, and other economists understand this too. What we say when asked, why do we do it? It's not always the same as to why we actually do it. And what's Smith's answer as to why we do it?

• 8:17Speaker 01

  So, Smith, and it's a very interesting contrast with the way most economists approach it. But Smith's argued that the key reason, the key motivation is that we work to be seen. We work to be admired. We work to be praised. We work to be held in esteem. So, a lot of our motivation is to get this approval from others. And the reason why it's in contrast with much of economics is that one of the main ways that economists model human behavior motivation is that my happiness or utility is based

• 9:00Speaker 01

  on what I consume, independent of what goes on around me. And I think anybody who has kids and anybody who engages with the world quickly realizes that that's not the case, that we are very much social animals. And this is, from the beginning, this is what Smith argues, that even our sense of right and wrong, our moral sentiments, is very much shaped by social interactions with our parents and our community more generally. So that was, that's the essence of Smith is that a big motivation is seeking this esteem

• 9:40Speaker 01

  and approval of others. And then he says, look, this is, this is, won't bring you happiness. This won't bring you tranquility, that you have to look inside to this impartial spectator and look to be admirable, not admired by others, and to be lovely, not necessarily seeking love and approval of others. And it's a deep insight into what motivates us and a deep insight into what can make us truly happy in the long run. It's, it's quite remarkable

• 10:19Speaker 01

  that somebody who's only known for a narrow perspective of what the invisible hand means is writing, as you explain extremely well in your book, essentially a self-help book on how to live a good life.

• 10:36Speaker 00

  Yeah, well, linked to an essay, a recent essay by Tim Ferriss, who's been a guest on the program. I really like Tim. Tim is, is in many ways the king of the self-help world. Got the Four Hour Work Week, which is a variant on the seven-minute exercise. He's got a lot of life hacks and many of those he's practiced and experimented on himself with. It's interesting. He's got quite an interesting business model. But he recently wrote a startling essay that says, you know, this self-help thing may not actually help. And that if you're always focused on yourself and making yourself more effective and happier

• 11:20Speaker 00

  and so on, you might end up being quite unhappy. It's a wonderful piece and it's a wonderful, I think, revelation for him. I will see how long it lasts, but it'll change the way he, I think, behaves and writes going forward. But I think this question of, of, you know, what motivates us and the people around us, you know, the social pressures we face, it's a weird thing because, you know, you said in your own life, you're thinking about it, but... You've been an extremely successful academic. You've taught at some of the finest universities in the world. Isn't that enough? I mean, really, are you going into the office now to rack up even more points?

• 12:03Speaker 00

  Don't you have enough love and admiration from people around you? Or do you think you're just stuck in a habit that you've acquired from long ago?

• 12:13Speaker 00

  It's a tough question. Sorry about that.

• 12:16Speaker 01

  It's a very good question, but I think, at least for me, I think I have an answer. So in terms of the having the love and approval of people who are closest to me, I am just extraordinarily fortunate. The issue for me was one of work. And I think there was a driving force for much of my life to be held in esteem, to be approved of, to have, to acquire a certain rank. And there's no question that this was a driving force. And I think over the last five to 10 years,

• 12:57Speaker 01

  there's been a reflection of, okay, now what do I want to do? And I think what motivates me now, I don't think I work that much less, but what motivates me now is to explore something different. For example, much of my life has been this, you know, it's been mainstream economic analysis, methodology, identification, my work on finance. And I think now it's, I want to explore something broader and write for a broader audience. And I may fail, but it's something that gives me a lot of joy. This reading about Smith has just been thrilling.

• 13:38Speaker 01

  And I'm writing a book that is more geared toward a broader audience and is not, doesn't have empirical work or any regressions in it. And so that has been very satisfying for me. And I think reading Smith gave me a little bit of extra insight and permission to do these other things.

• 14:04Speaker 00

  That's nice. I probably quoted it before, but I love this quote from George Allen, who was the coach of the Washington Redskins, who supposedly said, He supposedly said, "I don't send Christmas cards. They don't help you win football games." And I don't know if he meant that. I have a feeling he did mean it, actually. And I think a lot of economists have that attitude. Their version would be, "I don't do X, whatever it is, because it doesn't help me get peer-reviewed articles in top-tier journals." And that treadmill that a lot of academics are on, it's interesting because part of it is, as you get older, as you're suggesting, you start to wonder whether there are some

• 14:48Speaker 00

  things that might be better, your time might be better spent on. It's also a question of whether that particular treadmill is going to pay off the way it used to. Right? We're in a very interesting moment with respect to peer review, which is falling into disrepair, excuse me, falling into disrepute, and AI, which might be generating thousands of new articles. We're not sure how that's going to turn out, but it will, it will probably change the way some of our colleagues behave. I want to talk about the parable of the poor man's son.

• 15:20Speaker 01

  I just want to interject one thing, that I may be the only, one of your only guests who knows who George Allen is.

• 15:25Speaker 00

  That's true. It's true. Yeah. It's, I noticed that recognition when I mentioned him.

• 15:33Speaker 00

  So, the poor man's son, the parable of the poor man's son, I'm tempted to read it, but it's, it's very long, but it's great, and we'll put a link up to where you can find it. Describe that. What is the parable, the poor man's son, and why is it relevant for this, this conversation?

• 15:51Speaker 01

  So, it's, it's Smith's story, but it's, it's a story that has been told again and again in many different forms. So, I think for, for listeners, it will be very familiar. But it's a story about a young man who's poor, who sort of sees what the rich has and looks at all the glitter, and looks at the esteem with which the rich are held, and says, "If I can be rich, if I can acquire that, that wealth, I will have that esteem and approval, and that will make me happy." And the word he uses is, Smith uses is tranquil.

• 16:35Speaker 01

  And so it's about this person who works his life and neglects his family, neglects caring for himself in many ways. And then as old age hits, he realizes how much he has missed, how empty his life is. And that even though he is rich, all of this outside, external esteem doesn't leave him tranquil because of the choices that he made throughout his life. And so it's a story about ultimately feeling regret and about not making the types of choices

• 17:19Speaker 01

  that would have led to a happier, more tranquil life for him. And it was about seeking the approval of others in a particular realm, becoming rich, rather than seeking internal approval and being, what Smith would say, a virtuous person and a good person. Some of the things that you talked about, being benevolent and good to other people, treating people well, and that he neglected those essentials. I mean, it's... How about yourself? How do you read it? You are very much an expert on Smith. And I'm curious, do you have the same perspective on the story?

• 18:00Speaker 00

  Yeah, I'm not an expert on Smith. I only play one on TV, on podcasts and videos and Youtubes. But I love the story. But I think there's a piece to it that's especially interesting. Certainly, he emphasizes the sacrifices that the poor man's son makes. It's interesting, by the way, because he doesn't call him the poor man. It's the poor man's son. So this person grows up in this... Environment of disappointment, and I think about, this is a ridiculous association, but I think about LBJ and Robert Caro's biography, that his father was a small-time politician,

• 18:45Speaker 00

  who was a very honest man, and his honesty limited his ascent and acquisition of power. And LBJ, as a young man and a boy, thought, "That's not going to be me. I'm going to cut every corner, and I'm going to show the world I'm not going to be like my dad." So he was, in many ways, the poor man's son, in terms of both financial success and also political power. But anyway, the poor man's son, he looks over with envy at the rich man's son, growing up in ease. Fascinating to me, he's talking about the American dream, in many ways, this idea that anybody can succeed through hard work, which, of course, in Smith's day wasn't particularly true.

• 19:29Speaker 00

  It could happen, I guess, and Smith was particularly worried about people who would follow corrupt paths as a way to acquiring wealth, because it was much harder to, say, start a business or pull yourself up by your bootstraps, or whatever language you want to use. But anyway, so part of it is the sacrifice, the things you have to do to acquire the wealth. But the other part is that the wealth itself is so empty. And I don't know, you know, in Smith's age, and I joke about it a lot in my book, you know, the technological devices of Smith's times were ear pickers and toothpicks, things that we've moved on.

• 20:12Speaker 00

  We've got more entertaining toys, and it's, you wonder if Smith, in today's world, would be a little more understanding of the desire to acquire some of those things. But I think the...

• 20:28Speaker 00

  The essential part is exactly what you said. This is the wrong path. There's a certain condescension to Smith's story, saying to this kid, "Don't be a fool. You don't know. You're not gonna like this when you get what you want. Be careful what you wish for." And of course, longtime listeners will know the my favorite quote from Smith, which you've alluded to already. "Man naturally desires not only to be loved, but to be lovely." And loveliness, meaning being praiseworthy, admirable, as opposed to praised and admired, loveable, rather than just loved. Being intrinsically good is Smith's recipe for happiness. And in particular, to be a

• 21:11Speaker 00

  it's a really subtle point, because he's not saying it's foolish to care about what people around you think. But he's saying you should have a certain perspective on it. Talk about that.

• 21:23Speaker 01

  Well, my understanding was that this, that the perspective on this is that you, it's okay to want to be, to be held in esteem, to be approved of. But that you develop an impartial spectator, a conscience, we may call it today, a sense of right and wrong, that's developed from really the moment you're born and you start to interact with your parents. Do you get a smile? Do you get a hug? Do you get approval? So it's very, he, again, very contrary to some of the philosophers that time, and contrary to some economists, your sense of right and wrong is based on your social interactions.

• 22:07Speaker 01

  It doesn't just emerge. And that when there's a consistency between being this good, virtuous person, this person that you're conscious approves of, and being in a society that also

• 22:24Speaker 01

  Finds those things admirable. Then you, I read Smith as saying that this is when you have a very good life. But like you say, there's, there's, and you get to this more when he moves to the social interactions between an individual's choice in society. Is, there's very much this notion that if, if you're admired for the right things, or kind of virtue, then you will pursue all sorts of activities that seek to gain that approval that are consistent with yourself, that will be socially beneficial.

• 23:08Speaker 01

  If in contrast, society admires only wealth, regardless of how it's achieved, for example, through fraud, or through coercion, or through other types of force, then this is going to encourage those types of actions on the part of individuals, which will cause this, this distinction between gaining the approval from outside, and having the internal approval of your, of your own actions. That, that was my reading of it.

• 23:43Speaker 00

  Yeah, I want to take a quote that you have here that elaborates on it from your, from your letter. Before we do that, I want to talk for a second and get your thoughts on imposter syndrome. So, imposter syndrome, I think, is the idea that you know you're not worthy, but other people don't, and so you're treated in a certain way, but you're an imposter, you're not really the person that they think you are. And it seems to be such a common human insecurity. I certainly have it, and I often, and I, and I feel, often I get praised.

• 24:18Speaker 01

  Even in your, even in your quotation, when you said that you're not a, an expert on Smith, just play one on TV. It was a good, it was, it's a good joke, but there's, there's an element of the imposter element there.

• 24:29Speaker 00

  Exactly, it's well said.

• 24:30Speaker 01

  When you really, you, you wrote a book, you really are an expert on, on Smith.

• 24:33Speaker 00

  I'm not so sure, you know, I'm serious, I, but.

• 24:38Speaker 00

  I don't know, but I do, I do know there are people know a lot more about Adam Smith than I do. So in that sense, I think I'm something, I'm an imposter when I get treated as an expert. But I'm thinking just in general about the kind of esteem that people have for us in our social circles and among our friends and family. Often, of course, we know more than they do about our shortcomings. They're not just imagined, they're sometimes real. But what Smith, I think, is saying is that you want to avoid that if you can. You want to achieve your reputation honestly and come by it honestly and have it, have that reputation and match what people think of you.

• 25:22Speaker 01

  Yes, no, it's a very good point. And so now we can develop into psychotherapy a little bit here.

• 25:31Speaker 00

  Sure, bring it on.

• 25:31Speaker 01

  Yes, we all, we all sort of feel this sense of, of, of, maybe not all of us, but I do. Many people do have this syndrome, the imposter syndrome. And I think, at least for myself, part of what has happened over time is to just not engage with this thought of, am I really what people think I am? And simply to say, I am what I am.

• 26:02Speaker 01

  People will make their own assessments and I am just going to try to be, you know, professional, to do my best and to be as comfortable as I can with trying to be a good person and a good economist. And so, and again, I view that very consistent with Smith and why reading him, really starting to read him 10 years ago or so, was, had a very positive effect on my own approach to life more generally. And that's why I thought your book, and I think that people reading Smith are these,

• 26:41Speaker 01

  is, can be a useful way to lead a happier life, you know? And be a good, yeah, so I, and I think that you brought up a point earlier that Smith did not view one's happiness

• 27:00Speaker 01

  Simply as what they consume, that this notion of virtue, of being praiseworthy, was how one dealt with society as a whole. This did not mean foregoing self-interest, but it did mean not being greedy. And it meant, so he was, for someone who lived very much alone as a scholar, he had a very intricate view of how people engage with society more broadly and how important that was for their own sense of contentment.

• 27:45Speaker 00

  See, you have a really nice way of putting it here from your letter. You say, you know, make a reference to the, we have these two desires. We want to be loved. We want people to think highly of us, respected, admired, et cetera, praised. We want to matter, right? That's what Smith's saying. And at the same time, we want to be lovely. We don't just want to be loved. We want to merit these reactions from the people around us. And you write, this is very, I think, very deep. You say, "These two desires are easy to confuse. The love of praise seeks the opinions of others. The love of praiseworthiness seeks inner integrity. One depends on spectators. The other depends on conscience. One is fleeting and hollow. The other is steady and deeply satisfying.

• 28:29Speaker 00

  Much of human dissatisfaction comes from pursuing the first while neglecting the second. How do you know when you are truly praiseworthy and not really flattered for this? You must look within." And I think this is a great insight about these two things, that we care about both of them, obviously. We don't, we don't want to always fool people that we're successful. We'd like to be, have no imposter syndrome. But basically, it's a question of getting your motivation from the outside versus the inside, is what you're saying. You want to expand on that?

• 29:04Speaker 01

  Not what I, I wish I was insightful enough to say it, but I'm just trying to say what Smith said in Substack language, so it's easy to digest. Yeah.

• 29:18Speaker 00

  But then you go on and you say, "When your labor serves the desire to be worthy rather than merely admired, everything changes. Ambition becomes a source of meaning rather than anxiety. Hard work brings satisfaction rather than exhaustion. So work hard by all means, but first ask what desire your work serves. Ask not, will this impress others, but rather, will this satisfy the impartial spectator within?" It's great advice.

• 29:46Speaker 01

  Yeah. And by the way, so I was, I was, when I start, I have lots of letters to go, but I kind of wrote the first, first four. When I'm writing those, just apropos of this, I would wake up in the morning, it would be like dark outside, and I'd like, man, I really hope it's past five, because then I can start up and I can get up and kind of keep working on those, on the letters. And so that's, I think, very consistent with Smith's view, that, you know, are you engaged in something that you think is worthwhile internally, and maybe will, you know, hey, it's very, it's just wonderful to be on the show with you.

• 30:29Speaker 01

  But it's, he's not against working hard. He's against, you know, are you working hard in a way that is really going to give you this inner peace, where inner peace and content then also involves serving a social role?

• 30:49Speaker 00

  And I think the challenge, of course, it's easy to say that. It's easy to give this advice. And it's so much harder to actually follow the advice. And what thoughts do you have on how to help people internalize that message of listening to your inner drive versus your desire for approval of others?

• 31:14Speaker 01

  That's a very good question. So first of all, I do recognize that I am in such a... I don't want to use the word "privilege" because it's overused, but I am in a unique, unique position. And so, and many people must do a lot of work on things that are not intrinsically satisfying, but that provide the means to support their families. So that is... and that has to be recognized. The point is that, within the context of the control that somebody has, and if they're fortunate enough

• 31:59Speaker 01

  to have really what they need to survive, to ask themselves what they are doing and why they are doing it, have some introspection, and to think about the degree to which they're working to try to gain approval from others. Because those "others," their opinions can change, day to day, week to week, and you may devote your life, and they may approve of it now and disapprove of it later. And they may be on to the next shiny thing that they're going to admire. So there's a sense of trying to get... learn about yourself and figure out,

• 32:43Speaker 01

  is this something that you, we, me, as an individual, want to pursue, view as worthwhile? And that it can be a false and constantly moving target if one is seeking the approval of "the others." And I think that's how I would frame it, say, for my kids who are trying to make their way in the world and are not, you know, and turning toward their late 60s with the comforts to be able to just pursue

• 33:25Speaker 01

  their intellectual curiosities.

• 33:29Speaker 00

  Yeah, I think...

• 33:32Speaker 00

  I think there's some soul work that has to take place. And that's a phrase that's increasingly falling out of fashion. And anything with soul in it is out of fashion because, quote, "we don't have one." But we do have something deep inside us that drives us. And what I mean by soul work is, I think it's worthwhile for young people to put some time into figuring out who you want to become. And I think that's part of what Smith's talking about. And that work is not easy. There are many ways to get there from here. Religion, I've mentioned this before on the program, therapy, meditation, reading great works of literature. I think all of these help people figure out who they want to become and what's at their

• 34:17Speaker 00

  core that matters. And it's worth spending some time on that as opposed to racing ahead. I think there's a fear that if you don't race ahead, you'll be left behind. And that's probably not a good worry.

• 34:32Speaker 01

  Absolutely. Yes.

• 34:34Speaker 00

  Let's turn to your second letter, which I love for many reasons, but one of which is just you ask a question that I think most people wouldn't associate with Smith, or I think it's particularly important. You ask, Smith asks through your voice, "Are you admiring the right people?" And most of us don't think about that much. We might think about who our friends are, who we spend our time with. We all understand that we get influenced by the people around us. But really, what's the harm of admiring, fill in the blank, some entertainer, some athlete, some flawed human being, like we all are, because of their one piece of their success, say?

• 35:18Speaker 00

  And you could argue it really doesn't matter. So why did you decide to focus on this issue?

• 35:29Speaker 01

  I think I decided to focus on it for two reasons. One is that I really saw it as essential to portraying Smith. That this is something that he viewed as very important, because we can talk about this as we go, that links up to what he viewed as essential for prosperity broadly defined, and that is justice.

• 36:00Speaker 01

  And the other reason was that I wanted to, I wanted to talk to people today, especially today, especially given the media and the political environment, that when we admire people, we tend to want, we want, part of that is wanting to become like them, and part of that is cutting them some slack on whatever they've done to get there. And part of that is giving them, whatever they say, more credit than maybe it deserves.

• 36:45Speaker 01

  And it poses, again, the question that goes back to, I'll put it the way you put it, like, who do we want to become? You know, are these people virtuous? Are they good? Are they benevolent? And, or are they just rich? Have they become powerful through good means? And so is that what we want to reward in society via our admiration? And again, it comes back to what you're saying. It's like, who do we want to be? And part of who we want to be is what do we value? So I very much like the way you you posed it. I think that that's wonderful. And so that, it was those two reasons. It's really very true to Smith.

• 37:30Speaker 01

  It's not looking for something on the side where I wanted to say something and I looked at Smith. This is front and center.

• 37:37Speaker 00

  You know, he has a lot to say that's really fascinating, and I think is completely underappreciated about how we admire the powerful and, of course, that...

• 37:49Speaker 00

  There's two ways to be loved. One is to be virtuous, and we'll talk about that in a little bit. The other way is to be rich, powerful, famous. And rich, powerful, famous people are loved, meaning admired, praised. People pay attention to them. They matter. And Smith has a lot of fascinating psychological insights on how much we care about people who are not in our lives, famous people, that their narrative goes well. He has a lot of thoughtful things to say about the suffering of kings and the thriving of kings and how we want their stories to turn out happily. And when they don't, we get upset, even when they're horrible people,

• 38:34Speaker 00

  when they're despots, even when they're autocrats. And so, that's a fascinating thing, which we're not going to talk about. But what I'd like you to talk about is you actually make a very bold claim. You argue that admiring the wrong people isn't just like a you call it a harmless social habit. You say it's not that. You say it threatens the foundation of a free society. You give four reasons. I have them here. I don't know if you have them nearby or if you know them by heart, so I don't want to put you on the spot. So if you need help, I'll help you out. But you give four reasons for why this is socially, in other words, not just personally. Gee, you think a lot of that person, that person's not so nice. It's not good for you to admire somebody who's not a nice person.

• 39:17Speaker 00

  You know, I think a lot of our entertainment, which honors gangsters, to be blunt murderers, thugs, people who shed blood on screen and we think they're cool, and I think that's really unhealthy personally. It corrodes your soul or your inner self. But you're worried about the social set, the social impact of this. Talk about that.

• 39:42Speaker 01

  So I would point out, just as a quotation, which I think I'll get right, but when I say Smith really emphasized this, he sort of calls this admiration of the rich and the powerful, kind of the major threat, the major source of the corruption of our moral sentiments, so the major way in which our sense of right and wrong is corrupted. And so he very genuinely thought that this was an enormous deal. So let's see if I can get all four off the top of my head. So I think, one is very much as an economist, and it goes back to the first thing we talked

• 40:26Speaker 01

  about, in that if society, if we admire the wrong types of activities, and people want to be admired, then they are going to engage in the wrong types of activities. And so this is really essential, and it feeds into his understanding of the motivation of human beings. So that's one. And so he's not saying that the rich and the power are because they are rich and powerful unvirtuous, but he's saying that they're not necessarily virtuous because they're rich and they're powerful, and if we admire the one thing, the rich and the power, as opposed

• 41:10Speaker 01

  to the virtuousness, then that is what's going to lead to potentially fraud and coercion, and really the disintegration of a free society. That comes to the next point, which is both about a free society and a peaceful society, and also later what leads to his notion of what is, how the market is going to work to foster prosperity, and that is how much he stressed justice. So a sense of rules and a judicial system that focus normal self-interest in ways that are socially benevolent.

• 41:52Speaker 01

  And so the issue here is that if what we do is we admire the wrong people or we admire the wrong activities, simply if we just admire wealth, then this can give rise to fraud and the seeking of various types of monopoly privileges and the undermining of the judicial system. And people have less faith in the entire social apparatus. You can have a breakdown of freedom. Because for Smith, freedom and the market ultimately are founded on the judicial system

• 42:35Speaker 01

  and a sense that the judicial system is reasonably fair. And so that's why this admiring the wrong people is fundamental to Smith. The other two are interrelated with these. And that is that if we admire, it's what you told, the way you told the story about the kings. We want the rich and the powerful. We admire them, we want them to do well. Part of that could also mean that we cut them some slack when they do wrong.

• 43:11Speaker 01

  And that again means that the judicial system fails to be, fails to provide justice. And again, people can lose faith if it's not a reasonably equitable administration of justice across people.

• 43:33Speaker 00

  But there's one more.

• 43:35Speaker 01

  There's one more. I'm slipping my mind right now.

• 43:38Speaker 00

  You had it, but I think it's, you said misplaced admiration breeds servility. That we grow deferential to those above us and negligent towards those near them.

• 43:50Speaker 01

  Yes, so in many, I would guess that in many of the places where people work.

• 44:01Speaker 01

  That people can become extraordinarily deferential to those in positions of power across a number of dimensions. And therefore, rather than calling out or speaking up when they view things as wrong, they will defer. And that's part of this admiration of the rich and the powerful. And again, it's not the rich and the powerful just because they're rich and powerful. It's admiring them for reasons other than kind of their virtue and their honesty and the degree to which they live a life of integrity.

• 44:46Speaker 01

  And if that's the case, then we're going to defer to leaders who don't exhibit those types of virtuous traits. We're simply going to defer to people who have achieved power and wealth, regardless of how they've gone about it.

• 45:07Speaker 00

  When I was a little boy, my father gave me a book of stories. I think at the time, it was probably a not really at the time, but in his time, when he was a little boy, it was a book that was influential. And it was stories, there were stories of virtue. One that I recently reheard, I hadn't heard it in 50, 60 years, was the story of Damon and Pythias. Damon and Pythias are two friends. The king sentences one of them to death for treason or some not real reason, actually. It's not treason, he doesn't like the king or he says something bad about him. So the king sentences him to death and Damon, I'm not sure which one it was, I'll pretend it's Damon. Damon says, "Can I just, before you kill me,

• 45:52Speaker 00

  can I go home and say goodbye to my family?" And he says, "You think I'm a sucker? You think I'm gonna let you go? Is he pretending you're gonna come back? I mean, this is ancient times. It's not like a, can't put a track, you know, a device on him. Doesn't have GPS." So he says, "No, you can't go." And he says, his friend, Pythias, says, "I'll tell you what, I'll stand in his place. I trust him." I know he'll come back and if he doesn't come back, he can kill me. Which of course, really an unsatisfying outcome for the king. But, but he's relying on the friendship, which he understands is real. For whatever reason, why, I don't know why.

• 46:35Speaker 00

  But he knows it's real, so he knows that the, he thinks the other one will come back. So he lets him go. And of course, the, you know, the execution is scheduled for nine AM a week from then. And, you know, that he does not back the day before, he's not back that night, he's not back that morning at seven thirty. And as they're about to kill poor pithious Damon bursts in the door and says, you know, my ship sank and I got robbed by, by bandits and I did the best I could do. I'm really sorry, I made you nervous. But here I am. And the king pardons both of them. And, cause he's so impressed by the friendship and the loyalty and the kindness. And he says, I pardon you on condition that you teach me to be as good a friend.

• 47:20Speaker 00

  And you know, those are the kind of stories I grew up with. I'm not saying I'm a good friend. I don't, and I have no idea if I'm a good friend or not. I don't think I'm particularly a good friend. But I'm more interested in the fact that in America, when I was a little boy, people were raised on such stories. They were not raised on the rogue. They were not raised on the, the kid who did the wrong thing and got rich and got, you know, was the cool kid. And something happened in, in modernity, I think. I'm not sure what it is. It probably goes well, well, before my childhood. Something about the 20th century, that simple virtue became somewhat for suckers. And that's a bad thing for society. It's a really bad thing.

• 48:05Speaker 00

  And I think that's what Smith was saying, and it's what I understand you to be saying, that the people we admire, who we see as role models, matter. Uh, you know, I once heard a talk, we're in March and the Academy Awards are coming. There are the people we admire. You know, they get all the glory. They, a billion people are watching, I don't know how many, millions, tens of millions in America. These are the people who are the coolest. These are the people who are loved. And they're

• 48:38Speaker 00

  I mean, I like them a lot, some of them, but they're actors. They're not truly virtuous people. They're skilled. I like what they do. They've given me a lot of happiness and satisfaction, and they've moved me to tears and made me laugh. But they're actors. It's not the most... We don't have an Oscars for the best people. We have an Oscars for the best movie stars.

• 48:58Speaker 01

  Yeah.

• 49:00Speaker 01

  Yeah. No, I think...

• 49:04Speaker 01

  I guess I would...

• 49:08Speaker 01

  I think what I'm not sure of, this is a... What I'm not sure of in the US is there's an admiration for what glitters, as you point out.

• 49:25Speaker 01

  I would say that there's an admiration for certain political leaders that, to me, doesn't seem to be based on virtue or what Smith would admire.

• 49:40Speaker 01

  But at a... At very local levels,

• 49:46Speaker 01

  that, those types of traits, I think, are still very much valued.

• 49:56Speaker 01

  For example, I'll just give it a small example. My parents had a small... Had a small house in Maine. And the neighbors couldn't have been more different politically. And it was simply not possible to discuss national politics with them. But in terms of... If I needed anything and if they needed anything, we would be there for each other. And at a local level, dealing with how to raise money to address this problem or that problem, there was much, a very much, shared sense. And in terms of the story you gave about the friends going for death,

• 50:41Speaker 01

  I mean, trusting with money, resources, houses, anything. So this, this... There's sort of in me a hope that some of those traits that we see in each other at these smaller levels...

• 50:58Speaker 01

  Can with some work replace what's going on at a bigger level? There's a hope in me that some of the anger, some of the constant desire to be angered by what's going on at the national and international level, where we tap into that all of the time and the media feeds it to us all of the time, that we'll become tired of it. And maybe my optimism is irrational, but seeing it at a small level, I'm hoping we can reclaim it at a bigger level.

• 51:35Speaker 00

  Yeah, I think that's a great point.

• 51:38Speaker 01

  I don't know.

• 51:39Speaker 00

  No, that's a great point, and I think there is a temptation to think that politics is the most important arena, when in fact, usually it is not. It is the interactions we have with the people who live near us, our friends, our family, and so on. You know, being a good brother, being a good sister, being a good parent, being a good child, these are so much more important than being a smart voter or a wise consumer, social media. I'm going to read this quote from Smith, which I love, it's a little long, but it kind of summarizes what we've been talking about, and I want to close with something else. Quote, "To desire to acquire and to enjoy the respect and admiration of mankind are the great objects of ambition and emulation.

• 52:24Speaker 00

  Two different roads are presented to us, equally leading to the attainment of this so much desired object, the one by the study of wisdom and the practice of virtue, the other by the acquisition of wealth and greatness. Two different characters are presented to our emulation, the one of proud ambition and ostentatious avidity, the other of humble modesty and equitable justice. Two different models, two different pictures are held up to us, according to which we may fashion our own character and behavior, the one more gaudy and glittering in its coloring, the other more correct and more exquisitely beautiful in its outline, the one forcing itself upon the notice of every wandering eye, the other attracting the attention of scarce..."

• 53:07Speaker 00

  Anybody but the most studious and careful observer. They're the wise and the virtuous chiefly a select, though I am afraid, but a small party who are the real and steady admirers of wisdom and virtue. The great mob of mankind are the admirers and worshippers. And what may seem more extraordinary, extraordinary, most frequently, the disinterested admirers and worshippers of wealth and greatness. Close quote.

• 53:34Speaker 01

  How can you not love this guy?

• 53:35Speaker 00

  I know, yeah.

• 53:38Speaker 01

  Like, when you read that, it's so beautiful. I kind of then question. So why you, why do I have to rewrite it in a way for Substack? Just read the guy. Yeah, he's, um, yeah, he's, uh,

• 53:53Speaker 01

  he's a, it's, you can't, that's why it's can be annoying when Smith gets caricatured, like in the movie, um, uh, Wall Street with Michael Douglas, you know, greed is good. And I was like, that, that guy's not saying greed is good.

• 54:10Speaker 00

  Definitely not. And anyway, it's just such a fascinating thing when, you know, your observation that you should just read Smith. The reason, the reason Smith is great, I want to suggest, there are many reasons, but one of them is if you summarize that with ChatGPT, you don't have to use it because it's pretty easy to summarize. It says,

• 54:33Speaker 00

  pursue wisdom and virtue. Don't pursue wealth and fame. And that's good advice, kind of, I guess. But that's not why Smith is great, because he's giving you good advice. He's giving, the reason he's great is he says it in a way that first of all warns you about the temptation to take the wrong path. He's explaining to you how easy it is to succumb to the seductions of wealth and fame. And that's great. He's telling you an insight about your own character that you might otherwise. He's not just lecturing, he's not just preaching it.

• 55:10Speaker 01

  Correct.

• 55:11Speaker 00

  He's giving you an insight into the human heart that is, um, that is quite profound. It's interesting to think about his own life. He lived pretty well. He wasn't a pauper. He wasn't the poor man's son. Or the poor man. It might have been something of the poor man's son. But, you know, most of his life was devoted to understanding things and his friendship, you know, in many ways with David Hume, which he valued greatly. And of course, he's a guy to be friends with. He's very stimulating company. But you could debate how well Smith lived up to his own advice, but I think he did pretty good.

• 55:55Speaker 01

  Oh, yeah, I think so, too. I think the other thing, by the way, in the quotation, just building on what you were saying, is that he also, this goes back to the beginning part of our conversation, is that he sort of says, "Look, it's quite natural for us to seek this admiration of others." You know, that's part of the reason we work hard. And he sort of is telling you where this conflict comes from, because we seek that, and yet we're socialized, we have this internal, you know, impartial spectator that's conscious, and there can be a conflict. And that, he wants us to reflect and find that path that

• 56:37Speaker 01

  is consistent with our internal, you know, our internal morality, our internal sense of right or wrong. And so, it's very nuanced. It's not like wealth and power are bad. And so, it's a very, very sophisticated perspective on human nature. And that's why I appreciate him so much.

• 57:03Speaker 00

  And I guess the other way to be critical of him is that he's one of the most famous people in the history of human thought. Right? But I think, and this is a point about the nuance, he did not pursue that in a particularly aggressive way. He did not count how many downloads of his YouTube video describing the wealth of nations in eight minutes he was able to get. Of course, he lived in a different time. It was harder to be as ambitious as it's possible to be now through all kinds of ways that are not so healthy for the soul. But it is...

• 57:40Speaker 00

  He, in a way, got lucky. You know, I don't think he intended to be the greatest economist or most influential economist of all time. Let me ask you a question. Where'd you go to graduate school?

• 57:52Speaker 01

  UCLA.

• 57:53Speaker 00

  Did you read Smith in graduate school? What years were you there?

• 57:57Speaker 01

  No, I didn't read Smith in graduate school. There may have been small, small, small segments of the wealth of nations. So, actually, reading, the reading of the Theory of Moral Sentiments, if, I'll tell you a little story about that. So, my father, who is a professor of history and a Marxist, and writes a lot of books on Marx, felt that Marx did not understand Adam Smith. And so, he, this is during COVID, and he wanted to read Smith with me. So, he decided to start with the Theory of Moral Sentiments, which I, like I had mentioned, had not read.

• 58:39Speaker 01

  So, we were gonna read this chapter by chapter, section by section, and then chat. So, we each read, and then we got together. And I was very annoyed with my father, because I felt that he had read Smith, simply trying to find in Smith what he wanted to read. And then I realized that I had read Smith, simply wanting to find in Smith what I wanted to read. And so, I went back, and I read the sections again. And, you know, first I had highlighted, then I highlighted more. And then I realized, man, I can't caricature this guy into what I want him to be, given as a modern, trained economist.

• 59:22Speaker 01

  And it was just taking a deep breath, and reading, and appreciating him, and then talking to my, my father about it. And as I mentioned to you outside, is that by the time I got done reading Smith, the entire book was essentially highlighted, and I had to buy another copy so I could read it. And so, that's, that's sort of how, so, no, not graduate school, way after graduate school.

• 59:50Speaker 00

  But, and so, you know...

• 59:53Speaker 00

  I had to read, I think, the Divisional Labor Chapter, maybe the Compensating Differentials Labor Wage Chapter for my Labor Economics class in graduate school. But I suspect Smith's not read at all anymore at the graduate level in economics. And just to tell a quick story, when I gave a seminar on Smith at an institution I won't name, one of the faculty who doesn't have a Nobel Prize, but he could get one sooner than later, said to me, "Why would you read something written in 1759?" And I was talking about the Theory of Moral Sentiments. He said, "Hasn't everything in there been superseded by other things?

• 1:00:36Speaker 00

  I mean, don't we already know all this stuff?" And I should just mention that all the quotes I've read, I'm pretty sure, are from the Theory of Moral Sentiments, 1759, not Wealth of Nations, 1776. And I said, "Well," I wasn't quite sure how to respond to that, but I think it was Don Boudreau, who's been a guest many times on the program, pointed me to an essay by Coase, Ronald Coase, that I'll link to, where Coase gives a, he writes an essay on assessing Smith's contributions. It's a fantastic essay. And toward the end, he says something about how, yeah, well, and I'm going to paraphrase it, but something like, "Yeah, modern psychology, comma, when it's true, comma, has some of

• 1:01:21Speaker 00

  Smith's insights." Meaning, you know, this great advance, these great advances we've made over the last 250-plus years, they're kind of small. And Smith's wisdom and insight into the human condition are just as vivid and probably as correct as they were then and remain true and are worth reading for that reason. So, that's, you know, he's not a, you don't read him to find out the theory of chemistry in 1759, which we've made some advances. You read him to understand the human heart, and I don't think we've gotten that far since then.

• 1:02:01Speaker 01

  I couldn't agree more, Adam. I just could not agree more. It's funny to be-- like, if you go to economics before the movement in behavioral economics, I mean, Smith would have looked at the profession like, what are you guys doing? Have any of you sort of engaged with the world before? So I think that, yes. And like you say, I'm sure there have been immense advances in psychology, but Smith is, I think, writing a century or more before psychology even becomes its own discipline.

• 1:02:39Speaker 01

  So, and I think the passage you read earlier, there are a lot of insights. And I certainly, not only have learned a lot, but have-- it's given me great joy learning from Smith. It's been a real pleasure.

• 1:03:03Speaker 00

  My guest today has been Ross Levine. Check out his letters. We'll link to them. And Ross, thanks for being part of Econ Talk.

• 1:03:11Speaker 01

  Thank you very much for having me. It's been a pleasure.

• 1:03:19Speaker 00

  This is Econ Talk, part of the Library of Economics and Liberty. For more Econ Talk, go to econTalk.org, where you can also comment on today's podcast and find links and readings related to today's conversation. The sound engineer for Econ Talk is Rich Goyette. I'm your host, Russ Roberts. Thanks for listening. Talk to you on Monday.