transcript

Speaker 1:
[00:02] 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 and 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 mail at econtalk.org. We'd love to hear from you. Today is March 10th, 2026, and my guest is economist Ross Levine, the Booth-Durbus family, Edward Lazare 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 EconTalk.

Speaker 2:
[01:01] Oh, it's great to be here, Russ.

Speaker 1:
[01:03] Our topic for today is Adam Smith. Today is March 10th. Yesterday, March 9th, 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.

Speaker 2:
[01:25] So I decided that it was the 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 US 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 to read when they're waiting in 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.

Speaker 1:
[02:30] So, 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, which will also 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 have imagined and yet you track your sleep as if peace could be graphed, 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 read. But you also try to quote Smith directly, verbatim, as much as possible. And 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 what's Smith asking here? What is he saying to a modern, from his perspective of the 18th century? What's he asking us?

Speaker 2:
[04:16] So the way I understood it and understand it is 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. 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, and 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 was one of the ways in which Smith opens up the theory of moral sentiments, his first book, and seemed the right way to sort of engage readers from a very broad array of readers.

Speaker 1:
[05:34] And 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 life hack industry, right? Here's a trick. Here's a trick. You know, here's a shortcut. Here's a fantastic way to, you only have to sleep four hours and you'll be even more rested. Here's a seven-minute workout. I just got my second one. I thought that that fad died. It turns out all I need is a chair in seven minutes. And I am going to 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. 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 this focus of optimization.

Speaker 2:
[06:30] 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 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. 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.

Speaker 1:
[07:37] Yeah, I've quoted it before. There's a line from the poet George Bailey 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, etc., 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 is not always the same as to why we actually do it. And what's Smith's answer as to why we do it?

Speaker 2:
[08:17] So, Smith, and it's a very interesting contrast with the way most economists approach it. But Smith 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 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 and approval of others. And then he says, look, this 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 quite remarkable 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.

Speaker 1:
[10:36] 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, in many ways, the king of the self-help world. He's 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 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. We'll 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, 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? Don't you have enough love and admiration for people around you? Or do you think you're just stuck in a habit that you acquired from long ago? It's a tough question. Sorry about that.

Speaker 2:
[12:16] It's a very good question, but I think, at least for me, I think I have an answer. So in terms of 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 ten years, 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 has 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 and I'm writing a book that is more geared toward a broader audience and 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.

Speaker 1:
[14:04] 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 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 without, we're not sure how that's going to turn out, but it will probably change the way some of our colleagues behave. I want to talk about the parable of the poor man's son.

Speaker 2:
[15:20] I just want to interrupt one thing that I may be the only, one of your only guests who knows who George Allen is. That's true.

Speaker 1:
[15:27] It's true. Yeah, I noticed that recognition when I mentioned him. So, the poor man's son, the parable of the poor man's son, I'm tempted to read it, but 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 of the poor man's son, and why is it relevant for this conversation?

Speaker 2:
[15:51] So, it's Smith's story, but it's a story that has been told again and again in many different forms. So I think 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 wealth, I will have that esteem and approval, and that will make me happy. And the word he uses is, Smith uses is tranquil. 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 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. 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?

Speaker 1:
[18:01] 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, 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 ridiculous association, I think about LBJ and Robert Carrow's biography, that his father was a small-time politician 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 well- 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 at Smith's day wasn't particularly true. 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, 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. 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 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 going to like this when you get what you want. Be careful what you wish for. And of course, long-time listeners will know 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, lovable rather than just loved. Being intrinsically good is Smith's recipe for happiness. And in particular, to be a, 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.

Speaker 2:
[21:23] 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 conscious, 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's, he, he, again, very contrary to some of the philosophers at that time and contrary to some economists, your sense of right and wrong is, is based on your social interactions. It doesn't just emerge. And that when there's a consistency between, you know, being this good, virtuous person, this person that your conscious approves of, and being in a society that also finds those things admirable, then you, I read Smith as saying, this is when you have a very good life. But like you say, there's, there's, 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. 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 distinction between gaining the approval from outside and having the internal approval of your own actions. That was my reading of it. Yeah.

Speaker 1:
[23:44] I want to take a quote that you have here that elaborates on it 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. 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 feel, often I get praised.

Speaker 2:
[24:18] Even in your quotation when you said that you're not an expert on Smith. Just play one on TV. It's a good joke, but there's an element of the imposter element there.

Speaker 1:
[24:28] Exactly. It's well said.

Speaker 2:
[24:29] When you wrote a book, you really are an expert on Smith.

Speaker 1:
[24:33] I'm not so sure. I'm serious. But I don't know. But I do know there are people who 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, and have that reputation, and match what people think of you.

Speaker 2:
[25:22] Yes. No, it's a very good point. And so, now we can do, we can devolve into psychotherapy a little bit here.

Speaker 1:
[25:31] Sure, bring it on.

Speaker 2:
[25:31] Yes, we all sort of feel this sense of, maybe not all of us, but I do. Many people do have this 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. 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 ten 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, is, can be a useful way to lead a happier life, you know. And be a good, yeah, so I think that you brought up a point earlier, that Smith did not view one's happiness 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 forgoing 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.

Speaker 1:
[27:45] So 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're right, this is very, I think, very deep. We say these two desires are easy to confuse. The love of praise seeks the opinion of others. The love of praise worthiness seeks inner integrity. One depends on spectators. The other depends on conscience. One is fleeting and hollow. The other is steady and deeply satisfying. Much of human dissatisfaction comes from pursuing the first while neglecting the second. How do you know when you are truly praise worthy 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 want to always fool people that we're successful. We'd like to 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?

Speaker 2:
[29:05] I wish I was insightful enough to say it, but I'm just trying to say what Smith said in sub-stack language, so it's easy to digest, so, yeah.

Speaker 1:
[29:18] 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.

Speaker 2:
[29:46] Yeah. And by the way, so I was, when I start, I have lots of letters to go, but I kind of wrote the 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 we'll, you know, hey, it's very, it's just wonderful to be on the show with you. But it's, it's, so 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, an inner peace, or inner peace and contentment also involves serving a social role.

Speaker 1:
[30:49] And I think the challenge, of course, is easy to say that. It's easy to give this advice.

Speaker 2:
[30:55] It is.

Speaker 1:
[30:55] 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?

Speaker 2:
[31:14] 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 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, 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, quote, the others. And I think that's how I would frame it, say, for my kids who were trying to make their way in the world and are not turning toward their late 60s with the comforts to be able to just pursue their intellectual curiosities.

Speaker 1:
[33:29] Yeah, 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 in to figure 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 these help people figure out who they want to become and what's at their 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.

Speaker 2:
[34:32] Absolutely. Yes.

Speaker 1:
[34:35] 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. Samantha 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? It fell in the blank. Some entertainer, some athlete, some flawed human being like we all are, because of one piece of their success, say. And you could argue it really doesn't matter. So why did you decide to focus on this issue?

Speaker 2:
[35:29] 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. And the other reason was that I wanted to talk to people today, especially given the media and the political environment, that when we admire people, 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. And it poses, again, the question that goes back to the way I'll put it, the way you put it, like, who do we want to become? Are these people virtuous? Are they good? Are they benevolent? 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 were 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 pose it. I think that that's wonderful. And so it was those two reasons. It's really very true to Smith. It's not looking for something on the side where I wanted to say something and I look to Smith. This is front and center.

Speaker 1:
[37:38] You know, he has a lot to say that's really fascinating and I think completely underappreciated about how we admire the powerful and, of course, 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, 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, you call it a harmless social habit. You say it's not that. You say it threatens the foundation of a free society. You get 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 get four reasons for why this is socially, in other words, not just personally, gee, you think a lot of that person, that person is not so nice, not good for you to admire somebody who's not a nice person. 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.

Speaker 2:
[39:42] 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 about, 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 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. 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 if 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 a judicial system 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 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. 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.

Speaker 1:
[43:34] But there's one more.

Speaker 2:
[43:36] There's one more, I'm slipping my mind right now.

Speaker 1:
[43:38] 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.

Speaker 2:
[43:50] Yes. So, so in many, I would guess that in many of the places where people work, 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. 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.

Speaker 1:
[45:08] 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 re-heard, I hadn't read 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, can I go home and say goodbye to my family? And he says, do you think I'm a sucker? Do you think I'm going to let you go? Is he pretending you're going to come back? I mean, this is ancient times, it's not like you 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. Of course, really an unsatisfying outcome for the king. But he's relying on the friendship, which he understands is real, for whatever reason, I don't know why. 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 9 a.m. a week from then. And then, you know, that he does not back the day before, he's not back that night, he's not back that morning at 730. And is there about to kill poor, piteous, Damon bursts in the door and says, you know, my ship sank and I got robbed 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 because 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. 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 have no idea if I'm a good friend or not. I don't think I'm particularly 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 kid who did the wrong thing and got rich and was the cool kid. Something happened in modernity, I think. I'm not sure what it is. It probably goes well before my childhood, something about the 20th century, that simple virtue became somewhat for suckers. That's a bad thing for society. That's a really bad thing. I think that's what Smith was saying, and that's what I understand you to be saying, that the people we admire, who we see as role models, matter. I once heard a talk, we're in March and the Academy Awards are coming. There are the people we admire. They get all the glory. 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, 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.

Speaker 2:
[48:58] Yeah, yeah, yeah, no, I think, I guess I would, I think what I'm not sure of, this is, this is a, what I'm not sure of in the US is there's an admiration for what glitters, as you point out. I would say that there's an admiration for certain political leaders that to me doesn't seem to be based on virtue or, you know, what Smith would admire. But at a, at very local levels, that, those types of traits, I think, are still very much valued. 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, I mean, trusting with money, resources, houses, anything. So this, there's sort of in me a hope that some of those traits that we see in each other at these smaller levels 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.

Speaker 1:
[51:36] Yeah, I think 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 wise consumer of social media. I am going to read this quote from Smith which I love. It is a little long but it kind of summarizes what we have been talking about. 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. 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 anybody, but the most studious and careful observer. They are the wise and the virtuous, chiefly a select, though I'm 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 worshipers, and what may seem more extraordinary most frequently, the disinterested admirers and worshipers of wealth and greatness. Close quote.

Speaker 2:
[53:34] How can you not love this guy?

Speaker 1:
[53:35] I know.

Speaker 2:
[53:39] When you read that, it's so beautiful, I kind of then question, so why do I have to rewrite it in a way for Substance? Just read the guy. That's why it can be annoying when Smith gets caricatured, like in the movie Wall Street with Michael Douglas, you know, greed is good. And it's like, that guy's not saying greed is good.

Speaker 1:
[54:10] No, he's definitely not. Anyway, it's just such a fascinating thing when, you know, your observation that you should just read Smith. The reason Smith is great, I want to suggest, there are many reasons, but one of them is if you summarize that with Chachi PT., you don't have to use it because it's pretty easy to summarize. It says, 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 at you. He's giving you an insight into the human heart that is quite profound. It's interesting to think about his own wife. 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 most of his life was devoted to understanding things and his friendship, in many ways, with David Hume, which he valued greatly. Of course, he's a guy to be friends with. He's a very stimulating company. But you could debate how well Smith lived up to his own advice. But I think he did pretty good.

Speaker 2:
[55:55] 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, this conscious, and there can be a conflict. And that he wants us to reflect and find that path that is consistent with our internal, you know, our internal morality or 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.

Speaker 1:
[57:03] You know, 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. He didn't, 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, in a way, he 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 did you go to graduate school?

Speaker 2:
[57:53] UCLA.

Speaker 1:
[57:54] Did you read Smith in graduate school? What years were you there?

Speaker 2:
[57:58] No, I didn't read Smith in graduate school. There may have been small, small, small segments of the wealth of nations. So actually, the reading of the theory of moral sentiments, 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 was, this was during COVID, and he wanted to read Smith with me. So we decided to start with the theory of moral sentiments, which I, like I had mentioned, had not read. So we were going to 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, this guy, I can't caricature this guy into what I want him to be given as a modern, trained economist. And it was just taking a deep breath and reading and appreciating him. And then talking to 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 sort of how... So, no, not graduate school, way after graduate school.

Speaker 1:
[59:50] And so, you know, I had to read, I think, the division of 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 will not 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? I was talking about the theory of moral sentiments. He said, hasn't everything in there been superseded by other things? 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 and Action, 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, he writes an essay on assessing where, you know, Smith's contributions. It's a fantastic essay. And towards the end, he says something about how, yeah, well, and I'm going to paraphrase it, but, you know, something like, you know, modern psychology, comma, when it's true, comma, has some of Smith's insights, meaning, you know, this great advance, these great advances 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.

Speaker 2:
[62:01] 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? You know, have any of you sort of engaged with the world before? You know, 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. 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.

Speaker 1:
[63:02] My guest today has been Ross Levine. Check out his letters, we'll link to them. And Ross, thanks for being part of EconTalk.

Speaker 2:
[63:11] Thank you very much for having me. It's been a pleasure.

Speaker 1:
[63:19] This is EconTalk, part of the Library of Economics and Liberty. For more EconTalk, 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 EconTalk is Rich Goyette. I'm your host, Russ Roberts. Thanks for listening. Talk to you on Monday.