Adam Smith wrote two books, one about economics and the other about morality. His Wealth of Nations argues for a largely free-market economy, while his Theory of Moral Sentiments argues that human morality develops out of a mutual sympathy that people seek with one another. How do these books go together? How do markets and morality mix? James Otteson's 2002 book provides a comprehensive examination and interpretation of Smith's moral theory and shows how his conception of the nature of morality applies to his understanding of markets, language and other social institutions. Considering Smith's notions of natural sympathy, the impartial spectator, human nature, and human conscience the author also addresses the issue of whether Smith thinks that moral judgments enjoy a transcendent sanction. James Otteson sees Smith's theory of morality as an institution that develops unintentionally but nevertheless in an orderly way according to a market model.

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You have heard of the Seven Deadly Sins: pride, greed, lust, envy, gluttony, wrath, and sloth. Each is a natural human weakness that impedes happiness. In addition to these vices, however, there are economic sins as well. And they, too, wreak havoc on our lives and in society. They can seem intuitively compelling, yet they lead to waste, loss, and forgone prosperity. In this thoughtful and compelling book, James Otteson tells the story of seven central economic fallacies, explaining why they are fallacies, why believing in them leads to mistakes and loss, and how exorcizing them from our thinking can help us avoid costly errors and enable us to live in peace and prosperity.

Chapter 5 completes the argument on honorable business by specifying a “hierarchy of moral value” linking the individual businessperson’s activities to the purpose of a firm within a properly functioning market economy that is itself part of a just and humane society. If these relationships have been correctly described, the individual businessperson should be able to give an account of his or her professional activities that connects them all the way up the chain of moral purpose to the kind of society in which we should all want to live. The chapter also looks at the increase in material prosperity the world has experienced since approximately 1800 and connects that prosperity to the “hierarchy of moral value.” The chapter considers the role of government and regulation in the creation of prosperity and explores the extent to which the present argument connects to ethical theories of deontology, utilitarianism, and virtue ethics.