How Would Adam Smith Reimagine His “Economic Man” Today?

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In the face of a slowing economy, it is hard to ignore a report from the Council on Foreign Relations which details how closing the gender pay gap could add a staggering $28 trillion to the global GDP. Women make up half the population but only contribute 37 percent to the global GDP. This disparity got me thinking not only about how to close the gap, but also about how we value the unpaid, unseen, but nonetheless important work already being done by women around the world. Interestingly, this train of thought led me to Adam Smith and his concept of the “economic man”.

Adam Smith’s The Wealth of Nations famously states, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.” In the centuries since Smith’s writings his central premise – that economic men pursue self-interest, and in doing so increase the wealth of nations – has become foundational to most contemporary economic thinking.

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What Smith did not contemplate much was the value of economic women – not surprising given he lived and wrote in 1776 Scotland where very few women received a wage, invested in a business, or worked outside the home at all. But their labor was critical to building the wealth of their nation. Smith recognized that in North America, “a numerous family of children, instead of being a birth, is a source of opulence and prosperity to the parents.” Large families, and the “labour of husband and wife together,” were an important distinction between countries and their ability to build wealth.

He recognized the importance of what we would call “human capital” today, and the critical role of women in building human capital but did not explore the issue further. The fact is that unpaid work is still a reality for women around the world, as in 1776. Do we value it differently now than we did then? Would Adam Smith?

In her cleverly titled book, Who Cooked Adam Smith’s Dinner?Katrine Marcel raises the question of whether the economic woman is fundamentally different and how economics has historically regarded “women’s work.”

Recall Smith’s example of the “benevolent butcher” – isn’t it from the benevolence of our mothers that most of us expected our dinners? One could argue that a mother’s self-interest is to raise her children to be strong so they look after her as she ages, but that would diminish a mother’s love and effort on her children’s behalf. If Adam Smith were alive and writing today, would he value unpaid work like cooking his dinner or raising children and what impact would that have on the foundations of economic thinking?

Aside from the moral argument, Smith would almost certainly recognize the impact of unpaid labor on GDP calculations – a recent UN study found that unpaid care and domestic work (primarily undertaken by women) “is valued to be 10 and 39 per cent of the Gross Domestic Product and can contribute more to the economy than the manufacturing, commerce or transportation sectors.”

There’s an old saying that “A man works from sun to sun, but a woman’s work is never done.” It isn’t one of Smith’s, but it’s likely he’d have agreed with the sentiment. Were he to write today about the merits and impacts of “economic woman” alongside his economic man, we would have an economic value for the traditional women’s work of caring for family and building human capital.

Unfortunately, Smith isn’t here today to give us his thoughts, but his final residence, Panmure House in Edinburgh, has been restored as a place of research and economic debate in the spirit of Smith’s work. The Panmure House Prize funds research into long-term investing and its relationship with innovation in the spirit of Adam Smith – this year’s prize will be awarded on 19 July in Edinburgh. So, perhaps the concept of “economic woman” may indeed be explored further there in years to come.

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Credit: www.forbes.com /

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