law and the invisible hand A contemporary interpretation of Adam Smith’s work on jurisprudence, revealing Smith’sbeliefthatprogressemergesfromcooperationandacommitmenttojustice.In Smith’stheory,thetensionbetweenself–interestandtheinterestsofothersismediated by law, so that the common interest of the community can be promoted. Moreover, Smithinformsusthatsuccessfulsocietiesdoatleastthreethingswell.Theypromotethe commoninterest,advancejusticethroughtheruleoflaw,andtheyfacilitateournatural desiretotruck,barter,andexchange.Inthisprocess,lawfunctionsasaninvisibleforce that holds society together and keeps it operating smoothly and productively. Law enhances social cooperation, facilitates trade, and extends the market. In these ways, lawfunctionslikeAdamSmith’sinvisiblehand,guidingandfacilitatingtheprogressof humankind. robinpaulmalloyistheE.I.WhiteChairandDistinguishedProfessorofLaw,anda KauffmanProfessorofEntrepreneurshipandInnovationatSyracuseUniversityCollege of Law. He is a leading expert on market jurisprudence, property, real estate develop- ment, and land use regulation. Malloy has published numerous books and scholarly articles.ThisishisfourthbookwithCambridgeUniversityPress. Law and the Invisible Hand a theory of adam smith’s jurisprudence ROBIN PAUL MALLOY Syracuse University UniversityPrintingHouse,Cambridgecb28bs,UnitedKingdom OneLibertyPlaza,20thFloor,NewYork,ny10006,USA 477WilliamstownRoad,PortMelbourne,vic3207,Australia 314–321,3rdFloor,Plot3,SplendorForum,JasolaDistrictCentre,NewDelhi 110025,India 103PenangRoad,#05–06/07,VisioncrestCommercial,Singapore238467 CambridgeUniversityPressispartoftheUniversityofCambridge. ItfurtherstheUniversity’smissionbydisseminatingknowledgeinthepursuitof education,learning,andresearchatthehighestinternationallevelsofexcellence. www.cambridge.org Informationonthistitle:www.cambridge.org/9781108836630 doi:10.1017/9781108874168 ©RobinPaulMalloy2022 Thispublicationisincopyright.Subjecttostatutoryexception andtotheprovisionsofrelevantcollectivelicensingagreements, noreproductionofanypartmaytakeplacewithoutthewritten permissionofCambridgeUniversityPress. Firstpublished2022 AcataloguerecordforthispublicationisavailablefromtheBritishLibrary. LibraryofCongressCataloging-inPublicationData names:Malloy,RobinPaul,1956–author. title:Lawandtheinvisiblehand:atheoryofAdamSmith’sjurisprudence/RobinPaulMalloy, SyracuseUniversity,NewYork. description:Cambridge,UnitedKingdom;NewYork,NY:CambridgeUniversityPress,2022.| Includesbibliographicalreferencesandindex identifiers:lccn2021024916(print)|lccn2021024917(ebook)|isbn9781108836630(hardback)| isbn9781108812702(paperback)|isbn9781108874168(epub) subjects:lcsh:Lawandeconmics.|Smith,Adam,1723-1790–Influence. classification:lcck487.e3m35482022(print)|lcck487.e3(ebook)|ddc343.07–dc23 LCrecordavailableathttps://lccn.loc.gov/2021024916 LCebookrecordavailableathttps://lccn.loc.gov/2021024917 isbn978-110883663-0Hardback CambridgeUniversityPresshasnoresponsibilityforthepersistenceoraccuracy ofURLsforexternalorthird-partyinternetwebsitesreferredtointhispublication anddoesnotguaranteethatanycontentonsuchwebsitesis,orwillremain, accurateorappropriate. For Margaret ... With love as Time Goes By Contents About the Cover page ix Listof Figures xi About the Author xiii Preface xv Acknowledgments xxi Guide toCitations by Adam Smith xxiii 1 Introduction: Law’s InvisibleHand 1 2 Setting the Stage 10 3 Social Organization in the InformalRealm 21 3.1 The Invisible Hand 21 3.2 The Man in the Mirror 27 3.3 The Impartial Spectator 30 3.4 Connecting Smith’s Three Metaphors 35 4 Social Organization in the Formal Realm 40 4.1 Utility 41 4.2 Authority 44 4.3 Justice 49 4.4 Connecting Smith’s Three Pillars 57 5 Integrating the Informaland Formal in Smith’sTheory 59 6 The Spectator View 65 6.1 Language and Interpretation 68 vii viii Contents 7 Judgment and Justice 77 7.1 AestheticJudgment, Justice, and Smith’sIdeal 79 8 The Sentiment of Common Interest 82 9 The Impartial Spectator, Homo economicus, and Homo identicus 87 9.1 Homo economicus 90 9.2 Homo identicus 97 9.3 AFalse Dichotomy and the Impartial Spectator 101 10 Understandingthe Four Stages of Progress 104 10.1 Smith’sFour Stages 104 10.2 Market Process Theory 107 11 Adam Smith in American Law 119 12 Parting Thoughts 143 Bibliography 155 Index 165 About the Cover For those readers familiar with the works of Adam Smith, the cover art depicting a standingimageofAdamSmithshouldbeareminderofthefamous1790etchingby JohnKay.Anumberofyearsback,IobtainedanoldprintoftheJohnKayetching from an antiquarian bookstore.I have it framed and hanging in my office. For this book, I wanted a cover that would convey a transformative message of maintainingascholarlycommitmenttothetraditionofAdamSmithwhileexamin- ing his work in a contemporary context. I wanted the cover to illustrate my goal of bringing Adam Smith back into contemporary conversations about law and juris- prudence. To convey this message, I took Adam Smith out of the library setting portrayed by John Kay, where he is cloistured away from the world outside and identified as “Adam Smith the Author of The Wealth of Nations.” I placed Adam SmithinaroomwithalargepicturewindowandacontemporaryNewYorkskyline inthebackground.Ialsoaddedsomelaw-relatedobjectstoSmith’ssurroundingsto indicate that this is a book about Smith’s contributions to law rather than to economics. In this image, Smith is engaging the contemporary world on matters ofjurisprudence. Withthisgoalinmind,Idiscussedmyideasforatransformativebookcoverwitha local artist who I hired to do the work. The artist, Joe Orsak, lives and works in Syracuse, NY. His webpages are atjorsak.com. Caption: Law and the invisible hand Credit: Artwork copyright Robin Paul Malloy. A license has been granted to Cambridge University Press touse this artworkon the cover. ix