Justice, Beneficence, and the “Well-Governed Society”

Center for Citizenship & Constitutional Government

Available on-demand

How do individual actions harmonize to produce widespread prosperity? Master the essential principles of societal flourishing through an analytical examination of the moral and economic frameworks defining a well-governed society. James Otteson, John T. Ryan Jr. Professor of Business Ethics at the Mendoza College of Business at Notre Dame, refines your perspective on justice and governance, providing a robust foundation for understanding civilization.

To read along with the class, enjoy the following:

Adam Smith, Theory of Moral Sentiments (1759), bk. 2, sect. 2, chaps 1–3 (pp. 112–132)
Smith, Wealth of Nations, bk. 4, chap. 9, paras. 50–52 (pp. 184–185)
Class slides can be found here.

In what sense are “all men . . . created equal”? What is human liberty? What is prosperity, and how is wealth created? In 1776 these questions were addressed and acted upon in ways that have created the modern world. Commemorating the 250th anniversary, explore 1776 and the ideas that made the modern world, focusing on the Declaration of Independence and Adam Smith’s Wealth of Nations.

1776 and the Ideas That Made the Modern World, taught by Vincent Phillip Muñoz, Tocqueville Professor of Political Science and Concurrent Professor of Law at the University of Notre Dame and the Founding Director of ND’s Center for Citizenship & Constitutional Government, and James Otteson, John T. Ryan Jr. Professor of Business Ethics in the Mendoza College of Business is sponsored by the Center for Citizenship and Constitutional Government at the University of Notre Dame. To find out more, please visit their website.

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The Smithian Architecture of Prosperity

James Otteson’s lecture provides a sophisticated synthesis of Adam Smith’s dual masterworks, The Theory of Moral Sentiments and The Wealth of Nations. By navigating the intersection of moral philosophy and political economy, Otteson illustrates how “universal opulence” is achieved not through centralized command, but through a specific institutional framework that respects human nature and epistemological limits.

The Foundation of Universal Opulence

The strategic core of Smith’s “recipe” for prosperity begins with the division of labor, which catalyzes a precipitate increase in production. Otteson evaluates how this surplus drives prices down, making goods accessible to the “working poor”—the vast majority of any society. This “universal opulence” signifies that wealth is not a static hoard but a dynamic flow, raising the standard of living for those at the bottom of the economic hierarchy.

The Epistemological Wall—The Local Knowledge Argument

Otteson argues that the most critical barrier to centralized planning is the “local knowledge argument.” He defines knowledge as localized, changing, unknown antecedently, and tacit. Using the “plain woolen coat” example—a product of a staggering, incomputable network of global coordination—Otteson demonstrates that the information required to manage an economy “exceeds all computation.” Crucially, Otteson emphasizes that this knowledge cannot be gotten by third parties; it is an epistemic impossibility. Therefore, intellectual humility serves as a vital vice-prevention mechanism, guarding against the dangerous human tendency to vastly overestimate what one knows about the lives and needs of others.

The “Three Ps” and the Virtues of a Well-Governed Society

Otteson clarifies the distinction between two pivotal virtues: Beneficence and Justice. In a scholarly refinement, he distinguishes between benevolence (from the Latin volere, meaning to “will” good) and beneficence (from facere, to “do” or “make” good). While beneficence is a “positive virtue” involving personal sacrifice, Smithian justice is a “negative virtue.” Justice requires only that we refrain from harming others. Otteson details the “Three Ps”—Person, Property, and Promise—as the “sacred rules of justice.” While a society can persist without beneficence, it cannot survive without these rules, as justice provides the essential bedrock for any stable social order.

The Scope of Governance and the Invisible Hand

Governance must be restricted to three duties: Defense, Justice, and limited Public Works. Otteson explains that public works must meet two stringent criteria: they must be impossible for private entities to provide and must benefit everyone. Smith’s endorsement of “Reading, Writing, and Arithmetic” (the Three Rs) for primary education passes this test as a “common denominator” for all citizens, from plumbers to professors. Within this framework, the “Invisible Hand”—a hapax legomenon occurring only once in The Wealth of Nations—functions through “expanded self-interest.” This concept suggests that in a regime of voluntary exchange, individuals must focus on providing value to others to achieve their own goals.

The Evidence of History

Otteson concludes by highlighting the “prosperity hockey stick” as empirical validation. Over two centuries, the global adoption of Smithian principles has correlated with a reduction in extreme poverty from 94% to less than 9%. This historical evidence suggests that when the “Three Ps” are secure, the compounding nature of prosperity creates a flourishing civilization.

The Computational Limits of Social Planning: Centralized planning is an epistemic impossibility because the dispersed, tacit, and changing nature of human knowledge cannot be aggregated or computed by any third-party statesman.
The Moral Primacy of Justice: Justice is the essential “negative” bedrock of society. Unlike beneficence, which is a commendable personal sacrifice, the protection of Person, Property, and Promise is a mandatory requirement for civilization’s existence.
Expanded Self-Interest as a Social Catalyst: In a well-governed society based on voluntary exchange, individuals are incentivized to adopt “expanded self-interest,” where they must provide value to others to satisfy their own needs.
The Compounding Nature of Prosperity: Economic growth is not accidental; it requires the “certainty of ownership.” When the “Three Ps” are protected, wealth compounds like interest, as evidenced by the dramatic global reduction in extreme poverty.
The Stringency of Public Works: Government intervention is restricted to tasks that meet a dual-threshold: the absolute inability of private/civic groups to perform them and a universal, “common denominator” benefit to the entire population.

“The knowledge you would have to have to manage an entire economy exceeds all computation.” — James Otteson
“First obligation of a parent for a child, beyond making sure they eat and that sort of thing, is training them to follow the rules of justice no matter what. Do not harm other people, don’t steal their stuff.” — James Otteson
“The lack of beneficence tends to do no real positive evil to another person. If I don’t do the good thing for you that I might have done, I haven’t made you worse off.” — James Otteson
“We often vastly overestimate what we actually know about other people, about their situations, about how products are created. He’s calling for a little intellectual humility.” — James Otteson
“If you do nothing else in life but respect everybody else’s physical persons, their property and any voluntary promises you make, then that’s the minimum that we can expect of you in civilized society.” — James Otteson

Justice, Beneficence, and the “Well-Governed Society”

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