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The Theory of Moral Sentiments written by Adam Smith in 1759, is one of the most important works in the theory of capitalism. It provides the ethical, philosophical, psychological and methodological underpinnings to Smith's later works including The Wealth of Nations (1776), A Treatise on Public Opulence (1764) (first published in 1937), Essays on Philosophical Subjects (1795), and Lectures on Justice, Police, Revenue, and Arms (1763) (first published in 1896).
Broadly speaking, Smith followed his mentor, Francis Hutcheson's (University of Glasgow), division of moral philosophy into four parts: Ethics and Virtue; Private rights and Natural liberty; Familial rights (called Oeconomicks); and State and Individual rights (called Politicks).
More specificly he divided moral systems into:
Hutcheson had abandoned the latter, the psychological view of moral philosophy claiming that motives were too fickle to be used as a basis for a philosophical system. Instead he hypothesised a dedicated "sixth sense" to explain morality. This idea, to be taken up by David Hume (see Hume's Treatise 1740), claimed that man is pleased by utility.
Smith rejected his teachers reliance on this special sense. Starting in about 1741 Smith set on the task of using Hume's experimental method (appealing to human experience) to replace the specific moral sense with a pluralistic approach to morality based on a multitude of psychological motives. The Theory of Moral Sentiments begins with the following assertion:
Smith departs from the "moral sense" tradition of Shaftesbury, Hutcheson, and Hume, as the principle of sympathy takes the place of that organ. Sympathy, is the term Smith uses for the feeling of these moral sentiments. It is the feeling with the passions of others. It operates through a logic of mirroring, in which a spectator imaginatively reconstructs the experience of the person he watches:
Sympathy arises from an innate desire to identify with the emotions of others. It can lead people to strive to maintain good relations with their fellow human beings and provide the basis both for specific benevolent acts and for the general social order. Thus is formed within the beast the psychological basis for the desire to obey natural laws. The Theory of Moral Sentiment cuminates in man as self-interested and self-commanded. Individual freedom, according to Smith, is rooted in self reliance, the ability of an individual to pursue his self-interest while commanding himself based on the principles of natural law.