Smith also treated a form of "greed" as the "natural" motive dominant in "capitalism" (which he also treated as "natural"). In contrast to Marx and Keynes, however, the form he takes as natural does not have money as its ultimate object; it is an insatiable desire for material possessions (it's for this reason that Marx claims classical political economy couldn't understand "monetary crises").
Smith explicitly treats this motivation as irrationally based on a mistaken conception of the good life. He also claims, however, that its unfettered pursuit ("natural liberty"), though not an end in itself, has the unintended paradoxical result of providing other members of the community with the material means required for the true end in itself of life, for "what constitutes the real happiness of human life." He explains this as the working of the "invisible hand" of a providential God.
“The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition. These last too enjoy their share of all that it produces. In what constitutes the real happiness of human life, they are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.” Smith, The Theory of Moral Sentiments <http://www.econlib.org/LIBRARY/Smith/smMS.html>
This idea of irrational "greed" as unintentionally producing positive ethical consequences is identified and appropriated by both Marx and Keynes as what Keynes called "the wisdom of Adam Smith."
Thus Marx claims of classical political economy's conception of capitalist motives:
"Accumulate, accumulate! That is Moses and the prophets! 'Industry furnishes the material which saving accumulates.' [23] Therefore, save, save, i.e, reconvert the greatest possible portion of surplus- value, or surplus-product into capital! Accumulation for accumulation's sake, production for production's sake: by this formula classical economy expressed the historical mission of the bourgeoisie, and did not for a single instant deceive itself over the birth-throes of wealth. [24] But what avails lamentation in the face of historical necessity? If to classical economy, the proletarian is but a machine for the production of surplus-value; on the other hand, the capitalist is in its eyes only a machine for the conversion of this surplus-value into additional capital. Political Economy takes the historical function of the capitalist in bitter earnest." <http://www.marxists.org/archive/marx/works/1867-c1/ch24.htm>
Marx also treats these motives, which, following Hegel (whose philosophy of history, like Kant's, also appropriates this aspect of Smith), he calls the capitalist "passions," as unintentionally working to create the forces of production required to make a "true realm of freedom" practicable. This is "the historical function of the capitalist." See, for instance, the Manifesto. <http:// www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm>
Keynes's reference to the "wisdom of Adam Smith" is found is his posthumously published 1946 Economic Journal article, "The Balance of Payments of the United States." (Keynes, Collected Writings, vol. XXVII, pp. 444-6) The "permanent truth of great significance" the article attributes to "classical teaching" in general and to Adam Smith in particular is that "there are in these matters [the balance of payments of the US] deep undercurrents at work, natural forces, one can call them, or even the invisible hand, which are operating towards equilibrium.” The "deep undercurrents" are the “instincts” that find expression in irrational "passions" and whose functioning produces positive social consequences even though these are not consciously intended.
Keynes gives these "instincts" the same historical function as does Marx, the consciously unintended creation of the forces of production necessary to make the "true realm of freedom" practicable. Thus, in The Economic Consequences of the Peace, having claimed that, in 19th century capitalism,
“the duty of 'saving' became nine-tenths of virtue and the growth of the cake the object of true religion. There grew round the non- consumption of the cake all those instincts of puritanism which in other ages has withdrawn itself from the world and has neglected the arts of production as well as those of enjoyment. And so the cake increased; but to what end was not clearly contemplated. Individuals would be exhorted not so much to abstain as to defer, and to cultivate the pleasures of security and anticipation. Saving was for old age or for your children; but this was only in theory - the virtue of the cake was that it was never to be consumed, neither by you nor by your children after you”. (Collected Writings, vol. II, p. 12)
he goes on to claim that
“In the unconscious recesses of its being [19th century] society knew what it was about. The cake was really very small in proportion to the appetites of consumption, and no one, if it were shared all round, would be much the better off by the cutting of it. Society was working not for the small pleasures of today but for the future security and improvement of the race -- in fact for 'progress'. If only the cake were not cut but was allowed to grow in the geometrical proportion predicted by Malthus of population, but not less true of compound interest, perhaps a day might come when there would at last be enough to go round, and when posterity could enter into the enjoyment of our labours. In that day overwork, overcrowding, and underfeeding would come to an end, and men, secure of the comforts and necessities of the body, could proceed to the nobler exercises of their faculties. One geometrical ratio might cancel another, and the nineteenth century was able to forget the fertility of the species in a contemplation of the dizzy virtues of compound interest.” (Collected Writings, vol. II, pp. 12-3)
And in "Economic Possibilities for our Grandchildren" he claims the historical function of the capitalist "passions" will take at least another hundred years to be completed.
"The time for all this [ a 'return to some of the most sure and certain principles of religion and traditional virtue'] is not yet. For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight."
Ted