The existence of "impartial spectators", together with our naturally given sympathy, allow for an ongoing feedback process both between different people and also within the individual, between the "ego" and the "superego". This feedback process generates the moral views, categorical imperatives and other norms, conventions and informal rules that become relevant in society. It is in this process also that ambition is socially generated and supported - even in the purely materialistic realm. "It is because mankind are disposed to sympathise more entirely with our joy than with our sorrow, that we make parade of our riches, and conceal our poverty." The intensity of all moral views differs according to a spatial pattern that we all know: the further away someone is from us, either in physical or in psychological terms, the less we care. Our innate self-interest makes us look after ourselves first: "Every man...is first and principally recommended to his own care; and every man is certainly, in every respect, fitter and abler to take care of himself than of any other person." After ourselves, we then care more about our family than about some unknown stranger. Solidarity is a key value in the small group, while the anonymous "great society" refers us back to our enlightened, rule-bound self-interest. Smith states this as a fact. He merely explains it - and refrains from judging. In his positive approach, this is the course of nature.

In the Wealth of Nations, Smith again couches his analysis in the terms of a feedback process in society. While the Theory of Moral Sentiments basically describes an ongoing process of exchange in the market for norms, Smith now turns to the market in the more narrow sense: the market for goods and services. In the Theory of Moral Sentiments, he now posits that there exists a "propensity in human nature...to truck, barter, and exchange one thing for another." In order to feel this impulse to trade, one must not only own something to give in exchange, one must also desire something that someone else possesses. In the Theory of Moral Sentiments, what man strives for is praise. In the Wealth of Nations, it is some good or service. In both cases, this leads to exchange processes. For transactions really to take place, however, reciprocity is needed. In the small group, reciprocity is brought about through emotional ties and immediate social control. In the great society, these immediate mechanisms are replaced by conventions, rules of just conduct and institutions that have grown spontaneously and which are brought to us through tradition. This brings stability. It is for this reason, and this reason only, that Smith can write with regard to the "butcher, brewer and baker" that "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". By no means does this amount to a sanctification or even an endorsement of selfishness and greed. It is only the description of practical action in the abstract context of the great society.