Prudence

Since antiquity, prudence has been regarded as an important virtue; it is one of the four cardinal, or principle, virtues.  A prudent person is one who exercises sound judgment in his or her practical affairs.    Prudence is ‘practical wisdom.’

In contrast to the prevailing everyday notion of prudence that we have today, which carries with it connotations of cautiousness, of narrow-minded self-preservation, or of calculating self-interest, the concept of prudence throughout most of its – and our – history in the West carries a much broader, nobler sense.

Following Aristotle, St. Thomas Aquinas defined prudence as “right reason applied to practice,” and argued that the virtue was concerned not with determining means to ends, but with means to good ends, good ends for both the individual himself and for the community.

More recently (and perhaps of greater interest to those concerned with finance), the great economist Adam Smith wrote of the importance of prudence in his The Theory of Moral Sentiments.  Smith, too, understood prudence in broader sense than narrow self-interest, writing that prudence

“when carried to the highest degree of perfection, necessarily supposes the art, the talent, and the habit or disposition of acting with the most perfect propriety in every possible circumstance and situation.  It necessarily supposes the utmost perfection of all the intellectual and all of the moral virtues.  It is the best head joined to the best heart.  It is the most perfect wisdom combined with the most perfect virtue” (Adam Smith, The Theory of Moral Sentiment, 1759, p.216).