Revising Adam Smith and Laissez Faire

Earlier this month I noted an article by James Pyland and I reported it under the heading: “Trenchant Rebuttal of Laissez Faire Activists” (scroll down the Blog to read it).

I was struck by Pyland’s article and its main theme, namely that corporate activists attribute to Adam Smith views on laissez faire which he never held, and, because they link it to their misreading of Smithian ‘self-interest’, which they transmute into selfishness, they claim Smith’s authority for modern corporations to be absolutely free of any government interference, as their predecessors claimed for mine, mill and factory owners in the 19th century. Much government interference today is malign and plain wrong, but it would be wrong to erect a principle to make all interference illegal.

I also made clear that I had various quibbles with James Pyland’s presentation and the content of his arguments, but I avowed a disinclination to make these explicit in case they gave comfort to the laissez-faire activists he calls to account.

Today, in one of my regular visits to the Division of Labour Blog, there is a less than fair criticism of James Pyland’s article by Professor Robert Lawson, a regular contributor, with whom I often agree. I find it a disappointing put-down of Pyland’s article from a distinguished economist because it uses arguments unrelated to the general soundness of the author’s criticisms of laissez faire doctrines and their forced association of them with Adam Smith.

Pyland quotes extensively from Smith’s “Wealth of Nations”, attacks him for being a ‘Marxist’, which is something I had not noticed because I took the article at face value and, while I am a long way from being a Marxist, I do not think it relevant in the matter of questioning the misleading use of Smith’s legacy.

Here is Robert Lawson’s rebuttal of Pyland in full (read it http://www.divisionoflabour.com/):

"Revising Dr. Smith
--Robert Lawson
Here's yet another attempt by a Marxist to co-opt Adam Smith.

To refute the laissez-faire capitalism often ascribed to Adam Smith, it is only necessary to quote . . . Adam Smith

This should have read "To refute the laissez-faire capitalism often ascribed to Adam Smith, it is only necessary to selectively quote . . . Adam Smith"

It would be nearly impossible to quantify the number of times that pro-corporate, laissez-faire activists have used the phrase “invisible hand” to justify all manner of unjust and brutal economic policies and their outcomes.

Ok let's get this straight once and for all: laissez-faire activitists are PRO-FREEDOM not pro-corporate. (Apologies for the scream.) Corporations (which in Smith's day, unlike today, were all government granted monopolies) are very often against laissez-faire. I defy you to find me a bona fide laissez-faire activitst defending ADM's ethanol subsidy or the car quotas on Japanese cars or local tax abatements....

I was going to go on dissecting the article, but just can't put myself (or you dear reader) through the misery."

The unusual step of my quoting from another Blog in full is that is the only way that busy readers can judge its merits without visiting Division of Labour (a Blog I recommend because Division of Labour is an excellent source for commentary by economists).

Laissez-faire activists may be ‘pro-freedom’, but where that involves freedom for people Smith called ‘merchants and manufacturers’ to do what ever they will under cover of ‘freedom’, no matter what monopolistic, duopolistic, anti-competitive contrivances and anti-social short-termist behaviours they get up to (and remember Adam Smith considered that sort of behaviour to be a norm, not an exception) then such laissez-faire activists become apologists for corporate misdemeanours.

The 18th century chartered corporations were indeed operating under the legal sanction of Royal monopolies, but Professor Lawson is slipping a fast-one in suggesting that the history of modern corporations has been one of unsullied good behaviours just because they are private corporations. Smith had plenty to say about the inclinations and behaviours of private ‘merchants and manufacturers’, and recent headline accounts of some recent corporate dishonesty in the US suggest these inclinations and behaviours, regrettably, are still with us.

The challenge to “find me a bona fide laissez-faire activist defending ADM's ethanol subsidy or the car quotas on Japanese cars or local tax abatements....” is disingenuous in the extreme. Of course, laissez-faire activists, such as Professor Lawson, are completely consistent and honest in their inclinations and dealings, but it is not Professor Lawson who is under scrutiny here.

The charges are against the myths of the laissez-faire activists who traduce Adam Smith’s legacy - and his life-long disinclination to advocate laissez faire (he never used the words). I am grateful for Professor Lawson for his consideration and his kind desire not to put his readers “through the misery” of his dissection of Pyland’s article, but this reader for one (always willing to learn) would be pleased to read such a dissection, complete with an entirely different set of quotations or references from any or all Smith’s works he finds that exposes my ignorance in these matters.