Review of David Warsh's new book

Review

David Warsh. 2006. Knowledge and the Wealth of Nations, W. W. Norton, New York

Part One

While it is better to be approximately right than precisely wrong, it is even better to be precisely right where we can. David Warsh spoils what looks to be a most interesting book by asserting errors as profound facts in the early chapters. I am only up to Chapter 6 and the errors are becoming irritants, saved from my dismissal of the rest of the book only by its engaging style, excellent composition and its story of the economics profession and people in, many of whom were familiar names from my student days and afterwards as the high tide of Keynesian whimpered to an end.

I will press on with it, but feel compelled to post a preliminary comment, with others, perhaps, to follow.

The preliminary summary in two pages (pp 35-6) of Wealth of Nations is masterly. No quarrels there. It may just be presentational, but Chapter Four grates on my sensibilities, ‘The Invisible Hand and the Pin Factory’!

Yes, David Marsh has bought the conventional account of Smithian economics right out of mainstream US academe. He writes ‘you’ll learn further that the book’s publication marked the discovery of the “Invisible Hand” – that is, of the great self-organizing interdependency of prices and quantities that we know today as the price system’ (p 37) and he calls the Invisible Hand and the Pin Factory the ‘bifocals of Adam Smith’.

No, I shall not stop on this occasion to demonstrate the fallacy of this interpretation of the generality of Smith’s lonely use of the metaphor of the invisible hand (from Shakespeare’s Macbeth, 1605, and Defoe’s Moll Flanders, 1722). I have covered this many times on this Blog and elsewhere, so if you are a new reader check through the archives.

I shall press on with a comment that David Marsh and his informants have a narrow view of Smith on the division of labour. The famous Pin Factory was one of two illustrations offered in Wealth of Nations. Warsh correctly notes that Smith took this from ‘an encyclopaedia’. For the record it was Diderot’s and also for the record, Warsh is wrong to assert (p 40) that Smith did not visit a pin manufactory; he did, though not the one Diderot described, and he says so in Wealth of Nations (WN I.i.3, p 15) with details of the work of ‘ten men only’, where ‘some of them consequently performed two or three distinct operations’ of the ‘eighteen distinct operations’ referred to by Diderot.

To insist that Smith didn’t do what he states he did is to assert that he was lying. It is a small point, but indicative of the errors lurking in an account based on secondary sources.

If Warsh, or his sources, had read further they would have come across Smith’s most significant assertion of the source of growth, and with it opulence, namely the ‘multiplication of productions of all the different arts, in consequence of the division of labour’, which he illustrates with the example of the day-labourer’s woollen coat (WN I.i.11: pp 22-4). It is not the intensity of the division of labour in a single product like a pin that is decisive but the extensity of the divisions of labour across entire productive sectors, and eventually across the entire globe, that brings about economic growth and opulence.

Maybe later on in Warsh’s book he and those of whom he reports recognise this important Smithian insight (also noted by others, including Bernard Mandeville, Fable of the Bees, 1724), but I must wait and see.

These errors or omissions pale into insignificance in Warsh’s treatment of the epithet of the ‘dismal science’ applied to economics. Chapter 5 is entitled, ‘How the Dismal Science Got its Name’ but manages to avoid stating the basis for Warsh’s assertion. What it does ionstead is repeat the myths popularised in textbooks and newspaper Op Eds circulating in and from US academe in the 20th century.

Warsh links ‘dismal’ as a contrast with the alleged optimism of Smith (1723-90), Condorcet (1743-1794) and Godwin ( ), and places among the ‘dismal’ proponents of economics the names of Malthus and Ricardo, the former a prisoner of the iron law of exponential and arithmetic series and the latter an exponent of the inevitability diminishing returns to factors. A plausible enough theory bought in its entirely by Warsh, but, alas, so wrong as to be embarrassing. Warsh, an established journalist of 23 years vintage on the Boston Globe, apparently forgot the golden rule of journalism: check your facts and check your checks.

The first uses of the term the ‘dismal science’ came not from the pessimism of Malthus and Ricardo, nor from the restless years of the Napoleonic wars. The ‘joy’ of being ‘alive’ and the ‘heaven’ of being ‘young’ were a prelude to the mood swings of an artist’s disillusion, and not the considered opinions of critics of economics. The accolade, for such as it is, for calling economics the ‘dismal science’ belongs to Thomas Carlyle years later - in the late 1840s to be more precise – and while a charge against economics the substance of the charge had nothing to do with Smith’s, Condorcet’s, or Godwin’s optimism versus Matlhus and Ricardo’s pessimism.

It was caused by Carlyle’s racism and his horror at the idea, suggested by James Stuart Mill’s, that forcing fellow human beings, such as Negro people, into slavery was inhuman and morally wrong. Carlyle reacted to the notion that Negro people were human with horror and disgust, and because economists appeared to endorse the notion that blacks and whites were full members of a common race, the human race, he accused them of expounding an utterly ‘dismal’ philosophy contrary to all civilised values.

The evidence for Carlyle, long after Smith, Condorcet, Godwin, Malthus and Ricardo had died, being the source, the inspiration and the original exponent of economics being the ‘dismal science’ has been discussed before on this Blog (see archives), and the academic evidence for this being case can be found at:

Should David Warsh have known this? This would only be an unfair assertion if he had mentioned it in passing, but his Chapter 5 carries the heading, ‘How the Dismal science Got its Name’, and an experienced journalist is duty bound to check his facts (he could Google ‘dismal science’ and see for himself).

I did note that Warsh assumes or implies Smith had a theory of growth, but so far Warsh speaks as if Smith did not have a ‘stagnation’ scenario, which in fact he did have. In Adam Smith’s Lost Legacy (2205) is discuss Smith’s growth and stagnation hypothesis in detail.

I shall continue reading ‘Knowledge and the Wealth of Nations’ and report back in Pat Two.

APOLOGIES!

I have been cut off from the Internet since Saturday's post by a strange 'logic' in France Telecom.

Grateful for an opportunity to acquire ASDL broadband in rural France, I agreed to pruchase the connections from France Telecom. I was not told that the connection would take place on 1st June, but this is no problem as I can wait a fortnight.

However, France Telecom meanwhile cut off my phone line connection to Wanadoo without telling me, presumably without a concern that I would be without any internt connection until the undisclosed 1st June broadband connection.

It took all Monday morning to discover this and to arrange re-connection. I am used to French adninistrative 'logic' having lived here each summer over the past 17 years, but nothing beats the thinking behind whoever cut me off!

Now its restorted (hopefully). Hence, apologies for the interruption to my posting.