Misreading Adam Smith: a footnote to a podcast

“Much of the most powerful ideas of economics are unchanged since Adam Smith. So there is always going to be a tendency for the younger members of the profession to look for ways to be distinctive and marketable. That makes new niches for publication particularly attractive.”

From PrestoPundit (http://gregransom.com/prestopundit/?p=1186) posts a quote from a Podcast with Gary Becker and Russell Roberts at: (http://www.econlib.org/library/EconTalk.html).

Comment
Not having heard what was said to justify this statement, or what were its implications, I cannot comment either in agreement or disagreement. A later comment in the extract points to a perennial problem in economics between its ‘hard science’ ethos and its abhorrence of ‘soft’ explanatory power for the world we live in:

“Later in the podcast, Becker dismisses the idea that "everything had been figured out" and all the easy problems had already been solved. He's surely right that there is plenty left to do in economics. But I wonder how the field is shaped because of the difference between the social sciences and the physical sciences. In the physical sciences, technology helps make measurement more accurate or possible where it was impossible before. Other than neuroeconomics, there isn't much of a role for technology in making measurement more powerful or opening up new areas for research. If anything, cheap computing power has made empirical research less reliable (JSTOR subscription required) because it has made searching for a statistically significant result easier.”

Comment
The latter distinguished Smith’s work; Wealth of Nations was an inquiry into what caused wealth to be created, as well as the nature of wealth. It was decidedly empirical in method – exhaustively so, according to many people, who complain of the digressions and repetition – and used such a wide range of data, the seemingly trivial and the profound (which had more to do with the paucity of research libraries, no research assistants, and his relative isolation while writing), that readers miss for whom Smith was writing, which certainly did not include posterity.

I recently concluded a close reading of Book I and among other things I reviewed was what he had written on his so-called ‘labour theory of value’. Now this is decidedly not one of his ‘powerful ideas’ as commonly interpreted (see Rothbard, Schumpeter and Douglas articles blasting Smith, largely based on their misreading of what Smith actually wrote).

Thus, when Greg Ransom at PrestoPundit laments the likely attitude of the ‘hard science’ people in economics, broadly summed up by: “At a theoretical level Darwinian biology has a similar problem — most of the intellectual work is done, and the only real need left is to improve the model conceptually but unfortunately conceptual work looks more like “philosophy” than “hard science”, I am inclined to agree with him because I know what he means (and, I suspect most economists do too).

But I cannot help noting that within the errors of misreading Smith’s so-called labour theory of value (he didn’t have one, except for the ‘rude’ society of Hunters before the emergence of agriculture), lies a very powerful idea totally missed by almost the entire profession of ‘hard science’ obsessives, who make up the majority of the profession today, especially among the young trying to make a name for themselves, under the very visible hand (if I may say so) of the rules of publication. I refer to the almost total neglect of Smith’s role of ‘truck, barter, and exchange’ in the social evolution of wealth creation, which had little to do with the redundant concept of labour as the sole source of value once humans, or at least a large minority of them, left hunting (and gathering) as the sole mode of sustenance.

To cap it all, the only person to notice this lately is: Samuel Fleischacker (‘On Adam Smith’s Wealth of Nations: a philosophical companion’, 2004, pp 124-131, ‘Real Price/Normal Price; Labor Theory of Value’ Princeton University Press, Princeton, NJ).

Oh, and by the way, Sam is a philosopher.

Somehow, I think the false dichotomy between ‘hard science’ and, presumably, ‘soft science’ has just taken a knock on the head. But then, only a Smithian would notice this.

Seems to me, an inability to see a ‘powerful idea’ staring them on the page of a book over 200 years old does not suggest that ‘hard’ science deserves much credit, and in context, nor does it suggest that some noisy critics of Adam Smith, who found him ‘guilty’ of something he did not commit, and those who quote them with gusto, have all that much to be smug about.