The 'Indoctrination' of 6-year Old Good Economist

Ike Pigott (‘better communication makes the complex simple’)
Occam’s RazR (‘This site is as much for him as anyone -- to explain things that ought to be explained, explore ideas that keep him up at night, and connect concepts that are just begging to be joined’) HERE:

“Invisible Hands

We’re lucky when the teaching moments come to us.

My wife was explaining how she got a discount on milk yesterday. Apparently, the local Walmart and Publix are in a price war over milk which has dropped the price per gallon more than 90 cents. My six-year-old daughter wanted to know why the Walmart checker dropped the price without even being prompted.

“Let’s say you and Ryan are selling cupcakes,” I said. “You are selling them for five dollars, and Ryan is selling them for three. Who makes more money?”
“I do,” she said.

“Okay, now say I have ten dollars (holding up 10 fingers). I can buy two of your cupcakes (spending the fingers), or I can buy three of his and still have a dollar left over (re-spending the fingers). NOW who makes more money?”

“Ryan does.”

“So what do you need to do?”

“Charge three dollars,” she said.

Why is it that Adam Smith’s invisible hand is so difficult to understand? Functional adults deny its existence because it clashes with their ideology, yet a six-year-old gets it in 30 seconds.”

Comment
Well, Ike, I deny the existence of ‘an invisible hand’ and it certainly does not clash with any ‘ideological’ considerations on my part. I am familiar with the works of Adam Smith and know something about his use of the metaphor of ‘an invisible hand’, which he used once in 1759 in The Theory of Moral Sentiments at TMS IV.1.10: p 184, and once in 1776 in Wealth Of Nations (short-title) at: Book IV.ii.9: page 456.

He also, for the record referred to ‘the invisible hand of Jupiter’ in an essay, unpublished in his lifetime, known by its short-title as History of Astronomy, when he described the ‘pusillanimous superstition’ in pagan societies.

In none of these cases was his use of an invisible hand metaphor anything to do with how simple price markets work. Indeed, the operation of market choice is so simple that your charming six-year-old daughter can understand how they work. Congratulations to her.

So why do you complicate the issue by adding a reference to ‘an invisible hand’ as part of your explanation, and which is now part of her formerly clear understanding? What does an invisible hand have to do with the price mechanism?

It certainly wasn’t part of Adam Smiths’ explanation of prices in Books I and II of Wealth Of Nations – he never mentioned invisible hands when doing so.

His use of the metaphor, detailed above, had nothing to do with price signal, markets, or consumer choices. (If you do not have access to either book to hand, email me and I shall send the relevant two chapters as attachments to you for you to consult.)

In the case of ‘Moral Sentiments’ (short title), he was discussing how some people suffer from a ‘deception’; they disregard the utility of an object in favour of its ‘fitness’ of design. They chase after ‘numberless artificial and elegant contrivances for promoting this ease or pleasure’. In doing so they imagine their ownership of such items means that they will possess ‘more means of happiness’, adding that it is important that they feel this way:

‘And it is well that nature imposes upon us in this manner. It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which ennoble and embellish human life; which have entirely changed the whole face of the globe, have turned the rude forests of nature into agreeable and fertile plains, and made the trackless and barren ocean a new fund of subsistence, and the great high road of communication to the different nations of the earth. The earth by these labours of mankind has been obliged to redouble her natural fertility, and to maintain a greater multitude of inhabitants’ (TMS IV.1.8: p 182)

This leads directly to his use of the metaphor of ‘an invisible hand’:

“It is to no purpose, that the proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest that grows upon them. The homely and vulgar proverb, that the eye is larger than the belly, never was more fully verified than with regard to him. The capacity of his stomach bears no proportion to the immensity of his desires, and will receive no more than that of the meanest peasant. The rest he is obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets, which are employed in the oeconomy of greatness; all of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice. The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition. These last too enjoy their share of all that it produces. .” (TMS IV.1.20: p 184)

In summary, having explained exactly why the rich landlord from the products of his farms feeds the labouring farmers and their families (he can’t eat it all himself), Adam Smith uses a common 18th-century literary metaphor to support his contentions.

How necessary is the metaphor? The inescapable fact is that if the landlord didn’t distribute the surplus food, above what he and his immediate family consume for themselves, the labourers would starve and there would be nobody around in the Spring to work his lands (they would not last the Winter without subsistence, clothing and shelter), and the rich landlord’s life style would terminate. In other words landlords can do no other. The invisible hand metaphor adds nothing to the necessities of self-preservation.

In Wealth Of Nations (short title) he uses the metaphor of ‘an invisible hand’ after he has explained completely why some wholesale merchants prefer the home trade to engaging in the riskier foreign trade:

“First, every individual endeavours to employ his capital as near home as he can, and consequently as much as he can in the support of domestic industry; provided always that he can thereby obtain the ordinary, or not a great deal less than the ordinary profits of stock.

Thus, upon equal or nearly equal profits, every wholesale merchant naturally prefers the home-trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade. In the home-trade his capital is never so long out of his sight as it frequently is in the foreign trade of consumption. He can know better the character and situation of the persons whom he trusts, and if he should happen to be deceived, he knows better the laws of the country from which he must seek redress. In the carrying trade, the capital of the merchant is, as it were, divided between two foreign countries, and no part of it is ever necessarily brought home, or placed under his own immediate view and command.” (WN IV.ii.5-6: p 454)

And:

“But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” (WN IV.ii.9: p 456)

Again, Smith first explains the circumstances that lead some merchants to prefer the domestic trade to foreign trade, which boils down to their fears for the security of their capital (or in modern parlance, their risk-avoidance) – ‘he intends only his own security’ – and to the extent that many individuals react in this manner, the quantity of local capital will be greater and, therefore, the total output domestically will be greater.

This follows from a law of arithmetic that the whole is the sum of its parts – the more numerous the parts, the greater the whole. It is at this point that he uses the metaphor of an invisible hand, though anybody who reads the earlier passages will get the importance of his explanation without it. The invisible hand adds nothing to the correctness of Smith’s earlier analysis.

Yet, Ike accuses ‘functional adults’ of finding the invisible hand of being “so difficult to understand”. Is he sure that he is attacking the correct targets?

I completely understand Adam Smith’s explanations of the ‘mechanism’ by which the rich landlord feeds the poor labourers working for him and maintains their subsistence sufficient for them to maintain families and bring up their children - the next generation’s farm labourers, household retainers and body guards.

I also understand the psychological pressures that induce some merchants from their risk-avoidance to invest locally rather than abroad.

What I don’t understand is why Ike (and many, many others) think the metaphor of an invisible hand adds anything to our understanding of these processes.

Moreover, I cannot fathom why Ike (and many, many others, including distinguished economists) believe it is necessary to extend the use of the metaphor of an invisible hand to Adam Smith’s theory of markets, the derivation of prices, the working of competition and capital accumulation.

Adam Smith never suggested that the metaphor had wider use, nor did he link it to any other element of his analyses in moral philosophy not political economy.

I’m with his daughter age 6 in this exercise. She didn’t mention anything about an invisible hand either. She got the answer correct from the data given to her. Smart kid.

I hope she was not confused later by Ike introducing her to ‘an invisible hand’ as a dubious explanation for what she already knew from the data. That’s no way for her to turn into a ‘functional adult’.

Inferior Essay on Adam Smith's Theory of Exchange Value

I am always suspicious of essay writing Blogs that students may use (for a fee) to build their essay around (some hope!), but more likely simply lift and send in as their own work.

The worse comment I can make on this practice is that their tutors, presumably read the ‘essay’ and grade it, apparently without noticing that it is not their student’s work but an essay writing agency’s. I read one (‘Adam Smith and Theory of Value’) this early morning from a supplier of essays, this one presumably for a university assignment, called Thinking Made Easy (‘ideas, thoughts explanations’), HERE:

You can see why I was drawn to it and why I printed it to read over breakfast at 7 am.

Verdict? Oh, dear!

I was surprised by its truly juvenile English style, wrapped in an apparatus to give it an air of polished maturity. Unfortunately the cracks show in every paragraph.

All references are secondary and not from Wealth Of Nations. Even the references are ‘naked’ – a surname name, a year, occasional page number, no titles, no publishing data (even one reference says simply ‘Princeton University n.d.’) – which restricts reference and a quick judgement as to their quality. Interestingly, most references cite, suspiciously, page numbers between 1-6, with one at p 13.

The final test of the unsatisfactory nature of the author’s views on ‘Adam Smith and Theory of Value’ (note: no definite or indefinite article), is the number of incorrect statements attributed to Smith and the clear evidence that the author does not understand either what Adam Smith was writing or what others have written since.

As an educator, I am all for being encouraging in my comments to new students and examples of their work. I would even be gentle in what I recognise as a bought-in or copied piece of somebody else’s work (on the first occasion only), following a kind but firm exchange of views on presenting something as your own work that belongs to somebody else.

If they proved it was their own work, they would be requested to go away and show from Wealth Of Nations the sources for all their statements, and we would discuss their re-worked essay later that week.

For the authors who write for these sites I have not a great deal of respect – who knows what desperate circumstances they are in that pushes them to participate in such activities?

I blame those educationalists who allow ‘course work’ to count towards a final grading (as well as in-class participation and group work), even more so when the work is ‘out of sight and supervision’ in distance learning programmes.

The victim on this occasion is Adam Smith and his legacy; the students who ‘buy’ this inferior work also lose and not just what they pay for it in cash - they lose their dignity and integrity too.

The Usual Misunderstanding About Adam Smith and an Invisible Hand

In the Brisbane Times (30 August) HERE:

“Nature and the Altruism Gene”

“Capitalism, Darwinism and democracy share not only a reliance on competitive self-interest but a presumption that self-interest works - or can be made to work - for the common good. As America's patron saint Adam Smith so memorably wrote in The Wealth of Nations, "it is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest. 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."

This was the essence of Smith's famous invisible hand concept, and to the founding fathers it must have seemed, indeed, like manna from heaven. The invisible hand is the idea that a serendipitous glue ties individual self-betterment to the common good, so that the private interest and the public interest are, essentially, one.
The individual, wrote Smith, "intends only his own gain and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his original intention". Greed, in other words, will drive people to beneficial behaviour: producing the right deed, albeit for the wrong reason.”

Comment
The political comments associated with this article are not my concern. Its author has distinct views regarding a possible collapse of the US economy, to which I am tempted to say, as Adam Smith said in response to a similar concern about the collapse of Britain in the war against its colonies in North America, ‘there is a great deal of ruin in a nation’ (Corr. Letter 221, p 262, note 3; also WN IV.vii.64: pp 615-15, note 52).

However, the usual misquotation, and therefore, false conclusions of the article are of concern in Lost Legacy. The author, presumably an Australian, mocks Adam Smith as ‘America’s patron saint’, an goes on to show he is not talking of the Adam Smith from Kirkcaldy, Scotland, because the interpretation he puts on the passage he quotes, is actually the interpretation of the 'Adam Smith' created in Chicago nearly 200years later.

This Adam Smith is made to dance to the tune of “its all about greed”, which is quite different from Adam Smith the moral philosopher. Clearly, scholarly exactitude is not a strong point of leader writers on the Brisbane Times.

Where exactly is the reference to greed in the passage quoted: "it is not from the benevolence of the butcher, the brewer[,] or the baker that we expect our dinner, but from their regard to their own self-interest. 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"? (You will find it at WN I.ii.4: pp 26-27; original punctuation aded in square brackets.)

If you tried to buy the ingredients for your dinner out of greed, you may be less successful if you fail to appeal to the seller’s self-interests. She serves her family’s self-interests with the net proceeds from what you pay her for your meat, beer, and bread, and she is able to meet her self-interests – the comforts of her family (presumably a moral duty, including in Brisbane) by addressing your self-interests in feeding yourself and your family.

Each party to the exchange by addressing the self-interests of the other is not being greedy by any meaning of the word. Smith specifically enjoins you to address their ‘self-love’ and talk of ‘their advantages’, NOT YOUR OWN! Be other-centred, not self-centred.

Of course, you can try to appeal to their 'humanity' and if successful (and everybody else was successful similarly) the seller’s family would starve and the Brisbane authorities would doubtless intervene and charge the seller with neglect of her children.

Moreover, if the Brisbane Times bosses suggested to the editorial writers that they work each and every day not for their pay, or their family’s requirements in food, clothing and shelter – not to mention the affluent living standards associated with Brisbane – but out of sheer delight at working for nothing but the entertainment of the Brisbane Times’ readers, we know, and so does the author of the editorial, what the response would be.

Brisbane Times: “This was the essence of Smith's famous invisible hand concept, and to the founding fathers it must have seemed, indeed, like manna from heaven.”

Comment
The connection between the use of the metaphor of ‘an invisible hand’ (used only once in Book IV) and the above quoted passage from Book I) is entirely made up. There is not connection in Wealth Of Nations, which is one of the common errors associated with those who assert that there is a connection. It most certainly was not a connection made by Adam Smith from Kirkcaldy. Its connection was invented by US academe in the 1950s to give a spurious blessing to their assertions that their mathematical models of general equilibrium prove what they allege Adam Smith had in mind when he used the metaphor.

The fact that the metaphor was not connected to markets (covered in Books I and II without a single mention of ‘an invisible hand) is an exactitude of damaging relevance and it is safe from instant rebuttal on the fairly certain assurance that hardly anybody is likely to check by opening Wealth Of Nations and reading for themselves.

How ‘it must have seemed, indeed, like manna from heaven’ is a nonsense – I think the ‘Founding Fathers’ and a lot more to think about (they were creating the world's first democracy before Australia was founded as another colony in 1788) than an obscure metaphor in a long book, which they didn’t take much notice of, and nor did anybody else until one or two obscure philosophers (Cliff Leslie for one) in the late 19th century commented critically on the metaphor’s religious implications, and then 60 years later a whole host of neoclassical teachers invented a narrative about it from the 1950s.

[Those readers interested in my rebuttal of the myth of the invisible hand may ask for a copy of the paper I am presenting to the History of Economic Thought, 40th Annual Conference, to be held in Edinburgh 3-6 September, by identifying themselves to: gavin at] negweb Dot coM .]

“The invisible hand is the idea that a serendipitous glue ties individual self-betterment to the common good, so that the private interest and the public interest are, essentially, one.

The individual, wrote Smith, "intends only his own gain[,] and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his original intention". Greed, in other words, will drive people to beneficial behaviour: producing the right deed, albeit for the wrong reason.” [WN IV.ii.9: p 456; Original punctuation added]

Comment
This statement, as they say, straining to be polite, is problematical.

Has the editorial writer in Brisbane actually read Wealth Of Nations? The chapter in question is not about greed at all. It is about motivation and in this specific case the motivation of ‘wholesale merchants’ who act to invest locally is their ‘risk aversion’ to sending their capital stock abroad to the British colonies in North America, where necessarily it has to cross a wild ocean, and be placed in the hands of people they do not know well, in legal systems which are likely to be partial to local interests, and where the turn around of their capital stock as imports back into Britain, not only doubles the risks of a second crossing, but also may take up to four years compared to a local turn round of two or three times in a single year.

It is not surprising that the more risk-averse merchants prefer the domestic trade to foreign trade. Smith explains it thus:

“Thus, upon equal or nearly equal profits, every wholesale merchant naturally prefers the home-trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade. In the home-trade his capital is never so long out of his sight as it frequently is in the foreign trade of consumption. He can know better the character and situation of the persons whom he trusts, and if he should happen to be deceived, he knows better the laws of the country from which he must seek redress. In the carrying trade, the capital of the merchant is, as it were, divided between two foreign countries, and no part of it is ever necessarily brought home, or placed under his own immediate view and command.”
(WN IV.ii.6: p 454)

And the bit quoted in the Brisbane Times misses out the critical motive for preferring domestic investment, essential to understand the context of Smith’s use of the metaphor:

“But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” (
WN IV.ii.9:p 456)

The motive is not greed – it is caution; risk avoidance. And there is not mystery about it – ‘he intends only his own security’.

The consequence is that the total of domestic investment is the sum of all the individual investments made by those wholesale merchants who trade locally – the whole is the sum of the parts, a law of arithmetic. The greater the number of citizens who purchase the Brisbane Times, the greater the total revenue earned by the paper, and no invisible hand brings this about- it’s called producing a better newspaper as judged by customers. (If its a free sheet, the greate the number of readers the more advertising it atracts.)

And remember, despite the risk avoidance of some merchants in these matters, there was till a large number of local merchants who did engage in the colonial trade, despite the risks. They were not affected by an invisible hand – they took the risk and enough of them made regular profits to continue doing so.

Whether the actions of corporate bodies benefits society is an examinable question.

Certainly, polluters, monopolists, protected producers and restrictive union practices, do not benefit society. Adam Smith never shied from reminding readers of the perfidy of special interest groups (read Book IV if you want to check this statement).

And he never said anything about beneficent outcomes from whatever producers (owners, managers and employees) decide to do that necessarily benefited society.
The belief to the contrary is as much of a myth as the metaphor of ‘an invisible hand’.

Adam Smith On Absolute not Comparative Advantage

There are errors and there are double errors in proposing policies in economics. Here’s a typical week-end one:

Matthew Hisrich writes in Pal-item.com (HERE):

‘From bananas and prunes, lessons for an election year’ (30 August)

“The only response that makes sense now is to begin a major overhaul of how we produce and consume potassium in this country. To put it bluntly, we are addicted to bananas.

Fortunately, The Linus Pauling Institute reports that prunes and prune juice are a much better source of potassium than bananas. It is high time that the federal government begin to foster alternative sources of potassium such as prunes by subsidizing their production and launching educational campaigns to help consumers make better choices.

Does this sound like an absurd argument to you? [GK: YES]

That's probably because economist Adam Smith dispatched this line of reasoning to the dustbin of history over two centuries ago. In his classic Wealth of Nations, he gives the example of grape growing in Scotland to make his point. While it might technically be possible, he says, it would hardly make financial sense. Rather, countries would do far better focusing on those areas of production to which they are best suited.

"What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom," Smith observes. "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage."

What Adam Smith was explaining was the concept of comparative advantage. The party with the advantage in one field benefits by trading with a party who is better in another rather than trying to do everything themselves. Later economists built on this concept with the idea of absolute advantage. This means that even if you would be better at everything than anybody else, it is still in your interest to trade if for no other reason than you have a limited amount of time and resources.”

Comment
Adam Smith’s analysis was an example of ABSOLUTE not COMPARATIVE advantage (Matthew Hisrich gets it the wrong way round). Matthew then completes his double error:

‘Later economists built on this concept with the idea of absolute advantage.’

No, Matthew, later economists, especially David Ricardo, revised Adam Smith’s theory of ‘absolute advantage’ and produced the theory of ‘Comparative Advantage’.

“Economist Frederic Bastiat got to this point when he famously said that "When goods do not cross borders, soldiers will."

Comment
Unfortunately, experience also shows that because of the perversion of ‘jealousy of trade’ (after David Hume), jealous, rival neighbours, enraged by the movement of another country’s goods across frontiers, their own and their customers, are likely to engage in warfare, or acts that lead to warfare, or at a minimum, punitive tariffs and prohibitions against successful trading nations. If only trade was allowed to enhance harmonious relations, the poisoned minds of ‘balance of trade’ demagogues, of which we have plenty of experience in the18th, 19th, 20th and 21st century, if they gain the ear of legislators, blow increased harmony out of the window.

I listened the other night to remarks by a normally intelligent and balanced professor who was abnormally upset at the balance of trade between China and the USA, considering it placed world trade in dire danger.

He considered it plausible that foreign governments held dollars and US government bonds this placed the cards in Chinese hands who could dump them all at a stroke and bring down the mighty dollar and “what’s left of US democracy” (yes, it’s all George W. Bush’s fault…).

If the Chinese were to dump the US dollars they would liquidate at a stroke their real claims on US assets; if they sold dollars at a discount, their buyers would raise demand for US exports; if they converted dollars for Euro, or Yen, they would transfer their claims on US assets to others. Such are the realities; China is in hock to the US as much as the US is in hock to China.

David Hume, ‘Sancho Panza’ (Cervantes), Adam Smith and Karl Marx as Wine Critics?

Occasionally we can have a laugh, though the following is based on fact from their writings. But Cervantes’ immortal character, Sancho Panza, Squire to Don Quixote, tells a story about a wine critic (HERE): http://www.wine-econ.org/

“Sancho Panza and David Hume, the fathers of wine tasting?” (by Victor Ginsburgh, Journal of Wine Economics):

"But as our intention is to mingle some light of the understanding and the feelings of sentiment, it will be proper to give a more accurate definition of delicacy than has hitherto been attempted. And not to draw our philosophy from too profound a source, we shall have recourse to a noted story in Don Quixote (Cervantes, Don Quixote, Part II, chapter 13).

"It is with good reasons, says Sancho to the squire with the great nose, that I pretend to have judgment in wine: this is a quality hereditary in our family. Two of my kinsmen were once called to give their opinion of a hogshead, which was supposed to be excellent, being old and of a good vintage. One of them tastes it, considers it; and, after mature reflection, pronounces the wine to be good, were it not for a small taste of leather which he perceived in it. The other, after using the same precautions, gives his verdict in favor of the wine; but with the reserve of a taste of iron, which he could easily distinguish. You cannot imagine how much they were both ridiculed for their judgment. But who laughed in the end? On emptying the hogshead, there was found at the bottom an old key with a leathern thong tied to it." (

David Hume, 1757, Of the standard of taste, in On the Standard of Taste and Other Essays. Indianapolis: The Bobbs-Merrill Company, 1965).”

Karl Marx, another wine economist?

"What is the link between Karl Marx and wine?

"The parents of Karl Marx owned a few vineyards in Mertesdorf in the nearby Ruwer valley. Karl Marx’ father was a lawyer and it was quite common for bourgeois families at the time to acquire vineyards either for their own wine consumption or as an investment for their old age security. The Marx family vineyards were located in the “Viertelsberg”, a medium quality vineyard near the renowned ‘Grünhaus’ (now known as Carl von Schubert’s Maximin Grünhäuser). The Marx family sold their vineyards in 1857. Today, the ‘Weingut Erben von Beulwitz’ produces a Spätburgunder wine (pinot noir) with the Karl Marx label. The grapes do not come from the exact Marxian vineyards but from the Eitelsbacher Marienholz, a parcel nearby.

However, this is not the only link between Karl Marx and wine. Marx had been fond of good wine from early an age on. In 1835, at age 17, Marx enrolled in the law program at the University of Bonn where he joined the Trier Tavern Club drinking society; he later served as the president of that society…

… After the defeat of Napoleon in 1815, the Mosel region became a Prussian province and as the only notable wine region within the empire it provided all of Prussia with wine. Since wines from non-Prussian Germany were heavily taxed Mosel wineries enjoyed a quasi monopoly. Wine prices were high and the Mosel wine business was booming. The area under vines was sustantially expanded and most Mosel wine makers were well off.. However, in 1834, Prussia established the German Tariff Union (Zollunion) with the southern German states -- all of which have a substantial wine production. All of a sudden southern German wine was exempt from any duties and non-Mosel wine flooded the Prussian market. As a result, wine prices fell dramatically and the wine producers at the northernmost frontier of professional viticulture -- that is, the Mosel – were in deep trouble. A rigid Prussian tax policy that referred to past profits instead of present losses and a series of bad (= cooler and wet) vintages added to the misery. Mosel wine makers fell into deep poverty.

In 1842, Marx began to write for the Cologne based Rheinische Zeitung (in the same year he also became the editor-in-chief of the Rheinische Zeitung). His articles were anonymous using the pseudonym the “++-Korrespondent von der Mosel.” Marx was appalled by the Prussian tax policy that imposed harsh and unjust hardship on the Mosel vintners. In January of 1843 he wrote a series of articles known as the “Justification of the ++-Correspondent from the Mosel” in which he vehemently criticized the Prussian government. This was the beginning of his new life. A few months later Marx had to leave Prussia and emigrated to Paris where he met another German fugitive, Friedrich Engels. Together they changed the world.”

Adam Smith: The Father of Wine Economics?

“The foundation of Smith’s wine economics is laid out early in Wealth of Nations, Book One, Chapter 11: Of the Rent of Land. Here Smith tries to explain why some kinds of land earn more than other lands. Land suitable for viticulture earns higher rent, Smith said, and has long done so.

That the vineyard, when properly planted and brought to perfection, was the most valuable part of the farm, seems to have been an undoubted maxim in the ancient agriculture as it is in the modern through all the wine countries.

But viticultural profits were constantly threatened, Smith argued. Not by nature, although this could cause bad crops, and not by high taxes, although he argued against them. The chief threat (or perceived threat) to viticultural earnings was expansion to new lands. Old vineyards, as he called them, were threatened by New Vineyards — and would seek protection from them or to prevent their development. This section reads very well today if you change Old Vineyards to Old World wine and New Vineyards to New World Wine. Certainly New World Wines (and their vineyard, cellar and marketing practices) are seen by many Old World producers as a threat to their livelihood. Adam Smith understood why Old would seek by any means to prevent development of the New. You don’t have to have a Ph.D. in economics to already know that he did not approve.

Smith wrote about terroir, too. I can’t really say that Adam Smith invented terroir, the idea of a special taste of place that winemakers strive for, but I can say that he understood its economic value. Smith wrote that

The vine is more affected by the difference in soils than any other fruit tree. From some it derives a flavour which no culture or management can equal, it is supposed, upon any other. This flavour, real or imaginary, is sometimes peculiar to the produce of a few vineyards; sometimes it extends through the greater part of a small district and sometimes through a considerable part of a large province.

I note with interest that Smith recognized terroir and doubted the reality of its existence in the same sentence (”real or imagined”). It isn’t terroir that really matters to a wine economist, I suppose, it is only that people think there is terroir. Smith wrote at length about the economics of these special wines and, because of their limited quantities, the premium prices they could command. Any modern winemaker, upon reading this section, would immediately try to create an A.V.A. to cash in on the possibility of terroir by limiting supply.

The whole quantity of such wines that is brought to market falls short of the effectual demand, or the demand of those who would be willing to pay … The whole quantity, therefore, can be disposed of to those who are willing to pay more, which necessarily raises the price above that of common wine.

A small part of this higher price … is sufficient to pay the wages of the extraordinary wages bestowed upon their cultivation, and the profits of the extraordinary stock which puts this labor in motion.”

Comment
What an excellent Blog from the American Association of Wine Economists AAWE (http://www.wine-econ.org/). Apart from the above, there is a storming detailed account of Robin Goldstein sending a spoof wine and restaurant review for a Wine Spectator Award: Osteria L’Intrepido doesn’t exist, but it won an award for excellence.

But I am glad to see Adam Smith among the original wine critics and I assume his membership of Edinburgh's Oyster Club (an enlightened intellectual discussion and er, drinking and dancing club), enabled him to introduce many of his fellows to the produce of Bordeaux, where his close frend, Professor Joseph Black's father was a major Bordeaux negociant.

I was also intrigued to find out that the taxation and tariff changes of individual German states, which wiped out the smaller vineyards of Karl Marx's parents, were the probable cause of his lifetime’s hatred of markets and free trade.

Visit the American Association of Wine Economists blog and let a smile or two cross your face. Intrepid journalism like this is rare.

[Disclosure: as a non-drinker of alcohol – even the great wines of Bordeaux; diet coke is no substitute – I have no commercial or other interests, except perhaps nostalgia, for promoting wine. But I do enjoy the odd laugh about it.]

John Stossel is the Man on Adam Smith on Fortress America

At last, a quotation from Adam Smith’s Wealth Of Nations that is both relevant to the subject and supported by correct Smithian analysis, and relevant to a problem discussed today – the import of energy (oil) into the USA.

John Stossel, a popular US columnist, posts in the Desert Despatch 27 August, (HERE):

“Understanding energy’s place in the global market

My column last week mocking “energy independence” angered people.

I argued that “independence,” a favorite slogan of vote-hungry politicians, would require the government to interfere with the global division of labor, which, as economists have understood since Adam Smith’s day, make us richer and therefore better able to deal with the future uncertainties. “It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. ... If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them,” wrote Smith.

Of course, as many readers noted, the federal government, by doing things like prohibiting drilling in on- and off-shore areas that may have oil reserves, makes it more expensive or even impossible to produce energy in this country. Those policies should go, but that would still not bring self-sufficiency. Our demand for oil is too great.

And anyway, if the economics of oil production favor foreign over domestic producers, it still makes sense to buy the cheaper product. It wouldn’t matter how much shale oil we have in the United States.

Readers correctly point out that because governments control much oil production, there is no global free market. But it does not follow that market forces don’t work. There are many sources of oil in the world and many buyers. Supply and demand still set the price globally. It is foolish not to buy at the lowest price.
Many readers agreed with the one who said: “The short-term goal here is not complete energy independence. ... The goal is partial independence from those countries, many of whose citizens hate us and would do us harm.”

“Partial independence” sounds like partial pregnancy. People don’t have to like each other to benefit from trade. Those who sell us oil need the money so they can turn it into food, automobiles and other things. Refusing to sell because they don’t like us would be self-destructive. Anyway, all the world’s oil ends up in the same bathtub. If one foreign source stopped selling oil to the United States, it would sell to someone else, and that buyer would then have an incentive to sell to us.
Several readers argued that “Energy independence doesn’t mean opposition to trade. If we ever become energy independent, we’ll still have the option of buying energy on the world market.”

Of course. But this misses the bigger point. To even attempt to achieve energy independence, the government will have to plan the energy sector. Considering how pervasive energy is throughout the economy, this is a recipe for full central planning and a step toward poverty and tyranny.

“Why not keep all that $720 billion [we spend to import oil] in the United States of America?” was a sentiment expressed by many. But that reveals a poor understanding of world trade. When we trade dollars to foreigners for oil, they have to do something with those dollars. They don’t stuff them in mattresses. They buy American products (U.S. exports are soaring). Or they invest in businesses here. Or they sell the dollars to someone else who buys American products or invests in the United States.

If we stop buying from abroad, foreigners will have fewer dollars with which to buy American products or to invest. That would hurt us.

Many readers think that energy independence would produce jobs for Americans. But the idea that money spent abroad means fewer jobs here is just plain wrong. If Americans don’t produce energy, they will produce something else. The number of jobs is not fixed. There is always work to do.

If Americans can produce competitive forms of energy — without government subsidies — great! But if others can produce energy more cheaply, we’d be crazy not to buy it and use the savings to make other things to improve our lives."

Comment

No wonder that John Stossel is “the author of “Myth, Lies, and Downright Stupidity,” which is now out in paperback.

I could not add anything to what John Stossel has written in his column today.

The edited quotation from Wealth Of Nations commences on page 456 and is picked up again on page 457 (Glasgow Edition, published by Oxford University Press and Liberty Fund). There is a small bit missed out for space reasons that is relevant to the argument too because Smith explains the mechanism by which the gains from trade are affected:

‘The taylor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a taylor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for.’ (WN IV.ii. 11-12).

Read Stossel's column and circulate it to those who participate in the debate about ‘Fortress America’, a place thta no serious consumer would be glad the politicians chose to impose it upon her and the family.

[My apologies to the good folks at the Desert Despatch for my breach of courtesy in posting the whole column without previous permission. I shall try not to commit the heinous offence again but I learned a long time ago that it is better to ask for foregiveness than for permission.]

Dangers in Relying on P. J. O'Rourke's Version of Adam Smith

It’s time to address the ‘little finger’ and the Chinese earthquake that kills 100 million question once again. This time, the ‘reader’, Nick Thorn, asserts that Adam Smith’s example, or at least the bit he quotes, provides an interesting ‘insight into human nature’.

To be sure it isn’t a very flattering insight at all, especially linked to Nick’s unhappy association of it with ‘capitalism’ (and the ‘Daily Mail’, the voice of lumpen middle-class England...).

Nick writes ‘Nick Thorn Home Pages’ (‘technology for business’ sake’) HERE:

“Adam Smith, Human Nature, Capitalism and Realism

Three of my holiday reading books put together came up with an interesting insight into human nature. The books were “The Genome” by Matt Ridley followed by “Confessions of an Economic Hit Man: The Shocking Story of How America Really Took Over the World” by John Perkins, then followed up with “On the Wealth of Nations” by P.J. O’Rourke. (I did chuck in an Andy McNab from the library too ).

“The Genome” basically said that nature wins out over nurture a lot more than we realise.

“On The Wealth of Nations” has an Adam smith quote on human nature. From “Moral Sentiments”, part 3. I quote:

“Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment. He would too, perhaps, if he was a man of speculation, enter into many reasonings concerning the effects which this disaster might produce upon the commerce of Europe, and the trade and business of the world in general. And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened. The most frivolous disaster which could befal himself would occasion a more real disturbance. If he was to lose his little finger to-morrow, he would not sleep to-night; but, provided he never saw them, he will snore with the most profound security over the ruin of a hundred millions of his brethren…”

[Nick inserts a link to Moral Sentiments; leaving it to reader, presumably, to read on beyond the truncated bit he quotes.]

Interestingly, Adam Smith complains bitterly about big business, globalisation, poor government, feckless people and could have been writing for The Daily Mail today. In other words, nothing much changes. For that matter, the Romans also had pretty much the same list of complaints.”

Comment
However, Adam Smith goes on to discuss an imaginary dilemma for that same man who ‘snore[s] with the most profound security over the ruin of a hundred millions of his brethren’ in the same paragraph quoted by Nick.

The whole paragraph completely changes Nick’s presentation of the man being a close imitation of a psychopath.

Smith asks: what would the man do if he was offered a choice of losing his finger or saving the 100 million from the earthquake?

On Nick’s current prediction he would prefer to save his little finger.

Not sure? Right pose the hypothetical question to people who have read the piece that Nick quotes but who have not read the whole quotation.

Now read the full quotation, which Nick does not quote (it might spoil his conclusions about human nature):

“To prevent, therefore, this paltry misfortune to himself, would a man of humanity be willing to sacrifice the lives of a hundred millions of his brethren, provided he had never seen them? Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it. But what makes this difference? When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble? When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self-love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration. It is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self-love can be corrected only by the eye of this impartial spectator. It is he who shows us the propriety of generosity and the deformity of injustice; the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves. It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.”
(TMS III.3.4: pp 136-7)

Yes, the man would choose to lose his little finger rather than 100 million ‘of his brethren’ are killed in the Chinese earthquake. This gives a somewhat different picture of the man from reading the first part of the paragraph alone.

I think this point is sometimes lost on ‘quick’ readers, who miss Smith’s description of the man in question here – he is a ‘man of humanity’ (check the first sentence), and not a miserable, selfish person, that Nick (a ‘man of the world’?) portrays, which rather spoils Nick’s (and many others’) forced example.

Always read Adam Smith, a moral philosopher, in context, which is why so many quotations from his books lead to false conclusions.

[Nick got his quote from P. J. O’Rourke’s version of Adam Smith, which is proving to be a poor source for Adam Smith’s actual views….]

[As always, my thanks to Sandra Peart for drawing this assessment to my attention.]

Inappropriate Quotations

Populist blogging is a feature of Blogland and it is all the richer for it. Sometimes the populists stray into territories with which they are not familiar. One such example is the 'Nerd Family. Pro-Nerd. Pro-Family Blog' (HERE:)

"Adam Smith on Public School

‘…NerdDad found a great book. It is P. J. O'Rourke's On The Wealth of Nations (Books That Changed the World) . Now we here in the Nerd Family are huge P.J. O'Rourke fans, and we can speak of his greatness further in the future, so NerdDad checked it out and found that Adam Smith had his opinions on school and how it should work.

Adam Smith was only a tepid fan of public education. As he went on to explain in book 5 of Wealth, he thought that some government subsidy of education was needed so that "even the common labourer may afford it." Teachers, however, should be "partly, but not wholly paid" by the state. "In modern times the diligence of public teachers is more or less corrupted by the circumstances, which render them more or less independent of their success and reputation," wrote Smith, making his modern times sound like ours. And Smith believed that certain very prestigious institutions of higher learning were teaching "a mere useless and pedantic heap of sophistry and nonsense." Was UC Berkeley even around back then?"

Comment
I have no idea of who forms the ‘Nerd Family’ (it must be a local joke), nor am I convinced that P. J. O’Rourke is the best guide to Wealth Of Nations; he managed to dumb down its ideas for an already dumbed-down generation of self-proclaimed Nerds.

The issue facing Adam Smith was not how to reform an existing education system, but how to persuade legislators and those who influenced them to initiate some elementary education for a largely illiterate and innumerate (and mono-lingual speaking) generation.

For the majority of youngsters there was no or very little education. Girls tended not to be educated at all, except in the middle and upper-class households and then only in how to be ‘ladies’. Among boys, education lasted a year or two before they were put to work to earn pennies to supplement the weekly family earnings.

Of those ‘schools’ that functioned, most were paid for by local communities, bequests and charities. England had only two universities and these were financed by endowments, scholarships and private funding and mainly trained boys (14-17) for the church ministries.

The picture is Scotland was somewhat different to that of England and Wales. Scotland had four universities (Edinburgh, Glasgow, St Andrews and Aberdeen) and they took boys who completed schools education from 6 or 8 to 14 years old. Every Church parish had a school with the paid teacher and took boys of all classes to teach them the basics of reading, writing, and account (arithmetic), plus a smattering of Latin and Greek.

For those who showed promise, charitable funds were available to keep them at school without having to leave to work at round 8 to salve the dreadful poverty of their families. Those that went on to university went on scholarships, again without burden on their families. This route to upward mobility was an important feature of Scottish education, as was the whole education apparatus, partly funded by local public charges and charities, and by even miniscule payments by all but the very poorest families. Many visitors were surprised at the literacy levels among common labourers in Scotland.

It was this system that Smith presented in Wealth Of Nations for emulation across the United Kingdom. I am not sure just how qualified P. J. O’Rourke, or Nerd daddy is to pontificate about Smith’s modest proposals or to assert that he was ‘only a tepid fan of public education’. I think the education debate in the 21st-century USA on ‘public education’ is a long, long way from the problem that Smith addressed.

Once again it comes down to context, of which the Nerd Family may well not be aware of. You should not drag in Adam Smith to boost one side or another of a fractious ‘debate’ (mere like a ranting scream) in modern America, especially as it includes organised teachers unions, public authorities and parents of varying degrees of measured understanding of the issues, and almost certainly a complete lack of knowledge of Book V of Wealth Of Nations and
18th-century realities.

Nonsensical Snippet on Adam Smith

Somebody reports on global warming from the Big Tent in Denver (HERE):

“Van Jones: Nothing Radical Here

Oakland area activist Van Jones wastes no time getting to the heart of how clean energy can be sold as a pragmatic solution in the current political climate, and he does so by tipping his hat to everyone’s favorite capitalist, Adam Smith.”

Comment
“everyone’s favorite capitalist, Adam Smith”?

By no imagination can anybody make out that Adam Smith was a capitalist. It’s this kind of sloppy thinking that gives 'global warming activists' a bad name among sceptics.

The Mystery of Adam Smith's '1755 Paper'

Remy Briand and Madhusudan Subramanian post an article on investment prospects in ‘Emerging Markets: a 20 year perspective’ in IndexUniverse.com (Sept/Oct) (HERE):

‘Emerging Markets: a 20 year perspective’, which you have to read to get its professional investor flavour (vicariously, of course).

It opens, however, with a well known quotation from Adam Smith:

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things." — ."

Comment
No references to Adam Smith occupy any of the 5 pages of the article, and in that sense the quotation is disengaged from the article. I assume it was picked by the authors because it reads well and supposedly sends a powerful message to their readers.

However, the emerging markets that they are interested in do not qualify as having taken Smith’s advice – they tend to be state dominated in partnership with “family-controlled conglomerates that benefit from political connections”, which does not stop them being a ‘buy’ prospect, provided you have strong connections with a winning family (political or commercial).

The ‘1755 paper’ as it is known is most interesting, not least because it was only seen by Dugald Stewart (Smith’s first biographer) and not by others who could verify its contents and, perhaps more importantly, explain its context.

The occasion was Stewart’s eulogy following the death of Adam Smith (in 1790) and his reading of an appreciation of Smith’s work and life to the Royal Society of Edinburgh in 1793 (he read his eulogy in two parts, one in January and the other in March: the February meeting was postponed without explanation).

A partial explanation for the postponement was the rising concerns of the British Establishment for their safety in light of the events in revolutionary France with the trial of the French King in December 1792 and his execution in January 1793.

There were also a series of events in Edinburgh early 1793 in which various radicals were placed under observation and then on trial for sedition. In short, the atmosphere was not conducive to the proper business of an eulogy for a academic moral philosopher - even meetings were viewed with distrust.

Stewart quotes from Smith’s paper which was actually delivered in 1755 to his club in Glasgow and appears to be ‘expressed with a great deal of that honest and indignant warmth, which is perhaps unavoidable by a man who is conscious of the purity of his own intentions, when he suspects that advantages have been taken of the frankness of his temper’.

Stewart used the occasion to place on record in front of his peers (Smith was a founder member of the Royal Society of Edinburgh in 1783 – he had been elected to the Royal Society of London in 1773) a strong rebuttal of the mysterious circumstances that led him to write with ‘indignant warmth’ about unexplained matters that had ruffled his normal kindly disposition. Fellows of the RSE are assumed to have known what the dispute was about even though it had occurred 38 years earlier. It must have been some row!

But the paper was not published by Stewart – he thought it would be considered ‘improper’ to ‘revive the memory of private differences’, yet clearly everybody knew about them.

The paper, with a few quotations from it (including the one quoted above), was placed among Stewart’s papers and never saw the light of day. Unfortunately, Stewart’s son appears to have burned it among other papers when he was suffering from mental illness.

So, not knowing what the paper contained remains a major problem for Smithian scholars. I have discussed its possible contents and context in the appendix to my book, Adam Smith’s Lost Legacy, 2005, Palgrave Macmillan, pp 241-48.

I don't suppose Remy Briand and Madhusudan Subramanian are aware of this background, nor am I convinced that they quoted the sentence above because it had anything to do with the cotnents of their article. States and powerful family conglomerates don't do 'peace, easy taxes, and a tolerable administration of justice'.

Adam Smith on Happiness?

There are border line quotations from Adam Smith's writings that may or may not express the themes than an author wishes to convey, and this may be one of them.

Gretchen Rubin, a former lawyer from Yale, turned ‘writer’, for which she is working on The Happiness Project (HERE), writes:

“Happiness quotation from Adam Smith

“The consciousness, or even the suspicion, of having done wrong, is a load upon every mind, and is accompanied with anxiety and terror in all those who are not hardened by long habits of iniquity.” --Adam Smith, The Theory of Moral Sentiments

That's why I've found that when I behave myself better, and manage to keep my resolutions, I feel happier. Knowing that I've lost my temper, failed to use good manners, behaved thoughtlessly, etc., makes me anxious, even as I'm making excuses for myself.”

Comment
An unusual theme and I applaud any advice to readers that they might read Adam Smith’s Theory of Moral Sentiments.

Incidentally, the sentence that Gretchen quotes is part of a discussion in which, uncharacteristically, Smith attacks the ‘Roman Catholic superstition’ as part of a veiled attack on religious superstition in general. He was ‘safe’ from the attention of the Protestant zealots in mid-18th-century Scotland in describing the Catholic religion as ‘superstition’ in the context of the confession of sins to a priest; woe betide him if he said anything similar about the Calvinist confession.

However, judge for yourself for here is the quotation is its context:

“The doctrine of the casuists, however, is by no means confined to the consideration of what a conscientious regard to the general rules of justice would demand of us. It embraces many other parts of Christian and moral duty. What seems principally to have given occasion to the cultivation of this species of science was the custom of auricular confession, introduced by the Roman Catholic superstition, in times of barbarism and ignorance. By that institution, the most secret actions, and even the thoughts of every person, which could be suspected of receding in the smallest degree from the rules of Christian purity, were to be revealed to the confessor. The confessor informed his penitents whether, and in what respect they had violated their duty, and what penance it behoved them to undergo, before he could absolve them in the name of the offended Deity.

The consciousness, or even the suspicion of having done wrong, is a load upon every mind, and is accompanied with anxiety and terror in all those who are not hardened by long habits of iniquity. Men, in this, as in all other distresses, are naturally eager to disburthen themselves of the oppression which they feel upon their thoughts, by unbosoming the agony of their mind to some person whose secrecy and discretion they can confide in. The shame, which they suffer from this acknowledgment, is fully compensated by that deviation of their uneasiness which the sympathy of their confident seldom fails to occasion. It relieves them to find that they are not altogether unworthy of regard, and that however their past conduct may be censured, their present disposition is at least approved of, and is perhaps sufficient to compensate the other, at least to maintain them in some degree of esteem with their friend. A numerous and artful clergy had, in those times of superstition, insinuated themselves into the confidence of almost every private family. They possessed all the little learning which the times could afford, and their manners, though in many respects rude and disorderly, were polished and regular compared with those of the age they lived in. They were regarded, therefore, not only as the great directors of all religious, but of all moral duties. Their familiarity gave reputation to whoever was so happy as to possess it, and every mark of their disapprobation stamped the deepest ignominy upon all who had the misfortune to fall under it. Being considered as the great judges of right and wrong, they were naturally consulted about all scruples that occurred, and it was reputable for any person to have it known that he made those holy men the confidents of all such secrets, and took no important or delicate step in his conduct without their advice and approbation. It was not difficult for the clergy, therefore, to get it established as a general rule, that they should be entrusted with what it had already become fashionable to entrust them, and with what they generally would have been entrusted, though no such rule had been established. To qualify themselves for confessors became thus a necessary part of the study of churchmen and divines, and they were thence led to collect what are called cases of conscience, nice and delicate situations in which it is hard to determine whereabouts the propriety of conduct may lie. Such works, they imagined, might be of use both to the directors of consciences and to those who were to be directed; and hence the origin of books of casuistry.

The moral duties which fell under the consideration of the casuists were chiefly those which can, in some measure at least, be circumscribed within general rules, and of which the violation is naturally attended with some degree of remorse and some dread of suffering punishment. The design of that institution which gave occasion to their works, was to appease those terrors of conscience which attend upon the infringement of such duties. But it is not every virtue of which the defect is accompanied with any very severe compunctions of this kind, and no man applies to his confessor for absolution, because he did not perform the most generous, the most friendly, or the most magnanimous action which, in his circumstances, it was possible to perform. In failures of this kind, the rule that is violated is commonly not very determinate, and is generally of such a nature too, that though the observance of it might entitle to honour and reward, the violation seems to expose to no positive blame, censure, or punishment. The exercise of such virtues the casuists seem to have regarded as a sort of works of supererogation, which could not be very strictly exacted, and which it was therefore unnecessary for them to treat of.” (TMS IV.iv.16-7 pp 333-4)

I am not sure that all this is about happiness. But Gretchen is on the right track. There is much in Moral Sentiments that addresses the issues that she is interested in, and perhaps she should look elsewhere in the book for a better quotation.

Short Rant

A side-note on a minor diversion among anthropologists:

Postmodernism: ‘the open acknowledgement that an observer brings his or her own background into a scientific question’

‘It has meant that some of the new generation’s cultural scholars regard the time-honoured ethnographies of the past with scepticism. One health result has been an increase in the importance of ethnographies written by scholars of colour, especially those who are from the culture they study.’

p 11, Craig Stanford, John S. Allan, Susan C. Antón, 2006. Biological Anthropology, Pearson Prentice Hall, New Jersey

Comment
I was somewhat taken aback by this statement. I was looking through some newer references while completing my paper on the ‘Pre-History of Bargaining’ for the European Association for Evolutionary Political Economy (EAEPE) conference in Rome 3-6 November. You can see I sometimes cross from Economist's Land in to Anthropoloy Land, and even stranger lands beyond that.

Nevertheless it still stopped me in my tracks.

Especially the prospect alluded to in the text that anthropology may split into two clear sections, one, ‘biological’ (‘empirical’, ‘hypotheses testing’, and ‘scientific’) and the other ‘cultural’ (‘interpretive’, in the ‘light of power, gender and ethnicity’).

Well, the split may be inevitable and it may or may not be beneficial. Who knows? I am not opposed to such divisions on grounds of principle; they abound in economics and, for example, I am not comfortable with the policy consequences of neo-classical economics, but a division within a discipline that seems to be based on skin pigmentation and not science is a horrifying idea by any measure.

If some people have a view that their subject should be treated in a specific context, even by people who believe that their experiences within that context gives them an edge over outsider ‘number-crunchers’ – who may well be deeply immersed in the cultures they study - that is fine by me.

I am all for context, as Lost Legacy makes clear on a regular basis. If their results prove of lasting value, they will achieve the necessary credibility; if they don’t they won’t, and no harm done.

I would have thought that the subject range of anthropology precludes finding people who lived among the first farmers (11,000 years before the present), or the first migrants out of Africa (60-40,000 ybp), or the first human residents of California, which automatically precludes the need for people with ‘hairy-coats’, ‘white males’, ‘people of colour’ and those females ‘deeply immersed in gender politics’, who would be more 'correct' or whatever, than those moderns who were properly-trained anthropologists, with specialist expertise across the discipline, irrespective of their colour, who sift the evidence of the past with forensic passion.

The tenor of the article (‘A Paradigm Split in Anthropology’) smacks of a step too far of the insidious extremes of political correctness.

End of Rant.

Poor Sub-editing on Newsweek?

Anna Quindlen writes a column in Newsweek (HERE) which has the heading:

‘Endless Summer’ and the sub-heading:

In the future, all presidential candidates should be sent to a secure, undisclosed location with lemonade and some Adam Smith’

Comment
The actual article apart from the sub-heading does not mention Adam Smith again in it, so we don’t know exactly what the significance is of Cain and Obama drinking lemonade and (reading?) Adam Smith at the ‘undisclosed location’.

How did this get past the Newsweek subs?

A False Summary of Adam Smith is Published

Publishing ventures that seek to milk cash cows have their uses. Corrupting their authors' intentions ought not to be one of them.

In the Business Standard 23 August, New Delhi, a new series is announced of short summaries of 100 pages that 'explain' ideas from classical texts at popular, low prices HERE: http://www.business-standard.com/india/storypage.php?autono=332271

“Adam Smith’s The Invisible Hand has been extracted from his book The Theory of Moral Sentiments. Because he hasn’t been read carefully, Adam Smith has been projected as an advocate of laissez faire who opposed any effort by a government to control self-interested activities of individuals that led to exploitation. This interpretation is false because one of Smith’s constant themes is that the unintended consequences of good intentions are often bad: the mysterious “invisible hand” provides a corrective. Smith’s dictum is simple: proper reasoning does not infallibly lead men to proper conduct.”

Comment
It sure is a ‘mysterious invisible hand’ that ‘provides a corrective’ that also manages to mangle two ideas – Adam Smith was not an advocate of laissez-faire (TRUE) but he advocated the ‘invisible hand’ instead (NONSENSE).

Governments fail in attempting to lead individuals to ‘proper conduct’ (TRUE) and ‘proper reason does not infallibly lead men to proper conduct’ (TRUE), therefore leave it to the ‘mysterious invisible hand’ (NONSENSE).

Society can prevent ‘improper conduct’ by the rule of law (justice), not men – do not legislate for restrictions, monopolies, and tariffs.

Dismantle – gradually and with due consideration for their immediate affects – the mercantile political economy which is hostile to competitive trade. The only case for notional tariffs is to raise revenue for necessary public expenditure where other sources are not available.

How many readers of this series will understand Adam Smith from reading it?

Philosophising About Hard Work

Saturday's a time for some thinking about philosophical issues. On this occasion I take a brief look at the virtues of hard work for those undertaking it.

Wall Street Journal (22 August) in which Tony Woodlief asks: ‘Hi-Ho, Hi-Ho: How Can I Teach My Kids to Enjoy Work?’

“I thought perhaps the best person to consult for wisdom on the virtues of work would be that psalmist of markets, Adam Smith.

But as it turns out, Adam Smith's philosophy of work was that it requires one to lay down "a portion of his ease, his liberty, and his happiness." My sons agree wholeheartedly. Further, Smith measured wealth in terms of one's ability to hire others to do the work. I've not caught anyone paying to have his chores done, but I suspect it's a matter of time. Needless to say, "Wealth of Nations" is coming off our shelf for the time being.”

Much as it pains me to say it, I think the Frenchman was right. Maybe early Americans worked hard not because they found inherent pleasure in work but because they dreamed of a world with delivery pizza and videogames. And now that we've achieved that pinnacle of economic satisfaction, we're eager to follow Adam Smith's advice and take it easy.

Much as it pains me to say it, I think the Frenchman was right. Maybe early Americans worked hard not because they found inherent pleasure in work but because they dreamed of a world with delivery pizza and videogames. And now that we've achieved that pinnacle of economic satisfaction, we're eager to follow Adam Smith's advice and take it easy.

Left-leaning theologians like N.T. Wright and Miroslav Volf, meanwhile, agree that work should be seen not as a pietist's grim duty or as an avenue to wealth but as a way of participating in God's creative order. Liberal Tom Lutz's "Doing Nothing," a book that ostensibly sets out to justify Slackerism, likewise has a beef not with work but with purposeless work.

I'm a small-government guy, but when it comes to a work ethic, I find myself siding with the left. Humans need work, and they need to see that their work has a purpose. Come to think of it, you'll hear that from any of America's countless business gurus. We're all Marxists now.”

Comment
You can’t help liking Tony Woodlief. He has a family oriented honesty that gives pause to thought. His awkward conclusions irritate too. So it’s best that you read the article HERE:

However, I am not so sure that he’s got Smith (or Marx) right.

Adam Smith considered the real cost of anything was the ‘toil and trouble’ of making it yourself, as in the pre-history days of hunter-gathering when everything a person wanted had to be made for themselves – feeling cold? go into the forest and hunt a bear to make a coat; your hut leaks? – gather some brushwood and cover the gaps or gather all the bits and built another hut; you’re hungry – gather from the forest some berries, and fruit, and hunt a smallish animal to make the main treat.

Smith was speaking philosophically about the real cost of anything you needed. Your own labour could give you a surplus with which you could obtain the fruits of nature from somebody who had other things to spare. Labour was the cost of acquiring things; wealth was the amount of such things that represented the ‘necessities, conveniences, and amusements of life’. It was not the labour.

If it wasn’t so, then everybody would have to labour hard and long but would also be extremely poor, far beyond what a decent saint could tolerate in their vows of poverty (the latter living off the scraps of those working around them). The hut needs fixed because it is leaking badly? 'Sorry, there’s no food and you’ll have to get wet and like it, while I go to yonder territory and gather what I can – perhaps in a few days I’ll have the time to tend to the hut, but then perhaps not.'

How taking Wealth Of Nations from the shelf would prevent Tony’s boys reading about reality – obviously Tony hasn’t read or understood it, so why he fears his boys (4, 6, and 8 years old) would be corrupted by it, escapes me. They could read Genesis and the ‘sweat of thy brow’ bits, instead.

As for de Tocqueville and dreaming about working to ‘a world with delivery pizza and videogames’, I doubt it. The early Americans were working to get the wherewithal to live well for the rest of the year.

The desire to ‘take it easy’ is not something new; it’s the fact that while that desire to 'get by' is universal across all societies, there is always a minority who want to do better that 'get by' and they work hard trying to find inventive ways of doing better, but unfortunately the self-deception that they can rest after they’ve succeeded by a lifetime of toil is a receding horizon:

“And it is well that nature imposes upon us in this manner. It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which ennoble and embellish human life; which have entirely changed the whole face of the globe, have turned the rude forests of nature into agreeable and fertile plains, and made the trackless and barren ocean a new fund of subsistence, and the great high road of communication to the different nations of the earth. The earth by these labours of mankind has been obliged to redouble her natural fertility, and to maintain a greater multitude of inhabitants.” (TMS IV.1.10: pp 183-4)

What Tony Woodlief sees in hard word ‘as a way of participating in God's creative order’ other might see 12-18 hour days in paddy fields, or mind-numbing shifts in coal mines.

Without in any way deliberately mocking such religious-inspired images of the ‘creative-order’ attributed to an invisible God, its possible to intellectualise the inevitable amount of work that is and always will be ‘purposeless’ in the minds of those who have to do it.

Where does all this leave Tony Woodlief’s three young boys?

In Adam Smith’s time there were plenty of young boys, as young as six upwards, who didn’t ‘waste’ time playing; they were sent to work by and with their parents for a few pence a week which could have added a shilling-and-sixpence to the family’s meagre weekly budget, giving them the enjoyment and fulfilment that Tony yearns for his boys (echoes of the ‘Labour Sets You Free’ horrors of Nazi Germany).

Somehow, I am not so sure that his boys see it that way – at least, as well-brought up boys, they would not be overly prepared to say so in front of him. Might be better to get them engaged in sporting activities…

PS: I note in passing Tony’s comments on his son’s ‘slacking’ while nominally working, but were they slacking or exercising innovative capacities?

‘There are already signs of the Smithian ethos on our homestead: My 6-year-old tries to reduce how often he carries his clothes hamper to the laundry room by wearing the same outfit indefinitely. My 8-year-old, meanwhile, leaves the water hose stretched out where I trip over it, so that filling the dog's water dish takes less walking.’

This is predictable and very laidable!.

Smith notes the behaviour of children in work in his day; Smith noted a similar outcome in Wealth Of Nations:

‘Men are much more likely to discover easier and readier methods of attaining any object, when the whole attention of their minds is directed towards that single object, than when it is dissipated among a great variety of things. But in consequence of the division of labour, the whole of every man's attention comes naturally to be directed towards some one very simple object. It is naturally to be expected, therefore, that some one or other of those who are employed in each particular branch of labour should soon find out easier and readier methods of performing their own particular work, wherever the nature of it admits of such improvement. A great part of the machines made use of in those manufactures in which labour is most subdivided, were originally the inventions of common workmen, who, being each of them employed in some very simple operation, naturally turned their thoughts towards finding out easier and readier methods of performing it. Whoever has been much accustomed to visit such manufactures, must frequently have been shewn very pretty machines, which were the inventions of such workmen, in order to facilitate and quicken their own particular part of the work. In the first fire-engines, a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder, according as the piston either ascended or descended. One of those boys, who loved to play with his companions, observed that, by tying a string from the handle of the valve which opened this communication, to another part of the machine, the valve would open and shut without his assistance, and leave him at liberty to divert himself with his play-fellows. One of the greatest improvements that has been made upon this machine, since it was first invented, was in this manner the discovery of a boy who wanted to save his own labour.” (WN I.i.8: pp 20-21) [Incidentally, Smith was misled here by an anecdote]

I hope Tony praised his boys for their ingenuity in seeking easier way to complete their tasks, instead of, I fear, chastising them. That their solutions may have been 'unstable', they nevetheless provide an ideal platform to instill in them the positive virtues of trying to improve the way things are done.

It is that search for improving productivity that led from the forest via shepherding and farming to Tony’s ability in the world this created to sell-up in the city and move to a 20-acre homestead in the American countryside to induct his children into the virtues of hard work. Just a thought.

[Thanks to a correspondent (Adolpho Mendez) for drawing Tony Woodlief’s article in the WSJ to my attention - see comments to my post below]

US Treasury 'Manages' Its Debts?

Gerald P. O’Driscoll, Jnr. posts ‘Washington Is Quietly Repudiating Its Debts’ in the Wall Street Journal (22 August) HERE:

“Will the U.S. Treasury repudiate its obligations to its creditors, be they citizens or investors around the world? Most observers would answer "no" without hesitation. But Congress, with the complicity of the White House and the Fed, has arguably embarked on a stealth repudiation.

In his famous treatise, "The Wealth of Nations," Adam Smith noted there had never been a "single instance" of sovereign debts having been repaid once "accumulated to a certain degree." We may have reached Smith's threshold.”

Comment
Possibly a rare good use of a quotation from Wealth Of Nations (WN V.iii.59: p 929).

The only problem that I can see is I am not sure if the US has reached that stage just yet, but it is appropriate that a financial journal raises the possibility of the issue arising.

Maybe Gerald P. O’Driscoll is slightly exaggerating Smith’s views in this instance. Here is the actual wording of the paragraph, which is slightly less definitive in that ‘never’ replaces Smith’s more cautious words, ‘I believe’:

‘When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and compleately paid. The liberation of the public revenue, if it has ever been brought about at all, has always been brought about by bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretended payment.’ (WN V.iii.59: p 929)

Those interested in handling public debts might care to read the whole of chapter III of Book V (‘Of Public Debts’) for Smith’s excellent historical account of the sorry behaviour of kings, emperors, and governments regarding the debts they or they predecessors contracted, and which given the historical precedents, were almost certain not to be repaid in full, though they were good for their interest payments while they lasted (allowing for the ravages of inflation, adulterated coinages, and assorted financial crises on even the value of the nominal interest payments).

Adam Smith On Government Spending From Taxation and Borrowing

Another misuse of Adam Smith's actual stance, this time on the size of government expenditure.

RomeSentinel.com (New York) carries a punchy Editorial (HERE:)

“When Adam Smith wrote the book on economics, he didn’t trust corporations, unions, lobbyists, interest groups, governments, or anyone else. Smith knew that in an untrustworthy world, more competition was always better than less competition.

Government should be used sparingly, deftly, and narrowly focused. It has a limited purpose: Protect citizens from others and from each other, maintain courts, and minimally help people between jobs. Everything else is your business, because government doesn’t create jobs; people do. Adam Smith explained this 230 years ago.”

Comment
That’s a stripped down version of Adam Smith’s critique of the mercantile economics system prevalent in 18th-century Britain; so stripped down it’s missed a lot of the detail in pursuit of a political view.

Not that I against cutting the size of most 21st-century governments, especially the government of the UK. But I do not think anytime soon the UK, nor the USA; and certainly not Russia or China, are going to reduce the government’s share of GDP going to government legislated expenditures.

Smith’s approved programme for government expenditures was quite extensive, well beyond the editorial writer’s list on Rome Sentenial list.

Smith’s infra-structure programme to ‘facilitate commerce’ would cost tens of millions (good highways linking the main, and growing, cities; harbours; canals; bridges; paving and street lights), all mentioned in Book V of Wealth Of Nations.

The taxpayers’ money plus borrowing to fund the 7-years war at £172 million would have been better spent on british domestic infra-structure, which, of course would incur annual operating, maintenance, and repair costs, part funded by user-tolls, and Smith was pragmatic about whether they were managed by public or private commissioner.

To this you could add a national school system (a ‘little school in every parish – all 60,000 of them), partly funded by local taxes and small fees from families whose children attended them to better prepare them for productive work to supplement their family’s earnings.

He even advocated public funding for palliative care for victims of ‘loathsome diseases’ like leprosy (an agenda of expenditure in the disease-ridden towns that were to grow bigger in the next century).

Smith was not in favour of a ‘night-watchman state, an accusation often levied about him by some of today’s libertarian right. It was a sarcastic remark by a 19th-century socialist called Ferdinand Lassell (1825-64), who was trying to out-left the British left who were not robust enough politically for him; somehow, the Right picked this up as a ‘badge of pride’ and passed it on to their accounts of Smith’s government duties programme.

Smith certainly favoured a small state by today’s standards, but not as small by a long way as some would claim for him. It would make it easier to join these debates if more people read Adam Smith beyond the ‘rent-a-misquote’ efforts of those who don’t read him.

Misuse of a Metaphor

Emma Tom writes a punchy column in The Australian: “Bring on the nanny state and dig Doug out of squalor” HERE:

“Adam Smith's invisible hand was supposed to look after the underclass even though quite often it seemed to be raising an invisible middle finger and sneering "nerny nerny ner ner". The indulgent and economically delinquent concept of social justice was for girls.”

Comment

I have no quarrel with Emma’s focus in her column on the desperate abandoned plight of a down-and-out called ‘Doug’ in Canberra, Australia. It truly is a shocking account.

But why, oh, why must she bring into it a totally irrelevant and absolutely untrue link to anything that Adam Smith from Kirkcaldy had to say about it?

Maybe, the ‘Adam Smith’ from Chicago is culpable, but I don’t suppose Emma knows that. She takes a metaphor of an ‘invisible hand’, of restricted use – Smith only mentions it once in Wealth of Nations, once in Moral Sentiments and once in his History of Astronomy essay, which was not published until 1795, after he had died in 1790, and in each case, he was not talking about anything remotely connected with anything mysteriously benign nor related to the situation that ‘Doug’ is in.

Emma is taking the Chicago misuse of the metaphor at its word and makes out that somehow Adam Smith was horribly wrong about the desperate poverty of the likes of Doug and of which there were more than enough examples around Edinburgh in the late 18th century.

Her remarks more appropriately should be linked to Chicago economists, Nobel ‘Prize winners’ too, and she should berate them, not the Adam Smith born in Kirkcaldy, a long time incidentally before Chicago existed to host a group of epigones who stole Adam Smith’s legacy.

How does an invisible (i.e., imaginary’) finger manage to ‘sneer’ and vocalise about the plight of Doug? Smith respected the unemployed and the unemployable; he was quite contemptuous of the ‘great’, the celebrity admired, and the self-concerned ‘wives of Aldermen’ (we all know what he meant by that; probably even know some modern-day examples of that species, no doubt in Canberra itself).

You should follow the link to Emma’s article to read about ‘Doug’.

Misuse of a Quotation from Wealth Of Nations

Michael Dawson writes in Dissident Voice ('a radical alternative in the struggle for peace and social justice’ (HERE):

“We’re no. 28”

Does the flagship of big business society really prove the truth of Adam Smith’s famous claim that

“by directing that industry in such a manner as its produce may be of the greatest value, [the capitalist] intends only his [or her] own gain, and he [or she] is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his [or her] own interest he [or she]…promotes that of the society more effectually than when he really intends to promote it.”

For those actually willing to investigate and answer this question, the evidence is clear: Check out Mercer Consultants’ 2008 quality of life and personal safety survey results.

Mercer, which describes itself as “a global leader for trusted HR and related financial advice, products and services” that “has more than 18,000 employees serving clients in over 180 cities and 40 countries and territories worldwide,” finds that the top US city in its quality-of-life index is:
Honolulu, ranked #28”

Comment
I have not comment on the politics espoused by Dissident Voice (I only comment on the politics of the country I vote in, which is Scotland, UK).

However, I have an opinion on the misuse of a quotation from Adam Smith's, Wealth of Nations, which you will find at: WN IV.ii.9: p 456. I quote it accurately below:

“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”

Note the unnecessary and misleading insertions of the words: ‘the capitalist’; ‘or her’, ‘or she’, and that ‘he or she’ missed one in the last part of a sentence.

Inserting the word ‘capitalist’, a word not invented in English until 1854 (Oxford English Dictionary), when it appeared in Makepeace Thackery’s novel, The Newcomes (Smith died in 1790), is discreditable when giving the impression that Adam Smith was commenting on an economic system called capitalism when he patently was not. I call this ‘rent a quote’.

Moreover Smith was not talking about an economic system or even a market. He was discussing a behaviour associated with risk avoidance on the part of some merchants who preferred the home trade to foreign trade with the British colonies in North America, which no longer existed after 1783, when the British colonists forced the surrender of the British army, and the country went on to become the United States.

I would also observe that the authors of Dissident Voice appear to live in California, one of the richest places on Earth, and to which millions, not to say billions, would be delighted to move to from where they are to avoid starvation, disease, and a quality of life far removed from the heady delights of California.

An 'Unsafe' Paradigm

Simply Left Behind HERE:

‘Paradigms Found’

“The underlying flaw of any political or economic system -- democracy, capitalism, socialism, communism, even dictatorship -- is the human element: people cannot be easily predicted or controlled. In the right wing interpretation of a capitalist democracy, there is simply no accounting for the greed, avarice and rapaciousness of individuals.

Even Adam Smith, the father of modern capitalism, warns of this and suggests the only power great enough to deflect these basic human impulses is government.”

Comment
Oh, No sir. Government is NOT ‘the only power great enough to deflect these basic human impulses’ of ‘greed, avarice and rapaciousness of individuals’.

It is the rule of law that protects the individual and that is never the same as government. Under the separation of powers the Legislature is separated from Government and both are separated from the rule of law. Each is independent from the others and can be called to account for their misbehaviour.

This, Sir, is built into the US Constitution.

It is partly achieved in Britain (where the government – the ministers of the Crown -sit in the House of Commons; where the Law Lords sit in the House of Lords (one sits in the Cabinet). But judges and magistrate sit for life and for ‘good behaviour’).

The system is not perfect but our liberty does not depend on the goodwill or ‘good behaviour’ of government. Perish the thought!

The people hold their governments to account in regular, free, elections. Our liberties are enshrined in our history, not party-political manifestoes.

If liberty depended on politicians alone it would not last.

If liberty dependended on governments alone it would be eroded at their convenience.

When liberty dependends on the rule of law alone, it is safer than the inclinations of the other too.

Is this a Correct Use of a Quotation?

Steven Malanga in City Journal writes (19 July) about “New Jersey’s Ruin - The state’s leaders seem determined to drive it off a cliff”.

“Adam Smith once wrote that there’s a “great deal of ruin in a nation,” by which he meant that it takes an awful lot of bungling by political leaders to bring down a powerful and prosperous state. Today, New Jersey pols are giving Smith’s thesis quite a test drive. They are steering the Garden State toward ruin at an astonishing pace, and no amount of bad economic news seems capable of deterring them.”

Comment
I am not sure of the situation in New Jersey, which Steven Malanga details in his piece (HERE), but the exchange between Smith and Sir John Sinclair, following the British surrender at Saratoga, involved the following words:

Sir John: ‘If we go on at this rate, the nation must be ruined.’

To which Smith replied: ‘Be assured young friend, that there is a great deal of ruin in a nation’

From Ian Simpson Ross (Smith's definitive biographer), 1995. The Life of Adam Smith, p 32, Oxford University Press; in Correspondence of Sir John Sinclair of Ulbster, i.390-1, and in Correspondence of Adam Smith, Letter no. 221, footnote 3, Liberty Fund, 19.

It may be that Smith was less concerned at the prospect of the government’s defeat by the British colonists in America than Sir John (see Wealth of Nations, IV.vii.c: 64-79: pp 614-26), than the enormous cost of maintaining colonial monopolies that diverted scarce capital away from productive investment, and thereby contributed to slower economic growth, and also distorted capital flows from more rapid growth in the UK in favour of a longer turn around of capital, from once every four years instead off two or three times a year if invested locally.

In this context I am not convinced that Steven Malanga has deployed the quotation from Smith with greater affect.

As for the good folks of New Jersey, whatever happens in the near future, there may be pain, but the losers from corrective changes are not going to give up policies that benefit them as things stand; however, capital flight is feasible for those hurt by the current policies. The current gainers may end up the future losers.

Following the Trail of James Hutton in the Rain

I went on a country trip this morning with a colleague who specialised in geology, which he taught for many years at university. Our expedition was to visit Slighhouses farm, deep in the Berwickshire countryside, south of Edinburgh that once belonged to James Hutton, author the ‘Theory of the Earth’ (1788).

It was Hutton's passionate interest in what we now call geology that led him to announce that the world was not a mere 6,000 years old, as was confidently fixed by Bishop Uusher from his time-line for the Biblical Eden Garden, but which was appropriately of an age for which there was ‘no vestige of a beginning. No prospect of an end.’

James Hutton was a close friend and intellectual confident of Adam Smith and when Smith died in 1790, Hutton and his other close friend, Joseph Black (a professor of chemistry at the university of Edinburgh (previously the chair at Glasgow) were Smith’s joint executors.

On Smith’s detailed instructions, they burned 16 volumes of his unpublished papers, among which was the ms of the long-promised (since 1759) book on how civil government ‘ought’ to be arranged (Lectures in Jurisprudence) , but (and forever in the gratitude of scholars), they arranged the posthumous publication of Smith's ‘History of Astronomy’ in 1795.

‘Slighhouses’ is still a working farm (now worked by the Marshall family). The farm house still stands and is in the traditional 18th-century style.

It was raining fairly heavily (at least to me, but maybe not to a farmer – or a duck) so we did not have an inclination to hang about. A mile or so up the road we stopped at a Farmers Shop (owned by the Marshalls’) in which they have mounted a professional-looking museum exhibition about James Hutton, his geological works (his discoveries of the ‘uncomformity’ at Siccar’s Point on the nearby coast, and at a nearby River Jed at Jedburgh), and his connections with the Scottish Enlightenment.

My friend, Norman Butcher, explained the geology of these discoveries and the importance Hutton’s geological speculations. As a close friend and regular dining companion of Smith’s at his Sunday soirées at Panmure House and the more risqué nearby Oyster Club, Smith would have been well aware of the challenges of Hutton’s work to the widely believed Biblical accounts.

Going back nigh on 50 years, I remember how geology students used to moan about their compulsory fieldwork, incessantly accompanied by cold and rain that were their main features, compared to warm library sessions of we economists. Today, I understand how they felt…

Another Blog on Corporate Social Responsibility That Gets Adam Smith Wrong

George Starcher in ‘Ethics and Entrepreneurship: an oxymoron?’, ‘presents a model representing the stages of ethical consciousness an individual or business might have’, adding that those familiar with Lawrence Kohlberg’s theory of moral development will notice a resemblance’ and “karimbeers” in European Baha’I Business Forum Blog (16 August) HERE:

“Stages of Ethical Consciousness”

“The father of capitalism, Adam Smith, described the free enterprise system in The Wealth of Nations, published in 1776. He argued that the interests of society are best served by permitting each person to follow his or her own self-interest in economic life. We sometimes forget though that Adam Smith was himself a priest and that moral behaviour and the rule of law were already accepted bases for society when he wrote about capitalism.”

Comment
Three errors of thinking by attribution:

Smith didn’t argue “that the interests of society are best served by permitting each person to follow his or her own self-interest in economic life” without the strict, and often repeated requirement, that each person would not do harm to others or step outside the rule of law.

He gave many examples of ‘each person following his own self-interest’ which led to outcomes that were not beneficial for society because merchants and manufacturers, landlords and legislators usually resorted to protectionism, monopoly, conspiracies to raise prices and to narrow the competition, wars for trivial ends and colonialism.

If ‘we’ “sometimes forget though that Adam Smith was himself a priest” it can only be because he was never ordained as a priest. Smith studied at Balliol College, Oxford University on a Snell Exhibition for his MA that would enable him to become ordained in the Church of England and become a Minister in the Episcopal Church in Scotland. He did not complete his course and found Oxford an uncongenial place for series study (the faculty being both reverends in the Church of England and woefully inadequate as tutors). He left Oxford in 1746 never to return.

He never “wrote about capitalism”, an unknown phenomenon in 18th century Britain and the word which was not invented in English until 1854 (Smith died in 1790).

On Short Posts and Being Authoritative

A reader asks why I have posted long extracts from Adam Smith’s Wealth Of Nations and Moral Sentiments recently. She suggests that long posts are difficult to read and put her off.

Let’s remind ourselves that the purpose of Lost Legacy is to counter the apparent consensus about Adam Smith that:

a) he supported laissez-faire;
b) he was in favour of small government on principle;
c) he had a ‘theory’ of ‘an invisible hand’ guiding individuals to benefit society whatever their intentions;
d) he had written two different accounts of human society in Moral Sentiments (sympathy) and in Wealth Of Nations (self-interest, eliding into 'selfishness' and 'greed');
e) and he had another belief, not so important as the previous four, namely that he held religious or Deist beliefs underlining all his works.

These requires rebuttals based on his actual writings, and not just summaries of them, or page references, and undocumented assertions that the epigones are wrong.

I can shorten the post simply by referencing details of where he wrote this or that in refutation of the above five-main themes and the many sub-themes that mislead some readers. If I was assured that people will look up the references, assuming that they had a set of his books to hand, I could adopt such a policy.

But, in my view, not everybody would take the trouble and, in so far as I can easily extract the appropriate reference, it seems a better policy to cite the references on the page. Many of these may be familiar to the better informed regular reader, but Lost Legacy receives a lot of hits by visiting readers who might see the references but be unimpressed at their first visit by the absence of direct evidence. If nothing else, I want Lost Legacy to have a solid reputation for being authoritative and not just opinionated.

Also, many proselytisers of the Chicago-created myths and their derivatives in the media, may not be aware of the biographical contexts in which Adam Smith wrote his ideas. As this Blog is written by an educator of long standing – 35 years in university teaching and tutoring students – I do what I have always done, and take the trouble to demonstrate, I hope in an interesting, not to say inspiring, manner a command of the relevant sources.

If all this makes for rather long posts, backed by the relevant sources and not just assertions (‘Oh, no he didn’t, Oh, yes he did!’) I am prepared to risk irritating occasional readers (not that 'Cynthia' gives me any guidance on exactly what it is she wants me to do otherwise, except to write short posts).

I would like to think that regular readers, who find a post of relevance and of interest, save it to a word file and build up a regular source of specific arguments about Adam Smith for later reference when they address any of the main subjects subsequently. If any other readers have views on this subject I would be delighted to read them.

Once More on Murray Rothbard and his Lack of Knowledge About Adam Smith

I have commented on Murray Rothbard’s writings on the division of labour in Wealth Of Nations before and return to it only because his introduction to "Freedom, Inequality, Primitivism, and the Division of Labor," which he wrote in 1970 and published in 1991, is republished by Lew Rockwell HERE:

Rothbard writes: “The Division of Labor”

“I have come to realize, since writing this essay, that I overweighted the contributions and importance of Adam Smith on the division of labor. And to my surprise, I did not sufficiently appreciate the contributions of Ludwig von Mises.
Despite the enormous emphasis on specialization and the division of labor in the Wealth of Nations, much of Smith's discussion was misplaced and misleading. In the first place, he placed undue importance on the division of labor within a factory (the famous pin-factory example), and scarcely considered the far more important division of labor among various industries and occupations.”

Comment

Smith didn’t place ‘undue importance on the division of labor within a factory (the famous pin-factory example), and scarcely considered the far more important division of labor among various industries and occupations’. Some readers of Wealth Of Nations placed that ‘undue importance’ on the pin factory themselves; then they ignored the rest of the chapter.

Smith gives a single paragraph to the pin factory (WN I.i.3: pp 14-15). If Murray Rothbard gave ‘undue importance’ to the pin factory that could only be because he didn’t read the rest of the 11 chapters that make up the chapter (I suspected this was the case when I wrote about Rothbard’s misunderstandings of the chapter a couple of years ago on Lost Legacy – I think we have proof of that suggestion now).

Look at the next paragraph in Wealth Of Nations:

‘The separation of different trades and employments from one another, seems to have taken place, in consequence of this advantage…” (WN I.i.4: p 16)
‘..How many different trades are employed in each branch of the linen and woollen manufactures, from the growers of the flax and the wool, to the bleachers and smoothers of the linen, or to the dyers and dressers of the cloth! (Ibid)

Then go to paragraph 11 (p 22) and read Smith's account of the multiple trades engaged in the manufacture of the ‘common artificer or day labourer’s woolen coat:

‘Observe the accommodation of the most common artificer or day-labourer in a civilized and thriving country, and you will perceive that the number of people of whose industry a part, though but a small part, has been employed in procuring him this accommodation, exceeds all computation. The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! how much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world! What a variety of labour too is necessary in order to produce the tools of the meanest of those workmen! To say nothing of such complicated machines as the ship of the sailor, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brick-maker, the brick-layer, the workmen who attend the furnace, the mill-wright, the forger, the smith, must all of them join their different arts in order to produce them. Were we to examine, in the same manner, all the different parts of his dress and household furniture, the coarse linen shirt which he wears next his skin, the shoes which cover his feet, the bed which he lies on, and all the different parts which compose it, the kitchen-grate at which he prepares his victuals, the coals which he makes use of for that purpose, dug from the bowels of the earth, and brought to him perhaps by a long sea and a long land carriage, all the other utensils of his kitchen, all the furniture of his table, the knives and forks, the earthen or pewter plates upon which he serves up and divides his victuals, the different hands employed in preparing his bread and his beer, the glass window which lets in the heat and the light, and keeps out the wind and the rain, with all the knowledge and art requisite for preparing that beautiful and happy invention, without which these northern parts of the world could scarce have afforded a very comfortable habitation, together with the tools of all the different workmen employed in producing those different conveniencies; if we examine, I say, all these things, and consider what a variety of labour is employed about each of them, we shall be sensible that without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided, even according to what we very falsely imagine, the easy and simple manner in which he is commonly accommodated.’

Comment
Could it be expressed any clearer? The fact that Rothbard missed this example of the interconnection of numerous supply chains to produce so simple a product as a woolen coat, located in places miles away, even overseas, with the heavy implication that if you take more complex products, the inter-connectedness would be even greater, says much about Rothbard’s lack of thoroughness about Adam Smith, perhaps from distant loss of memory, or from an original ignorance of the contents of Wealth Of Nations.

‘Secondly, there is the mischievous contradiction between the discussions in Book I and Book V in the Wealth of Nations. In Book I, the division of labor is hailed as responsible for civilization as well as economic growth, and is also praised as expanding the alertness and intelligence of the population. But in Book V the division of labor is condemned as leading to the intellectual and moral degeneration of the same population, and to the loss of their "intellectual, social, and martial virtues." These complaints about the division of labor as well as similar themes in Smith's close friend Adam Ferguson, strongly influenced the griping about "alienation" in Marx and later socialist writers.

Comment
Again it is evidence of Rothbard’s lack of knowledge about Wealth Of Nations.

The first chapter in Book I is about the prodigious productive powers of the division labour from ‘increased dexterity’, the ‘saving of time’ and ‘the great number of machines which facilitate and abridge labour’ (other people made the ‘machines’ in other trades!). (WN I.i.5: p 17)

The increase in the output of the ‘necessaries, conveniences, and amusements of life’ constitutes economic growth and the spread of opulence, especially to the labouring poor.

The paragraph in Book V (WN V.i.f.50: pp 781-2) is in the midst of Smith’s argument in favour of education for all through ‘little schools’ in each village, paid for local public funds (on the Scottish model). His book seeks to influence the literate readers from the income groups who would have to pay for universal education if it was legislated for in Parliament, which meant he had to persuade legislators and those who influence them to pass the necessary laws. This can be seen by reading the paragraphs:

‘Of the Expence of the Institutions for the Education of Youth’

'In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expence of his intellectual, social, and martial virtues. But in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it.’ (WN V.i.f: 50: pp 781-2)

‘The education of the common people requires, perhaps, in a civilized and commercial society the attention of the public more than that of people of some rank and fortune.' (52)

‘It is otherwise with the common people. They have little time to spare for education. Their parents can scarce afford to maintain them even in infancy. As soon as they are able to work they must apply to some trade by which they can earn their subsistence. That trade, too, is generally so simple and uniform as to give little exercise to the understanding, while, at the same time, their labour is both so constant and so severe, that it leaves them little leisure and less inclination to apply to, or even to think of, anything else.’(53)

‘For a very small expence the public can facilitate, can encourage, and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education.’ (54)

‘The public can facilitate this acquisition by establishing in every parish or district a little school, where children may be taught for a reward so moderate that even a common labourer may afford it; the master being partly, but not wholly, paid by the public, because, if he was wholly, or even principally, paid by it, he would soon learn to neglect his business. In Scotland the establishment of such parish schools has taught almost the whole common people to read, and a very great proportion of them to write and account. In England the establishment of charity schools has had an effect of the same kind, though not so universally, because the establishment is not so universal. If in those little schools the books, by which the children are taught to read, were a little more instructive than they commonly are, and if, instead of a little smattering of Latin, which the children of the common people are sometimes taught there, and which can scarce ever be of any use to them, they were instructed in the elementary parts of geometry and mechanics, the literary education of this rank of people would perhaps be as complete as it can be. There is scarce a common trade which does not afford some opportunities of applying to it the principles of geometry and mechanics, and which would not therefore gradually exercise and improve the common people in those principles, the necessary introduction to the most sublime as well as to the most useful sciences.’
And then the clincher: if his readers were not convinced yet by the education argument alone, Smith appeals to their fear of the consequences of leaving the common people ignorant for want of a small expense to educate the children:

‘A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it.’

Comment
Rothbard never got the point. He was a selective quotation searcher and not a reader.

To paraphrase from Rothbard: I have come to realize, since writing these comments, that I overweighted the contributions and importance of Murray Rothbard on economics. And to my surprise, I did not sufficiently realize how weak he was on his knowledge of Adam Smith.

Putting Chicago's 'Adam Smith' (not the one born in Kirkcaldy) to Ill Use

Combine a shallow knowledge of Adam Smith, his moral philosophy and his political economy, with a self-interested response to a perceived world crisis that is recipe for a totalitarian state that may be worse than the perceived problem, though it would create decades – possibly centuries – of sustainable work for, er, architects… unless, of course, it all ends in tears.

John Van Doren (architect) writes a literate Blog, The Sustainable Home, HERE:

So where does he get his image of the way the world works?

“In 1776, Adam Smith made some ground breaking observations about economic behavior and published An Inquiry into the Nature of Causes of the Wealth of Nations. Smith would argue that individuals, working in unfettered freedom for their own self interest, would collectively and via an “invisible hand” provide for the greatest common good. His work would provide the foundation for much of today’s economic theory and would father the concept of the “free market”.

“Adam’s work coincided with the birth our nation, and it is ironic, but not surprising that this Scottish moral philosopher, would become the patron saint of Wall Street. For many, the belief in the invisible hand of an unfettered free market would take on religious overtones and it would become the dominant sub-text in our American political discourse.”

“…However, free markets and their invisible hand are blind to these limits and will continue to grow out of self interest until the invisible hand of the underlying ecosystem adjusts out of its own self interest.”

Comment
Who said that modern economists and their fantasies about Adam Smith are only innocently mistaken? They are responsible for no doubt the well meaning John van Doren who believes his false views about what Adam Smith said (yet John can read Smith’s books for himself – they are available for a few dollars from the likes of Amazon, or for my account of his views, Adam Smith: a moral philosopher and his political economy, it is also available from the same source, er, for a few dollars more).

John gets his ideas about Adam Smith from 20th-century Chicago-trained economists not from Adam Smith’s books.

Chicago teaches his alleged laissez-faire advocacy not from Smith - he never used the words - and similarly, the alleged ‘invisible hand’ was a metaphor that he used only once in Wealth Of Nations to describe the consequences of risk avoidance among merchants contemplating engaging in foreign trade. His sole reference in Book IV of Wealth Of Nations was nowhere near his account of markets in Books I and II. And the religious connotations came from mid-20th century epigones, not Smith.

That John stretches the famous metaphor from it being invisible to it also being ‘blind’ is almost laughable, though sad.

I shall say nothing about John’s remedies for what he sees as unsustainable economics. They are just so, well totalitarian, almost a brief ‘treatment’ that could sell a Hollywood film script (well, he does live in Los Angeles) for a disaster movie, complete with sinister, all powerful government – perhaps a plot for another series of 24?

On the other hand they could be a PR piece for his being hired as an architect to design one of his utopian ‘villages’ to give him a ‘sustainable’ life style.

Adam Smith's Edinburgh Home is Bought By Edinburgh Business School

The Principal of Heriot-Watt University, Professor Anton Muscatelli, has anounced the purchase of Panmure House, the home of Adam Smith from 1788 to 1790, by its Edinburgh Business School.

This means the restoration work can begin as soon as the funds are available and restoration architects have concluded the proposed work, keeping as close as possible to its 18th century character.

Those heritage vandals who flippantly suggested that it be demolished and turned into a McDonalds, and only marginally less silly, were those Bloggers - economists all - who invoked Adam Smith's mythical persona and called for the 'highest bidder' (by which I assmue they meant money) to 'win' the bid, betraying their lack of knowledge of how sealed bid auctions are conducted in Scotland. The seller is not obliged to accept any bid of the 'highest'.

The highest 'clean bid' is not necessarily the highest money bid and this was the case in the sale of Panmure House. The other bid was 'subject to structural survey', which for a 17th-century building (1690) could have delayed the exchange of missives (contracts) and also delayed the Council getting its money, plus the inevitable negotiations to reduce the bid price to take account of anything revealed in the survey.

The bid from Edinburgh Business School was 'unconditional' - removing the risk from the current owners to the University - and did not involve any public money or subsidy. Its public benefit criteria was to restore Panmure House as a post-graduate research centre of international standing for education in Scotland and internationally.

Panmure House is the last building standing that is associated intimately with Adam Smith and leading figures of the Scottish Enlightenment (many of whom met and dined with Adam Smith at his regular Sunday dinners) and where he died in 1790. His grave is about 100 yards away in the Canongate Churchyard.

There is a lot of work to do now at Panmure House; I shall play my modest part in that restoration work, as well as my work at Lost Legacy to restore his contributions to moral philosophy and political economy from the depredations of the epigones.

On the Infringement of Adam Smith's Natural Rights to his Reputation

Lost Legacy has argued many times that there is something wrong with modern economics (particularly with its ‘neo-classical’ version) and it has made occasional swipes at what are called ‘classical economics’ (Malthus, Ricardo, Mill, Marx) because of the common inclusion of Adam Smith in among them.

So a thoughtful essay on “The German antidote to mainstream economics” by Angus Sibley, an actuary and former member of the London Stock Exchange and a specialist in bonds, is a welcome contribution to the on-going (and given the dominance of modern economics, probably a never-ending debate).

It’s published in Enerpub (‘energy publisher’):

“Those German economists were practical and humane. They were not much interested in theories; they did not see economics as a science like astronomy, in which the behaviour of stars and planets can be predicted with the help of complex mathematics. They thought it more akin to psychology; economics, after all, is about human behaviour. In fact, they deliberately reacted against the mechanistic economics of the 'classical' (Adam Smith) school, the basis of modern orthodoxy.”

“…Western economists have for many years had the bad habit of setting up mathematical theories describing how economies work, then arrogantly asserting that these theories are valid universally, at all times and in all places. Thus they feel justified in going out into the wide world and telling everyone from Russians to Africans or Latin Americans how to run their economies. The Germans took a different approach. They studied history to see what actually happened in the economies of various countries and cultures. That is why they are known as the Historical School; they preferred historical fact to pseudo-scientific theory.”

“…Mainstream economics does not encourage us to behave like good neighbours; indeed, as you will have noticed from Hayek's comment above, it even does the exact opposite. It exhorts us to spend our lives trying to get the better of each other. It is obsessively individualistic; it asserts that we cannot have a successful economy unless everyone struggles, independently and single-mindedly and without regard for the public good, for his own greatest advantage; unless no-one admits that he depends upon the goodwill of others and has a corresponding obligation to show goodwill towards other people.”

“Self-reliance is the watchword; as if any human being could ever be entirely self-reliant; or would, as a normal and reasonable person, wish to be so.”

Comment
My extracts do not do Angus Sibley’s article justice. So read it in full HERE:

I offer some criticism of the article in respect of its treatment of Adam Smith:

“In fact, they deliberately reacted against the mechanistic economics of the 'classical' (Adam Smith) school, the basis of modern orthodoxy.”

There is little mechanistic in Adam Smith. He was not a theorist of equilibrium. He was a moral philosopher, not a classical economist, and is in no way in close affinity with Ricardo, etc., and certainly not remotely close to modern economists and the reduction of human relationships in society to mathematics(though he was a competent 18th-century mathematician, as it happens).

Smith took a completely historical approach to society – he looked ‘backwards’ (as Sam Fleischacker put it) to understand how society evolved from its hunting past (he didn’t know about the role of female gatherers – and nor did anybody else) through the four ‘Ages’ of subsistence – hunting, shepherding, farming and commerce (Lectures in Jurisprudence, 1762-64 and Wealth Of Nations).

His books, Moral Sentiments and Wealth Of Nations are steeped in the historical approach. For example in his histories of astronomy, languages, theatre, poetry, song and dance, moral philosophy, ‘natural religion’, ethics, money, feudal rules, jurisprudence, war-fare, trade policies, living standards from Roman times, taxation, voyages of ‘discovery’, civil government, land rents, values of gold, silver, general prices, progress of opulence in different nations, agriculture since the fall of Rome, of cities and commerce, of mercantile political economy, treaties and colonies and public expenditures and taxation.

These are just a top-level list of historical themes from Smith the political economist. Together, Smith’s works constitute a veritable tour de force of the historical core of his thinking, hardly any of which touches the modern epigones of his political economy, to the point at which I have described their versions as gross distortions of his work – it is, and so far remains - a lost legacy.

I am not yet familiar with the writings of Gustav von Schmoller (1838 - 1917), though I know of the work of his colleague, Adolph Wagner, from teaching a class in public finance at the University of Strathclyde in 1976-81. If Angus Sibley is to be accurate, as well as fair, he should review the basis under which Smith is associated with modern economics by the self-certification of modern economists who do not have any real acquaintance with his works – many of whom confess to not having read him, ‘finding too many diversions’ in it to history for their liking – but they nevertheless impose their narrow imaginary economics on luckless people in his name.

It looks like Angus Sibley has bought into the theft of Adam Smith’s legacy. I hope he realises this and corrects this view at an early opportunity, bearing in mind that Smith was greatly influenced by Samuel von Pufendorf’s natural rights theory, in which he has a ‘sacred’ ‘right to his 'reputation’ and that he is ‘injured’ by imputing to him such disreputable ideas by false association.

“Self-reliance is the watchword; as if any human being could ever be entirely self-reliant; or would, as a normal and reasonable person, wish to be so.”

Nobody who is remotely acquainted with Smith’s Moral Sentiments would attribute such a view to him. ‘Self-reliance’ was a condition of our forebears, and they suffered from dreadful deprivations as a result compared to the living standards of those who had developed more dependent economies. The ‘savage’, the ‘brutes’, were totally in thrall to all kinds of frightening beliefs, including the possibility of blood sacrifices to invisible gods. The virtues of their self-reliance are romanticised only by people living in opulence. It was never a Smithian idea and on that ground alone disqualifies the inclusion of Adam Smith in such haughty company.

Read Angus Sibley’s article, HERE and ignore any references in it to Adam Smith and learn, perhaps, some interesting ideas about a neglected school of political economy from the writings of Gustav von Schmoller.

Caveat Hedge Fund Advisors

Waving a false prospectus is no defence against falling flat on your face. I spot one such ‘unintended consequence’ about to happen if investors plunge into the ideas of “ a New York Hedge Fund Roundtable”, the goal of which “is to self-enforce otherwise voluntary and "weak" hedge fund practices”.

It comes via an article by Susan Mangiero, “ A Seal of Approval for Hedge Funds”. HERE:

"Goldstein's support of the free market to act as the ultimate enforcer is laudable, especially at a time when global regulators are far from silent about the need for more stringent rules. Will Adam Smith's "invisible hand" really work? Let's hope so. As this blogger has written many times before, regulations no doubt change the way market participants behave, often leading to the "Law of Unintended Consequences."

Goldstein strongly believes in the power of collective self-policing.”

Comment
For a start there is no ‘invisible hand’ to ‘work’ or ‘fail to work’. It was a metaphor, not a “theory” and was used to lighten up an otherwise strong discussion on the effects of risk aversion in the behaviour of 18th century merchants contemplating the higher risks (and higher profits) of engaging in trade with the British colonies in North America by crossing and re-crossing the north Atlantic versus investing in local trade with people they knew and a legal system they were surer of.

You wouldn’t guess this by following the editor’s note whose partial quotation from Wealth Of Nations (Book IV) is generalised as if he was talking about all trade among all merchants:

“According to economist Adam Smith in his Wealth of Nations, "Every individual...generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." Click for more quotes by Adam Smith". [Note that last invitation as if 'more quotes from Adam Smith' was a substitute for actually reading him.

This gives a wholly different slant to the only occasion in which Smith mentions the invisible hand metaphor in Wealth Of Nations – in his Books I and II, which are about markets, and invisible entities are not mentioned at all.

The editor adds another quotation from Book I that has nothing at all to do with his sole use of the metaphor over 400 pages later, crowned by the nonsence that the metaphor was Adam Smith’s ‘theory’:

“According to the Library of Economics and Liberty, the "Law of Unintended Consequences" states that "actions of people - and especially of government - always have effects that are unanticipated or 'unintended.'" The concept is related to Adam Smith's invisible hand theory, wherein the famous economist wrote, "It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own self interest."

Oh dear. And these guys and gals invest millions of other people’s money in Hedge Funds! No wonder the world money system is in a mess. If they are waiting for a metaphor to guide them and secure their money they should be warned about ‘caveat emptor and caveat vendor’.

Susan Mangiero has an impressive resume (HERE), so she isn’t naïve; her formidable talents are misinformed by her acceptance of the standard modern economics model of Adam Smith’s political economy. Given with so much at stake in money markets investment advice she should invest a little time in reading what Adam Smith said and not what others say about him.

Thank you Clive Crook and Mark Thoma

Three Blogs pick up on my comments on Clive Crook’s excellent posting on Saturday in his article in the Financial Times: “Adam Smith on CSR”

Mark Thoma’s top economics blog (HERE) kindly reprints the Lost Legacy post (with full attribution and link to Lost Legacy) and his Blog contains comments from several thoughtful correspondents to his own Blog, which are worth reading (as does Clive Crook’s original post in the FT). I really appreciate Mark Thoma when he does that, as his Blog, Economists View, has a large readership among students and exponents of political economy and always draws extra hits to Lost Legacy.

A small, idiosyncratic, Blog, Jacob Christensen, from Denmark, quotes the Lost Legacy piece
(HERE.)

Pacific Views also posts ‘Reflections on Adam Smith' HERE.

‘Mary’ quotes from my piece on Clive Crook’s article, but attributes it to Mark Thoma. I am always pleased to be associated with Mark, but I am not sure he may be happy about that!

However, the more readers of Adam Smith who become aware of the content in which he wrote his two books, the wider the realisation among economists and philosophers that he wrote things from a different perspective and purpose from the notions they pick up in selective third-hand quotations.

Interesting Discussion on the FT Blog

There is a most interesting - and informed - debate on the Financial Times Blog (Washington edition) HERE that carries Clive Crook's essay on Adam Smith and Corporate Social Responsibility (CSR) to which I posted a comment yesterday (see below).

I have edited my Lost Legacy post and posted it on the FT. Blog comments section.

Not all the ideas posted on the FT Blog on this ocassion are agreeable to me, but there does seem to be an informed readership offering their views. Worth reading for CSR issues.

The Very Visible Hands of Markets

Sometimes a journalist (who may have a background in some formal economics education) hits the nail on the head about the reality of markets, as Adam Smith intended.

But Smith’s legacy has become victim to some lazy modern economists raiding his works to ‘lift a metaphor’ to justify their own life’s work by using his iconic name to bless by association their imaginary economies that allegedly validate general equilibrium theory.

Enter the lists one Simon Caulkin, management editor of The Observer (UK), 10 August, HERE:

“One of the fallacies earnestly and unquestioningly maintained by New Labour is that we live in a primarily individual economy. We don't. To adapt Adam Smith, it's not through the efforts of the individual baker, farmer and consumer that toast, eggs and tea materialise on our tables in the morning - it's through the very visible hand of Tesco, Associated Foods, Nestlé and the utility companies. No organisations, no breakfast.”

Comment
I like it. Caulkin's observation would shame many professional economists who prattle on about ‘invisible hands’ mysteriously working their ‘magic’, blessed by a divine spirit, to keep markets doing their job, as if the same economists didn’t know how markets worked without the mumbo-jumbo emanating from mid-20th century economists.

Can you imagine a student economist answering a question on markets by simply writing that “it’s all down the invisible hand (see Adam Smith, passim)”, and his grader, a fully paid-up member of the ‘invisible hand mythology paradigm’, ticking the answer and passing her?

I take Simon Caulkin’s paragraph as better news on the Lost Legacy front that the usual Sunday nonsense about invisiblle hands that I have to comment upon most weeks.

No Contradictions Between Moral Sentiments and Wealth Of Nations

Questions about whether Moral Sentiments and Wealth Of Nations are at odds with each other arise from time to time, even among scholars, and the idea is without plausibility once you look behind the assertion and apply a time-line to when both books were in preparation. In these respects the publication dates (1759 and 1776) are misleading.

Clive Crook takes up the issue of the alleged gap in The Atlantic.com (HERE) and talks some good sense:


“I agree that Smith is badly served by many of his supposed followers. The idea that "greed is good", which one often sees attributed to him, is a travesty. He was no libertarian either. His idea of "natural liberty" was almost the opposite of what it is usually taken to mean (namely, "do as you wish"). He was at pains in both books to emphasize the importance of self-control, of regard for the opinions of others, and of an expansive role of government in providing security, rule of law, and economic infrastructure. Way ahead of his time, he was even in favor of compulsory schooling.

But I think it is wrong to regard Moral Sentiments as somehow at odds with Wealth of Nations, which seems to be the prevailing view. You quote one or the other, according to taste, but never both. Smith certainly saw no rift. The two books, though written with different purposes (Wealth of Nations to sway legislators, Moral Sentiments more to guide and inform a wider educated public) were a single intellectual project and fit together comfortably. Of the two, by the way, Wealth Of Nations takes the dimmer view of "merchants"--paradoxically, since this is the title favored by free-enterprise types. Moral Sentiments, name-dropped mainly by the left, is more kindly towards men of business, because it wants to establish the civilizing effects of commerce. What a difference it would make if anybody actually read these books.

Smith believed that most people are self-interested, sympathetic, and wish to be well thought of. Successful commercial societies, he argued, are built on these traits. The question is, how can they best be combined? In modern terms, how can institutions and incentives shape, channel, and balance these sometimes conflicting instincts to promote greater peace and prosperity? This is the subject of both books.

In Wealth of Nations, addressed to rulers, Smith exalts competition as the way to keep self-interest in check, and to subordinate producers to consumers. That is why the book is so opposed to protected monopolies and, above all, barriers to trade. In Moral Sentiments, he puts less weight on public policy and more on the wellsprings of virtue. He underlines the need for the approval of others, not just as an end in itself but also as a requirement for flourishing in commercial society. In short, competition disciplines producers (Wealth of Nations); commercial interaction nurtures propriety and prudence (Moral Sentiments). These are different perspectives, but by no means contradictory.

What would Smith, cited so freely by both sides, have made of the modern CSR debate? Hard to say, and pointless to speculate--but let's do so anyway. I am sure about one thing. He would have disagreed with Bill that a new kind of capitalism is needed to marry sentiment and self-interest. This is exactly what ordinary profit-seeking commerce achieves, in Smith's telling. This is the over-arching idea in both books.”

Comment
I have discussed the “creative capitalism project” before and this seems to be a sensible article on its strong and weak points’. Clive Crook is aware of the similarities, connectedness and purpose of each of Adam Smith’s books and this alone makes his article worth reading.

The ‘debate’ seems to assume that the two books are quite different. Moral Sentiments is about the history of ethics and Wealth Of Nations is a about the hsitory of economic ideas and a critique of political economy, as it was understood in the 18th century, or, if you like, sympathy and self interest. In these stripped-down, one-word meanings the entire context and purpose of the books is thrown away, and their publication dates lends credence to the charges made by would-be ‘smart’ commentators.

First, Moral Sentiments was not a manifesto of Smith’s ideas. Its contents came from the ethics course he gave at Glasgow University between 1752 and 1764 to young students preparing themselves for the ‘AM’ degree. Hence, before jumping to conclusions about its author’s views on morality, we ought to recognise that preparing a basic course in moral philosophy for 14 to 17-year olds requires that the lecturer cover the whole subject and not just his own views. I have been reminding those who read into Moral Sentiments a strong strain of Christianity/Deism in Smith’s thinking, they may be fooling themselves by attributing to Smith their selective interpretations of the views he identifies belonging to the authors he cites, and not necessarily his own.

It helps in this respect to read Book VII of Moral Sentiments first and then read 1-VI, which is the order in which he gave his lectures. Book VII reviews ideas on moral philosophy since Greco-Roman times, and he continually refers to the ideas of earlier moral philosophers throughout. Smith taught the subject as it stood up to mid-18th century, and he did so in an institution in which the prevailing orthodoxy expected its students to become competent in the history of the subject by the time they graduated. This meant covering the ‘names’ and their ideas, with some leeway leftover for the professor to make available his own ideas, as long as they were muted, could be interpreted as no challenge to orthodox Calvinism, and were preceded by prayers in the Protestant tradition at the start of every class. Smith was not comfortable with the requirement to open lectures with prayers, nor with teaching everything in Latin (he asked to be excused from the prayers requirement, but was refused permission).

However, he also taught Jurisprudence to the same class, a subject that contained a fair amount in it that re-appeared verbatim in Wealth Of Nations, including noticeably the sections that covered the ‘Butcher, Brewer, and Baker’ passage which are so popular with those who see mistakenly that it extols the virtues of self-interest. It doesn’t actually do that, because read carefully in its context (a rare occurrence), the entire chapter is about addressing the other party’s interests and not your own.

Quick quote grabbers (most do not read the book at all) jump to the ‘its-all-about selfish self interest’, which elides into selfishness and then to ‘greed’, when it is about neither. Smith was saying, ‘stop thinking about your own needs; think about the other persons’ and persuade them that the exchange of what you have for what you want from them, so they get what they want from you what they give to you, makes you both better off.

It wasn’t that Smith changed his mind when he came to write Wealth Of Nations in 1764 (he already had a written draft in 1763), 5 years after he published Moral Sentiments in 1759 (but not, note, 17 years later in 1776 when he published Wealth Of Nations). He was giving the substance of both Moral Sentiments and Wealth Of Nations simultaneously in the same classroom to the same students for 11years.

If there was a glaring contradiction in the two sets of lectures he (and his brighter students) would have noticed it. The two books are not at odds at all. Clive Crook is right in that respect.

Fancy 'Help' to Write an Essay on Adam Smith?

Sometimes a little bit of enterprise works and the initiator gets satisfaction or maybe makes money; sometimes it's a con.

I don’t know what to make of this posting which comes from the Indian state of Maharashtra (HERE):

“Keys to Writing Successful Adam Smith Essays”

Adam Smith – “father of economics” and a moral philosopher was an outstanding and genius person. His extremely significant works contributed greatly to the creation of the modern economics discipline. His political and philosophical ideas made him one of the most prominent figures of the Scottish Enlightenment movement.
You are going to complete a really exciting task. You can rest assured that writing your Adam Smith essay will not be boring. If you invest enough efforts into this work, you will find a lot of information about this person and his works. Thus, you will not lack ideas for your Adam Smith essay.
Yet, let us help you a little and give several hints on completing Adam Smith essays.

If you do not want your Adam Smith essay look dry, you can give some facts from his biography. Particularly, several really fascinating facts can be included in your paper. For instance, you can tell that he was quite an odd person. Like all geniuses he was very talented, but also had some eccentricities. He could talk to himself, had strange gait and speech.

However, talking about the oddities is not enough for Adam Smith essays. Definitely, a special emphasis should be made on his works. There are two major works of Adam Smith: The Wealth of Nations and The Theory of Moral Sentiments. So, in your Adam Smith essay you can give an analysis of these treatises.

It would be great if you make a comparison of Adam Smith’s ideas and ideas of other famous economists. For example, in your Adam Smith essay you can compare Adam Smith’s beliefs about capitalism and Marx and Engels teachings. By the way, you can mention in Adam Smith essays that he was a henchman of capitalism.

So, if in your Adam Smith essay you mix the information on his biography and economics teachings, your essay or research paper will be successful.”

Comment
What do you think? Was Adam Smith ‘odd’

Was he “very talented, but also had some eccentricities. He could talk to himself, had strange gait and speech”.

Should the reader, “mention in Adam Smith essays that he was a henchman of capitalism”? What is a “henchman”?

What did ‘capitalism' mean to Adam Smith, who died in 1790 and the word capitalism was not invented until 1854?

If there is a market in essays about Adam Smith, would the above advice be helpful?

I ‘ae my doubts’…

In Search of Goldilocks

The long debate over the amount of government regulation of the details of a market economy is central to the political divisions today between those who want more (there are daily – hourly!- calls for regulating this or that on Radio 5, my regular station) and those who want less.

I came across an interesting contribution to this debate this morning (8 August), by someone called ‘Bonerici’ in Live Journal (a computer geek by resume). Read the whole article HERE:

“the problem with regulation and capitalism”

“Back during the cold war, it was all so very easy. It was a fight to the death between this idealized central authority run by either a committee or a man or a program vs the idea of a decentralized authority where the goods and services were not managed centrally but managed locally and the method of management was Adam Smith's "invisible hand"… [er, ignore the myth of the invisible hand…]

… During the Reagan era, there was this understanding that any regulation was too much. Later, this idea was encapsulated in the idea of shrinking government to such a small size that it could be drowned in a bathtub. I've said before that this was not Adam Smith's idea in his "Wealth of the Nations" for true capitalism. True capitalism is not anarchy! It is not a brawling wild west where people are free to steal and cheat and lie, where corporations can get away with dumping chemicals into the local stream, where toy makers can build toys full of arsenic and lead and it is buyer beware! I think this idea of caveat emptor is what many people think capitalism is or should be…

… Capitalism does not run well in a pure anarchy. It requires certain rules and regulations and restrictions, and these very restrictions make capitalism bloom. Deciding what these regulations will be is the task of capitalism in the coming years. First of all, it is clear that it is good to have solid secure banking regulations…

… That's the first step in regulations and Adam Smith talks about it in his book the "Wealth of Nations."… [See WN II.ii.1-106: pp 286-329 for Smith’s account of the need for banking regulations in a commercial economy]

… That, I think is the ideal goal of regulation in a good capitalistic society, where the regulation itself makes the goods and services less expensive for everyone. Where the con artists are weeded out of the system entirely…

… There's a fine line that has to be found. Between complete lawlessness, which inhibits capitalism because there is no trust, to stifling regulation which destroys a competitive marketplace…

… Finding the Goldilocks amount of regulation is not a challenge for the older generation. It's a challenge for the post-cold war generation. To figure out the perfect amount of regulation that encourages a great amount of trust between consumers and businesses while not stifling businesses, an amount that encourages them by providing an even playing field for both big and small businesses…

Comment
The debate of how much regulation: None? Goldilocks? Total?, is the major question for those who would manage a market economy.

Having absolutely no regulation is easy: abolish all regulations and rely on the Law, but is also too difficult: getting an administration elected that would implement the programme. It also needs a fail-safe in reserve, if the economy descends into criminal chaos.

Achieving total regulation is what we are drifting towards just now in Britain and Europe (even the USA is drifting that way, and I saw evidence of regulationitis in Canada this year in surfaces crowded with little notices about what not to do when stepping off a bus). Seeing where we are and where we going, it occurs to me that I don’t want to go further down the ‘total’ route.

‘Goldilocks’ is best. And Adam Smith had it right. Markets need trust to work efficiently. It’s not enough to rely on untrustworthy people being found out - they can poison the well of trust too far before the crooks are caught.

Passing regulations does not equate with them being obeyed. That’s the job of Laws and their rigorous application – the more chief executives and co caught with their hands in the till and cheating customers is a sign of a clean economy, not an excuse for moralising about the failing of capitalism.

The failings of individuals are to be expected – when their punishment is certain (make them poorer!), the effect is good for trust. It’s when they appear to get away with it that the stench of the poisoned well erodes the general trust necessary for markets to work.

Some Few Top Economists Do Get It!

This morning (8 August) I read a quite remarkable piece (i.e., in good sense in the usual sea of nonsense I endure from the world’s mainstream press): ‘Killing the myth that Ireland's wealth has poisoned its values’, from the Irish Times by Michael Casey, former chief economist of the Central Bank and a member of the board of the International Monetary Fund.

To quote bits from Michael Casey’s article would be literary vandalism; it’s worth much more than that, so read all of it HERE:

Before you do, a reference to Adam Smith, the litmus test for any economist worth reading (the other kind fail the test miserably):

“There is also the "greed-is-good" concept which is actually more a Hollywood invention than anything to do with poor, misinterpreted Adam Smith or run-of-the-mill capitalism.”

Comment
No comment is necessary for regular readers of Lost Legacy – new readers may scroll through the archives. So don’t delay, get over to Michael Casey in the Irish Times HERE:

A Top Economist Writes

It is the nature of journalism, even pieces written by top economists, for the pithy remark to take the place of accuracy or meaning. Here are three examples from an article in The Guardian (UK) HERE:

“Turn left for growth”

“In contrast to the right, the left has a coherent agenda. It's one that offers not only higher growth, but also social justice”
“A year in prison can cost more than a year at Harvard. The cost of incarcerating two million Americans – one of the highest per capita rates (pdf) in the world – should be viewed as a subtraction from GDP, yet it is added on.”

Comment
Adam Smith described wealth as the ‘annual production of the necessaries, convenience, and amusements of life’. Thus all that is produced ina year – whatever it consisted of, whether it was approved or not (and Smith had his views on what was approvable), and whatever people spent their money on out of their income, savings, or borrowing, added together constituted a measure that year’s wealth.

How then can the expenditure on prisons be ‘viewed as a subtraction from GDP’? The products and services are real, they are produced in the economy, and they would be noted if they were not produced, therefore they are part of the GDP. That the outputs consumed might be 'better' spent elsewhere (make that two-and-a-bit Harvards in the economy instead of one, or, if you like, close Harvard and more than double the prison service) makes no difference to the amount of GDP that year – though it might affect future GDP.

If the annual output of the ‘necessaries, conveniences, and amusements of life’ is reshuffled, or the profits are moved from investment in expanding future output to failed projects instead of profitable enterprises, prodigal consumption instead of frugality, unproductive expenditure instead of productive expenditure, future GDP may be lower. Whatever is done with the elements of the GDP in any year is included in that year’s GDP. The author should (does!) know that but it's only journalism so no harm done.

“The right often traces its intellectual parentage to Adam Smith, but while Smith recognised the power of markets, he also recognised their limits. Even in his era, businesses found that they could increase profits more easily by conspiring to raise prices than by producing innovative products more efficiently. There is a need for strong anti-trust laws.”

Comment
Careful with glib solutions. Competittion breaks up monopolies. However, it’s what happens next that is difficult. When monopolies are broken there is dislocation and there can (will) be hardship. Adam Smith recognised this in Wealth Of Nations (WN IV.ii.40-45: pp 468-72).

In modern time in the UK, the governments of the day prolonged the monopolistic practices of businesses, large and small, by continuing with prohibitions, protectionism, and tariffs. They still do with mercantile policies. The Left are the fiercest defenders of jobs, at least those in Britain (and sod the lack of jobs elsewhere) and Rightwing governments have been no better at accepting the decline of high-cost, low productivity businesses, if the owners and the workers wave a union jack. Both ignore, in Britain's case the need, as Smith put it, 'to endeavour to accommodate her future views and designs to the real medocrity of her circumstances' (WN Book V.viii.92: p947 - the very last paragraoh of his book). What is the cost to the economy in Britain's 'world role'?

How many millions were poured into the cotton, shipbuilding, steel, coal, and vehicles, with damn all to show for it once the inevitable became real. Those millions released as investment into the rising industries and services – not, please not by government search for ‘winners’ - by abolishing corporation taxes, taxes on savings, and penal tax rates on the poor, would have done the job of transformation more humanely than what was imposed by Left and Right.

“During the Great Depression, similar arguments were heard: the government need not do anything, because markets would restore the economy to full employment in the long run. But, as John Maynard Keynes famously put it, in the long run we are all dead.”

Comment
War did for the Great Depression what no economic theorists dreamt of drawing too much attention to for obvious reasons – which insane person would ever recommend wars to put right what politicians and those who influence them have mucked up with their short-term non ‘solutions’?

Wars are great mobilisers of capital and labour, which when there is under utilisation and substantial unemployment, there is substantial room for expansion; when there is full employment, wars create the Great Inflations.

The trouble is carrying on Keynesian remedies at full employment – if its difficult to be sacked because of restrictive labour laws, there is no appetite for innovation, technological change, or being competitive. Leftwing State legislation has done and does damage to the economy as much as monopoly ever did.

The fact that in the ‘long run we are all dead’ is true whatever policies by whichever economist we choose to listen to. It is a typical one-line quip that Oxbridge professors are known for, but not very meaningful.

If the author of the above article believes that the today’s Left has better answers than the soon-to-be yesterday’s US Right (probably the exact reverse in the UK and France) and he expects an incoming President in the USA is going to ‘make it better’, then he, and the President elect, is in for a disappointment.

And who is the author of The Guardian article?

Why none other than Joseph Stiglitz, of course! Winner of the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (2001), the economists’ 'Nobel Prize'. So he must know what he is talking about...

Beyond Abomination

Reading posts from score of Blogs a week (in addition to those I have bookmarked for their worthwhile commentary, not all of which I agree with, I caome across some strange interpretations of Adam Smith’s alleged contribution to modern predicaments.

More often than not, they are absolutely incorrect attributions, because so few actually read his books and take as ‘gospel’ instead the presumed authoritative attributions of top notch economists, Nobel prizewinners and those destined to be tomorrow’s prizewinners too, who seem not able to read what he actually wrote too.

Here’s an example from Tommy Stevenson, an associate editor at The Tuscaloosa News in Alabama (HERE)

“Socialism for the rich. Not so much for the not-so-rich.

Capitalism is an economic system, as is socialism.

Democracy is a form of government, as are monarchy, theocracy and fascism in all its repugnant forms, including communism.

Morality is a system under which people try to do the right thing, both in their own lives and for their fellow men and women.

Christianity is a religious system encompassing morality, as are other major world religions like Judaism, Islam and Hinduism.

In the last 20 years or so, however, the most ardent proponents of the first system seem to have conflated it with all of rest of the above. Especially guilty are those who have elevated unfettered capitalism to an all-encompassing way of life for this country. They would have us all place our faith in Adam Smith's "invisible hand" guiding the free market system, bestowing with in that system the mystical powers of God.

But that philosophy/quasi-religion, which is really simply economic Darwinism, isn't working out so well these days, now is it?”

Comment
Whatever those who subscribe to “the most ardent proponents” of “unfettered capitalism” (a strange notion in that there is no country on earth where “unfettered capitalism” reigns) want “us all to place our faith in” it has and had nothing to do with Adam Smith, nor did it have anything to “unfettered” socialism (a worse abomination than capitalism, fettered or unfettered, could ever impose on anybody).

The market system is not guided by ‘invisible hands’ or by the “mystical powers of God”, or any other imaginative creation of what Adam Smith called ‘pusillanimous superstition’.

Markets work by processes and outcomes completely and well understood as any physical process in elementary knowledge. Smith covered this is Books I and II of Wealth Of Nations. Why people want to mystify markets is beyond me.

How Many Invisible Hands Are there?

It’s not often we get a piece of modern economic analysis, inevitably linked to the notion of ‘an invisible hand’ and attributed incorrectly to Adam Smith (as if it is the truth). Both versions express the neoclassical false version of its meaning and expose it vacuity.

Jay Zawatsky, chief executive of havepower, LLC(?) writes in National Interest online (HERE):

“Improving the “Pickens Plan” (4 August)

”For the last month, the electronic media has been graced by the weather-beaten face and folksy voice of billionaire oilman-turned-wind-pitchman T. Boone Pickens “splainin’” his plan to reduce U.S. oil imports by 38 percent, thereby lowering the U.S. bill for imported petroleum by $300 billion per year. Pickens envisions the construction of up to eight hundred thousand megawatts of wind-turbine capacity, at a privately funded cost of $1 trillion, from west Texas north to the Canadian border in America’s “wind corridor.” Those “wind watts” would replace the 22 percent of U.S. electricity now generated with natural gas. The natural gas saved would be used to fuel trucks and cars (particularly fleet vehicles), replacing imported petroleum-based gasoline and diesel.

Pickens is putting his money where his mouth is, demonstrating his belief in the efficacy of swapping “wind watts” for “gas watts.” He is footing the multimillion-dollar tab for the national media campaign promoting his plan. Of course, Pickens owns several companies that will benefit from both the construction and operation of the wind turbines and from the switch to natural-gas engines and the construction of a natural-gas delivery infrastructure. But this is America. We need, and should applaud, properly applied self-interest, and we (at least some of us) recognize the societal benefits of Adam Smith’s invisible hand…

…. There is one fly in Pickens’s ointment, however. Along most of the “wind corridor,” the wind blows the strongest and steadiest before the sun rises; its strength diminishes until the hottest point of the day, just as the demand for electricity, particularly in the summer months, peaks. As a result, replacing natural-gas base load capacity with “wind watts” does not work. Peak loads still will have to be met with natural-gas generated electricity. That will diminish by billions of cubic feet the amount of natural gas available to be converted to transportation fuel, defeating the essence of the plan.

…The solution Pickens, and the rest of America, ultimately seeks is independence from imported petroleum. That solution is right under our collective noses. John McCain has begun to grasp it. It is increased nuclear base load capacity.
The cost of building forty-five new nuclear plants is the same as the cost of Pickens’s wind turbines. The cost of building the transmission infrastructure for the nukes is less, as the nukes will not be as remotely located as Pickens’s turbines. The quality and number of domestic jobs created by both the Pickens Plan and the plan for forty-five new nukes are roughly the same. The amount of imported petroleum saved is the same. The bottom line: nukes work; Pickens falls short.”

Comment
Now which is it: the invisible hand that picks Picking’s wind farms or another invisible hand that picks Zawatsky’s nuclear plants? It certainly can’t be both.

Or is it one of the many other ‘solutions’ to the energy problem? Or won’t we know until 2050 or thereabouts?

Is this true of all theories of the invisible hand – is it whichever produces the ‘right’ outcome? Who determines which is right?

Who exactly are among the “we (at least some of us) recognize the societal benefits of Adam Smith’s invisible hand”? Is this a secret society?

Where do they get this twaddle from? Certainly not from anything Adam Smith wrote.

In fact Adam Smith would not recognize Zwawatksy’s uses of the simple metaphor, commonly known in his day among literate people given its quite extensive use by authors, such as Shakespeare, Defoe, and Voltaire, plus a stream of classical authors from Greco-Roman times.

And I don’t believe he would be well pleased with the association of his name with what is pure, gratuitous nonsense.

A Small Milestone for Lost Legacy

According to the counter, Lost Legacy has just passed it 1,500th posting, since February 2005.

Not bad for such a specialist subject. I hope regular readers agree.

I would like to think Lost Legacy has made a contribution to the spread of Adam Smith’s true legacy around the world.

My enthusiasm remains undiminished

Now on to the 2000th post…

Excellent Dramatisation of Adam Smith and his Views

I attended the Edinburgh Fringe Festival ‘world premier’ last night of ‘Adam Smith: making poverty history’, a docu-drama production by The Radicals, described as ‘an inclusive drama group’ that uses ‘play reading’ to help us better identify with those whose life and teachings we wish to understand and evaluate’.

Overall, I recognised most of the (too long?) quotations from Adam Smith’s works and correspondence, most of the characters participating in the presentation, and what the players were trying to do in making the case that Adam Smith was not the person often portrayed by modern ‘neo-cons’ (a catch-all euphemism for sinister forces emanating in the USA – surely, on the eve of the US Presidential election, a spent force?).

Some comment and minor criticisms of the content:

The ‘Commentator’ (Wally Shaw) repeated correctly several times that Adam Smith was not an advocate of laissez-faire, a point made regularly on Lost Legacy.

The Narrator (Margot Daru-Elliot) held the links between scenes together, spoke clearly, and played the part well. She seemed to get fixated by the year ‘1773’, and stumbled over the year of the death of Smith’s father (1723) about four months before young Adam was born (not ‘some years’ before, which provoked credulous laughter from the audience and was corrected smartly by her).

Frances Hutcheson is listed in the performance notes as ‘Hutchison’, an easy mistake to make and one easily corrected by proof reading - and by checking (Google?).

Conversations between Adam Smith (Cameron Pirie) and David Hume (Kevin O’Donnell) were accurate and believable, but were also spoiled by the acoustics of the venue and by not being projected to the audience – it’s a play performance up to 30 feet away, not a conversation to each other across a couple of feet in distance.

Smith’s mother, Margaret Douglas Smith (Josée Mobbs), was convincing, acted well, and presented the audience with things they may not have known about. She could have been portrayed more accurately if the script made more of her deeply religious views, which may have given young Adam a chance to avoid upsetting her with presenting his real views on religion (shared in his social-hours with David Hume and his academic colleagues, but not overtly in his books and not in conversations with his mother.

Benjamin Franklin (Simon Byrom) was plausible and like conversations mentioned above would have been better understood if he, Smith and Hume stood in a ‘triangluar’ stance with space between them and spoke up to the audience and not to each other only. It was an imaginative scene and the issues were clearly presented as issues (if you knew their views), but may have been lost to others present on the issues chosen for presentation. More could have been made if Smith’s views on Empire had been quoted, Hume’s on Jealousy of Trade, and Franklin’s on the cause of the British colonists in North America, as three brief interchanges.

David Millar (Doug Healy) was an excellent cameo in discussion with Mrs Smith (the shaking head was a great touch), as was Marie Riccoboni (Mary Cameron). Smith’s ‘lady in Fife’ is described in Dugald Stewart’s his eulogy ‘Life of Adam Smith’ (1793; published in 1795) when she was still a spinster in her 80’s – a quite sad story of Smith’s real love that never flowered.

Robert Burns (David McGill) was a good end piece too.

Lastly, back to Adam Smith. Cameron Pirie looked the part and was convincing (project more!) and he coped with reading chunks of quite difficult pieces from Moral Sentiments.

General (quibbles):
Why not replace something with Smith’s parable of the earthquake in China and the contrast between the ‘man of humanity’ snoring soundly after sympathising over the death of 100 millions of ‘his brethren’ and then tackling the question Smith posed next: would such a man prefer to keep his little finger if losing it could avert the death of 100 millions? Most people quote this wrongly and conclude he prefers his little finger; yet in the next sentence such a man receives Smith's fury in the best tradition of a Scottish pulpit (Moral Sentiments, Book III, section 3, paragraph 4: pp 136-8?

On Wealth Of Nations and the pin factory, I think the point can be made more pointedly in the discussion with the young Duke of Buccleugh (Sandy Paterson – incidentally a very convincing performance; the Duke became Smith’s major source of patronage and secured the job as a Commissioner of Customs for him in 1778).

It was not just the numbers of 48,000 pins a day, but the growth of markets for pins and all the other things the division of labour made possible: Adam Smith defined wealth not as gold, silver and baubles, but as the annual production of the ‘necessaries, conveniences and amusements of life’, and from these annual outputs the common day labourer in 18th century Scotland was incomparably better off than the Indian or African ‘prince’, even though he was not as well off as a European prince (Wealth of Nations, Book I, chapter 1, pp 22-24).

The division of labour was the critical factor and not any other differences between the continents. John Locke noted, ‘that in the beginning all the world was America’; Europe had once been a hunting economy too just like the America’s until our ancestors discovered agriculture and the division of labour.

Overall, the performance of the cast was very good and most informative. It made its case well and effectively. My family who attended with me were highly positive about the learning experience and talked about it last night over dinner and this morning without any prompting from me.

On Claiming an Affinity With Adam Smith From Living in Kirkcaldy

Claiming an affinity with Adam Smith from living in, though much changed, Kirkcaldy is liable to self-anointed delusions and to ridicule from critics.

A clear example of this is seen in an article from ‘deepest’ Australia, which illustrates how an idea spread about by the person, is picked up and exaggerated into a simple error of fact, adding conviction to the original misleading invention (his critics say ‘intention’), which in due course could turn into an historical ‘fact’.

Alex Millmow, a senior lecturer in economics at the University of Ballarat, writes in The Canberra Times HERE:

“Brown takes centre stage in ironic tale of tragedy”

“Born in Kirkcaldy, near Edinburgh, Brown was also an astute follower of the economics of his famous townsman Adam Smith, who wrote The Wealth of Nations in 1776.”

Comment
The readable article on Gordon Brown, British Prime Minister, is marred by a fiction 'contrived' by him and, say his opponents, is deliberately misleading.

Gordon Brown was not 'born in Kirkcaldy, near Edinburgh'. He was born in Glasgow, somewhat further away and which has entirely different political connotations in Scotland.

Brown alludes to being 'from Kirkcaldy' because a) his parents took him from Glasgow to Kirkcaldy while an infant when his father became the Minister at St Bride's church in the town; and b) it is where Adam Smith was born in 1723, which has notable and favourable international connotations through the ideas of the Wealth Of Nations and the ideas of Moral Sentiments, which Brown quotes as regularly.

Brown regularly repeats a sentence in his speeches to the effect: 'coming from Kirkcaldy I have a special understanding of Adam Smith's ideas', though such sentences do not make much sense, and are exposed to corrective ridicule in the press, adding to his current image problems.

It is such quirks of character that have undone him for the moment; politics is a fickle profession; he could bounce back, he could go under.

He should change his 'scripts' about himself, the problems his supporters feel, and his 'needle stuck' mantras that avoid inspiring answers for the vacuous 'getting on with the job' lines that he normally deploys.

Knowing him since student days, I had always hoped and expected for better days at the top for him. What is happening to him is more sad than tragic.

Californian Water and the Invisible Hand

It's not often that a clear statement of what an author thinks the metaphor of the invisible hand means is posted in Blogland, but I think today's effort is remarkably clear of how its use (attributed to Adam Smith) is misleading.

Spreck Rosekrans posting on the Water sisweb Blog (HERE) writes:

On the Water Front: What would Adam Smith do? (part 1) for ‘Planning and Management’:

‘To be smart about how we manage any natural resource, it is important to "internalize the externalities", i.e. make sure the costs of pollution and environmental degradation are fully included in decision-making.

Under such a system, the famous "invisible hand" of economist Adam Smith would encourage rational use of limited resources without excessive environmental destruction. Water management in California and the west is the result, however, of a "first in time, first in right" policy that has little to do with economic efficiency.’

Comment
The logical disconnection of ‘the famous "invisible hand" of economist Adam Smith’ is exposed here. The proposition is: If ‘we’ (presumably by some policy direction of some kind) ‘make sure the costs of pollution and environmental degradation are fully included in decision-making’ it would ‘encourage rational use of limited resources without excessive environmental destruction’.

Now think about that. It says if the policy is adopted and everybody (or even the majority) implements it, then there would be ‘rational use of limited resources’. Now ask: why is that consequence the result? I think the sensible answer is that the consequence follows from the adoption of a policy of ‘internaliz[ing] the externalities’. In other words, the consequence follows from adopting the policy.

Question: what does the invisible hand do in this process that is not completely determined by the adopted policy and its necessary consequence?

Ergo: the invisible hand is a metaphor for what happens without it; it has no explanatory or contributory role in the connection between a policy and a consequence. To argue, or worse, to believe, that it does anything is a myth.

Of course, Smith had a different view of how individuals choose from their self-interests – which may have no connected intensions about the outcome for society – when they act in a specific manner. He argued that people may individually act in a certain manner (in the two cases he referred to, it was risk avoidance in Wealth Of Nations, and because the rich landlords could do no other in Moral Sentiments without becoming self destruction) which could (not, would) in the aggregate benefit society.

In Wealth Of Nations (WN IV.ii.9.:p 456) the benefit was because the whole national output is the sum of each individual local investment; in Moral Sentiments (TMS IV.1.10: p 184) it was that by feeding his ‘employees’ they lived to re-plant the crops, tend and harvest them, next season.

In Californian water, apparently, the actions of past and present individual users of water on their "first in time, first in right" policy produces an outcome that is economically inefficient. Clearly, the current consequence is a result of the adoption of the ‘wrong’ individual policies. It has nothing to do with invisible hands; if such abstractions actually existed, instead of being a mere metaphor, they are not working.

Why? Because metaphors do not exist! And Adam Smith never said that they did! That is a myth invented in the second half of the 20th century by Chicago economists.

[Readers interested in reading my paper: ‘Adam Smith and the Invisible Hand: from metaphor to myth’ should contact me at gavinATnegwebDotcom and introduce themselves. The paper is to be read at the 40th Anniversary conference of the Journal of the History of Economic Thought in Edinburgh in September].

Silly Saturday Stories About Adam Smith no 21

Amazing how opinionated opinion formers launch attacks on ‘capitalists’ without proportionate words about government ministers, by far a greater parcel of rogues than the corporate bosses of those parts – by no means the whole – of the economy. It’s probably safer to do so in Africa (glance at the headlines not attacking Mbeki with half-as-much gusto; even less so about Mugabe).

Anonymous ‘capitalists’ are made out to be in hidden conspiracy against whoever form the ‘us’ in the columnist’s litany of the downtrodden masses.

Sentletse Diakanyo writes a column in Thought Leader (Mail and Guardian Online HERE:

His headline leads with the unpromising title: ‘We are continuously being screwed by bloody capitalists!’

[Comments: words in square brackets are mine]

“Our society is tied as a whole by an invisible umbilical cord: capitalism. It continuously promises the masses the vastness of a seemingly infinite horizon of affluence, yet the poor are still subjected to vile and ignoble existence, to an undignified and humiliating squalor of poverty [not shared by prosperous and healthy-looking newspaper columnists].

The level of depravity entailed in the accumulation of wealth under capitalism is unacceptable [it’s also unacceptable – Zimbabwe anyone? – to be without the real ‘depravity’ of no capital accumulation]. Capitalism breeds greed, corruption and all other industrialist iniquities. [There are fewer living below the poverty line in capitalist market economies than in economies without capitalist markets – and, er, capitalists.] Unjustified escalation of global food prices is attributable [by who?] to remorseless profiteering by capitalists at all cost. This acceleration of prices has been augmented by a marked rise in profit margins, and bears testimony to the suspicion that there is no correlated increase in the production costs. [Data please!]

Under normal circumstances this surge in prices would be countered by an increased entry of new competitors willing to undercut prices and by increased labour costs as more companies try to exploit the opportunity for exorbitant profits by expanding employment and output. That increase in competitive pressure would generally return profit margins to more acceptable levels. Unfortunately, none of this fantasy is soon to become reality. [Hang on – fuel price inflation is about to bankrupt 50 world airlines – that’s no ‘fantasy’]

What consumers have to contend with is rising inflation, now at a staggering 11,6% and continuing to press against historical limits. Inflation in all probability will continue to escalate considerably beyond the [politicians'] inflation target of between 3% and 6%. As this monster continues to erode the disposable income of households, month after month, consumers are left with nothing to neutralise the harmful effects of a tighter monetary policy. [Wait a minute – relax monetary policy to cover the ‘harmful effects’ of inflation and you increase the rate of increase in prices; a daft suggestio, what? – become a billionaire in Zimbabwe and cannot afford bread!]

We need to overcome the prevailing economic orthodoxy in respect of capitalism and institute progressive reforms to promote moral and ethical consciousness in those in business [in Communist China they used to call this ‘re-education’, killing millions before they learned anything.]. Adam Smith’s views of laissez-faire and economic individualism, deeply entrenched under capitalism, are dangerous to the well-being and prosperity of society in general. [Sorry, but Adam Smith did not mention ‘laissez-faire’ ever – that was a French idea; Smith spoke of ‘Natural Liberty’, a wholly honourable notion. Sentletse Diakanyo apparently knows little about Adam Smith, which if his ideas are ‘deeply entrenched’ they haven’t yet penetrated into the columnist’s consciousness]

Society as a collective of individuals requires, for its own prosperity, self-sacrifice and the subordination of one’s interests to those of others [the alibi of every dictator in the modern era – who monitors the ‘subordination’?]; it insists on the recognition that when society prospers, individuals prosper [wrong way round: when individuals prosper, society prospers!]. None of what I propagate dictates that individuals be chained to collective action and collective thought for the sake of “the common good”, if such collective action is fruitless. [So if its ‘fruitful’ they can be ‘chained to collective action and collective thought? Who decides if dictatorship is ‘fruitful’ – name one dictator where all individuals were made ‘better off’, or does he mean the entourage of Robert Mugabe being ‘better off’?] The challenge is finding equilibrium between the needs of the collective and individuals. [Yes: it’s called liberty; the separation of powers – legislature, executive, and justice; regular, free and open elections; the rule of law, not of the ruling party; open economies; markets and entrenched human rights; none of which is found in state-managed ‘equilibrium’ economies].

We should be vigilant of the threat of capitalism [‘threat’? – you need the entrench markets under the rule of law] and ensure that we employ requisite measures [here we go! A recipe for disaster] to prevent the continuous entrenchment of inequalities in society. [Poverty is the absence of wealth creation] We live in a world that is deeply and antagonistically divided into groupings of nations very dissimilar in economic, social, religious and political positions. Such differences ferment conflict and impede any progress of material kind for the downtrodden.

None of us can contest the assertion that capitalism has throughout recorded time proved itself to be an inhumane system that subjects a large number of ordinary men and women to abject and dehumanising poverty, while a handful few reap its limited fruits. [Have you any idea at all of the 'abject and dehumanising poverty’ of ALL pre-market economies before capitalism?] We cannot change the system, but we can certainly put certain safeguards in place, for example regulation. [You cannot ‘regulate’ an economy to wealth; nobody has done it ever but you can de-regulate an economy to greater wealth creation and the spread of affluence - see the modest but real results of doing so in over-regulated India and even in Communist-planned China (but not in North Korea or Cuba)].

If we do not do anything now, in the long run we are all dead. [er, surely in the ‘long run we are all dead’; nothing the columnist proposes will postpone that event… it will just make worse the journey to that end]

A Union Agitator Speaks and Libels Adam Smith

Peter Goodman blogs at ED in the Apple and is reproduced in Edwize HERE:

Martin Niemoller’s haunting piece on Nazis coming to arrest their enemies, which is usually reserved for occasions of serious threats to liberty and person (Zimbabwe, Dofua, Srebnezia under Karadzich), is sometimes used for the most spurious of comparable occasion, as is this one about a dispute between teachers unions and their critics in New York in 2008:

“Adam Smith, Plutocrats and Teacher Unions: Keeping Silent Because You Are Not a Trade Unionist Can be Fatal”

After the heated rant of the union agitator – which wouldn’t be out of place in a true believer’s address to a political rally - we get this:

“The invisible hand of Adam Smith, the cold, cruel world of the marketplace, with economic determinism as guiding force is the “answer” for the today’s neo-robber barons.”

If that doesn’t send shivers down the spine, Peter Goodman follows up with this ominous warning:

“Journalists who blithely blame teacher unions for the ills of schools are hiding their heads in the sands of time. There will come a time when those same journalists will be the subject of the arrows of the economic plutocrats.”

‘So ‘there will come a time’, eh? You had better shut up you journalists; you are getting above yourselves in criticising the voice of the mob; only don’t be surprised if it’s not the arrows of ‘neo-robber barons’ that are fired at you – it may well be the ‘neo-bully barons’ of the ‘educators’(?) in the same unions you 'libel' with your charges of monopoly behaviour.

I am not sure which is worse: the ‘cold, cruel world of the marketplace’ or the ‘hot, cruel world’ of the political agitator, who lumps Adam Smith with 'neo-robber barons', as if Adam Smith ever associated with the likes. He favoured every parish having a 'little school' in it with every child, mainly from the poorest families (at the time the British colonies in North America neglected their children's education to the same degree). His strictures on the indolence of teachers at Oxford University (but not Glasgow!) in Wealth Of Nations is well known (er, Book V.i.f.1-61: pp 758-88, Mr Goodman).

And Adam Smith had not doubts about ‘men of system’:

“The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.” (Moral Sentiments: VI.ii.2.16).

Adam Smith – and I agree – did not want to be a mere ‘wooden piece’ on some agitator’s chess board. I don’t think I want such ‘men of system’ to be in charge of my children’s’ – or rather, my grandchildren’s’ – education about the world and how to get along with the people in it.

I don't believe that the teachers' unions - and the teachers in them - are above criticism and if there are serious problems in the schools, some large measure of their cause must be down to those who teach and those who administer the schools.