Excellent Summary of Adam Smith's Considered Views

Ligneus on his Blog, Road Sassy (“Dedicated to the fight against Islam and Progressives - Members of Either Are Candidates for Road Kill Here”) quotes from the The National Post an article by Peter Foster, ‘The genius of Adam Smith’, on the unveiling of the statue of Adam Smith:

“At long last Adam Smith, whose insights are still too rarely grasped more than 200 years after his death, will receive a fitting memorial.

July 4th is appropriate for such a tribute, as is the fact that Smith’s towering statue (pictured below) is being unveiled by an American. Not only was Smith’s great book, The Wealth of Nations, published in 1776, the year of American Independence, but he had great sympathy with the colonists’ revolutionary cause. Smith had been a professor at Glasgow University when that city was booming from trade with the Americas, but he had realized that much of Glasgow’s wealth came from restrictions on what the colonies could produce for themselves. He also pointed out that the military costs involved in controlling colonies as part of a “mercantilist” system were greater than the benefits. He favoured a free trade relationship and even political union with North America, which he predicted would one day rise to become a greater power than Britain.

One oft-repeated criticism of Smith is that his insights could not possibly apply to a world of supermarkets and giant corporations, of automobiles and air travel, of global financial institutions and the Internet, of alleged resource depletion and worsening pollution. But despite the fact that politicians and activists persist in biting the Invisible Hand, it continues its remarkable work. More fundamentally, Smith’s insights remain valid because he was not merely a supporter of markets and a critic of overweening governments, but also a student of human nature. Indeed, Vernon Smith has pointed out that Adam Smith should also perhaps be known as the “father of psychology.”

Some have seen a fundamental contradiction between Smith’s two books, but the notion that one must choose between humans as either self-interested or sympathetic is ridiculous. Smith painted humans as complex and often internally conflicted creatures whose prudence, benevolence and ingenuity is nevertheless best encouraged in a free and open society with minimal government, clear laws and strong external defences…

Among Smith’s philosophical works is a treatise on astronomy that notes that scientific theories are designed to cater to our desire for explanations, and are always and inevitably provisional. He would thus treat claims that science of climate change was “settled” with the greatest suspicion, particularly since they come accompanied by calls for draconian government action.”

Comment
An excellent account of the importance of Adam Smith that is close to his true role in modern thinking and in stark contrast to the usual version of Smith’s work and context.

You should read it in full (HERE).

I have some critical comments but shall leave them unsaid because Peter Foster's article is almost as accurate as can be constructed. (I take no responsibility for the Blog site’s targets for ‘road kill’; neither Peter Foster, the author of the excellent article, nor The National Post bear responsibility for a Blog author’s idiosyncrasies).

Events Associated with the Unveiling of Adam Smith’s Statue: 2

The first event of the day was the ‘breakfast’ reception at Panmure House in which Adam Smith lived from 1778 to 1790.

Eamonn Butler, director of the Adam Smith Institute, opened the proceedings and welcomed the early morning participants. I was next up the give a short speech on Adam Smith’s life in Panmure House, where he lived with his mother, Margaret Douglas Smith, and his cousin, Janet Douglas, and his housekeeper of his household from 1754 (at his house at Professors’ Close, Glasgow University) to when she died in at Panmure House in 1787.

Necessarily brief and selective, I reported on the visit by the young English poet, Samuel Rogers, who left a memoir of his visit to Edinburgh in 1789 and his reception by Adam Smith, regarded as a typical experience of Smith’s household in those later years of Smith’s life (d. 1790).

Smith invited him to dine everyday, and though his other social obligations cut into his free time, he did dine and sup with Smith, and accompanied him to the Oyster Club to meet some of his enlightenment friends (including Joseph Black, discovererof latent heat and cor-respondent of James Watt. He also joined Smith at his regular Sunday dinner (‘between sermons’ – Roger’s not Smith’s – at the local Kirk). Panmure House is almost next door to Canongate Kirk (where Smith is now buried).

On that particular Sunday, Smith’s guests included William Robertson (Principal of Edinburgh University), Hugh Blair (‘too puffed up’ by his fame as a preacher), Henry Mackenzie (Attorney for the Crown in Scotland). James Hutton (farmer, geologist and Smith’s close friend), and John McGowan (Lawyer).

They discussed, says Rogers, the French economist, Turgot and the Geneva man-of-letters, Voltaire. After their repast, they went together to a meeting of the Royal Society of Edinburgh (of which Smith was a founder member in 1783; he had been admitted previously to the Royal Society of London in 1772). The RSE meeting (only seven people present) heard a paper by Dr Anderson (author of papers on political economy, and reputed to have presented a theory of rent that anticipated David Ricardo’s), which Samuel Rogers described as ‘dull’.

Rogers found Adam Smith to be ‘very friendly and agreeable’ and observed that he did not have the ‘absence of mind’ that he was reputed to have.

Adam Smith died in Panmure House in 1790 and his literary executors (Joseph Black and James Hutton) supervised the burning of his 16 volumes of unpublished papers, a manuscript on Jurisprudence) which he had advertised in successive editions of Moral Sentiments since 1759, but which he never finished.

I gave my opinion that he reason for seeking employment as a Commissioner of Customs was to create a sound case for being too busy to complete the work on his book. Why? Because his book on Jurisprudence, which he described in his Lectures on Jurisprudence (the sets of students’ notes found in 1895 and 1958) as ‘the theory of the rules by which civil government ought to be directed’.

Once the decisive war of independence broke out in 1776, the contending issues about how a country ‘ought to be governed’, as expressed by the writings of, and his conversations with, representative figures (example. Bejamin Franklin) in the intellectual core of the colonists’ leaders and influencers, were bound to cause him severe personal and political embarrassment. How could he not discuss and comment upon how the colonists wished to be governed outside the rule of the King and legislature of Great Britain? And whatever he did discuss – how he honestly and intellectually would have to present it or how he emasculated his own thinking and tried to hide his sympathies – was bound to cause him serious problems with the political establishment of his country and his King.

His solution was to become ‘too busy’ to complete and publish his book. So he didn’t and on his death bed he ordered his friends to burn all of his unpublished manuscripts, except of course, his Essays on the Philosophical Method, which included his History of Astronomy, kept locked in his bureau for 40 years that he began writing in 1744 while at Oxford (but that’s another story…), which Black and Hutton published pothumously in 1795.

Events Associated with the Unveiling of Adam Smith’s Statue

Adam Smith’s new (only) statue in Scotland is to be unveiled on Friday, 4 July, in Edinburgh, and the first of the events to celebrate the occasion was held last night: ‘The Adam Smith Debate’ (sponsored by the Adam Smith Institute and the English Speaking Union).

The motion was ‘This House would prefer to be led by the Invisible Hand’.

The venue was in a part of Old Edinburgh – the converted stables off the Cowgate, now posing as a social night club, at The Caves, Niddrie Street.

It was packed with standing room only and, looking around the crowded debating room and the packed gallery, there were many ‘well kent’ faces from Scottish politics, academe, business and NGOs in the audience.

The debate was excellent, a good humoured knock-about session, loosely connected with current and past political life - someone mentioned the Atlee government and there were many references to Thatcher’s, occasional references to Blair’s and somewhat disparaging remarks about Brown’s (he really is unpopular across the spectrum).

Michael (Lord) Forsyth, former conservative Secretary of State for Scotland, a hero of the Right and ogre of the Left, led for the motion. The invisible hand became a synonym for open markets, less government regulation, and successful social mobility. It was a stellar performance.

As was the response of Brian Wilson, former Minister in Blair’s labour government, forever associated in Scottish National Party eyes as an ‘insidious traitor’ for supporting the Union and not independence (more for being an effective opponent than for any moral failings on his part). I have known him for years – we agree to disagree - and he has a genuine intellectual passion for the Union. He equated the invisible hand with Tory one-sided concerns about the plight of the rich and not with the poor, during which the old ‘war’ about the Tory ‘Poll Tax’ was re-fought by its prominent combatants – but always with good humour, polite banter, and without rabid rancour.

The supporting speakers were of excellent quality. Dr Madsen Pirie, President of the Adam Smith Institute, dapper dressed as always, plus bow tie, supported the motion and gave an excellent contribution in favour of the free market, again with a mixture of good humour and spirited rapier thrusts of a keen debater’s sword.

He was replied to by Alex Nei, MSP, of the Scottish National Party, probably the best debater in the Scottish Parliament and a well-known close-in ‘fighter’ for independence. He is also an economist. He opened by saying this was the first time he had been on the side of Brian Wilson, but he endorsed his remarks and then laid into Lord Forsyth and Dr Pirie, mixing, as they had, his barbed wit and his typical passion.

The followed too younger debaters, each prize winning champions in Debating contests, who clearly knew of each other’s style. For the motion was Andy Hume (a prominent ‘name’ in these parts) from whom I detected in a couple of places, his acquaintance with the fact that the invisible hand was a metaphor (he told me afterwards he had been reading Lost Legacy!). Kenneth Fleming, in reply, made an impassioned – but restrained with effective humour – speech that highlighted the state of the poverty estates of East Glasgow (they are not much better in the west) and what he called the failure of the 'market'. Others disagreed, believing this is a failure of state provision.

The brief summing up by Forsyth and Wilson concluded what by widespread acclaim around the room and in post-debate conversations everywhere was widely asserted to be to have been an excellent debate. Throughout the evening, the audience laughed enthusiastically at the humour from both sides – it wasn’t a partisan, baying mob supporting only those they agreed with (I watched the faces I knew well on both sides of the underlying political issues at stake and they cheered and applauded whenever either side landed an effective ‘blow’).

I enjoyed the evening, making no comments on the assertions about the metaphor and myth of the invisible hand. It was not the time or place for academic argument. I spoke to speakers from both sides afterwards and congratulated them on their performances.

Today, I am making two short contributions to proceedings in the programme, beginning this morning with a reception at Panmure House (Adams Smith’s home in 1778-90) and later I am chairing a session at the opening of a exhibition at the National Library of Scotland of Adam Smith’s Works and associated manuscripts, which is to be addressed by Professor Chris Berry, of Glasgow University, where Smith was a student and professor, and later, rector. Chris Berry is currently the co-director of the Adam Smith Research Foundation.

History of Economics Society Annual Meeting (York University, Toronto) 3

The first session I attended today was ‘Plato, Aristotle (and Marx?)’. It is becoming clear that a respectable number of contributors are interested in the philosophical links in the history of economic thought, including in Adam Smith’s work.

Anna Greco took Plato’s republic as the theme of ‘Economic Effectiveness and Economic Efficiency’ (largely about the different perspectives on the division of labour of Plato and modern economics) and Spenser Pack reported on Aristotle and his ‘difficult relationship with Modern theory’ from which I learned a lot about what I had previously known very little. He showed strong philosophical links between Aristotle and Smith. Robert Urquhart advanced a proposition of ‘Marx as a Left Aristotelian’ and made good case for his hypothesis. I found this session the most interesting and clearest intellectual survey. The discussion was equally good (those speaking occasionally dropped into conversation mode and I could not hear them well, or in some parts at all).

The plenary session on, ‘Why do Historians of Economics Hate Social Studies of Science?’ struck a chord with me. I have long been suspicious of disciplinary boundaries (in some cases, Iron Curtains), where excursions into or visitors from other disciplines might help economists conduct their studies better. I could not imagine Adam Smith’s work being so productive of insights if he had written solely within the strict boundaries of modern social science, or at least as it is practised in some areas by colleagues.

The major problem of this session was the familiar one that speakers from the floor tended to speak conversationally, though there were mikes present but they were not used. What is it with the coming generation of academics that they prefer to speak and not be heard than get up and go to a mike? Some members of the audience shouted advice to ‘speak up’ and were ignored (I didn’t do this at any meeting). ‘Twas a pity’, as was the failure of speakers to repeat or summarise the inaudible questions or comments in reply.

Next up after lunch – in my case a cup of coffee (decaf) and a Danish - was Maria Pia Paganelli whose paper was on ‘Approbation and the Desire to Better One’s Condition in Adam Smith’. This was presented well and her argument was solid. She took the usual assertion among modern economists of Adam Smith supposedly stating that in the search for approbation (praise), people’s self interests would have social benefits, and she showed that this conclusion was unsustainable in many cases, using a simple graphic.

I followed with my paper on Smith’s theory of bargaining, showing how his tentative view that the ‘propensity to truck, barter, and exchange’ appears to have been prevalent in pre-history, first as reciprocation, and that this evolved into bargaining, which Smith described as the conditional proposition (‘If you give me what I want, then I will give you this that you want’). My work in bargaining since 1972 completely concurs with the significance that Smith attached to the conditional proposition (largely mised by colleagues). This allows for an interpretation of the famous paragraph about the ‘butcher, the brewer, and the baker’ that is different from common interpretations among main stream economists, including, sadly, among some historians of economic thought.

In the next session, I chose to attend a fascinating discussion of ‘The Economics of Altruism’, which was presented by Steven Medema (‘Creating a Paradox: self-interest, civic duty, and the evolution of the theory of the rational voter’; Alain Marciona (‘Altruism and Rescue Law’) and Phillipe Fontaine (‘Beyond Altruism’). I have never been happy with the use made of word like ‘altruism’ in social sciences generally. It’s not that I have an alternative word for the phenomenon of altruism so much as it requires the observer to know what’s going on in the mind of the ‘altruist’, which is a feat beyond human capacity. However, the session was interesting, as were the questions. The speakers spoke up and the quietest, Phillipe Fontaine, was audible because I was sitting at the front.

Sandra Peart’s Presidential Address (‘We’re all “Persons” now: classical economists, on marriage, the franchise, and socialism’) was of the standard I have come to expect from her – you can see why she held the presidency of the society this past year. She also seems – from observation – to be popular across the board.

I missed the full-booked HES Banquet (I had a headache – quite a stressful day – but I gave my paid-for ticket to a delegate for his wife, and wondered if that was an example of altruism?).

The morning of the last day was devoted to ‘David Hume’s Political Economy’ and this session consisted of presentations by four of the authors of a new book of the title (Routledge, 2008, edited by Carl Wennerlind and Margaret Schabas). The papers were ‘The Historical Context of David Hume’s Political Economy’; ‘David Hume on Value, Manners and Morals’; David Hume’s Monetary Thought: theory and applications’; and ‘The reception of David Hume’s Political Economy in France.’ There was considerable unanimity among the authors and I shall order a copy as the book is now out – each presenter waved a copy with pride to prove it. (If there had been a flyer for it I would ordered one).

Smith and Hume were friends, as is well known – Hume kept a room for him to stay when he (rarely) visited Edinburgh (1766-73). Smith did not treat his friend well on at least two occasions: when Hume applied for a chair in Glasgow University – most assume it was for the Chair in Logic, but I believe it may have been for the Chair in Moral Philosophy in 1751, which Smith was gathering support for his own candidacy.

He wrote to a University colleague, William Cullen, his famous words: ‘I should prefer David Hume to any man for a colleague; but I am afraid the public would not be of that opinion; and the interest of the society will oblige us to have some regard to the opinion of the public’, which damned him with faint praise [Correspondence, No. 10, p 5-6, November 1751].

When asked by Hume to arrange for the publication of his essay on Natural Religion when it was clear he was dying in 1775-6, Smith 'refused' and Hume was disappointed in this treatment and his correspondence shows his disappointment with Smith, who feared repercussions from society. Hume wrote, ever the diplomat, ‘I think, however, your Scruples groundless’ (3 May), and later that day, in a different letter, he wrote: ‘After reflecting more maturely… I have become sensible … of your situation’ [Correspondence: Letters Nos. 156, pp 194-5 and 157, pp 195-6].

The last plenary session was a practical teaching session: ‘Advancing the History of Economics in and out of the classroom’. Kirsten K. Madden gave a spirited address illustrating her ‘Interpretive Question Cluster Discussion Technique in a History of Economic Thought Course’. I was impressed with her message and illustrations.

Years ago, Heriot-Watt economics department introduced the ‘TIPS’ programme to Scottish economists and I believe it achieved improvements in performance in both faculty and students. That it could (would?) economise on faculty resources was a major barrier to its adoption by the departments who tried it. Tenured faculty engage in restrictive labour practices as much as the most unionised plants. But that is an old wound and I won’t go there.

Bruce Caldwell finished the conference with an exciting report on the new Centre for the History of Political Economy in North Caroline (Duke). This could have an impact on the recruitment of faculty prepared to add ‘HOPE’ courses to their curricula in mainstream departments. We shared a cab to the airport during which he gave me more details of his intentions.
…

So that was HES 2008. On the whole a good conference. I met many new faces and heard some excellent treatments. HES 2009 is to be in Denver, Colorado. If I am able to attend I shall do so.

Robert J. Samuelson's Take on Adam Smith

Robert J. Samuelson writes a Newsweek piece on “
“The Spirit Of Adam Smith: We Could Use It, Because (Contrary To Myth) He Tried To Balance Government And The Market”:

“Liberals are so protective of government that they cannot concede the great power of Smith's "invisible hand." Self-interest is not simply greed, selfishness or narcissism. If properly constrained, it is an immense force for social good, and much human progress stems from the independent exertions and creative energies of individuals and enterprises. Liberals recoil at this notion because it deprives them of the power, social status and psychological gratification of seeming to deliver (through government) all the trappings of the good society.”

Comment
Nomenclature: ‘Liberals’ in the USA and the UK have different meanings. But the point that Samuelson is a good one: there are enormous rewards – status, pay and jobs for highly regulated societies – for people employed in politics, NGOs, public agencies, lobbyists, think tanks, and consultancies.

“Meanwhile, conservatives are so contemptuous of government that they cannot admit that it is often more than a necessary evil. It creates the legal and political framework without which tolerably free markets could not survive. It also supplies the collective services--from defense to roads--that the private market doesn't and deals with the market's unwanted "excesses.'' Smith realized that government produced these benefits, but many conservatives who cite him seem oblivious to their existence or importance.”

Comment
Samuelson’s honest confession in not having read Wealth Of Nations raises questions about his justiifcation of his conviction of "the great power of Smith's "invisible hand." The sole reference to an invisible hand is buried in Book IV and Samuelson probably relies on references to it without realising that it had nothing to do with markets.

“I don't claim to have read Smith's "The Wealth of Nations' (1776) from cover to cover. But anyone who doubts the complexity of his thinking ought to plunge into a short but superb intellectual biography by historian Jerry Muller of Catholic University (""Adam Smith in His Time and Ours,'' Princeton University Press). In it, he demolishes the stereotype of Smith as an anti-government zealot. That image founders on one fact: Smith served for years as a bureaucrat, Scotland's Commissioner of Customs. He collected import duties, then the government's largest source of revenue. The job was akin to the head of the IRS today.

Smith's theories explained changes that had already occurred. In 18th-century Britain, feudalism had collapsed. Farm production rose, as did living standards. In England, people felt ashamed to go without shoes; in France, being shoeless was still common. Blankets, linens and ironware became common in England. Smith attributed the new wealth to the triumph of the market: buying and selling. Before, food was mostly consumed by those who produced it or their feudal lords. Manufacturing was also transformed. "Goods once produced laboriously at home--clothes, beer, candles ... furniture--could now be purchased,'' writes Muller.
The market multiplied wealth, Smith reasoned, because it led to economic specialization: the "division of labor" that--through more knowledge, experience and customized machinery--raised production. None of this was planned. It flowed (as if by an invisible hand) from the striving of sellers to maximize their wealth. "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner" Smith wrote memorably, "but from their regard to their own interest.'' ….Government's ability to cripple the market appalled Smith. "The Wealth of Nations" aimed to fortify legislators against "the pressures of economic groups'' for special privileges, Muller says. But Smith's skepticism of government wasn't a revulsion for it. He "enjoyed the work'' as customs commissioner, writes Muller. This was not hypocrisy, because Smith saw three vital roles for government: a) providing defense, b) ensuring justice and protecting property, and c) building roads, canals, harbors--"infrastructure.'' Government had to be properly financed.

Nor did Smith believe that wealth was all that mattered.”

Comment
True, in the modern sense of ‘wealth’, but not in his original sense, where he defined wealth as the annual output of the ‘necessaries, conveniences, and amusements of life”. He saw the raising of living standards of the majority of the poorer members of society as being accompanied, and caused by, engagement through employment as a means to make society more mannered, more gentle and more educated the civilising virtues, and less brutalised, less ignorant, and less likely to be misled by fanatics.

On the whole this is a fair treatment of Smith's views and of its lack of support by 'Liberals' and 'Greed is Good' Conservatives. I also recommend Jerry Muller's Adam Smith in his time and ours, but I would suggest that reading Wealth Of Nations and Moral Sentiments might be the bets place to start from.

A Tall Sunday Story of an Invisible Hand

Dialektika (‘the working man in the world unit’)

Adam Smith and the invisible hand by Helen Joyce.

Joyce begins by slightly misleading her readers, by cutting into the famous paragraph 9 that mentions the metaphor of the invisible hand (WN IV.ii.9: 455-6).

By cutting out the crucial information that Adam Smith discusses not just the general individual in society but those particular individuals who employ ‘whatever capital [they] command’ (WN IV.ii.4: 454), namely merchant traders. He is dealing with a particular case of owners of capital who contemplate where to invest it and choose between engaging in the ‘foreign trade of consumption’, particularly, though not exclusively, in British colonies in North America or India, or investing it locally.

The decision centres on which destination is ‘most advantageous’, which boils down to which is most profitable and least risky? Both are profitable, but one (foreign trade) is more profitable and more risky than the other.

When he invests locally his ‘capital is never so long out of his sight’ and in the colonial trade it may be away from him for months, and subject to the vagaries of the weather at sea, risks of piracy, seizure during wars, dishonest handling in foreign ports, malfeasance when under the control of distant merchants, of whom he knows less than those close by him, the vagaries of foreign justice, and the fortunes of distant consumers.

Not considering the context of which Smith was addressing is tantamount to drawing in the minds of readers of the stripped down quotation a completely misleading impression that Smith is talking as a general rule of trade. He wasn’t! It isn't even mentioned during his long discussiosn of markets in Books I and II of Wealth Of Nations!

Smith is discussing the risk aversion of merchants to investing in trade abroad and necessarily investing locally. The consequence is for Joyce to downplay those parts of the quotation from paragraph 9 that make it clear of what he speaks.

The individual merchant ‘intends only his own security’ and it is this consideration, plus his desire to make profits, ‘provided he can thereby obtain he ordinary, or not a great deal less than the ordinary profits of stock’ (WN IV.ii.5: 454), which determine inexorably, by the arithmetic rule that the whole is the sum of its parts, that domestic products thereby ‘may be of the greatest value’, and certainly greater than they would be if merchants were risk neutral.

This conclusion is sufficiently explained by Smith and readers who understand its construction would see that truth immediately. His readers were educated and literate, but not necessarily all to the same standard, and to cap his presentation he drew on his knowledge of literature, both contemporary and classical, where the metaphor of ‘an invisible hand’, which was widely used and recognised in the 18th century, of ‘an invisible hand’.

The metaphor represents, as metaphors are supposed to, and as Smith taught in his lectures on Rhetoric (see: Lectures on Rhetoric and Belles Lettres,[1763] 1983), the object under discussion, namely the behaviour of risk averse merchants. It was not a ‘theory’, ‘concept’, or ‘paradigm’, nor the greatest idea of great significance. It was not a reference to God, or some divine intervention, which Joyce thought that Smith discovered because he ‘was profoundly religious, and saw the “invisible hand” as the mechanism by which a benevolent God administered a universe in which human happiness was maximised.’ Her conclusion is an assertion for which she has limited evidence.

Smith’s mother was ‘profoundly religious’ but there is no evidence that he was. Indeed, he had abandoned Oxford University to avoid continuing to become a priest in the Church of England and to preach in the Episcopalian Church in Scotland.

The metaphor of the invisible hand is just a metaphor. Nothing more.

Shakespeare used the invisible hand in Macbeth (the ‘Scottish play’), as did Daniel Defoe in Moll Flanders and Colonel Jack, and a score of other authors in books on the shelves of most educated people in the 18th century.

Helen Joyce makes several other wild assertions in her article (HERE). If I have time I shall return to them, but for now I have a conference to attend.

The 35th History of Economics Society Conference, Toronto, 2

From the interesting reminiscences of Geoff Harcourt (a veritable tour de force), I caught the tail end of the paper by Francis Peddle on ‘Hegel’s Concept of Poverty and Scottish Philosophy’. This was not the last reference to Hegel and Adam Smith’s (and Adam Ferguson and Dugald Stewart’s) influence on him. Hegel came up in several conversations during the rest of the day and, as I have little acquaintance with Hegel, it’s all new to me.

Duncan K. Foley took the plenary session. He spoke from, or rather read from, a two-sided pile of typed pages, sometimes at breakneck speed on ‘The History of Economic Thought in the Education of Duncan Foley’. What I caught seemed interesting; unfortunately, much was lost in a rushed mumble, which the sound system did not do much to help in the vast auditorium. By reading from a paper, necessarily looking down at it (Duncan is an American-tall man), he did not help his delivery. I shall await its publication and make a more informed judgement.

The next session that I attended was ‘18th-century Thought’ and this was a gold-dust session for me. Three excellent presentations; three interesting topics; and three stimulating speakers – they made my day.

Loic Charles reported on his work with Christine Théré in Quesnay’s archives and their discovery of the close collaboration of Mirabeau in the ‘produit net’, showing how Mirabeau convinced Quesnay to re-define its meaning. The archives of their handwritten exchanges show this clearly. Incidentally, the French pronunciation (Charles is French) of Quesnay is ‘Kenay’, silent ‘s’; I never knew that, though the discussants from the floor clearly did.

Jeffrey Young (St Lawrence University) ran through his paper on the post-war literature on Malthusian ideas (Limits to Growth, etc.,) and illustrated his case with clear diagrams showing the ‘ecological’ version of Malthus and how they must be re-drawn to correspond to both Malthus’ original ideas and to analysis of he actual constraints on growth. I have seen a similarly constructed diagram by Gavin Reid, showing Adam Smith’s ‘Four Ages of Man’ (Hunting, Shepherding, Agriculture, and Commerce).

Young concluded that the real constraint on growth is not the physical shortage of resources so much as institutional deficiencies (population behaviours; wrong-headed policies). Malthusian predictions have not materialised, and apart from local problems, human prospects are much better than is propagated by ‘limits-to-growth’ type literature.

Young called his approach in the paper as ‘thin history'; for something ostensibly ‘thin’, he was remarkably productive in making his case. David Levy, his discussant was excellent – he spoke to the listeners in the room, and not as is often the case, he did not engage in a barely audible conversation with the speaker a few feet from him; he spoke to the seminar.

In a spirited contribution, Levy, spoke of his case that there are two separate claims to the ideas of Malthus: one is straight Malthusian set of ideas based on what he wrote; the other is a ‘Malthus’ invented by modern literature. I felt the same can be said of Adam Smith.

Benjamin Mitra Kahn (City University) spoke to 'Defining Economic Growth in the 18th century'. His exposition was excellent; his content well arranged, and his purpose fulfilled in showing how ideas about national income accounting slowly emerged as nation states wrestled with what seems to be a problem of classification of stocks and flows, but which was in fact a highly practical search for a clear method of selecting flows for taxation to finance wars.

I commented, briefly, that Adam Smith's distinction between 'productive' and 'unproductive labour' had nothing to do with national accounting, though incorrectly ascribed as that later. These had much to do with Smith's dynamics of growth: what added to growth (circulating capital) and which didn't (prodigality in consumption). It wasn't a divide into manufacturing and services, as is commonly claimed; providers of services for unproductive consumption, were profit-seeking suppliers who did replace their outlays plus a profit, some of which was re-invested in replacing labour and materoal costs and therefore were productive.

I attended part of the session ‘Money in Hume, Law and Cantillon’, in which James Ahiakpor spoke on the ‘Search for a Consistent Interpretation’ of ‘Hume on money’. Again, it is a case of being ‘interpreted’ by
20th-century theorists (Fisher, Taussig, Viner, et al) rather than his (Humes')contributions, ‘Of Money’, ‘Of Interest’ and ‘Of the Balance of Trade’, taken together. Ahiakpor made a competent case, supported by on-screen paragraphs from the different sources.

Here I took a break, and conversed in the coffee room with some participants, and bought a couple of books. The ‘In Memorium’ plenary session for ‘Bob’ Coats was well attended and had a video link to Warren Samuels, whom I had hoped to speak to about his 2007 paper on the modern treatment of the invisible hand. Clearly, he was convalescing and not in attendance. The speeches about Bob Coats (of whom I knew little, other than couple of his pieces I have read on 19th-century social conditions) were moving tributes to the man, his wife and partner, Sonia, and their work.

Lastly, I went to the reception for the outgoing editor of the excellent Journal of the History of Economic Thought, Steven Medema. After ten years, he hands over to the next editor. He has also organised the speakers for the Edinburgh Conference of HET in September, at which I am presenting a paper.

Small change: I was proposing to speak on ‘Adam Smith and the Labour Theory of Value’, basically showing he has been wrongly (dis)credited with a LTV. Instead, I have been asked to give my latest version of my paper, ‘Adam Smith and the Invisible Hand: from metaphor to myth’ and I am very pleased to do so. I shall present the LTV paper (now in final draft) next year at an early opportunity.

The ‘invisible hand’ is a more pressing issue than LTV among the profession and given the critical audience of the HET conference – small numbers, longer sessions, more discussion and more time for critical appraisal, I am pleased, apprehensive, but not complacent, at the challenge of a critical test before my peers for a theme I have been explicating and defending since 2005 on Lost Legacy.

The final paper goes into the conference secretariat next week. It is a clear case of presenting the original ‘S’ rather than the modern “S” (acknowledgements to David Levy).

... Sunday dawns, and I am ready for delivering my paper: ‘Adam Smith on Bargaining’ after lunch, and after a morning session on ‘Plato, Aristotle (and Marx?)’, plus a panel discussion on ‘historians and the history of social science’.

History of Economics Society 35th Annual Meeting 1

Toronto, Canada. I've been here couple of times, changing planes, but this is my first visit to the city on the ground. I have been here in imagination though. My grandfather was in Toronto from the coal fields of Killwinning in Ayr, Scotland from 1910 to the first world war when he returned home. He told me he came home to join the army but they sent him back down the pits to dig coal. Just as well, otherwise my mother would not have been born in 1916, nor me in 1940.

Riding around in taxis, I wodnered how much had changed. From the look of the buildings, the main roads, bridges and railways, it must have changed a great deal. My grandparents would never have recognised anything. They had met and married in Toronto, she from Moray, 'in service' to a Lord and family and he, a cobalt miner from somewhere in Canada.

York University, the conference venue, is large by Scottish, though not by Shanghai standards. Is also new, modern and neat. We're in the 'Schulich Scool of Business' building.

This afternoon (Friday) it was registration, an impressively efficient affair. I wandered off for a coffee with Geoff Harcourt (Cambridge) whom I have not met before but knew him from his role in the 'capital controversy' of the 60' and 70's (I still have a copy of his book). This was a debate between neoclassical economists in Cambridge, Mass. and Cambridge, England. He is a most interesting conversationalist, typical of what I missed from not going to Cambridge. We knew various people in common, but he knew many more, mostly 'big names' in the discipline, and his accounts of them and their work fascinated me. Geoff is a intellectual biorapher, particularly of the Joan Robinson, whom I met once when she was awarded a Honorary Degree at Brunel University, where I was a junior lecturer in the Economics Dept headed by John Vaizey. I also read her book, Imperfect Competition, which struck me as brilliant, and also because of a small point: it was the first economics text that I had read that had diagrams that included red lines as well as standard black. By the 1970s multi-coloured illustrations were fairly common and no longer limited to plain text and often impenetratable graphs. She was always readable.

At the evening supper I slipped away early, preferring to stick close to UK time zone habits as my stay here is short and it's a busy week to come with the unveiling arrangements of Adam Smith's statue in Edinburgh on 4 July.

Lost Legacy Loses Contact!

Apologies but my computer crashed on Tuesday (after a house guest used it for his emailsy). This cut me off on Wednesday. On Thursday I was travelling to the History of Economics Society Conference in Toronto and my office is wroking to undo the damage (in future I shall decline my hospitality being extended to my pc).

I am only able to post via my laptop in the hotel in Toronto.

However, I shall report on the HES Conference each day.

Sorry for this.

Gavin

More on Samuel Bowles' Misreading of Adam Smith

The problem with citing Adam Smith in support of an interpretation of a modern designed experiment in behavioural economics is that the understanding of modern economists, or indeed their familiarity with Adam Smith’s writings, leaves a great deal to be desired. If their understanding of Adam Smith’s theories is not just limited, but what they do know about them, usually from isolated third-hand quotations, is completely incorrect or at least lacking correctness in key places.

I have already referred critically to the article in the 20 June issue of Scientist by Samuel Bowles (for the Sante Fe Institute) and another reports of the article in Reasononline (free minds and free markets) (HERE:)

“Does the Invisible Hand Need a Helping Hand?”
(‘A behavioral economist explores the interaction of moral sentiments and self-interest) by Ronald Bailey, 24 June, asserts:

“In the June 20 issue of Science, Samuel Bowles, director of the Behavioral Sciences Program at the Santa Fe Institute, looks at how market interactions can fail to optimize the rewards of participants—e.g., the micromanager who gets less than he wants from his employees. For Bowles, the key is that policies designed for self-interested citizens may undermine "the moral sentiments." His citation of the "moral sentiments" obviously references Adam Smith's The Theory of Moral Sentiments (1759), in which Smith argued that people have an innate moral sense. This natural feeling of conscience and sympathy enables human beings to live and work together in mutually beneficial ways.”

“Bowles, with some evident regret, observes, "Before the advent of economics in the 18th century, it was more common to appeal to civic virtues." Bowles does recognize that such appeals "are hardly adequate to avoid market failures." How to resolve these market failures was the subject of Smith's second great book, The Wealth of Nations (1776), where he explained: "By pursuing his own interest (the individual) frequently promotes that of society more effectually than when he really intends to promote it."

Comment
I pick on these paragraphs because they contain serious errors of attribution to Adam Smith, easily corrected by reading Moral Sentiments and Wealth Of Nations.

“For Bowles, the key is that policies designed for self-interested citizens may undermine "the moral sentiments."

His citation of the "moral sentiments" obviously references Adam Smith's The Theory of Moral Sentiments (1759), in which Smith argued that people have an innate moral sense.”

Adam Smith did not assert that “people have an innate moral sense”, which is a fairly common error, though unsustainable if Moral Sentiments is consulted. The idea of an ‘innate moral sense’ properly should be attributed to Frances Hutcheson, Professor of Moral Philosophy at Glasgow University, and Adam Smith’s tutor from 1737-40. Not for the only time did Smith disagree with his old and much respected tutor, whom he described as ‘never to be forgotten’.

Smith excludes the innateness of moral sense by an imaginary example:

“Were it possible that a human creature could grow up to manhood in some solitary place, without any communication with his own species, he could no more think of his own character, of the propriety or demerit of his own sentiments and conduct, of the beauty or deformity of his own mind, than of the beauty or deformity of his own face. All these are objects which he cannot easily see, which naturally he does not look at, and with regard to which he is provided with no mirror which can present them to his view. Bring him into society, and he is immediately provided with the mirror which he wanted before. It is placed in the countenance and behaviour of those he lives with, which always mark when they enter into, and when they disapprove of his sentiments; and it is here that he first views the propriety and impropriety of his own passions, the beauty and deformity of his own mind. To a man who from his birth was a stranger to society, the objects of his passions, the external bodies which either pleased or hurt him, would occupy his whole attention. The passions themselves, the desires or aversions, the joys or sorrows, which those objects excited, though of all things the most immediately present to him, could scarce ever be the objects of his thoughts. The idea of them could never interest him so much as to call upon his attentive consideration. The consideration of his joy could in him excite no new joy, nor that of his sorrow any new sorrow, though the consideration of the causes of those passions might often excite both. Bring him into society, and all his own passions will immediately become the causes of new passions. He will observe that mankind approve of some of them, and are disgusted by others. He will be elevated in the one case, and cast down in the other; his desires and aversions, his joys and sorrows, will now often become the causes of new desires and new aversions, new joys and new sorrows: they will now, therefore, interest him deeply, and often call upon his most attentive consideration.” (TMS III.1.3: p 110)

Smith’s metaphor for the effect of society on the individual was as a ‘mirror’ by which people learn how to behave and how to distinguish between propriety and impropriety. They are not born with these attributes; they have no inbuilt set of values; these emerge, slowly and gradually, through contact with others, first with adults and then with other children (in the ‘great school of self command’). It is from these that their ‘impartial spectator’ emerges as the judge of their moral conduct.

Their “natural feeling of conscience and sympathy enables human beings to live and work together in mutually beneficial ways”, but only because they ‘live and work together’, and not because they are born to do so without the essential contact with others. Otherwise, children would ‘know’ how to express their moral senses without the need for the emotional chastisement of the others with whom they interact as they grow up and mature.

At the end of the article there is a clear recognition of Adam Smith’s theories of the location of the sources of moral sentiments: “In other words, as people gain more experience with markets, morals and material incentives pull together.” Yes, it is the gaining of experience from interaction with others in markets that teaches people the role of ‘markets, morals and material incentives’.

The second quotation, moving on from Moral Sentiments to Wealth Of Nations only carries weight in Samuel Bowles’ argument – at least as expressed by Ronald Bailey – because it is torn out of context:

"By pursuing his own interest (the individual) frequently promotes that of society more effectually than when he really intends to promote it." (WN IV.ii.9: p 456)

This is, of course, from the infamous (considering what has been done with it since the mid-20th century by modern economists) quotation from the paragraph that includes his lonely use of the metaphor of ‘an invisible hand’.

It is not true to suggest that this statement was about “how to resolve these market failures” which “was the subject of Smith's” Wealth Of Nations.

Regular readers will know that the paragraph in question, from Book IV and not from Books I, II, III or V, refers to the specific consequence of risk avoidance among merchants leading some, but by no means not all of them, to prefer to invest their scarce capitals locally rather than take the higher risks of piracy, disasters at sea, malfeasance of those strangers they trade with in distant foreign countries and colonies, and the longer delays from returning their capital and profits.

The inescapable consequence, by the laws of arithmetic, that the more capital that is invested locally (foregoing higher profits), the higher will be domestic capital formation, and the higher the ‘annual output of the necessaries, conveniences, and amusements of life’, summarized as the whole is the sum of its parts – increase the parts and the larger will be the whole.

The merchant who is risk averse ‘intends only his own security’ and thereby promotes the interest of the domestic economy, for the larger the local ‘industry’, the larger the local employment (Smith considered the two variables to be intimately linked), and the quicker the ‘spread of opulence’ especially ton the poorer labours and their families. It had nothing to do with ‘market failure’.

That behavioural economics is presented in this manner by Samuel Bowles and others, the greater is the pity because their incorrect interpretation of the very positive research results of their experiments compromises the real lessons that could be gleaned from them if modern economists were more familiar with Adam Smith’s true legacy.