Review Commentary No. 1: Milgate and Stimson's "After Adam Smith": a promising good read

Murray Milgate and Shannon C. Stimson, 2009.
After Adam Smith: a century of transformation in politics and political economyPrinceton University Press, Princeton, ISBN 978-0-691-14037-7

Murray Milgate, a fellow and director of studies in economics at Queen’s College, University of Cambridge, and Shannon C. Stimson, professor of political science and the history of political thought at the University of California, Berkeley, have co-authored a promising exhibition of scholarship in the history of economic thought, which has significant meaning for economists and political theorists – perhaps also policy makers – in the 21st century.

They tackle the relatively unexplored territory of what happened to political economy after Adam Smith died in 1790 that made the subject, and what replaced it, quite different by the last quarter of the 19th century (and, therefore, beyond, to what it has become today).

The gap, if there is one, which I think there is, has traditionally been filled with studied accounts of the theoretical ‘corrective’ process, considered inevitable in a new discipline, once the early authorities have passed on and new authorities have arisen in public esteem, seemingly correcting the early errors and sloppy concepts that no longer held sway or even respect.

Indeed, I have read both scholars and ‘young Turks’, who comment with unveiled and disparaging astonishment that Adam Smith, for example, did not take, what is now obvious to them, because of their graduate training, a very small step from where he left some of his prominent concepts. If Smith had done so, apparently he would have ‘saved’ the discipline a hundred years of frightful errors in a dead-end, made worse by the political consequences of the delay to new ideas ‘discovered’ in the 1870s, but apparently discoverable in the 1770s, or at least in the 1790s (Smith, we note died, in 1790).

These critics have in mind the example of his alleged ‘labour theory of value’ – more a ‘labour theory of muddle’ in my view – which, apparently, led to Karl Marx and , in the rather silly assessment of the ever-irascible Murray Rothbard, this meant Smith was to blame for the 20th-century’s horrors of communism! (“Against stupidity even the gods battle in vain’, Schiller)

Milgate and Stimson are not of that ilk. They have written a well-argued, mature approach to what happened in the broad discipline of political economy after Smith died. The period, of what they call the transition, which took place between the eighteenth-century discourse on commercial society and liberty of trade (Smith’s focus) and what these ideas came to exemplify in what is broadly known today as classical political economy and the science of politics.

Adam Smith was not the only memorable political economist of the eighteenth-century. The field is almost crowded with justly-memorable figures and with several-thousand lesser known and unknown figures in the healthy pamphlet culture that flourished for a hundred years before Smith’s Wealth Of Nations (Yale University has over 4,000 such pamphlets on economics, finance, and politics in its archives).

Smith wrote a synthesis of economic thought relevant to his main theme – a critique of mercantile political economy, the ruling political dogma at the time – and brought to the attention of his readers large parts of what he had taught his students about jurisprudence, including ‘police’, civic society, rhetoric, and moral sentiments, from 1748-51 in Edinburgh and 1751-64 in Glasgow.

In the first half of the 19th-century, Malthus, Ricardo, and Mill dominated British political economy and shifted its focus into new territories, which Milgate and Stimson note was quite a break from the direction in which Smith took, so much so, that they note that modern ‘left-right’ political histories that treat as a continuity the writings of Smith with modern welfare and neo-liberal politics are ‘anachronistic and misleading’. Adam Smith, the radical, however valid for the 18th century, in modern terms is unconvincing. The agenda has changed, as has the way we see social problems.

There is wide disagreement among modern commentators on what Smith was saying – see the journal literature for an overview and a sense of the differences. Milgate and Stimson explore what Smith meant and show how his idea of ‘perfect liberty’ in its market and government manifestations was developed and altered after him.

Economists were no longer talking about the same things. Take self-interest; it became “constrained optimisation” and “not only a component part of economic life in civil society but rather its only component. Where once stood Smith’s rich description of morally regulated, prudent behaviour described self-interested interaction – derived from a model of a socially constructed self – now stood a rational calculator of exclusively private costs and benefits” P6).

Milgate and Stimson open with Dugald Stewart, the son of Smith’s student friend, Michael Stewart, Professor of Mathematics at Edinburgh University, the chair that Dugald occupied before transferring to the Edinburgh Chair of Moral Philosopy, which in the fashion of the time, included political economy.

Dugald, they report, “altered Smith’s views on the input that political economy might have in both legislative practice and constitutional reform” by re-creating Smith as someone for whom “political economy was exclusively a science of the legislator” and which “had nothing to contribute to debates over forms of constitutional order”, especially in “revolutionary ways”.

Dugald Stewart had previous form in these matters, which might explain his motives for the shift. In January and March 1793, Dugald Stewart gave the eulogy at the commemoration of Smith’s life to the Royal Society of Edinburgh, coinciding inadvertently with social unrest in Scotland among the “inferior orders”.

The consequent trials of those perceived to be the leaders of the bouts of unrest took place in the heightened social tensions where the “superior orders” took fright, so to speak at the events in revolutionary France. Hanging, prison and transportation followed for the guilty.

The legal establishment took a closer look at intellectuals, such as Smith, whose Wealth Of Nations may have been supposed among the legal minds of the day (let’s be clear they were not radically-minded men; reactionary would hardly exaggerate their inclinations) to have contributed to the social unrest.

Smith was dead but Dugald Stewart was alive, and was making controversial public speeches, albeit to the staid fellows of the RSE and not the ignorant and easily stirred up ‘mob’. Think of Smith on the combination acts, his hostility to “merchants and manufacturers”, and his intemperate remarks about landlords (though actually making clear they behaved “like all men”) who preferred to “reap where the never sowed”.

Dugald escaped judicial punishment, largely by assuring his legal interrogator that Smith had no ambitions to alter the existing constitutional order. He saved himself, but also moved Smith away from his legacy, just enough to start the long transformation of his original ideas into what they became 50 years later.

I shall say more about this episode in future review/commentaries on Milgate and Stimson’s fascinating account, as I go through chapter by chapter.

You can order it from Amazon and follow my account and comments. Your opinions are also welcome.

Adam Smith on What Needed to be Done

‘sposton’, a commentator, responds to Paul Krugman, Nobel Prize winner, in a column on the recession and when it will end (recovery in the summer, and ending in 2014, says, Krugman), in the Huffington Post HERE.

‘Sposton’ broadens the discussion:

‘My friend, you know very little about moral philosophy and its history. Did you know that Adam Smith was first and foremost a moral philosopher? And so were many other early liberal economists. Smith's never reduced himself to a mere economist in your sense of the word. Your statements are the end result of modern reductionism than liberal economists. Our current situation is precisely the result of this kind of thinking where one discipline is utterly divorced from another and all divorced from any moral or ethical anchor. Without such an anchor our knowledge is utterly devoid of any wisdom and that is what our world need now more anything else. This methodology may have brought some good results in science but on the other hand it has diminished us all.

In its own little thought universe all you have said makes some sense. The problem lies in the nature of your universe. It belongs more to the domain of our problems and less so to the domain of solutions.’

Comment

I have no idea who ‘Sposton’ is or what else he/she stands for. Another commentator lists all of Krugman’s impressive awards beside a Nobel Prize, but while I acknowledge them and Krugman’s achievements, I am sceptical of their relevance when precise dates are given for a global event of the current magnitude.

If Krugman is correct, we shall stand in awe; if his precision is wrong, we can expect concurrent explanations from him about ‘surprises’, ‘lags’ and such like. We certainly will not hear his silent retirement from the prediction business.

This partly is why I noted ‘Sposton’s’ comment. Moral philosophy in Smith’s day encompassed many areas of science beyond political economy, or ‘police’ as it was known in the 18th century.

In Smith’s case, it included jurisprudence (how civil societies ‘ought’ to be governed – he wrote but did not publish a book on the subject; it was burned on his order in 1790), but he saved the philosophical method, published posthumously in 1795, and known as his ‘History of Astronomy’). He also wrote on history and the history of politics, and how the range of human behaviour influenced events in all their complexity.

Above all, Adam Smith did not make predictions about the future; his was a backward-looking appreciation of the past and a studied analysis of the present.

He did not say that everybody pursuing their self interest would necessarily produce an outcome beneficial to society; a ludicrous proposition as any acquaintance with history – of the present! – would confirm. It was human intervention, for good or ill intentions, that creates the very situation that policy makers, and individuals following their self interests, try to improve (often making them worse in the process too).

Adam Smith did not recommend sitting back and doing nothing – the logical advice if he had the views attributed to him by modern economists. Wealth Of Nations was a critique of the then political economy of the governments of Britain since the 16th century, know to Smith as mercantile political economy (‘mercantilism’ is a word, also attributed to Smith, first applied in the late 19th century; Smith died in 1790).

If he had believed that self-interest was enough he would have had no need to spend 12 years writing Wealth Of Nations!

Smith’s critique was aimed at the high policy levels of legislators, and those who influenced them, trying to persuade them to desist from policies that slowed down the growth path to the spread of opulence.

In these policies, ‘merchants and manufacturers’, were complicit; indeed, their self interests made them so; by narrowing the competition they widened the market for their goods and raised prices against consumers, many already on the bread line. Their self-interests did not benefit society; Smith knew this and said so, explicitly.

Only modern economists, Krugman included, teach a model of society without humans, who supposedly are rational maximisers, harmoniously creating an optimum output; or, in the sophisticated version (I am being a touch sarcastic) would be doing so if only government did not intervene at all.

It is the moral corruption of the players, legislators and influencers, producers and consumers, alike that leads to a far less sub-optimal outcome, precisely because self-interest, while the powerful driving force behind human endeavour, is best not left completely alone.

If moral teaching is not enough, which was the subject of Adam Smith’s earlier work, The Theory of Moral Sentiments (though its ideas were taught by Smith alongside his lectures on ‘police’ and civil government at Glasgow University in 1751-64), as Smith believed it was not, then a strong system of justice was essential, as well as a culture of Liberty, enforced by law.

Smith was not a utopian. He did not believe that there was a ‘master plan’, which if adopted would change the world towards perfection. Far from it; he denounced such ‘plans’ as the dangerous illusions of ‘men of system’, arrogant in their approach to society.

Smith took human nature as it was, pointed out several major areas where what was going on was deleterious to society (protectionism, monopolies, ‘jealousy of trade’, wars beyond the needs of defence against invasion, legal restraints on labouring people ‘combining' to raise wages or stop them being cut, while employers could ‘combine’ to resist their employees, laws preventing anybody but members of ancient Guild monopolies from exercising applying their labour as they wished, laws preventing working men seeking employment elsewhere than in the parish they lived in, and national policies that failed to educated children in ‘reading, writing, and account’ (girls were not educated at all, except in the middle class and above), and the absence of palliative care for persons afflicted with leprosy and ‘other loathsome diseases’.

In all this, Smith did not expect sweeping changes or any immediate changes. He set out only to persuade; not to impose. He did not believe that international free trade would ever be enacted, nor that slavery would ever be abolished (it’s still operating today in some countries), nor that the world would become full of ‘sweetness and light’. But it could be improved, at the margin, if legislators and those who influenced them were persuaded to do so.

Correct Summary of Adam Smith's Ideas

‘pilgrim’ in Red State Blog (HERE): writes “Fisking Marx” (that’s Reinhard Marx, archbishop of Munich and Freising, formerly, bishop of Trier, the birthplace in 1818 of Karl Marx, who has views on the end of capitalism, to which ‘pilgrim’ objects, during which post he made these statements:

“Never did John Locke, David Hume, Adam Smith, John Stuart Mill, Ayn Rand, F.A. Hayek, or Milton Friedman advocate unbridled capitalism or freedom. It seems that socialists have badly sullied the reputation of liberty. The socialists have repeatedly alleged that capitalism caters to so-called capitalists and gives them unbridled powers to exploit the weak. But that is totally false. Philosophers of liberty have always insisted that freedom comes with responsibility and justice. Adam Smith opposed mercantilism and monopolistic industrial interests. David Ricardo wanted more competition and free trade. Adam Smith and John Stuart Mill advocated labor unions to face the economic power of the owners of industry.

Unlike Karl Marx, who was a revolutionary, Adam Smith was a reformer. Where Karl Marx saw class struggle, Adam Smith saw special interests that were often at odds with the public interest. If Adam Smith were alive today, it is unlikely that he would join the chorus of triumphant anticommunists. Instead, he would warn that capitalism is prone to excess. He would observe that vigilance is required to ensure that the political system is not manipulated for the economic benefit of a few to the detriment of the entire society. He would be advocating political reforms to make sure that the system is not corrupted by special interests.

Adam Smith described free markets as an obvious and simple system of natural liberty. He did not favor the landowner, the factory owner, or the worker, but rather all of society. He saw, however, self-defeating forces at work, preventing the full operation of the free market and undermining the wealth of all nations.”

Comment
I think we can rest assured that ‘pilgrim’ understands what Adam Smith was about.

Perhaps ‘pilgrim’ is stretching a bit when saying Adam Smith favoured labour unions – he certainly objected to collusion among employers to restrain labourers who sought either pay rises, or resisted pay cuts, and he considered the Combination Acts against labour taking collective action in defence of their interests, while employers’ combinations, especially their ‘secret’ meetings, were not disallowed under current laws.

I suspect that Adam Smith wanted restrictive laws against combinations repealed, but favoured open competition in wages matters, applied to both labourers and employers. He certainly favoured higher wages for labourers because these were conducive to higher productivity and diligence and opposed reactionary policies that held wages down, ostensibly in the belief that such measures ‘encouraged’ labour to work harder.

Apart from this criticism of ‘pilgrims’ post, I would suggest readers follow the link because overall ‘pilgrim’ is spot on.