A Confusion of Identities

In the Daily Klos Blog, Patrice Ayme writes HERE:

“SMITH OUGHT TO HAVE LEARNED MORE THAN FRENCH:

Adam Smith, having apparently confused his mastery of French with a mastery of economics, grabbed the word "laissez faire" from the French self christened "Economistes", and thought that this "invisible hand" had solved house management, for the better. Adam Smith did not invent the theory of the "invisible hand", either, it was written down before Smith was born (by Mandeville who subtitled his famous Fable of the Bees, with: "Private Vices Public Benefits" – this striking formulation pretty much extols the naivety of it all).

Well, "laissez faire" and invisibility of manipulators do not provide necessarily with the best housemanagement. Every country that has established a government insured health care system has long known that.”

Comment
Patrice appears not to know that Adam Smith never used the phrase ‘laissez-faire’ at all in anything he wrote, so it seems strange that Patrice thinks he ‘grabbed’ it from French economistes (I think he means the Physiocrats).

Patrice is correct, however, though not in the way he thinks: Adam Smith did not ‘invent the theory of the invisible hand’ – he never had such a theory in anything he wrote.

For Smith it was a metaphor, not a 'theory', and its modern notion was invented by modern economists in Chicago in the 1930 and popularised from the 1940s. Its modern meanings had nothing to do with Adam Smith.

I am not clear how Bernard Mandeville gets into this story.

The rest of Patrice’s article is a long rant about health care ... I gave up reading it.

An Innocent Adam Smith Charged Wrongly

Bob Matteson from Bennington posts in the Rutlandherald.com HERE:

“Time to shift away from greed”

“The dramatic juxtaposition of huge governmental bailouts and astronomical private bonuses in great financial institutions has highlighted America's over-reliance on speculative money-making, the more, the better, as the major drive wheel of the American economy. Adam Smith's "hidden hand," the supposed working of private greed for public benefit, is being severely challenged.”

Comment
Sorry, but Bob addresses the wrong person with his criticism.

‘Private greed for public benefit’ is close to its original author’s actual words (which were ‘Private Vice, Public Virtues’) but it wasn’t Adam Smith who penned them. It was Bernard Mandeville in his infamous book (1724), Fable of the Bees'.

Adam Smith regarded Mandeville as ‘licentious’ and his ideas as ‘pernicious’ – see Adam Smith, The Theory of Moral Sentiments, 1759 (TMSVii.4.6: 308).

Adam Smith’s use of the metaphor, ‘an invisible hand’, had nothing to do with ‘greed’ working for ‘public benefit’.

Bob claims that this misattributed notion ‘is being severely challenged’. I should hope so. It was challenged over two-hundred years by Adam Smith, though not I suspect until recently by Bob.

So, not only his Bob accusing an innocent man (Adam Smith) of a heinous offence, he obviously does not know anything about the real perpetrator (Bernard Mandeville) of the original crime. So much for justice, Bennington style!

Was Adam Smith Trumped by Charles Darwin?

Thomas McQuade writes (12 July) in Think Markets (‘A blog of the NYU Colloquium on Market Institutions and Economic Processes’) HERE:

“Frank and Stein

In a recent opinion piece in The New York Times (“The Invisible Hand, Trumped by Darwin?”), Robert H. Frank proposes that Charles Darwin, not Adam Smith, should be seen as the real intellectual founder of the discipline of economics. He claims that Smith’s most famous idea – that the competitive pursuit of individual self-interest can redound to social good – is but a special case of Darwin’s more general picture of competition in which individual benefit sometimes does, but often does not, benefit the larger group. The sort of competition for which the invisible hand does not work well is, he says, where the competition is for relative gain, i.e., when the rewards depend on relative performance, and people gain by bettering each other rather than by bettering nature.

The problem with Frank’s argument is his careless deployment of the analogy between human beings interacting in a highly structured social environment and animals in general interacting in an environment of considerably less social complexity. He is ignoring the effects of human institutions in constraining self-interested behavior. And compounding the error, he appears unable to distinguish between those institutions which provide constraining feedback and those which undermine and deflect such feedback.

The economic problem at hand is not, as Frank characterizes it, competition based on relative performance versus competition based on absolute performance. It is competition constrained by negative feedback versus competition freed from normal constraints. Successful social institutions, as well as providing positive incentives for personal gain, incorporate negative incentives for straying very far from conventional expectations. The interplay between these opposing forces can make for stable growth of the societal activity in question. It is the reason why science has been such a spectacularly successful social enterprise, and why markets, despite being set about by all sorts of monetary and regulatory interventions which weaken the feedback, have greatly increased human wellbeing.

Frank points to “the recent economic wreckage”, an instance of what can happen when “greedy people trade for their own advantage in unfettered private markets”, as evidence for his contention. Unfettered markets, if they existed, could certainly display greed, herding behavior and other “inefficiencies.

Adam Smith’s contention was that the pursuit of self-interest, constrained by appropriate social institutions, would be much more effective at producing societal wellbeing than actions which purported to aim at that wellbeing directly. And “appropriate” does not involve the overriding of constraining incentives. That is why so much of The Wealth of Nations is taken up with analysis and criticism of the social institutions of Smith’s day. Frank predicts that, 100 years from now, economists will point to Darwin as the owner of the shoulders they are standing on, not Smith. Let me make a competing prediction: that 100 years from now economists will look back and wonder how so many of their predecessors could have been so superficial in their appreciation of Adam Smith and, as a result, could have so completely misunderstood the economic events they lived through.

Comments
I think Thomas McQuade is closer to the truth than Robert H. Frank. In this month of celebration of Charles Darwin’s Origin of Species (1859), it is natural that writers look for new angles on both Adam Smith and Charles Darwin would compare with the banking crisis uppermost in our minds.

Robert Frank chooses to pit Darwin against Smith (albeit that Frank’s is a version of the Chicago Adam Smith rather than the Adam Smith born in Kirkcaldy in 1723). Even Frank’s contest for the supposed title of ‘the real intellectual founder of the discipline of economics’ is quite spurious (Smith was awarded the title today by others and with the supposed prestige of ‘inventing capitalism’ and or of being the ‘high priest of capitalism’, or similar hierarchical nonsense).

Frank writes: “Smith is celebrated for his “invisible hand” theory, which holds that when greedy people trade for their own advantage in unfettered private markets, they will often be led, as if by an invisible hand, to produce the greatest good for all. The invisible hand remains a powerful narrative, but after the recent economic wreckage, skepticism about it has grown. My prediction is that it will eventually be supplanted by a version of Darwin’s more general narrative — one that grants the invisible hand its due, but also strips it of the sweeping powers that many now ascribe to it.” (New York Times: HERE)

Smith is ‘celebrated’ by Frank for the invented reasons of modern economists (post-war in the late 1940s), not for what Smith actually wrote in Wealth Of Nations or Moral Sentiments. Smith never alluded to ‘selfish reasons’ and ‘greed’ (that was Bernard Mandeville, whom Smith described as ‘licentious’ in Moral Sentiments. Smith was made into a cartoon image by Hollywood script writers (‘Wall Street’ and ‘Beautiful Mind’). He certainly never claimed that “greedy people” will “often be led, as if by an invisible hand, to produce the greatest good for all” and it belittles Frank's credibility for him to claim that he did.

With such glaring errors about Smith, Frank's claims for Darwin are immediately suspect.

“The central theme of Darwin’s narrative was that competition favors traits and behavior according to how they affect the success of individuals, not species or other groups. As in Smith’s account, traits that enhance individual fitness sometimes promote group interests. For example, a mutation for keener eyesight in hawks benefits not only any individual hawk that bears it, but also makes hawks more likely to prosper as a species.”

Comment
At least Frank gets Darwin right. Of elks, Frank writes: “For instance, a mutation for larger antlers served the reproductive interests of an individual male elk, because it helped him prevail in battles with other males for access to mates. But as this mutation spread, it started an arms race that made life more hazardous for male elk over all. The antlers of male elk can now span five feet or more. And despite their utility in battle, they often become a fatal handicap when predators pursue males into dense woods.”

But is this not the same with Smithian competition? An individual exploits a handy source of raw materials, disregards the environmental damage, and enjoys prosperity for a while. He runs out of the resource, or the owners of the resource site impose heavy taxes, or take the resource over and run it themselves. Local maxima need not be higher than competitive maxima.

Frank: “Ideas have consequences. The uncritical celebration of the invisible hand by Smith’s disciples has undermined regulatory efforts to reconcile conflicts between individual and collective interests in recent decades, causing considerable harm to us all. If, as Darwin suggested, many important aspects of life are graded on the curve, his insights may help us avoid stumbling down that grim path once again.

The competitive forces that mold business behavior are like the forces of natural selection that molded elk. In each case, we see instances of socially benign conduct. But in neither can we safely presume that individual and social interests coincide.”

Comment
Frank notes that the “uncritical celebration of the invisible hand by Smith’s disciples has undermined regulatory efforts”, but which ‘disciples’ is he talking about? (Note the religious overtones of ‘disciples’).

The Kirkcaldy Adam Smith was quite clear on the need for regulations (or ‘police’ as they were called then) where ‘merchants and manufacturers’ misbehaved (see Smith’s discussion on regulating banks to curb the behaviours of ‘bold projectors’, WN II.ii.56-7: 304).

His reputation as a believer in ‘laissez-faire’ ideology is undeserved (he never used the words ‘laissez-faire’). Smith was no extreme ‘libertarian’, but he believed firnly in Liberty, tempered by the negative virtue of Justice, without which society would ‘crumble to atoms’; TMS II.3.4: 86).

How much of Adam Smith has Robert Frank actually read recently? He is, after all, an economist at Cornell, and a visiting faculty member at the Stern School of Business at New York University.

Frank adds: “The uncritical celebration of the invisible hand by Smith’s disciples has undermined regulatory efforts to reconcile conflicts between individual and collective interests in recent decades, causing considerable harm to us all.”

I would agree, but the ‘invisible hand’ celebrated by modern economists, many of them proud to wear the title of ‘disciple’ of the Chicago Adam Smith, is actually a crown of thorns: he never had a ‘theory’, a ‘concept’, a ‘doctrine, or a ‘paradigm’ of ‘an invisible hand’ (fir him it was a mere metaphor), and while such people, and the people they influence (for good money), parade their version of it to limit some regulations, they also have used their influence to continue the mercantile regulations, which Smith railed against in the 18th century, and which blight modern economies through various forms of protectionism and tariff policies, and they lower world living standards both at home and abroad, particularly in poorer countries.

Thomas McQuade ends his review of Frank’s article with a a comment on Frank's prediction that:

“100 years from now, economists will point to Darwin as the owner of the shoulders they are standing on, not Smith. Let me [Thomas McQuade] make a competing prediction: that 100 years from now economists will look back and wonder how so many of their predecessors could have been so superficial in their appreciation of Adam Smith and, as a result, could have so completely misunderstood the economic events they lived through.”

I completely agree with Thomas McQuade and give a thumbs down for Robert Frank.

Going Back to Tribalism?

Thomas Ivan Dahlheimer writes on “Regaining traditional tribal values and ancestral homelands” on the News for Natives.com Blog HERE [Also; see HERE]:

“The main idea of Adam Smith, the founder of unrestricted capitalism, was the idea that the individual’s pursuit of self-interest should be regarded as the main foundation upon which society benefits as a whole. This is perhaps the central premise of his book, The Wealth of Nations. Prior to the Enlightenment, avarice, or greed, was viewed with contempt as one of the seven deadly sins, but Adam Smith, buttressed with the work of Mandeville, Hume and other avowed atheists, paved the way for greed to be viewed as a natural, and even as a positive thing. This change in values was perhaps one of the most important and profound changes that helped to overthrow Judeo-Christian morality as the foundation of Western civilization.
If our nation’s dominant society, which is a part of Western civilization, would replace its current greedy economic system with a traditional tribal economic system it would be going (in respect to the economy of our nation) back to Judeo-Christian morality.

Comment
It is not for me to comment on a situation that arose from the occupation of a continent by, first Asian, and then, 9-11 millennia later, by European settlers displacing the earlier (not the original!) occupants. This happened all over the earth’s surface 60-100,000 years ago when the first Homo sapiens left Africa for West Asia (and Europe) and then East and South-East Asia, Australia, the Pacific islands and, of course, the Americas.

Thomas Ivan Dahlheimer writes an interesting essay on the claims by some surviving mid-west ‘native Americans’, anthropologically a misleading label, to their lands in the Dakotas.

My comments are directed at the quoted remarks about Adam Smith, who was not, by the way, ‘the founder of unrestricted capitalism’. Smith died in 1790, long before the word ‘capitalism’ entered the English language in 1854. Nor was commercial society, which Smith wrote about, ‘founded’ by anyone, least of all a moral philosopher.

Societies are not like technical inventions, which are the result of inspired, or maybe accidental, inspiration by individuals; they emerge in their different forms over long periods, sometimes millennia.

Attempts to ‘found’ new societies always (I do not exaggerate) fail, of which Soviet socialism is a prime example on a large scale, while North Korea is another on a smaller scale. I suspect that the re-claimed Wakan Wakpa (Rum River) in Minnesota ancestral homeland would go the same way eventually; experiments of returning people from the modern technological age to past ways of life have not been successful – they tend to break up in acrimony, exhaustion, and desertion. However, that is not my business to comment upon.

Smith did not recommend that people act in their self-interest; he observed that people acted in their self-interest (Smith was an observer, not a missionary). He most certainly did not advocate greed, nor were his observations ‘buttressed with the work of Mandeville, Hume and other avowed atheists’ to pave ‘the way for greed to be viewed as a natural, and even as a positive thing.’

Smith criticised Bernard Mandeville’s (1724) ideas about ‘Private Vice’ being ‘Public Virtue’; in Moral Sentiments (1759) he called such ideas ‘licentious’. David Hume is also totally innocent of the charge of ‘buttressing’ self-interest by notions of greed. What alleged ‘atheism’ has to do with this argument is not stated; it’s simply asserted? It’s almost a slur just to make its author’s case stronger, but for anyone informed of the ideas of Mandeville, Hume, and Adam Smith, the slur damages its author’s case.

Thomas Ivan Dahlheimer, or Wahkon (it’s not clear exactly who is the author) claims that if ‘the dominant society’ would ‘replace its current greedy economic system with a traditional tribal economic system it would be going (in respect to the economy of our nation) back to Judeo-Christian morality.’ Whether that would be a benefit (let alone a possibility) is debateable.

All the well-debated ‘ills’ of Judeo-Christian morality in practice may have dubious credentials for improving any form of society, but the extent that people believe that such morality (in its best forms) would be a benefit to any society is a perfectly legitimate reason for them trying to persuade others the agree with them. However, I think we should approach such suggestions with caution.

Consider this other paragraph from the article:

‘Indigenous people did not follow the English concept of property ownership, but never-the-less they had homelands that they considered their territory, so they did “own” land. And they would defend it if invaders tried to take it away from them. And do so by forcefully driving them from their land, if they had the military might to do so.’

As Shakespeare said, this is the ‘rub’. Wahkon articulates a rather rosy picture of life before the European settlers, perhaps forgetting that the Europeans had formerly been living life-styles similar to the plains inhabitants of mid-west North America. John Locke remarked that ‘in the beginning all the World was America’ (Locke, 1690: Two treatises on Government) and some parts had only recently began to transition from tribalism to commercial society.

The resultant picture in Europe was noisy, bloody, and pretty ghastly. That the tribalism of Wahkon’s past did not embrace private ownership of property does not free it from the consequences of tribal ownership of property, which took several millennia to transit to private property in Europe and East Asia.

The great State tyrannies of Egypt, Babylon, India, and China were founded on State property, and rival conquests, mass slaveries, dominant priesthoods, and dynastic kings and emperors. Something similar (with its attendant horrors) was already well underway in Central and South America when Columbus arrived in 1492 (which does not excuse the barbaric attrocities perpetuated by the Spaniards on the local inhabitants).

Moreover, Wahkon skates over the realities of inter-tribal warfare among the plains and mountain tribes that has began to penetrate anthropologists who have looked beyond the idyllic life before the European settlers and found strong evidence of warfare, raiding, and maltreatment of ‘strangers’ entering tribal property.

I recommend Raymond Kelly’s 2000 book, Warless Societies and the Origin of War, University of Michigan, Ann Arbor, for a detailed, scholarly account, of the realities of life in our mutual tribal past.

Remember, in the beginning, ‘all the World was America’; going back to that past, voluntarily, is not an option. It may come about by a world post-nuclewr, post-biolgical catastrophy.

Friends Like Richard Are No Help At All

Richard Bernstein writes in the International Herald Tribune (11 March) HERE:

'Responsible middle' gets no help in crisis’

'So, what's in this for me?" my friend wanted to know. He was asking in good Adam Smith fashion - whose theory was that the common good emerges when everybody works for their own selfish interest - how he could benefit from the current financial crisis.’

Comment
I would advise ‘Zach’ (Richard Bernstein’s friend) not to ask said Richard anything about what’s going on (or not, as the case maybe) in the house-finance markets, because anybody who does not know what Adam Smith’s ‘theory’ (indeed, moral philosophy) was about, and who makes such a ridiculous tabloid hash of it, is not the person to trust on such matters.

Adam Smith never said anything like: ‘the common good emerges when everybody works for their own selfish interest’. And this is not just a quibble.

Smith gives over 50 instances of people working for their ‘own selfish interest’, under the guise of working for their ‘self interests’ (a quite different idea, but that will only confuse Richard), which worked against the ‘common good’ in Books I and II of Wealth Of Nations. Clearly, Smith would not have been so inconsistent as Richard claims him to have been.

In fact, Smith never spoke favourably of selfishness. Richard confuses him with Ayn Rand (1960s) or even Bernard Mandeville (1734). They both lauded selfishness (Rand by making it a virtue and Mandeville by making it a social compulsion – ‘private vice, public benefits’). But not Adam Smith; he called Mandeville's theory 'licentious'.

I’m sorry for Zach having a ‘friend’ like Richard.

Selfishness Is Never a Smithian Virtue

Theodore Roosevelt Malloch, author of Spiritual Enterprise: Doing Virtuous Business (Encounter Books), writes in American Spectator this week, ‘The Deeper Roots of Our Financial Crisis’ (11 February), HERE:

“Capitalism, the goose that laid our golden eggs over the past decades, brings about immense transformation, particularly in its globalized form. It is in nature as Adam Smith reminded us in his first book, The Theory of Moral Sentiments, written long before his better-known work, The Wealth of Nations, all about what he called "the moral sentiments." He himself distinguished between self-interest, which he promoted, and greed. Self-interest is both good and essential. Greed is always wrong and bad. The key difference is the former uses self-restraint, which obviously requires a moral code and a moral compass. There are moral preconditions in a market economy: the sentiments of sympathy, benevolence and compassion, of approval; disapproval and indignation, which underpin the social order and make it possible to engage in business in the first place. Human beings are not just profit-maximizers. They have moral scruples, personal commitments and the desire for happiness. These set limits to their plans for personal profit, and also stimulate them to pursue profit in ways that honor their higher values and generosity. Many companies, large and small, exhibit these; they live and conduct business by these values, in every industry and on every continent. I collected sixty examples in my recent book but there are thousands upon thousands.”

Comment
Adam Smith also taught his course in ‘Ethics’ (moral philosophy) in his public Edinburgh Lectures, 1748-51, and at Glasgow University, 1751-64. Much of their contents were written up as The Theory of Moral Sentiments (1759). It is also important to realise that he also taught his Lectures on Jurisprudence, which contained elements of his ‘political economy’ and parts of which were repeated verbatim in Wealth Of Nations (1776 – though essentially completed c. 1763-4).

I mention this to be sure that Theodore Roosevelt Malloch does not accidentally give the impression that Smith’s moral philosophy was in some sense an ‘early work’ that was different in moral tones from his Wealth Of Nations, published some years later. Smith’s Work, essentially, a part of his oeuvre was not a ‘second thought’ as exponents of the myth of the 19th-century, ‘Das Adam Smith problem’, still tout seriously today (I heard a paper claiming it to be a continuing problem in 2008!).

Having said this, I congratulate Theodore on his assessment of Smith’s clear understanding, and repeated statements of the difference between self-interest and selfishness.

This is the second time today that I have offered congratulations to an author on this subject, which certainly makes a change from almost daily having to chastise authors for eliding the two quite separate motivations of self-interest and selfishness, and worse, attributing the erroneous elision to Adam Smith.

Smith didn’t ever get confused on this matter. Those authors – sad to say, many of them economists – who do so, confuse Adam Smith with a predecessor, Bernard Mandeville (1734), whom Smith criticised in Moral Sentiments as ‘licentious’, and they exhibit the ignorance of the Hollywood script writer who had Gordon Gecko mouth the savage words, ‘greed is good’, or perhaps, like Alan Greenspan of the Ayn Rand school of selfishness, misread what Adam Smith actually wrote, perhaps relying on Ayn to be authentic.

That misleading ideas about Adam Smith are not unanimous, encourages Lost Legacy in its not so-lonely battle against the epigones.

Adam Smith is Innocent

Martin Hutchinson, writes on “How Beatniks, Pyromaniacs and Gangsters Caused the Global Financial Crisis" on the Monday Morning Blog (HERE), to which a Richard Williams posts this comment (29 January 2009):

“The point you seem to have taken very long to grasp is that deregulation, laissez-faire, free-market economics, etc. have never functioned. Free trade is a British hoax used to plunder its colonies. Adam Smith was recruited by Lord Shelburne to concoct the Wealth of Nations as a means of discrediting the American System, which has always been the adversary of the British System, the one that is now collapsing. Smith argued that individual selfishness and greed leads to the common good. In fact, national governments are the sole guarantors of the general welfare. Perhaps you ought to read Alexander Hamilton.”

Comment
Richard Williams puts modern spin of Alexander Hamilton’s protectionist policy writings for the new Republic, and on the German author, Friedrich List’s nationalist polemical work, The National System of Political Economy (1841). Fair enough. Any student of the period should read these and other works, and should make his or her mind up about the issues related to them.

However, Richard Williams extends his criticism of the period to what Adam Smith is alleged to have written and advised, which clashes with the known facts. Now this is not surprising because Smith’s legacy is subject to widespread distortion from many sources, not the least significant of which is the distortion emanating from modern economists who invented of a wholly mythical Adam Smith, some parts of which Richard Williams draws upon.

As for meetings between Smith and Lord Shelburne on the subject of colonies, in this case of the behaviour of Greek and Roman colonies in classical times (which he found, variously, acted independently, didn’t always contribute to the mother country, and were in states of rebellion).

Smith repeated some of this material in Wealth Of Nations. Far from ‘discrediting the American system’ (whatever that means), he wrote what history reported and what he observed about recent relations with the British colonies.

Smith’s analysis in Wealth Of Nations was not sympathetic to the aims of british legislators, and some of those who influenced them, as British governments moved towards suppression of the rebellion by British colonists. He suggested a compromise of a union of parliaments – full representation in the House of Commons and a contribution to the cost of defending the colonies from French and Spanish military interventions – Spain held territory to the south of the British colonies and the French held territories to the North and West, and both were present in the Caribbean and Central America.

From Britain’s point of view, the Cromwellian Navigation Acts were beneficial to Britain, an island that was dependent on access to and from the sea for its trade. That is a fact of geography and of commerce. Whether it was justified to monopolise trade to and from its colonies was always another matter.

Smith certainly did not think the British mercantile monopoly should continue, as he shows quite clearly in Book IV of Wealth Of Nations, in his polemic against mercantile political economy and its affects on trade with the British colonies in North America and British commercial exploitation through the East India Company and its Royal Charter.

How all this discredited the ‘American system’ in the 1760s is beyond me – it discredited the British mercantile system, not the ‘American’.

He advised Britain that it should have continued to improve agriculture as a generator of wealth (the ‘annual output of the necessaries, conveniences, and amusements of life’) before embarking on too rapid an increase in industry, which he considered was the natural course of development.

Given the new facts about an independent North America, them emerging, he advised the former colonies to continue trading for manufactured goods from the whole of Europe and not just Britain (to break the pernicious British trade monopoly, and utilize competition to reduce import prices and raise export prices), and as the country would grow even richer it should develop the import replacement sectors. This was his honest judgement of how any modern economy should develop naturally. It is cynical in the extreme to see this as a 'conspiracy' or a ‘hoax’.

Smith NEVER ‘argued that individual selfishness and greed leads to the common good’. These were the ‘licentiousness’ views of Bernard Mandeville (1731) , which Smith criticised in Moral Sentiments (1759), though ignorant Hollywood scriptwriters passed it off as Smith’s in the mouth of Geko, and it has been copied since by the uninformed media for readers who know no different.

Whatever the failings of ‘deregulation, laissez-faire, free-market economics, etc.’, these were not Adam Smith’s policies – he never ever used the words ‘laissez-faire’! That is an attribution that gained currency after he had died in 1790, particularly from the early 19th century onwards.

Smith made specific recommendations about the need for regulation (see his chapters in Wealth Of Nations dealing with problems in banking and his recommendations that the Government was the only safe agency for quality controls in stamping cloths and assaying gold and silver plate and bullion).

Smith favoured freer commerce, within the ambit of laws and justice. The numerous interventions of Government in social life, including commerce, were well founded in the 18th century, including the legalisation of town guilds (local trade monopolies), the Settlement Acts preventing the free movement of people around the United Kingdom, and the Apprenticeship Statute which pretended to guarantee quality, but which enabled Masters to ‘widen markets and narrow the competition’.

His recommendation for widespread public funding of education – a ‘little school’ in every parish – was an ambitious expansion of public expenditure, with parents paying something (even a penny) for the education of all children (a nascent voucher scheme?).

Finally, what are we to make of the allegation: “Free trade is a British hoax used to plunder its colonies”?

For a start, whatever British governments did from the 16th century onwards it was surely fortuitous that North America was settled largely by people largely from the British constitutional monarchy (1688) and not the Spanish, Portuguese, or French absolute monarchies.

It is unlikely that Richard Williams (of Anglo-Welsh descent?) would be able to write so despairingly about the running of, and the outcomes from, British colonies in North America. The Spanish and Portuguese colonies have not exactly performed as well, either economically or in terms of Liberty, as the former colonies performed when under British rule and since, when to a large extent, the institutional structures of the new Republic were formed from British theory (if not practice) in jurisprudence, moral philosophy, and civic justice.

Smith himself drew the favourable contrast between the state of affairs in the British colonies in America and the state of affairs in India under the East India Company on the eve of the Rebellion (not that the ‘Indians’ in North America prospered well from the benefits of Liberty any more than the Indians under The Company did any better).

But for ‘Free Trade to be a Hoax’ it would require some serious conspiracy naivety to link this to Adam Smith.

His historical observations in jurisprudence and his writings of a commercial society were largely ignored and were not implemented by British governments. Free trade remained an idea and not an actuality; he didn’t think a fully free trade society was likely ever to occur because of the need for some tariffs to raise revenue for government (there was no income tax in Britain while Smith was alive), and without customs revenue, governments would not function in their essential duties of defence, justice, public works and public institutions that facilitated trade (as the USA soon found out).

His last paragraph in Wealth Of Nations was to recommend that:

“Great Britain should free herself from the expence of defending those [colonial] provinces in time of war, and of supporting any part of their civil or military establishments in time of peace, and endeavour to accommodate her future views and designs to the real mediocrity of her circumstances’ (WN V.iii.92: p 947; Edwin Canaan, 1937 edition, p 900, Random House).

Unfortunately, but probably inevitably, his advice was disregarded by all British governments, despite the great opportunity that the loss of the British colonies presented them with, enabling them to abandon the goal of Empire, world roles of imagined glory and unilaterally assumed responsibilities, refrain from embarking on fresh continental wars and from keeping old colonies, Canada, Caribbean, and not to embark on adding new colonies (Australia, 1788), Africa, India and Asia, and continuing with an ever deeper mercantile political economy, all refuted by Smith in futile detail in Wealth Of Nations.

‘Free trade’ was never a ‘hoax’ on Smith’s part. His thinking was ignored in practice, though his memory is only lauded in a theory he did not condone. That is measure of the British national tragedy right into the 21st century.

Smith Knew the Differences Between Self Interest and Selfishness

There is much in the media at present that attempts to draw easy conclusions about the causes of the current financial crises, often of a kind that finds the sins of commission in the commercial market system and the virtues of omission in the state sector.

Hardly, a day goes by when we are not lectured on the ‘end of market capitalism’ and its replacement by what amounts to state capitalism. Fair enough, it’s a free country in this constitutional monarchy and in the largest capitalist market economy, the United States of America.

However, the constant drum beat of nonsense about self interest as taught by Adam Smith, frankly is tiresome because it is so untrue that he didn’t know the difference or, worse, ‘changed his mind’ in Wealth Of Nations, that I think it worthwhile to note something he wrote in Moral Sentiments in a discourse on the effects of a supposed earthquake ‘the great empire of China’ and how a ‘man of humanity' might react to an event, then about two years return distance away by sailing ship.

I have quoted the first part of the discussion several times on Lost Legacy, mainly, perhaps in vain, to correct scribblers who draw the absolutely wrong conclusions from it, namely they calim that even a man of humanity would prefer to save his little finger, of immediate, close and personal interest to himself, rather than save the ‘ruin of a 100 millions of his brethren’. Many quote this thought experiment of Smith as if he concludes the triumph of the ‘man of humanity’s’ sselfish elf-interest over millions of earthquake victims.

They are totally wrong. They should have read on:

“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.3.5: p 137)

Comment
If that is not a final and devastating rebuttal of the ‘selfish greed’ libel against Adam Smith, I don’t know what he could have written in its place.

'Geko’s', ‘greed is good’, outburst slipped in for dramatic affect of a Hollywood script writer did not come from anything that Smith wrote. They expose their ignorance those who claim he did.

They confuse Bernard Mandeville’s satire of [1705-1732] 1924, 'Fable of the Bees, or Private Vices, Public Benefits’, (Oxford University Press) with Smith’s writings from 1744 to 1790 (Mandeville died in 1733; Smith was 10). Now, of course, Smith knew of Mandeville’s writings; he described them as ‘licentious’ in Moral Sentiments (TMS VII.4: pp 306-14).

The piece quoted above from Moral Sentiments is clear and unequivocal.