Some Basic Facts About Adam Smith Spoil Good Intentions by Good People

A short 2-page biography of Adam Smith, “The Life of Adam Smith”, was published this week HERE 

by the Adam Smith Global Foundation, of which I have expressed my support for its work on Lost Legacy. I recently attended an excellent 2-day Symposium under the auspices of the global Foundation in Kirkcaldy and admired the enthusiasm of its personnel.

However, I have some criticisms of the biography, recognising that the Foundation works under financial constraints and depends on volunteers for some of it accounts of Adam Smith’s Works, though they are well up-to-speed on their detailed knowledge of the history of Kirkcaldy in general and of Adam Smith’s life there with his mother in particular.

So my comments below are made in a spirit of intending to be helpful.  The dedicated people concerned do a magnificent job on developing knowledge of Adam Smith in the local community and abroad.

 “Adam went on to attend the University of Glasgow in 1737, where he left with an MA with distinction, before being awarded a Snell exhibition at Balliol College, Oxford. However, disillusioned by his academic life he embarked on an extensive course of self-education, before returning home to Kirkcaldy in 1746. Shortly afterwards he became a lecturer at the University of Edinburgh.”

Comment

It was a condition of applying for a Snell Exhibition to Balliol that his Glasgow sponsors affirmed that “Adam Smith had not passed a degree at Glasgow or anywhere else”.  As he does not appear to have passed a degree at Oxford either, Smith did not have a MA degree at all.  This was not a major issue in the 18^th century that it became today.  It seems that he was awarded an MA by Glasgow years later retrospectively, but I know of no specific date mentioned in the records.  (He was awarded an LL.D degree in 1763).

The last sentence of the above Global Foundation statement is incorrect as it stands. 

Adam Smith was never on the Faculty of Edinburgh University. 

For the winter months of 1748-49, 1749-50, and 1750-51, paying attendees at his Edinburgh lecture series heard Smith most probably in the meeting rooms of the Philosophical Society, or the Music Society in Edinburgh, but not on University premises. (See Ian S. Ross, The Life of Adam Smith, 1976; 2^nd ed. 2010. pp.80-81, Oxford University Press and/or Nicholas Phillipson, Adam Smith: An Enlightened Life, 2010. pp. 89-90 Yale University Press). 

Smith delivered his series of lectures, primarily on Rhetoric, but not until 1822 were the first Rhetoric lectures offered at Edinburgh University by Dr. Hugh Blair, a former Enlightenment colleague of Adam Smith’s, who acknowledged years later (Smith died in 1790) his use of Smith’s Rhetoric lecture notes in his own highly successful Rhetoric course.

Meanwhile, chronologically, Smith’s Rhetoric lectures were given under the patronage of Henry Home, later Lord Kames, along with some early versions of the materials later included in his Glasgow lectures on jurisprudence and elements of political economy.  Henry Home paid Smith £100 a year as his (generous) share of the fees charged to those who attended. 

Smith was well versed in moral philosophy from when he was a student at Glasgow University, under Professor Francis Hutcheson during 1737-40, and from his six years of essentially private study at Balliol College, Oxford (1740-46).

Smith also developed a series of Rhetoric and Jurisprudence lectures at Glasgow University, for which we have a set of student notes on those he delivered in c.1762-3.

Recently, there has been a spate of claims, mainly emanating from the Edinburgh University student press which claim that Smith was on the faculty at Edinburgh University, for which there is no evidence, and is unsupported by any of his main scholarly biographers (Dugald Stewart, John Rae, W. Scott, Ian Ross, or Nicholas Phillipson).  Even more recently, some Edinburgh University official publications have made similar claims to those from the student’s press (though the original sources could have been either from the students or the University).

“He served as Professor of Logic, and Chair of Moral Philosophy at Glasgow University from 1751-52, before accepting a well-paid tutoring post to the 3rd Duke of Buccleuch in 1764.”

Comment

The dates above should read” from 1751-64” and not “1751-52”.

The dates for Smith’s professorships at Glasgow are well-known; first his election as the Professor of Logic, 1751-2, and then as the Professor of Moral Philosophy, 1752-64.

“In the years that followed he would move around, but preferred to spend his time in Kirkcaldy, socialising and enjoying supper parties, for which he became renowned. Using his experience of life in Kirkcaldy as an inspiration, he then completed what many regard as his magnum opus in 1767 – The Wealth of Nations”.

Comment

Smith started writing sections of what re-appeared in the Wealth of Nations (1776) while at Glasgow University.  We know this from almost verbatim sections for 1762-3 re-appearing in what became the Wealth Of Nations, in student notes of his “Lectures On Jurisprudence” and also some surviving short manuscript papers known today as “The Early Draft”, found in the archives of Glasgow University.  Another Early Draft copy was found at the Duke of Buccleuch’s home in Dalkeith, dated from the time of the young Duke’s stepfather, Charles Townshend’s, residence there, when Smith visited him in the 1760s (Ian Ross, 2010, pp 294-5).

Smith also mentions in his correspondence with David Hume, during Smith’s trip to France with the young Duke, of his starting to write a book “to pass the time”(Smith, Correspondence, from Toulouse, 5 July, 1764).

It is most unlikely, impossible even, that Smith could finish a book of the length and detail of the Wealth Of Nations a year after his return from France to Kirkcaldy in 1767.  Therefore he did not finish WN so early.

The facts suggest Smith completed much of WN in Kirkcaldy in 1773, before he passed briefly through Edinburgh on his way to London to supervise his book’s passage through his printer/publisher.  Also he seems to have deliberately held back from finishing WN completely because reportedly he was “zealous” in American affairs and was trying to influence government Ministers in favour of conciliation with America many months before and during 1775.

The Duke of Buccleuch and David Hume had advised him to cease to be “zealous on American affairs”. It is possible that he was also held it back to see how the troubles in the British colonies of North America (then still a colony) were decided before publishing WN. 
In the event he seems to have taken his friends’ advice and he handed over his very large manuscript for type-setting and proof-reading in November-December 1775 and the first 2-volume edition of Wealth Of Nations was published in March, 1776, several months before the Beginning of the End on July 4, 1776.

ANNOUNCEMENT

In August 2012, I received a letter from the Principal of Heriot-Watt University informing me that the University was to award me the degree of Honorary D.Litt and that my graduation would take place on 18 June, 2013. 

I was enjoined to make no pubic statements about the award until my graduation, a condition I have adhered to until late on the 17^th (though it is already the 18^th east of Australia).

The award of an Honorary D.Litt is a singular academic honour in British Universities.   It was not sought nor expected by me and news of the award was both surprising and extremely gratifying.  

It caps a 44-year postgraduate academic career in ways I never anticipated.  The esteem of one’s long-standing colleagues, both those I worked well with and with those with whom I had occasional ‘differences’, is worth more than anything I can explain, even to my family.

Readers will understand if today I do not post much, if anything (though old habits may ‘kick-in’!).

Thank you.

Perspicuity is Better Than Obscurity

Johannes Mosmann addresses the “IndyBay Area” (translated from the German original).

“How Does Justice Come to the Economy?  Here  A website copyrighted by the “San Francisco Bay Area Independent Media Center”.

“Obviously there have been many idealists with sublime ideas before us. Comprehensive drafts of society were dreamt up by individual minds and then introduced somehow. Individual heads believed they had the perfect idea for the life together of all people and tried to promote this idea in reality. An idea simply extrapolated from a head into reality is a foreign body for this reality, something stiff, rigid and inflexible that cannot be digested by the living process of social life. Thus an idea becomes a tyranny for life. For that reason the great social utopias from socialism to neoliberalism must become tyrannies for people.”

… “Therefore returning again and again, going inward again and again and visualizing the ideal from which one starts is essential for a social project. One has to go beyond and submerge. One must return to oneself and make clear one’s goal. …

…” The publication of the book “Wealth of Nations” of a famous theologian is commonly considered the birth-hour of the national economy. This famous theologian and moral philosopher was Adam Smith. Adam Smith sought God behind the bustling activity of humans, behind a drive and behind egoism, not in the state. You know this. Smith assumed the well-being of everyone is greatest when everyone indulges his egoism uninhibitedly. However when a person intends to do something good to another, he would actually do something less good. The theologian explanation is that God works in the person when he surrenders his selfish drive. A metaphor for this work of God has become famous in this connection: an invisible hand, Smith said, increases the happiness of everyone in the moment when the individual only thinks of himself. “

That is the core of classical economics. The dear God appears to economic theologians differently than to state theologians. God is more a fate-God, a nature-God…”

Comment

That’s just a small sample from a very long set of posts.  Frankly, I found much of it incomprehensible.   It is typical of a strain of Germanic philosophising – the school that produced Karl Marx – and is often mimicked by today's leftish thinkers expressing ideas that defy reality in the belief that obscurity is better than perspicuity, in the belief, perhaps, that obscurity sounds more 'intellectual'.  (For Smith's view see: Adam Smith, "Lectures on Rhetoric and Belles Lettres', LRBL, i.9.10: 6).   

In a world of very small populations, the majority not living much beyond 40 years old, and most on the equivalent of less than $1 a day, Johannes Mosmann focuses on the 30 million today who live their short lives in appalling levels of absolute and relative deprivation, and starvation out of 6 billion mostly living in relative plenty compared to the 30 million staring to death each year from starvation.  And there are many hundreds of millions now living to average ages well beyond this experienced in the past.  (When I reached 73, I was the first male member of the Kennedy family for several preceding generations, that I know of, who lived beyond 72).

Simultaneously, Johannes Mosmann, bitterly criticises what he considers the cause of the appalling deprivation (which it was and is) of the 30 millions, namely “capitalism”, the only arrangement of economic affairs in all of history and pre-history that raises many billions above absolute poverty and deprivation.  The poor in the richest countries are incomparably richer than even their very rich forebears in the millennia of human history.  Moreover, the overwhelming majority of the 99 per cent today are better fed, with better access to material goods than any earlier 1% comprising the minority of social elites in all pre-market economies, as they moved to machine manufacturing, only a few centuries ago in a small part of North-Western Europe and then spread across the world.

As for the nonsense about the “famous theologian and moral philosopher … Adam Smith”, I recommend readers consult either my article, “The Hidden Adam Smith in his Alleged Theology”, published in The Journal of the History of Economic Thought, September, 2011, or my chapter, “Adam Smith on Religion”, in The Adam Smith Handbook, 2013. eds. Chris Berry, Maria Paganelli, and Craig Smith, Oxford University Press.

Relative Prices Rule in Markets

“Peabody Energy Corporation (BTU), Arch Coal Inc (ACI): Now Is the Time to Focus on Coal Companies”.

 Read more at Insider Monkey HERE 

‘Motley Fool” a.k.a Reuben Brewer writes: “The invisible hand”

“Markets are guided by a so-called invisible hand in which reasonably rational individuals do what is in their own best interests. In the end, supply and demand come together to create a working ecosystem. That's happening to coal in spades.

New methods of drilling for natural gas overtook demand for the fuel and led to a steep price decline. That led utilities, the largest users of coal, to switch to gas as a fuel source to keep costs down. Coal demand and pricing fell as a result. The coal industry reduced production and refined operations as a result.

Natural gas prices, however, were so low that drillers couldn't make money drilling. Natural gas drilling has, thus, slowed. That has pushed gas prices notably higher to the point where the choice between coal and gas as a base load fuel is no longer tilted in favor of gas.

The invisible hand is an incredible thing. And there are other long-term positives for coal, too.”

Read more at the above link.

Comment

Read this piece and note how the so-called “invisible hand” attributed to Adam Smith has absolutely nothing to do with the ever changing relative VISIBLE prices of natural gas and coal having the predicted affects that “Motley Fool” identifies nor any explanation of exactly what the contribution of the so-called  “invisible hand” does in these processes.

No explanation is given of what the “invisible-hand” actually does to bring these changes about, separate from the normally expected reaction of buyers and investors to changing VISIBLE prices in these markets.

Whatever “Motley Fool's” assertions, they have nothing to do with what Adam Smith wrote in Wealth Of Nations nor what he wrote in his “Theory of Moral Sentiments”.

And that itself is the real problem. 

So imbued with the “invisible hand” ideology are modern economists that they spout platitudes about the “invisible hand” without ever questioning its thin-ice logic given the perfectly complete explanation of relative price movements in competing markets nor they do stop to question the import of an “invisible” operator whose role in VISIBLE price changes is clearly redundant. Prices determine market decisions.  There is no invisible force doing anything else in markets.

Adam Smith Did Not Defeat the "Mercantilists" - They Just Ignored Him

Dirk Ehnts, Econoblog101 posts HERE

“Adam Smith's Uneasy Grave”

“What defeated mercantilism was Adam Smith (The Wealth of Nations, 1776) and his idea of the specialization of labour.”

Comment

Yes, the link between the headline and the text is tenuous, but it includes a photoshot of the words on the headstone, situated at Adam Smith’s grave-site in the Canongate Church yard, Royal Mile, Edinburgh, Scotland.**

However, Dirk Ehnts makes a fallacious statement claiming that Adam Smith “defeated” mercantilism by his book, Wealth Of Nations.

The idea is quite wrong.   If it only took an idea to “defeat” long-established policies imposed by Governments, be they ever so mistaken, social evolution would be quite different.

Mercantile political economy had been followed by successive governments for centuries, and were strongly believed to be appropriate by “common” consent, and not just by those who benefitted from them, such as domestic “merchants and manufacturers”.  

The basic compulsion behind mercantile prejudices is that foreign trade imports are “bad” for a domestic economy, particularly when exports are less in value than the imports, and the appropriate remedy for deficient trade balance includes discouraging foreign imports into the country and encouraging domestic exports to foreign countries. If every country does this, economies would be smaller and people less well off.

Where outright prejudices favouring exports were weak, the remedy was for the state to impose tariffs on foreign sourced imports, even impose outright prohibitions on them, and in England’s case, to use indirect means, such as the by-product of the defensive “Navigation Acts” that required, from Cromwell’s times, all shipping of goods to be landed in English ports to be carried into the country in English owned ships, manned by English crews only.  This would ensure that in times of war, England had sufficient ships and crews to keep needed supply lines open from marauding foreign navies.

The Navigation Acts were extended to Scotland on the 1707 Act of Union and remained on the statute book until the 1840s.

Moreover, mercantile political economy also carried far more policy implications than just tariffs and prohibitions and also continued in various forms in the 19^th and 20^th centuries.  In fact, these ideas continue today across the world and occasionally break out in political discourse, summed by David Hume, as “jealousy of trade”, such as demands to buy  “American” or buy “British” and warnings about “Chinese” trade “destroying” our jobs.

Therefore, beyond the clear fact that mercantile ideas survived, despite Adam Smith’s – and many others' –warnings about their negativity, we should be wary about glib statements than “Adam Smith defeated mercantilism”. He didn’t – unfortunately!   Nor could he nor anybody else.  Important though ideas are they are not decisive alone in promoting change, as politics across the world have shown in practice.  We see this regularly on LOst Legacy when somebody, alone or in company, proposes a new economics system to replace "wicked, corrupt, immoral" capitalism with something entirely different, such as "benign", humane", "socially good".   First they have to persuade only 7 billion others; meanwhile they fad away in their utopian dreams.

As for the “specialisation of labour”.  That is another misleading claim, long practiced for millennia before Adam Smith.  Much better to focus on what he did say and why he was pragmatic, not romantic, and observed "everything" as a philosopher should, especially the past for clues as to how we get to the present, but he said nothing about the future.

** Well worth a visit if you come to Edinburgh.  It’s almost next door to Panmure House, where Adam Smith lived from 1778 until his death in July 1790.   Interested visitors can arrange with me a guided walking tour of Adam Smith’s Edinburgh, from where he worked in the Custom's Office to where he lived at Panmure house, including his grave site, conducted by my good self, if mutually convenient. Just email me well ahead of your visit.

Adam Smith and the Division of Labour in Law Firms

Toby Brown posts on “3 Greeks and a Law Blog", described as “A law blog addressing the foci of 3 intrepid law geeks, specializing in 
their respective fields of knowledge management, internet marketing 
and library sciences, melding together to form the Dynamic Trio.” HERE 

“Adam Smith’s Pin Factory and the Law Firm”

“One of Adam Smith's great contributions to economics was his commentary on the ‘division of labor’ - explained in his pin factory example. …

He evaluated an artisan craftsman who makes pins with great care and quality, one at a time. The craftsman performs every function, from straightening the metal to attaching the pin head. Adam Smith then describes a factory where each function is performed by a specialist who only straightens the metal or only applies the pin heads.

... His thesis was that the division of labor leads to much higher productivity. “The result of labor division in Smith’s example resulted in productivity increasing by 24,000 percent (sic), i.e. that the same number of workers made 240 times as many pins as they had been producing before the introduction of labor division.” His argument was compelling to the point that Henry Ford modeled his car factories based on these principles.

… Most lawyers are generalists/ craftsman as it relates to their functions. … In their minds specialization, and the standardization that follows, equals lower quality. In contrast, in Adam Smith’s world, specialization and standardization equal efficiency and quality.

For as smart as lawyers can be, they continue to miss some basic business lessons. In this instance, Adam Smith was proven right decades ago … repeatedly.

Add “division of labor” to the list of changes needed at law firms.”

Comment

Some basic facts:  Adam Smith was not, nor did he claim to be, the first person to note the division of labour.  He explicitly noted that the “division of labour has been very often taken notice of”.   The numerical example of the division of labour on the trade of the pin-maker” came from the French “Encyclopedie” 1755, then with its derivatives in wide circulation in Europe, though his specific source not identified by Smith.  He did mention: “I have seen a small manufactury of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations” (WN I.i.3: 14). 9. See also: Peaucelle, J. L.. 2006. ‘Adam Smith’s use of multiple references for his pin-making examples’, European Journal of the History of Economic Thought, 13(4): 480-512.  Lawyers who are sticklers for facts would want to know these details.

We should also note Smith’s clear statement that “the division of labour must always be limited by … the extent of the market” (WN I.iii: p 31).  For any law firm its numerical size and individual specialisms normally reflects the size of its business. 

A small firm – one lawyer only – will require her to be generalist serving all kinds of legal purposes or an highly specialised professional who receives commissions from several other law firms because of her high expertise in a single legal skills set and her remuneration would reflect her specialised skill set and the number of other firms using her service.

There are also some very large law firms whose combined partners cover every aspect of the law supplied by its individual skilled specialist professionals who combine to serve all the needs of their clients, though none of them are generalists.

I have attended such meetings where individual specialists from the same law firm join the negotiations to cover their client’s needs depending on what subject is under discussion.  But the point remains they can only specialise and develop their individual skill sets if there is sufficient work in those special areas to justify their fees.  Otherwise, individual partners must “double or treble up, much like the “small manufactury” Smith visited” where “some of them consequently performed two or three distinct operations”.

I recall negotiating a business agreement with an Edinburgh professional lawyer whose main expertise was in representing her firm’s female clients but she could also turn her hand to negotiating her other client’s business interests.  I did not notice any lack of skills on her part when it came to the specific business issues we were negotiating.

So, while taking the point that Toby Brown makes about considering the division of labour, I also remind him of Smith’s clear understanding that multi-tasking remains a function of the overall size of a law firm’s market.

Once More on Adam Smith and Self-Interest

Arturo Cuenllas posts HERE

"Adam Smith said that the best result comes from everyone in the group doing what's best for himself. Right? That's what he said, right? (...) Incomplete. Incomplete, okay? Because the best result will come from everyone in the group doing what's best for himself… and the group (…) Governing dynamics, gentlemen. Governing dynamics. Adam Smith … was wrong!" (From Russell Crowe interpreting John Nash in A beautiful mind.}"

Comment

I have commented on the script writer’s false presentation of Adam Smith’s moral philosophy in the “Beautiful Mind” film on Lost Legacy many times.  It is a totally false notion about Smith on self-interest.  It suited the plot in the film, but not artistic integrity.

Adam Smith did not make such statements attributed to him by the script writer, which are not supported either in Smith’s Theory of Moral Sentiments or in his Wealth Of Nations, and it is a perverse statement to say that Adam Smith said “the best result comes from everyone in the group doing what's best for himself. Right? That's what he said, right?” the best result comes from everyone in the group doing what's best for himself. Right? That's what he said, right?”  No, No, No! 

Consider what Adam Smith states early in Wealth Of Nations about “self-interest”:

“In civilized society he stands at all times in need of the co–operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals each individual, when it is grown up to maturity, is intirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only.6 He will be more likely to prevail if he can interest their self–love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self–love, and never talk to them of our own necessities but of their advantages” (WN I.ii.2: 26-27).

Read the above carefully.  To obtain our self-interests of obtaining the ingredients of our dinner (or whatever), we must persuade the “butcher, brewer, and baker” to supply them to us.  Insisting on our self-interest as imagined by the lonesome image of the Hollywood scriptwriter would not secure our dinner  (or anything else) for us.  We must persuade them to supply us; not demand they meet our needs. What about their needs?  What do they do?  Just say in response: “yes, sir, no sir, three bags full sir”?

Indeed, Smith underlines that point by insisting that we must address “their self–love, and never talk to them of our own necessities but of their advantages”.  In short, we mediate our different self-interests by taking into account the self-interests of others.  This is the exact opposite of Arturo Cuenllas’s presentation.

An egoistic non-cooperator would soon starve.  We persuade, bargain, and co-opperate as consumers and suppliers, in and outside the family.  That is why sales training is a multi-million dollar business in market societies.

Adam Smith was not wrong.  He never said “the best result comes from everyone in the group doing what's best for himself”.  In fact, he said the exact opposite, and the contents of both books prove it.

Clarity Needed On Smith's Approach to the Division of Labour

James Padilioni writes HERE “Adam Smith: The Early Modern Postmodernist?”

“A major theme in libertarian discourse is the elevation of the market as a hallmark of human progress. In a three-part video series titled “Trade is Made of Win,” Learn Liberty extols the benefits of the division of labor, not only for its ability to generate wealth, but also for its ability to enhance cooperation among individuals and conserve natural resources. Many libertarians believe that man is homo economicus, and as a result, rational calculation, efficiency, and operating on the bases of utility receive much attention and esteem within libertarian rhetoric. If progress is a worthy goal of society, then a sophisticated market economy is a necessary component to achieving its success. Humans “win” when we economize, and economization more often than not involves materiality – goods and services, capital and production, tangible realities that create affluence. The game of progress, then, can be measured by who has the biggest pile of stuff. …

… Adam Smith acclaimed the division of labor in The Wealth of Nations as his famous pin factory example illustrates. But far from extolling only the good that this division of labor provides materially, Smith questioned its effect on the interior soul of man. As Smith analyzed various economic modes of history, he praised agrarian, pre-commercial society because it could stimulate the minds of individuals better than a division of labor: “Invention is kept alive, and the mind is not suffered to fall into that drowsy stupidity which, in a civilized society, seems to benumb the understanding of almost all the inferior ranks of people.” He continued his critique on market society:

In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two…The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same…naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become…The uniformity of his stationary life naturally corrupts the courage of his mind.”

Now, one must remember that Smith was writing in the 1770s, and “stupid” was not a pejorative in the way used today. What Smith was saying is that a market in which people only work in mechanized ways can dull the mind into a stupor and corrupt what otherwise would be a thoughtful, sentimental life  - the necessarily inventive life of premodernism – into a life of monotony.

In Leisure: The Basis of Culture, Joseof Pieper, described the fundamental importance leisure played to human well-being historically. …

… “Premodern man danced, and made merry, and in the process formed community.

perception of idle time, leisure is a deeply spiritual and affirmative human tradition that stood in opposition to “useful work” as a means constructed towards an end. Pieper admonished that “the cultus, now as in the distant past, is the primary source of man’s freedom, independence, and immunity within society. Suppress that last sphere of freedom, and freedom itself, and all our liberties, will in the end vanish into thin air.”

Comment

James Padilioni has written a thoughtful article.  I have some reservations about some of it, especially in relation to Adam Smith.

It is half-a-step too far to say that that the “elevation of the market [is] a hallmark of human progress”. 

The market is certainly the latest step in a long line of steps, not all them necessarily moving in the same direction, as if human societies always get “better” in some sense, from when mankind lived and survived in the forest and plains of the habited planet had a “better” life.

Humanity has experienced many forms and variations of ensuring its livelihood across all human societies from 200 millennia ago.  There is no ordained progression from one “lower” to another “higher” form of livelihood, especially in the sense that whatever happens later and differently is necessarily a “progression” or an improvement.  Smith implies that there are many “vales of tears” endured by some human societies, especially from some of the “vile” rulers of mankind. Smith said there had been different broad “Ages of Man” throughout pre-history and history: hunting, shepherding, farming, and commerce. 

It is also obvious that the “Age of Commerce” can be associated with many forms of markets; indeed, pure markets have never existed, each market society is sui generis.  Moreover, markets since Smith’s day varied across Europe and have changed since then, displaying a great deal of different forms and degrees since he focused his critique on mercantile political economy. Commerce operated both from developing within and alongside various forms of farming tenure, and even through quite different forms in Asian and European experience.

Development is uneven.  Markets are no exception. That is why numerous exponents of grand plans to reform markets that are offered  from time to time on the Internet and in various media are somewhat utopian (and a few are quite delusionary) because they assume that completely new forms of market organization can be designed and introduced, supposedly by the better intentions of their designers.  I have commented negatively on several on Lost Legacy.

So whether the “elevation of the market [is] a hallmark of human progress” is something unique or but an instance in the constantly changing evolution of market organisation is open to question.

Next, I am profoundly unimpressed with James Padilioni’s assertion, if true”, that ‘Many libertarians believe that man is homo economicus, and as a result, rational calculation, efficiency, and operating on the bases of utility receive much attention and esteem within libertarian rhetoric.”  Whatever the basis of the assertion in respect of “libertarians” it is definitely not true of Adam Smith in truth or even rhetorically despite occasional claims to the contrary.  I am a moderate libertarian in Smith’s sense but I have no illusions that individuals are motivated by “rational expectations” (what Deirdre McCloskey calls “Max U” theorising) and such an approach is not supported in Smith’s Works.

Contrary to the interpretation of the part quotation from Smith’s Wealth Of Nations (WN V.i.f.50: 781-2) given above, James Padilioni asserts that” far from extolling only the good that this division of labor provides materially, Smith questioned its effect on the interior soul of man” and it was his “critique on market society”.  We have discussed this theme of the dulling affects of the division of labour many times on Lost Legacy – as recently as last week – and I have always insisted that we should read Smith’s words in relation to the subject of the chapter in WN from where Smith makes the case of government action in respect of the education of youth, which he argued was in a deplorable condition in England (but less so in Scotland), and not the usual explanation of what he meant (see my posts on “Chomsky”).  Smith had some reservations that were solely about the division of labour among actual illiterate, unread, and innumerate recruits to the labour force and the effects of these deficiencies, and it was not a call for governments to intervene in the division of labour so much as for their intervention by legislating for investment in the education of the workforce to prevent the dangerous affects of ignorance. 

The widespread lack of education of the children of labouring families meant they were serially ignorant to the prey of those advocating wild ideas as “enthusiasts” and agitators that threatened social stability.  His book was read by the educated and upper class families and those reading it would be alarmed at the potential threat to their lives and property unless they subscribed to the educational reform to spread the socially stabilising affects to prevent the further stunting of the ignorant lives of those employed in these emerging modern industries.

James Padilioni closes with “Premodern man danced, and made merry, and in the process formed community”, complete with a merry, coloured painting of country folk dancing and being merry.  Many authors use such themes of merry folk dancing round May poles with explicit themes that contrasts with town folk lined up and slaving over banks of machines in the “dark satanic mills” of industrial capitalism.  This of course can give the impression of a once happy labouring population employed joyously on the land but driven by poverty into smelly, crowded towns.  I suspect that such images are loaded with naivety about the realities of farming life throughout history for serfs, slaves, debt ridden peasantry, and country-folk across the world, then and today, over much of the pre-market millennia.

Questionable Conclusions from an Interesting Premise

Tca Srinivasa Raghavan posts in The Hindu HERE 

“Marginal Utility: Moral immorality” What if my altruism comes at your expense?

Three-and-a-half centuries ago, the Scotsman Adam Smith, the Bhishmapitamaha of western economics, wrote a book called ‘A Theory of Moral Sentiments’. His better known work, The Wealth of Nations, was based on the ideas in this book.

In a sentence, the former’s purpose was to explain to the morally underdeveloped English that human beings could be selfish and altruistic at the same time. A key purpose was to get the rich to be more caring for the poor.

That was fine except that he overlooked one thing: what if my altruism came at your expense and vice versa? That problem had to wait for Keynes to come along and create it. For, in 1936, Keynes enunciated a new idea, at least for the West. (It had been known as raj dharma in India for at least a couple of thousand years).

The basic idea is simple: it is the duty of the state to intervene to raise the level of economic activity in the country when it has dipped below morally acceptable levels. Its success was based not on an appeal to charity — as Smith’s had been — but to force. The state would levy fresh taxes on the rich to help the poor.

Your money, my happiness

This problem, of getting others to pay for your sense of morality, is what underlies the NAC’s (National Advisory Council) formulations. Had Mr. Smith been asked to review its antics over the last nine years, I am sure he would have written a companion volume called ‘A Theory of Moral Immorality’.

At the core of this confusion lies a problem that was identified by Kaushik Basu, now Chief Economist at the World Bank, in the mid-1980s. It asks the following question: why is aircraft design not determined democratically?

It was not a frivolous question. Dr. Basu was simply saying that no matter what it is, expertise is important. In creating and paying heed to the NAC, Sonia Gandhi disregarded this injunction because, thanks to Keynes, it was possible for her to pass on her pain to the taxpayer. Their collective altruism would be financed by you.

… Adam Smith had no economic policy agenda in mind and saw no direct role for the State. Keynes had no political agenda in mind in that he never intended his theory to be used for garnering votes.

Yet, that is what all democracies have ended up doing.

How it happened

It is a myth that only good ideas have many fathers. Even bad ones do. In this specific case, it happened because the idea of justice morphed into the idea of a just society — no one has ever rigorously questioned this transition because it is seen as being in bad taste — and the idea of a just society led to the politically beneficial idea of entitlements.

Leading the charge for the last was our own Amartya Sen. Inadvertently he created the intellectual basis for decent people, knaves and politicians to achieve a common purpose.

Sen’s idea that in a just society people have entitlements has been transformed to convert an entitlement into a legal right.

[There is much, much more in the long article: follow the link.]

Comment

Adam Smith’s take on some of the issues raised above include the government’s responsibility for what was known in the 18^th century as “police”.  This is quite different from its meaning today as a function of “law and order”.  In Smith’s day “police” meant the responsibility of the government to ensure that towns and cities were supplied with necessary food subsistence for the consumption of the citizens living in them, which included removing obstacles to the free movement of subsistence goods from the countryside.  Parts of this process included removing bandits and such like by instituting the rule of law for all. 

This “all” included qualifying the absolute rule of Emperors, Kings, usurpers and governments noted for their “vile” behaviours, the removal of which took centuries, which alas has not yet been completed across large parts of the Earth.   However, this removal process was never seen by Smith as having being quickened by a revolutionary “quick fix”. Those who have attempted “quick fixes”, whatever the quality of their good intentions, have always led speedily to totalitarianism of some degree or another, a message not yet grasped by new generations, though their impatience is understandable given the vileness of their rulers.

Hence, Smith’s suspicions of “men of system” who are “wise in their own conceit” and think that people are like “wooden chess pieces” in the “great chess board of society” moveable about at the will of a “player”, ignoring the fact that in human societies every individual piece” is a person “who has a principle of motion of its own” (TMS VI.ii.2.17).  Revolutionaries, in their frustration, often resort to tyranny as bad, and certainly no better, that the tyranny that forced them to seize power.

I am not aware that Smith appealed “to charity” in TMS or WN and he certainly did not appeal “to force”. 

I wrote on Lost Legacy (November and December 2010), a critical review of Kaushik Basu’s “Beyond the Invisible Hand” Princeton University Press, 2010, to which he replied in May 2012, and we came to a clearer and more acceptable understanding of what he meant.

The statement that “Adam Smith had no economic policy agenda in mind and saw no direct role for the State” is questionable.  In a modern market-state society the proposition as it stands, in my view as a moderate libertarian, requires considerable qualification.

Moreover for Tca Srinivasa Raghavan to argue that Amartya Sen “Inadvertently … created the intellectual basis for decent people, knaves and politicians to achieve a common purpose” and that “Sen’s idea that in a just society people have entitlements has been transformed to convert an entitlement into a legal right” also requires qualification for me to be comfortable with it, in the light of my Smithian comments above about the inevitably long process it takes in human societies to change the deep rooted socio-cultural forms carried over from the history of the last 10,000 years or so.