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Das Capitalist

Adam Smith: An Enlightened Life [1], Nicholas Phillipson, Yale, 346 pages

By George Scialabba

Adam Smith [2]In the “Overture” to his grandly symphonic The Enlightenment: An Interpretation, Peter Gay describes the “international type” of the philosophe as a “facile, articulate, doctrinaire, sociable, secular man of letters.” On this definition, was Adam Smith a philosophe?

Yes and no. Unlike his French counterparts and even his bosom friend David Hume, he led a retired life, much of it in the small Scottish town where he was born, and he lived with his mother until she died at a very advanced age. He was shy, destroyed most of his letters, and did not seem to relish giving brilliant performances, either in print or in conversation. He never fell afoul of civil or religious authority, had no mistresses, and engaged in no public quarrels.

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(A semi-public one, though. Shortly after Hume’s death, Smith met Samuel Johnson at a party. Johnson spoke slightingly of Hume, Smith defended him, and their exchanges grew increasingly heated until Johnson exclaimed, “Sir, you lie!” To which Smith retorted, “Sir, you are the son of a whore!” and stalked out.)

On the other hand, Smith was modestly sociable—he had warm relationships with Turgot, Quesnay, and Condorcet. Like most of the philosophes, he was prolific and versatile, publishing much-admired essays on law, literature, and the history of science as well as his masterpieces on moral philosophy and political economy. And although he was not openly irreligious like Hume and Voltaire, he had as little use for the Calvinist superstitions of Scotland as his French contemporaries had for Roman Catholicism.

Perhaps the main difference lies in that slightly ambiguous word “doctrinaire.” Smith was a critic and reformer, and there are plenty of doctrines in his writings, some of them strikingly original. But he was detached and scholarly by temperament, rather than ardently polemical. If he was a philosophe, he was an exceptionally philosophical one.

Adam Smith was born in 1723 in Kirkcaldy, Scotland. His father, a lawyer and civil servant, died six months before Adam’s birth. He left his family well off, and young Adam’s mother devoted the rest of her life to her son, who reciprocated her devotion. The first and only adventure in Smith’s life took place in his childhood, when he was snatched while at play by some strolling vaga bonds but was shortly afterwards rescued by his uncle and a search party.

change_me

He was sent to the excellent local grammar school and then, at 14, to Glasgow University. After three successful years there, he won a scholarship to Oxford, which was then sunk in intellectual torpor and futile scholasticism. Smith loathed it and returned to Scotland halfway through the term of his scholarship.

The academic job market was considerably brighter then than now. The 25-year-old was invited to give two series of lectures, on rhetoric and jurisprudence, at Edinburgh. They were a rousing success, leading to Smith’s appointment as professor of logic and metaphysics at Glasgow University in 1751 and professor of moral philosophy in 1752. He remained there happily until lured away, for a princely fee, to tutor and travel with a young duke. From 1767 to 1776 he largely secluded himself in Kirkcaldy, composing The Wealth of Nations. He returned to Edinburgh in 1778 as commissioner of customs, an important and lucrative post, and died there in 1790.

As Nicholas Phillipson dryly observes at the beginning of his—unavoidably—rather dry biography: “There is a general lack of visibility in Smith’s life.” Smith burned his letters, notes, and unpublished manuscripts; we don’t even have a likeness till he was past 40. Phillipson makes up for this by sketching—in sometimes gratifying and sometimes tiresome detail—the social and cultural background of the Scottish Enlightenment, the remarkable environment in which Smith thrived. Scotland’s early 18th-century prosperity produced an eager audience for lecturers like the young Smith and generous patrons for public intellectuals like the mature Smith. Perhaps equally important, Phillipson suggests, the bustle of Kirkcaldy and Glasgow, growing market towns, may have first planted in Smith’s mind the image of incessant activity, continually expanding needs, and harmonious haggling that lurks everywhere in the background of his writings.

Most important for Smith, and central to the Scottish Enlightenment, was David Hume. Smith discovered Hume while at Oxford—he was officially reprimanded when discovered reading Hume’s Treatise on Human Nature in his rooms in Balliol College—and became first a disciple, then a close friend. Smith’s brief, eloquent memorial tribute to Hume offended the orthodox and, Smith complained, “brought upon me ten times more abuse than the very violent attack I had made [in The Wealth of Nations] upon the whole commercial system of Great Britain.”

Hume figures prominently in Phillipson’s biography. Smith’s lifework, he writes, was essentially to “develop a science of man on Humean principles.” Hume declined to derive claims about morality and justice from reason or from metaphysical notions about the nature of being. He looked instead to the way moral sentiments were acquired in the course of social life, to the refinement of passions by conversation and commerce, and to the growth and quickening of “sympathy,” or moral imagination. Hume was an astute moral psychologist but, Phillipson writes, never went used those insights to formulate a theory of the social origins of morality. That was Smith’s ambition.

The Theory of Moral Sentiments was Smith’s “account of the processes by which we learn the principles of morality from the experience of common life.” This approach—a natural history of sociability—was both a response to and a continuation of Smith’s predecessors Hutcheson, Hume, and Rousseau. But Smith added something new: he replaced the solitary voice of conscience and the collective voice of mankind with a hybrid, the “man within the breast,” an imaginary, impartial spectator whose judgments are not innate but formed by experience and whose sympathy is allocated with scrupulous, almost Stoic, fairness.

There is perhaps a foreshadowing of Rawls’s “veil of ignorance” in Smith’s conception. Even this contemporary echo, however, cannot much enliven Smith’s treatise, at least for this reader. It takes the literary genius of a Hume or Rousseau to make 18th-century moral psychology engaging. Equally, perhaps, it takes the scholarly flair of an Albert Hirschman or Deirdre McCloskey to make the intellectual history of moral theory absorbingly interesting. Phillipson, though amiable, is a bit pedestrian.

Even more disappointing is that, although Phillipson does an admirable job of recounting what is known of Smith’s life, he refrains from offering opinions about Smith’s afterlife, which is, after all, far more interesting. Smith has become, along with Milton Friedman and Friedrich Hayek, one of the deities in the libertarian-conservative pantheon. I suspect Smith would have firmly declined this honor, even before his more zealous devotees, the proponents of the “efficient markets” hypothesis, nearly succeeded in wrecking the economies of the United States, Britain, and their unfortunate imitators.

The Wealth of Nations appeared in the eventful year 1776. The title page described the author as “formerly professor of Moral Philosophy in the University of Glasgow.” His principal influence, Francois Quesnay, chief of the Physiocrats, was a distinguished physician. They were both amateurs, generalists, and reformers—political economists, far removed in outlook and purpose from today’s “specialists without spirit.” The celebrated sarcasms and exhortations in Wealth of Nations—“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind,” for example, or “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”—are not incidental but central. The book might equally well have been titled The Welfare of Nations.

Everyone knows, of course, what Adam Smith stood for: free trade, the division of labor, the minimal state, the invisible hand, the illimitable growth of wants and needs. “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.” “Every individual … intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” Case closed.

What everyone knows is seldom altogether wrong; but often it is not altogether right, either. As Emma Rothschild notes at the outset of Economic Sentiments, her superb study of Smith and Condorcet, “They think and write about self-interest and competition, about institutions and corporations, about the ‘market’ and the ‘state.’ But the words mean different things to them, and their connotation is of a different, and sometimes of an opposite, politics.” It is far from obvious that Smith would have entertained cordial feelings toward Alan Greenspan or Margaret Thatcher.

For one thing, Smith roundly mistrusted businessmen. In addition to the sallies already quoted, he insisted that businessmen, for all they may talk of freedom and fairness, “generally have an interest to deceive and even oppress the public.” One example out of many from The Wealth of Nations:

Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.

Smith did not by any means deny or gloss over class conflict. On the contrary, he was unflinchingly clear-eyed about the unscrupulousness of employers and the connivance of governments:

What are the common wages of labour, depends every where upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour. It is not difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it.

Smith was concerned about more than just formal cartelization and monopoly: “Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. … We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things which nobody ever hears of.” And when masters do form “particular combinations” they “are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people.”

Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen; who sometimes too, without any provocation of this kind, combine of their own accord to raise the price of labour. … But whether the workmen’s combinations be offensive or defensive, they are always abundantly heard of. … They are desperate, and act with the folly of desperate men, who must either starve, or frighten their masters into compliance with their demands. The masters upon these occasions are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combinations of servants, labourers, and journeymen.

Like Hume, Smith was firmly on the side of the workers, a robust partisan of full employment and high wages.

What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves well fed, clothed, and lodged.

And another sarcasm against early capitalist apologetics, which applies equally well to later ones:

That a little more plenty than ordinary may render some workmen idle, cannot well be doubted; but that it should have that effect upon the greater part, or that men in general should work better when they are ill fed than when they are well fed, when they are disheartened than when they are in good spirits, when they are frequently sick than when they are in good health, seems not very probable.

Smith straightforwardly supported the principle underlying progressive taxation:

The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

Nor was Smith a proponent of the minimal state. Government has the duty of “erecting and maintaining those public institutions and those public works which may be in the highest degree advantageous to a great society,” but which “are of such a nature that the profit could never repay the expense to any individual or small number of individuals.” And as Emma Rothschild points out, “Of Smith’s great diatribes in The Wealth of Nations, only one is concerned with what would later have been understood as a principally economic activity of national government.”

Smith was, in short, a mensch. He would not feel at home in the American Enterprise Institute or the Heritage Foundation.

But although Smith’s heart was in the right place, he was wrong about three large matters. Two of them have to do with the quality of life, and so are invisible to most contemporary economists. But one of them is central to their concerns: his advocacy of free trade, based on the theory of comparative advantage. No developing country, Smith asserts, should try to nurture particular “strategic” (as we now say) industries:

By means of such regulations, indeed, a particular manufacture may sometimes be acquired sooner than it could have been otherwise, and after a certain time may be made at home as cheap or cheaper than in the foreign country. But though the industry of the society may be thus carried with advantage into a particular channel sooner than it could have been otherwise, it will by no means follow that the sum total, either of its industry, or of its revenue, can ever be augmented by any such regulation. … Though for want of any such regulations the society should never acquire the proposed manufacture, it would not, upon that account, necessarily be the poorer in any one period of its duration.

This is from perhaps the most influential section of The Wealth of Nations, the one containing the reference to the “invisible hand” and the now hoary old chestnut, “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.”

But Smith was wrong. Every successful economy, without exception, has prospered by subsidizing key industries and protecting them from foreign competition. And nearly without exception, every developed society has then, with consummate hypocrisy, preached free trade to less-developed countries. Friedrich List first refuted Smith’s development theory. For a thorough review of this issue, see the work of the contemporary Oxford economist Ha-Joon Chang, in particular Kicking Away the Ladder and Bad Samaritans.

The other important matters about which Smith was wrong were, first, his notion of indefinite progress. Smith recognized that only economic growth could sustain high wages and widely diffused prosperity without society-wide planning and cooperation. Unsurprisingly, he failed to recognize that there are inescapable limits to growth.

Second, Smith acknowledged that work in a capitalist society was liable to be stultifying for most people.

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. … The man whose whole life is spent thus … naturally loses the habit of exerting his understanding or invention, and generally becomes as stupid and ignorant as it is possible for a human creature to become … [hence] not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life [as well as] of the great and extensive interests of his country … This is the state into which the great body of the people must necessarily fall, unless government takes some pains to prevent it.

Which is, of course, what a civilized society would do. Ours has failed miserably, indeed scarcely tried. Education in America, like virtually every other institution here, serves the purposes of business.

Still, these failures of vision are hardly Smith’s fault. He at least had a moral imagination, unlike most of those who now claim his legacy. Perhaps the finest tribute to Smith came from his noblest successor, John Stuart Mill:

For practical purposes, political economy is inseparably intertwined with many other branches of social philosophy … Smith never loses sight of this truth. … [A] work similar in its object and general conception to that of Adam Smith, but adapted to the more extended knowledge and improved ideas of the present age, is the kind of contribution which political economy at present requires.

It still is.

George Scialabba is the author of What Are Intellectuals Good For [3]?

40 Comments (Open | Close)

40 Comments To "Das Capitalist"

#1 Comment By Libertreee On February 24, 2011 @ 11:36 am

That every successful nation has subsidized key industries and sheltered them from competition is a fallacy called “post hoc, ergo propter hoc.” A historical analogy, which is characterized by a general statement of certitude, must show the causal relationship clearly. IF the premise is true, it is NOT based on a mathematical proof, which Ricardo used to demonstrate Smith’s thesis of the law of comparative advantage, but is based on mere empirical observation. To what can the author base this observation? If every successful nation is self evidently improved by protectionism, despite the mathematical, logical disproof, then what metrics are used? Is the “successful nation” compared to an “unsuccessful nation” that used free trade? Then how much free trade? What other factors could have empirically overridden the comparative advantages? The minimum wage laws, all things being equal, cause unemployment. But, there are a few historical exceptions due to other factors, which make all things unequal.
We have never had pure capitalism, and never will so long as we have governments and states. If “successful nations” benefit from protectionism, and all nations that are successful have been protectionist, despite mathematical proofs to the contrary, then logically one can ask: how much MORE successful would they have been with free trade instead of protectionism?

BTW, if you refer to the US, which was generally considered second only to England in 19th century trade, can the enormous political unrest, leading to the greatest war of the nominally free trade 19th century, be a historical marker of “success”?

#2 Comment By Adam_Smith On February 24, 2011 @ 9:20 pm

Along with Libertreee, I am doubtful that Smith’s “advocacy of free trade, based on the theory of comparative advantage” has in reality been decisively discredited by anyone. Any such refutation must include a demonstration that the benefits of a contrary “strategic industry” policy, however apparent, exceed the costs of such a policy. Those costs must include not only the forgone gains demonstrable from comparative advantage but also the risk that the policy will precipitate a trade war which may well develop, in turn, into an armed conflict.

#3 Pingback By Tweets that mention The American Conservative » Das Capitalist — Topsy.com On February 25, 2011 @ 5:14 am

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#4 Comment By Stormcrow On February 25, 2011 @ 7:07 am

Ha Joon-Chang’s ‘Kicking Away the Ladder’ very adequately explains how both Britain and the US protected (and still protect) their own markets in any number of inefficient ways, while at the same time demanding complete openess and lack of protection in other countries, particularly ‘developing’ ones.

A case in point is Haiti. While US agricultural producers are protected, Haiti was required to open its markets to much cheaper imports, such as rice. The effect was to put small independent Haitian farmers right out of business (with no other prospects of employment). Haiti used to be a net exporter of food…no more. ‘Developing’ countries need to protect their own production until they are able to compete…not forced to compete right from day one, especially when there are a number of major producers who still practise protectionist policies that shield them from ‘competition’.

Smith would be horrified by the types who claim to follow his teachings today. He’d correctly iidentify them as a self-interested class who, as Smith noted, warn of others (workers) but conveniently excuse their own behaviour.

#5 Comment By beowulf On February 25, 2011 @ 11:57 am

“If every successful nation is self evidently improved by protectionism, despite the mathematical, logical disproof, then what metrics are used?”

Err, so if reality conflicts with theory, its reality that’s been disproven? Right.

#6 Comment By Jim Evans On February 26, 2011 @ 10:26 am

Classical comparative advantage works because some countries have the capacity to produce particular goods more economically than others due to geographical advantages vis-a-vis other countries, who in turn, have their own geographical advantage for particular goods.

Trade between two countries in such a relationship, in the goods, each produces more economically, is a win-win situation.

But that is not what is going on today.

Today, it is an absolute advantage due to subsistence-level wages, lacked safety conditions, taxes, and non-existent environmental standards in various countries.

This creates a race to the bottom.

The only way to compete is to mirror the lowest common denominator.

Adam Smith was a humanitarian — he would not recognize the brutality that today’s Free Trade has wrought.

Adam Smith did not support or condone a “race to the bottom” where the country, which brutalized its workers the most and enriched its elites the most, would be declared the winner.

Adam Smith knew the key to prosperity for a country was an increasing prosperity for the workers of that country.

Adam Smith, like many humanitarian philosophers, has had his ideas expropriated and twisted to suit the elite at the expense of the many.

Adam Smith, the humanitarian, has been used as a fig leaf to justify what he could not envision from his 17th century vantage point in human history.

#7 Comment By Barry Loberfeld On February 28, 2011 @ 9:47 am

Adam Smith was (mostly) a proponent of laissez faire and an opponent of mercantilism. If the distinction is not readily apparent, scroll down to [5]

#8 Comment By Michael Hardesty On February 28, 2011 @ 2:27 pm

I’m surprised to see an old leftist warhorse like George Scialabba here instead of one of his usual venues like The Nation.
But the fact is that Smith’s work has long been eclipsed by Bohm-Bawerk, Von Mises, Rothbard, Reisman and Rand.
Smith simply propounded the stale old altruist-collectivist ethics which is much better suited to a defense of all forms of statism than laissez-faire. That’s why leftist charlatans like
Chomsky selectively quote him.
Scialabba used to pen tiresome tributes to the anti-philosophy pragmatist hack Richard Rorty.
If there were talented leftist writers like Murray Bookchin,
George would invariably find them “depressing” as I found out
from a very brief corrrespondence with him in the 90s.
The bulk of Smith’s economic argument does favor laiisez-faire capitalism but he, unfortunately, believed in the labor theory of value, taken over by Marx and totally demolished by the Austrians.

#9 Comment By Jim Evans On February 28, 2011 @ 4:32 pm

Barry Loberfeld:

I would suggest defining the question in terms of “either”, “or”, is not the way to frame the question.

It’s akin to, “you are either for me or against me.”

I don’t accept the premise of the question.

In considering trade between nations, it is more complicated than that.

Status quo supporters often try and make change from the status quo an all or nothing deal.

Such is not the case.

I support trade, increased trade, but not to the disadvantage of one nation over another, and the trade of nations is no different than going to a used car dealer: There are good deals, neutral deals (equally beneficial for both parties), and bad deals.

I see no reason a nation has to accept bad deals, from its perspective, for the sake of being true to mythical notions of Free Trade.

Trade is managed. Sometimes, explicitly, sometimes by the man behind the curtain.

#10 Comment By Patrick D.Hazard On March 18, 2011 @ 2:12 am

That’s not the Adam Smith Foxey Noose bleats daily. Excellent essay.PDH, Weimar, Germany.

#11 Comment By Troy Camplin On March 18, 2011 @ 5:14 am

The author does not seem to know the difference between being pro-free markets and pro-business. They are absolutely not the same thing. Smith understood this. Thus, Smith is indeed pro-free markets precisely because he is anti-crony capitalism.

I won’t even get into the nonsense about subsidies and protectionism being behind economic growth. That is economic ignorance at its worst.

#12 Comment By JR On March 18, 2011 @ 8:42 am

Many good replies here to what in my analysis is an extremely selective reading of Smith. Really appreciate the learned commentary from posters. Nicely done.

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#14 Comment By Ben Dickinson On March 18, 2011 @ 11:39 am

Comical ex cathedra splutterings here from the market fundamentalists. Folks, it’s messy and complicated. The dark side of protectionism, a la Smoot-Hawley, is its own race to the bottom; but evidence for government-promoted export-led growth in the national interest is so thick on the ground as to be impossible not to stumble over. Let’s dub it the China Syndrome and be done with it. Here’s another actual brilliant anatomization (I notice a distinct dearth of empirical citations from the abstract-model worshippers here): Albert O. Hirschman, National Power and the Structure of Foreign Trade.

#15 Comment By Kent Allard On March 18, 2011 @ 12:06 pm

Mr. Hardesty,

Adam Smith eclipsed by Ayn Rand? That’s like saying Mozart was eclipsed by Lady Gaga.

Let me simplify the argument for you. Billionaire’s retainers have convinced a critical mass of people that the billionaires interests are the only interests that matter – and any competing argument is the argument of a pitiful charlatan.

They co-opt and compromise any argument they can use to their advantage to support their self-serving thesis, mock their detractors, and laugh on the way to the bank, stepping over their victims without a second glance.

It isn’t an argument of fact or reason, simply an argument of misplaced and pathological confidence, the bread and butter of narcissistic thought. Thus, the word “con”.

Ayn Rand eclipsing Adam Smith? That’s rich.

Pun intended.

#16 Comment By Guy Scotton On March 18, 2011 @ 9:13 pm

Mr Camplin:

“The author does not seem to know the difference between being pro-free markets and pro-business. They are absolutely not the same thing. Smith understood this. Thus, Smith is indeed pro-free markets precisely because he is anti-crony capitalism.”

You are of course correct about Adam Smith’s views in a literal sense, but I (and Scialabba) beg to differ regarding the implications of this distinction. I will first let Smith speak for himself:

“To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it. Were the officers of the army to oppose with the same zeal and unanimity any reduction in the number of forces, with which master manufacturers set themselves against any law that is likely to increase the number of their rivals in the home market; were the former to animate their soldiers, in the same manner as the latter enflame their workmen, to attack with violence and outrage the proposers of any such regulation; to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us.”

A system – in this case “pure” free trade – that is desirable but not possible is not desirable at all. Therefore, measures and reforms that might abstractly be of a piece with some crystal palace of “true” capitalism must be evaluated with respect to the good or ill they achieve and the interests they serve in the here and now (the “here and now” should, of course, include long-term factors). What ideologues would call “compromise” is, in fact, the truest and most sophisticated application of a model to reality. This is exactly what Scialabba means when he suggests that the difference between Smith and the philosophes was that he could propound doctrines without being doctrinaire.

Thus, Smith did not “put up” with concepts like progressive taxation, funding of public goods, and the basic rights of labour, waiting for the day when they would swept into irrelevance by the total triumph of his invisible hand – he advocated them as necessary ballasts to capitalism as he saw it in the world, and as he imagined it would continue to develop. Therein Smith’s genius.

#17 Comment By Adam Ferguson On March 19, 2011 @ 3:39 am

Most commentators here use ad hominem attacks and insults to make their points. Not a conservatism that Adam Smith would have approved of.

#18 Comment By Troy Camplin On March 19, 2011 @ 5:11 am

How does it follow that because a pure example of something is impossible, that attempting to approximate it is undesirable? Freedom of speech is impossible — there is always some government official violating someone’s freedom of speech in this country. Does that then mean that freedom of speech is undesirable? Truly free and fair elections are impossible — there are always people “discovering” some ballots or “misplacing” others. Does that then mean that free and fair elections is undesirable?

What I see in that quote is not a defense of government-protected/created monopoly, but an observation that changes must be incremental in order to restore free markets and get rid of the government-protected/created monopoly. He is trying, in the Scottish tradition of marginalism, to argue that revolutionary changes will be damaging. As, indeed, they are.

#19 Pingback By Darwiniana » Das Capitalist On March 19, 2011 @ 10:08 am

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#20 Comment By Guy Scotton On March 19, 2011 @ 7:52 pm

It is certainly true that the obvious implication of the WoN passage I quoted is that _more_ free trade (relative to Smith’s outlook) is desirable. What I am suggesting is that, having dismissed the possibility of Utopia, Smith is rather more sophisticated than to simply set out approximating it. This would be a sort of gradualist fallacy that ignores the very specific circumstances and agents that not only attenuate progress but actively subvert it.

[If you’d like me to address your analogies, I won’t speak for Smith’s view, but I will say that, yes, the same argument can be extended against the relentless (by which, of course, I mean something much more specific than “enthusiastic” or “committed”) pursuit, gradual or otherwise, of some abstract, static conception of “ideal freedom of speech” or “ideal democracy.”]

Conspicuously, unlike his erstwhile disciples today, Smith does not here once blame “the state” as distinct from a constellation of public prejudices and private vices. Not that he was any friend of the politician as such – “that insidious and crafty animal, vulgarly called a statesman or politican”, to quote again from the WoN!

Finally, it is worth pointing out that, despite his tremendous candour in relation both to the contemporary situation and its ultimate prospects, Smith was almost certainly more _conceptually_ optimistic than we would be inclined to be, insofar as his work, expounding as it does an “obvious and simple system of natural liberty”, bears the mark of then-current notions of natural law and universal harmony.

#21 Comment By Troy Camplin On March 20, 2011 @ 5:59 am

Institutions matter. If people believe they can get an advantage from the state, one shouldn’t be surprised if they try. If they don’t, then they will put their energies into those things that will advantage them. Call this “blaming the state” if you will, but it really is the state that has these institutions in place — or doesn’t. They may do so out of pressure. But it doesn’t matter where the impetus for putting in bad institutions comes from; what matters is the presence of bad institutions.More, the science of economics should be used to properly inform us about what will actually accomplish our goals for us. This again points to the proper role of government and having the right institutions.

#22 Comment By Philip Salter On March 20, 2011 @ 12:24 pm

This article is weak on many counts (in no particular order):

1. Not to metion Smith’s mistake on the labour theory of value is a massive oversight.
2. Hong Kong rose to power withour subsidies.
3. There is no limit to progress – it is just a matter of how progress is defined. The appitie of man is such that
4. Smith’s relevance for libertarians / conservatives is the stance he took against mercantalism in favour of free trade. Most free market types have not used Smith directly to argue their modern arguements, but do take inspiration from him. The Austrian School is often critical of him. The popular idea that libertarians do not understand that Smith he was not a libertarian is a mistake.
5. Just because Smith was not an anarcho-capitalist, does not mean that he would be in favour of the welfare state. In fact, this article makes the same mistake it accuses libertarians of making. In Smith’s time the state was minimal. To try to imagine what he thought of the modern state is impossible, but one thing is for sure – he would be surprised that it accounts for around 50 per cent of GDP. Whether he is a fan of modern state is unknowable, although I would suggest he would be largely encouraged by the progress made with, or without the government since his time.
6. Finally, I suggest you carry on reading past this quote (Google will help): “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”. Here Smith argues against business conspiracy, but also, more importantly government intervention to try to stop.

I could go on…

#23 Comment By Paul Johnson On March 21, 2011 @ 1:00 am

Alas, it’s good to remove Smith from being boxed in by any narrow ideology, but there are some errors here. Just a selection:
Smith favored free trade but not on the basis on “comparative advantage.” That concept was developed by Ricardo.
Support for “public works” is hardly contrary to modern economics, which recognizes “public goods” as a legitimate role for government – but note that what qualifies as a public good is narrowly defined.
He did not support what we would call “crony capitalism.”
The “Theory of Moral Sentiments” is extremely pertinent to economics – he was the first behavioral economist – THAT is the big Smith mistake of mainstream economics.
Smith favored an ecological/evolutionary approach to developing better policy, which puts him in opposition to the “men of system” on BOTH the right and left.

#24 Comment By Paul Johnson On March 21, 2011 @ 1:07 am

Oops – one more.”The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.” If this is a CONSTANT proportion then we have a flat tax, not a progressive tax. In one of his letters he listed low taxes as one of the few requirements for growth, along with” peace” and “tolerable administration of justice.” He was not a high tax guy. And he wrote letters which add quite a bit to our understanding of his philosophy. But all anyone ever talks about is the “Wealth of Nations”, sometimes with a few selected quotes from “The Theory of Moral Sentiments.” For shame…

#25 Comment By Marx, Groucho On March 21, 2011 @ 2:36 am

It was the Austrian school of economics that stripped the “morality” from Smith and his likes and tried to make it a “science”. Economics is not yet a science, it is just a tool for the ruling powers.
Smith knew that, hence his support for a just society. All other interpretations are only wishful thinking of market talibans.

#26 Pingback By Was Adam Smith the 18th-century’s Paul Krugman? On March 21, 2011 @ 9:08 am

[…] portrays Smith as having been less a proto-Milton Friedman and more a proto-Paul Krugman (“Das Capitalist,” March).  His portrait, alas, bears no resemblance to the real Adam […]

#27 Pingback By Book Review: Das Capitalist | International Political Economy On March 21, 2011 @ 9:32 am

[…] Yes and no. Unlike his French counterparts and even his bosom friend David Hume, he led a retired life, much of it in the small Scottish town where he was born, and he lived with his mother until she died at a very advanced age. He was shy, destroyed most of his letters, and did not seem to relish giving brilliant performances, either in print or in conversation. He never fell afoul of civil or religious authority, had no mistresses, and engaged in no public quarrels. (Read Further) […]

#28 Comment By charle s On March 21, 2011 @ 7:13 pm

Deep in the heart of every capitalist is a desire to do away with competition. “Morgan, Cornelius Vanderbilt, John D. Rockefeller and all the other robber barons shared two beliefs: cutthroat competition was ruinous, and combination and size could reduce competition while increasing efficiency. Morgan used his personal power and reputation to encourage the formation of trusts and mergers within industries where he saw ruinous competition.” See [6]

So much for Free Enterprise. The rise of China shows the power of mercantilism which is what really happens in the real world instead of that mythical Free Enterprise, see [7] .

Most people beleive in economic fantasy that is propagated by the rich and powerful. It will never change.

#29 Pingback By Those Alone Fall Prey to a Greed | Bruce Hanify On March 21, 2011 @ 9:47 pm

[…] What are the com­mon wages of labour, depends every where upon the con­tract usu­ally made between those two par­ties, whose inter­ests are by no means the same. The work­men desire to get as much, the mas­ters to give as lit­tle as pos­si­ble. The for­mer are dis­posed to com­bine in order to raise, the lat­ter in order to lower the wages of labour. It is not dif­fi­cult to fore­see which of the two par­ties must, upon all ordi­nary occa­sions, have the advan­tage in the dis­pute and force the other into a com­pli­ance with their terms. The mas­ters, being fewer in num­ber, can com­bine much more eas­ily; and the law, besides, autho­rizes, or at least does not pro­hibit their com­bi­na­tions, while it pro­hibits those of the work­men. We have no acts of par­lia­ment against com­bin­ing to lower the price of work; but many against com­bin­ing to raise it.   Das Cap­i­tal­ist […]

#30 Comment By Freelancelot On March 22, 2011 @ 7:08 am

Education in this country does not serve the purposes of businesses. It serves the purposes of government, which is far more insidious. Yes, our educational system came into being mainly to train people to be employable. Yes, it should be more than just that. But it is not the role of the government to make it more than just that. As society evolves, so will education, if left alone in private hands as it should be. It would be justified for each state’s government to offer grants as incentives to certain private groups to open up certain private schools in their state if state political leaders saw a need, yes. This author’s idea about what our government should be doing, however, is false and insidious.

#31 Comment By Russell Nelson On March 22, 2011 @ 10:51 pm

I don’t know which is worse: the original essay or the commentators. If astronomy were as poorly understood by the blithering masses, it would be indistinguishable from astrology.

#32 Comment By Menander K. Dyskolos On March 23, 2011 @ 8:07 am

Lord Russell Nelson’s point is well made.

With subservient respect,

Hoi Polloi

“We need a dictator. A constitutional dictatorship. One in which the dictator is strictly limited in power. One whose power can be taken away by a vote of a super-majority of the people. While I don’t actually want to be a dictator, I want to get the coordination problems solved. From serious problems like the over-extension of copyright law, to the War on Drugs, to defending our national borders, all the way down to why we don’t have any standard sizes for Li-Ion batteries? There are AAA, AA, C, and D sized cells for carbon-manganese (remember them?), alkaline, Ni-Cad, Ni-MH, and Lithium. Why not Li-Ion or Li-FePo? It’s a coordination problem; nobody wants to make their device dependent on somebody else’s batteries.

So, Vote Nelson for Dictator! I promise not to do anything for you that you can do for yourself!” —Russ Nelson

#33 Comment By Johnathan Pearce On March 25, 2011 @ 2:38 am

Philip Salter has nicely rebutted many of the points of this remarkably bad article. But I would add this point to the argument, made here, that somehow there is a case for protectionism in giving “infant” industries a chance to get off the ground. It is sometimes argued that in the case of some of the “Asian Tigers” – Japan, Taiwan, South Korea, etc – that this is what happened. That is far too glib. Sure, some of these countries practised protection, but then again, as Philip Salter said, Hong Kong did not. Also, many African nations, which on a per capita basis were richer than Asia in 1945, often used subsidies, tariffs, quotas and many other restrictions, and those countries have been largely overtaken by Asia.

For a good debunking of the whole “infant protectionist” argument, I recommend this article by R. E. Baldwin: “The Case Against Infant Industry Tariff Protection”; Journal of Political Economy 77 (May/June) 295-305, as cited on page 41 of “Reviving the Invisible Hand: The Case for Classical Liberalism in the 21st Century, by Deepak Lal.

I suggest readers of this website study that book, if only to guard against the kind of nonsense that this publication has chosen to publish.

In the meantime, I commend PJ O’Rourke’s recent excellent, and typically witty, study of Adam Smith.

#34 Comment By Patrick On March 26, 2011 @ 4:39 am

I’ll call Johnathan Pearce’s Hong Kong and raise with China.

Mercantilism/protectionism doesn’t work? Hooey. As prior commenters have noted, Ha Joon-Chang’s works have neatly laid out the historical benefits accrued to those now calling for more ‘free trade’; after they have reaped the benefits of not indulging in such practices themselves.

#35 Pingback By Der Sozialdemokrat Adam Smith « Das Philoblog On March 31, 2011 @ 9:23 am

[…] Wieder ein interessantes Stück über Adam Smith, das gängige Fehlinterpretationen sowie die üblichen Auswüchse der Ökonomie ins richtige Licht rückt, diesmal beim American Conservative: […]

#36 Comment By Ted Schrey Montreal On April 6, 2011 @ 6:40 pm

Das Capitalist? Why not Der Kapitalist?

Anyway, Adam Smith was a ‘mensch’–which explains his acute vision re human circumstance, even way back when.

I have thought for some time now that the West got a huge head-start by exploiting colonial possessions. These may not have been much of a sales-market, but sure were profitable elsewhere.

#37 Comment By Ted Schrey Montreal On April 6, 2011 @ 6:42 pm

Oh, by the way, this was a remarkably g-o-o-d article.

#38 Comment By Ted Schrey Montreal On April 6, 2011 @ 10:24 pm

Yes, well, this so-called ‘free trade’, blown up to global proportions, lies necessarily at the root of America’s decline, it seems to me.

Vast numbers of relatively well-paying jobs are lost because of it. Shipping employment overseas is a curious form of self-sacrifice.

Adhering to such a principle is a dangerous, costly practice and perhaps not worth the sense of self-righteous noblesse oblige that accompanies it.

Giving away the store is also a noble principle, but in terms of sound business hardly worth the effort.

#39 Comment By mike On April 7, 2011 @ 6:59 am

Patrick: work for whom? One of the valid points that Ha Joon Chang makes is that the proper analysis for places like China or nineteenth century Britain is one of political economy, not “pure” economics. Yet in spite of his awareness of this point, Chang’s criticisms of the free-marketers are themselves falacious, since pacè Jonathan, and for the very reason just given, the arguments are more a-priori than empirical. See [8], [9] and [10].

#40 Comment By Greg Marquez On April 18, 2011 @ 9:10 pm

So how is it again that China is winning. They send us stuff which cost them man hours and treasure, and we send them little pieces of paper. They take those little pieces of paper and store them in our banks and refuse to spend them on American stuff lest they loose a sale. I say keep it up China.