Wednesday, June 15, 2005

Not a qibble - just accuracy

“Economic Viewpoint: Lost Arab Banking Creativity”
Dar Al-Hayat , Saudi Arabia - 15/06/05


Mr. Al Anani, an economic expert, is the author of the article, “Economic Viewpoint: Lost Arab Banking Creativity” in Dar Al-Hayat. He writes on the need for Saudi banks to become more innovative in producing financial products rather than relying on imported ideas from western banks.

Among the statements he makes (in what is an interesting perspective on banking) is:

“Adam Smith said that the division of labor depends on the size of the market.”

Now while it is true Smith makes that statement in “Wealth of Nations”, he was not the originator of the concept of the relationship between the division of labour and the size of the market, though this has been continually attributed to him since the late 1th century, and now in the 21st century.

Some economists have gone further. They claim Smith was the first to identify the division of labour itself, despite it being written about by Plato in The Republic and Sir William Petty in 1683.

Adam Smith’s professor when he was an undergraduate student at the University of Glasgow, 1737-40, was Professor Francis Hutcheson. As was the normal practice in the Scottish Universities in the 18th century, Professor’s Hutcheson’s classes in Moral Philosophy included a large element in them of what we now call ‘political economy’. In the classes that Smith attended, Hutcheson included a section around the statement that the ‘division of labour is limited by the market’ (see: Hutcheson, “A System of Moral Philosophy”, 1755 – posthumous, published by his son).

These matters are not just pedantic quibbles.

Adam Smith is constantly quoted as the authority for lots of ideas he never had, while his real genius is hardly known because it is ignored. In the case of the division of labour and the market he is credited with something he did not discover (and never claimed to have done).

Both the views he never held (the usual false ascriptions about laissez faire, self interest, selfishness, and benevolence, etc., all discussed in “Adam Smith’s Lost Legacy” (Palgrave Macmillan, ISBN 1-4039-4789-9) and the discoveries he never made (division of labour limited by the market), blot out all the useful concepts he did originate, including his model of society in his ideas about the Impartial Spectator, Impartial Justice and the Impartial Market.

Adam Smith is a much more interesting philosopher for what he did write than popular knowledge about him suggests.

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