From Wall Street Journal to Moral Philosophy
In yesterday’s Blog on the discussion between Professors Russell Roberts and William Polley in the Wall Street Journal (WSJ), I praised them for the excellence of their article. I have since followed up by looking at their Blog sites (www.marginalrevolution.com and www.williampolley.com/blog).
On William Polley’s Blog he carries, today, a reference to an article in WSJ, 29 September 2004 (http://www.opinionjournal.com/extra/?id=110005687) by Professor Deirdre McCloskey, who teaches economics, history, and English at the University of Illinois at Chicago; and philosophy, economics, and art and cultural studies at Erasmus University of Rotterdam. She is the author of 20 books on economics, British economic history, and the rhetoric and philosophy of economics; and is finishing another called "The Bourgeois Virtues: Ethics for an Age of Capitalism." Her article appears in the Fall 2004 issue of In Character: A Journal of Everyday Virtues. I think readers of “Lost Legacy” would find it most interesting on its own account and also because of her many references to Adam Smith and “The Theory of Moral Sentiments”.
Entitled, “What Would Jesus Spend?: Christian virtues won't hurt the economy”, Deirdre McCloskey, says much with which I would agree, and as it is consistent with Smith’s approach in “Moral Sentiments”, I feel sure he would have agreed with her too.
However, this is a Blog dedicated to being accurate about what Smith wrote and asserted in the context of mid-18th century Britain, and I am therefore obliged out of defence of our standing policy to comment on one area of Smith's work where I believe Professor McCloskey goes astray. It concerns, you may not be surprised to know, the vexed question of the metaphor of the invisible hand, though not of the kind that such errors of attribution normally attain.
She explains Smith’s acerbic comments on the consumption by the “proud and unfeeling landlord” who forgets “his brethren” and imagines he consumes all of the produce of his lands, but because his stomach is no bigger than a poor man’s, he receives ‘no more than that of the meanest peasant’ (TMS IV.i.10. page 184). In “Wealth of Nations”, Smith adds that the “rich man’s” desire for ”the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary” (WN I.xi.c.7. page 181)
Professor McCloskey comments:
"This is all true. Millionaires, and especially billionaires, have limits on how much they can use those incomes so much higher than ours for correspondingly unequal consumption--of, say, trousers. But Smith--arguing in effect against Rousseau's notion that property brings inequality in its train--goes too far. In consequence, he says cheerfully, the rich "are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants.
That is incorrect. Smith is forgetting that if, say, Saddam Hussein took 50% of Iraqi national produce and put it into arms and palaces, the stuff was in consequence not available for ordinary Iraqis to consume as food or fuel or shelter. Iraq was impoverished, and so the necessaries of life were available in nothing like the distribution that would have been made under equality. The percentage distribution was the same--one man, one pair of trousers--but the absolute amount was reduced by the needless luxury. Saddam may not have gotten the benefit of palaces he never visited. But neither did anyone else. Socially speaking the resources were thrown away. What a rich woman cannot consume, such as the diamond bauble that sits unworn in the back of her jewelry box, is simply wasted, socially speaking. She gets no pleasure from it, except perhaps the happy memory of its purchase.”
I respectfully disagree with her assessment of the veracity of Smith’s assertion, without it in any way undermining the excellence of the rest of the full article. Let me dissect Smith’s actual statement to show why. The rich landlord cannot consume all the produce of his land. The surplus above his own consumption he is:
“obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets, which are employed in the œconomy of greatness; all of whom thus derive from his luxury and caprice, that share of the necessities of life, which they would in vain have expected from his humanity or his justice.”
The “rich landlords” select from the heap of produce ‘what is most precious and agreeable” and:
“in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end of which they propose from the labours of all the thousands whom they employ be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements.”
This leads directly to Smith’s only reference in the “Moral Sentiments” to Shakespeare’s metaphor of the invisible hand (Macbeth: 3.2) and makes its context clear (above all, that it had nothing to do with the working of markets; which ‘workings’ are certainly not mysterious and are well known):
“They [the rich landlords] are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided in equal proportions among all its inhabitants, and thus without intending it, without knowing it, advance the interests of society, and afford the multiplication of the species.” (TMS IV.i.10 pages 184-5)
Smith’s assessment was absolutely correct. First, look carefully what he said. The rich landlord believes he consumes all that his land produces, but in order to eat his food, sitting in a palace (compared to the hovels lived in by his retainers and serfs – except those retainers living in the servants quarters of his palace), prepared by his cooks, served by his waiters, fitted out and maintained by his retainers and protected by his armed guards, all of whom receive a share (not a fair share) of the food distributed to them by the rich landlord, or more accurately by his ‘Factor’ and his Oafs, which comes from the large pile his lands produce.
Moreover, the serfs who work his land, plant, tend and harvest the crops and shepherd his sheep, goats, horses and cattle, also draw of the same pile (again not fair shares), as do the local clergy in the Church, and so on. Rich men also fancy (‘insatiably’) “all the different baubles and trinkets”, plus covers, cloaks, trousers, kilts and nick-knacks, all of which are produced and sold to him for his ‘gratification’ and vanity and delight by those who produce them or bring them in trade. All these people receive in return the necessities of life, in some measure related to their value, or the equivalent in coin.
Now Smith’s proposition is perfectly accurate. For a single rich landlord his annual produce is distributed in this manner and they receive: “nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided in equal proportions among all its inhabitants”. Each family’s share is “nearly” the same (i.e., probably less) than it would have been if each family had the same amount of land to live off. I should think that this would have led to a smaller total annual produce for the same number of people because of the inefficiencies in small holdings, without the progress of the “improvements” wrought by feudal tenures, and the ‘protections’ afforded by his landlord.
Now what is true for a single rich landlord would have aggregated to a similar truth for a society of all landlords. All that is produced is consumed, unequally, but the subsistence level would be sufficient for the “multiplication of the species” (a prime objective of the ends of nature in “Moral Sentiments”).
This leaves the validity of Professor McCluskey’s analogy of Saddam Hussein’s palaces and the Iraqi population in her article:
“The percentage distribution was the same--one man, one pair of trousers--but the absolute amount was reduced by the needless luxury. Saddam may not have gotten the benefit of palaces he never visited. But neither did anyone else. Socially speaking the resources were thrown away.”
This does not invalidate Smith’s assertion, Saddam Hussein being no stranger to “selfishness and rapacity”. His palaces were guarded by retainers and soldiers, watched by his police, courts and jailers and built and maintained by labourers, and in so far has they were paid for these services, as were the rich traders who visited him and his bureaucrats and sold him ‘trinkets and baubles’ (and weapons), they too shared in the stolen loot of 50 per cent of GDP in Professor McCloskey’s scenario. The people of Iraq were poorer than they needed to be in much the same way as were the retainers and serfs of feudal Britain in the 18th century. But the appropriate distribution of income is not Smith’s point so much as the effect of these motivations from which the rich landlords believed they benefited. The equity, efficiency or otherwise of these operations has nothing to do with the point Smith makes.
It was the lure of trinkets and baubles that finally undermined the power of local feudal lords; they handed over their surplus produce to traders and manufacturers and in consequence, had to free the serfs from feudal to tenancies, which reduced the lord’s powers militarily and politically. The towns grew more powerful and, with the re-establishment of commerce from the 16th century on, led to the growth of markets and the political powers of the new rich merchant and manufacturing classes. As they say, the rest is history.
Professor McCloskey’s last point in the article is so accurate and worth noting that I hope my above critique does not leave anybody doubting that she is a person worth reading (check out her article):
“The businessmen wearing the Adam Smith ties need to do a little reading of “The Wealth of Nations” and especially The "Theory of Moral Sentiments" on the train from Westport. Smith did not say, ever, that Greed is Good. And the Christians and other opponents of the sin of avarice need to stop conceding the point to the men of Westport. There is no paradox of thrift, not in a properly Christian world. Nor even in the world we have.”
(Google 'Deirdre McCloskey' and read some of her other articles.)
On William Polley’s Blog he carries, today, a reference to an article in WSJ, 29 September 2004 (http://www.opinionjournal.com/extra/?id=110005687) by Professor Deirdre McCloskey, who teaches economics, history, and English at the University of Illinois at Chicago; and philosophy, economics, and art and cultural studies at Erasmus University of Rotterdam. She is the author of 20 books on economics, British economic history, and the rhetoric and philosophy of economics; and is finishing another called "The Bourgeois Virtues: Ethics for an Age of Capitalism." Her article appears in the Fall 2004 issue of In Character: A Journal of Everyday Virtues. I think readers of “Lost Legacy” would find it most interesting on its own account and also because of her many references to Adam Smith and “The Theory of Moral Sentiments”.
Entitled, “What Would Jesus Spend?: Christian virtues won't hurt the economy”, Deirdre McCloskey, says much with which I would agree, and as it is consistent with Smith’s approach in “Moral Sentiments”, I feel sure he would have agreed with her too.
However, this is a Blog dedicated to being accurate about what Smith wrote and asserted in the context of mid-18th century Britain, and I am therefore obliged out of defence of our standing policy to comment on one area of Smith's work where I believe Professor McCloskey goes astray. It concerns, you may not be surprised to know, the vexed question of the metaphor of the invisible hand, though not of the kind that such errors of attribution normally attain.
She explains Smith’s acerbic comments on the consumption by the “proud and unfeeling landlord” who forgets “his brethren” and imagines he consumes all of the produce of his lands, but because his stomach is no bigger than a poor man’s, he receives ‘no more than that of the meanest peasant’ (TMS IV.i.10. page 184). In “Wealth of Nations”, Smith adds that the “rich man’s” desire for ”the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary” (WN I.xi.c.7. page 181)
Professor McCloskey comments:
"This is all true. Millionaires, and especially billionaires, have limits on how much they can use those incomes so much higher than ours for correspondingly unequal consumption--of, say, trousers. But Smith--arguing in effect against Rousseau's notion that property brings inequality in its train--goes too far. In consequence, he says cheerfully, the rich "are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants.
That is incorrect. Smith is forgetting that if, say, Saddam Hussein took 50% of Iraqi national produce and put it into arms and palaces, the stuff was in consequence not available for ordinary Iraqis to consume as food or fuel or shelter. Iraq was impoverished, and so the necessaries of life were available in nothing like the distribution that would have been made under equality. The percentage distribution was the same--one man, one pair of trousers--but the absolute amount was reduced by the needless luxury. Saddam may not have gotten the benefit of palaces he never visited. But neither did anyone else. Socially speaking the resources were thrown away. What a rich woman cannot consume, such as the diamond bauble that sits unworn in the back of her jewelry box, is simply wasted, socially speaking. She gets no pleasure from it, except perhaps the happy memory of its purchase.”
I respectfully disagree with her assessment of the veracity of Smith’s assertion, without it in any way undermining the excellence of the rest of the full article. Let me dissect Smith’s actual statement to show why. The rich landlord cannot consume all the produce of his land. The surplus above his own consumption he is:
“obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets, which are employed in the œconomy of greatness; all of whom thus derive from his luxury and caprice, that share of the necessities of life, which they would in vain have expected from his humanity or his justice.”
The “rich landlords” select from the heap of produce ‘what is most precious and agreeable” and:
“in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end of which they propose from the labours of all the thousands whom they employ be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements.”
This leads directly to Smith’s only reference in the “Moral Sentiments” to Shakespeare’s metaphor of the invisible hand (Macbeth: 3.2) and makes its context clear (above all, that it had nothing to do with the working of markets; which ‘workings’ are certainly not mysterious and are well known):
“They [the rich landlords] are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided in equal proportions among all its inhabitants, and thus without intending it, without knowing it, advance the interests of society, and afford the multiplication of the species.” (TMS IV.i.10 pages 184-5)
Smith’s assessment was absolutely correct. First, look carefully what he said. The rich landlord believes he consumes all that his land produces, but in order to eat his food, sitting in a palace (compared to the hovels lived in by his retainers and serfs – except those retainers living in the servants quarters of his palace), prepared by his cooks, served by his waiters, fitted out and maintained by his retainers and protected by his armed guards, all of whom receive a share (not a fair share) of the food distributed to them by the rich landlord, or more accurately by his ‘Factor’ and his Oafs, which comes from the large pile his lands produce.
Moreover, the serfs who work his land, plant, tend and harvest the crops and shepherd his sheep, goats, horses and cattle, also draw of the same pile (again not fair shares), as do the local clergy in the Church, and so on. Rich men also fancy (‘insatiably’) “all the different baubles and trinkets”, plus covers, cloaks, trousers, kilts and nick-knacks, all of which are produced and sold to him for his ‘gratification’ and vanity and delight by those who produce them or bring them in trade. All these people receive in return the necessities of life, in some measure related to their value, or the equivalent in coin.
Now Smith’s proposition is perfectly accurate. For a single rich landlord his annual produce is distributed in this manner and they receive: “nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided in equal proportions among all its inhabitants”. Each family’s share is “nearly” the same (i.e., probably less) than it would have been if each family had the same amount of land to live off. I should think that this would have led to a smaller total annual produce for the same number of people because of the inefficiencies in small holdings, without the progress of the “improvements” wrought by feudal tenures, and the ‘protections’ afforded by his landlord.
Now what is true for a single rich landlord would have aggregated to a similar truth for a society of all landlords. All that is produced is consumed, unequally, but the subsistence level would be sufficient for the “multiplication of the species” (a prime objective of the ends of nature in “Moral Sentiments”).
This leaves the validity of Professor McCluskey’s analogy of Saddam Hussein’s palaces and the Iraqi population in her article:
“The percentage distribution was the same--one man, one pair of trousers--but the absolute amount was reduced by the needless luxury. Saddam may not have gotten the benefit of palaces he never visited. But neither did anyone else. Socially speaking the resources were thrown away.”
This does not invalidate Smith’s assertion, Saddam Hussein being no stranger to “selfishness and rapacity”. His palaces were guarded by retainers and soldiers, watched by his police, courts and jailers and built and maintained by labourers, and in so far has they were paid for these services, as were the rich traders who visited him and his bureaucrats and sold him ‘trinkets and baubles’ (and weapons), they too shared in the stolen loot of 50 per cent of GDP in Professor McCloskey’s scenario. The people of Iraq were poorer than they needed to be in much the same way as were the retainers and serfs of feudal Britain in the 18th century. But the appropriate distribution of income is not Smith’s point so much as the effect of these motivations from which the rich landlords believed they benefited. The equity, efficiency or otherwise of these operations has nothing to do with the point Smith makes.
It was the lure of trinkets and baubles that finally undermined the power of local feudal lords; they handed over their surplus produce to traders and manufacturers and in consequence, had to free the serfs from feudal to tenancies, which reduced the lord’s powers militarily and politically. The towns grew more powerful and, with the re-establishment of commerce from the 16th century on, led to the growth of markets and the political powers of the new rich merchant and manufacturing classes. As they say, the rest is history.
Professor McCloskey’s last point in the article is so accurate and worth noting that I hope my above critique does not leave anybody doubting that she is a person worth reading (check out her article):
“The businessmen wearing the Adam Smith ties need to do a little reading of “The Wealth of Nations” and especially The "Theory of Moral Sentiments" on the train from Westport. Smith did not say, ever, that Greed is Good. And the Christians and other opponents of the sin of avarice need to stop conceding the point to the men of Westport. There is no paradox of thrift, not in a properly Christian world. Nor even in the world we have.”
(Google 'Deirdre McCloskey' and read some of her other articles.)
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