Friday, January 27, 2006

Myths of Murray Rothbard no 6

Murray Rothbard writes his polemic against Adam Smith entirely based on his own reputation as an Austrian economist, making charge after charge against his target without giving the kind of detailed evidence in support of his case that one expects from a younger economist yet to make his or her reputation among professionals peers.

Rothbard apparently expected his Austrian colleagues and sympathisers (and others, such as myself, who admire their work without necessarily subscribing sufficiently to be an affiliate) to accept his, albeit intemperate, judgements uncritically. However, should his readers be familiar with Adam Smith’s life and work, they might recoil from his more extreme criticism, perhaps, as I do, by assessing Rothbard’s detailed points (on the few occasions where he gives any), which are clearly incorrect exegetically (as itemised in previous my postings 1-5) as bald generalisations more suitable for opinionated journalists than for reputable scholars.
In this respect, consider Rothbard’s criticism of Adam Smith on what became known after his death in 1790 as the ‘Industrial Revolution’.

Smith's use of an example of a small French pin-factory rather than a larger British one highlights a curious fact about his celebrated Wealth of Nations: the renowned economist seems to have had no inkling of the Industrial Revolution going on all about him. Although he was a friend of Dr John Roebuck, the owner of the Carron iron works, whose opening in 1760 marked the beginning of the Industrial Revolution in Scotland, Smith showed no indication that he knew of its existence. Although he was at least an acquaintance of the great inventor James Watt, Smith displayed no knowledge whatever of some of Watt's leading inventions. He made no mention in his famous book of the canal boom which had begun in the early 1760s, of the very existence of the burgeoning cotton textile industry, or of pottery or of the new methods of making beer. There is no reference to the enormous drop in travel costs that the new turnpikes were bringing about.
In contrast, then, to those historians who praise Smith for his empirical grasp of contemporary economic and industrial affairs, Adam Smith was oblivious to the important economic events around him

Rothbard, as pointed out earlier, misreads Smith’s paragraphs in “Wealth of Nations” on the pin factory to arrive at the conclusion that Smith only considered an ‘18’ operations to make pins example from the French Encyclopaedia (1775) and not the ‘larger British one’ which had (Rothbard alleges, without citing a reference) ‘25’ operations in ‘England’. Smith certainly quoted the 18 operations example from France, but left the ‘10 labourers’ example, which he affirmed that he witnessed (presumably in Scotland), where some of the ten operators undertook more than one operation each. Smith did not refer to the total number of operations at the factory he visited. There could be 18 operations, or any number greater than 18 up to and beyond 25. This is a telling detailed example of Rothbard’s habit of generalising in his rush to make a secondary point about Smith’s alleged plagiarism. Rothbard, for all we know, may have got the numbers mixed up from his secondary sources. What else did he mix up?

Was Rothbard aware of the conditions in which Smith wrote the bulk of “Wealth of Nations”, and certainly its first chapters? He was not writing in a well-endowed University library – he left Glasgow in January 1764. He wrote on the basis of whatever books he had acquired privately; he did not have a tenth of the books available to Rothbard in the last quarter of the 19th century, plus the 200 years or more of additional academic research published widely in journal articles. He had the examples of the division of labour from Plato and, perhaps, Petty, and others, including his student’s notes of Francis Hutcheson, the extract from the French Encyclopaedia and his notes from a visit to a small pin factory.

Rothbard sneers: “the renowned economist seems to have had no inkling of the Industrial Revolution going on all about him.” For a start, perhaps Rothbard elaborated on the details of the “the Industrial Revolution going on all about him” and gave details of whom among Smith’s contemporaries had an ‘inkling’ of the Industrial Revolution in the third quarter of the 18th century?

That Smith knew Dr John Roebuck and James Watt is beyond doubt. That he should have grasped the significance of the Carron Ironworks for the industrial revolution development is extravagant. What features of Roebuck’s investment were progenitors of the power-driven industry of the 19th century that became known as the Industrial Revolution? It was certainly large scale, but it was not power driven. T. S. Ashton (The Industrial revolution, 1760-1830, Oxford 1948) declared that the lighting of the furnace at Carron on 26 December 1760 was the day when the industrial revolution began, but this is from his well-documented hindsight not his foresight and the same hindsight is found in abundance among scholars, not in 1760, but after 1860 when the contours of industrial development taken together were visible to all who shared their research-fed literary privileged vantage points, including, of course, Murray Rothbard writing in the 1960s.

James Watt was Glasgow University’s instrument maker and part-time dabbler in mechanics. Smith taught yards away from Watt’s workshop but little untoward in terms of Watt’s future role in the power-driven industrial revolution was visible to Smith between 1751-1763. The early years of Watt’s experiments with steam power were related to the pumping of water out of coal mines (an ancient trade) and not the driving of factory-based machinery in the next century.

There has been a long-standing debate among economic historians about Smith’s awareness of the isolated, separate and dispersed changes slowly beginning to appear in the last quarter of the 18th century. I discuss this in more detail in ‘Adam Smith’s Lost legacy’ (Chapter 29: Palgrave Macmillan, 2005). I conclude broadly in favour of Charles Kindleberger’s assessment that he was not aware, nor had reason to be so, and that R. M. Hartwell’s assessment that he was aware is wrong in detail and in his assertions about the evidence.

As for Rothbard’s straws about ‘canals’, Smith discussed their suitability for public investment; of ‘turnpike roads’ he discussed their suitability for public or private management in Book V, though there was a long way to go before they would reap economies of scale (it still took two days to travel from Glasgow to Edinburgh, a distance of 40 miles, in the 1760s) and the state of most of Britain’s roads remained chronic well into the 1840s. Smith recognised their importance for commercial prosperity and he discussed the advantages of better roads for commercial transport by six-horse pulled wagons.

As with other details in Rothbard’s polemic, while there is room for debate about the conclusions we can draw from such details, and opinions may differ legitimately, I come back to my main charge that Rothbard on Smith is unfair where he is wrong and dubious when he says something with which reasonable people might be open minded. Rothbard and his sympathisers have no grounds for his expressed absolute certainties.


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