Friday, January 13, 2006

Reply to Rothbard on Smith 1

Murray N. Rothbard, a distinguished contributor to the von Mises’ school of Austrian economics has had his essay (billed as the ‘Myth of Adam Smith’) republished from An Austrian Perspective on the History of Economic Thought , (two volumes, Edward Elgar, 1995; Mises Institute 2006).

In, if I may say so, an appropriate Rothbardian fashion (no prisoners, no ambiguity, no wasted prose), the Von Mises Institute announces its publication typical of his fighting style: “In an essay that made his
masterpiece on the history of thought famous, Murray Rothbard argues that Adam Smith's should not be called the founder of economics, nor a theorist who improved on economic science, nor even a consistent defender of the market economy. Rothbard sees him as unoriginal, confused, opportunistic, vastly overrated, and even dishonest. Yet this except is only a tiny bit of what you will find in this 2-volume wonder”.

I have only read, so far, a few of Rothbard’s contributions (I am working my way through von Mises’ “Human Action” amidst my other duties at present) and should not comment at this time until I am more familiar with the Austrian approach, which strikes me as formidable in its certitudes. However, I am familiar with the life and works of Adam Smith and spend a deal of time correcting obvious errors broadcast about him. To that extent I agree that there are many myths about the man, his writings and his ideas, and I could write articles under the title of ‘The Myth of Adam Smith’. My themes would be somewhat different from Murray Rothbard’s and other critics along the same lines, such as Professor Salim Rashid.

Given the length of Murray Rothbard’s slamming critique, I cannot reply to it in the detail it requires in one contribution and I shall return to the other aspects of where I disagree on either Rothbard’s facts or interpretation in future Blogs. While Murray Rothbard (1925-1995) cannot reply, I am sure many of the lively Mise libertarians Blogging today will pile in if they consider my points invalid. I am sure we can conduct the discussion without lacking in manners.

My first point of detail concerns “Sir James Steuart's (1712-80) outdated two-volume work, Principles of Political Oeconomy (1767).” Rothbard treats Smith’s neglect of mentioning Sir James Setuart’s then recently published book as evidence of something underhand and suspicious (so did Rashid), both hinting that this was responsible for Steuart’s book not doing as well as it might have done. I quote from Rothbard:

Sir James Steuart's (1712-80) outdated two-volume work, Principles of Political Oeconomy (1767). Steuart, a Jacobite who had been involved in Bonnie Prince Charlie's rebellion, was for much of his life an exile in Germany, where he became imbued with the methodology and ideals of German 'cameralism.' Cameralism was a virulent form of absolutist mercantilism that flourished in Germany in the seventeenth and eighteenth centuries. Cameralists, even more than western European mercantilists, were not economists at all—that is, they did not analyse the processes of the market but were technical advisers to rulers on how and in what way to build up state power over the economy. Steuart's Principles was in that tradition, scarcely economics but rather a call for massive government intervention and totalitarian planning, from detailed regulation of trade to a system of compulsory cartels to inflationary monetary policy.

Even though Steuart's Principles was out of step with the emerging classi­cal liberal Zeitgeist, it was no foregone conclusion that the work would have little or no influence. The book was well received, highly respected, and sold very well, and five years after its publication, in 1772, Steuart won out over Adam Smith in acquiring a post as monetary consultant to the East India Company.”

Adam Smith was not a Jacobite. His father had a credible record of commitment to the Hanoverian King’s cause and was party to the Unionist shenanigans that led to the merger of Scotland with England in 1707. Yet Smith was not a person to carry differences into personal relationships. His very first published writing was his preface to the publication of William Hamilton’s Poems on Several Occasions in 1748. Hamilton was a Jacobite in exile who was pardoned later. So, Smith had no personal or political reason to ostracise Steuart or his book. Indeed, we know he regularly conversed with him after his discreet return from exile in 1763 and when Smith returned from his Tour of France in 1766. As Smith directed some of his polemics against mercantile political economy in “Wealth of Nations” to confuting Steuart’s ‘false principles’, he hardly ignored Steuart’s book, though he admitted he did this ‘without mentioning’ it:

I have the same opinion of Sir James Stewarts Book that you have. Without once mentioning it, I flatter myself that every principle in it, will meet with a clear and distinct confutation in mine.” (Correspondence of Adam Smith: Smith to William Pulteney, 3 September 1772, no 133, pp. 163-4, Liberty Fund, 1987)

I cannot think of many, if any, occasions in which Smith criticised a living person’s writings by name, though he could be robust with the named writings of those who were dead. It may have had something to do with an old fashioned sense of the proprieties common among gentlemen in 18th-century Scotland. It was quite common in published works, well into the 19th century, for authors to refer to people’s names with most letters blanked out. For example, James Steuart would be referred to as: ‘J-------------t’.

Given Steuart’s theme in favour of mercantile state building, I consider its failure as a book after 1772 had more to do with its contents than to any sales it might have received if Smith had identified it in 1776. It took some time before “Wealth of Nations” made significant sales (a point mocked at by Rashid). From what I know of the various editions of Smith’s book they did not sell like hot cakes (he sent free copies to many important people) and I would wager they made greater sales in later editions in the 19th and 20th centuries than they did while he was alive. When Frederick List published his “National System of Political Economy” (1841) he lambasted Smith’s “Wealth of Nations” because it contained vigorous criticism of mercantile state building, which List saw as the foundation for German unification and nationalism. It consequences were seen in the 20th Century.

Rothbard makes, gratuitously, a side-swipe at Smith containing tendentious implications: “in 1772, Steuart won out over Adam Smith in acquiring a post as monetary consultant to the East India Company.” If this is meant to suggest that Smith had applied for a post with the East India Company in competition with Sir James Steuart and lost the contest, suggesting Steuart was judged the better monetary specialist, it could only convince someone who has no idea of the facts.

For one thing, Steaurt’s book was circulating from 1767 and Smith did not publish “Wealth of Nations” until 1776. For another, the circumstances surrounding Smith’s name lying before directors of the East India Company, who were looking for a specialist to advise them on the currency problem they had in Bengal, rubbish Rothbard’s implications. Smith did not apply for the post, as is clear in his polite remarks to the person who had put his name forward:

I think myself very much honoured and obliged to you for having mentioned me to the east India Directors as a person who could be of any use to them. You have acted in your old way of doing your friends a good office behind their backs, pretty much as other people do them a bad one. There is no labour of any kind which you can impose on me which I will not readily undertake. By what Mr Stewart and Mr Ferguson hinted to me concerning your notion of the proper remedy for the disorders of the coin in Bengal, I believe our opinions upon that subject are perfectly the same” (Correspondence of Adam Smith, Smith to William Pulteney, 3 September 1772, no 133, p. 164, Liberty Fund, 1987)

‘Mr Ferguson’ was Adam Ferguson, and Smith’s spelling of Steuart’s name is how the name was spelt in Scotland, whereas ‘Steuart’ or, more commonly ‘Stuart’, is the English spelling.

And while discussing Rothbard’s resort to a side-swipe’, I shall foolow him and mention the fact that so-called ‘Bonnie Prince Charlie’ was neither ‘bonnie’ (check his portrait) nor a ‘Prince’. He was the foreign-speaking son of the former British King, who had been deposed by constitutional means from the throne in favour of the Hanoverian King William of Orange. 'Carlies' father was a Pretender to the throne; his son’s claim to be a Prince was false (remember the saying that ‘treason never prospers, because if it prospers none dare call it treason’). As for Steuart being ‘involved’ in Charlie’s futile rebellion, he was his private secretary, suggesting a more intimate commitment to the Jacobite cause than merely being ‘involved’ in it. Many thousands were ‘involved’, but few of them became a ‘private secretary’ to its leader.

I intend to work my way through Murray Rothbard’s article in future Blogs.


Blogger Motoo said...

Dear Gavin,
It would be great if you would let me know what sources you rely on when you say "he regularly conversed with him."
The background of my curiosity is this: I once read an article written in Japanese, my lanquage, that cited Smith's 3 Sept '72 letter to show that Smith ignored Steuart's work in spite of being aware of it. If frequent conversations between the two economists are known facts, the article's attempt is marginal at best, if not completely out of the mark.

1:20 a.m.  

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