Wednesday, June 21, 2006

Critics of Smith Who Missed the Plot

Reflecting on the recent exchanges of between myself and persons published by mises.org on Rothbard’s (and to a lesser extent the views of Salim Rashid) on Adam Smith’s contributions of the division of labour, I think I can see where our differences have arisen.

So far the ‘debate’ has tended to focus on the minutia of the examples Smith quotes in Wealth of Nations - the ‘pin factory’ or rather, factories – he refers to more than one of them, one from Diderot’s Encyclopaedia (1755), with 18 distinct operations, and one he visited himself, with 10 men and boys employed (some undertaking several of the required operations).

Rothbard and Rashid make a fuss about Smith not acknowledging Diderot as a source, but in the circumstances of mid-18th century Scotland, when the division of labour was well-known and the current literature shows it to have been so , and hence never claimed, or implied, he was original in the topic, he may not have considered it important, at least not to the same degree modern PhD scholars are trained to cite every single fact, no matter how trivial, to demonstrate to their unforgiving examiners their command of the Literature.

I was drawn into debating the inaccuracy of Rothbard’s arithmetic and reading of the relevant paragraphs, as if these were an important source of our differences. They are not. At most they are mildly instructive. The main point should be whether what Smith was doing was consistent with his reasons for writing An Inquiry into the Nature and Causes of the Wealth of Nations. In this respect I am sure Smith was consistent and as sure that Rothbard, Rashid and others, missed the plot.

When writing in this area of Smith’s work some months ago for my contribution to Palgrave’s Great Thinkers in Economics series, I focussed on the underlying system of thought that Smith brought to all of his Works, and I did not take the usual approach of writing solely about the contents of Wealth of Nations, interesting and important as they are (they cannot be missed anyway).

Smith did not write a textbook on political economy, or a manifesto on how to, or why it might be a good idea to, change society (of which he had many criticisms); he wrote to understand how society, primarily in Britain, had arrived at its then current form. In essence, as Sam Fleischacker expresses it, he looked backwards, not forwards (which is why he had little to say about the future role of the industrial revolution and potential technologies, and such like).

Wealth of Nations (1776) opens with the division of labour and if these chapters are read with his Lectures in Jurisprudence (1762-3) we see the key to why he took twelve years to painstakingly research and write his inquiry into the nature and causes of the wealth of nations. The copy of the lectures covering the materials with which he opens Wealth of Nations were delivered towards the end of the session (March 1763) and as he had been giving them at least since 1752 in something like that form (perhaps earlier in his Edinburgh lectures too, 1748-51) the rather dramatic illustration he uses of the contrast between the living conditions and access to the ‘necessaries and conveniences of life’ of the common and ‘meanest’ British day labourer and an ‘Indian’ king (North American native), I believe, prompted his inquiry: ‘How was it that the ‘meanest labourer’ in Britain, living in a hovel and in dreadful ‘poverty’ compared to a rich landowner was nevertheless incomparably better off than the Indian (later editions, ‘African’) ‘prince’ who held the lives of ‘1000 naked savages’ at his disposal?

Rejecting any racial explanation (intelligence, culture, etc.,) Smith asserts that the cause was purely the existence and development of the division of labour in Europe and its non-development, or primitive manifestation, in North America and Africa. Now this must have prompted the follow-on question of why the division of labour – and with it its driving force, the human ‘propensity to ‘truck, barter, and exchange’ – was more developed in Europe and less developed in America?

In 1763, he did not know the answer, of course, but his Moral Sentiments (1759) had brought his name to the attention of Charles Townshend (who almost single headedly provoked through his taxation policies the American colonial rebellion – he was the British Chancellor) whose wife wanted her son, the Duke of Buccleugh (sometimes spelt ‘Buccleuch’), then aged 15 and at Eton, to go to France on the ritual ‘tour’ with a prominent academic Tutor.

Once in France in 1764-66, Smith commenced writing Wealth of Nations from his Glasgow lecture notes (we know because large chunks of the latter reappear in the former). That was what he was inquiring into and this is why the division of labour opens his report of his inquiries. Smith used the existing and well-known materials on the division of labour, known since Plato and observed widely since – citations of 18th century texts run to many dozens of items – to convey: a) his linking of what many knew about the division of labour already to the ‘force’ of the principle of ‘exchange’ (bargaining) – one was intertwined with the other (not widely known or much noticed in the literature then or since); b) the ‘force’ of the propensity to exchange set limits on the division of labour at any one moment – the market!; and c) the division of labour was weak in the first ‘Ages of Man’ (Hunting, Shepherding) – and progressively stronger in the later ‘Ages of Man’ (Farming, Commerce) and that the North American Indians (it was or had been different in Central America before the Spanish arrived) had not gone past Hunting as their mode of subsistence, and such agricultural activities as they had were primitive side-lines, rather than production sectors, and therefore they were bereft of the advantages of a division of labour. Given time they would have developed farming, but the Europeans arrived, who had been farming for 8,000 years (perhaps in parts for longer) and disrupted their ‘Natural’liberties.


Hence, I say that Rothbard and Rashid missed the plot, at least as Smith understood it, and they judge him by the standards of economic knowledge 200 years later. By the standards of his day, his insights into the nature and causes of the creation of wealth are at least worthy of a little respect.

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