Wednesday, February 28, 2007

Beware Doctrinal Purity as Adam Smith Did

P J O’Rourke’s version of Adam Smith’s Wealth Of Nations generally has had a good reception in main stream media. I haven’t got round to reading mine yet. I’m saving it for April when I am hope to be nearing the end of writing my version, which may not concur entirely with “P.J.’s”, but it has had some good reviews and if it gets people interested in finding out more, all well and good.

Over at ‘Division of Labour’, a Blog by serious economists worth reading regularly, two of them, Michael Munger and Lawrence H. White, have offered brief criticisms.

Michael Munger writes:

Just finished reading PJ O'Rourke's new book, on Adam Smith's Wealth of Nations.
A disappointment. To be fair, I am a really, really big fan of both O'Rourke and of Smith, so my hopes were perhaps unrealistically high.

But Smith is subtle, and it is hard to understand his main thesis on division of labor. PJ apparently doesn't, or at least skips over it any real discussion. He wastes chapters paraphrasing Smith's language, instead of summarizing his ideas

And Lawrence H. White adds:

“Like Mike Munger, I recently finished reading P. J. O’Rourke’s On the Wealth of Nations. And like Mike, I was disappointed. I’m teaching undergrad History of Economic Thought this semester and I was hoping the book might be worth assigning. But it’s not really suitable. The book’s strong suit is its humor, but many of the jokes will be over the head of undergrad readers, most of whom (one must assume) aren’t already familiar with the subject.

Even more fatally, there are too many economic and doctrine-historical errors in the book. Fixing these would not have made the book any less funny. I wish P. J. or his editor had had the good sense to hire a few economists to vet the manuscript. If they had, we wouldn’t have to wince at amateurish misstatements.”

I would have liked Michael Munger to explain a bit about O’Rourke’s misunderstanding of the significance of Smith’s ‘main thesis of the division of labour’ – it certainly is a central idea of Smith’s political economy and it is an error to which many in the profession also committed over the 19th and 20th centuries (including such as Murray Rothbard, whom I have criticized on Lost Legacy in detail).

The short examples given by Lawrence H. White of errors about monetary theory and banking were most useful, though I might have reservations about White’s unelaborated upon views that:

“In fact Smith endorsed (to my view, mistakenly) two existing limitations on competitive private banking’s notes: the outlawing of notes below a minimum denomination, and the outlawing of clauses giving the issuer an option to delay redemption.”

That would depend upon just how much disruption you are prepared to tolerate while an economy adjusted to new changes that in longer term made sense, but which in the short term caused considerable personal misery to families caught up in them. In 18th-century Scotland, there were no margins for errors, no safety nets and no relief from utter destitution when things went wrong. And when they went wrong, people died, especially children.

Smith in this, and in regard to many other doctrinally sound economic practices (even tariff reform) considered that ‘humanity required’ a more cautious approach, which, where possible, mitigated the spillovers from doctrinal purity.

[Read the contributions at: Division of Labour Blog]


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