Thursday, February 22, 2007

The Moment When Brad Delong Understood What Adam Smith Was About

Every student (a status we should never lose, even unto retirement) knows the feeling; suddenly the light switches on, and you see further and deeper into a subject than you did the moment before. You are never the same again; and it happens again and again if you keep reading and researching in and around your subject.

One such ‘moment’, where the light struck (and is remembered with justified pride) occurred in the life of Brad Delong, twenty-five years ago, when still an undergraduate, and he wrote about it on his Blog yesterday.

I came across it too late last night to post, and I left it to read a chapter of Craig Smith’s new book on Adam Smith and spontaneous order. I thought about it, though, first thing this morning and wish to share it with you.

I only quote a small section of it – you MUST read it all for yourself. It concerns the time Brad Delong was searching for an original theme for his Bachelor degree final paper and was referred to a book by Keith Tribe, heavily influenced by Foucault. He titles his post with: "Two Months Before the Mast of Post-Modernism" Recycled” (those with an interest in sea stories will understand the first part of the title; those interested in literary criticism will understand the second, for the rest, those with a sense of irony will get by):

“I began to read Keith Tribe. He said very strange things. He said that the Wealth of Nations that economists read was not the Wealth of Nations that Adam Smith wrote. The Wealth of Nations that economists read was made up of two books: Book I on markets and Book II on capital. The Wealth of Nations that Adam Smith wrote was made up of five books: Book I on the "system of natural liberty," Book II on accumulation and the profits of stock, Book III on the economic history of Europe and why the empirical history of its economic development had diverged from its natural history, Book IV on the mercantile and physiocratic systems of political economy, and Book V on the proper management of the affairs of the public household by the statesman.

The Wealth of Nations, Tribe said, could not be a book of economics because a book of economics had to be about the economy. And there was no such thing as the economy in 1776 for a book of economics to be about. What was there? There was the undifferentiated stuff of the mixed social-cultural-political-trading system that governed production and distribution: material life. There was the study of the management of public finances. This was conceived in a manner analogous to the domestic-economic management of household finances. Just as--to Robert Filmer and others--the King was the father of the people, so the King's household--which became the state--had to be properly and prudently managed.

In the words of [Sir] James Steuart, who wrote his Principles of Political Oeconomy nine years before the Wealth of Nations, in 1767: "Oeconomy, in general, is the art of providing for all the wants of a family, with prudence and frugality. What oeconomy is in a family, political oeconomy is in a state." It is managing affairs to make the people prosperous and the tax collections ample by governing "in such a manner as naturally to create the reciprocal relations and dependencies between [inhabitants], so as to make their several interests lead them to supply one another with their reciprocal wants."

There wasn't, Tribe argued, an economy that an economist could write a book of economics about until the 1820s or so. …

And I became convinced that Tribe and Foucault were right. It was, indeed, only with Ricardo that the operation of what we now say is the economy--the production, exchange, and distribution of goods and services all mediated through market exchange--was seen as something that was important enough, or separate enough, or coherent enough to be something that it made sense to write books about, and, indeed, something that it made sense to be an expert in. David Ricardo was a political economist. Adam Smith was a moral philosopher. To try--as somebody like Joseph Schumpeter was--to grade Adam Smith as if he were engaged in the same intellectual project as Schumpeter was somewhat absurd.

Tribe applied this methodology to Adam Smith, his predecessors, contemporaries, and successors. What they were doing, before Ricardo, was Political Oeconomy--writing manuals of tactics and policy as advice to statesmen, although manuals restricted to what Adam Smith would have called (did call) a subclass of police: how to keep public order and create public prosperity. Hence for Adam Smith Book V of Wealth of Nations is the payoff: it tells British statesmen what they ought to do in order to make the nation prosperous, their tax coffers full, and thus the state well-funded. Book IV is a necessary prequel to Book V: it tells the statesmen in the audience why the advice that they are being given by others in other books of Political Oeconomy--by Mercantilists and Physiocrats. Book III is another necessary prequel: it teaches statesmen about the economic history of Europe and how political oeconomy of various kinds has been practiced in the past.

But Tribe's (and Foucault's) methodology collapses when we work back to Books II and I of the Wealth of Nations. For Adam Smith is not the prisoner of the discursive formation of Political Oeconomy. He is not the simple bearer of currents of thought and ideas that he recombines as other authors do in more-or-less standard and repeated ways. Adam Smith is a genius. He is the prophet and the master of a new discipline. He is the founder of economics.

Adam Smith is the founder of economics because he has a great and extraordinary insight: that the competitive market system is a remarkably powerful social calculating and organizing mechanism, and that the sophisticated division of labor to which a competitive market system backed up by secure and honest enforcement of property rights give rise is the key to the wealth of nations. Some others before had had this insight in part: Richard Cantillon writing of how once you have specified demands the market does by itself all the heavy lifting that a central planner would need to do; Bernard de Mandeville that dextrous management by a statesman can use the power of private greed to produce the benefit of public utility. But it is Smith who sees what the power of the "system of natural liberty" that is the market could be--and who follows the argument through to the conclusion that it forever upsets and overturns the previous intellectual moves made in and conclusions reached by the discursive formation of Political Oeconomy.

And once I had worked my way through to this conclusion, I could start to write my own thesis. I had broken the thralldom. Foucault's ideas of "discourse" and "archaeology" were not my masters, but my tools. And as I wrote it became very clear to me that between David Ricardo and even the later John Stuart Mill the discursive formation that was Classical Economics did not produce anybody like Adam Smith. There was nobody who made the intellectual leap--produced the epistemological break--that Smith had done that shattered Political Oeconomy and enabled the birth of Classical Economics. I could write my thesis about how the British Classical Economists never understood the Industrial Revolution that they were living through.
--J. Bradford DeLong, B.A. in Social Studies summa cum laude, June 1982.

These past four or more years when I have been reading many books, papers, journals and Blogs on Adam Smith, this is the first one that I can recollect that understands what Adam Smith was about in the Wealth of Nations, and that expresses it so well. It is hard to realize this is from an undergraduate’s essay on Smith, not a doctoral or post-doctoral thesis, or a magnum opus.

Here I was, anticipating with not a little pleasure, that my book on Adam Smith for the Great Thinkers in Economics series (Palgrave-Macmillan) would set the record straight – Smith did not write a book on economics; he wrote a book that made economics possible – and Brad had concluded the same and shared it with his examiners, quietly in 1982. It was an awe struck moment for me late last night; there is no doubt in my mind that Brad Delong on Adam Smith’s role in the history of economics is absolutely right, because I in my modest way know why too.

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