Thursday, July 19, 2007

Adam Smith On the Analogy of the Circulation of Blood with Trade Flows

The World’s Fair: 'all manner of human creativity on display carries an article (here):

A Commentary on Flow: Muscles, Trains, and the Internet Converge (19 Jul) Benjamin Cohen, an Asst. Professor of Science, Tech., and Society at the University of Virginia, writes today:

One could delve considerably more deeply into any of these, but my own recent reading has me thrumming on the circulatory analogy. Specifically, Richard Sennett's 1994 monograph Flesh and Stone: The Body and the City in Western Civilization, and in particular its chapter on William Harvey's revolution. Though Sennett is by no means the first to draw a conceptual line from William Harvey's 1628 De motus cordis (with its bracing new delineation of the role of a pumping heart in powering the circulation of blood throughout the body) through, for example, Adam Smith's Wealth of Nations (1776), with its own revolutionary conception of the circulation of wealth, resources, workers, etc., in the modern economy, his comments seem especially pertinent in the current context.

Thus, for example:
The new understandings of the body coincided with the birth of modern capitalism, and helped bring into being the great social transformation we call individualism. The modern individual is, above all else, a mobile human being. Adam Smith's Wealth of Nations first reckoned what Harvey's discoveries would lead to in this regard, for Adam Smith imagined the free market of labor and goods operating much like freely circulating blood within the body and with similar life-giving consequences. Smith, in observing the frantic business behavior of his contemporaries, recognized a design. Circulation of goods and money proved more profitable than fixed and stable possession. Ownership served as the prelude for exchange, at least for those who improved their lot in life. Yet for people to benefit from the virtues of a circulating economy, Smith knew, they would be obliged to cut themselves free of old allegiances. This mobile economic actor would moreover have to learn specialized, individual tasks, in order to have something distinctive to offer. Cut loose, specialized Homo econimus could move around in society, exploit possessions and skills as the market offered, but all at a price

Adam Smith knew Quesnay, leader of the French Physiocrats and medical doctor, well from his meetings with him in France. He knew of Quesnay’s Tableau Economique and could recognize its affinity with the circulation of blood.

In Wealth Of Nations he used a particular gruesome image of blocked blood circulation to emphasise the risks to the British economy, as a result of the implementation of mercantile political economy policies, in respect of the British colonies in North America, and real problem of the ‘recent disturbances’ that were to lead to the successful rebellion of the colonists.

Mercantile colonial trade led to distortions in the allocation of capital across manufacturing industries because the monopolising spirit of the Navigation Acts, which reduced competition and thereby raised prices of colonial imports into Britain, leading to higher profits, drew off capital that would normally have gone in domestic activity, and into trade with the rest of Europe. If that trade was ‘blocked’ for any reason, the disruption it could cause would be serious, though not insurmountable.

It would be better if Britain did not have colonies (they costs too much to defend) and instead of imposing an exclusive monopoly, it traded freely with neighbours. Any way, Benjamin Cohen, might like to note this extract from Wealth Of Nations if he is looking for references in this area:

In her present condition, Great Britain resembles one those unwholesome bodies in which some of the vital parts are overgrown, and which upon that account, are liable to many dangerous disorders scarce incident to those in which all the parts are more properly proportioned. A small stop in that great blood-vessel, which has been artificially swelled beyond its natural dimensions, and through which an unnatural proportion of the industry and commerce of the country has been forced to circulate, is very likely to bring on the most dangerous disorder upon the whole body politick. The expectation of a rupture with the colonies, accordingly has struck the people of Great Britain with more terror that they ever felt for a Spanish armada, or a French invasion.

The blood, of which the circulation is stopt in some of the smaller vessels, easily disgorges itself into the greater, without occasioning any dangerous disorder; but, when it is stopt in any of the greater vessels, convulsions, apoplexy, or death, are the immediate and unavoidable consequences.’
(WN IV.vii.c.43. pp 604-5)


Post a comment

<< Home