Wednesday, August 22, 2007

Over Pessimistic reading of Adam Smith's Correspondence or Lack of it Surviving

Irwin M. Stelzer, a contributing editor to The Weekly Standard, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London) sets a very standard for his making a sloppy statement in his piece, ‘Financial Markets and the Real Economy’ in Yahoo News (here):(22 August).

He quotes from a letter from David Hume to Adam Smith:

In the longer-term, it is the hard lessons learned by lenders and borrowers that will matter. It was ever thus. On 27 June 1772, David Hume wrote to Adam Smith, commenting on the financial crisis of the day, "...On the whole, I believe, that the Check given to our exorbitant and ill grounded Credit will prove of Advantage in the long run, as it will reduce people to more solid and less sanguine Projects, and at the same time introduce Frugality among the Merchants and Manufacturers: What say you?"

Unfortunately, so far as I can tell, Smith never answered Hume's question.”

Does it not occur to Irwin that he might not be expecting too high a standard of retained correspondence in the 18th century, which might very well explain the absence of a copy of the response from Adam Smith to his friend David Hume. [See: Corr. Letter no 131 from David Hume: pp 161-3]

At the time Smith was in Kirkcaldy, busy with Wealth Of Nations. There are wide gaps in his correspondence that has survived, as shown in ‘Correspondence of Adam Smith’ (Liberty Fund, 1987).

For example the previous letter (no 130) we have is dated ‘February 1772’ (Corr. P 161) and the subsequent letter (no 132) is dated ‘3 September 1772’ (Corr. P 163). We also known that he had most of his papers burned just before he died.

Possibilities: he replied to David Hume, but Hume did not preserve it; he replied to David Hume but did not keep a copy of it (no photocopiers! Or no amanuensis, or clerk), or he did not reply by letter to David Hume. We do know that he ‘replied’ to questions about the credit crisis lading to the failure of the ‘Ayr Bank’ in 1773, because Wealth Of Nations contains a detailed analysis of the crisis in WN II.ii.71-78, pp 311-17 and footnotes.

But in any of the three eventualities, there is no way of knowing. It is presumptuous to write: “Unfortunately, so far as I can tell, Smith never answered Hume's question” because this puts the burden of proof on whether his entire correspondence survived, or even the bulk of it.

The absence of evidence is not evidence of absence. Irwin should have written:

Unfortunately, if Smith did reply to David Hume to answer his question, no copy of the letter appears to have survived, but he did give a detailed explanation of the credit problems leading to business bankruptsies in 1772-3 and the Ayr Bank episode in Wealth Of Nations, which we know Hume read the book before he died. It may also have been a topic of conversation when they met.”


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