Monday, October 01, 2007

Gregory Clark Acknowledges that Adam Smith's Ideas May Not Be Represented by 'Modern' Economists

In all of the debate over Gregory Clark’s new book, A Farewell to Alms (Princeton University Press) – surely destined to become a major contributor to economic policy in the coming years – it is clear that the author is listening in an area of interest to Lost Legacy, namely comments on his earlier remarks about Adam Smith.

In an article, ‘Wealth and the culture of nations’, published in The Malta Independent (online) 1 October (sorry no URL; it didn’t come down with the Google Alert), Gregory Clark leads with this paragraph:

Modern economists have turned Adam Smith into a prophet, just as Communist regimes once deified Karl Marx. The central tenet they attribute to Smith – that good incentives, regardless of culture, produce good results – has become the great commandment of economics. Yet that view is a mistaken interpretation of history (and probably a mistaken reading of Smith).”

Its first sentence doesn’t seem to offer much comfort, though it is qualified as applying to ‘modern economists’.

And note what follows: ‘The central tenet they attribute to Smith’. He criticises what ‘modern economists’ (by which he must mean those economists of the ‘neoclassical school’) ‘attribute to Smith’.

And he adds:

Yet that view is a mistaken interpretation of history (and probably a mistaken reading of Smith).’

Who said that the age of reasoned debate is over, that scholars cannot escape their entrenched views even if their ideas are challenged authoritatively and based on checkable evidence?

In the debate, hosted on Econ Library Blog over the past few weeks by Bryan Caplan (to which I contributed modestly; see August-September archives), I criticised Gregory Clark’s conventional attribution of neoclassical assertions to Adam Smith as if he spoke in their language or shared their mathematical abstractions. He certainly did not subscribe to perfectly competitive markets, Solow’s exogenous growth theory, or the ‘Washington Consensus’.

Adam Smith wrote extensively on what causes people in nations to create wealth, namely the annual production of ‘the necessaries, conveniences, and amusements of life’ – not the necessary and convenient places for dictators, corrupt democrats and outright rogues to deposit stolen money from aid donors, investors and the people, for their own amusement.

In the article in question, Gregory Clark makes some interesting comments on how to change the culture of ordinary people in developing countries, and countries recovering from communism, in order to promote development.

A strong feature of the transfer from communist planning towards open markets within the iron grip of a dictatorial communist party, has been the massive number of successful entrepreneurs from among the overseas Chinese population, long resident within capitalist markets (Hong Kong, Taiwan, Malaysia, Singapore, North America, and Europe) who have returned to their family’s birthplaces, and funded many start-up businesses, expanded existing universities (many impressive buildings), bringing with them deep contacts with the hi-tech industries in the countries they have come from, and, crucially, have introduced licensing of mass market branded products for their own and for export markets.

This fits well will some of the ideas Gregory Clark advances in today’s Malta Independent. It’s worth reading for that, and for the disassociation of Adam Smith with the ideas of ‘modern neoclassical economists’.


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