'Providence' Was Not Necessary for Adam Smith's Argument But Allowed Him to Make His Argument

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Gavin Kennedy

PRAXIS (5 December, 2007)) writes (here): “Invisible Hand - fragments from the history of a metaphor. (Part One. Featuring a lot of googling and almost no real knowledge)”, whichI mentioned a couple of days ago that I would return to his article with a comment (I have taken a short rest from copy-editing responses to my new book).

“At times this goes by the name of the ‘invisible hand’; at times, by the name Providence. In the other famous ‘invisible hand’ passage, from ‘Theory of [the] Moral Sentiments’, Smith articulates an early version of the ‘trickle down’ theory of income distribution.
“The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition.”
The invisible hand is here the hand of Providence – and the idea of Providence makes little sense outside an intellectual context which imagines a beneficent divine force behind the natural order of the world. Kennedy quotes Saint Augustine as a source from which Smith might have derived his phrase: “God’s hand is his power, which moves visible things by invisible means.” It’s surely not far fetched to see the idea of the invisible hand as invoking the hand of God.”

Comment
Interestingly, I addressed the same passage in the previous post on Doug Jones and you are referred to it. PRAXIS describes the invisible hand metaphor as Smith articulating “an early version of the ‘trickle down’ theory of income distribution”. A nice stylistic point but bear in mind the numbers involved among the great landlords: ‘the labours of all the thousands whom they employ’.

The landlords had no choice but to ensure the ‘thousands they employ’ survive between harvests and to do that they had to receive at least the customary level of subsistence. As the ‘thousands they employ’ also formed the lords’ armed retainers, who enforced his writ and fought his battles, it did not require anything mysterious to explain their behaviour.

“They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.”

Adam Smith wrote this knowing full well that in early Roman society the law required that the land be divided equally among the population and all attempts to carry the law out ended in failure. Inter-generational changes nullified the equal distribution; marriage alliances, inheritance maldistribution, growing populations, territorial expansion, local politics, or, if you like, human nature worked against it.

Roman law over the centuries created a massive litigation library of cases of arguments, some bloody, over inheritance disputes – historically quite advanced in scope and subtlety). So, ‘nearly the same distribution’ when tried, failed in the Roman Empire.

But the vast estates within the Roman empire and after it required labour to produce the sustenance and subsistence for most and its luxurious version for a few, without which it could not be sustained. Rome expanded militarily; barbarian lords and their subordinates depopulated the commercial networks of cities, the countryside was ravaged by warring Lords and ‘banditii’, and it took centuries to return to local peace.

The lords learned that feeding their employees was a necessity for their security to continue. They did not need the illusion of Providence to nudge them in this manner; self survival was sufficient. Indeed, ‘Providence did not divide the earth’; violent men did that on their own account.

In 18th century British society, Smith had no choice (self-preservation) but to accord ‘sage’ religious sanction to what violent usurpers (of each other) did on their own, though it was not ‘safe ‘to say so. His readers included many of the descendants of lords, who held sway politically in the king’s parliament, and his overarching aim was to persuade those who had influence, and those who influenced them, to adopt policies that would aid ‘progress towards opulence’, which would necessarily ‘spread to the inferior orders’ (the poor).

Picking St Augustine out from among 11 other authors for making a case for the invisible hand is disingenuous, if it is to be into a meaningful case that Adam Smith meant his use to be taken this way. The point is that the metaphor was well known to educated readers and Smith drew on it for his purpose, not to introduce metaphyiscal influences into his arguments. His case was perfectly explained on the two occasions he used in his books and the metaphor added nothing that was not perfectly understood from his two examples before he introduced it.

Here is a list of prior uses of the ‘invisible hand’ in literature, known to Adam Smith:
● Homer (Iliad, 720 BC); ‘And from behind Zeus thrust him on
with exceeding mighty hand’;
● Horace (65-8 BC), Ovid (Metamorphoses,
8 AD): ‘twisted and plied his invisible hand, inflicting wound within wound’;
● Lactantius (De divinio praemio, c.250-325): ‘invisibilis’;
● Augustine, 354-430, “God’s ‘hand’ is his power, which moves
visible things by invisible means’ (Concerning the City of God, xii, 24);
● Shakespeare, ‘Thy Bloody and Invisible Hand’, (Macbeth, 2.3
; 1605);
● Daniel Defoe, ‘A sudden Blow from an almost invisible Hand,
blasted all my Happiness’, in Moll Flanders (1722); ‘it has all been brought
to pass by an invisible hand’ (Colonel Jack, 1723);
● Nicolas Lenglet Dufesnoy said that an “invisible hand” has
power over “what happens under our eyes”;
● Charles Rollin (1661-1741), described as ‘very well known
in English and Scottish Universities’, said of the military successes of
Israeli Kings “the rapidity of their consequences ought to have enabled them to discern the invisible hand which conducted them”;
● Charles Bonnet (whom Smith befriended in Geneva in 1765)
wrote of the economy of the animal: “It is led towards its end by an
invisible hand”;
● Jean-Baptiste Robinet (a translator of Hume) refers to
fresh water as “those basins of mineral water, prepared by an invisible
hand”.
● Voltaire (1694-1178) in Oedipe (1718) writes: “Tremble,
unfortunate King, an invisible hand suspends above your head’; and ‘an
invisible hand pushed away my presents’;
● Professor W. Leechman (1706-1785) (1755): ‘the silent and
unseen hand of an all-wise Providence.'
● Kant E.(1784) ‘Universal History’: ‘leads on to infer the
design of a wise creator and not [the hand of a malicious spirit]’.

Praxis stated: ‘It’s surely not far fetched to see the idea of the invisible hand as invoking the hand of God’, as if this is self-evident.’ That may be true for Praxis, but it is stretching it for Adam Smith (back projection onto Adam Smith is a risky business). What were Homer and Horace on about? They both lived in societies that believed in invisible gods (‘pusillanimous superstition’ Smith called it in his History of Astronomy; see previous post).

Moreover, Praxis must explain what ‘an invisible hand’ brought to the subjects in Moral Sentiments (minimal subsistence for self-preservation of Lord) and Wealth Of Nations (risk-avoidance of some merchants) that were left unexplained by Adam Smith’s clear prior explanations of the events covered by the invisible hand metaphor?

This question must be answered just to get past first base before going on to explain the explanatory power of so-called invisible hands in the wilder (and superstitious) use invisible hands to explain market forces in the wider economy, which was not explained by Adam Smith (and all economists since) about how markets work.

A graduate student answering a question on markets in an examination to prove his or her competence, who slipped in as the answer that it’s all achieved by ‘invisible hands’ would hardly justify a pass mark, let alone a top grade, if that is all that was said. But if he or she demonstrated competently how markets work there would be no need whatsoever to invoke an invisible hand into the explanation, and if it was it would not justify a top grade (evidence of time wasting). If there is need, then the competence standard is not reached.

“But for Smith’s audience, despite the newly sceptical age in which he wrote, the concept of Providence could be invoked without provoking too many secularist doubts.”

Praxis misunderstands 18th-century Scotland. It was not ‘secularist doubts’ that were foremost in the minds of Enlightenment thinkers. It was the risk of provoking religious doubts among those in a position to make life uncomfortable for those who appeared to doubt revealed religion.

Using Providence as a code word had the same soporific effect on the zealots as experienced in the declining days of the Soviet Union and East Europe, which impelled intellectual doubters of the ‘glories’ of communism to work approved passages into their speeches, articles and books to ward off the attentions of the State censors.

Doug Jones and Credulous Reading of Adam Smith, Part 2

Doug Jones (Part 2) writes on Blog called Scribblative Agincourting (here)and his post on 27 February is entitled: ‘Adam Smith’s Wacky Mythology’. It could do with the sub-title: ‘where a little knowledge can be dangerous’:

“… Adam Smith even attributed the distribution of land to providence rather than to social forces. But even so, the invisible hand would come to the aid of the poor:
‘….The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life….When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition. These last too enjoy their share of all that it produces. In what constitutes the real happiness of human life, they are in no respect inferior to those who would be so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for’ (Theory of Moral Sentiments).

“Smith uses the invisible hand to produce a truly Panglossian vision of society, an attitude that carries over in today’s standard economics….Needless to say, the consequences of this for modern economic policy are staggering.” — Erik Reinert, How Rich Countries Got Rich…And Why Poor Countries Stay Poor (New York: Carroll & Graf Publishers, 2007), 52,53.

Gasp. Why didn’t Christ or the Old Testament prophets figure out this astronomical solution to poverty? They needn’t have wasted all that breath. Just let the planets do their economic thing. The odd story about how a large segment of the modern Church absorbed Smith’s wackiness has yet to be written, but it has to do with simplicity, Proverbs 1:22 style.”

Comment
Doug Jones’s interpretation of Adam Smith slides into ‘pious’ verbiage. Spare a thought for the context. First, Adam Smith was well aware of how land was divided among people. He was under no illusions that it was divided by ‘Providence’ – it was divided by men not ‘Providence’, who were often violent, or gaiend it from inheritance or marriage.

In his Lectures On Jurisprudence he wrote about how the ‘barbarian invasions’ of Western Europe destroyed the Roman Empire, which was a significant event in Smith’s version of the history of the world, and his account of the allodial land ownership that followed (owned by those strong enough to take and hold it) and its transformation over centuries into feudal titles awarded by a king (the most violent head honcho among ‘softer’ honchos), was not assisted by anything invisible – it as the all-too-visible brute strength of violent retribution on those who resisted the existing settlement of land ownership and in heritance.

How then did ‘Providence’ get into Smith’s account in Moral Sentiments? Look at the sentence: ‘When Providence divided the earth among a few lordly masters’ and consider the power structure he lived in. First, set aside any views you may have that the right to freedom of speech or expression was protected by law in 18th century Britain (or anywhere else in 1759). Statements likely to incite the ‘inferior orders’ to discord, rebellion, and disrespect for their masters risked retribution by ruin, jail, transportation or capital punishment.

If Adam Smith had written something like ‘When lordly masters divided the earth among themselves…’, he would have collided with the existing power structure and suffered whatever consequences their impatience would bestow upon him. He may not have found a publisher, nor a wide readership, many of whom were among the ‘lordly masters’ of his day.

As it was, in 1793 (he died in 1790) his writings were studied closely and his close friends (Professor Dugald Stewart) were interviewed for what he did write, heavily sanitised as it was, for signs that his books could incite the ‘inferior orders’ to disorder.

When you realise that 1793 was the opening years of the French Terror and the British establishment panicked at the slightest sign of unrest, hanged some and transported many more to Australia, the threat was real (see Emma Rothschild’s, Economics Sentiments: Adam Smith, Condorcet and the Enlightenment – Harvard, 2002), and Smith, a ‘man of the world’ had acted with great caution never to provoke the men in power (many of whom he knew well).

Those who read Moral Sentiments carefully notice how studied are his references to the role of the Church and items of theology. In Scotland, its ‘Taliban’ wing of zealots patrolled everywhere, looking for apostasy, blasphemy, and atheism, and showed their willingness to prosecute anybody considered by them to show disrespect tp the Church.

Even Adam Smith’s tutor, Professor Frances Hutcheson, an ordained Minister in the Ulster protestant church, then, and still, not a body given to liberal interpretations of the Bible, was prosecuted by them (Smith was a student of his at them time). David Hume, Britain’s, perhaps Europe’s, foremost philosopher, was denied a professorship (twice) for his careful, though considered outspoken, scepticism about religion.

I think Doug Jones reads too much into Smith's use of ‘Providence’ in the passage he quotes. The mystery of the rest of the sentence: ‘Providence’ [or even the violent lords who] ‘neither forgot nor abandoned those who seemed to have been left out in the partition’ is no mystery at all; not even miraculous, and certainly not requiring ‘an invisible hand’ to those who realised what was going on.

The Lords could not do all the work of their farms and flock alone; they had no choice but to hire, enforce, or make slaves of the labourers who would do their work for them. And, having arranged it that way, they had to feed their retainers, servants, soldiers, and serfs at least to the level of sufficient subsistence to ensure they were fit enough to work, could feed their families and allow their children to survive into adulthood if their descendants were to survive to the next harvest, never mind the next generation.

How is it that Doug Jones – and all the others who rush over this paragraph in Moral Sentiments – relapses to the literal interpretation of Adam Smith’s use of the common metaphor of an ‘invisible hand’, well known to Smith’s readers in the 18th century?

If the great landlords did not distribute the product of their vast estates, net of their own prodigious consumption, to those who served them in their castles, fought their battles when required, and who worked their estates, how were they to survive as Lords? Now, Smith was too careful to pose it so starkly, so he used the metaphor on ‘an invisible hand’ to give the actions of the great landlords a ‘nicer’ air. How socially reassuring Smith’s literary language would read among those looking for trouble-stirring scribblers.

If there was more to Providence, Smith would have placed the ridiculous notion of an actual ‘invisible hand’ at work at the centre of this moral philosophy (Book IV of Moral Sentiments)and at the front of his Wealth Of Nations (Book IV too!) and not in single throw-away lines near the end of both books.
Hence, that is why I suggest that for some people (credulous may be too strong a word; oh, I don’t know) a ‘little knowledge is dangerous’…

Doug Jones and 'Wacky Mythology'

Doug Jones writes on Blog called Scribblative Agincourting (here)and his post on 27 February is entitled: ‘Adam Smith’s Wacky Mythology’. It could do with the sub-title: ‘where a little knowledge can be dangerous’.

“Adam Smith’s first work was on astronomy, and the metaphor adopted by Smith and his followers remains influential in contemporary economics: just as the planets are kept in orbit around the sun by an invisible hand, so will the invisible hand of the market economy automatically find its equilibrium as long as people do not interfere. There is, then, a very fine line dividing the invisible hand of the market and the simple faith in fate and providence.”

Comment
Yes, Smith’s ‘History of Astronomy’ was written partly when he was a student at Oxford (1740-46) and partly as a would-be tutor (1746-51), with a possible addendum on Newton’s work after 1773. It was also the last of his works published - posthumously in 1795 (by his executors, Joseph Black and James Hutton).

However, Adam Smith’s reference to ‘the invisible hand of Jupiter’ had absolutely nothing (not even a scintilla) to do with gravity, the planets and orbits round the sun. Where on earth (or the heavens) did Doug Jones get that loony idea from? It most certainly was never gleaned by Doug Jones from reading Adam Smith’s ‘History of Astronomy’.

The essay can be found in ‘Essays on Philosophical Subjects’, edited by W. D. D. Wightman, 1980/82. ‘The Principles which lead and direct Philosophical Enquires; illustrated by the History of Astronomy’, III.2pp 49-50, Oxford University Press/Liberty Fund.

Here is what Adam Smith wrote (he is discussing the ‘origins of polytheism’, ‘vulgar superstition’ and beliefs in ‘invisible gods’):

‘Fire burns, ands water refreshes; heavenly bodies descend, and light substances fly upwards, by the necessity of their own nature; nor was the invisible hand of Jupiter ever apprehended to be employed in those matters.’

At the end of the paragraph, Smith adds: ‘And thus, in frist ages of the world, the lowest and most pusillanimous superstition supplied the place of philosophy’. (p50)

It seems that Doug Jones had seen the word ‘Jupiter’ and 38 pages later, seen the word ‘Newton’, and assumed there is a connection. There is a connection but not the one drawn by Doug Jones.

The ‘invisible hand of Jupiter’ to which Adam Smith refers is not to the planet Jupiter, but to the Roman god, Jove (Jupiter), who watched over Rome and those within it. His statue was placed on the Capitoline hill of Rome, and glowered over those who would harm the Emperor, ready to strike with thunderbolts anybody of who threatened him harm.

Adam Smith was a classical scholar who demonstrated his classical credentials in both of this books, which are replete with classical references well known to most of his readers (lectures in his day were still given in Latin by the professors, though Smith followed Professor Hutcheson in switching to English; but competence in Latin was a necessary condition for matriculation at all universities then (and was still necessary as late as the 1950s in Scotland).

Roman coins had an image of Jupiter on them casting his thunderbolts. So nobody reading Smith’s History of Astronomy would make such a basic error of confusing Jupiter, the god, with the planet. Nor would they misunderstand Jupiter’s invisible hand with the invisible force of gravity. This makes the identity of the ‘planets … kept in orbit around the sun by an invisible hand’ with the so-called ‘invisible hand of the market economy’ a tenuous and wholly problematic, even 'wacky myth'.

Just as Adam Smith was not guilty of the first allusion about gravity by Doug Jones, he also was not guilty of the second allusion to the market. If I have time today I shall return to the rest of Doug Jones’s article, which is equally tendentious.

A Serious Critique of Lost Legacy Writes (part 1)

Currently, I do not have much time for commentary and reading other Blogs, but I cam across a most entertaining Blog making some pointed remarks abou Lost Legacy's efforts to correct the overwhelming consensus that Adam Smith had a 'concept', a 'theory', a 'principle', even a 'paradigm' of 'an invisible hand', guiding the market places of the world to the social betterment, etc., of society, despite - and this is where I part company with most economists, despite my strong belief that markets are the least worst, by a long way, that humans may organise a society's affairs - irrespective of the nature of the self-interests of those who participate, even when their actions are socially disruptive, even malign (such as is the cases with monopolists, protectionists, and polluters).

Well, while looking up a reference, I came across an article on this site: PRAXIS here
(5 December, 2007: yews, I know, I missed it when it was published!):

"Invisible Hand - fragments from the history of a metaphor. (Part One. Featuring a lot of googling and almost no real knowledge)"

"Over on Adam Smith’s Lost Legacy, Gavin Kennedy is fighting an infinite one man losing battle against the misattribution of the ‘invisible hand of the market’ doctrine to Adam Smith. Smith only used the phrase, Kennedy tirelessly asserts and reasserts, one time in ‘The Wealth of Nations’ – not discussing the market in general, but discussing an individual’s decision to invest in the domestic economy, rather than in riskier foreign ventures. Here’s the famous quote:
“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

Kennedy tells us that the pervasive use of this phrase in twentieth and twenty-first century economics misrepresents Smith’s meaning. Smith isn’t claiming that laissez faire market operations will always, or even usually, increase the common good. He’s making a specific point about a specific issue, using a vivid metaphor – and to take the doctrine of the ‘invisible hand’ as the cornerstone of Smith’s legacy is to do considerable violence to Smith’s nuanced thought.

Kennedy has a point - the ‘invisible hand’ metaphor does not play the prominent role in Smith’s work that it does in modern economics. But I have some doubts about Kennedy’s broader argument. There is a strong sense in Smith that social and economic relations are guided by a beneficent impersonal force to bring about the greatest social good. At times this goes by the name of the ‘invisible hand’; at times, by the name Providence. In the other famous ‘invisible hand’ passage, from ‘Theory of the Moral Sentiments’, Smith articulates an early version of the ‘trickle down’ theory of income distribution."

Comment

Praxis goes on to make a good case for the contrary view and its author attempts to rescue the invisible hand metaphor from the influence, such as it is, of Lost Legacy.

With only two days left to go to return the book files for my new book, Adam Smith: a moral philosopher and his political economy (Palgrave, July 2008) before it goes finally to press, I do not have time to delay that necessary work to see what can be made of the argument in Praxis (the first serious critique I have read so far of my views on what became of the invisible hand metaphor in the hands of the epigones of Adam Smith, located in the environs of Chicago University, who is, in my view, somewhat unrelated to the Adam Smith who was born in Kirkcaldy in 1723).

I can promise you that I shall return to the Praxis critique in the next few days once I have had a final read of the proof files. Because the Praxis critique is written seriously I shall start by seeing where we can agree; I shall search also to see if other parts of the Praxis critique have been published in the meantime.

Exchange Pre-Dates Capitalism

Bill Bonner writes (25 February) in The Daily Reckoning (here) that
‘Capitalism Was Just Fine Until Politicians Got Involved’

“The genius of capitalism was described by Adam Smith more than 200 years ago: Let a man seek his own advantage; sometimes he will flourish. Sometimes he will flounder. But always, the process of innovation and failure will reward the ‘common good.’
“It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest,” is how he put it.”

Comment
There is no connection between the two paragraphs.

The first is off the pace: Adam Smith did not write about what became capitalism in the mid-19th century (when the word was first invented in English by an English novelist, William Makepeace Thackery (The Newcomes, 1854).

Smith wrote about small scale merchants and manufacturers, and local town markets where produce was sold from near and far but definitely not in ‘big boxes’. Most business was small scale, funded by scrimped savings from past incomes, occasional inheritance, and modest borrowing. They were single owners or small co-partneries, in which the owners pledged all their assets in cases of bankruptcy – their liabilities were unlimited and extended to their entire fortunes.

There were a few larger-scale enterprises in coal mining, potteries, engineering works and shipping, but for the most part capital-stock was scarce, risky and carefully managed. By the end of the 18th century and through the 19th century, larger amounts of capital became available, associated with the entrepreneurial innovators, as a separate capital-owning stratum slowly emerged, eventually able to amass large capitals.

New organizational forms appeared, re-modelled from the large chartered monopoly trading companies which had been formed to serve overseas trade and colonies, but without the trappings of monopoly powers and closely linked to civil projects and technological innovations.

The famous ‘butcher, brewer, and baker’ example long pre-dated 19th century capitalism. It was linked to the pre-historic propensity to ‘truck, barter, and exchange’, which Adam Smith regarded was the core principle of human behaviour in the simplest of market-place transactions. Fittingly, it appears in Book I of Wealth Of Nations as a necessary consequence of the division of labour and specialisation.

It is integral to Adam Smith’s theory of exchange: ‘Give me that which I want, and you shall have this which you want, is the meaning of every such offer, and it is in this manner that we obtain from one another the greater part of those good offices which we stand in need of.’ (WN I.ii.2: p 26) I

t is clear that to serve our own interests, we must, absolutely must, serve the interests of those with whom we transact. This is more than an individual ‘seek[ing] his own advantage’. He has to do so by serving the interests of the other person, which is why he can only succeed by addressing ‘their regard to their own interest’ and not just his own.

Once people realised this truth (because it worked) aeons ago, then societies had an alternative to mere plunder as the source of their wealth, which he described as the ‘annual consumption of the necessaries, conveniences, and amusements of life’. Violence can consume wealth, it cannot create it. A man seeking ‘his own advantage’ needs a partner to exchange what each wants from each other. That pre-dates capitalism by many millennia. That is what Adam Smith wrote about.

Professor Marian Bowley Understood Adam Smith

Palgrave's copy-editor’s queries from the file proofs of 'Adam Smith: a moral philosopher and his political economy' arrived the other day while I was in hospital and I am now working through them. This requires the checking of numerous bibliographical titles, publishers, and dates.

Whilst checking my book cases, I came across a book at the back that I had forgotten I had bought a couple of years ago, which I intended to read for my then intended volume on who among the economics professionals were responsible for the misuses of Adam Smith’s legacy since he died in 1790 (I have mentioned this postponed project several times here).

The book is by Marian Bowley Studies in the History of Economic Theory before 1870, Macmillan, 1973. Marian Bowley (1911 - 2002), was Professor in Political Economy in the University of London.

Late last night I took Bowley’s book to bed for a read, and continued early this morning. It was with mounting trepidation that I began reading her analysis of Richard Cantillon’s work (1734) and compared it with Adam Smith’s Wealth Of Nations (1776).

Of particular interest to me was her chapter on exchange value (‘The price Mechanism in the Eighteenth Century') and, as she began to explore Adam Smith on the ‘labour theory of value’, I became apprehensive that she would expose the analysis of my Adam Smith's version to anything I had missed or upon which I was seriously mistaken.

It is remarkable that I found we agreed completely that Adam Smith does not deserve the reputation given to him as an advocate of a ‘Labour Theory of Value’. For this I am especially grateful, because since I wrote the first draft of that chapter of my book (2006) I felt somewhat isolated among economists for concluding that a close reading of Wealth Of Nations shows that the attribution made about his views on value is completely misleading. He did not articulate a labour theory of value for other than a hunter society (the first age of mankind).

Murray Rothbard, for one, owed Adam Smith an apology for the uncompromising critique of Smith’s views that he made and for lumbering him with the slur that in those chapters dealing with value Smith was instrumental in misleading Ricardo and, in ultimo extremis, was responsible for the nonsense written by Marx on 'surplus value'.

Marian Bowley came to this conclusion via different route to mine as she worked through the relevant chapters of Wealth Of Nations (she pointed out correctly that Smith said next to nothing about labour value in his Lectures On Jurisprudence) and was with great pleasure to find that she was one of the few (if any!) economists whom I can now quote as not falling for the Labour Value fallacy attributed to Adam Smith.

Paul Douglas, for instance, wrote of Adam Smith's theory of value that 'it might seem to be the path of wisdom to pass these topics by in discreet silence', a most patronising dismissal imaginable, and utterly unnecessary, as well as being untrue.

I salute therefore the memory of Professor Marian Bowley who stands out from the mass ranks of modern econmomists because she read carefully what Adam Smith actually wrote, which can hardly be said of so many others, including several Nobel Prize winnners.

Postscript: All the files of my book have arrived and they want them back by 28 Feb, so blogging may be a little sparse in the next few days. I cannot sit for hours on end if I am to recover properly. Apologies.

An Explanation for Absence and a Report

[I have had to undertake hospital treatment this week from which I am now recovering with the physiotherapy part of the programme. I am also on a course of medicine to smother recurring pain (I am not usually into taking pills). This has prevented me from commenting on Lost Legacy. Anyway, I am now ‘mobile’ again around the house.]

I took advantage to read some books, including one’s I had read before, and I would like to mention two of these.

A much neglected work of Adam Smith’s must be his ‘Lectures on Rhetoric and Belles Lettres’ (LRBL) [1762-3] which was found in 1958 by Professor John M. Lothian (1896-1970) among papers of the Forbes-Leith family, which Professor Lothian published in 1963 (two hundred years after Adam Smith delivered them at Glasgow University). The were subsequently published in the Glasgow Edition series of the Works and Correspondence of Adam Smith, edited by J. C. Bryce (with much assistance from Andrew Skinner) in 1983. There is an excellent low-budget printing of them by Liberty Fund, which is within reach of any student on a tight budget.

It covers much more than rhetoric (though those lectures soon explain why Adam Smith wrote his major works, Moral Sentiments and Wealth Of Nations in the manner he did. He included a briefer version of his Considerations Concerning the First Formation of Languages (1761) in Lecture 3, and the editors have included the original article as an appendix in LRBL. Reading the lecture, as taken down by unknown students, gives a flavour of his lecture style (he read out his lectures from pre-prepared notes).

Moreover you will see the outlines of his ‘evolutionary’ approach to the ‘slow and gradual’, unintentional process by which workable institutional relations are created independently by disparate individuals seeking to better themselves (not necessarily financially – a somewhat limited idea of what Smith meant by everybody seeking to ‘better themselves’). This evolutionary theme was picked out by Professor Jim Otteson, in his ‘Adam Smith’s Market Place of Life’ (Cambridge University Press), which I strongly recommend to you, as the common theme running through all of Smith’s published works, and which I fully endorse in my new book, Adam Smith: a moral philosopher and his political economy’ (Palgrave, 2008-in press).

The other book that I re-read, and much enjoyed again, was Knud Haakonssen’s, ‘The Science of a Legislator: the natural jurisprudence of David Hume and Adam Smith’ (Cambridge University Press, 1981). This is a tour de force through David Hume’s ‘Treatise..’ and ‘Enquiry…’ and through Adam Smith’s Lectures On Jurisprudence (another extraordinary tale of the finding of lost manuscripts written by students as notes of Adam Smith’s lectures at Glasgow University, one set found and published by Professor Edwin Canaan in 1896 (now known as ‘LJ(B))’ and dated by the student as ‘Report of 1766’ but which is conventionally dated by scholars as 1763-4 - Smith left the University in January 1764.

The second set of lectures in LJ was found by Professor J. M. Lothian in Aberdeen in the same library where LRBL was found, and these are known as ‘LJ(A)’, covering the dated sessions for 1762-3. The Glasgow Edition series included Lectures On Jurisprudence, edited by Ronald Meek, D. D. Raphael and P. G. Stein, which Oxford University Press published in 1978, followed by the re-print edition from Liberty Fund in 1982.

In my view, Wealth Of Nations makes for an impoverished read without you having read before or afterwards Smith’s Lectures On Jurisprudence. Now this is a formidable reading task because it’s over 500 pages, and this is where Knud Haakonssen’s, ‘The Science of a Legislator: the natural jurisprudence of David Hume and Adam Smith’, reveals its extraordinary power. Read Haakonssen’s book first, and, with Lectures On Jurisprudence by your side, re-read Haakonssen’s by following his text with your reading his detailed references to LJ(A) and LJ(B), and Wealth Of Nations. You will bring Haakonssen’s insightful comments and analysis to the references from Smith’s works, and will soon begin to appreciate Haakonssen’s scholarship, and what Adam Smith was getting at.

It certainly worked for me some years ago and it was a great refresher this week, pre- and post-op. I strongly recommend it for you.

Adam Smith's Example of the Little Finger and the Chinese Earthquake: a debate

Lost Legacy received a comment from the author of the article mentioned two posts below (on the man's little finger and the Chinese earthquake in Moral Sentiments) and because he entered it in the post immediately below on an entirely diferent subject (student memories), I have re-posted his comments and my response here because it deserves a wider readership in view of the big names who support his interpretation:

"tarmstro3 said...
Thank you, but I’m not sure I’ve come to an “unwarranted and erroneous conclusion.” If I did, than you are also suggesting Gary Becker–a Nobel Prize and Presidential Medal of Freedom winner–did as well.

Smith describes his “little finger” and China bit and goes on to change his tone. That’s true. He says:

“It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.”

His point seems to be clear and direct. We do not serve others–i.e. “neighbour” or “mankind”–because we love them, we do so because of honor, dignity and “superiority of our own characters.” Notice he is still saying we don’t do good for others because we like them, we do good for others because of our love for ourselves. We are pompous creates who are concerned about our own dignity and self worth.

I don’t see how anyone could read it any other way. And yes, I own copies of both Adam Smith's great works, but I'll admit to only reading Wealth of Nations. You have me there.

Gary Becker, myself and others read it differently than you. Yes, people appeal to other people's interest in order to help themselves. That's true. But why do we appeal to other people's interests in the first place? Is is not because we are just trying to satisfy our own interests?

All intellectuals I know of read it like Becker and myself. Just check your typical Milton Friedman, Thomas Sowell, Thomas DiLorenzo, etc. books.

Thank you, and I'll plan to continue reading your blog, although I'm sure we still disagree."

My response:

Hi ‘Tarmstrow’

Thank you for responding.

Authorities are not in themselves a certainty that their interpretations of Adam Smith’s texts are correct. The only relevant authority in our differences of interpretation of something Adam Smith said can only be Adam Smith’s text. Modern interpretations of Wealth Of Nations and Moral Sentiments are replete with errors of attribution and interpretation of his meaning, both in the statements he made and in the relevant context in which he made them.

Adam Smith lectured and wrote in the classical rhetorical tradition. He stated a proposition which appeared to state one thing and then questioned what he had stated with further elaborations until he had undone the original statement. The single, though long, paragraph I quoted is an excellent example of this lecturing technique. He regarded it as the best way to educate young students.

Moral Sentiments (1759) was written from his class lectures in his moral philosophy course at Glasgow University (1751-63). They first accepted what he stated – it being a reasonable account of the topic – and then, while their acceptance was fresh in their minds he gradually unpicked it and helped them realise their first acceptance was in error. They were unlikely to forget the lesson (learning being about correcting our errors and confusion).

Consider the extracts:
‘When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble?’

Bernard Mandeville (1724: ‘Fable of the Bees’) generalised the ‘passive feelings’ into the guiding principle of human behaviour. Adam Smith rejected his philosophy (‘private vice, public virtue’) as ‘licentious’ (TMS VII.ii.iv: pp307-14) and it is often mistaken as being Smithian (not all ‘experts’ read Moral Sentiments right through).

Adam Smith asserted that humans are capable of a more generous disposition to others, which is why societies can live in harmony, if not entirely in mutual love and affection (TMS, Chapter 1 of Book 1, on sympathy) and elaborated on this them throughout Moral Sentiments:

‘But though the necessary assistance should not be afforded from such generous and disinterested motives, though among the different members of society there should be no mutual love and affection, the society, though less happy and agreeable, will not necessarily be dissolved. Society may subsist among different men, as among different merchants, from a sense of utility, without any mutual love or affection; and though no man in it should owe any obligation, or be bound in gratitude to any other, it may still be upheld by a mercenary exchange of good offices according to an agreed valuation’. (TMS II.ii.3.2: pp 85-6)

Contrast that extract from Moral Sentiments with your assertion in your response:

‘Notice he is still saying we don’t do good for others because we like them, we do good for others because of our love for ourselves. We are pompous creates who are concerned about our own dignity and self worth.’

This is not to say that you are wrong; I am only claiming that your assertion was not Adam Smith’s view. He specifically excluded the need to do ‘good’ (serve their interests) ‘because we like them’ (though that did not exclude that we could so for that reason - our family, say). He showed that we could transact ‘without any mutual love or affection’ and, indeed, in both books he showed that the exchange mechanism operates anonymously to enable us to consume goods and services from perfect strangers, even from people we may dislike, provided the terms of the transaction (‘mercenary exchange’) were agreed by what he called ‘bargaining’ (or the ‘propensity to truck, barter, and exchange’) in Wealth Of Nations (WN I.ii.1: p 25).

He also defined bargaining: ‘Give me that which I want, and you shall have this which you want’ … and it is in this manner that we obtain from one another the far greater part of these good offices which we stand in need of’. (WN I.ii.2: p 26).

Then follows the well-known passage (often quoted, seldom correctly understood) from Wealth Of Nations:

‘It is not from the benevolence of the brewer, the butcher, or the baker, that we expect our dinner, but from their regard for their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages’ (WN I.ii2: pp 26-7).

You say that you cannot see ‘how anyone could read it any other way’ the whole passage of the ‘little finger and the Chinese earthquake’. I think you should read it carefully again. Smith’s challenge to his students and readers (and you) was for you to consider a mind game that the man who sleeps soundly after his thinking about his 100 million brethren dying in the earthquake, is offered an exchange: sacrifice your little finger and the earthquake would be averted, what would he do? Would he save his finger and 100 million Chinese would die? (It’s stated clearly in the paragraph at the top of page 137.)

Adam Smith states his answer forcefully: ‘Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it.’

Your response is to half-quote again: ‘It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters’, and to draw the Bernard Mandeville cynical and licentious conclusion.

But Adam Smith leads towards his answer in the same paragraph:

‘When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self-love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration. It is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self-love can be corrected only by the eye of this impartial spectator. It is he who shows us the propriety of generosity and the deformity of injustice; the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves. It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.” (TMS III.iii.4: pp 136-7)

Once again if you read this carefully you will see what he was getting at. If you are not familiar with Adam Smith’s meaning in the ‘eye of this impartial spectator’ you will need to read Moral Sentiments, but you get a feel for this important idea of Smith’s from a common sense reading of the passage.

Finally, I note your appeal to ‘All intellectuals I know of read it like Becker and myself. Just check your typical Milton Friedman, Thomas Sowell, Thomas DiLorenzo, etc. books.’

I am familiar with three of the intellectuals you cite and I defer to their standing among economists. I do not defer to their understanding of Adam Smith on the points we are discussing, should your cited affiliation be correct (I am surprised to find you mentioning Thomas Sowell, a fine scholar on classical economics - the title of his excellent book of that name), but I can only present the case from Adam Smith’s texts and do my bit to re-claim his legacy.

Please, continue reading Lost Legacy and any comments from you are welcomed.

Some students have long memories….

At the weekend I came across at a report from the Sunday Times in August 2004 with the following paragraph, which I hadn’t seen before:

‘Gavin Kennedy, the former Scottish Nationalist Party economics spokesman, used to tell Strathclyde first-year economics students: “Statistics are like a bikini, what they reveal is interesting, but what they hide is essential.”

Comment
‘First-year economics’ places it between 1973-79, or roughly 30+ years ago. I was mainly interested in defence economics at the time (‘Military in the Third World’, Duckworth, 1974; ‘Defense Economics’, Faber & Faber, 1975; ‘Burden Sharing in NATO’, Duckworth 1997).

In fact, it was from an impromptu meeting with Andrew Skinner in 1973 (since recently retired from the Adam Smith Chair in Political Economy at the University of Glasgow) that led me to read Wealth Of Nations for the first time to follow up on his comments on Smith’s ‘strange’ attitude towards the protectionist Navigation Acts and his observation that ‘defence was more important than opulence’.

However, I am impressed with the student’s memory. Not all lecture experiences are incredibly dull and de-motivating. I think we all have memorable lines from some of the lectures we sat through that we can recall. The main thing is how much of what was covered in the dull ones did we recall when we were examined?

Armchair Economist Is Precisely Wrong

Armchair economist – ‘empower the individual and minimise the state’ - writes on ‘Bill Gates and Altruism’ here:

“We can help others by simply helping ourselves–Adam Smith demonstrated this in the 18th century.

This brings me to Gary Becker. The professor, writing about Gateses ideas on corporate altruism, takes an example from Adam Smith that has always resonated with me. It goes:

"Smith was skeptical not about the strength of altruism, but about its scope or reach. For example, he uses an example in this book that is highly relevant to the present and to Gates’ quest. He asks “how a man of humanity in Europe: would respond to hearing ” that the great empire of China… was suddenly swallowed up by an earthquake…”? His answer was that “If he [this man] was to lose his little finger tomorrow, he would not sleep tonight; but, provided he never saw them [i.e, the people of China], he would snore with the most profound security over the ruin of a hundred million of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him than this paltry misfortune of his own” (Part III, Chapter 3).

"Liberals tend to hate this above example.”

Comment
Having no claim to being a ‘liberal’ (US sense), because I’m moderate right-of-centre, and I step into this discussion, not in order to defend ‘liberals’, but to present Adam Smith’s legacy accurately.

It is always preferable to read all that Adam Smith wrote about a topic rather than just a snippet of a quotation torn out of context. This particular quotation is widely misunderstood because readers do not read far enough. I am surprised that Garry Becker, a Nobel Prize winner in economics (Bank of Sweden) may have made this mistake.

You will find the entire episode in The Theory of Moral Sentiments (TMS III.iii. 3.4: pp 136-37). I shall quote the entire paragraph for you to read and compare as a whole with the unwarranted conclusion placed upon it by the Armchair Economist’s edited version of it:

“Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment. He would too, perhaps, if he was a man of speculation, enter into many reasonings concerning the effects which this disaster might produce upon the commerce of Europe, and the trade and business of the world in general. And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened. The most frivolous disaster which could befal himself would occasion a more real disturbance. If he was to lose his little finger to-morrow, he would not sleep to-night; but, provided he never saw them, he will snore with the most profound security over the ruin of a hundred millions of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him, than this paltry misfortune of his own. To prevent, therefore, this paltry misfortune to himself, would a man of humanity be willing to sacrifice the lives of a hundred millions of his brethren, provided he had never seen them? Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it. But what makes this difference? When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble? When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self-love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration. It is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self-love can be corrected only by the eye of this impartial spectator. It is he who shows us the propriety of generosity and the deformity of injustice; the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves. It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.” (TMS III.iii.4: pp 136-7)

If you read this carefully, the entire tone of the Armchair Economist’s selected and edited partial quotation changes completely.

Offered a choice between losing his little finger and saving 100 millions of his brethren, does the man choose his finger or does he save the 100 million in China?

From the first part of Adam Smith’s paragraph it seems he would act as Armchair economist imagines he would act, but that is not what Adam Smith said. It is only plausible if the reader is not presented with the rest of Smith’s paragraph, as it is so often the case when it is used to show the base selfishness of mankind (perhaps for those who edit the paragraph, they truly believe they would choose their little finger!). But what does Smith say of such persons?

‘Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it.’

So much for the moral fibre of the Armchair economist. But he has not natural right to misreport what Adam Smith said – he can disagree with Adam Smith by all means, but he abuses Adam Smith’s Natural rights to his reputation, if he purloins his words to say the reverse of what he actually said.

[I am grateful for Sandra Peart for correcting my own misreading of this passage in 2005.]

Oh, by the way: Armchair also got it wrong when he claims: ‘We can help others by simply helping ourselves’, and worse, claims that ‘Adam Smith demonstrated this in the 18th century’.

No! What Adam Smith demonstrated was the exact reverse: that by helping others (when we address their interests, not our own) we help ourselves!

This is precisely the opposite of what the Armchair economist asserts – he should get out of his armchair more often and take Moral Sentiments off of his shelf (he does have a copy, doesn’t he?) read carefully the above fuller extract [and read Wealth Of Nations and see what Adam Smith did write]:

‘We address ourselves, not to their humanity but to their self-love, and never speak to them of our necessities but of their advantages’ (WN I.ii.4: p 27)

Adam Smith the Pragmatic Free-Trader

Here are two references from Adam Smith on the reasons for free trade remaining less likely than utopia and the pragmatic reason why the total abolition of protective tariffs was not really practical politics (or finance) for governments facing a shortfall in taxation from other sources to meet it budgetary ambitions.

‘To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana, or Utopia should ever be established in it. Not only the prejudices of the public, but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it.’

[Wealth Of Nations, IV.ii.43, page 471 (Glasgow Edition of WN, Oxford University Press; or pages 437-8 of Edwin Canaan’s edition of WN, 1937, Random House)].

Here is the reference to Britain becoming a free-port if only the government’s customs could be raised some other way:

‘From the above consideration it appears that Britain should by all means be made a free port, that there should be no interruption of any kind to forreign (sic) trade, that if it were possible to defray the expencgovernments faced wites of government by any other method, all duties, customs, and excise should be abolished, and that free commerce and liberty of exchange should be allowed with all nations and for all things.’

[Lectures in Jurisprudence, paragraph 269, page 514, student notes of Adam Smith’s lectures, report dated ‘1766’ (but believed to be 1763-64), Glasgow Edition, Oxford University Press; or page 209 of Lectures on Justice, Police, Revenue and Arms delivered in the University of Glasgow by Adam Smith reported by a student in 1763, edited and introduced by Edwin Canaan, Oxford University Press, 1896]

Clearly, Adam Smith was pragmatic about the need to meld the necessity for fee-trade reform matched by its practicality in the light of the institutional circumstances prevailing at the time.

In his comment on the ‘man of system’ who would use violence to conquer ‘the rooted prejudices of the people’ instead of ‘by reason and persuasion’, he referred to Solon, a law maker of ancient Athens, who, Adam Smith paraphrased, ‘when he cannot establish the best system of laws, he will endeavour to establish the best that the people can bear’ [Moral Sentiments, VI.ii.2.16: page 233]

A Tour of Adam Smith's Sites in Edinburgh

Yesterday, I had a visit from a German journalist who flew up to Edinburgh from Germany, via London on British Airways (which ‘lost’ his luggage; no surprise).

He wanted to see where Adam Smith worked when he was a Scottish Commissioner of Customs from 1778-1790, and was pleasantly surprised to see that the Royal Exchange and Custom House was still standing and is still used by Edinburgh City Council, who took it over in 1811.

The Customs House was built in 1761 and occupies a sizeable and magnificent Georgian building, complete with a large courtyard. Adam Smith worked there four days a week, except when he was in London briefing Prime Ministers and cabinet members on policy issues in public finance and on his criticism of mercantile political economy.

This year sometime, the first ever public statue of Adam Smith will be erected opposite the Custom’s House across the High Street (Royal Mile). The magnificent bronze statue has been cast and is being prepared for its erection on a stone plinth (19 feet in height in total). It will face downhill towards where he lived and is buried.

The statue was paid for by public subscriptions (no taxation subsidies or grants from government), which was organised by the Adam Smith Institute (London), and anybody wishing to make a donation (large or small) to cover the costs of the events around its unveiling would find a welcome via: Eamonn Butler, Director, at: http://www.adamsmith.org/blog/

Smith walked up the ‘Royal Mile’ from his house about 600 yards from his home, at Panmure House, a substantial building built just back from the Royal Mile, the road connecting the Castle with Holyrood Palace, formerly the monarch’s permanent residences up to the Union of Crowns in 1604, when James 6th and 1st decamped from Edinburgh to London (Holyrood Palace remains a royal residence when the Queen is in Edinburgh).

I took my guest down to the house rented by Adam Smith from Lord Panmure, through Panmure Close, in which he lived with his mother and cousin for the last 14 years of his life. The building is now used as the social work department’s offices.

I reported to my visitor that Esmee Fairbairn Research Centre, at Heriot-Watt University, had been offered a lease on Panmure House in the 1970s, which today would have had immense potential as a library, conference centre and visitor’s site, if only ….

[Any donor with sufficient money to make a move to acquire a lease on the building for these purposes surely would be welcomed in Edinburgh!].

Walking too and fro, each day from Panmure House, Adam Smith would pass Canongate Kirkyard, where he was to be buried in 1790. His fairly plain grave, recently tidied up, is set against the wall to the left entering the Church gate. Small brass casts of his iconic likeness lead you to the grave stone, surrounded by an iron railing mounted on a low stone wall on three sides, the fourth side is formed by the rear wall of the house fronting on to the Royal Mile.

Incidentally, am always willing, if mutually convenient, to act as a guide to any reader of Lost Legacy who visits Edinburgh and who wishes to walk along the Royal Mile and see these three hsitoric places that were closely related to Adam Smith. Just drop me a line to this Blog.

Adam Smith Confused with Bernard Mandeville (again!)

Jude Ndu write a tendentious piece in Nigerian Tribune (here), called ‘Money and greed’:

“And greed, you mark my words, will not only save this company but also, that other Malfunctioning company called the U.S.A. Indeed greed eventually revealed itself to be very destructive as I watched Gordon Gekko (Michael Douglas) crashed and crushed towards the end of the movie. In 1776, Adam smith, father of modern economics wrote the book that changed the world’s economic system – The wealth of Nations. In his book, Smith laid the intellectual foundation for today’s capitalism. His thesis was that individual ambition and self-centered interest for self-actualization was more powerful than any organized government system.

Adam Smith said the best results come from everyone in an organization or economic system doing what is best for him or her self. In competition the individual ambition serves the common good. Every man for himself. The global economy today revolves around the self-interest of a powerful few – The driving force for all capitalistic success. If you make money the centre of your economic policy, the machine will eventually be brought to a halt by greed. It’s not the love of money itself but the love of giving that drives economic success – compared to greed, giving is God like.”

Comment
There are so many errors of fact and attribution in this piece that it ia hardly worth correcting. Those academics who taught the nonsense that Adam Smith anything remotely related to ‘greed’ which came from the misunderstanding of self-interest’ being the rock on which his economics was based (once again George Stigler’s fault!) when in fact Smith said the opposite, namely that by serving the self-interest of others each serves his own best interest.

Gordon Gekko (Wall Street) was a misidentification from its scriptwriter who confused Adam Smith’s philosophy with its opposite, the scandalous and 'licentious system' of Bernard Mandeville (Fable of the Bees, 1724). Gekko-type greedy behaviour has more in common with ‘creative’ talent of Hollywood than anything Adam Smith wrote about in Moral Sentiments or Wealth Of Nations.

Please: Adam Smith was Scottish Not 'American'

Steady On There!:

“Value pricing: a debate without end. By Rob Lewis Baker argues that take-up has been slow because the move represents a fundamental change in theory. Indeed, it is a theory he has occupied himself with for many years. A well-read man who clearly does not shy away from abstract thought, Baker compares the shift towards value-pricing with the medical acceptance of germ theory, and says that diffusing a new theory into the population, be it scientific or otherwise, is measured in decades, if not centuries. His writing and speaking on the subject frequently makes reference to philosophers like Karl Popper, Immanuel Kant and Karl Marx, as well as the economist Adam Smith. Off at the deep end “I owe it all to the economists,” says Baker. “Adam Smith, Milton Freidman, Milton Freidman’s son David, and Steven Landsberg.” These US free market thinkers are not surprising influences, perhaps, for a Californian who believes the accountancy profession is a business that should be defined above all else by what it can charge for. In fact, there is an American flavour to much of the value billing argument. The VeraSage Insitute, which Baker co-founded, asks its members to sign a “declaration of independence” akin to the one the continental congress adopted in 1776. Last month he described the billable hour (value pricing’s mortal enemy) as a form of communism.'

In AccountingWeb (here

Comment
I know that people cnan be confused about Adam Smith's persona, given that George Stigler asserted that he was 'alive and well and living Chicago' and that much of US academe believes he wrote many things that he didn't, but it's going too far to include him as amongst 'US free market thinkers'.

Adam Smith was born in Kirkcaldy, Scotland, and though he was sympathetic to the British colonists in North America, he remained in every sense a Scotsman.

Defence and GDP ratios

The Heritage Foundation (here) writes a snippet on The First Duty Of Government 13 February:

“Writing in Human Events, W. Thomas Smith, Jr. (Defense Spending Crisis reminds us of Adam Smith’s first duty of government: “protecting the society from the violence and invasion of other independent societies.” To that end Republican lawmakers are pushing a proposal to set a floor on military spending at 4% of GDP. Congressional Quarterly reports that sponsors of the resolution (H J Res 67) point out that the percentage GDP spent on defense today is low compared to other eras. Not including supplemental funding for Iraq and Afghanistan, the fiscal 2009 budget spends about 3.6% of GDP on defense. During the Korean war that percentage was 13-14%, during Vietnam it was 7-9%, and during World War II it was 37-38%. House sponsor of the legislation, Rep. Trent Franks (R-AZ) told CQ: “This is the only way we can stop the inexorable slide on national defense.”

Comment
Defence spending should be appropriate to the credibility of the threat and the capability of the enemy (real or potential). That requires an authoritative analytical study of the credibility and capabilities of potential threats. That defence spending is a certain percentage of GDP is a consequence of the budgeted spending; it is not in itself a safe indicator that the defence posture is properly met or whether what is spent on defence is a prodigal waste.

In so far as defence spending is a deterrent, what it costs is always lower than the costs of war. Adam Smith famously noted that ‘defence is more important than opulence’, because without defence opulence would be at risk.

Adam Smith was conscious of the after effects of the fall of Rome (5th century) and how it set back Europe for near on a thousand year until commerce began to revive by the expansion of trade.

Andrew Rivkin Misunderstands Smithian Growth

Ronald Bailey writes in Reason Online (here):

‘Decrying the "Pursuit of Unnecessary Things" Are we overconsuming our way to doomsday?’ (12 February)

‘New York Times science reporter Andrew Revkin has written a provocative column, "The Endless Pursuit of Unnecessary Things," on his always interesting Dot Earth blog. The title is from a line attributed to Adam Smith: "An investment is by all right-minded people to be commended, because it brings comforts and necessities to the citizenry. But, if continued indefinitely, it will lead to the endless pursuit of unnecessary things." (I confess my usual sources of Smith arcana could not turn up this quotation anywhere online, but no matter, let's assume Smith wrote it.)

Comment
Ronald Bailey is right to be supicious of Andrew Rivkin's claimed source. I have already commented recently on Andrew Revkin and this ‘investment’ notion somewhere, so I will simply say that I do not recognize this phraseology as Adam Smith’s. If anybody can suggest a reference I would be obliged.

Adam Smith favoured investment in productive labour because this increased employment of poor labourers and allowed them to enjoy a share of opulence. Their employment also created revenue and out of the net profits more employment could be initiated. He regarded this as a social good, whereas spending revenue on prodigal living did not replace the capital used in supplying the wastrels with frivolous consumption.

Andrew Rivkin is saying something quite different and putting his words into Adam Smith’s Wealth Of Nations and misses the point of Smithian growth theory.

Adam Smith Was Not Opposed to Competitive Joint -Stock Companies

Selecting quotations from Adam Smith is foolhardy, misinterpreting them is dangerous. Ruari McCallion does both in today’s issue of Exec (‘Essential information for business executives’) 11 Feb, which can be found here:

‘The Executive Cull: The state of the British boardroom’

“Has the response to the Higgs Report on corporate governance upset the delicate balance between functional executives and non-execs on British corporate boards? Exec investigates.

Corporate governance and company ownership has been a vexed subject for a very long time. Most people will think of Robert Maxwell but concerns go back a lot further. Adam Smith declared in The Wealth of Nations that managers (for which read, directors) could not be trusted to look after other people’s money; that ‘negligence and profusion’ were the inevitable result of businesses becoming incorporated. He said that in 1776, at which time shareholder-owned companies had been banned from the UK since 1720, after the South Sea Bubble. Exchange Alley, in the City, was the hang-out of con-men pushing stock they praised to the skies – early-style PR, perhaps? Shareholding was viewed as a way of parting fools from their money, which quickly found its way into the pockets of the company managers, before the inevitable collapse.

Comment
Ruari McCallion has found a quotation from Wealth Of Nations, torn it out of context, and run with it. But anybody who knows of the context knows it is not quite as simple as that.

Adam Smith discussed the East India Company in a section he added to the 3rd edition of Wealth Of Nations and placed it in Book V, though they properly belong to Book IV where he discusses his ‘violent’ critique of mercantile political economy. (WN IV i.3: pp 731-58)

The trading companies required large capitals to produce their monopoly profits because although they were called ‘trading companies’ of necessity they were much more than that. They took on the role of mini-states too, with their own fortified ports, trading posts, and ships. Their charters came from the King or Acts of Parliament and they were legal monopolies. The most prominent of them, aside from the share-fraud scheme of the South Sea Company (1711-1720), was the East India Company founded in 1600 and which in the next two hundred years ended up ruling all of India.

All of Adam Smith’s severe criticism was centred on the East India Company, in particular, and the general notion of Chartered trading companies in general. This is confused with joint-stock companies that formed from the mid-19th century and I read accounts of modern international companies of this century and the last as if they are identical in all respects and in the same context. They are not.

The capital required in the 17th and 18th centuries for chartered trading companies –ships, fortified warehouses, armies, trading goods, and wages – were not trivial. Most commercial entities were small one-man, or one-family, businesses or small partnerships, with small capitals (stocks, workers wages, crude tools, and materials). These were not protected and if one of them was in financial trouble, all the assets of the owners were pledged to clear their debts.

The chartered companies were privatised instruments of British state policy – trade, colonies, exploration and conquest – and their joint-stock status was independent of the assets of shareholders, though loss of their money tied in the shares could be disastrous. Sir Isaac Newton was one of many caught by the collapse of the South Sea bubble. Most of the chartered companies were unsuccessful and useless, the facts of which Adam Smith details in Wealth Of Nations.

The East India Company was also distant in its operations and local management. It took over a year to send written messages back and forth from India to London, leaving the local management in the midst of temptation to ‘trade on their own account’ which few resisted, including the lowliest clerks. Today communication is counted in seconds and the world’s media reports on what it observes. Modern managements cannot get away with bare-faced theft of company property as recent criminal cases have shown.

Moreover, Adam Smith was not totally opposed to joint-stock companies. He certainly opposed them if they were granted legal monopolies. In fact he specifically approved of several examples of joint stock companies, such as the Bank of England, the Bank of Scotland, the Royal Bank of Scotland, as well as when they were instituted for ‘routine’ business such as insurance companies, major civil projects (navigable canals and water supplies).

It was long after he had died in 1790 that the spread of power-driven industry and larger-scale operations required a substantial increase in their capital that joint-stock companies became the most efficient (relatively speaking) to raise such capital sums. Hence, by the later 19th century new legal versions of competitive, not monopolistic, joint-stock companies became feasible and more popular. They have been closely scrutinised by the regulators and the law ever since.

‘Information for business executives’ should not be a tendentious misreading of history and of the Works of Adam Smith; false information is less useful than the accurate kind.

Jean Louis Peaucelle's Paper on Pin-Making and Wealth Of Nations

IMPORTANT NOTICE

ADAM SMITH’S LOST LEGACY HAS BEEN MOVED BY “BLOGGER”, THE HOST SITE, TO A NEW ADDRESS:

www.adamsmithslostlegacy.blogspot.co.uk

TO FOLLOW ALL 2083 POSTS (AND COUNTNG) FROM HERE TO 2012 AND BEYOND, PLEASE USE THE NEW ADDRESS.

THANK YOU

Gavin Kennedy

I received a PDF file from Jean Louis Peaucelle [jean-louis.peaucelle@univ-reunion.fr] discussing the famous pin-making example from Wealth Of Nations and I have posted it for wider circulation:

Find attached in PDF format a manuscript about capture of economic data beginnings in the context of pin-making during the eighteenth century in France. In particular, it contains a report of labour rhythms measured for some pin-making operations in 1700.

Besides, I rediscovered the documents that Adam Smith read about pin-making (the sources about which spoke Adam Ferguson). These documents are published in France, see:
Peaucelle, 2006, “Adam Smith’s use of multiple references for his pin-making example”, The European Journal of the History of Economic Thought, 13:4, 489-512.

Altogether, I revisited how Adam Smith built his theory about division of labour. I examined three topics:
- The documents about pin-making published in the eighteenth century, and all these documents were published in France;
- The real process of the pin-making, in craft shops in Paris or London, and the more industrialized process in Holland, Normandy and in Gloucester (UK);
- The economic reasoning about this pin-making industry, including the Adam Smith theory and the Charles Babbage theory.

The question that arises is the following: Is the theory about division of labour true in the case of pin-making?

This work was published in French.

Jean Louis Peaucelle

ftp.adamsmithslostlegacy.com/Pinmaking-Billettes.pdf

Adam Smith Knew a Great Deal About the Role of Religion in 18th-century Scotland

I have replied to a comment by a reader of Economist's View on the matter of Adam Smith's expertise on religion and government in 18th century Scotland.

It is appended below:

Andrew
Adam Smith lived in 18th century Scotland which was notable for the closest with which its established Church, the Church of Scotland, dominated much of society, and since the union of Scotland with England in 1707, the even stronger Church of England, which dominated social, political and moral life, loomed large in the intellectual life of the time and the daily lives of everybody.

Adam Smith was born in 1723 and the last person hanged for blasphemy was John Aitkenhead in 1697 (the last witch was burned in 1727).

Schooling and Scottish Universities were run mainly by ordained Ministers of the Church in both Scotland and England. Smith won a scholarship to Oxford University in 1740 to study to become an ordained member of the Church of England; he left without completing ordination in 1746, somewhat disillusioned with the divines who 'taught' at Oxford (prayers twice a day, and two poor lectures a week).

When he became a professor at Glasgow in 1751 he had to sign the Calvinist Confession of Faith in front of the University body at the Cathedral and teach orthodox religion as part of his Moral Philosophy course from 1752.

To show dissent, or even doubts, about religous interference in private or communal life was to invite severe retribution, as suffered by his friend David Hume.

Therefore he had very good reasons to have considered views on religion as practised in Scotland, with the local zealots (Scotland's Taliban) scrutinising everything any body said or worse, did. His published views on religion in Wealth Of Nations and Moral Sentiments were written carefully to avoid attracting attention and his views on encouraging as many separate churches as possible was his intelligent way of making the point: separate Church and State, and allow freedom of worship.

In this case the moral philosopher, who taught 'Natural Religion' in his classes, and moral conduct too, can be considered an authoritative voice in this subject.

Lost Legacy Quoted on Economist's View Blog

Mark Thoma of Economist’s View Blog (here) cites my piece commenting on Walter Russell Meade’s article on 'Adam Smith and Religious Institutions' in Atlantic Monthly (March 2008 issue):

“Adam Smith On Religious Institutions

This is from Gavin Kennedy at Adam Smith's Lost Legacy:
Adam Smith On Religious Institutions, by Gavin Kennedy: Walter Russell Meade writes an interesting article, ‘Born Again’ in The Atlantic.com (March) on religious movements in the USA and goes back to Adam Smith’s Wealth Of Nations for his theme….”

Comment
The comments on the Economist’s View reproduction of my article are
interesting, especially this one from ‘robertdfeinman’ who writes:

‘all well and good to write articles about the work of important historical figures, but why does everyone seem to need to then take such writings as being applicable to the present?

Appeals to authority are one of the weakest techniques to use when trying to make a case about the modern condition. It is, however, a favored technique of those who have a set view of what morality and acceptable behavior consist of.”

It is partly because so many people across the media and in academe often make quotations and assertions about their version of Adam Smith’s take on 21st century events, mostly on the slimmest of evidential grounds and without taking the trouble to read what he actually wrote, that Lost Legacy finds it worthwhile to comment on the perpetrators.

Needless to say, I am not ‘trying to make a case about the modern condition”.

I am trying to make it clear what Adam Smith actually thought.

[Meanwhile, thank you Mark Thoma for taking notice and linking your many readers to Lost Legacy.]

Alexander Hamilton, Fredrich List and Adam Smith

Is it true that Alexander Hamilton was the first to theorise for protective tariffs ‘to allow American industry to develop without too much foreign competition’?

Not quite. Hamilton’s Report was published in 1791. Adam Smith’s Wealth Of Nations was published first in 1776 and its 5th English edition in 1789. The first American edition was published in 1789 in Philadelphia, by Thomas Dobson. 1789 (3 vols), though copies of the 1st English edition were shipped to the American colonies, and widely read by the American legislators a few months after they were printed in London (and a ‘pirated’ edition in Dublin) on 9 March, 1776.

The colonies had proclaimed their Declaration of Independence in July, 1776. Adam Smith took a close interest in the ‘recent disturbances’ leading up to independence and published his analysis and sentiments in Wealth Of Nations, but his book arrived too late to influence events.

However, Adam Smith advised the colonists, should independence be gained, against erecting tariff barriers against manufactured products from Europe (note: not just Britain). Partly, this was because he considered the ‘natural’ sequence of developing agriculture, including mining, should precede manufacturing, and he put the inverting of this process in Europe as a cause of the mercantile obsession of colonies, jealousy of trade, and colonial wars.

His admiration for the potential future of the ex-colonies was fulsome – he thought that ‘America’ within a hundred years could overtake Britain to become the world’s largest economy. The risk was that the American colonies would slide into the mercantile trap of tariff protection (once imposed, harder to remove) and all the negatives that Adam Smith associated with those policies.

In The Devolved Intellect Blog, David Kidder writes on ‘Alexander Hamilton’s Economics’ (here) http://www.theintellectualdevotional.com/blog/index.php
7 February:

Alexander Hamilton’s famous Report on Manufactures occupies an odd place in the history of economics. He advocated for protectionist tariffs to allow American industry to develop without too much foreign competition, so this put him at odds with the views of the Scottish Enlightenment philosopher Adam Smith. Hamilton had read Smith’s most famous work, An Inquiry into the Nature and Causes of the Wealth of Nations, and used Smith’s theories about the “division of labor” in the first part of the Report. However, he was not as resolute a free-market advocate as Smith, placing national interest above the principle of market competition.

Though Hamilton’s vision seems unique in the history of economic thought, it has been the basis for many developing economies in the past few centuries. … Could it be true that an extremely important economic model has only been theorized in an 18th-century Congressional report? Not quite. Every theory that Hamilton set forth was later developed by a brilliant (if little-known) 19th-century German economist named Friedrich List.

List was well versed in the works of Adam Smith and other economists, but he disagreed with their explanations of how economies worked at important transitional points. When it came to the day to day operations of commerce and trade, List conceded that Smith’s theories worked. But when it came to exceptional circumstances, like fostering a new economy or recovering from a major downturn, List felt otherwise. This excerpt from List’s 1837 The Natural System of Political Economy could have been lifted directly from Hamilton’s report:

"The cosmopolitan theorists [List’s term for Smith and his ilk] do not question the importance of industrial expansion. They assume, however, that this can be achieved by adopting the policy of free trade and by leaving individuals to pursue their own private interests. They believe that in such circumstances a country will automatically secure the development of those branches of manufacture which are best suited to its own particular situation. They consider that government action to stimulate the establishment of industries does more harm than good….

The lessons of history justify our opposition to the assertion that states reach economic maturity most rapidly if left to their own devices. A study of the origin of various branches of manufacture reveals that industrial growth may often have been due to chance. It may be chance that leads certain individuals to a particular place to foster the expansion of an industry that was once small and insignificant—just as seeds blown by chance by the wind may sometimes grow into big trees. But the growth of industries is a process that may take hundreds of years to complete and one should not ascribe to sheer chance what a nation has achieved through its laws and institutions.

List’s theories are completely at odds with almost everything taught in Western universities today, or recognized by the Nobel committee. Nonetheless, it takes less work to find historical precedents that fit with List’s theories and, most importantly, newer industrial powers like Japan and Korea self-consciously apply his theories today. They ought to be better known.

Comment
Arguments for protection are well known. So is the work of Friedrich List, The National System of Political Economy, 1844 (my copy was published in 1916 by Longman, Green and Co, London) and his ideas were featured among economists throughout much of the 19th century and translations into English were common. List visited the USA and picked up Hamilton’s ideas and included in them his polemic, much of it against Adam Smith.

List attempts mischievously to lump a charge of Adam Smith projecting charades by saying one thing but meaning another. England (by which he means Britain) exhorted the benefits of free trade while conducting a drive for national wealth through the interests of a strong state. His theory is an intellectual theory of nationalism, born at a time when the weakness of the various German states was a result of national disunity. He was a German nationalist, of which the later 19th century and the early 20th century was to hear a lot more from his adherents.

Adam Smith was accused of having disguised the real intentions of creating a strong national English state by imposing free trade on weaker states while it protected its industries. The problem was that while Wealth Of Nations received great admiration among intellectuals for its free trade advocacy, the English state continued constructing ‘National Wealth’ from its hidden ‘National Political Economy’.

Much of this confusion in List’s thinking came from the undoubted fact that Wealth Of Nations was a critique of mercantile political economy in mid-to –late 18th century, at a time when UK military power was rising – wars on Continental Europe, across the Atlantic – and its reach extended across the world to India, the Pacific, Australia and the Caribbean. But the British state did not adopt free trade as a policy until it was the most powerful economy in the world. That, of course, had nothing to do with Adam Smith’s intentions. His critique of mercantile political economy was read in English and in translation but adopted nowhere.

To write that List was not ‘as resolute a free-market advocate as Smith, placing national interest above the principle of market competition’ is disingenuous. Adam Smith was not ‘resolute’ about free trade. That misleading image comes from his epigones in US academe and their exponents in the media. It does not come from Wealth Of Nations (excluding out of context quotations).

Smith was pragmatic about changes in policies arising from political economy. He was not an ideologue. He was not in a hurry for change. He looked backwards to how a country arrived at where it was at. He rarely made predictions about the future.

He observed and reported on what he observed, and he cautioned people who read his books not to rush at making the needed changes he identified in Britain’s political economy. His free trade analysis arose from what the mercantile political economy of Britain since the 15th century had done to hold back the ‘natural’ growth of the economy, which could spread opulence deeper into society, particularly to the vast majority of the labour poor who supported all the rest.

He recommended ‘slow and gradual change’in Britain’s monopolistic and protectionist regime, in the interests of ‘common humanity’ to ensure those vulnerable to its dismantling would be able to adjust over a period of time. He didn’t think free trade would ever be completely established, given the institutions and interest groups who benefited from protection.

He was not a ‘militarist’. He opposed wars for frivolous ends, especially those based on ‘jealousy of trade’ and seeing trading partners as enemies. He was not a pure pacifist either. His historical studies showed the awesome consequences of not being able to defend against ‘barbarian’ warlords, such as those who overran the Western Roman Empire in the 5th century, which devastated ‘tolerable’ Roman opulence and took a thousand years for Europe to begin to recover from the 15th century.
For this he favoured the maintenance of the British ‘Navigation Acts’, themselves the major instrument of British colonial monopoly, because ‘defence is more important than opulence’, given the consequences of the weakness of Britain as an island.

List took the wrong lessons from Wealth Of Nations, as did Alexander Hamilton. Neither of them was unique in making a case for state-sponsored economic development. Almost all governments of nation states apply protectionism in trade. Britain, a supreme mercantile constitutional monarchy, long practised protectionism allied to military strength. Smith exposed in Wealth Of Nations the true cost of such political economy. Continental Europe, in confusing what Wealth Of Nations suggested should be done with what successive British governments persisted in doing (the second British Empire), inflicted on themselves and their hapless colonies a high price.

Blaming Adam Smith for what followed, when he warned against such policies, is an error of high magnitude.