Friday, March 14, 2008

More On Adam Smith and Bernard Mandeville's Differences

Mark Koyama replies to my comments on Bernard Mandeville and Adam Smith’s difference on his blog, Oxonomics, here and I respond as below:

Adam Smith defined wealth as the ‘annual production of the necessaries, the conveniences, and the amusements of life’. Clearly, without the production of the ‘necessaries’ to subsistence level, society would not continue, and this was the experience in the ‘1st Age of Man’ (hunting). After property was introduced, the ‘2nd and 3rd Ages of Man’ (shepherding and farming), ‘conveniences’ were produced (unequally distributed), followed by the 4th Age of Man’ (commerce, ‘industry’, ‘arts’, artifacts, cities). ‘Amusements’ or Luxuries (mainly ‘superior’ decoration, dress, clothes, shelter, appurtenances of living) have been associated with each age.

To say that ‘Smith and Hume' were ‘both defenders of luxury' is not to say much, except in the sense they did not go along with the moral teachings that railed against the facts of human history. A hunter painting his face for his religious devotions was engaged in consuming a ‘luxury’ – it was neither a necessary nor a convenience; a woman carving an animal’s bone for decoration was engaged in luxury production; a priest commanding a temple be built, likewise. As societies became ‘affluent’ – defined as a surplus of annual product over subsistence – the rich and powerful ‘spent’ their affluence on artefacts, tools of war, decoration and splendid buildings, sacrifices to the gods, and succour for the priests who observed of their religions.

In the later years of the first millennium, after the fall of Rome, Adam Smith noted the decline and then collapse of Western Europe’s economy; commerce lapsed, agriculture became ‘pitiful’, and internecine local wars were the norm.

By c. 15th century, commerce was reviving. Smith’s ‘defence’ of luxury should be seen in this context: society advanced from basic ‘necessaries’ through to ‘amusements’. Those purveyors of ‘supercilious superstition’ (mainly of the religious kind) who denounced luxury missed the significance of the spread of opulence, albeit unequal in its distribution.

Adam Smith regarded the main event of the return of commercial society was from the annual growth in annual product and he analysed how growth was likely to raise the annual consumption of the labouring poor by creating ever widening paid employment through the division of labour and specialisation in a non-equilibrium open economy. (Note: this is not the same as the equilibrium dominated models of 20th-century neo-classical economics).

To say that Smith ‘accepted Mandeville's analysis of commercial society’ is somewhat extravagant, to put it politely. I think a close reading of Smith’s Moral Sentiments (TMS IV.ii.4) discussing Mandeville’s ‘pernicious system’ does not support anything like that assertion. Smith discusses Mandeville’s version of human morality; that ‘human virtue’ is ‘the mere offspring of flattery begot upon pride’. I assume I need not rehearse here Smith’s detailed arguments against Mandeville, based on Smith’s theory of moral sentiments, especially his contrast of Mandeville’s denunciation of every passion as ‘wholly vicious’ in ‘any degree and in any direction’ with earlier ‘popular aesthetic doctrines’ which were once similarly popular and which argued that the virtues should face ‘extirpation and annihilation’.

Smith drew attention to Mandeville’s passing popularity, and conceded that ‘it could never have imposed upon so great a number of persons, nor have occasioned so general and alarm among those who are friends of better principles, had it not in some respects bordered upon the truth’ (TMS IV.ii.4.14: p 313). He also noted that the ‘vortices’ of Des Cartes were believed in for a century, though they did not exist, until it was realised that they were impossible and did not have the effects credited to them. Similarly, Mandeville’s ascription of vice to the virtues felt by people was not ‘connected’ to their experience of themselves.

It is commonplace to find almost daily references to Smith supposedly believing in the positive good of ‘greed’ in the economy, often associated with ideas about selfishness attributed to him, but which he never wrote about in his books, and that the actions of business leaders, no matter how selfish their motivations, ends up doing good, blessed by ‘an invisible hand’ to cover the miraculous transformation of 'good' springing from ‘evil’. This is so contrary to his denunciation of the 'merchants and manufactuers' who form monopolies, support protections, generate 'jealousy of trade' against neighbours, promote wars, colonies and other mischief as to be a woonder in itself.

In this libel, the perpetrators are confusing Adam Smith with Mandeville. It stems from the vulgar tutorial presentations of neoclassical economists, who read quickly quotations from Adam Smith, not his books, and who create myths of about his use of the metaphor of ‘an invisible hand’.They conclude with conviction, ‘bingo’!; what they believe in their attributions are monsters of their imaginations.

1 Comments:

Blogger Mark Koyama said...

Hi Gavin,

You are right of course that Smith is far too often described as a defender of selfishness. Perhaps where we differ in this debate in not in interpreting Smith so much as in our view of Mandeville?

I think Mandeville is serious thinker but that he deliberated couched his insights in language designed to shock rather than to enlighten.

Thanks for reading my paper, mainstream economics is still struggling to integrate Smith's insights concerning the disequilibrium nature of growth. I'm not sure to what extent it is possible to do this but it seems like a worthwhile endeavour.

12:01 p.m.  

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