Thought For the Day, no 8

It is often preached (a not inappropriate word in this context) that Adam Smith was a believer in what became known in the later 19th century as Homo eonomicus, or the perfectly rational person, driven by manic self-interest to maximise his personal utility.

In Moral Sentiments (1759), Adam Smith presents a different perspective to the uni-dimensional automaton that modern economists since the 19th century created, and which their successors in the 20th century increasingly refined, so to speak, to make this creature (for surely it was never intended to be regarded as human) fit into the determinate convenient mathematics of general equilibrium.

Smith on a richer, more complex, and more realistic vision of man in society is worth reading – and thinking about:

‘There can be no proper motive for hurting our neighbour, there can be no incitement to do evil to another, which mankind will go along with, except just indignation for evil which that other has done to us. To disturb his happiness merely because it stands in the way of our own, to take from him what is of real use to him merely because it may be of equal or of more use to us, or to indulge, in this manner, at the expence of other people, the natural preference which every man has for his own happiness above that of other people, is what no impartial spectator can go along with. Every man is, no doubt, by nature, first and principally recommended to his own care; and as he is fitter to take care of himself than of any other person, it is fit and right that it should be so. Every man, therefore, is much more deeply interested in whatever immediately concerns himself, than in what concerns any other man: and to hear, perhaps, of the death of another person, with whom we have no particular connexion, will give us less concern, will spoil our stomach, or break our rest much less than a very insignificant disaster which has befallen ourselves. But though the ruin of our neighbour may affect us much less than a very small misfortune of our own, we must not ruin him to prevent that small misfortune, nor even to prevent our own ruin. We must, here, as in all other cases, view ourselves not so much according to that light in which we may naturally appear to ourselves, as according to that in which we naturally appear to others. Though every man may, according to the proverb, be the whole world to himself, to the rest of mankind he is a most insignificant part of it. Though his own happiness may be of more importance to him than that of all the world besides, to every other person it is of no more consequence than that of any other man. Though it may be true, therefore, that every individual, in his own breast, naturally prefers himself to all mankind, yet he dares not look mankind in the face, and avow that he acts according to this principle. He feels that in this preference they can never go along with him, and that how natural soever it may be to him, it must always appear excessive and extravagant to them. When he views himself in the light in which he is conscious that others will view him, he sees that to them he is but one of the multitude in no respect better than any other in it. If he would act so as that the impartial spectator may enter into the principles of his conduct, which is what of all things he has the greatest desire to do, he must, upon this, as upon all other occasions, humble the arrogance of his self-love, and bring it down to something which other men can go along with. They will indulge it so far as to allow him to be more anxious about, and to pursue with more earnest assiduity, his own happiness than that of any other person. Thus far, whenever they place themselves in his situation, they will readily go along with him. In the race for wealth, and honours, and preferments, he may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should justle, or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play, which they cannot admit of. This man is to them, in every respect, as good as he: they do not enter into that self-love by which he prefers himself so much to this other, and cannot go along with the motive from which he hurt him. They readily, therefore, sympathize with the natural resentment of the injured, and the offender becomes the object of their hatred and indignation. He is sensible that he becomes so, and feels that those sentiments are ready to burst out from all sides against him.’ (TMS II.ii.2.1: 82-83)

Don't Trust Anybody From Chicago on Adam Smith

Froma Harrop writes in Real Clear Politics Chicago, Illinois HERE:

“In a Q&A last year with the Pittsburgh Tribune-Review, former Pennsylvania Rep. Pat Toomey was asked what book he wanted Barack Obama to read. The Republican quickly recommended the work of Adam Smith, the 18th century economist and philosopher who held that individuals promote the good of society when they pursue their self-interest.”

Comments
The rest of her article is a report on the intricacies of Republican inner-party politics, about which I know little and which also comes under my self-denying ordinance of not commenting on the politics of a country other than the one I vote in.

The question is whether Real Clear Politics in general, and Rep. Pat Toomey in particular will advance their cause with complete a misunderstanding of Adam Smith’s actual observations about the role of self-interest and its impact on society, for good or ill.

The way Pat Toomey is quoted, ‘individuals promote the good of society when they pursue their self-interest’, it is clear from the evidence of human societies that there is no smooth, or even bumpy, relationship between individuals pursuing their ‘self-interest’ and the good of society. No society works, or has ever worked, like that.

Experiments with utopian-inspired communes show conclusively that they are not what some call today sustainable, despite the good intentions of those who shun normal society and found their ideal societies for ideal people. Variously, the next generation becomes bored and willfully disrupt their parents' expectations, or some of the parents fall out, and the little society withers in disillusionment.

But the more telling problem is that real societies do not function as model beneficiaries of the self-interested behaviors of individuals. This should be no surprise to observers of the societies they live in. Adam Smith was one such careful observer. He never said what Pat Toomey, allegedly alleged (I only have Froma Harrop’s word that Toomey did so allege that the words paraphrased as reported, were attributed to Adam Smith (admittedly, a common enough delusion of academics in Chicago and elsewhere).

Now, the fate of Pat Toomey is of little consequence in the big scheme of things, but that it is often alleged that Adam Smith was of a mind to have uttered something similar about self-interested actions, it is this assertion that I wish to correct.

The idea comes from a partial reading of the infamous passage, which for want of a better shorthand, let’s call it the 'invisible hand' paragraph in Wealth Of Nations (Book IV, chapter 2, paragraph 7-9: 455-56). Smith discusses the behaviours of some, but not all, merchants, who from their concerns for the ‘security’ of their trading capital, prefer to invest locally rather than in foreign trade. Their self-interest drives them to choose to employ their capital so as to generate the ‘greatest possible value’, which ‘necessarily’ gives ‘revenue’ and ‘employment’ to the greatest number of people in their ‘own country’, which in turn renders the annual revenue of the local society ‘as great as he can’.

It is this statement that some readers (or more likely, readers of quotes) of Wealth Of Nations draw the incredible idea that Adam Smith believed ‘that individuals promote the good of society when they pursue their self-interest’.

As a statement of the connection between those traders which Smith discusses in the paragraph and the general interest of society, it is of course, true, but whether it applies in all cases, all the time, that is another matter, as a reading of the whole chapter clearly shows. They may do so, but then they may not.

Indeed, Smith was suspicious to put it mildly, all through Wealth Of Nations, of the motives and behaviours of ‘merchants and manufacturers’. A little example, again from Smith, illustrates my assertion.

Consider the motive of the home trader, identified by Smith in the paragraph, but rarely noted by those who quote it:

‘By preferring the support of domestick to that of foreign industry, he intends only his own security [and ] his own gain …’ (WN IV.ii.9: 456)

So far so good, but some merchants and manufacturers easily note a chance to enhance their ‘own gain’, and simultaneously their ‘own security’, driven by their self-interest. Suppose, they may muse, it was possible to persuade legislators and people who influence them that by imposing tariff protection on foreign goods entering our domestic markets, this would raise our revenue (and profits) by the higher prices we could charge in the absence of foreign competition.

Instead of exporting local jobs to foreigners, we could increase local employment. That’s got to be good for the local economy (and, our profits). It is not so good, however, for local consumers who pay higher prices, nor for labourers seeking work, because the increase in tariff-protected employment is not likely to be proportionate (Smith makes this point too; he suggests that it is what we could call an ‘empirical question’).

Yet, Pat Toomey, taking just a part of a particular case, generalises a conclusion from that case and applies it to all expressions of self-interest, and concludes that ‘individuals promote the good of society when they pursue their self-interest’, and, worse, claims that Adam Smith said so.

No Sir! It is Pat Toomey who says so, not Adam Smith, and distinguished as Rep. Pat Toomey no doubt is, his name does not carry the authority of Adam Smith in economic matters, hence he is comfortable to use Adam Smith’s name with impunity.

However, Lost Legacy is dedicated to the restoration of Adam Smith’s legacy; and, as in the Wild West movies, I ‘call him out’. He should withdraw his slur on Adam Smith and present his own ideas in his own name.

Great Correspondents in Our Time no. 1

Two interesting letters to the Wall Street Journal (HERE):

“The Moral Hazards of Managing Other People's Money"

“John C. Bogle in "A Crisis of Ethic Proportions" (op-ed, April 21) proposes that we try harder to be more moral, and in that misses the point of Adam Smith. Mr. Bogle cites Adam Smith's statement, "[M]anagers of other people's money [rarely] watch over it with the same anxious vigilance with which . . . [they] watch over their own" which is an indictment of human nature. Smith's position is that man's essential nature is a given, not something which can be altered. It is from this base that the invisible hand is derived. Setting up structures which rely on what man ought to be, compared to what he is, is like building a house on sand.” Adam Freund, Oak Park, Mich.

“Mr. Bogle cites Adam Smith's prescient words about the frailty and the faults of managers who manage other people's money. But this tension between the owners and the overseers of commercial activities goes back much further. Consider these words from John 10:11-13 ". . . the good shepherd giveth his life for the sheep. But he that is an hireling, and not the shepherd, whose own the sheep are not, seeth the wolf coming, and leaveth the sheep, and fleeth: and the wolf catcheth them, and scattereth the sheep. The hireling fleeth, because he is an hireling, and careth not for the sheep." Paul O. Gaddis, Franklin, Tenn.

Comment
What intelligent and informed correspondents write to the Wall Street Journal!
I have no time just yet for a comment - will try later.

Newish Blog on the Block

An interesting Blog has come to my attention. It’s called The Debts of a Nation (‘dedicated to presenting finance and economics news in plain English’) HERE:

Its heading description is tantalising:

“In Debt We Trust

The Debts of a Nation is a modern revision of "The Wealth of Nations" by Adam Smith. Smith structured his arguments as a critique against the prevailing economic and political ideology of his time - namely mercantilism. Under mercantilism the colonial powers of Europe amassed enormous amounts of gold and silver wealth through strict control of exports and the wholesale looting of foreign shores. Their colonists were locked in a cycle of indebtedness with financiers in their home countries. Fast forward to the modern age. Not much has changed - except instead of specie wealth we have fiat based currencies based on overleveraged government bor[r]owing. Mercantilist trade imbalances still exist. Citizens continue to live under debt bondage. And Western governments continue to loot emerging markets. The next few years will be a time of unknown risks surfacing. The majority of market pundits continue to operate under the assumption that all known risks have been contained. They still believe that the system's parameters can sufficiently contain the world's credit problems. They still continue to believe in the debts of a nation.”

Comment
Briefly, as I am preparing for a visit to geological site today (the ‘non-conformity’ at Siccar Point, near Edinburgh, discovered and explained by James Hutton, 1726-1797, and a close friend of Adam Smith) and I will come back later to discuss The Debts of a Nation in more detail, which appears to parallel my general approach to what has changed/not changed since Adam Smith wrote Wealth Of Nations, as discussed on Lost Legacy.

Most prominently, we still live in a world dominated by mercantile political economy, jealousy of trade, wars not for defence, tariff and non-tariff protectionism, limited free trade, state-favoured business (made worse by Big Government), regulations beyond that necessary for good government, and constant tinkering in personal affairs, and the dominance of a legislative cycle that is shorter than the policy-effectiveness period need to prove the effectiveness or otherwise of the interventions.

The Debts of a Nation, on the basis of a rapid glance, looks serious. I shall test my first hasty impression later after my geological expedition.

Thought for the Day: no. 7

Adam Smith in Moral Sentiments strays into dangerous territory:

“A woman who paints, could derive, one should imagine, but little vanity from the compliments that are paid to her complexion. These, we should expect, ought rather to put her in mind of the sentiments which her real complexion would excite, and mortify her the more by the contrast. To be pleased with such groundless applause is a proof of the most superficial levity and weakness. It is what is properly called vanity, and is the foundation of the most ridiculous and contemptible vices, the vices of affectation and common lying; follies which, if experience did not teach us how common they are, one should imagine the least spark of common sense would save us from.” (TMS III.2.5: 115; 1872 Alex Murray (Joseph Black edition), p 103).

The original sentence in editions 1 - 5 began: ‘A woman who paints to conceal her ugliness, could derive, etc., …’, and ending with ‘… paid to her beauty.’ (which he changed as above to ‘paid to her complexion’, both of which he changed for the 6th edition, the last he supervised in 1790, as above.

Rather ungallant of Adam Smith, though we do not know what was presented as fashionable to him in the streets and drawing rooms of Edinburgh.

Modern make up, properly presented is beautifying compared to the rosy cheeks, slap dash, thinly-disguised horribleness that passed for ‘paint’ in the 17th-18th centuries. Maybe it was an improvement on common face sores at the time.

Edinburgh had its fair share of prostitutes and prostituted women, as written about in ‘Boswell’s Edinburgh Journals 1767-86’, edited by Hugh M. Milne, 2001, Mercat Press, 2001 and Yale University 2003. Boswell was a frequent user of prostitutes.

Smith also commented on prostitutes in London, while extolling the virtues of the potato in a diet:

‘The chairmen, porters, and coal-heavers in London, and those unfortunate women who live by prostitution, the strongest men and the most beautiful women perhaps in the British dominions, are said to be, the greater part of them, from the lowest rank of people in Ireland, who are generally fed with this root.’ (WN I.xi.b.41: 177)

Smith’s mother died in 1784 and he may have decided to dilute his critique of a ‘woman who paints to conceal her ugliness’, which was written possibly to reassure her of his lack of interest in any such women.

Property is Civilisation

Fred Bauer writes (24 May) in the Blog, New Majority.com (‘Building a conservatism that can win again’) HERE:

“Republican Equality

Theories of the free market have long concerned themselves with the role of inequality. In The Wealth of Nations, Adam Smith famously argues that the development of advanced modes of production and commerce undermined the stark inequalities of the feudal world. The thirst of the rich for luxuries such as diamond buckles led to a breakdown of the system of feudal-agricultural dependence, in which wealthy landholders held not merely economic but also political domination of those below them.

Smith's argument has two salient implications for the current political right/classical liberals/conservatives: (1) certain forms of radical economic inequality can result in significant political inequalities (witness the petty tyrannies of medieval nobles), and (2) the functioning of the free market can serve as a way of mitigating these inequalities, of leading to a turnover of wealth, of making differences in levels of income less poisonous for civil liberties. The free market and inequality thus have a quarrelsome relationship: the market helps create inequalities, but it also undercuts the financial inequality of any given moment, allowing the rich to fall and the poor to rise. Inequality in results is a key characteristic of a market economy, and the very operations of a free exchange can prevent these inequalities from hardening into radical caste differences.

However -- and this is a crucial "however" -- the market itself, particularly in the wake of modern industrialization and certain forms of government intervention, can result in inequalities so vast that they begin to undermine a faith in free markets. And the growth of these radical inequalities can lead to a creeping sense of the hardening of financial differences. If one of the promises of the free market as a vehicle for an authentically liberal-democratic politics is in its ability to allow for social and economic mobility, increasing doubts about the existence of these mobilities also increases doubts about the efficacy of the market and its contribution to political equality. Radical inequalities and a sense of economic stagnation can in turn lead to a widespread rejection of the instruments of the free market and, more broadly, the free society.

The early twentieth century, that high tide of income inequality (the top .1% took home about 10 % of the national income in 1916), was also the high-water mark of the Socialist Party of America; Eugene V. Debs won 6% of the national vote in the fractious election of 1912.

Granted, the rise and fall of the SPA cannot be reduced to that single statistic, but wide income disparities perhaps set some of the conditions for this rise.
Aside from questions about social and economic ideals, this hard practical fact endures: in the modern welfare state, if a great majority believes that it can no longer economically advance, it has the political power to legislate the confiscation via taxation of the wealth of the rich. Now, this confiscation may not succeed in reducing inequality -- the grotesque inequalities of so many "workers' paradises" are built upon the failure of this confiscation to equalize -- but it can still be attempted. In addition to ethical objections about such a policy, a kind of economic hope as well as an economic fear serve to restrain this confiscatory enterprise.

The fear is that such governmental power could be turned against the members of a temporary majority; the hope is that the poor could, too, become rich, so they would want to be able to enjoy their wealth. But at a certain point, the fear of the misuse of power can recede before other, more immediate fears (such as starvation or death of exposure). Social mobility, on the other hand, feeds this hope. If one of the free market's benefits is social mobility, this mobility itself helps increase public support for the free market and protects it from overweening government.

The free market and government regulation are, then, both double-edged entities for issues of inequality. The free market can create radical inequalities through allowing a select coterie to dominate and entrench itself as an economic elite, but it can also unsettle entrenched elites and provide the hope of mobility through an open exchange; governmental regulations can prevent monopolies from forming and ensure limitations on the power of the extremely wealthy, but these very regulations can be tools for the hyper-rich to shut down the market and prevent competition.

Comment
When conservative-minded writers put their minds to work they often produce well thought out ideas. If only they translated into practical politics, but that’s another story.

Adam Smith’s writings on the decline of feudal-property relations in Britain shows an outstanding grasp of history and a deft hand at work, explaining the complex inter-actions between the ruling feudal lords and the newer, lower-order and despised trading merchants. Smith confined his remarks to silver buckle buying by some of the Lords (he lived in a man’s world), but we can be sure that much of the trinkets, brooches, rings, rare perfumes, silks and such like were destined for the Lords’ women.

Smith’s point was that the merchant traders brought luxury goods for the Lords to buy, who were increasingly tempted dispose of the main sources of their political power – their armed retainers – which troubled the leading Lord, the King, and those would-be Kings who eyed their throne, and oppressed the landed workers (hardly, incidentally, a ‘petty tyranny’; it served ‘petty’ ends, no doubt, but was brutal to its victims).

This was a long process, but the end result was an enfeebled aristocracy and a more vibrant merchant core, able to extract concessions from the king in parliament which gave them, eventually, an effective veto over the sovereign’s spending, legitimised by the outcome of a civil war. These Liberties constituted the constitutional monarchy that was 18th-century Britain.

Markets only continue what the consequences of the origination of property did way back in pre-history: create wealth (the 'annual output of the necessaries, conveniences, and amusements of life' and, inevitably, inequality. The great agricultural societies, growing from a long history of hunter-gatherer subsistence economies from 11,000 years ago in a small segment of the earth’s surface, were noticeable by their inequality, which extended way beyond economic inequality to political and religious inequality. Tribal property in territory preceded family and private property.

The great empires of Egypt, Babylon, India and China, were dominated by ruling elites that managed the hydraulic mysteries and seasonal timings of everything about everyday life for the vast majority of their peoples. The stone detritus of these former stone-built civilisations are spread across the Eurasian continents, north Africa, and in parts of central and south America.

Their predecessor stone-age tool detritus is spread all round the world, into modern times too, which was the subsistence mode of every human society that did not grow into shepherding and farming. Those, few, modern, aimlessly discontented, people who have notions of going back to what they call, the ‘simpler’ life of pre-history, seem to have no idea what that would involve, including the mass extermination of about 6 billion people.

For tens of millennia, the inequality of the world’s population remained constant, with a small elite monopolising the power, and almost everybody else living on subsistence and almost static per capita levels. That is until, again in parts of Europe, commercial society from the 14th century began, slowly, to revive after a thousand years of stagnation, Black Death, endless wars, and social strife, since roughly it was after the fall of the Western Roman empire.

And within four centuries, in Britain, economics, technological and social change, and the unprecedented steady, cinpound interest of the albeit minute rise in per capita incomes finally broke through the petty cycles of the 'Malthusian Trap', ironically almost coterminous with its identification by Thomas Malthus.

These events created social inequalities of a new kind – that between societies that developed institutions capable of ensuring the necessary conditions for continuous, though small, growth rates and those societies – the majority – not capable for various reasons of breaking out of their subsistence economies. The unequal poor in the commercial societies were incomparably better off than those in the unequal traditional societies, claimed Smith in Wealth Of Nations.

It is that comparative inequality that is the distinction brought about by the social evolution of early commercial societies into what became known as capitalism from the mid-19th century. It is a phenomenon that the Left do not acknowledge and the conservatives do not yet accept. There is nothing ordained about the existing arrangements of Big State capitalism or Big Welfare States that will ensure their continuation in their present forms.

The task of the philosopher, said Adam Smith, is to observe and seek to understand; it is not to do anything to intervene with panaceas and social engineering. Philosophers must be wary of becoming 'men (and women) of system' (TMS VI.II.2.17-18: 233-4)

Kofi Annan on Adam Smith and African Development

Peter Foster posts ‘Kofi sends Adam spinning’ in the National Post (HERE):

"Adam Smith believed that great danger lay in ‘partnerships’ between government and business. Kofi Annan has done more than anybody to promote such partnerships’
“The inside of Adam Smith’s grave must be worn pretty smooth by now, after two centuries of the great man’s spinning due to constant misinterpretation. Numerous additional rotations were surely in order yesterday when former secretary-general of the United Nations, Kofi Annan, delivered the annual Adam Smith lecture at the Kirkcaldy college that bears Smith’s name. Mr. Annan came at the invitation of deeply unpopular British Prime Minister Gordon Brown, who spent far more of his youth reading Das Kapital than The Wealth of Nations, but who also claims to be a Smith fan.”

“Mr. Annan typically tried to present Smith as an 18th-century proto-Bono. In fact, although Smith believed that personal benevolence was the highest virtue, he might have regarded Mr. Annan (and Bono) as typical of what he called “whining and melancholy moralists, who are perpetually reproaching us with our happiness, while so many of our brethren are in misery, who regard as impious the natural joy of prosperity, which does not think of the many wretches that are at every instant labouring under all sorts of calamities, in the languor of poverty, in the agony of disease, in the horrors of death, under the insults and oppression of their enemies.”

“Smith believed that great common good was provided by the pursuit of self-interest. He also believed that great danger lay in “partnerships” between government and business. Mr. Annan has done more than anybody (prodded by advisers such as Maurice Strong and Jeffrey Sachs) to promote such partnerships and lumber business with social and environmental “leadership,” thus diverting them from job creation.”

”The simple Smithian reference that Mr. Annan would perhaps do best to dwell upon is from the Sage of Kirkcaldy’s lectures at Glasgow University, where he suggested that “Little else is required to carry a state to the highest degree of affluence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.”

”What Africa needs is not more slush funds laundered via corrupt agencies and even more corrupt governments, but “peace, easy taxes and a tolerable administration of justice.”

Comment
I agree with Peter Foster, though, please, would he stop referring to Capital by Karl Marx as Das Kapital – somebody said on a Blog recently that people who refer to Marx’s Capital by other than its title in English have never read it (excepting, of course, those who read German!).

The reference to Adam Smith on ‘whining and melancholy moralists’ is from Moral Sentiments: TMS III.3.9: 139-40, and it is worth reading in context too. At the time he was contrasting two strands of morality (well represented in the Christianity preached in Scotland at the time):

“Two different sets of philosophers have attempted to teach us this hardest of all the lessons of morality. One set have laboured to increase our sensibility to the interests of others; another, to diminish that to our own. The first would have us feel for others as we naturally feel for ourselves. The second would have us feel for ourselves as we naturally feel for others. Both, perhaps, have carried their doctrines a good deal beyond the just standard of nature and propriety.

The first are those whining and melancholy moralists, who are perpetually reproaching us with our happiness, while so many of our brethren are in misery, who regard as impious the natural joy of prosperity, which does not think of the many wretches that are at every instant labouring under all sorts of calamities, in the languor of poverty, in the agony of disease, in the horrors of death, under the insults and oppression of their enemies. Commiseration for those miseries which we never saw, which we never heard of, but which we may be assured are at all times infesting such numbers of our fellow-creatures, ought, they think, to damp the pleasures of the fortunate, and to render a certain melancholy dejection habitual to all men. But first of all, this extreme sympathy with misfortunes which we know nothing about, seems altogether absurd and unreasonable. Take the whole earth at an average, for one man who suffers pain or misery, you will find twenty in prosperity and joy, or at least in tolerable circumstances. No reason, surely, can be assigned why we should rather weep with the one than rejoice with the twenty. This artificial commiseration, besides, is not only absurd, but seems altogether unattainable; and those who affect this character have commonly nothing but a certain affected and sentimental sadness, which, without reaching the heart, serves only to render the countenance and conversation impertinently dismal and disagreeable. And last of all, this disposition of mind, though it could be attained, would be perfectly useless, and could serve no other purpose than to render miserable the person who possessed it. Whatever interest we take in the fortune of those with whom we have no acquaintance or connexion, and who are placed altogether out of the sphere of our activity, can produce only anxiety to ourselves, without any manner of advantage to them. To what purpose should we trouble ourselves about the world in the moon? All men, even those at the greatest distance, are no doubt entitled to our good wishes, and our good wishes we naturally give them. But if, notwithstanding, they should be unfortunate, to give ourselves any anxiety upon that account, seems to be no part of our duty. That we should be but little interested, therefore, in the fortune of those whom we can neither serve nor hurt, and who are in every respect so very remote from us, seems wisely ordered by Nature; and if it were possible to alter in this respect the original constitution of our frame, we could yet gain nothing by the change.” (TMS III.3.8-9: 139-40)

Foster hits home with “slush funds laundered via corrupt agencies and even more corrupt governments” – he could have added that those who use their ‘moral authority’ to provide soft cover for the corrupt agencies and corrupt governments are also part of the problem too.

Adam Smith is Not Guilty of One-Dimensional Rationality

David Wolfe's Ageless Marketing HERE:

‘The End of a Myth: The Rational Man Theory of Markplace Behavior'

‘This experiment and many more are discussed in Ariely’s provocative new book, Predictably Irrational: The Hidden Forces that Shape Our Decisions. I enthusiastically recommend Ariely’s book to anyone involved in product pricing in any category. You will likely come away from this read with a better handle on how to price products.

Classical economics has rested on a premise that Ariely shatters to smithereens. For well over two hundred years economists have based their thinking on the premise that marketplace trends are determined by the rational behavior of people acting in their own interests. This in fact is the keystone of Adam Smith’s book The Wealth of Nations, the Old Testament of capitalism.

Ariely is not the first to challenge the rational man premise of classical economics. A whole new subfield called behavioral economics has taken root because some brave-minded stalwarts in the dismal science decided the emperor was stark naked. The notion that marketplace trends reflect the outcome of human reasoning in an objectively fathomable world is every bit as illusory as the appearance that the earth is more or less flat.

The cat is out of the bad, so to speak. I would expect to start seeing more accurate economic projections in the future now that such prominent economists as those who wrote the books I’ve cited in this post have revealed just how naked the rational man theory is.’

Comment
David Wolfe bases his article on, ‘Economist’ Dan Ariely’s book, discussed on Lost Legacy earlier this week. Yet Adam Smith’s book, The Wealth of Nations, does not base its ‘thinking on the premise that marketplace trends are determined by the rational behaviour of people acting in their own interests’, where the implication is that all consumers share the same self-interests and to the same degree.

If Dan Ariely has read Wealth Of Nations, Books I and II he would know of the 60 plus incidents in these two books which deal with markets where the self-interests of individuals have negative consequences for others (externalities) and there is no common self-interest that is necessarily shared by all those in the market. People do not buy merely on price (that is a construct of the mathematics of the late 19th century Marshallian demand curve and is an axion of modern neo-classical, not classical, economics).

Even in the simple purchase of examples in Wealth Of Nations introduces a movement of prices: ‘A publick mourning raises the price of black cloth’ (WN I.vii.19: 76-77).

Some people try to buy despite the rise in price; they are in mourning; others do not buy at all – they may be in mourning, they may not be.

Some, but not all, people pay higher prices for a new commodity because they want to be ‘fashionable’, to ‘attract attention’, to ‘cut a figure at a ball’, and any of a dozen other ‘rational’ (to them) reasons. In Book IV of Wealth Of Nations there is a discussion in Chapter ii of the role of the 'delusion' of the 'beauty' or 'fitness' of a contrivance being more persuasive than its utility for soem people - Smith gives it a central role in the motivation of entrepreneurs and consumers.

There is no common rationality. Smith discusses this and more in Moral Sentiments (1759).

Homo economicus was invented as a concept in the late 19th century, not by Adam Smith (he died in 1790). It fits a certain kind of mathematics – the kind that needs to be determinate.

Its sponsors have to find a common explanation, even if their explanation is partial. When used to predict the future, for which large fees are paid (despite the lousy track record), it is at its most vulnerable to ‘events, dear boy, events’.

Behaviourists and psychologists are aware of the variability of human motivation and behaviour. All we have to do now is convince more economists, which, ironically in view of the partial knowledge of Dan Ariely about Adam Smith, means encouraging more of them to read both Moral Sentiments and Wealth Of Nations.

Adam Smith on Liberty

Today’s Tomas Estrada-Palma Message (‘I am the great grandson of Don Tomás Estrada-Palma, the first elected president of Cuba, 1902-06). HERE:

Preface to the Post:

‘Tomás Estrada-Palma: LocaAnnapolis, MD, United States’

‘Let entrepreneurs into Cuba, keep the tax low and watch the economic explosion happen. Whenever there are more jobs than workers the wages and benefits are driven upward. That's because entrepreneurs compete for a limited supply of workers. Those who lose the competition will not be as successful because they can't grow without more laborers. Finally, the first modern society on the planet will be populated by people who are neither slaves to the pharaohs of industry nor government. Cuban workers will have the best job security in the world!'

The Post:

Stock Manipulation (23 April)

‘What's going to happen? Adam Smith wrote that the invisible hand of the marketplace always corrects the price of everything eventually. What the Treasury Department is futilely attempting to do is to re-inflate the stock market bubble. They will fail dramatically and very soon. The bubble is going to pop and the drop will be much more significant than if the government would have just left things alone.’

Comment
I posted the Preface because for its contents, because Tomas Estrada-Palma, deserves to be saluted and respected by all who believe in Liberty.

His later post is less clear. Adam Smith did NOT write that ‘the invisible hand of the marketplace always corrects the price of everything eventually’. Smith wrote that markets determine the ‘the price of everything eventually’.

There were no invisible hands involved in Adam Smith’s writings about markets, as can be seen in Books I and II of Wealth Of Nations.

That is a myth invented in the middle of the 20th century by modern economists (download my paper, ‘Adam Smith and the invisible hand: from metaphor to myth’, from ASLL Home Page: click where invited to do so).

Tomas is correct: ‘the Treasury Department is futilely attempting … to re-inflate the stock market bubble.’ And burdening current and future generations with immense debts that will have to be repaid from taxation.

On Cuba’s future, I am sure it would be in safe hands if its people elect a (small) government to be ‘at peace, introduce easy taxes, and a tolerable administration of justice’ (Adam Smith, 1755).

The best response to Castroism is not bloody revenge nor mass persecution of his acolytes: let the people create prosperity based on justice and competitive markets. Keep an eye out for monopolistic tendencies and special pleading for privilege; stamp out corruption, fraud and favours.

And above all secure the people with Liberty.

Nicholas Gruen on Smith's Moral Sentiments

Nicholas Gruen’s article on Adam Smith’s Moral Sentiments (first published in the Sydney Morning Herald, 10 April) is republished in On Line Opinion (Australia’s e-journal of social and political debate’) HERE:

I recommend that you follow the link and read Nick’s explication of the role of sympathy in human relations, as explained by Smith in his Theory of Moral Sentiments (1759).

Over at Econ Talk (HERE) Dan Klein and Russ Roberts are discussing the whole of Smith’s Moral Sentiments text (they are on part 3 of the series this week), but if you want a short, sharp introduction to Smith’s theory of reciprocal sympathy, Nick’s excellent and inimitable prose style in just the right tone will provide you with the tools in about 15 minutes reading (and thinking).

Here is the briefest of extracts for you (consistent with ‘fair dealing’ of copyright materials):

"Happy 250th birthday: Adam Smith the public figure

Smith’s great theme was that self-interest was healthy if balanced by similarly powerful forces tending towards the public good. In economic life in freely competitive markets, competition and self-seeking behaviour would - miraculously - serve both private and public interests. So long as a bargain was free and informed - for instance free of a merchant’s monopoly power or of fraud - it would improve the lot of all concerned.

And Smith’s Theory of Moral Sentiments argued that people seeking their own interests in a society were united by their sympathy or fellow feeling for others. If that sounds a bit lame to you - a monopolist’s sympathy for his customers rarely stops him exploiting them - Smith wasn’t arguing that people always do the right thing. His point was subtler and more powerful. Smith observed the way we internalise others’ values and live enmeshed in social meanings and expectations.
In thrall to Newton’s explanation of the movement of planets via a single, uniform principle - that of gravity - he looked for a similar foundation for human behaviour in society. In modern parlance Smith argued that we were “hardwired” for sympathy or fellow feeling with others, not in the sense that we always take their side, but in the deeper sense that our understanding and ultimate judgment of them depends on an imaginative sympathy, on the process of being able to place ourselves in their position, to see the world through their eyes."

Comment
Lost Legacy has corresponded with Nick Gruen since its foundation in 2005 and he is a perceptive literary scholar of Adam Smith’s Moral Sentiments. I have posted a couple of his articles in the past on Lost Legacy’s Home page.

Trade is Beneficial But Not Free

Peter Cresswell writes in the (exciting) Not PC Blog (. . . promoting capitalist acts between consenting adults’) HERE:

‘ANZAC WEEK: The Horsemen of non-apocalypse’

Trade. Trade works. Trade is simply the voluntary exchange of goods and services to mutual advantage. In the words of the economists, when I trade my apples for my neighbour's oranges, it is because I value the oranges more than my apples, and my neighbour values my apples more than his oranges. We both see mutual advantage in the exchange, and since both sets of goods are each moved from a 'lower value' to a 'higher value,' the nett result of this and every voluntary trade is that both traders win - everyone kicks a goal! -- and from each trade new wealth is created thereby: the economy is greater for the sum of the higher values achieved, and my breakfast table is richer by some freshly squeezed orange juice -- and my neighbours by my apples.

It us thus that men live by production and voluntary exchange, not by plunder. This is the benevolent 'invisible hand' of which Adam Smith spoke. It is a hand of peace, since as Frederic Bastiat observed, "when goods don't cross border, armies will." Countries that trade with each other don't go to war with each other: there's too much to lose.

"Free trade helps quell government's passion for war. It creates powerful lobbying groups on all sides that demand the preservation of peace and the triumph of diplomacy over hostility. International trade networks create intermediating structures of business relations that work as a barrier to bombs and belligerence.

Trade trumps conquest. Rather than seeing trade itself as a conflict, as something involving embargoes, sanctions and aggressive 'trade wars,' we should realise that peace and free trade are mutually dependent."

Let those who are actually concerned with peace observe, for example, that the free trade era of the nineteenth-century trade brought to the world the most peaceful century yet known. And in the twentieth century, post-war trade brought benefits to twentieth-century Germany and Japan that their earlier destructive attempts at conquest never could.

Comment
I agree with much of this article but a few caveats are called for.

‘This is the benevolent 'invisible hand' of which Adam Smith spoke’.

An exaggeration surely. I refer new readers to several article on Adam Smith’s use of the metaphor of ‘an invisible hand’ (you can down load my paper, ‘Adam and the Invisible Hand: from metaphor to myth’ from the ASLL home page; ‘click’ on message).

Bastiat was right in theory, but wrong historically, as is Peter Cresswell:

‘Countries that trade with each other don't go to war with each other: there's too much to lose.’

France and Britain traded with each other – and could have traded more, except for the mercantile political economy practised by All European governments, which Smith criticised in Book IV of Wealth Of Nations – and were at war several times in the 18th century and in the early 19th century when Bastiat wrote his article.

The problem is one of what David Hume called ‘jealousy of trade’ – the proclivity to treat neighbouring trading partners as deadly rivals, which festers into hostile actions and eventually into wars. Tariff protection often is a prelude to war. Armies cross borders in pursuit of commercial advantage, apart from wars of dynastic succession, of which there were many in Europe.

Trade is a civilising influence, but it is subject to ideology, religious extremism, passionate causes, economic illiteracy, politics and emotional ignorance. Add in mercantile fallacies, protectionism, discrimination, short-term advantage, and the cussedness of people, and Bastiat’s optimism is soon compromised.

All the more reason to make the case for free trade on sound grounds (and often!).

Governments Are Not the Solution to Many Problems

A piece in the New York Times: A fast, so-called car; Let our economy run free, save the planet; they shoot wild horses don’t they? (but no bullets please), etc…. HERE:

“One suspects the most controversial piece in the section is some non-newswriting by columnist John Tierney. It is non-newswriting because few citations of sources and no opinions counter to his theme appear. It is a column. He channels the late and smart economist Julian Simon while arguing that the way to a greener, low-carbon future will be automatically followed if we just encourage national - and presumably individual - wealth. He doesn’t say it this way, but the implication is that individual self-interest and the hidden hand of Adam Smith will deliver us from the evils of a hothouse world. There is much truth in the piece: that wealth permits nations to maintain their environments, establish and maintain nat’l parks, provide healthy air and water, perform eco-tourism, etc. Which is why The Tracker firmly believes that right now, while we still have some wealth to gather up with our taxes, it is time to spend trillions and trillions of dollars in gov’t money (and stimulate even more in private capital) to transform the economy - by deliberate, political decision. Unfettered new coal plants ought, as soon as possible, be illegal. Tierney’s example of wealthy-means-green is the cleanup of sulphur from the air. That was by government cap-and-trade fiat. But Tierney’s approach appears more on the laissez faire, relax-already side. He says more on his blog. And there, readers have a lot to say in reply.”

Comment
Advocating spending ‘trillions and trillions of dollars in government money’ and at the same time ‘stimulat[ing] even more in private capital’, I am bound to ask from where is the government going to get this money?

Presumably, by taxing the private incomes, corporate profits, private spending, and private savings of the taxpayers, plus anything that can be ‘saved’ from government spending.

So, from what current/income and expenditures is this vast stream for the government’s coffers to come from? Which current spending is to be curtailed and taxed to pay for the approved goals of John Tierney?

As important, we should (always)ask what assurances, let alone certainties, are available for taxpayers (the electors) that the government’s institutions and the legislators (and those who influence them) are able to spend these vast sums efficiently and effectively?

Few governments, if any, and certainly for very few for long, have commendable records when it comes to large scale public spending, and this is especially true among the world’s governments where personal liberties are absent and not protected by independent justice systems.

Perhaps Milton Friedman was border-line hyperbolic when he surmised that if the Federal government in the USA was in charge of the Sahara desert, it would run out of sand.

But we know what he meant and suspect it would not be safe to trust any government ‘to spend trillions and trillions of dollars [of our] money’ productively to ‘deliver us from the evils of a hothouse world’.

Maxedoutmama joins the fray

‘Maxedoutmama’ posts a most interesting and imaginative explication of Adam Smith’s views related to the current financial crisis (HERE):

“I Digress: Taking a break from the somewhat grim global economic news:

”I always feel embarrassed to use a non-journalist's name when I am pointing out that someone's assertions are lunatic, so I won't cite the author's name. Instead, I will confer a charitable anonymity by using the sobriquet "Wonder Dummy" for the author henceforth.

The basic theme of Wonder Dummy's post:

‘Adam Smith first coined the term “The Invisible Hand” in his important book “The Wealth of Nations.” With this term he was trying to capture the idea that the marketplace would be self-regulating. The basic principle of the invisible hand is that though we may be unaware of it, an unseen hand is constantly prodding us along to act in line with what’s best for the whole economy. This means that when this invisible hand exists, when we all pursue our own interest, we end up promoting the public good, and often more effectively than if we had actually and directly intended to do so. This is a beautiful idea, but the question of course is how closely it represents reality.’

Comment
Do you recognise the author whom ‘Maxedoutmama’ quotes? I posted my criticism of him yesterday (Clue: he’s at Duke University).

‘Maxedoutmama’ continues:

“Of course the answer to the question is preordained by this careful miscast of Adam Smith's main assertion. That assertion is that economic efficiency is best for the economy, and that economic efficiency can best be attained by not interfering with prices in the marketplace. In fact, I suspect that Wonder Dummy has never read Adam Smith. I prefer to be charitable and assume that Wonder Dummy is not knowingly lying in order to lend credence to a meme that is currently popular, if completely wrong.”

And she recommends reading Adam Smith’s Moral Sentiments and Wealth Of Nations:

”If you want to find out what Adam Smith (1723-1790) really said, you can find most of his writing online….Adam Smith was no superficial thinker, and his economic musings were not based on an unrealistic view of mankind… To which I must add … my favorite Adam Smith quote:

‘What can be added to the happiness of the man who is in health, who is out of debt, and has a clear conscience?’

Comment
To which she adds a remark about Dan Ariely’s transmutation of the invisible hand into ‘government debt’:

“What a surprise. In fact, those who have actually read Adam Smith know that the "invisible hand" is used in the context of government control of trade, specifically, protectionist tariffs against foreign goods. The discussion is found in Chapter 2 of Book IV "Of Systems of Political Economy" …

“In short, this is about what governments can and cannot accomplish. Chapter 2 begins as a discussion of government-granted monopolies to domestic industries, and continues as an explication of the harm that such monopolies cause to the general welfare.

Comment
The rest of the post by ‘Maxedoutmama’ is on the details in the chapter which mentions the metaphor of an invisible had and the causes of the current crisis, and you should read it in detail (follow the link above).

While enjoying the skewering of Dan Ariely’s version of the invisible hand, I have reservations about Maxedoutmama’s version too. The survey of the build-up to the singular use of the invisible hand metaphor demonstrates that she has read Wealth Of Nations, which is an improvement on Dan’s version.

However, it neglects the specific details of the risk-aversion of those merchants who prefer the home trade to foreign trade. In doing so, it swaps a more realistic role for The Metaphor for the unrealistic and imaginative role accorded to it by Dan Ariely.

Thus, though more authoritative that Dan’s, ‘Maxedoutmama’s version is too close to the orthodox version, and also implicitly accepts some role for The Metaphor, when in my opinion it is just a literary metaphor.

However, congratulations to ‘Maxedoutmama’ (she seems to have the rhetorical punch of Deirdre N. McCloskey, of the University of Illinois) for her valiant efforts against Dan’s error.

Self-Interest is Not Always Benign

A regular correspondent writes:

‘I don't know if you take requests, but I would love to see one of your posts on the recent interview at the Freakonomics blog about "The Invisible Hook", a new book about the economics of piracy. Here's the link:

Here is the quotation from the Freakonomics article on piracy:

"In Adam Smith, the idea is that each individual pursuing his own self-interest is led, as if by an invisible hand, to promote the interest of society. The idea of the invisible hook is that pirates, though they’re criminals, are still driven by their self-interest. So they were driven to build systems of government and social structures that allowed them to better pursue their criminal ends. They’re connected, but the big difference is that, for Adam Smith, self-interest results in cooperation that generates wealth and makes other people better off. For pirates, self-interest results in cooperation that destroys wealth by allowing pirates to plunder more effectively."

Comment
The first question is easy: I am delighted to respond to requests about any subjects related to Adam Smith’s Lost Legacy. I receive these regularly by email and I usually replied privately by correspondence, but there is no inhibition on my part from replying via ASLL.

I have also read the article by Freakonomics in the New York Times (link above) and my initial response to the sentence: ‘The idea of the invisible hook is that pirates, though they’re criminals, are still driven by their self-interest', was incongruity.

Who suggests that criminals do not act according to their self-interest? Of course they do. They certainly do not act for anybody else’s interests!

When Mugabe authorises maltreatment of opponents by his hired thugs, he acts in accordance with his self-interest as he sees them. Indeed, Adam Smith gives 60 instances of people acting according to their self-interest but not in the interests of others in Books I and II of Wealth Of Nations, and these people’s actions certainly did not benefit society as a whole, nor were they intended to do so.

That’s part of the problem with the Freakonomics’ approach: it seeks the rational motives behind people’s actions, when rational decision-making can have non-beneficial consequences for those affected by the decisions. But the Freakonomics authors, ingenious as their explanations often are, sometimes fail to find unanimity in the decision makers’ cohorts – not all members of a cohort, sharing, say, the same characteristics as gang members, become gang members, or take drugs, get pregnant, or kill anybody.

So the pirates ‘driven to build systems of government and social structures that allowed them to better pursue their criminal ends’ is only part of the story.

Smith noted a significant and relevant point in this regard:

‘Society, however, cannot subsist among those who are at all times ready to hurt and injure one another. The moment that injury begins, the moment that mutual resentment and animosity take place, all the bands of it are broke asunder, and the different members of which it consisted are, as it were, dissipated and scattered abroad by the violence and opposition of their discordant affections. If there is any society among robbers and murderers, they must at least, according to the trite observation, abstain from robbing and murdering one another. Beneficence, therefore, is less essential to the existence of society than justice. Society may subsist, though not in the most comfortable state, without beneficence; but the prevalence of injustice must utterly destroy it.’ (TMS II.ii.3.3)

Now, pirates in the 17th and 18th centuries were composed of experienced seamen and their officers. The learned their trade as seamen in the merchant marine and the Royal Navy. Both sections of the shipping business had many shared customs, some of ancient vintage. For example, in times of severe scarcity, food from a captured seabird’s carcass was divided among the crew by the venerable system of ‘who shall have this?’ and not by the captain’s prerogative.

One seaman turned his back of the divided segments of the bird and another seaman pointed to a piece of dismembered bird and asked ‘who shall have this’. The crew member who could not see what his colleague was pointing at would shout out a name, and that piece, whatever it was – beak, feathered tail, webbed feet, or succulent breast – was allocated to the man whose name was called out. This happened to Captain Bligh and his boat crew after the mutiny – the men were amused (quietly) when Bligh received the feet on one occasion.

So, much of the so-called drive ‘to build systems of government and social structures that allowed them to better pursue their criminal ends’ which were merely simple rules for self-preservation, and, as Smith put it: ‘any society among robbers and murderers, they must at least, according to the trite observation, abstain from robbing and murdering one another’, because ‘the prevalence of injustice must utterly destroy it.’

Now fast forward to Somalia and the pirate menace to shipping.

The first big difference is that 18th-century pirates sailed large, self-sufficient, and well-armed and fast ships, crewed by excellent seamen, and captained by proven leaders who could keep the crew in order according the conventions among pirates. Everybody received a share of the loot according to their station (much like Prize Money paid by the Royal Navy for captured foreign vessels).

The Somalia pirates are in a different league; their ships are less seaworthy, their crews number a half-dozen men, and the ships they board are defenceless largely. Their leaders, judiciously, are on shore, not on the little boats. They take the bulk of the loot obtained – ‘independents’ are rare – and they launder the vast sums with the efficiency of banks through high-level international contacts. When a heist goes wrong, it’s the boys in the bum boats who die, not the shore-based quasi-bankers.

‘For pirates, self-interest results in cooperation that destroys wealth by allowing pirates to plunder more effectively’.

Pirates do not create nor destroy wealth; they redistribute it. Plunder as an alternative to wealth creation is as old as, if not older than, voluntary exchange. Hijacking a lorry full of merchandise is not different that sea-born piracy and regularly happens inside all major economies.

The nature of an activity does not alter the self-interested activity of criminals, polluters, spoilers of the commons, kleptomaniac African (or Russian, or Prohibition Mafias), and petty thieves in supermarkets.

What Freakonomics adds to what we know about self-interested actions, for good or ill, I am not qualified to comment, but on the piracy phenomenon, I am not impressed.

Only Slightly Disappointed

A correspondent writes to inform me that Dan Ariely is not a graduate economist but, in fact, he was a graduate in psychology (BA), cognitive psychology (MA), cognitive psychology (PhD) and Business Administration (PhD). Apart from his second PhD, he is not an academic economist, so I was wrong to be astonished that he wrote what he did about Adam Smith (it depends on how much history of economics he read on the business administration programme).

However, Duke University is home to one of America’s strongest centres for history of economics and very much the current ‘home’ of the subject. It publishes the leading academic, refereed journal, History of Political Economy (HOPE), regularly recruits graduate students for its PhD programmes.

But it is still surprising that a specialist in behavioural economics, which is justifiably critical of the rational Home economicus model, has not read what Adam Smith actually wrote in both Moral Sentiments and Wealth Of Nations, and appears to have accepted on trust what 20th-21st century ‘authorities’ claim were his ideas.

If a major figure is claimed to be the foundation of so-called rational economics and one’s major work is about developing a more realistic model of human behaviour, I would have thought it incumbent to read for oneself the original works and published papers.

Call me old fashioned but that’s my approach. When I taught undergraduate students in Economics I, many years ago, I often reminded them that St Thomas, the Doubter, was the patron saint of students. Should I ever visit the subject of behavioural economics, I would start with a long reading list before commenting on what has proceeded my interest or curiosity.

Smith on Morals of Competition

John E. Hill writes a comment to an article, ‘Adam Smith would be appalled’ in The Boston Globe (20 April) HERE:

‘GORDON MARINO hit the nail squarely on the head with his op-ed "The business of business ethics." But he did not hammer the nail hard enough. Adam Smith, considered the father of capitalism, wrote, "In the race for wealth, and honors, and preferments, [one] may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors." But Smith added that one should not harm another in the process.

Surely Marino's critique of investors "taking unconscionable but legal risks with other people's pensions and life savings" means that hundreds of thousands of people have been harmed. And isn't the opacity of the instruments used to essentially defraud people of their pensions an impediment to the transparency needed for a truly free market?

The greedy Wall Street manipulators have violated not only ethical principles but also the free-market principles of Adam Smith.

Comment
John Hill should quote the full passage following the sentence he quotes to make clear and definitive the particular point that Smith makes (though congratulations to John Hill for spotting the basis of Smithian moral conduct in competition):

‘In the race for wealth, and honours, and preferments, he may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should justle, or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play, which they cannot admit of. This man is to them, in every respect, as good as he: they do not enter into that self-love by which he prefers himself so much to this other, and cannot go along with the motive from which he hurt him. They readily, therefore, sympathize with the natural resentment of the injured, and the offender becomes the object of their hatred and indignation. He is sensible that he becomes so, and feels that those sentiments are ready to burst out from all sides against him.’ [TMS II.ii.2.1: 83]

Top Behavioural Economist Invents New Mythical Role for the Invisible Hand

Dan Ariely, James B. Duke Professor of Behavioral Economics at Duke University and a visiting professor at MIT’s Media Laboratory, has contributed and article (20 April) for Technology Review (published by MIT) HERE: and for Predictably Irrational HERE

'Irrationality is the real invisible hand'

“Adam Smith first coined the term “The Invisible Hand” in his important book “The Wealth of Nations.” With this term he was trying to capture the idea that the marketplace would be self-regulating. The basic principle of the invisible hand is that though we may be unaware of it, an unseen hand is constantly prodding us along to act in line with what’s best for the whole economy. This means that when this invisible hand exists, when we all pursue our own interest, we end up promoting the public good, and often more effectively than if we had actually and directly intended to do so. This is a beautiful idea, but the question of course is how closely it represents reality.

In my mind this experience has taught us that Adam Smith ‘s version of invisible hand does not exist, but that a different version of the invisible hand that is very real, very active, and very dangerous if we don’t learn to recognize it. Perhaps a more accurate description of the invisible hand is that it represents human irrationality. In terms of irrationality the hand that guides our behavior is clearly invisible — after all recent events have demonstrated that we are largely blinded to the ways rationality plays in our lives and our institutions. Moreover it is also clear that irrationality does shape our behavior in many ways, pushing and prodding us along a path can lead to destruction. Whether we’re procrastinating on our medical check-ups, letting our emotions get the best of us, or letting conflicts of interest and short term time horizon ruin the financial market, irrationality is certainly involved.

In Adam Smith’s world the invisible hand was a wonderful force, and the fact it was invisible made no difference whatsoever. The irrational invisible hand is a different story altogether - here we must identify the ways in which irrationality plays tricks on us and make the invisible hand visible!”

Comment
I am astonished that such a senior academic economist is unaware that what he asserts about Adam Smith is a myth invented in the mid-20th century, which, on the evidence above, he seems to have swallowed hook, line, and sinker.

The first three sentences of his piece above contain three errors.

Smith did not ‘[coin] the term The Invisible Hand’ – he used it twice previously, once in his Essay on Astronomy [1744-; 1795], and once in his Theory of Moral Sentiments [1759].

He was not ‘trying to capture the idea that the marketplace would be self-regulating’. He never mentioned the invisible hand metaphor when he analysed markets in Books I and II of Wealth Of Nations; his sole mention of the invisible hand was in Book IV (page 456) and the end of an analysis of why some (not all!) merchants preferred to invest their capitals in the local market rather than face the risks (and, incidentally higher profits) of sending their capitals abroad to the British colonies in North America.

It was a case of their risk-aversion (read the whole of Chapter 2 in Book IV of Wealth Of Nations; don’t rely on the 1930s oral tradition at Chicago University or your tutor’s misunderstandings emanating from Paul Samuelson’s Economics,1948).

For a professor of behavioural economics to assert that ‘an unseen hand is constantly prodding us along to act in line with what’s best for the whole economy’ is astonishing. That wasn’t what Adam Smith said, nor does it correspond to his political economy.

He gives over 60 examples in Books I and II of Wealth Of Nations of instances where individual self-interested actions lead not ‘what’s best for the whole economy’, but what had negative consequences for those affected.

To turn these myths around and pose the ideas that ‘Perhaps a more accurate description of the invisible hand is that it represents human irrationality’ is breathtaking in its, er, error: there is no actual invisible hand, it doesn’t exist as an operator – it’s a only a mere metaphor, offered by Adam Smith after he had explained in detail why the risk-averse merchants behaved as they did, presumably for those readers who didn’t follow his argument (which apparently is the entire profession from the mid-50s in US and British universities).

Why did the brightest in the profession spread these errors? You’ll have to ask them, but remember the context. In the 1930s capitalism as an alternative to Soviet communist planning was struggling in the depression years (as it is just now) and once the Cold War was underway, the West was threatened militarily.

Someone got the bright idea to use an innocuous metaphor (fairly common in literary works in the 18th century) used by Smith, en passant, as a mysterious force, which they placed in market capitalism that had the miraculous powers of guiding individuals to benefit national goals without them knowing what they were doing. It didn’t require battalions of state planners, and the tyranny that came with them; it required liberty and freedom, both anathema to Communism.

It was game, set, and match, and given scientific credibility with the success of theorists of general equilibrium (Samuleson and Debreu), and propagandized across the world’s campuses. It was also given historical credibility by linking it to Adam Smith, even the linkage was dubious in the extreme.

But the question never answered is: which term in the theory of general equilibrium represents the invisible hand and what does it consist of and what does it do?

Dan has introduced a new role for it: irrationality; so it both invisible and part of cognition and behaviour!

For Dan to write: ‘In Adam Smith’s world the invisible hand was a wonderful force, and the fact it was invisible made no difference whatsoever’, frankly is embarrassing.

Smith never discussed it elsewhere in any of his writings – near on a million words – other than as a metaphor on the three occasions he used it. If it was true that ‘the invisible hand was a wonderful force’, one would expect it have been more central in Wealth Of Nations when he discusses markets in Books I Nad II, but he didn’t, nor did his contemporaries or anybody else, including critics at the end of the 19th century. It’s in the mid-20th century that the metaphor was re-invented as ‘a wonderful idea’.

It was so ‘invisible’ that none of Malthus, Lauderdale, Playfair, Ricardo, McCulloch, Mill, Marx, or even Bright and Cobden, mentioned it.

To get the invisible hand into perspective, download my paper: Adam Smith and the Invisible Hand: from metaphor to myth, HERE:

Ethical Crisis - What Crisis?

MURRAY WHYTE write in Toronto Star (The Star.com HERE)

‘Closed due to the recession’

“U of T's Lind, whose central field of study is economic ethics, points out that this is a relatively new quandary. Until the industrial revolution, ethics and economics were a unified field. Adam Smith, who described the advent of market economics as being guided by "an invisible hand," is often misconstrued as the early progenitor of the Milton Friedman-spawned, market-knows-all Chicago School. "But really, he was making a moral argument, because to him, there was no distinction."
As the 20th century dawned and economics turned away from the philosophical and more toward hard math, the separation grew. "The field of ethics went into crisis just as economics turned to mathematics," Lind says. "Economics became a hard science, whereas ethics became a confusion."

Comment
From where do they get these muddled ideas? Economics as a subject did not exist in the 18th century, certainly not as Adam Smith wrote about what was called ‘police’ (ensuring subsistence for a society).

Political economy was a title coming into vogue when Smith wrote Wealth Of Nations, which lasted a century until the 1870s when mathematical analysis began to appear. That title too declined in the 20th century.

Smith wrote about ‘commercial society’ and market, but did not mention The Metaphor of an ‘invisible hand’ in his analysis of how markets functioned (Books I and II of Wealth Of Nations). He certainly never said ‘the advent of market economics as being guided by "an invisible hand" ’.

It is, however, true that The Metaphor is ‘often misconstrued as the early progenitor of the Milton Friedman-spawned, market-knows-all Chicago School’.

Indeed, the modern myth of The Metaphor was virtually invented by ‘Chicago’ in the environs of 59th street (see Oscar Lange, 1946 and Paul Samuelson, 1948) and has become universally misconstrued as ‘markets always produce socially beneficial outcomes’, despite the presence of monopolistic practices, protectionist policies, tariffs and non-tariff barriers, pollution, and other negative externalities.

Economics didn’t turn ‘to mathematics’; scholars calling themselves economists ‘turned to mathematics’. Economics did not become ‘a hard science’; its proponents confused ‘hard science’ with economic models that were bereft of the presence of human beings.

And ‘ethics’ did not become ‘a confusion’ – the basic ideas of ethics (partly summarized by Adam Smith in his Moral Sentiments) remain valid.

The absence of people in mathematical modeling of the kind dependent on 19th-century calculus eliminates ethics from the equations. People are given objectives that lead to determinate solutions; the ‘solutions’ have little operational value.

I am not sure that ethics is in ‘crisis’; people without ethics are in crisis. The ‘U of T[oronto]’ should be teaching its students to think about the differences in the tone of this article and the reality of the dead-end where economics has come to rest.

Thought for the Day no. 6

I have been reading Charles Darwin’s lesser known book, The Descent of Man, and selection in relation to sex (1871), which reports on his research published after his Origin of Species (1859).

In it, Darwin makes a direct reference to Adam Smith’s Moral Sentiments (Smith’s first book, published in 1759) in his chapter discussing moral sense.

From this chapter, it is clear that Darwin agreed with Smith that moral sense was not an innate faculty (as suggested by Frances Hutcheson), but was learned from social contact with other humans in society.

‘Thus, the social instincts, which must have been acquired by man in a very rude state, and probably even by his early ape-like progenitors, still give the impulse to many of his best actions, but his actions are largely determined by the expressed wishes and judgement of his fellow men, and unfortunately still oftener by his own strong, selfish desires.’ (Descent of Man, p 86; see also footnote 17, p 82)

Darwin's theatre of activity included the whole range of animals, beside humans, and he used his detailed knowledge to test the extent of moral behaviour across a wider range of species than Smith, who considered only humans. He also drew on a hundred years of extra research not available to Adam Smith. On the whole, I think Smith's theories stand up quite well.

A Myth of Free Markets

Dan McLaughlin posts (17 April) a book review of “Free Lunch” By David Cay Johnston in Citizen Economists HERE: http://www.citizeneconomists.com/blogs/2009/04/17/free-lunch-by-david-

“Quotations from Adam Smith are generously sprinkled throughout the book, and made to sound as though the champion of free markets would have supported Johnston’s proposals for big government and heavy regulation of business.

According to Johnston’s analysis, the problems that modern America faces are due to alleged “deregulation”. The author summarizes his confusion early on when he says “In the past quarter century or so our government has enacted new rules that have created not only free markets, but rigged ones.” If the markets are “rigged”, they are not free in any sense. The regulators rig the market and make it un-free. It shouldn’t be that hard to make the connection. The regulation that he longs for has always been written by the regulated, to the detriment of competitors, taxpayers and the buying public.”

Comment
Dan McLaughlin makes a good point about ‘deregulation’. There is mantra circulating that ‘deregulation’ being bad and ‘regulation being good, wrapped in an assertion that the capitalist economies have been too laissez-faire and that the government has to intervene in the so-called ‘free markets’ supposed to exist all around us, summed as the government must introduce tighter regulation.

The problem with this debate is that the premise is incorrect. Markets are hardly free when the existing regulation (supported by laws, such as in the European Union, covering everything from hours of work, overtime, consultation over social issues, Health and Safety, discipline, redundancies, human rights, race, feminism, labelling, testing, supervision, insurance, minimum wages, pensions, copyrights, patents, planning procedures, banking and finance, and so on and on).

It’s not that these regulations are all bad – though some are barmy – it’s that their existence contradicts assertions about ‘free markets’, and I have only mentioned a few of them. Capitalist markets are dominated by Big Government, hence we do not have anything remotely like laissez-faire (which, contrary to assertion, never featured in Adam Smith’s political economy). It’s more accurately described as State Capitalism, with governments intervening with ever more legislation to impact on businesses, egged on or resisted by armies of professional lobbyists.

Not everybody who quotes from Adam Smith respects his legacy, nor do they all understand it. Dan McLaughlin appears to do so more than the author of the book he reviewed.

A Sympatheic Commentor on Adam Smith's Views

Winton Bates writes ‘How High was Adam Smith’s Jen Ratio?’ in
Citizen Economists HERE:

‘I have been looking forward to reading “Born to be Good”. I have previously considered on this blog the question of whether the inner nature of humans is good and I want to explore this topic further.

However, after reading a few pages I began to wonder whether reading this book will do much to improve my jen ratio. The problem is that it seems to me that Keltner’s discussion of the views of Adam Smith is uncharitable. Keltner claims that Smith portrayed Homo economicus as some kind of ideal of human evolution who was designed to maximize self-interest in the form of experienced pleasure and advances in advances in material wealth ( p 8).

Smith had a realistic view of human nature. I don’t think he saw humans as rational maximisers of anything, but it is true that he did make some famous observations about self interest as a motivating force. Smith stated: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest” (“Wealth of Nations”, I.ii.2). It seems to me that this is an observation about the way the world works rather than a statement advocating selfishness.

I think the closest Smith got to advocating selfishness is his claim that by pursuing his own interests an individual frequently promotes that of society: “I have never known much good done by those who affected to trade for the publick good” (W.N., IV, ii, 9).

It is arguable that Smith was being too cynical at that point. It is possible to think of examples of a great deal of good being done by not-for-profit organisations e.g. in running schools and hospitals.

Anyone who had an interest in presenting a fair picture of Smith’s views of human nature, however, would also take account of the views he presented in “The Theory of Moral Sentiments”. For example: “The virtues of prudence, justice, and beneficence, have no tendency to produce any but the most agreeable effects. … In our approbation of all these virtues , our sense of their agreeable effects , of their utility, either to the person who exercises them , or to some other persons, joins with our sense of their propriety, and constitutes always a considerable, frequently the greater part of that approbation” (TMS IV, iii, 59).

It is not fair to portray Adam Smith as promoting an “ideology about human nature … with a jen ratio trending toward zero”.

Comment
The ‘Jen Ratio’ is complicated to explain and readers should consult the article in the link above.

Adam Smith never portrayed anybody as Homo economicus (a late 19th century notion, much lauded by modern economists to no valid purpose), nor as ‘rational maximisers’ (a mid-20th century assumption that removes people from markets).

Yes, the famous quote about “the benevolence of the butcher, the brewer, or the baker” is about self-interest (“Wealth of Nations”, I.ii.2: 26-7) and Smith is postulating from observation and this did not mean either party was ‘selfish’.

Look closely at the paragraph: there are two self-interested parties, not just one. You in your self-interest want your dinner and you are willing to pay something for it; the butcher, brewer, and baker, want (out of their self-interest) to earn revenue by supplying you with your dinner.

The bargaining problem is to find a price that both parties can agree upon. But how is this determined? If you just go on about why you need your dinner and you ignore the interests of the sellers, and the sellers go on about why you should pay them the price they demand and ignore your interests, the result will be deadlock. But Smith goes beyond that narrow view of self-interest.

He advises you to ‘address’ your conversation to the sellers advantages (interests), not your own necessities (interests)’. And bargains are obtained by offering the other party something that is to their ‘advantage: ‘Give me that which I want, and you shall have this which you want’, known as the conditional proposition. As each party lowers their demands and improve their offers, they move towards an acceptable bargain.

The alternative is to demand the other party surrender and you will suffer deadlock. Two selfish demanders get nowhere. If that was the rule of bargaining in commercial society, it would never prosper.

The reference to “I have never known much good done by those who affected to trade for the publick good” (W.N., IV, ii, 9: 456) is not about ‘selfishness’, its about the discordant music played by a few when trading, again for no good end.

Winton Bates demonstrates a sympathetic appreciation of what Adam Smith wrote and is to congratulated for that. My remarks above are offered to clarify important aspects of his thinking.

Adam Smith on Government Roles

Leon Fink, a history professor at the University of Illinois at Chicago, writes (16 April) on “The piratical world of commerce” at the Chicago Tribune HERE.

“Unlike the 18th Century Barbary pirates, to whom they have been compared on the superficial grounds that they are both poor Muslims feeding off oceanic traffic, today's pirates are stateless actors generally operating in a medium (the ocean) of weak or even fictive states. Moreover, though they may be the most violent actors at sea, the pirates' mercenary motives and ethics place them in the mainstream of today's shipping world.

In "The Wealth of Nations," 18th Century political economist Adam Smith famously anticipated a world in which an unfettered marketplace would maximize production, trade and wealth. Yet, even as he counseled restraint from governmental interference, Smith allowed himself wiggle room when it came to commerce and the sea. Maintaining access to the navigable world and, if possible, control of the world's trade, was a crucial mark of national power.

For the most part, world shipping today is the prototype for "globalization," the reign of private marketplace competition over any national or political consideration. In keeping with a pattern of deregulation that has steadily grown since World War II, shipowners (commonly centered in the richer, Western countries and Japan) have evaded the labor and tax laws of their home states by registering their vessels with governmental weaklings like Panama, Liberia and the Marshall Islands as "flags of convenience".”

Comment
Smith was far too much a ‘man of the world’ to have ‘anticipated a world in which an unfettered marketplace would maximize production, trade and wealth’ (much of that notion was invented by modern economists in the 20th century).

Also, he was not confident that free trade would be established (he called that idea utopian) [WN IV.ii.43: 471], and he criticised the French Physiocrats for demanding that ever aspect of their philosophy or 'precise regimen' (which some of them called ‘laissez-faire’) be implemented in full (WN IV.ix.28: 674].

Smith did not anticipate 'a world in which an unfettered marketplace would maximize production, trade and wealth' nor counsel against all government interference as a principle; he certain counselled against those 18th-century examples of government interference, some of them going back to Elizabethan times (Acts of Settlement, Statute of Apprentices, Incorporated Trades and Guilds, Mercantile Political Economy, legislators and those who influenced them imposing legal monopolies and tariff protections, and general arrogance that they knew better than individuals about managing their affairs.

But it is essential to understand that Smithian political economy saw important roles and major roles for government in infra-structure investment (roads, canals, harbours, city sanitations, pavements, and street lighting), administration of justice, and in public-interest activity (Royal Mail, banking regulations, interest rate ceilings, cloth stamping, gold assaying, palliative health care, education and ecclesiastical freedoms).

To these must be added his acknowledgement of the government’s ‘first duty’, to protect the society from invasions, among which he recognised the need for an island society like Britain to ensure a sufficiency of naval power to protect its foreign trade (the Acts of Navigation). Of course, British governments, captured by special interest groups, took these sensible measures to the extremes of armed unnecessary interventions beyond defensive necessity to wilful intervention in Continental dynastic disputes, in unprofitable trading companies and colonies, and general hostilities based on toxic ideas of ‘jealousy of trade’, mercantile monopolies, and excessive expenditures (the seven-years war being typical at £120 million).

However, Professor Leon Fink’s article on the modern problem of piracy, apart from these observations, is an excellent read and I recommend that you follow the link above.

Apologies for some duplicate postings but I could not post this afternoon for some reason and my attempts led to duplication off screen.

The Man of Public Spirit Praised by Adam Smith

I was asked recently by a correspondent if I knew of anything written by Adam Smith on ‘public spirit’. I replied:

It depends of what is meant by 'public spirit'. I assume it is something to do with acting in a manner that has public welfare benefits.

Adam Smith addressed this possibility in The Theory of Moral Sentiments (1759). To understand Smith’s idea, you should read the whole of chapter 1 in Book IV, in which he discusses the role of 'beauty' in relation to 'utility', and asserts that the beauty of a contrivance is more valued than its utility (which he claimed, uncharacteristically, as his original development of an idea from David Hume).

First, he sets out his proposition that the ‘fitness’ of a contrivance is valued more than the ‘very end for which it is intended’ by giving everyday examples of disordered chairs in a room which the owner would tidy up angrily, though it makes no difference to their utility as chairs; and of a two-guinea timepiece that runs two-minutes slow, so that the owner buys fifty-guinea watch that runs only second slow, but which runs perfectly for its the possessor. Or a hovel, which keeps the inhabitants dry, compared to a palace that does the same task and costs immense amounts of money, but enhances its owner’s prestige

This leads him to discuss the parable of the 'poor man's son whom heaven in its anger has fired with ambition', who is driven to work hard to become rich because he imagines the rich have the means to happiness. It also covers the rich landlord who surveys his fields and feels good, even though he cannot eat any more than poor man.

Having noted the significance of these delusions, Smith describes their social implications: these are the delusions that created civilisation.

He then turns to the ‘public spirited’ man and discusses what drives such a man; Smith asserts a driver is his admiration for the workings of a great society, which incentivised him to devote his time and his own money to improving society in some manner to make it even better. And it is appropriate that they should do so. It is not all down to a stark choice between that perennial antipathy of private enterprise versus public spending. There are additional sources of enterprise that are significant today.

Individuals can be affected by a sense of public spirit to bring about improvements in what private and public spending has done, so far, on their own. Apart from foundations that disperse funds to what they consider worthy ends and charities that mobilise resources to fill gaps in current provision, there are publicly-spirited individuals who make donations to selected objectives or take the initiative to undertake beneficial public projects on their own account. All these, and others, are well within the ambit of Smithian political economy for commercial societies.

Here is Smith’s (much neglected) explanation of the efficacy of ‘public spirit’:

“The same principle, the same love of system, the same regard to the beauty of order, of art and contrivance, frequently serves to recommend those institutions which tend to promote the public welfare. When a patriot exerts himself for the improvement of any part of the public police, his conduct does not always arise from pure sympathy with the happiness of those who are to reap the benefit of it. It is not commonly from a fellow-feeling with carriers and waggoners that a public-spirited man encourages the mending of high roads. When the legislature establishes premiums and other encouragements to advance the linen or woollen manufactures, its conduct seldom proceeds from pure sympathy with the wearer of cheap or fine cloth, and much less from that with the manufacturer or merchant. The perfection of police, the extension of trade and manufactures, are noble and magnificent objects. The contemplation of them pleases us, and we are interested in whatever can tend to advance them. They make part of the great system of government, and the wheels of the political machine seem to move with more harmony and ease by means of them. We take pleasure in beholding the perfection of so beautiful and grand a system, and we are uneasy till we remove any obstruction that can in the least disturb or encumber the regularity of its motions. All constitutions of government, however, are valued only in proportion as they tend to promote the happiness of those who live under them. This is their sole use and end. From a certain spirit of system, however, from a certain love of art and contrivance, we sometimes seem to value the means more than the end, and to be eager to promote the happiness of our fellow-creatures, rather from a view to perfect and improve a certain beautiful and orderly system, than from any immediate sense or feeling of what they either suffer or enjoy. There have been men of the greatest public spirit, who have shown themselves in other respects not very sensible to the feelings of humanity. And on the contrary, there have been men of the greatest humanity, who seem to have been entirely devoid of public spirit. Every man may find in the circle of his acquaintance instances both of the one kind and the other. Who had ever less humanity, or more public spirit, than the celebrated legislator of Muscovy? The social and well-natured James the First of Great Britain seems, on the contrary, to have had scarce any passion, either for the glory or the interest of his country. Would you awaken the industry of the man who seems almost dead to ambition, it will often be to no purpose to describe to him the happiness of the rich and the great; to tell him that they are generally sheltered from the sun and the rain, that they are seldom hungry, that they are seldom cold, and that they are rarely exposed to weariness, or to want of any kind. The most eloquent exhortation of this kind will have little effect upon him. If you would hope to succeed, you must describe to him the conveniency and arrangement of the different apartments in their palaces; you must explain to him the propriety of their equipages, and point out to him the number, the order, and the different offices of all their attendants. If any thing is capable of making impression upon him, this will. Yet all these things tend only to keep off the sun and the rain, to save them from hunger and cold, from want and weariness. In the same manner, if you would implant public virtue in the breast of him who seems heedless of the interest of his country, it will often be to no purpose to tell him, what superior advantages the subjects of a well-governed state enjoy; that they are better lodged, that they are better clothed, that they are better fed. These considerations will commonly make no great impression. You will be more likely to persuade, if you describe the great system of public police which procures these advantages, if you explain the connexions and dependencies of its several parts, their mutual subordination to one another, and their general subserviency to the happiness of the society; if you show how this system might be introduced into his own country, what it is that hinders it from taking place there at present, how those obstructions might be removed, and all the several wheels of the machine of government be made to move with more harmony and smoothness, without grating upon one another, or mutually retarding one another's motions. It is scarce possible that a man should listen to a discourse of this kind, and not feel himself animated to some degree of public spirit. He will, at least for the moment, feel some desire to remove those obstructions, and to put into motion so beautiful and so orderly a machine. Nothing tends so much to promote public spirit as the study of politics, of the several systems of civil government, their advantages and disadvantages, of the constitution of our own country, its situation, and interest with regard to foreign nations, its commerce, its defence, the disadvantages it labours under, the dangers to which it may be exposed, how to remove the one, and how to guard against the other. Upon this account political disquisitions, if just, and reasonable, and practicable, are of all the works of speculation the most useful. Even the weakest and the worst of them are not altogether without their utility. They serve at least to animate the public passions of men, and rouse them to seek out the means of promoting the happiness of the society.”

[Theory of Moral Sentiments, Book IV.I.II pages 185-87 (Glasgow Edition, Oxford University Press, 1976; Liberty Fund edition, 1982)]