Sunday, January 10, 2010

Review Commentary No. 3: Milgate and Stimson's "After Adam Smith":

Murray Milgate and Shannon C. Stimson, 2009. "After Adam Smith: a century of transformation in politics and political economy", Princeton University Press, Princeton, ISBN 978-0-691-14037-7

[I hope from now on to continue with my review/commentary of Milgate and Stimson’s excellent book, which was interrupted by domestic affairs (moving house, etc.,). To re-start my review commentary (Nos. 1 and 2 were posted in November and December)]

Introductory link reminder:

“There is no doubt that the popular (and academic) portrayal of the lifetime-works of Adam Smith is quite at odds with the actual contribution of the Adam Smith born in Kirkcaldy in 1723. It’s as if a completely new persona was invented bearing limited resemblance to him or his surviving works (sometimes referred to on Lost Legacy as the 'Chicago Adam Smith').

I sometimes wonder if anything similar happened to other historical figures from the ancient worlds of Greece and Rome, as it did spectacularly in the case of Jesus, and the thousands who stand out in the great Pantheon of those who are known to us today for their places in the history of human endeavour.

We have The Glasgow Edition of The Life and Correspondence of Adam Smith, from Oxford University Press (and the low cost Liberty Fund editions): The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth Of Nations, plus his extant essays, The History of Astronomy (1744-<1758) and Origins of Language (1761). To these we have surviving student notes of his lectures, Jurisprudence (1762-63) and Rhetoric and Belles Lettres (1763), plus the surviving Correspondence of Adam Smith, and, most important, the definitive biography, The Life of Adam Smith (1996, 2nd ed. 2010) by Ian S. Ross.

We ought, therefore, to be pretty sure as to what constitutes Adam Smith’s oeuvre, but instead of his works being a model of original scholarship, it is riven by contrary, incompatible, and mutually exclusive opinions as to what he wrote and what he meant, much of it advanced by scholars of indisputable integrity.

However, there is even considerable public doubt as to the exact words he used to express his ideas, despite the ready availability of all of his works to whomsoever wishes to consult them – sadly, many scholars pontificate with the certainties of the highly opinionated, who clearly have not read his works for themselves or have forgotten what they must have read years ago.

Now, something must have happened in the 219 years that separate Smith’s life from today. It’s not all down to scholarly slackness. Ideas about the past, and the people who lived through them, do not form in a vacuum. Adam Smith – contrary to trite media assertions – did not write his books as veritable bibles; he was not the ‘high priest’ of economics; he did not ‘invent’ capitalism; nor was he the manic believer in ‘laissez-faire’, and other similar nonsense (Smith neither of the words ‘capitalism’, nor ‘laissez-faire’).

Readers influence the accepted meanings of what an author writes (see, for instance, Willie Henderson, Evaluating Adam Smith: creating the wealth of nations’, 2006, Routledge). Smith's readers are no exception, and because Adam Smith’s name is often quoted (excessively so today) in support of, or as the problem of, current controversies in the (mis)management of economies, it adds to the intellectual – and popular – confusion as to what credence should be given to this or that declamation on one side of the other of those making the noise of interested faction in this first decade of the 21st century.

Lost Legacy readers will know that I am researching the origins of the spread of the notion of an actual (or metaphorical) “invisible hand” in the teaching of economics since the 1940s. From that teaching came forth consequential policies in business and government as students graduated and entered the “ordinary business of life”, and applied their teachers’ wisdom, either within society generally or in their own teaching careers, and inadvertently spreading a conceptual virus like the biological kind.

Earlier last year, I discussed Steven G. Medema’s excellent, The Hesitant Hand: taming self-interest in the history of economic ideas (Princeton University Press), which covered a slice through history from Adam Smith to 20th-century welfare economics. This fits well with the book by Murray Milgate and Shannon C. Stimson, which sweeps through the first hundred years from Adam Smith to the end of the 19th century.

It short, Milgate and Stimson have studied how the “grand ideas” that are attributed to Adam Smith are “as much the product of the gradual modifications and changes wrought by later writers”, such that we “are much the heirs of later images of Smith as we are of Smith himself”. I concur with Milgate and Stimson in this commentary on their book."

I, and many readers, living through the last half of the 20th century, during which “the gradual modifications and changes wrought by later writers” on the unchanged original exposition of the ideas of Adam Smith sleep in pristine innocence in his texts. Therefore, we can compare and contrast his original ideas with the “later images of Smith”, which are often a long way from those written by “Smith himself”.

How we got from what Adam Smith wrote to what modern economists assert about him is a study in the history of intellectual dilution and invented accretion. Murray Milgate and Shannon C. Stimson have written the first part of that history.

Commentary No. 3:

Milgate and Stimson provide an authoritative account of the distorted modern presentations of his thinking that claim him to express ideas and themes known today as a liberal capitalist perspective. It is worth the attention of readers to begin with what Milgate and Stimson say about the ‘rise and fall of civil society’ because this encompasses the basic differences between the way that societies were observed before Smith the 18th century (and earlier) and how they came to be observed from the 19th century (and later).

Society in the feudal (also in earlier allodial forms) and in the mercantile era was a top-down affair, at the head of which was the sovereign, with the feudal lords below him (and the disregarded lower orders below them). The ‘superior orders’ were given to continual unrest, specifically over dynastic issues and territory, including strategic alliances, marriages, and shifting family allegiances and the unavoidable strife they caused before the victors, settled the inheritance for generations of the ownership of vast physical properties, and the power that flowed from them.

These dynastic struggles affected neighbouring kingdoms in Europe in very long and bloody, wars that were fought across neighbouring domains (such as the 30-years and the 100-years wars). They required substantial physical resources and manpower and the means to maintain them. Hence the importance to kings, and those close to them, of mercantile notions of how to pay for and maintain sufficient resources to project their state powers.

Gold and silver were not sought for their own sake; kings did not just sit in their ‘counting houses, counting out their money’ like obsessed misers; money was the very essence of a king’s necessary self-defensive duty to protect his power and his inheritance against the regular violent challenges of rivals (among family kin, cousins, and distant opportunists). Hence, the king’s writ supported his claims on resources through enforcing feudal obligations in taxation and the provisions of armies, and through the ordering of civil society in ways that expressed his legitimate right to control his dominions as he saw fit, with everybody below him, secular and religious, obeying him as if he was ordained by an invisible God. (‘Treason never prospers because if it prospers none dare call it Treason.’)

The re-emergence of despised commerce (regularly condemned as impious by theologists) from around the 15th century, after the so-called ‘dark ages’ since the fall of Rome in the 5th century, was crude, rude and none too genteel, and its participants were liable to be audaciously robbed and bullied by Lords and local disorders, and none too fussy about morals themselves. Despite these unpromising beginnings, merchants and their customers slowly transformed the meaning of traditional civil society by creating, unintentionally, an alternative means to relative wealth from within it. Commerce did not require a revolution; it just needs to find customers.

Milgate and Stimson capture the broad sweep of these changes in Chapter 3 (‘Rise and Fall of Civil Society) by writing a brilliant, intellectual account of the transformation towards a different society, identified by the questions asked by Adam Smith, and others, of the shibboleths of the mercantile state and the associated government regulations that enforced local Incorporated Guilds and international royal-chartered monopolies, of which the East India Company was the most morally disgusting.

Much wringing of hands among philosophers and divines - did it enhance the values of civil society or cause their degeneration? - began with the first appearance of commerce. James Steuart, the last of the traditional mercantilists, equivocated in his Principles of Political Economy (1767), as did another author, Adam Ferguson, the first of what became the new discipline of sociology, in the same year.

Ferguson had an on-off relationship with Smith and an almost romantic vision of the Roman Republic and the civic potential for morality in human society. He saw the progress of commerce, in particular that of the division of labour, as a dual-headed benign blessing, and a not so benign monster.

Karl Marx in Capital mistakenly praised Ferguson, the “tutor”, to Smith, ‘his pupil” from prior publication of his Essay on Civil Society (1767) before Smith’s Wealth Of Nations (1776).

In fact, Smith’s famous references to the productivity of the division of labour, were taken verbatim from Smith’s Glasgow Lectures on Jurisprudence (1762-63), which circulated (as was the norm) as students notes in Glasgow and Edinburgh, where Ferguson probably read them. Ferguson certainly quarrelled with Smith about his allegations of ‘plagiarism’, though how original Smith’s reporting was on the role of the division of labour is questioned today by J-L Peaucelle: ‘Adam Smith’s use of multiple references for his pin making examples’, European Journal of the History of Economic Thought, 13:4, pp480-512.).

Milgate and Stimson’s treatment of these episodic events among the literati are thorough and stimulating, and readers unfamiliar with these debates can glean a great deal from them. The civil-society debate continued in Smith’s work, and in those who like Mandeville preceded him, and those who followed later, such as Ricardo, Mill and Marx, though, as the decades slipped past, the issues matured and their content changed.

Smith is quoted (p 48) from his History of Astronomy (named, by Milgate and Stimson, for an unstated reason, as his ‘lectures’, and date them ‘ca. 1750’); as viewing society as resembling an invented ‘system’ connecting the different movements and effects of reality. They quote from Wealth Of Nations; I quote the whole reference:

It is thus that every system which endeavours, either by extraordinary encouragements to draw towards a particular species of industry a greater share of the capital of the society than what would naturally go to it, or, by extraordinary restraints, force from a particular species of industry some share of the capital which would otherwise be employed in it, is in reality subversive of the great purpose which it means to promote. It retards, instead of accelerating, the progress of the society towards real wealth and greatness; and diminishes, instead of increasing, the real value of the annual produce of its land and labour.

All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expence to any individual or small number of individuals, though it may frequently do much more than repay it to a great society
.” (WN IV.ix.50-52: 687-89)

Clearly, Smith is not talking about the system that exists (has it ever existed?), but of an imagined system, which if it did exist, then society in practice would be better off than the existing distorted systems of ‘preference and restraint’ will ever be, as long as the ‘preferences and restraints’ continued.

However, the existing mercantile system, despite its drawbacks, of which it had many and against which Smith made a “very violent attack” in Wealth Of Nations, could not stop all ‘progress to opulence”, nor stop it prospering (WN IV.ix.28: 674).

Milgate and Stimson (p 48) assert that “the obvious and simple system of natural liberty” lies at the centre of Smith’s account of the market mechanism” and, further, that “it displaces the centrality of both the state and the direct influence of statesmen” from the market “space”.

In essence, this is the main challenge of market forces to the old verities of civil society; the king, if not dead, is made redundant.

I shall return to this evocative idea and place some caveats upon it in my next review/commentary post on Milgate and Stimson’s excellent book.

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Blogger Nicholas Gruen said...

Emma Rothschild's 'Economic Sentimets' had a great chapter dealing with the way in which Smith's TMS and WN were reinterpreted in the 1790s immediately after his death embracing the free trade aspect of his work and underplaying the extent to which he'd habitually taken the side of the poor and the weak.

7:26 a.m.  
Blogger Gavin Kennedy said...

See above post.


10:43 a.m.  
Blogger Tom Hickey said...

Alan Blinder perpetuates the myth:

"When economists first heard Gekko's now-famous dictum, "Greed is good," they thought it a crude expression of Adam Smith's "Invisible Hand"—which is one of history's great ideas. But in Smith's vision, greed is socially beneficial only when properly harnessed and channeled. The necessary conditions include, among other things: appropriate incentives (for risk taking, etc.), effective competition, safeguards against exploitation of what economists call "asymmetric information" (as when a deceitful seller unloads junk on an unsuspecting buyer), regulators to enforce the rules and keep participants honest, and—when relevant—protection of taxpayers against pilferage or malfeasance by others. When these conditions fail to hold, greed is not good."

11:05 p.m.  
Blogger Gavin Kennedy said...

Hi Tom

I saw the peice but I am so busy with things that I had no time to comment on it.

Blinder, sort of, is following a line from Samuelson's 10th edition (Economics).

Agreed it perpetuates the myth.

Fo Smith it wass nevere socially useful to practise greed. That is a crude idea from Mandeville (1734) and not Smith.

Has Blinder read Moral Sentiments recewntly, or at all


5:55 p.m.  

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