Sunday, July 18, 2010

Matt Ridley's New Book: he understands Adam Smith on 'Toil and Trouble'

I am reading Matt Ridley’sThe Rational Optimist: how prosperity evolves’” (2010: Fourth Estate, London) , a most impressive composition with which I am both enthused by his new material and pleased that so much of my own work is confirmed.

For example, I have long had the view, and been on the receiving end of sharp criticism by fellow economists for my interpretation of Adam Smith’s so-called labour theory of exchangeable value, as expressed in my “Adam Smith: a moral philosopher and his political economy”, 2008, Palgrave Macmillan, soon to be out in a second edition in September, 2010.

A sentence in Matt Ridley’s book (page 22) struck a chord:

‘The true measure of something’s worth is the hours it takes to acquire it.’

which echoes Adam Smith in Wealth Of Nations (WN I.v.2: 46):

The real price of everything what everything costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, who want to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money or with goods is purchased by labour as much as what we acquire by the toil of our own body. That money or those goods indeed save us this toil. They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity. Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who posses it and who want to exchange it for some new production is precisely equal to the quantity of labour which it can enable them to purchase or command.’ ( WN I.v.2: 47-48)

Now, many colleagues read that passage too quickly. They see ‘quantity’ of labour and jump in to think of a labour theory of value.

Yet, this misses clues: ‘original price’ (in ‘rude society’, i.e. before the appearance of property, landlords and owners of capital`) which in post-rude societies is still experienced as ‘toil and trouble’.

If I want a wooden fence painted, I can do it myself (‘toil and trouble’) or pay someone else to do it (I’m a lousy fence painter; their ‘toil and trouble’). His ‘money price’ against ‘time’, ‘toil and trouble’ is the negotiated exchange ratio. It does not imply a detailed assessment of something called the ‘quantity’ of labour at all and Smith did not consider it so. ‘Toil and trouble’ is subjective, plus consideration of what else I can be doing while the fence is painted.

‘All the wealth of the world’ in the first age of society was sourced from labour. The fruits of the forest were ‘free’; they either laboured to feed, clothe, and shelter for themselves or they went hungry, were cold, and were exposed to predators. All the ‘wealth of the world’ in those times were a meagre bundle of goods, indeed!

Matt Ridley shows the consequence of time, toil and trouble motives:

‘Time: that is the key. Forget dollars, cowrie shells or gold. The true measure of something’s worth is the hours it takes to acquire it. If you have to acquire it for yourself, it usually takes longer than if you get it ready-made by other people. And if you can get it made efficiently by others, then you can afford more of it. As light became cheaper so people used more of it. The average Briton today consumes roughly 40,000 times as much artificial light as he did in 1750. He consumes fifty times as much power and 250 times as much transport (measured in passenger-miles travelled too.’

Ridley gives scores of telling examples. Read his book for eye-opening details.

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3 Comments:

Blogger Frank S. Robinson said...

Those interested in Ridley's very good book might also wish to know about another one, THE CASE FOR RATIONAL OPTIMISM (Transaction Books, Rutgers University, 2009), which makes quite similar points and arguments, but develops the case for optimism over a rather broader range of subject areas. The book also makes the case for ADAM SMITH's continuing relevance. See http://www.fsrcoin.com/k.htm

12:01 p.m.  
Blogger Gavin Kennedy said...

Frank

Thanks for the information. I shall check it out when I arrive in France for a month's rest and recuperation, and, hopefully, recovery after Saturday.

I am impressed the more of Ridley's book I read.

Gavin

7:16 p.m.  
Blogger Smithian Economist said...

Dear Gavin,

As you know my Phd thesis is an entire re interpretation of the Wealth of Nations, and I arrived to these same conclusions as you stated yourself. Labor in Smith was a meassure of value, not THEE source of value. Indeed labor referring to time.

Best,

Andres Guzman

4:30 a.m.  

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