Thursday, June 02, 2011

Adam Smith's Insight Spreads Across the USA - and Ethiopia

Lynne Kiesling (a Distinguished Senior Lecturer in the Department of Economics at Northwestern University, and in the Social Enterprise at Kellogg (SEEK) program in the Kellogg School of Management at Northwestern University) writes in Knowledge Problem HERE comments ‘Recently Caught my eye’, also posted in the Ethiopian Review (!) (HERE)

"Gavin Kennedy provides a gentle correction to Dani Rodrik’s interpretation of the meaning and implication of Adam Smith’s analysis of the human “propensity to truck, barter, and exchange”, which Rodrik inaccurately claims to be innate in Smith’s view. Kennedy’s pointing to Smith’s connection of that propensity to our “faculties of reason and speech” is accurate and important to bear in mind because, as Kennedy points out in this excellent post, Smith saw this exchange propensity as a “foundation of human social life”, not just commercial activity. I could not agree more."

Thank you to Lynne Kiesling for publicising a post from Lost Legacy (and to Ethiopian Review for picking it up - they could do with a lot of Smithian exchange in their part of the world).

So many economists misconstrue Adam Smith's idea on the prevalence of exchange relations (some like Karl Polanyi to add balast to their ideology, unfortunately picked up by some people whom I otherwise admire) that its a lonely road to trying to set the record straight. My pieceon Adam Smith on Bargaining can be read HERE

Rodrick and others show pay attention to this paragraph:

'Institutions are formed by people, not equations, and people have a ‘propensity for exchange’ that shapes the institutions they form. Less than perfect economies, with people in less than perfect liberty have formed working societies well short of perfection. Neither perfect competition nor perfect natural liberty (and we can add not even perfect institutions) are necessary or sufficient for progress towards opulence (Smith rebuked Dr Quesnay on this very issue: WN IV.ix.28.674).'



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