Friday, March 23, 2012

Thomas Hutchison, the Talented Historian of Economics Who Sometimes Wrote Drivel

Paul Walker on Anti-dismal (‘Bog on all things to do with economics and related subjects’ - worth bookmarking) HERE

"Hutchison on Smith”

‘The way Adam Smith evaluated the role of government in the economy is often misinterpreted. Recently I came across this comment by Terence Hutchison.

“However, The Wealth of Nations was, as Viner emphasised, 'an evaluating and crusading book', which sharply criticised existing society and government, and argued strongly for changes in national policy' (1968, p. 326). Smith was crusading, of course, against the excessive activities of monarchical, aristocratic and highly nationalistic governments, and for a greatly expanding role for the invisible hand.”

‘This view seems to argue for anti-government view of Smith (or at least an anti-government-as-Smith-knew-it view). But Hutchison then adds,

“At the same time Smith wanted to retain a wide-ranging economic agenda for government, the precise extent of which had to be decided by empirical, case-by-case studies. He would have rejected fundamentally any conjecture that the invisible hand, or any other system, could produce perfect efficiency for a real-world economy. In his ideas, thought and method, Smith abhorred the perfection, or extremes, which 'the man of system' sought so eagerly to promote.

Such a case-by-case method of evaluation looks somewhat like a Coaseian comparative institutional analysis approach

This is a quality post that is typical of the sober thinking of Paul Walker, with whom, however, I should say I do not always agree in the nicest possible terms.

I would add that Smith’s “violent attack” (his words) of the commercial system of Europe can be interpreted as a critique of the activities of “of monarchical, aristocratic and highly nationalistic governments” but this does not amount to an “anti-government” stance, as some of today’s more extreme libertarians assert. Such governments dominated Europe, and Smith (and Hume) found this expressed in their “jealousy of trade” of rivals and their regular resort to wars to weaken potential trading partners, often at huge domestic cost, or also the pursuit of damaging, self-inflicted anti-trade policies of tariff protections and prohibitions. Smith (and Hume) favoured free trade among countries to enhance common opulence and domestic net capital productive investment.

Hutchison’s assertion that Smith “was crusading for a greatly expanding role for the invisible hand” is utter drivel. After all, I suppose, in was 1968, and neoclasssical economists worldwide had swallowed the sheer invention by Samuelson of Smith’s mythical role as a believer in the “selfish’ being" led by the invisible hand to better outcomes in society".

I was a final-year undergraduate in 1968 and read much Hutchison (on and off the syllabus), not always agreeing with his views, though his history of economics’ books were useful, including his “Review of Economic Doctrines from 1870” (I still have a copy).

The second paragraph quoted by Paul Walker is perfectly acceptable and at variance in tone with the first paragraph. Smith was a bit of a pragmatist from his study of the past to understand how we had arrived at the present. He was caustic, sometimes, of utopias, which I find helpful when assessing the fashion for those planning changes to capitalism for this or that end.


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