Friday, March 09, 2012

Wealth Of Nations: 236 years old, today

From Eamonn Butler, Director, The Adam Smith Institute (London)Pin Factory Blog HERE

"Today is the 236th anniversary of the publication of the Wealth of Nations. Here is Eamonn's post commemorating last year's anniversary:

For a quarter of the last millennium, we have actually known the principles by which wealth is created and maximised. The trouble is, that for most of the same time, we have been trying to resist that information, thinking that we can somehow do better than the market.

The Wealth of Nations is a great book: most objective commentators would probably put it among the top five books ever written, in terms of its influence on humankind and the way we live. Yes, it's very eighteenth-century stuff, sprawling and wordy, with enormous digressions on things that do not seem very interesting to us today. And yet it is the book which took economics out of its primitive phase and made it distinctly modern. We can understand what Smith says because it is all around us today.

The very first sentence of the book dismisses the old idea that the wealth of a nation was the amount of gold and silver that it had hoarded up in its vaults. Rather, says Smith, the measure of a country's wealth is what it produces. He had invented the idea of gross national product. And the wealth of the citizens of that country depends on how many there are. He had invented the idea of GDP per capita. And so it goes on.

But surely his greatest breakthrough was the realisation that we do not have to grow or make things in order to increase our wealth. We can also increase it by simply exchanging things. If you have something I want and I have something you want, we are both better off by swapping it. And that is the foundation of market exchange and trade, and of the specialisation that makes our production and exchange system so spectacularly efficient, creating and spreading benefit throughout the world.

A typical brilliant concise contribution from Eamonn Butler, Director of the Adam Smith Institute, London, combining his erudition and clarity on the lasting legacy of Adam Smith and, at the same time, reaching into new aspects of Smith's thinking that are usually neglected during the 236 years of access to his ideas.

I refer to his last paragraph. I have been making much the same point (without Eammon's clarity) for years, to little avail. It was not gold and silver, nor millions of paper in the bank, that constituted the real wealth of a nation; it was, in Smith's words, the annual output of the "necessaries, conveniences, and amusements of life". But more, this idea was rooted in a characteristic of humankind, namely the "propensity to exchange"; a characteristic that "probably" was traced back to the emergence of the "faculties of reasoning and speech" (Wealth Of Nations, Chapter 1, 1776).

This idea of Smith's, normally ignored by readers, but not by Eammon Butler, in my view, is Smith's most significant idea, or rather, the hint of it. That it is wrapped with the 18th-century wordage of the "propensity to truck, barter, and exchange" has probably condemned it to its relative anonymity among scholars. But Eamonn is absolutely clear. For Smith, read "exchange"!

Currently, I am working on an essay: "Adam Smith on Exchange: the first 200,000 years", in which I address, in the manner of Adam Smith's central method of enquiry throughout his works, "conjectural history" (See Dugald Stewart's, 1793 Eulogy to Adam Smith, 1795) the significance of exchange for Smith’s philosopy. This revises my 2003 unpublished "Prehistory of Bargaining", with surveys of recent work on anthropology, palaeontology, and history, plus a closer look at aspects Smith’s philosophy in his Works.

So, enjoy Eammon’s celebration of the 236 years of Wealth Of Nations.

Also, follow the link HERE to the Adam Smith Blog, for both contemporary views on today’s issues, and occasional contributions by Eamonn Butler.

[Disclosure: I am a Fellow of the Adam Smith Institute]

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