A Video on the Birth of Economics

Lawrence Reed (7 March) “Adam Smith and the Birth of Economics” (video lecture) at the Foundation of Economic Education. View it HERE: 

“Invisible Hand” is a “term coined by Adam Smith that refers to the self-ordering process of the free market. As individuals work to fulfill their own goals, there appears order out of the multitude of individual plans. This is possible because, where property rights are secure and the rule of law prevails, individuals have incentives to trade and cooperate in a manner which benefits all parties involved.”

Comment

Smith insisted on the importance of property rights under the laws of justice (which also potentially protected individuals from the miss-behaviour of those they live amongst).   Individuals who trade with each other by exchanging some of what they have for some other things that they prefer, with other individuals, positively benefit from such exchanges.  Both are made better off from exchanging; it is a non-zero sum game.  

Smith described this as bargaining by formulating proposed exchanges as: “give me this that I want and I shall give that which you want”, the universal (If-then) conditional proposal.  Agreed settlement exchange may emerge by the successive specification of stated offers and wants, which both parties may agree to after one or more mutual conditional proposals are made and considered, until one proposal is accepted by both of them, or they break off and find another trading partner.

Both parties benefit from the acceptance of the terms of the final proposed exchange because they would normally only agree to any specific exchange if it made them individually better off than before an exchange took place (though whether they are equally better off is not of relevance – they cannot read each other’s minds and individual perceptions cannot be measured).

Whether the outcome is a “self-ordering process” is not decisive, especially if by this is meant that there is only one, unique, exchange outcome that “benefits parties involved”.   Individuals may reject terms that are accepted by other pairs. There may be several possible outcomes among pairs of bargainers.  There is no single bargained outcome likely between all pairs of negotiators in the real world, though there may be one in an imagined General Equilibrium.  The real world does not conform to the imaginary conditions of mathematical equilibrium.  We know this because the assumptions of GE have never existed, yet.

The “invisible hand” was not “coined by Adam Smith to “refer to the self-ordering process of the free market”.  He didn’t ‘coin’ the IH metaphor. It was well known and regularly used in the 17^th and 18^th centuries, manly among theological preachers to refer to the “hand of God”, who was “invisible” and given to miraculous and mysterious powers. It was also used by poets, playwrights, novelists and politicians long before it was used only twice by Adam Smith and Smith never used the IH metaphor in any relationship to “free markets”, which were also fictional, even fabled, because they have not existed, anywhere, except as special theoretical cases in economic theories.

This does not detract from the excellent educational work of FEE. 
[Apologies: my original link to FEE was incorrect; the above new link worked today at 5.50pm BST, 31 March.]

When One Paragraph Contradicts the Next One

Peter Boettke on the Coordination Problem Blog on “How the Keynesian Revolution Changed Everything” HERE 

 “Consider the straigthforward approach of Buchanan and Richard Wagner in their wonderful book, Democracy in Deficit (1977):

Such complex budgetary rules as "balance at full employment" serve to rationalize budgetary irresponsibility by playing upon the sense that the present is unique and involves special circumstances, and that once these circumstances have been dealt with, we can revert to the rules applicable to "normal" settings. This is like the alcoholic who has some sense that all is not well with his conduct of his life, and who resolves to get hold of himself once the particular tensions he currently finds unbearable have passed him by. Only each day, week, or month presents a fresh set of tensions, unusual circumstances, and special conditions, so "normalcy" never returns, for either the alcoholic or the Keynesian political economy. (165-66)

I argued that we must pursue a true microeconomic analysis of monetary and fiscal policy, and see economics as a coordination problem guided by price signals and acted upon by rational actors.”

Comment

Though I agree with much that Peter Boettke teaches in his Blog, I disagree with his emphasis when he writes “economics as a coordination problem guided by price signals and acted upon by rational actors”.  The reference to “rational actors” is too close to the neoclassical obsession, which Professor Deirdre McCloskey dubbed as “Max U” economics, and is associated with rational expectations theory.

Such rigid thinking is absolutely necessary when ideas are applied to mathematics, which requires stable behaviours, and upon which an image of an imaginary world is preferred to the real world, where people certainly reason but they are not necessarily bound by a common rationality (all of us do not make the same choices).  Adam Smith described humans as using their ‘reason’, bounded by their self-interests.

The mathematical treatment of two or more variables requires predictable behavioural stability for a stable result, yet much of the behaviour of humans is unpredictable in practice, saints and sinners alike, and by preferring rigour to the messiness associated with humanity, exponents of “Max U” claim the high ground of a “hard science” over the “softer” narratives of verbal treatments, such as those by Adam Smith (who was accomplished in mathematics by 18^th century university standards).

By formulating economics as a “coordination problem guided by price signals and acted upon by rational actors” Professor Boettke is insightful about “price-signals”, though much less so by seeing “the invisible hand of the market economy (Smith)” in his “Living Economics” (2012) (“On Teaching Economics”, p 164) as integral to “price signals”.  But what exactly does this invented notion of the “Invisible-Hand”, wrongly attributed to Adam Smith, do which is not fully explained by those very same “price signals”?

[Note: I recommend regular reading of Peter Boettke's Blog" "Coordination Problem".]

Loony Tunes no. 79

1

"These 2 Deep-Value Commodity Stocks Have at Least 50% Upside" 

David Sterman writes in StreetAuthority Here

“As the major indexes post multi-year highs, many investors credit the invisible hand of the Federal Reserve.”

2

““The conflict of moral character and meritocracy
In Binghamton University’s “Pipe Dream by Mike Marinaccio

HERE 

“As stated by political philosopher John Rawls, “the invisible hand guides things in the wrong direction and favors an oligopolistic configuration of accumulations that succeeds in maintaining unjustified inequalities and restrictions on fair opportunity.” … “This invisible hand is human nature.”

3

Colombian Yields Fall Ahead of Surprise Rate Cut; Peso Drops  Andrea Jaramillo in Blomberg Business Weeks HERE 

“We aren't economists of the orthodox tradition who say the market should determine the exchange rate,” Cardenas said. “We believe firmly that you have to intervene. That is, it isn't the invisible hand of the market, but the visible hand of the state”.

GK: Surely it must be the reverse:  Very visible prices run markets, but the secretive lobbying and machinations of politicians and hidden interests run the state!”

For the Sake of an Imaginary Empire Much Treasure was Wasted

Jeffrey Collins, professor of history,  Queen's University in Kingston, Ontario, reviews Iain McDaniel’s, “Adam Ferguson in the Scottish Enlightenment,” Harvard, in The Wall Street Journal HERE

“A Skeptical Modern”

Eighteenth-century Britain's mixture of liberty and empire inspired philosophers. Adam Ferguson thought it spelled doom.

“By the staid standards of the Scottish Enlightenment, the philosopher Adam Ferguson enjoyed a vividly eventful life. Descended from the dukes of Argyll, he received a deluxe education at St. Andrews and Edinburgh. He served as chaplain to the storied 42nd regiment of Highlanders. It was claimed, implausibly, that he was a fighting cleric, leading infantry against the French at the battle of Fontenoy in 1745. "Damn my clerical commission," he supposedly roared. After his military career, Ferguson joined Edinburgh's Select Society, the brain trust of the Scottish Enlightenment. He composed political pamphlets and—embarrassingly—promoted the "newly discovered" epics of Ossian (supposedly a "Celtic Homer" but in fact a hoax). He included among his friends Adam Smith, David Hume and Sir Walter Scott.

Ferguson eventually eased into an academic career at the University of Edinburgh. In 1767, he published his most significant book, "An Essay on the History of Civil Society." A "speculative history" of the kind popular with the Scots, the "Essay" hypothesized an account of humankind's emergence from natural barbarity. Ferguson's other major work, his "History of the Progress and Termination of the Roman Republic," remained popular into the 19th century and earned the praise of Edward Gibbon (no easy feat).

Comment

Please read Professor Colins’s full review by following the link (it is far too long to quote without raising the ire of the Wall Street Journal and it is very interesting).  I make some short comments on some sentences in the review below:

“Ferguson joined Edinburgh's Select Society, the brain trust of the Scottish Enlightenment.”

I had occasion recently to comment on the Select Society and it may put the Select Society in a more realistic light than Professor Daniels's remarks.

“Of his attendance at the many clubs in Glasgow and Edinburg, Ross reports that: “On such visits [to Edinburgh] Smith attended the clubs and societies of the literati in Edinburgh. The Philosophical Society … flourished from the 1750s”.  The “Select Society” (1754) to “promote literary and Philosophical discussion “At the first meeting on 22 May …Smith in his first and last speech, so it was said, presented the guiding principles that members could suggest any topic for debate “except such as regard Revealed Religion, or Principles of Jacobitism” (Ross, 2010: 141-2). 

Smith did not attend any meetings afterwards – probably he was not inclined to debate for debate’s sake, nor to travel through from Glasgow for its meetings in Edinburgh (he was also absent from Edinburgh from 1764 to 1773). 

The Select Society still exists but it is still relatively secret, as well as remaining very select. It meets over dinners in Edinburgh University premises and members may be given the task for the evening of debating for or against propositions with which they may hold opposite views to those they are charged with defending for the evening’s debate.  This continues its disputatious traditions from 1754. It was not likely to attract Smith’s temperament, though it probably suits those whose professional lives are spent in the Scottish Courts engaging in subtle debates on the finer points of law, which is perhaps why its members were and are mostly senior advocates, Judges, QCs and law professors.

To say that The Select Society was the “brain trust of the Scottish Enlightenment” is hyperbole.  Edinburgh and Glasgow were home to numerous clubs, many with interlocking memberships.  Adam Smith joined several societies and attended their meetings in Edinburgh and Glasgow, as did Adam Ferguson.

“He included among his friends Adam Smith, David Hume and Sir Walter Scott”.

I would mention that a roll call of all of the personnel in the Scottish Enlightenment who were also in regular contact with Ferguson.  Ferguson mixed with them all at the height of his and their powers.  True, in old age, Ferguson tended to be reclusive after most of his enlightened friends had died off.  As it was, he moved residence out of Edinburgh’s Old Town and went to stay at Sciennes House, of which his friends dubbed as “Kamchatka” (Siberia), because they regarded Sciennes as too far away on the outskirts of Edinburgh from the intimacies of the Old Town, though in fact, it was only about 1,200 yards from Smith’s Panmure house, deep in the Old Town, and much less from Edinburgh University’s campus

Professor Collins writes: “What emerges is a reminder that, if Scotland and France were the pre-eminent sites of the Enlightenment, England was its abiding subject. For the philosophes, 18th-century Britain's rise to imperial pre-eminence exemplified the new political dynamics of the modern age.”

… “While the French monarchy frantically sold off assets and borrowed at ruinous rates, Britain created a perpetual, rolling national debt. Smaller than France, Britain mobilized its wealth with vastly greater efficiency. The "financial revolution" made fortunes at home and an empire abroad. Its consequences are with us still.”

… “Neither commercial wealth nor imperial power has yet undermined the British constitution (or its American cousin). For good or ill, commerce, consumption and interest are the springs that feed modern liberal society. Hume, Smith and Tocqueville understood that these currents were irreversible.”

Smith was always pragmatic, regarding whatever had happened in history and happens in current events as agenda, more the subject for which its consequences are studied, rather than lamented. Ferguson’s overall pessimism – such as he manifested in his panoramic views – were not aligned with Smith’s. His concluding advice in Wealth Of Nations in view of the likely failure of King George III to overcome the rebellions of in the British colonies in North America, he expressed thus:

“This empire, however, has hitherto existed in imagination only. It has hitherto been, not an empire, but the project of an empire; not a gold mine, but the project of a gold mine; a project which has cost, which continues to cost, and which, if pursued in the same way as it has been hitherto, is likely to cost immense expence, without being likely to bring any profit; for the effects of the monopoly of the colony trade, it has been shewn, are, to the great body of the people, mere loss instead of profit. It is surely now time that our rulers should either realize this golden dream, in which they have been indulging themselves, perhaps, as well as the people; or, that they should awake from it themselves, and endeavour to awaken the people. If the project cannot be compleated, it ought to be given up. If any of the provinces of the British empire cannot be made to contribute towards the support of the whole empire, it is surely time that Great Britain should free herself from the expence of defending those provinces in time of war, and of supporting any part of their civil or military establishments in time of peace, and endeavour to accommodate her future views and designs to the real mediocrity of her circumstances“ (WN V.iii.92: 946-7).

Smith’s pragmatic advice was ignored by successive British governments into the next century and beyond.  They remained attached to their imaginary vision of an Empire and having lost the first one and the vast resources spent in pursuing their quest, they established another, even bigger Empire and spent even more scarce resources in so doing, well into the 20^th century.  They lost that Empire too and now spend billions in keeping the mirage of a being great naval power afloat, though it’s a pale shadow of their former’s imagined glories, destined to go the same way as the first bankrupt first Empire. 

Smith’s last sentence in WN sums his pragmatism: “endeavour to accommodate her future views and designs to the real mediocrity of her circumstances“.  It also sums the difference between Adam Smith and Adam Ferguson.

Loony Tunes no. 78

1

The Invisible Hand of God: By Tim Harcourt*. HERE 

GK: Harcourt calls for Argentina “to build price signals back into the Argentine economy”.  As economies work through very VISIBLE prices, doesn’t it make using “an invisible hand” metaphor for visible price somewhat redundant?

2

The Invisible Hand of Rule Britannia in “Your weekly discussion's discussion board” HERE

The Blog page is adorned by a full-size and very visible Red, White ad Blue UK Union flag. An anonymous author comments: “I see more of the invisible hand of her master and the rule Britannia.”.

3

Invisible Hand University

Management 101 teaches a magic inequality-enhancing formula.

By Khalil Bendib HERE 

Some Thoughts on Indian Economic Development

Ajit Balakrishnan is the author of The Wave Rider and writes “The invisible hand of the government” in rediff business HERE 

“Why don’t Indian universities (and the Indian Institutes of Technology, Indian Institutes of Management and the All-India Institute of Medical Sciences) and Indian businesses converse with each other, define research problems and quickly produce the stream of inventions that will lead to explosive growth and completely new industries, asks Ajit Balakrishnan”

“Very little direct government expenditure was incurred -- success was relatively costless. But the “invisible hand” of the government is rarely acknowledged in popular accounts.
Depending merely on Adam Smith’s invisible hand, the market, transforming an individual’s pursuit of his own again into a societal gain may not go far in these matters.
Thousands of heroic entrepreneurs in hundreds of industries could be energised with similar costless policy initiatives. 

These policy initiatives are the invisible hand of our time.”

Comment

Seems a sensible and practical question.  However, the suggested case examples include the “Indian pharmaceutical industry” and “India’s IT services industry”.  In Pharmaceuticals, the government initiated changes in patent laws, making imitation easier and in IT it sponsored Unix and related data base systems, leaving entrepreneurs to take advantages of the new rules.  Two apparent successes do not make a sure thing (were there no failures at all?).

With millions of qualified graduates on stream from universities and colleges, the needed workforce was available.  As India was moving from a heavily-populated rural economy and its town populations were booming, these changes accelerated the processes needed for rapid economic boom. Towns have always been hot-beds for markets.

But Indian Governments were dominated for decades after independence by an ideology inimical to the development of markets.  Left-leaning, socialist thinking governments considered that state-managed planning was the road to development, not ‘capitalism’.  Internationally, India was non-aligned, stepping outside the Cold War fixations of the Western democracies versus the Soviet 5-year planning regimes managed by communist parties in Russia and the dictatorial Communist Party in China.  State planning stunted the development of an entrepreneurial culture in all the planned economies and had the same debilitating effects on their performance in many communist and European democracies.

So both the measures advocated today by Ajit Balakrishnan required a massive change in Indian political ideologies that had dominated the State and electoral parties in India for many decades since independence in 1947.  Much of this happened electorally in India. There is a long way to go – films about the slums of Mumbia show just how far India has yet to travel. They also show just how vibrant entrepreneurial energy there is in India right down into those slums, even at the petty level of waste reclamation and a habitat suited to criminality.

The population of India at 1 billion has potential markets for all manner of consumer goods, and most critically too, the potential for capital markets in modern industries like steel, motor vehicles, chemicals, IT and aircraft.

The vast bureaucracy of the Indian government, the corruption endemic across society, the shuffling of political alliances of convenience, and the in-built inefficiencies of state-managed ‘investment’ in projects in pursuit of rapid results, combine to slow down the very entrepreneurial transformation that is wanted on all sides of the political spectrum.

Ajit Balakrishnan is not wrong in his objective, but he may well be wrong in the means by which he hopes to realise it.  For Adam Smith in 18th-century Europe, markets and their associated innovative technologies and products were also associated with personal liberty, sound government, the rule of law, and private property rights. Two-hundred and fifty years of the experience of market-led opulence confirmed Smith's insights.

Is the Invisible Hand Self-Interest?

“Primal Rambler” writes on Rampage Liberty HERE 

“For those unfamiliar with the invisible hand, it’s a metaphor popularized by Adam Smith in the mid 18th century for how free markets are guided (not controlled).  The invisible hand is an individuals’ self interest. The theory being pushed is that in a free market people’s self interest is channeled into socially desireable ends.

Your mileage on the theory may vary, but it’s worth considering.“It’s not from the benevolence of the butcher, the
brewer, or the baker that we expect our dinner, but
from their regard for their own interest (Adam Smith, “Wealth of Nations”).

Comment

Primal Rambler is obviously confident that he knows what Adam Smith meant when he used the metaphor only once of “an invisible hand” in Wealth Of Nations (book IV).  

His juxtaposition of the assertion that “The invisible hand is an individuals’ self interest”, supposedly from Book IV ,with the statement about how one obtains one’s dinner from the “butcher, the brewer, and the baker” in Book I, reveals his source is from misrepresentations by modern economists and not from what Adam Smith was writing about on self interest. 

The same erroneous linkage is made regularly by senior economists, such as David Friedman on Lost Legacy (see Lost Legacy: June 2006; August 2011; and etc.). 

Friedman wriggles out of his errors of linking the two passages, to his satisfaction, by asserting the linkage is not a general statement, which denies the generality of the claimed statement and ignores the real and rich meaning of Smith’s paragraph about the ‘butcher, brewer and baker’. ‘Primal Rambler’ makes the same erroneous generalization.

For a start, if Smith had been so careless as to assert as a general statement that “The invisible hand is an individuals’ self interest”, he would have contradicted a great deal of his meaning in Wealth Of Nations.

First, because Smith knew that self-interest motivated all the actions of individuals across society, some parts of which led to unintended consequences that were actually of negative benefit to those who were affected by such actions, such as consumers who faced increased prices from the self-interested clamour for tariff protection and prohibitions of imports by “merchants and manufacturers”.  This would have made his political economy self-contradictory, which is why he opposed all monopolistic behaviours that consequentially led to restricting competition among suppliers and the narrowing of markets. And these were  certainly not examples of an “invisible hand” channeling “self-interest” into “socially desireable ends”. 

They are examples of “self-interest” leading to undesireable consequences, and once we have exceptions to general statements, they are no longer true. Hence, the assertion of Primal Rambler that by his use of the IH metaphor Smith meant self-interest is false. In fact, Smith never linked self-interest to the IH metaphor, or to markets, or to price theory, and so on.  Moreover in the circumstances of the 18^th-century where he did use in Book IV, it was hardly about “competitive markets”.

Second, the “butcher, brewer, and baker” example was not about an individual’s self-interest in isolation; it described the appropriate conduct of negotiations between the self-interested readers and the self-interested suppliers of their meat, drink and bread for their dinners through the mutual mediation of their individual self-interests. The jointly agreed price of the items for one’s dinner was summarised by Smith:

“But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only.  He will be more likely to prevail if he can interest their self–love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self–love, and never talk to them of our own necessities but of their advantages” ((Book 1, chapter 2, paragraph 2).

The absolute mediation of self-interest is clearly stated in that paragraph.  Yes, self-interest draws the butcher, brewer, and baker to labour to produce items for sale in the market, and self-interest draws potential customers to visit the market in search of the ingredients for their dinners, as commonly found in the 18^th century.  But one’s self-interest does not determine the price of those ingredients, because both buyers and sellers have views on what that agreed single price should be.  Smith advised readers to “address” themselves not to the seller’s humanity, but to their “self-love and never talk to them of our own necessities but of their advantages” in setting a price acceptable to buyers.  Those engaged in commercial negotiations will recognize the validity of Smith’s observations.

If prices were solely decided by sellers, and buyers had to accept the sellers’ prices, the self-interests of sellers would drive prices above competitive prices towards extortionate monopoly prices.  This too definitely would not be a case of self-interest channeling prices “into socially desireable ends”.

It is usually at this point that modern economists try to corer the cracks in their generalisation of self-interests driving “socially desirable” ends, by claiming they are only talking of “competitive” situations, not the commonplace markets that have always existed.  But exceptions show the assertion is erroneous as written, especially by ideologues and mis- interpretations of the “butcher, brewer, baker” example.

Thoughts on Smith’s Failure to Publish his Third Major Work on the “Science of Jurisprudence’

When Smith had almost completed writing “Wealth Of Nations”he took his manuscript to London in 1773 [i] to see it through the press for publication. We know that Smith “was very zealous in American affairs” in London from 1773 to 1776.[ii]  The momentous political events in North America intruded and he delayed publication of Wealth Of Nations to March 1776.

As it was, he ended “Wealth Of Nations” in its very last paragraph with a direct reference to the events in America, more from a pragmatic view of strategic pubic finance than any themes it had for his unfinished ‘Science of Jurisprudence’:

“The rulers of Great Britain have, for more than a century past, amused the people with the imagination that they possessed a great empire on the west side of the Atlantic. This empire, however, has hitherto existed in imagination only. It has hitherto been, not an empire, but the project of an empire; not a gold mine, but the project of a gold mine; a project which has cost, which continues to cost, and which, if pursued in the same way as it has been hitherto, is likely to cost immense expence, without being likely to bring any profit; for the effects of the monopoly of the colony trade, it has been shewn, are, to the great body of the people, mere loss instead of profit. It is surely now time that our rulers should either realize this golden dream, in which they have been indulging themselves, perhaps, as well as the people; or, that they should awake from it themselves, and endeavour to awaken the people. If the project cannot be compleated, it ought to be given up. If any of the provinces of the British empire cannot be made to contribute towards the support of the whole empire, it is surely time that Great Britain should free herself from the expence of defending those provinces in time of war, and of supporting any part of their civil or military establishments in time of peace, and endeavour to accommodate her future views and designs to the real mediocrity of her circumstances.”[iii]

After WN was published he was left with the dilemma of what do next and how to avoid the implications for his ‘science of jurisprudence’ of the last paragraph in WN. He had already widely advertised his intentions of completing such a volume in his Theory Of Moral Sentiments in the first 1759 edition and in subsequent editions.[iv] 

The events in the British colonies in North America may have caused Smith to hesitate from fulfilling his 1759 promise, but having taken 12 years work to complete WN, he had no obvious excuse for delaying his ‘Jurisprudence’ indefinitely. In December 1762, [v] he told his students: “Jurisprudence is the theory of the rules by which civil governments ought to be directed”.  Obviously, a theory of jurisprudence must cover a very long swathe of history from Grecian times to the implications for jurisprudence following the American events. At the very least, he would have to explain them privately.

If British colonists succeeded in rejecting a constitutional monarchy, Smith’s ‘Jurisprudence’ would have to cover that event, knowing that he had to be cautious of whatever problems arose for him from his comments.  Subsequent events after the 1783 Declaration of Independence and the outcome of armed conflict exacerbated his dilemma because he could not write on a “science of jurisprudence” without confronting the American problem head-on. Except by saying nothing at all and by postponing the completion of his proposed book on Jurisprudence, and, eventually, by destroying his unfinished manuscript, dogged postponement resolved his problem, however unsatisfactory it remains for his posterity.  He gave strict orders to his executors from his deathbed in 1790 that most of his unpublished papers, including his draft manuscripts for “Jurisprudence” were to be burned “unread” and “without any examination”.[vi]

The new US Constitution may have fitted well with Smith’s teachings on Jurisprudence and Wealth Of Nations, such as the separation powers, the separation of church and state, Habeas Corpus, trial by jury, and judges appointed for life and good behaviour.[vii] But whatever the appeal the US constitution might have had for Smith, he could not publicly condone a rebellion against King George. Smith was an Hanoverian in matters of rebellions in Scotland in 1715 and 1745 against the King. Therefore, Smith’s major problem in post-1776 Britain was to avoid offending the legitimacy of the British sovereign. Whichever way he wrote “Jurisprudence”, he had to address the American rebellion and the implications of the ideas behind the rejection of George III  by the former colonists.

Smith from 1776, still had to find something else to do. He also wanted to move to Edinburgh where the intellectual life was most appealing to him. In the event, in 1777 that opportunity presented itself in the form of a vacancy at the Scottish Customs Board.  Smith decided to apply for the post to Sir Grey Cooper, Secretary to the Treasury. His long time friend, the Duke of Buccleuch, aided independently by his mother, the Duchess, were active in pursuing support for Smith’s appointment. By coincidence, Smith had written earlier to Sir Grey Cooper, Secretary the Treasury Secretary, in support of an individual for a vacant post of a Collectorship at Grenville harbour, and which Sir Grey said showed marked enthusiasm for that candidate.  Grey said Smith’s application on someone else’s behalf contrasted with the “Phlegm, Composure and Indifference” of Smith’s own application for himself of the post as a Scottish Custom’s Commissioner.  Grey also told Smith, at that time acting as consultant on tax affairs for Lord North (premier), that he did not need “yours or any other great mans recommendation” for a Commissioner’s appointment and he “will, if I am not much mistaken soon be appointed a Commissioner of the Customs in Scotland”.[viii]

Smith assiduousness in exercising his Custom House duties is revealing.  Minutes show he attended 4 days week from January 1778 to 1790, chairing meetings and administrative work, except when on official duty in London at the request of government ministers for advice, combined on occasion when he visited his publisher to guide new editions through the press.  His regular attendance at the Custom’s House resulted in his signature on over 80 per cent of the official letters and minutes during his tenure. He chaired a Commissioner’s meeting for the last time on 8 April 1790, just weeks before he died on 17 July.

The demands of being a fulltime Commissioner fortuitously precluded Smith from finishing his major work on Jurisprudence and I suggest this became his perfect excuse for his silence about ‘Jurisprudence’ and implications for the governance of the UK of American independence from 1776-90.

 [i] Smith, A. Correspondence, Letter no. 137 to David Hume, pp. 168. 16 April 1773.

[ii] Smith, A. 1980. Correspondence, Letter no 149 from David Hume, pp.188-9. 8 Feb 1776.

[iii] Smith, A. 1776. Wealth Of Nations, Book V. iii.92: 946-47.

[iv] Smith, A. 1759. The Theory of Moral Sentiments, II.iv.37: p.342. cf. the ‘Advertisement’ in ed. 6: p.5.

[v] Smith, A. Lectures on Jurisprudence, LJ(A), 1762. ix. 1:7. Dec. 24, 1762. Oxford: Oxford University Press.

[vi] Ross, 2010. P 435. [Please note that Ian Ross is not implicated in my interpretations of Smith’s motives or behaviours in the above matter].

[vii] See: Kennedy, G. 2010. “Adam Smith: a moral philosopher and his political economy”, London: Palgrave-Macmillan, pp. 49-51.

[viii] Smith, A. Correspondence, Letter. No. 186, pp. 227-28.from Sir Grey Cooper, 7 November, 1777.

From: Gavin Kennedy: “Adam Smith from Kirkcaldy, via Glasgow University to Panmure House, Edinburgh” for the Adam Smith Review, 2013. Extracted (26 March, 2013) from a lecture given to the ‘Adam Smith Colloquium’, Kirkcaldy, 7 August 2012.