Mathematical Truths Do Not Make Untrue Assumptions in Economics True

Tim Johnston, is a Lecturer in Financial Mathematics at Heriot-Watt University in Edinburgh.  (Heriot-Watt was the first UK university to offer degrees in Actuarial Science and Financial Mathematics and is a leading UK research centre in the fields). He posted this article in “Magic , Maths and Money” HERE

“How economics suffers from de-politicised mathematics”

“Financial economics produced sophisticated mathematical theorems related to pricing and risk management in the derivative markets and  simply by existing as mathematics they were legitimate. There was no room for debate or discussion because mathematics, based on Hilbert’s formal deduction and Bourbaki’s idealised abstractions, and written in obscure notation, was infallible. It doesn't seem to matter that there were discussion and concerns within mathematics, economics accepted the authority of the theorems and their models simply because they were mathematical.

I have not yet come across what I feel is a credible reason why economics has become so enamored with formalist mathematics. Lawson [7, Ch 10] argues it is because mathematics confers authority, but gives no explanation as to why mathematics should have this power. Lawson challenges the power but one senses that he feels mathematics exists independently of human thought, and this mathematics is irrelevant to social phenomena. He does not seem to think that mathematics could be a product of economic intuition, not just physical intuition. Weitntraub [14] offers a narrative of how mathematical ideas crossed over into economics, without giving what I think is a compelling argument as to why mathematical formalism became so significant. Mirowski argues that ‘Cyborg science’, did not spontaneously emerge but was “constructed by a new breed of science managers” [9, p 15] and it was these managers that promoted the mathematisation of economics. While the emergence of ‘Cyborg science’ as a dominant theme of post-war science may well have been constructed, there is something spontaneous in Wiener, Turing and Kolmogorov, the leading twentieth century mathematicians of the US, UK and USSR, all independently having a youthful interest in biology, becoming mathematicians and making contributions in probability and going on to work in computation.

My own belief is that the critical process was the interaction between (particularly American) economists and mathematicians in the Second World War working on problems of Operations Research. At the outbreak of the war in 1939 the vast majority of soldiers and politicians would not have thought mathematicians had much to offer the war effort, the attitude among the military is still often that “war is a human activity that cannot be reduced to mathematical formulae” [12, p 3]. However, operational researchers had laid the foundations for Britain’s survival in the dark days of 1940-1941, Turing and his code-breakers had enabled the allies to keep one step ahead of the Nazis and Allied scientists had ensured that the scarce resources of men and arms were effectively allocated to achieving different objectives. Alan Bullock argues that the blitzkrieg was the only military tactic available to the Nazis, since they had neither the capability nor the capacity to manage more complex operations [2, pp 588–594]. By the end of the war, it could be argued that the war had been won as much through the efforts of awkward engineers as square-jawed commandos and the Supreme Commander of Allied Forces in Europe and Chief of the U.S. Army, General Eisenhower was calling for more scientists to support the military [12, p 64].

It is hardly surprising that in the post-war years economists embraced mathematics. Pre-war generals would have made the same sort of objections to mathematics that economists had. However, after the war the success of Operations Research could be compared to the failure of economists in the lead up to, and in the aftermath of, the Great Depression that had dominated the decade before the war. But possibly more significant than this theory is the fact that many post-war economists had worked alongside mathematicians on military and government policy problems during the war. Samuelson who was instrumental in introducing stochastic calculus had worked in Wiener’s lab at MIT addressing gun-control problems during the war [8, p 63–64].

Personally I feel prominent economists became over awed by the successes of mathematics, through, for example, observing mathematicians’ abilities to transform apparently random sequences of letters into meaningful messages, something that must have seemed magical and resonant to the economic problem of interpreting data. The problem is codes are generated deterministically but the same cannot be said for economic data. I believe it was a synthesis of the post First World War traumas of mathematics and the post-Second World War optimism and confidence of economics that created the explosion of mathematical economics in the 1950s-1960s.

Today mathematical finance is possibly the most abstract branch of applied mathematics, while mathematical physics is complex it is still connected to sensible phenomena and amenable to intuition, and this state seems to be typical of the relationship between mathematics and economics.  The situation is not irrecoverable, but, as I have said before, it requires a much tighter integration of non-mathematical economists and un-economic mathematicians.  I look with envy at my colleagues carrying out research  in biology using the same mathematical technology I use but, as one said recently, their papers do not need to prove a theorem and clear results are admired, not technical brilliance.”

Refs:

[7] T. Lawson. Reorienting Economics. Taylor & Francis, 2012.

[8] D. MacKenzie. An Engine, Not a Camera: How Financial Models Shape Markets. The MIT Press, 2008.

[9] P. Mirowski. Machine dreams: Economic agents as cyborgs. History of Political Economy, 29(1):13–40, 1998.

[10] PCBS. Changing Banking for Good. Technical report, The Parliamentary Commission on Banking Standards, 2013.

[11] Y. Rav. A critique of a formalist-mechanist version of the justification of arguments in mathematicians’ proof practices. Philosophia Mathematica, 15(3):291–320, 2007.

[12] C. R. Schrader. History of Operations Research in the United States Army, Volume I: 1942–1962. U. S. Government Printing Office, 2006.

[13] I. Stewart. Bye–Bye Bourbaki: Paradigm shifts in mathematics. The Mathematical Gazette, 79(486):496–498, 1995.

[14] E. R. Weintraub. How Economics Became a Mathematical Science. Duke University Press, 2002. 

Comment

The above is an extract from a much longer post discussing aspects of the history of formalised theorems in post 19^th-century maths and should be consulted to see where Tim Johnston places his interesting ideas about the consequential shadow of maths in economic thinking, or more particularly, in financial economics.

I tend to agree with Tim Johnston’s general slant (noticing that he is on the faculty of Heriot-Watt University from which I retired in 2005 after 33 years in the Department of Finance and Edinburgh Business School; I have not yet met him).

Broadly, I am remain sceptical of the arrogance of mathematical exponents in economics and their related philosophical ideology of ‘Max U’ thinking that dominated economics since the last quarter of the 19^th century. Economic theory is not made any truer by maths. It is a basic error to project mathematical treatment as true of the real world.

Maximisation of utility ideas grip mainstream thinking.  If individuals are assumed to behave as if maximising utility theories are true in the real world, when they may not be true outside the assumption that they are, then even if the maths are true, the assumption of ‘MaxU’ may very well remain untrue.

On their own terms the maths of ‘MaxU’ are unassailable; on any terms ‘MaxU’ is not true of the real world.  Moreover, making decisions based upon the truth of predictions that may very well not be true, is dangerous, as the recent global financial crisis illustrates.

(Hat Tip to Mark Thoma HERE)

Spurious "Facts"

Eric De Groot posts on “Eric De Groot’s Insight” HERE

“The Invisible Hand Will Force The Taper”

“The Fed, contrary to popular opinion, follows the forces of the invisible hand, not vice versa.”

His graph gives away the shallowness of the assertion about an invisible hand.  It shows the VISIBLE % Treasury Bond Yield tracking the VISIBLE $ price of gold.  

What’s invisible about that?

Beware the World Changers!

Jason Brennan at Bleeding Heart Libertarians HERE  posts on a debate he has with Ross Levatter HERE http://www.libertarianism.org/blog/libertarianism-thought-experiments

I extract this statement from Jason with which I agree:

“Libertarianism doesn’t follow from fundamental principles or axioms that are not open to question. Rather, to get to libertarianism, if you are at all sensitive to consequences, you need to make a series of empirical arguments about how institutions work. Now, in light of existing social science, it’s pretty clear that large-scale economies need to be run fundamentally on market principles. But it’s highly controversial to what extent government should supplement, enhance, regulate, or supplant markets in order to generate what consequence-sensitive libertarians would themselves agree are better outcomes.”

Comment

I prefer Adam Smith’s approach as a moral philosopher – “observe everything, do nothing” (History of Astronomy) as opposed to Marx’s later call: “The purpose is not to understand the world but to change the it”, because the world-changers always make things worse (no exceptions), particularly when they impose their utopian changes upon the rest of us.

The road to Hell is paved with good intentions!

A Debate on Libertarian and Left v Right Stances

David Brin posts a lively article on “Institute for emerging ethics & technologies” Blog HERE 

[David Brin is a scientist and best-selling author whose future-oriented novels include Earth, The Postman, and Hugo Award winners Startide Rising and The Uplift War. David's newest novel - Existence - is now available, published by Tor Books."]

Brin writes:

“R.J. Eskow - on Salon - offers "11 Questions to see if Libertarians are Hypocrites."  HERE 

And yes, most of Eskow's posers certainly do set up some stark and thought-provoking contradictions - even hypocrisies - in the oft-touted positions held by many who today use the "L-word" to describe themselves. The article is well-worth reading and it does skewer especially those who bow in obeisance to Ayn Rand, the patron saint of resentful ingrates who want desperately to blame society for being under-achievers. And yet and yet Eskow wound up inciting the contrarian in me, with his blatant straw-manning -- setting up the reader to assume that all "libertarians" are lapel-grabbing, solipsistic randians.  Moreover, indeed, he tells flagrant untruths even about randians. Elsewhere I have dissected the Cult of Ayn far more carefully HERE  actually looking carefully at her messages on many levels. Eskow wants only a caricature and a punching bag. 

He ignores, for example the randians' admission that government should retain a monopoly on force and should be involved also in the enforcement of all contracts, not just copyright. Not entire-anarchism, indeed, it retains what's necessary for the ultimate randian outcome -- a return to feudalism -- to have real teeth. Eskow should know his enemy better.

 (Note that I use Eskow's method of asking questions in what I hope is a much more neutral and thorough way, in my Questionnaire on Ideology, that encourages folks to re-examine many of their own underlying assumptions; take it if you dare!")

In fact, Eskow ignores other strands to libertarianism that include the erudite versions of William F. Buckley and Friedrich Hayek, who denounced the randian obsession with demigods as a guaranteed route to feudalism.  Hayek, in particular, extolled a level playing field that maximizes the number of competitors and avoids a narrow ruling-owner caste. Indeed, there are some versions of libertarianism that I consider to be entirely justified  -- the moderate versions offered to us by authors who range from Kurt Vonnegut to Adam Smith, from Robert Heinlein to Ray Bradbury...

...a version under which one is willing to negotiate and see a successful State that does good and useful things by general consensus and assent, but always with an emphasis on doing useful things that wind up empowering the individual to go his or her own, creative way. In other words, judging state actions (even skeptically) by a standard that is high, but allows us to work together on some valuable things that help us to then grow as we choose.

I could go on and on about that aspect of things; but instead I will simply offer a link to a far more cogent appraisal of this important thread of human political discourse, one that - alas - has been hijacked by oversimplifying fools who wind up parroting fox-fed nostrums and serve as tools for the very oligarchy that aims to tear down every remnant of freedom. (See: Maps, Models and Visions of Tomorrow.) 

Indeed, the name you'll never hear randians mention… and alas the same holds true of the oversimplifying straw-manner Eskow… is Adam Smith, whose version of libertarianism adults still look to, HERE from time to time.  A version that admires and promotes individualism and the stunning power of human competition, but also recognizes that competitive-creative markets and democracy and science only achieve their wondrous positive sum games when carefully regulated… the way soccer or football must be, lest the strongest just form one team and stomp every potential rival flat and then gouge out their eyes… which is exactly what winner-owner-oligarch-lords did in every human culture for 6000 years.  Till Adam Smith came along and described how to get the good outcomes without the bad.

 The stealing of Adam Smith's movement by fanatics and cynically manipulative oligarchs is not just a tragedy for the right, and for market capitalism.  It is tragic for civilization.”

Comment

Yes, these are long posts plus their associated references.  Those interested may read the debate and possibly learn something about the milieu of ideas floating around relating to aspects of Adam Smith’s ideas on liberty and the individual.  These ideas are somewhat tangential to the normal stale debates about Adam Smith which beginners should read at least once (i.e., the stale debates, not Smith’s ideas, which may require more than one reading).

I often comment on Ayn Rand’s toxic brand of Libertarianism in a negative stance because at root she is responsible in a large part for the spread of the nonsense about legitimising “selfish” motives in respect of individuals that leads to public benefits, enabling modern economists to associate them with Adam Smith’s ideas.

Modern ideologues, both pro- and anti-, would do better to study what Smith writes and not what “authorities” assert he meant.  Reading such debates as above at least once should cure believers and uninformed innocents.

My own stance is that of moderate or 'soft' libertarian, a stance that I think reflects Adam Smith’s position (broadly that liberty under law is more important than the label democracy – what atrocities are committed in thy name (think Korea, Zimbabwe, et al). Moreover, modern ideas of  “Left” and “Right” are anachronistic in respect of Adam Smith and the crossover into their opposites in recent history (eg., Stalinism and National Socialism).

Follow the links and make your own mind up. 

Adam Smith On Unproductive Labour

A Comment I sent to Robert Vienneu’s Blog: “Thoughts on Economics”: ‘Capital as a Social Relationship’, 29 August 2013 is posted below. HERE 

Robert writes a most interesting Blog, though familiarity with some basic maths is required, but there is also much else posted that general readers can enjoy and learn from. 

While I hold different views as a soft Libertarian to Robert Vienneu’s - he is more in the David Ricardo, Karl Marx, Piero Sraffa (“Production of Commodities by Means of Commodities”) intellectual lineage - I find his thoughtful pieces stimulating. He also exemplifies how to conduct debate by intellectual argument, absent abuse and with integrity.

Thus when I read Robert’s ‘Capital as a Social Relationship’ last month I posted a comment with I hope some interesting thoughts on Adam Smith’s sensible thoughts on productive and unproductive labour, which are misunderstood today by neoclassical economists.  Smith’s predominant interest was in economic growth and what caused and sustained it; he was less interested in equilibrium in markets of the economy.

My comments on Smith's Productive-Unproductive Labour in “Thoughts on Economics” (29 August)”

“I am in difficulty with the common interpretation of the ‘productive v unproductive’ distinction as one of “goods v services” (an error of Kaldor’s on the Selective Employment Tax). In Smith’s treatment there is, typically, some vagueness.
Take the case of defence expenditures, which are regarded as ‘unproductive’ because defence forces do not raise revenue from their activities. Clear enough. But businesses selling products and services to the defence sector are productive because the earn revenues that generate profits for the suppliers, normally amounting to serious revenues for the owners and for the skilled employees. The bulk of defence expenditures do require productive labour and capital on Smith’s definition.  So do professional singers, dancers, waiters, dealers managing card or dice games, other games of chance, and owners of the associated buildings (theatres, concert halls, opera houses, casino’s, brothels, opium dens and taxis drivers). They work as providers of services generating profits on the invested capital for the owners of the establishments and other purchasers of their inputs (all their supplies are from productive firms and employees). Their customers who pay the revenues they earn, which for them certainly are unproductive activities, but are not so for the suppliers of the necessary inputs for the services who are productive, including the lowly puppeteer performer charging pennies for the public’s enjoyment of “Punch and Judy” shows. If he makes a living out of his staged efforts in his booth he earns revenue to cover his own consumption plus the costs of his puppets and their effects and in booth, he is engaged in productive work.
 Much the same is true of employees working in legal services, such as barristers, lawyers, clerks and their suppliers of the inputs they utilize in their productive activities on behalf of clients (paper, books, quill pens, court clothes and wigs, etc.,). Even Marx noted these distinctions in his otherwise misguided criticism of Smith.
 It is true that hiring “a multitude of menial servants’ may make a “rich man” poorer because he consumes what productive suppliers of such “menial servants” from other “rich men” who grow richer upon on the basis that the hiring costs cover produce costs and marked-up wines and groceries, plus profits.
 For these reasons I am wary of classifying the productive v unproductive distinction simply as one of goods v services.”

Co-operation and Competition: Why You Cannot Have One Without the Other

Jonathon Haidt and David Sloan Wilson post (5 September 2013) “Sears the Invisible Band” on Forbes HERE  

“Five years ago, Eddie Lampert, the chairman of Sears Holdings after Sears merged with Kmart, reorganized the company so that each business unit functions like an autonomous company, with its own president, board of directors, and profit-and-loss statement.  …

…”The results have been disastrous, in part because Lampert was ideologically committed to the metaphor of the invisible hand and the associated idea that people are purely selfish. Ideology is a lens – it makes some things more visible, others less so. Lampert’s ideology prevented him from seeing that he was destroying the invisible band – the bond that forms around groups that can trust each other and work together toward shared goals” …

… “People are not just selfish. It might make Ayn Rand roll over in her grave to put it this way, but corporations and capitalism depend on the invisible band, as well as the invisible hand.”

Comment

This is a short extract from an interesting article, but to read more follow the link (I am just about on the verge of breaching Forbes’ copyright to quote more).  It goes on to discuss aspects of evolutionary theory that are worth reading too.

Markets are not entirely “dog eat dog” experiences. I remember hearing an overly self-confident entrepreneur who almost salivated at his commitment to “balls-breaking competition” (he didn’t specify what he meant by that”).

I think it is morea  characteristic of “merchants and manufacturers”, as Adam Smith described them, to aim to avoid competition where they can, which, at root, is the purpose of tariff protectionism since before Smith’s day (plus the Statute of Apprentices, Settlement Acts, and Navigation Acts – prompted by the dynastic and territorial ambitions of European rival monarchies and the clamour of businesses with State legislatures to impose minimum regulatory requirements on smaller businesses unable to afford them and, ultimately force them out of business, rather than genuinely improve product and service quality. 

“Narrowing the competition” has always been a common objective of businesses, manifested in their “trade associations”, lobbying activities and other contact points with politicians, nowhere more evident than in the richest world markets, especially those with large government sectors. Moreover, competition is not “balls breaking”. 

Trade requires at least minimal co-operation.  Smith on exchange by “bargaining” (WN I.ii.) makes this clear with his iconic “butcher, brewer, and baker” example.  Buyers should address the “self-love” of the sellers and vice versa.

Markets do not work well when each party demands only his or her own self-interests (tonight’s dinner) without “addressing” the other parties “self interests” too.  In short self-interested actors must mediate their self-interests to fit in with the mediated self-interests of the party when trying to strike a bargain (not all negotiated bargains are concluded.

In TMS Smith refers to “persuasion” as the way we seek what we want the other party to do to co-operate with us in exchange for what we will do for them. This is called the condition proposition: “If you do this for me, Then I shall do that for you’.

Whatever Lambert running Sears thought he was up to, he was bound to fail and it had nothing to do with Adam Smith's use of the invisible-hand' metaphor.

Wishfull Thinking?

“Toward Formal Models of the Theoretical Framework of Fundamental Economics,” Fundamenta Informaticae, 90(4), 443-459” [Wang, 2009]:

“A mathematical model of economic equilibrium developed in this paper provides a formal proof of Adam Smith's hypothesis of the 'invisible hand'.

Comment

Adam Smith did not have a “hypothesis” of “the invisible hand”, therefore Wang’s, no doubt, brilliant “formal proof”, that he did is empty of relevance and meaning.  Marginal candidate for Loony Tunes?

Loony Tunes no.84*

Rachna Chhabria write “Rachna's Scriptorium” HERE

1  “Someone once told me that writers just don’t write, they often take dictation from a higher source (call it God or something else). I agree with this sentiment, as I too believe that we have an invisible hand guiding our writing from a far off place. Sometimes the stories our dictated to us. At other times key points are whispered into our ears so that we are able to build a story based on that.”

* A correspondent asks if my Loony Tunes posts are ended.   The short answer is No.   I am exceptionally busy on academic work at present and I have not posted Loony  entries only because of time.  I shall do so as time permits.

Bargaining Using Adam Smith's Insight

Tim Worstall posts (6 September) on “The Pin Factory Blog”, Adam Smith Institute: 

“Cooperation works for humans, not competition”

“This isn't as much of a breakthrough as the Mail thinks I'm afraid:

“ls 'survival of the fittest' finished? Scientists 'prove' that generosity - not selfishness - is the only way modern civilisation can survive.”

“We've known for some years now that the correct solution to the prisoners' dilemma is tit for tat: as long as the game is running in repeated iterations. And given that life is a repeating series of interactions with very much the same people this is thus the winning strategy in life. If someone cooperates with you then cooperate back: if they do you over then do them over back. We also know from the ultimatum game that people will damage their own interests in order to enforce their vision of fairness. So there's no real surprise about the idea that cooperation works for human beings: we've seen both that in the way that life is actually lived it brings rewards and also that humans seem hard wired to punish those who do not.”

Comment

I comment with some claims to authority after many years of running “Red-Blue” games in Europe and elsewhere, including the USA, and studying the results from managers from many cultures,  as the normal introduction to my thousands of negotiation workshops that  I ran until my retirement.

It may be misleading to draw sharp conclusions such as its really about ‘markets v. socialism’, or worse: ‘self-interest v. co-operation’.  Human behaviour is not easily squeezed into tidy labelled boxes like that, and neither are the categories so clearly defined by such asserted properties.

Markets are not about ‘survival of the fitness’, or the home of all that is ruthless. Socialism is not a humanitarian tea-party (in fact, the Soviet experience of socialism – and its modern bastard in North Korea – have a lot to answer for in the crimes against humanity's book of account).

Competition can only operate well with even a minimal but necessary degree of co-operation, but that didn’t exclude a high degree of co-operation too.  

Adam Smith correctly noted this in chapter 2 of Wealth Of Nations, where he discussed the human phenomenon of bargaining between a diner seeking to buy the ingredients for a dinner from a “butcher, brewer, and baker”.   Smith’s advice was to exchange offers with the sellers in search of a bargain: “Give me that which I want, and you shall have this which you want, is the meaning of ever such offer”. That, noted Smith: “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.” 

Bargaining is a form of persuasion, that is, it is not an exchange of ultimatums that, if maintained, will usually result in no transactions at all between two solely self-interested egoists.

Bargainers need a degree of patience. The ‘wham, bam, gimme it now’ school of negotiation is the ante-chamber of angry disappointment. 

Smith advised the dinner buyer to address the self-interests of the seller and not their own self-interests, and not just plead for the other party to exercise their feeling of humanity.  He advised to talk of the seller’s “self-love”, that is, their self-interests, and how they may be met as a result of the transaction on mutually bargained terms.

Now this seems to me to be clear understanding of how negotiations are conducted in the real world by negotiators, who understand that their best interests are served by addressing the interests of the other party.  This requires them to find a mutually satisfactory basis for both parties to co-operate to mutually agree on the specifics of the terms of their transaction, using condition bargains ("If you - then I").

Now Tim, of course, understands that. Sadly, many “rightist” economists, including among my “harder” libertarian colleagues, and most sociologists, many (most?) of whom are on the ‘left’, and sundry others on the ‘left’, do not.

The enduring lesson of the “Red-Blue” game of “Tit-for-Tat” is clear evidence for inducing co-operation as the safe anchorage of workable competition, with each party’s self-interested behaviour mutually contributing to the acceptable agreement from the conduct of both parties.

News of Sale of a First Edition of Adam Smith’s "Wealth Of Nations"

A rare first edition of Adam Smith’s Wealth Of Nations was bought at auction in Edinburgh by an undisclosed telephone bidder for £46,000 winning bid price, plus the separate sales commission, altogether coming to £55,000.  The report below is from the local Kirkcaldy newspaper, “Fife Today”. HERE 

“Smith’s Wealth of Nations sells at auction for £46k

A first edition of Adam Smith’s Wealth of Nations fetched a staggering hammer price of £46,000 at an Edinburgh auction yesterday (Wednesday).

The two-volume book previously belonged to the 2nd Earl of Rosslyn and was sold by Lyon and Turnbull for a “private Scottish family”.

Including commission, the floor buyer parted cash with a healthy £55,200.

“They are pretty rare and only come up for sale very, very occasionally,” said Lyon and Turnbull’s book expert Simon Vickers.

“It’s a very important book; a special item and highly sought after - it has all the glamour and mystique of being the first appearance of this particularly important work.

First published in 1776, Adam Smith’s magnum opus took him the best part of ten years to write here in Kirkcaldy and became a cornerstone theory of modern economics.

The book sets out Smith’s arguments for promoting free trade, challenging the prevailing view at the time that a nation’s wealth was measured by how much gold it held and that imports were harmful.

Today, world leaders promote free trade as a matter of course.

Mr Vickers believed around 2000 copies were originally published by London firm Strahan and Cadell.

However, it was impossible to tell how many still exist today.

At £1 16 shillings, the Wealth of Nations was expensive from day one but, today, a pristine first edition is on sale in the USA for an eye-watering $180,000.

Mr Vickers commented: “There’s not many people who are going to be in the market for this type of book but, obviously, by definition they will be incredibly rich.

“If they have that kind of money, to pay an extra £5000 or £10,000 is neither here nor there.”

Meanwhile, Kirkcaldy residents might be gladdened to know the local library owns not just one, but two first editions of the book.

One is currently on display in the galleries’ A Moment in Time’ exhibition, but, needless to say, neither copy is available for home loan.”

Comment

The auction also featured in other Scottish newspapers and in several English papers too.  However, I thought it appropriate that the “Fife Today” report was quoted in full (respecting “Fife Today’s” copyright).  The local paper from Adam Smith’s birthplace deserves top billing.

“The 4° 1st edition was published 9 March 1776 at £1.16.0 in blue–grey or marbled boards” [WN (1776) 1976. Intro, 61, Oxford University Press, Glasgow Edition, and Liberty Press). 

It was the 18^th-century custom for the printer to sell the uncut, printed sheets and for the purchaser of the sheets to arrange for them to be cut and bound to suit their tastes.

Of the copies that have survived, fewer have been bound in varying styles in two volumes, but given the rarity of the first edition and the importance of the author, copies in almost any condition will attract high prices. 

Of the few copies I have seen, most were definitely in their original browned leather bindings, showing their age and looking somewhat drab. 

Everything Stays The Same

Andrew Coyne, writes in the Calgary Herald,  HERE http://www.calgaryherald.com/opinion/oped/Coyne
+Interests+producer+take+precedence/8819002/story.html “Coyne: Interests of producer take precedence”

"Consumption is the sole end and purpose of all production," Adam Smith wrote more than two centuries ago, "and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer." He added: "The maxim is so perfectly self evident, that it would be absurd to attempt to prove it." Oh Adam, if only you were alive to see Canada today, where the maxim, far from self-evident, is everywhere turned on its head - where, as you wrote of the mercantilists of your day, "the interest of the consumer is almost constantly sacrificed to that of the producer."

It plainly reflects the sincere belief of much of the Canadian business, media and political elites. The maxim guiding much of Canadian public policy is, quite literally, that the purpose of consumption is production - or at any rate, that it is the consumer's duty to submit to the needs of producers.”

Comment

I am always pleased to see authors quoting from Adam Smith, especially when their quotation is accurate.  Andrew Coyne’s is accurate, though a trite truncated. So, here is Smith’s full quote and reference below:

“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self–evident, that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and

commerce” (WN IV.viii.49: 660).

Andrew appears to dramatically over-do Smith’s reaction should he be alive today and see the supposed difference with his experience of observing how mercantile merchants behaved regarding the “self-evident maxim”:

“the maxim, far from self-evident, is everywhere turned on its head - where, as you wrote of the mercantilists of your day, "the interest of the consumer is almost constantly sacrificed to that of the producer."  Continuing with Coyne’s imagined reaction of Smith, I should think his reaction on observing Canadian business behaviour, would be “plus ça change, plus c'est la même chose”, assuming he was familiar with a (now) common phrase popularised since 1848.  (Note: Smith spoke French in a Scottish accent, and he understood French – see his translations of Rousseau).

So nothing has changed!

Moreover, Smith only asserted ”The maxim is so perfectly self–evident, that it would be absurd to attempt to prove it”; he did not suggest that the “maxim” was necessarily followed in practice, though in his view it “ought” to be followed.  Maxims are “oughts” and an “ought” is not an “is”!

But thank you Andrew Coyne for introducing, even reminding, your readers of Smith’s wisdom on this occasion.  Every little helps.