CRITIQUE OF MICHAEL PERELMAN'S "THE FRAUD OF ADAM SMITH'S PIN FACTORY" (PART 1)

Critque of "Michael Perelman on The Fraud of Adam Smith’s Pin Factory” (Part 1)

Yves Smith, a Lost Legacy reader, sent me copies of Michael Perelman’s paper for the 2014 Hustory of Economic Thought conference.  Michael is a professor of economics at California State University, Chico, with whom I have corresponded since we met and exchanged our different views on Adam Smith, without rancour, in 2009.  I disagree with Michael’s take on Adam Smith, but I respect his views.  He has looked into Adam Smith’s Works and has done so much more thoroughly than some mainstream historians currently writing in this field.  

Part 1 of my response presents more detail of Adam Smith’s work with a sketch of the context which he uses to present his report on the “Pin Factory” example and how it related to the historic division of labour. [Edited 24 June]

Comment

Part 1 of my response sketches out the context in which Adam Smith based his lectures and writings on the historic importance of the division of labour in what we regard today as the social evolution of humans, as the uniquely productive wealth-creating animal within Smith’s moral philosopy. I shall show that Michael Perelman’s analysis of Smith’s approach is far too narrow by focussing on the “pin factory” example, with his charges of “fraud” and other alleged misdemeanours. 

Smith, however, in his University lectures, built his analysis step-by-step, using an historical approach that his first biographer, Dugald Stewart, called “congectural history” (Stewart, 1793). Dugald was the son of Michael Stewart, Professor of Mathematics at Edinburgh University and, formerly, a student friend with Adam Smith at Glasgow University 1737-40 and afterwards.

Adam Smith’s lecture on Monday, 28 March, 1763, is an example of his philosophical history. Michael Perelman selectively uses isolated, short quotations to support his summary judgements of Adam Smith as an intellectual “fraud”.  He misses the significance of the whole of Smith’s carefully expressed context from which Michael constructs a misleading argument.

Adam Smith opened his 28th March,1763 lecture by describing the “regulation of government in general”, using examples of the principles then operating in 18th-century France and England in the matter of the “policy”, “politics“, “adminstration of justice”, “police”, and “defence”, broadly descriptive of then existing city governments, wihtout normative judgements.  

To avoid confusion with the modern meaning of the word “Police”, readers should note that its 18th-century distinctive meaning referred to the attention paid by governments in Paris and London, and etc., to the public cleanliness of the “roads and streets”, and to the public’s “security” by the “prevention of crimes and disturbances”. As developed countries improved sanitation and household refuse removal over time in the 19th century and into the 20th century, the modern narrower meaning of ‘police’ evolved into State monopoly obligations in crime prevention.

Adam Smith added to contemporary meanings of ‘Police’ the obligation to assure “the cheapness or plenty” of the means to meet people’s “necessities, conveniences, and amusements” (which people could sell and buy when they wished to exchange in ‘Bon Marche’), all of which were vulnerable to disturbance by ‘crimes and scarcities’. These passages on pp. 331-33 of LJ, 1763, help readers clarify Adam Smiths’ objective contents of his Lectures and the unhappy consequences of the non-fulfillment of these basic social requirements. This is seen today in the absence of the wider obligations of city governments in the poorest countries, or where crime and disorder predominates. 

Modern TV news is full of scenes of the breakdown of law and order from military invasions and civil wars, and the consequential interruptions in the supply of food, clean water, and general security, as shown in the awful plight of refugees caught up in such events.  Some years ago, for example a couple of hundred yards from a top hotel I stayed at in Turkey, the whole hillside below was piled high with household refuse dumped there by local residents because of the absense of refuse collection by the city council.

Smith compared murder rates in Paris and London and linked them to the number of retainers and dependents maintained under fuedal governments. He quoted David Hume, who observered that murders in Queen Elizabeth’s reign were at an all time high (p. 332), driven by numbers of feudal servants being abandoned by their feudal Lords and who, without skills for normal labour, turned to crime.  Smith favoured society having fewer “idle and luxurious” lives living “in idleness and plenty” (p. 323). He also considered that the expansion of commerce was the “great preventative” of idle “dependency” because “manufacturing gives the poorer sort better wages than any [feudal] master could afford.

For these reasons, Adam Smith saw “the object of police as the “proper means of introducing plenty and abundance into the country, by means of  the cheapess of goods of all sorts” and also, incidently, he introduces what amounts to what we know now as the ‘water-diamond paradox’ (p. 233).

From this long discussion, Smith moves to the vast array of products that “supply the wants of meat, drink, clothing, and lodging” which “almost the whole of arts and sciences have been invented and improved”. Agriculture “multiplies the materials” on “which the several artificers are imployed”, the “forest supplies us with trees and planks for building” and “from the plain we have wool, flax, cotton…silk for clothing, beside indigo, woad, madder and 100 other plants”.  He then elaborates over three pages on the complex interconnnections between the tens of thousands of artificers and labourers who produce in their different trades the vast arrays of specialised products commonly exchanged in European societies, including by the “ordinary day labourer”, supposedly living in the “most simple manner”, when in fact he has more of the “conveniences and luxuries of life than an Indian [North American] prince at the head of 1000 naked savages” (p. 338).  This much quoted famous passage illustrates the significance of the division of labour across society, riven as they are with distinctions of rank.  

Smith sets the context in which he develops his social assessments the division of labour that still sharply divides simpler “savage” societies across the world.  Incidentally, 18th-century language ought not to be judged by 21st-century sensitivities to racial, gender, religious and other stereotypes.  Smith summarises the consequential distinctions, ‘warts and all’, with no attempt to downplay their social contexts - Smith was an observer of the pre-modern realities of what were regarded then as “savage’ (i.e.) in the 18th-century society he lived in. He made honest, pragmatic assessments of what, for him and his cotnemporary readers, counted:

“it may not indeed seem wonderful that the great man who has 1000 dependents and tenants and servants who are oppressed that he may live in luxury and affluence, that the moneyd man and man of rank, should be so very affluent, when the merchant, the poor, and the needy all give their assistance to his support.  It need not, I say, seem surprising these should far exceed the greatest man amongst a whole tribe of savages.  But that the poor day labourer or indigent farmers should be more at his own ease than the savage notwithstanding all oppression and tyranny, should be more at his own ease than the savage, does not appear so probable.  Amongst the savages there are no landlords nor userers, no tax gatherers, so that everyone has the full fruit of his labours, and should therefore injoy the greatest abundance, but the case is far otherwise” (LJ. vi.24: p. 339).

Smith writes with frank indifference to imposed modern ideologies that compare modern ideas about ‘equality, ‘injustice’, and ‘Leftist’ utopian possibilities, all worthy of considertion in their own right, but nowhere experienced in the deep history of humanity.  Given the commonalities of all histories (and prehistories) of human social changes, the philospher’s ambitions focussed on what happened and not upon what some modern reformers think should have or could have happened.  Adam Smith taught what happened in history without dressing facts up to conform with a modern ideology; Michael Perelman focus judges what he thinks should or could have happened and scours Smith’s texts for evidence that Smith’s often frank accounts of what happened somehow meant  Smith recommended them just by mentioning them without condemning them, because in someway it means he approved of them, which he clearly did not.  Philosophy is about understanding history, not merely condemning it against a set of controversial 19 to 21st century ideological standards.

In Part 2, I shall look closely at how Michael Perelman is led into ideological bias.