Monday, April 30, 2007

A New Language for Economists - and for Presidents?

I come across a wodnerful array of Blogs posting pieces that refer to Adam Smith, many I have not heard of before. Mostly, they say something representative of ideas, not all misleading, about Smith and what he wrote about. Some regular ones write good sense about his ideas; a few regular ones remain instransigent in their attachment to false ideas about him.

Here's new Blog: Open Letters to George Bush("Letters to the president from his ardent admirer Belacqua Jones”):

We’re going to talk about the financialization of capitalism. It’s all part of a process in which we have gone from the capitalism of Adam Smith that was based on small producers and merchants to the age of monopoly capitalism. Financialization is a logical outgrowth of monopoly capitalism.

In monopoly capitalism (or Corporatism since monopoly capitalism really isn’t capitalism), profits accumulate and investment opportunities shrink in an increasingly controlled and saturated market. Profits become concentrated in the top one-percent of the population.

Well, whatever Belacqua Jones ends up calling it, we can agree that since the 19th century capitalism is a different phenomenon from the 18th-century commercial economy analysed by Adam Smith.

The common tendency is to call Smith a ‘high priest’ of capitalism, or some such silly title. He wasn’t. He applied moral philosophy, which in those days in Scotland included political economy (or ‘police’) to the long-run revival of the commercial age of subsistence, interrupted by the fall of Rome by the invasions of Germanic and other Eastern tribes, the after effects of which lasted a thousand years.

On these time scales, our modern age has difficulty contemplating them. The current inter-glacial could be several thousand years in arriving, and then last for 50-70 thousand years. How long the 24-hour news cycle will remain focused on the alleged problems of global warming is anyone’s guess – my hunch is not very long.

Now, whether President Bush ever reads Belacqua’s open letter is doubtful; whether he would appreciate the point made about Adam Smith and commercial society and capitalism, monopoly capitalism, and financialisation capitalism, and their distinctions, is an open question. I didn’t, and certainly Smith didn’t – he didn’t even know about capitalism, a word first used in print in 1854 in Thackeray’s ‘The Newcomes’.

For Presidents, such loaded terms are not operational politically. He’s got a couple of years to do in office – one of the amazing benefits of democracy, compared to dictatorships, is political bosses have limited terms in office in the USA, which should reduce the hyper-exaggerated impatience of opposition activists – and I don’t suppose he has much time to find out what the open letter means, or what should or could be done about it, if anything.

You can find it here – see what you make with it.

Sunday, April 29, 2007

Thomas Sowell May Be On To Something With 'Constrained/Uncontrained' Visions

I’ve been fairly busy today writing but I took a little time to check the Blog rolls and noted that in “Rants and Raves”, Stephanie Browne (Norman, Oklahoma) posted her review of Thomas Sowell’s A Conflict of Visions: Ideological Origins of Political Struggles” (Perseus Books Group, New paperback edition: from Amazon for $14.78).

From a brief blurb, Sowell divides the political spectrum dominating social science arguments as “the ‘constrained vision’, which views man as unchanged, limited and dependent on evolved social processes (market economies, constitutional law, etc.); and the ‘unconstrained vision’, which argues for man's potential and perfectibility, and the possibility of rational planning for social solutions. Examining the views of thinkers who reflect these constrained (Adam Smith) and unconstrained (William Godwin) visions, Sowell shows how the powerful and subjective visions give rise to carefully constructed social theories. His discussion of how these conflicting attitudes ultimately produce clashes over equality, social justice and other issues is instructive.”

The paragraph that caught my eye in Stephanie Brown’s excellent review says:

The unconstrained vision is more often characteristic of those who would use the coercive power of the state to affect great changes in the structure of society and human nature, but it cannot be assumed that a constrained vision leads to a blind defense of the status quo. He gives the example of Adam Smith, an exemplar of a strongly constrained vision, was an advocate of sweeping social changes such as the abolition of slavery and an end to mercantilist policies.”

And her summary, plus Sowell’s example, shows the ‘weakness’ of placing as set of visions for an identified person as well known as Adam Smith, across all of his views, and I suspect those of most persons who might try to place themselves in ‘constrained’ or ‘unconstrained’ segments of the spectrum, is that people might display sets of characteristics of constrained and unconstrained visions, depending on the issues under their scrutiny at any particular moment.

This is a general problem we find in ‘personality profiling’: we’ve all got at least one personality, but most of us have the characteristics of several personalities within our repertoires. I found this the case when examining proposals for ‘personality profiling’ in negotiation behaviours (Rubin and Brown’s ‘interpersonal orientations’ and ‘competitive’, ‘collaborative’ behaviours) in my former ‘day job’ teaching negotiation at the Business School.

Stephanie provides a most useful service in providing her version in a detailed chart summarising Sowell’s visions, and reading through it I found myself agreeing that the constrained visions she abstracted more closely represented how I stood on the issues she identified, than the unconstrained visions. I agree, therefore, that someone affected (infected?) by Adam Smith’s philosophy and evident behaviour would be classed as having a ‘constrained vision’.

Sowell recognises this too, in his example of Adam Smith that Stephanie quotes, that Smith was “an exemplar of a strongly constrained vision”, and “was an advocate of sweeping social changes such as the abolition of slavery and an end to mercantilist policies.”

Secular democracy exacerbates the trend to changes in the status quo because changing policies is endemic in democracy because governing parties win and lose power regularly. Smith didn’t think that slavery would be abolished because it was entrenched in many societies from Eastern Europe and Russia, through the Arab middle- and near-East, large swathes of Africa south of the Sahara, India, China and Asia, and latterly in the America’s. In Western Europe, slavery was practised less, except in the galleys and the colonies. Slavery was declared illegal within Scotland in 1778 and a little later in England too (both countries had and have seaprate legal systems).

After the fall of Rome, slavery was dismantled in its classical form (and the form most vivid in the cultural memory – though it continued for a thousand years afterwards in the aforementioned regions larely unnoticed), to be replaced with feudal serfdom until that withered after the 15th century, a sort of part-way form of slavery that eventually gave way to tenant farmers.

While pessimistic about the chances of countries where slavery was entrenched (though critical of it economically), he was not much more optimistic about abolishing mercantile political economy. He thought to remove it entirely was akin to believing in ‘Utopia’ and ‘Oceania’, but nevertheless he considered much of its laws and regulations could be dismantled if enough legislators could be persuaded. And he set out to persuade them but did not do so by demanding ‘sweeping’ changes.

Smith’s advocacy of certain policies was not that of a political agitator or campaigner. He analysed society in order to understand it; not to change it (that was Marx’s claim). He provided the moral and economic evidence for change, but not to an urgent timetable. In Wealth Of Nations he cautioned against ‘sweeping’ changes by such as removing protectionist policies (better not to introduce any more of them) that caused distress for labouring people if implemented too quickly, preferring change to come ‘slowly and gradually’ to give people time to adjust.

Hence, within the ‘constrained’ vision there is a fair amount of practical good sense for legislators to consider; for the ‘unconstrained visionaries’ he cautioned against ‘men of system’, who had answers for everything and saw human society as a great ‘chessboard’ and who in their ‘conceit’ forget that people act under ‘motions of their own’ and not like wooden chess pieces.

On this basis, and after reading earlier books of his, I think Sowell may be onto something in his ‘Conflict of Visions’, and his book looks interesting enough for me, and perhaps for you, to acquire a copy.

Saturday, April 28, 2007

Not Quite Off Topic: did Lieutenant Bligh meet Adam Smith?

On this date 218 year ago, sometime after 4 am on 28 April 1789, Master’s Mate and acting Lieutenant, Fletcher Christian, with a small party of armed seamen, arrested Lieutenant, William Bligh, commander of HMS Bounty, an armed vessel carrying botanic specimens to the West Indies, about 30 miles off the Pacific island of Tofoa, in what was to become the most famous, and also least important, mutiny in the history of the Royal Navy.

The connection to Adam Smith is tenuous, in that 19 years ago I wrote a biography of William Bligh (‘Captain Bligh, the man and his mutinies’, Duckworth, 1988) using the primary source papers, journals and letters, most of them held in the Mitchell Library of New South Wales, Australia. Much of the context of the 18th century, so important for understanding Adam Smith and his world, overlapped in the lives of these two gentlemen from the middling ranks of British society.

I wrote ‘Bligh’ with an economist’s eye on what was going on in his professional and personal life, as I have when tackling many incidents in Smith’s life, such as the ‘interest’ system that both men used to effect in their search for ‘place’ in the social structures within which they excelled, Bligh the navigator within the strict hierarchy of the Royal Navy and Smith the philosopher within the democratic hierarchy of the Scottish Enlightenment. They had much in common (and also many differences). They were both ‘Celtic’ in disposition and spoke in their vernacular tongues socially.

Both men exhibited ‘warm’ behaviour, with Bligh’s taken to extremes of passion (he couldn’t abide indiscipline or professional slackness), Smith impatient with those who impugned his integrity. Both of them excelled in their chosen professions, Bligh the sailor and Smith the professor.

Did their paths cross? Indirectly, yes. Neil Campbell, Principal of Glasgow University, who appointed Smith as professor, was the grandfather of Peter Heywood, midshipman on Bounty and convicted mutineer, and Smith also corresponded on other matters with Sir Joseph Banks, the naturalist and President of the Royal Society, who was Bligh’s main sponsor and source of his interest with the King and Royal Navy.

Did they meet? Possibly. Bligh visited Edinburgh many times when ships he served on anchored at Leith Roads, the port of Edinburgh in the Firth of Forth. We know he was in Edinburgh doing the social rounds as Master on the frigate HMS Belle Poule, escorting as a prize, a captured French merchant, La Cologne, in April 1781, and later as 5th Lieutenant on HMS Princess Amelia, ship-of-the-line.

On 1 Jan, 25 and 30 January 1782, he attended dinners in Edinburgh when James Boswell was also in attendance, and he is recorded in Boswell’s diary as a ‘celebrated navigator’ with Captain Cook (Bligh was Master on HMS Resolution on Cook’s fatal third voyage, when he was killed at Hawaii on 14 February 1779). Smith had copies of Cook’s voyages in his library. It is highly likely that Smith met Bligh at one of the many dinners that officers from visiting ships would attend as a matter of course (only officers had shore-leave; the crew were likely to desert).

Well, it was just a thought when I went for my morning walk this morning at 6.30 am and my mind turned, as it always does on 28 April each year, to the events that early morning, so far away and so long ago in 1789.

And when I think of young Bligh and Christian now, I am soon led to think about Smith, the older man, at that time at the top of his career, Commissioner for Customs, who would die in July 1790, followed by Christian who died in 1793 on the Pacific island of Pitcairn (named after Midshipman Pitcairn whose father, Major Pitcairn, was the first British officer killed at Bunker Hill).

What might they have said to each other if they had met in 1782? What Bligh said to Boswell was not recorded by him in his diary...

Thursday, April 26, 2007

Anniversary of Smith's Theory Of Moral Sentiments

Dr Eamonn Butler, Director of the Adam Smith Institute, posts a tribute to Adam Smith today, the anniversary of the publication of his Theory Of Moral Sentiments in 1759, while he was teaching at Glasgow University.

His tribute is entitled ‘An Ethical Anniversary’. I post a single paragraph from it (you should visit the ASI Blog to read the rest):

On this day in 1759, Adam Smith published The Theory Of Moral Sentiments. A work on ethics, it made his name and his fortune, and gave him the time and the freedom to spend much of the next decade and a half writing the iconoclastic Wealth Of Nations, for which he is best known today.”

I have posted a short comment on the ASI Blog, which you can read when you visit it here.

Good Points From Burlington, Vermont, from Something Adam Smith Said (approximately)

Claire Collier in “Burlington Free Press”, Burlington, Vermont (26 April), writes a blistering comment on US politics as represented by Rich Tarrant, a fellow correspondent and, apparently, a Republican.

I shall not comment on the issues because I am not familiar with US politics.

We’ve got an election on here in Scotland for the Scottish Parliament on 3 May, and that is confusing enough, and I’ve voted already, using my postal vote, while the noise emanating all around us is of the usual low standard of debate. On the scale of 1 to 10 it’s around 4. On the good humour count it’s minus 10. I think the candidates could do well to ‘lighten up’, as I believe it is said nowadays.

However, Claire’s post is punchy enough and I think she scores a good point with her use of Adam Smith to rebut something Rich had said (allegedly). She writes:

“Tax structure favors the wealthy” by Claire Collier”

“Adam Smith wrote that his economic theory required honorable actors, and he thought the competition for financial success would produce such people. Enron, anyone? He knew nothing of the effects of mass psychologically driven advertising, golden parachutes, lobbying, the insulating effects of size and the guilty paranoia of personal competition for the ultimate goal, money and power.”

Read the rest of her letter here.

Tuesday, April 24, 2007

Would Adam Smith Have Blogged?

Bruce MacEwen hosts an active legal Blog for his fellow professionals called ‘Adam Smith, Esq.,’ and it combines the sort of stuff that ambitious, presumably young, lawyers like to read about their world and the people in it. Lay-persons can also enjoy the topics, especially those where he steps into linking Adam Smith to his themes.

One such is his follow up on the ubiquitous P. J. O’Rourke who asserted (typically) in Forbes that Smith would have enjoyed the Internet because he described its functionality in promoting Wealth Of Nations:

"In The Wealth of Nations , published in 1776, Adam Smith explained the three factors that constitute the free market: pursuit of self-interest, division of labor and freedom of trade. There you have the Internet without so much as a mouse click. [...]

"The Internet is not a wonderful new world. The Internet just is a natural extension of the free market."

"Smith saw that the free market answered liberty's need for a larger network of voluntary association. The pursuit of self-interest means that the free market has built-in incentives for network maintenance and expansion."

The 'net promotes, above all, connections. And this brings us to P.J. O'Rourke's key, and deadly serious, insight:
"Since networks are self-organizing they are, like all do-it-yourself projects, a mess. This makes networks too hard for any one person to understand, let alone dominate.

" Most of our lives are spent in channels or chains of command or circuits. Networks release us from this. We are presented with numerous alternative connections. On the Internet these connections are, without intending a pun, virtually unlimited. We can take our business elsewhere or be that elsewhere by starting a business of our own.

In other words, the 'net permits us to create new connections, to launch new conversations, and to form new micro-communities neither foreseen nor exhorted by any person or group directing our actions or our attention. Sounds like a free market to me. If, as O'Rourke says, "the Internet is an advance for voluntary association," then Adam Smith would surely approve.

And of course he'd be publishing working drafts of Wealth of Nations online for critical commentary as they were done.

What an exciting insight O’Rourke provides about the disorder of the Net emerging into a polite order, and added to by Bruce Macewen’s practicing Smithian outlook on that most ordered profession, the administration of justice (without which, said Smith, society ‘would crumble into atoms’).

Entry is relatively costless and you may conduct your business at low cost, whatever the business you are in, including the usual spam businesses from porn, sex aids and drugs, scams of various kinds and fake degrees. Of course, legitimate businesses dominate the Net and much mail-order selling and buying is conducted to the benefit for both parties. Few regulations and controls intrude on the Net, though they intrude as normal beyond the net when the cash enters the sellers’ bank accounts.

Yes, I think Adam Smith would have approved. But don’t put money on governments keeping their hands off the Net for ever. That’s not the nature of the State.

Monday, April 23, 2007

The Torment of Not Knowing

An interesting public lecture is underway today at the University of Minnesota (12 noon at the Social Sciences Building) by Professor Robert Brenner (Professor of History and Director of the Center for Social Theory and Comparative History at UCLA), entitled "Property and Progress: Where Adam Smith Went Wrong".

What a torment it is to read such an announcement and not know what Professor Brenner’s theme will be beyond the tantalising title!

He used a similar title “Property and Progress: Where Adam Smith Went Wrong”, at a symposium on ‘Marxist Historiography: Alive, Dead, or Moribund?’, at the British Academy in November 2004.

I am always willing to read any credible critiques of Adam Smith in case they provide a new perspective and I am now in the hunt for details of Professor Brenner’s appreciation of where Smith went ‘wrong’.

Anybody out there with any suggestions?

Adam Smith was an Accomplished Mathematician

Phil Birnbaum makes a good case against the snobbery among some academics for discrediting, more commonly, ignoring, work not published in top-line peer-refereed journals. A sentiment I share, but probably for slightly different reasons. One’s peers in science may just a easily be blinkered in what they consider ‘correct’ science and may refuse to look at any idea than does not conform to whatever passes for the current ‘consensus’ or paradigm. You get a taste of this in observing today the hostility among some scientists against anybody who is ‘guilty’ of ‘climate change denial’, which I regard as a most unscientific stance.

However, in Phil Birnbaum’s post on his Blog, Sabermetric Research (‘links to and reviews sabermetric studies and sports research’, he illustrates against his excellent approach, why ‘peer review’ has a useful role to play in that he refers to Adam Smith, somewhat ambiguously, in what could be taken as an inappropriate example of the point he wishes to make (his use of the example of Shakepeare in this context is spot on!).

He writes:

“… Calling Bill James an "intelligent layman" because he doesn't have a Ph.D. is like calling Adam Smith a layman because he never took an econometrics course.”

It may not be appreciated by numerate readers of Wealth Of Nations today, but Adam Smith was an accomplished mathematician by 18th-century standards. He took a great deal of scholarly interest in mathematics as a student and later as an academic at Glasgow University.

Professor Robert Simson (1687-1768), a leading mathematician at Glasgow, and a specialist in geometry, encouraged Smith’s extra curricula studies and his fellow student, Matthew Stewart (1718-1787), later professor of mathematics at Edinburgh University (1747-85), remarked to Professor Dugald Stewart (his mathematical son and Smith’s first biographer) about Smith’s mathematical abilities in solving a ‘geometrical problem of considerable difficulty’ set as an exercise by Dr Simson (Stewart, D. 1793, Account of the Life and writings of Adam Smith, LL.D). Smith was also a friend and an ‘intimate’ correspondent with Jean le Rond d’Alembert (1717-83), (John Rae, Life of Adam Smith, 1895, pp 10-11), known for the ‘d'Alembert principle’ of motion, among many others.
Though Smith did not take courses in econometrics (and none of his contemporaries did either), he was not innumerate by any standards. And he held a LL.D too. I think another comparison is warranted.

That is where a peer-review of an article provides a useful service – it might save us embarrassment before the profession reads a ‘slip’ we might leave in error and thereby destroy the credibility of the good points we wish to make. In my experience, hostile critics pick on the most inconsequential of slips to discredit that which they cannot abide, or people they don't like.

Sunday, April 22, 2007

Please: Self-Interest in Adam Smith Does Not Mean Selfishness

Economists who stay in silos within their discipline miss a great deal of useful inter-disciplinary work that could contribute to their own insights in how societies and their economies work, and it is always encouraging to see prominent economists looking beyond the rigid demarcation lines around our subject. It would also be beneficial for some economists to look outside their own silo into the work undertaken within other silos within economics, as a start towards looking out of their windows.

Mark Thoma’s Blog, Economist’s View, (22 April) is always worth reading from selected articles and the inevitable shoals of comments that they attract.

Today he has a post entitled, ‘Unnaturally Good?’, which is about the prevalence of altruism and the problems this creates for some social scientists and how it was answered by ‘a brilliant British biologist named William D. Hamilton’, quoting from The Sunday Times online (Srilanka): ‘Is Goodness Natural?’, by Lee Alan Dugatkin, (Professor of Biology and Distinguished University Scholar in the Biology Department at The University of Louisville). His most recent book is "The Altruism Equation: Seven Scientists Search for the Origins of Goodness", Princeton University Press, 2006):

Hamilton ... began by defining three terms: the genetic relatedness between individuals (labeled r), the cost of an act of goodness (c), and the benefit that a recipient obtained when someone was nice to him or her (b). Using some beautiful mathematics, in the early 1960’s Hamilton discovered that altruism and blood kinship are not linked by an all- or- nothing relationship.

Instead, what is now known as “Hamilton’s Rule” states that altruism evolves whenever r times b is greater than c. In other words, if enough relatives receive benefits from altruism to outweigh the cost of altruism, then altruism spreads; otherwise, it does not

This sparks off the usual shoal of comments, in one of which Smith Acolyte says:

Only a small minority in each nation are truly altruistic beyond their immediate family/friends.

Adam Smith wrote that capitalism works because in a free market people can promote the common good by pursuing their own selfish interest. Not that everyone pursues only their own selfish interest, but many (most) do. No large economic system can work if it depends upon altruism. Small communes that depend upon altruism can last for awhile, because altruistic people can band together to help each other

Adam Smith said no such thing. Apart from Smith never mentioning the word ‘capitalism’ (not invented until 1854 – Smith died in 1790) or the phenomenon of capitalism and the ‘industrial revolution’, feature of the mid-19th century onwards, and completely unrecognisable to anyone living in the mid-18th-century, he most certainly never wrote favourably about ‘selfishness’, nor saw a positive role of it in society.

That is a gloss put on his work by 20th century neoclassical economists and picked up by their students. Smith also wrote a great deal about the self-interested actions of individuals working against the ‘common good’. A short sample would include his criticisms of ‘merchants and manufacturers’ seeking protection from competition; tradesmen (petty businesses in towns who conspire against the public to raise prices and cut supplies), sovereigns (governments) that make war for trivial ends, armies that indulge in rapine and plunder, landlords who are idle, adventurers who fail in business, prodigals who spend revenue on consumption and decry frugality, people who defraud banks and savers, retainers who are unproductive, agitators for trade protection and mercantile political economy, gullible legislators, politicians and all ‘men of system’ whose nostrums threaten social stability.

All these people (and others) act in their self-interest and against the common good.
People acting in their self-interest, but not always or necessarily (and the difference is important, may act unintentionally and without direction in a way that does benefit the public good. But that is not by acting ‘selfishly’. Self-interest is not selfishness. To confuse the two is to adopt the ideas of Bernard Mandeville (‘Fable of the Bees', 1724), which Smith directly criticises in ‘Moral Sentiments’ as a ‘pernicious’ notion.

On Hamilton’s rule I observe that it does not explain behaviours regarded as ‘altruistic’ among people unrelated to themselves genetically, but it is a most useful starter for those getting into the subject.

Saturday, April 21, 2007

Have a Look at a Mini-'Debate' on Pins and Things

Over at Stumbling and Mumbling, Chris Dillow’s post: ‘What the £20 note doesn’t say’ and Adam Smith’s take on the division of labour, on which I commented this week, has produced an exchange of posts among readers, some from a neo-Marxian persuasion, others from a Smithian perspective and a few assorted others (most, not mine, are semi- or fully-anonymous).

Never-the-less, the posts are readable and informative, and readers of Lost Legacy may benefit from reviewing the issue under debate:

was the division of labour, illustrated by the famous ‘pin factory’ in Wealth of Nations a political power play by capitalist owners to control the workers for their nefarious ends (a view articulated by Professor Stephen Marglin of Harvard University) or was it, as Adam Smith asserted, a method of increasing labour productivity to meet the demand for pins?

It’s worth a look for those interested in Adam Smith's work.

Thursday, April 19, 2007

A Weird Radical Explanation for the Division of Labour

Chris Dillow writes a regular Blog called ‘Stumbling and Mumbling’ that normally I find interesting and while I do not agree with every bit of it, he has established a reputation, at least with me, for good sense and he is worth reading. Recently, Chris changed his Blog’s slogan to: “an extremist, not a fanatic” from something he used before, which was slightly self-deprecating about being an awkward ‘oik’.

“What the £20 Note Doesn’t Say”

Today he writes on the new £20 bank note and Adam Smith, but I found it a trifle strange coming from an economist:

The £20 note celebrates the division of labour. But there's something it doesn't say - that the division of labour originated not as a way of boosting productivity, but as a way of increasing capitalist control of the labour process.”

The exact process by which mid-18th century commercial tradesmen (the ‘manufacturers’ of Wealth of Nations’) were transmuted into scheming zombies working for ‘capitalist control of labour’ is unexplained. The concepts that would have to be involved in such high levels of class consciousness about the requirements of a ‘capitalist’ system, not yet named nor invented in mid-18th-century Scotland (the word itself was only invented in 1854) are wondrous to behold. The notion that fairly uneducated artisans formulated such ideas about their secret roles on behalf of an inanimate ‘system’ nobody else noted or wrote about before the 19th century, is far fetched, to say the least.

Chris quotes from Adam Smith’s example of the pin-factory in Wealth Of Nations:

One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands.

To which Chris adds:

But why should these operations be performed by distinct hands? In theory, a pin-maker could spend one-eighteenth of his time drawing out the wire, another eighteenth straightening it, and so on with the result that during a week, 18 men would make as many pins as 18 men doing the specialist tasks.”

As Mr McEnroe used to put it: ‘You can’t be serious’.

At say, a 10-hour working day (I’m keeping the arithmetic simple) that means the labourer (man or boy) would work for 33 minutes on each of the 18 operations to make a pin (changing activities with infinite velocity and being equally dexterous at each operation) and would have to produce 2,000 part pins per 33 minute working session to equal the output of 18 men working on a single part of the process each. There would have to be no ‘stumbling’ at all.

Assuming this could be done (having worked in factory processes, I have my doubts), why then wasn’t it done this way? Chris has the answer from what he calls ‘“In one of the greatest papers ever written (pdf)” (!!), written by Stephen A. Marglin, Harvard University, entitled: ‘‘What Do Bosses Do?: the origins and functions of hierarchy in capitalist production”, published in ‘The Review of Radical Political Economics’ (Vol 6 No 2 Summer 1974).

Well, it lives up to its ‘radical’ name, for Stephen Marglin writes:

specialization was used by bosses as a way of dividing workers, and a way of ensuring that bosses had an essential function - that of coordinating the separate operations. Specialization, then, is a weapon in the class war, not a technical necessity.”

Now you know. As if 18 labourers changing their roles every 33 minutes would not require ‘co-ordination’! They would probably require more co-ordination if they were required to do all 18 operations to strict 33-minute time intervals.

So, previously unrecognised professional ‘proselytizers for capitalism’ travelled the entire western world finding artisans about to embark on adopting the division of labour, quietly spoke to them, and were so convincing that these hapless naïve idiots went against all of their instincts and re-organised their processes, not to increase labour productivity, but to engage in preparing the ground for ‘the class war’ on behalf of a class that did not yet exist and for a ‘war’ they would not live long enough to see.

Moreover, given that the division of labour commenced millennia beforehand in the ‘rude’ hunting mode of production and slowly and gradually spread across all modes of subsistence that followed, why on Earth did it necessarily lead to becoming prevalent as a ‘weapon’ in a ‘class war’? And why did nobody notice it?

Is there some hiden force at work, invisible to everybody else but authors in ‘The Review of Radical Political Economics’ that secretly is guiding selected people to do its bidding? Lost Legacy has written much on the myths of invisible body parts in the metaphor of the invisible hand, usually, we might note, secretly spreading the version of capitalism from the spokespeople of the Right-end of the spectrum. Now the left have joined in.

What’s common to both ends of the spectrum? A belief in secret, invisible, and seditious ‘forces’ that run the lives of billions of people, with absolutely no evidence, nor plausible speculations as to where these hidden forces come from, how they materialise or why they bother.

I think Chris ought to get out more, or look out of his window at least; the world ain’t like that – and never has been. Sad.

Wednesday, April 18, 2007

Darwin Needs No Introductions to Adam Smith

Denis Pombriat write in the Beagle Research Group (“insight advice results”) Blog under the heading: “Mr Darwin, Meet Mr Smith” (18 April):

There is actually a new way of thinking about economics, called complexity economics, which views economics through the Darwinian lens and comes up with some better explanations for the way the world works than the classical economics handed down to us from people like Adam Smith.

Just as I won't get into monkeys here, it is not my intent to go deep into complexity economics either, there isn't enough space. If you'd like to know more though, I can recommend "The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics," by Eric Beinhocker. The book is published by Harvard Business School Press and the jacket says Beinhocker is an adviser to McKinsey & Company, so don't let the "radical" in the subtitle throw you: this is not "The Communist Manifesto."

Beinhocker provides the theoretical underpinnings for Clay Christenson's observations in "The Innovator's Dilemma," which I think does a good job of explaining the ebb and flow of individual innovations. If I had to boil it down, the reason for loss of market share it would be failure to innovate and I wonder if we're seeing some of that failure today in enterprise software. I don't know how else to explain the tepid response many vendors have so far given to the Software-as-a-Service movement

Yes, Complex Adaptive System thinking is a new way of thinking as an economist, and yes it probably has a great future, and yes, Eric Beinhocker has written an informative book on this and related subjects.

However, how reliable a guide he is to CAS is a less certain issue. Last year (on 8 August, 15 August,17 August, 26 August,13 September 2006 – see archives for August and September, 2006, by clicking on these months in the right hand column) I wrote a number of posts part in praise of Beinhocker and then in more skeptical tones when I continued reading through his book and his coverage of subjects I knew a lot more about than I did of CAS at that time (topics like Adam Smith and John Nash for example).

Denis Pombriat appears to be software genius with a knowledge of business innovation, two specialities which in my experience do not always go together, and he may be on to something from CAS in terms of evolutionary thinking. This is apposite today as it is appropriate to understand that Smith was only a short step from being a thinker with a social-evolutionary approach to society. He was a close friend and intellectual buddy of James Hutton, one of the earliest geologists of the Scottish Enlightenment, who correctly surmised from his field research into rock formations that the world was a lot older than the ridiculous statement of Bishop Ussher that the Earth was created on October 22, 4004 BC (details on Google) because the dates given in the Bible added to this figure.

All of Smith’s Works show elements of his evolutionary approach, especially in respect of societies slowly and gradually changing (backwards in relapses and forwards in spurts). Charles Darwin, like most educated people in the 19th century, read Wealth of Nations in parts. Hence, I am not sure why Denis Pombriat thinks Darwin needs an introduction to Smith. He was fairly familiar with his and others’ Works (Malthus for example) on political economy. Nothing Darwin wrote in Origins of Species would have been at variance to Wealth of Nations, Moral Sentiments or Lectures on Jurisprudence

The same cannot be said, possibly, for neoclassical modellers under the influence of Chicago, for whom time is a missing element, and evolution another subject.

[I may add that despite writing to Eric Beinhocker several times asking quesitons about his references to Smith and Nash, I did not receive replies or acknowledgements, nor even from comments of mine that appeared on web sites to which Eric has access.]

Tuesday, April 17, 2007

Hard Work Ain't Easy - on families ...

My family apparently think I am working too hard on Adam Smith for Palgrave and my son arranged two tickets for Manchester United v Sheffield United (both towns mentioned in Wealth Of Nations, but alas neither footbal team - yes, I think I am working too hard to finish the book for the deadline in June!).

So I am in Manchester, England and, bereft of my laptop, and I have sneaked to the Business Centre in the Hilton while my son is having a shower (Dads - always shower first when trapped socially).

Needless to say, I shall not post today - back in Edinburgh (Scotland) tomorrow, hopefully after a Man U win...

Monday, April 16, 2007

Feminists Don't Need to Mistranslate Adam Smith's Ideas

I won’t get into the issues about feminism and women discussed in this article in “Book Blog” (‘something a bit more serious’) by Bridgetter Gregory. She is reviewing “Women in the Nineteenth Century by Margaret Fuller”, which is full I may say of the usual arguments, though in a 19th century background.

Among them is this paragraph – it’s not clear whether this is Margaret’s claim or Bridgetter’s - and it is almost totally in error:

Individuality is a matter of economics to many, especially with the ideas of Adam Smith and laissez-faire. According to Smith, governments should encourage their population to be individually selfish. He believed that when people were allowed to be selfish with their products and businesses that the economy would prosper. Smith’s laissez-faire helped in many countries including the United States. If this idea were taken as an approach to women’s equality there would be twice as much of the population looking out for their self-interest which could only help the economy more.”

That individuality is the centre piece of the mathematical ideas of neoclassical economics is beyond question. Chicago’s notion of Homo economicus is its most prominent icon. However, I am not quite clear how the consequences alluded to by Margaret/Bridgetter come into the frame.

Smith did not advocate ‘laissez-faire’, in fact he never mentioned the words in anything he wrote, though he knew the words and he knew some of the French economists who used them regularly.

According to Smith’ says Bridgetter (or Margaret); but where precisely did he say this most improbable follow on about ‘governments should encourage their population to be individually selfish’? I know of no such statement (though I’m always willing to be corrected).

On these lines, I wonder if Margaret has read Smith's severe (moral and economic)criticism of selfishness in his dismissal of Bernard Mandeville (‘Fable of the Bees’, 1724), who most certainly did advocate the social benefits of selfishness. Smith never did, either for the individual or for governments to ‘encourage’ selfishness.

In like manner, Smith did not believe “that when people were allowed to be selfish with their products and businesses that the economy would prosper”. His criticisms of ‘merchants and manufacturers’ who acted selfishly are so well-known that I cannot but wonder where Margaret or Bridgetter get the idea from? It was never in Smith’s books, though apparently it is in Margaret’s.

As Smith enver advocated laissez-faire he couldn’t have ‘helped in many countries including the United States’ with it. Something here has got lost in translation as it crossed the Atlantic. Smith advocated the dismantling of the mercantile state’s political economy. He thought governments pursuing the wrong policies should roll back their wrong policies. That was not the same thing as the idea that there was no role for governments in an economy.

He gave specific roles for government: defence against belligerent nations; the setting up of a system of justice (independent from the Executive; trial by jury; habeas corpus; judges appointed for life; the rule of law); public works and public institutions (toll roads, bridges, harbours, canals, national mint, post office, weights and measures, and action against ‘noxious diseases’); establishing a national system of education with a school in each parish on the Scottish model, partly paid by taxation and partly by parents (except from those parents too poor to contribute a 'penny'); education and instruction for people of ‘all ages’; separation of State and Churches (note the plural); and paying for the ‘dignity of the sovereign’ or government. All to be paid for by a fair taxation system that has elements in it of an ‘ability to pay’.

I would have thought, just a suggestion, if you wanted to make a feminist case for the disregard of the roles of women in a society and its economy, you could find many examples of male disregard of women in Smith’s ‘Wealth of Nations’. He was an 18th century not a 21st century man and his remarks about women are, well, somewhat far from the sympathies of Bridgetter, but that’s another story.

Sunday, April 15, 2007

The Myth of the Magic Body Parts Rides On

From the mystic magic department we get all sorts of notions celebrating the Chicago idea that markets are run by invisible body parts that have the amazing capacity to turn whatever people do, for whatever motive, good or ill or none at all (that’ll go down wonders with over-wrought therapists failing to treat psychopaths), to magically turn out to be for the best possible benefit for society.

That the idea is so ridiculous I stand in awe before the otherwise brilliant people who purvey this nonsense with all the certainty of one of their equations which show how economies work without the slightest acquaintance with the real world.

Moreover, they dismiss sceptics who cannot find any benefit for society in the self-interested actions of Robert Mugabe and wonder about scores of other examples daily around them (which self-interested actions of paedophiles benefit their victims or society?). They bless their certainties also with what they believe is a final rebuff in claiming that their reference for the source of their belief in body parts as being Adam Smith himself, saying in effect, how can (dare!) you argue with the founder of economics who made ‘the invisible hand’ the centre-piece of his theory of capitalist markets?

Here they reveal one of two things: first, they have never read Adam Smith on ‘an invisible hand’ in either Moral Sentiments or Wealth of Nations, or secondly, if they have, they assume that their readers haven’t or won't. The arrogance of the first view is only matched by the impertinence of the second.

The problem with their self-delusion is that they teach others, innocent students in Economics 101, who go out into the world preaching what they have been told to believe, and lo, what some of them preach is read by those who never bought the myth of the ‘invisible’ body parts being more than a slightly misleading literary metaphor that had nothing to do with markets and less to do with a law of human behaviour showing self-interested actions always led to benign outcomes for others or society generally.

Today’s example (we get them enarly every day from somewhere in the world) Ian Robinson write in the Calgary Sun (Canada), 15 April, under the heading: “Imus gets his due: slapdown by invisible hand preferable to iron fist of the state”, a story about a ‘shock jock’ getting fired for an aside about a women’s basket ball team, not one of the world’s most serious crimes on the planet this weekend I would have thought, but big news in a media desperate for stories to place next to their advertisements (sad that so many talented people are really ‘space filers’).

Ian Robinson (a Scottish name too):

Something kind of cool happened in the case of shock jock Don Imus.

After calling the largely black Rutgers women's basketball team "nappy-headed hos," Imus got a slap in the mouth from the invisible hand.

Much preferable to the visible fist of the state, with its ridiculous hate-crime legislation.

The invisible hand is the term coined by moral and economic philosopher Adam Smith, who wrote The Wealth of Nations.

It has come to mean the mysterious, way-good stuff that happens when free people exercise their desires as individuals.

Sometimes that means you can buy a dozen sweatsocks at Wal-Mart for a couple of bucks. Sometimes it means a Ronald Reagan gets to be U.S. president.

On the other hand, it can also mean an endless supply of Internet porn, American Idol and Pop Tarts ... but hey. Freedom beats the alternative. Which is Kim Il Jong's North Korea or that sunny Caribbean gulag, Cuba.

Where a Pop Tart costs $850 and the only porn you can find is a 1950s gas station calendar featuring a buxom blond woman -- now long dead, no doubt -- showing less skin than your grandma would during a visit to the Vatican

Smith did not coin the metaphor ‘invisible hand’. Try looking up Shakespeare’s Macbeth, the ‘Scottish play’ from 1605, at 3.2; or Daniel Defoe’s Moll Flanders from 1722, and numerous other authors up to before Wealth Of Nations was published, who used the metaphor, ‘coined’ it if you like, not Smith.

Ian then gives an example of the “good stuff that happens when free people exercise their desires as individuals” followed by examples of the not so good.

True, Ian hints that he may have seen through the myth attributed to Adam Smith: “It has come to mean the mysterious…”, and for that I am grateful, but the damage has been done. He’s given the precedence to Smith for something several other authors coined before him.

The door is partly closed; the horse has bolted to join the others. The myth of the body parts rides on (after all the story comes from Calgary...).

Saturday, April 14, 2007

Restrictive Practices Are Seldom Benign

Edward Lotterman, and economist who teaches and writes in St. Paul, Minn., writes in the Idaho Statesman that “State-funded schools should serve public” and explains why in an article of measured good sense, both economically and philosophically that Adam Smith would have been in complete agreement. Such articles in the media are rare. Read it here. Usually they are incorrect and have no connection Adam Smith’s writings. Ed Lotterman is an exception.

“Adam Smith, the first great economist, would not be surprised at all by this union's demand. He gave many examples of how different groups feather their nests by restricting competition. The impulse is widespread and entirely rational. Smith would, however, rebuke any kowtowing to such an anti-competitive request.

Labor unions can perform a useful economic function in providing a counterweight to the disproportionate bargaining power of large employers. In many situations, this can improve economic efficiency. However, federal policies have been particularly hostile to unions since 1981. The proportion of the private-sector labor force that is unionized is a fraction of what it once was. The skilled building trades are a partial exception to that general trend.

But unions also function to restrict competition for their members. Craft unions trace back to medieval guilds. Restricting entry into any craft or profession lay at the core of the whole guild system, and that has carried over to the modern era.
For any given demand for skilled-trade labor, the fewer trained people, the better the wages. If the economy is booming, a limited labor supply fosters power to seek wage increases. If the economy is slow, it minimizes downward pressure on wages and unemployment.

But what is optimal for a union is not necessarily optimal for society. It is good for society that technical colleges be responsive to the changing skills needed in a dynamic economy. It is not good, however, for them to determine exactly where supply and demand should meet and at what wage rate, particularly at the behest of a group with a financial ax to grind.

Moreover, members of white-collar professions are just as avid in restricting competition as any labor union. The American Medical Association and associations of medical specialists have long exerted subtle but very real pressure to limit the number of doctors and specialists turned out in a year. Licensing requirements and codes of ethics for other professions may protect the public from unqualified practitioners, but often limit competition, too.”

Restrictive practices are common and have long been so. The medieval Guilds, craft trades and professional associations run in a long line of continuity in conspiring to restrict inductees into their trades or to allow them to get jobs. This is usually done under some pretext or other, such as to ensure they are properly trained, or to maintain quality and safety standards.

Subjecting potential recruits to long apprenticeships, including for skilled trades that can be taught in months not years, is a hang-over from the medieval past. The first universities were modelled on the medieval apprenticeship system of seven years – a duration that still has remnants in Europe in some countries, where students attended university for seven years, with a variation they could attend more than one university during their course. The four-year undergraduate degree, plus three years for a doctorate is also an echo of that distant past.

What colleges teach, the duration of their courses, their admission procedures and their examination systems should be the business of the colleges and not those of outside interests, especially not unions or employers, who have a real interest in restrictions of the supply of their members’ or in substantial increases in the supply of employees with skills sets that match their needs. Both these centres of influence may hold and express a point of view but that is how it should be treated –as a point of view.

University faculty also have restrictive practice, though it is not often presented as such. It’s called tenure which restricts supply by filling jobs for life and thus keeping out newcomers. It’s what self-interested people do that has malign affects of labour markets – a case against the oft misquoted and misapplied metaphor of ‘an invisible hand’.

Now protectionists and practitioners of restrictive practice to raise the price of their labour and charge more than they may be worth know that their case would be bolstered by claiming that their actions are for the benefit of society and hiding the plain fact that it has malign consequences of others. That’s why they love Adam Smith, Chicago version, not the man from Kirkcaldy. Smith was never fooled by them. Neither should you.

Friday, April 13, 2007

Adam Smith (Chicago version) and Climate Change

Curtis Brainard writing in CJR CJRDaily (“real time media criticism from the Columbia Journalism Review”), under the heading of “Emissions Markets: The Good, The Bad, The Ugly” makes a case here for using government regulations and proscriptions to tackle pollution problems associated with what is now called ‘global warming’ (a sometimes hysterical over-reaction by politicians to a perceived, but not yet understood phenomenon – a consensus is not the same as understanding it - of which I have no firm views and remain a sceptic in the Humean sense).

Now, Curtis Brainard has a case that is worth listening to about whether the remedies for the perceived phenomenon should be tackled by markets or by governments, or by some combination of both (of course, there may be nothing we can do about global climates), and I would like him and others to argue the case.

But I object to his dragging in false ascriptions to Adam Smith as part of his case. I found five obvious errors about Adam Smith in this paragraph:

Free-market economists going back to Adam Smith have lauded capitalism because it doesn't wait for anybody, especially politicians and lawyers, to figure out how a market works most efficiently. An "invisible hand" pushes self-interested consumers to make decisions that benefit society as a whole. It's like magic, but actually this libertarian construct characterizes much of how emerging emissions trading markets operate. These markets are either "compliant," meaning that businesses must meet certain emissions reductions under the Kyoto Protocol, for example, or "voluntary," meaning that individuals and businesses pay for emissions-reducing technology without any obligation to do so. It's not exactly the laissez-faire world that Smith envisioned, but the now-lucrative trade in greenhouse gas credits and offsets has evolved largely without government standards and protocols.”

Re-casting the paragraph as Curtis Brainard should have written it, consistent with leaving Adam Smith out, it could have read like this:

“Free-market economists going back to the early 20th century have lauded capitalism because it doesn't wait for anybody, especially politicians and lawyers, to figure out how a market works most efficiently. Self-interested consumers make decisions that may benefit society as a whole, but as often don’t. It's how people have always behaved and it is a libertarian construct to characterize the emerging emissions trading markets as necessarily operating benignly. These markets are either "compliant," meaning that businesses must meet certain emissions reductions under the Kyoto Protocol, for example, or "voluntary," meaning that individuals and businesses pay for emissions-reducing technology without any obligation to do so. It's not exactly the laissez-faire world that Chicago economists have envisioned, but the now-lucrative trade in greenhouse gas credits and offsets has evolved largely without government standards and protocols.”

Of course, Curtis Brainard, a very clear writer indeed, would turn my suggested prose into finer a reading style, but my stilted version of his paragraph about Adam Smith, invisible body parts, and laissez-faire, is accurate, whereas as his golden touch is inaccurate. And among journalists, a penchant for absolute accuracy is a prime virtue. I hope he practices it in future when referring to Adam Smith and his views.

Wednesday, April 11, 2007

Mountain Men Should Stick to the Plain Facts

Some articles on Adam Smith in the media start off on the wrong foot, and only get worse. It is not the fault of their authors at all (they seem to be sincere and, probably, are nice people) but it is the fault of those teachers who portray Adam Smith as a caricature of what he was like and for what he articulated in the 18th century on moral philosophy and the causes of wealth creation.

Take this example for example. Gary Demlack writing in the Asheville Citizen Times – ‘voice of the mountains’ in North Carolina (surely it means ‘voice of people in the mountains’?) on 10 April, writes:

In 1776 Adam Smith published “An Inquiry into the Nature and Causes of the Wealth of Nations.” In this book, Smith outlined the basic tenets of modern capitalism.".

Smith wrote about the basic tenets of markets, not capitalism, a phenomenon of which he (nor anybody else in mid-18th century) knew anything, it being a phenomenon from the 19th century.

Wealth, he said, is created when each individual strives to become wealthy “intending his own gain.” By exchanging his products or services with other like-minded people who are focused on their self-interest, wealth is created and the public interest is advanced.”

Gary Demlack confuses ‘wealth’ with money when he fixes on ‘becoming wealthy’, a view that Smith criticised the mercantile-minded governments for confusing (Book IV, Wealth Of Nations). Smithian wealth was about the annual production of the ‘land and labour’ or specifically the ‘necessaries, conveniences and amusements of life’. Money in itself was not wealth; it was the means to purchase real wealth and had no intrinsic value in itself.

Gary Demlach continues:

“This process, he [Smith] said, is “led by an invisible hand to promote an end which was not part of his intention” (that is — to benefit society). Smith concludes: “By pursuing his own interest he frequently promotes that of [the] society more effectually than when he really intends to promote it. I have never known much good done by those who affected [to] trade for the public[k] good.” [typos corrected in square brackets: WN IV.ii9: p 456].

Smith was not referring to the creation of wealth or of markets. He was referring to the motive of security among individuals, who preferred the domestic industry to foreign trade because of the risks of losing their cargoes at sea (wind and waves, piracy] and fraud committed by foreign traders, and dubious legal decisions in cases of disputes.

The interest of society was to maximise domestic industry and its output of real wealth; if local traders invested more locally, instead of sending some abroad, then domestic industry would produce a higher annual output of goods and services. The whole is the arithmetical sum of the constituent parts. That is all this paragraph means. For my comments on the metaphor of an invisible hand, see scores of my posts in the archives.

Gary Demlack continues:

For the “Invisible Hand” to function effectively, Smith noted there had to be mechanisms in place, such as strong property rights and protection against theft and misrepresentation. Being devoutly religious, he said that moral norms are necessary for orderly exchanges to proceed: enforceable contracts, good access to information about products and services and enforceable laws.”

Yes, success in markets depends on ‘strong property rights’ and ‘justice’.
But what’s this about Smith being ‘devoutly religious’? His mother certainly was and so were most people in Scotland in the mid-18th century, but the evidence for Adam Smith being religious, even ‘devoutly’, is ambiguous at the very best, and doubtful at the very least.

His friendship with David Hume, a philosopher accused by many devout Christians of being an atheist and treated as a danger to society. Hume’s proven, historic, status of being Britain’s most talented philosopher, as well as a humanist and gentle person who would decorate any society with his manners, kindness to all, and a model of what some Christians claimed to aspire for themselves while denying it in all others not of their faith, was in Smith’s mind an outrageous slur on Hume and those who knew him well (including many devout Christians who remembered that Christ walked with sinners and were glad they knew David Hume as a friend).
Smith avoided the zealots – a Christian equivalent of today’s Taliban – and sought not to provoke them. He conformed to the rules but in his writings he wrote in code that showed his lack of faith in Church doctrine.

Gary Demlack ends with:

Aversion to subsidies
Smith disliked subsidies of any kind because it meant benefiting one person at the expense of another. As practiced today, Adam Smith would not look favorably upon tax breaks and other laws passed to benefit corporations who donate to political campaigns

Yes, a view of Smith that is correct. However, this extract and most of those above could well be re-written to take references to Adam Smith away and stick to contemporary statements that justify Gary’s views. He does not need to seek endorsements for his views no doubt sincere on capitalism, about corporations or the limitations of subsidies from inappropriate presentations of the views of Adam Smith.

My advice to Gary Demlack is to keep writing trenchant and articulate articles from the Mountains on your preferred economy, but do so on their own merits and leave Adam Smith out of it. He deserves better.

And for teachers of economics who influence media authors in later years, my advice is read Adam Smith and stop repeating the mantras you learned from your teachers on the Chicago University conveyor belt about Homo economicus, wholly fabricated concepts of human behaviour that had nothing whatsoever to do with the Adam Smith born in Kirkcaldy in 1723 and who wrote Wealth Of Nations and Moral Sentiments.

Tuesday, April 10, 2007

What Dick Whittington's Cat Teaches Us About Royal Chartered Trading Companies

James Bond, Michigan writes a Blog with the intriguing title: Why ‘Conservatives’ Can’t Do Foreign Policy and adds a subtitle: ‘My first and Third Posts distinguish ‘conservatives’ from pseudo-conservatives; my fourth post explains why pseudo-conservatives can’t do foreign policy’ which doubly intrigues but finding his first, third and fourth posts defeats all but the most intrepid reader and the quotation marks remain a mystery.

However, here’s an extract:

I have noticed that writers like Friedrich von Hayek and Milton Friedman LOVE to denounce what they don't like in government by using the terms "collectivism" or "collectivization". I frankly can't recall reading how they define the term however. I would include the huge centralization achieved by the modern corporation as a prime example of modern collectivization. If they fail to do so I believe I'd consider that an inconsistency. Although people on the right in America LOVE to idolize Adam Smith it is a little known fact that Adam Smith was seriously concerned about corporations if not opposed to their being too frequently chartered. Why? For one rather obvious reason Smith was thoroughly serious about real competition and felt that owners of businesses should be fully responsible for their business practices and this was most likely to occur if they had something approximating face-to-face relationships with their customers as was the case with single owners and partnerships. Moreover, Smith could see the likelihood that corporations might wield disproportionate power over government and thus distort the political process. Any American who doesn't see that that has occurred in the United States really must have their head in the sand or be a died in the wool pro-corporate ideologue. (For Adam Smith's attitudes toward corporations, he called them "joint stock companies", see the 2003 Bantam Classics edition and read Alan Krueger's Introduction.)

Hayek and Friedman can answer for themselves through their intellectual heirs. James Bond must answer for himself.

Adam Smith did not write in a vacuum; he wrote in the mid-18th century when ‘merchants and manufacturers’ in the main employed of between one and twenty people.

The most common form of ‘company’ structure was the ‘co-partnery’, in which the principal(s) shared the risks of their enterprise up to the full value of everything they owned. If it failed, they went down from what they had to utter destitution. Their liabilities were total.

The 17th century's children's story about 'Dick Whittington and his Cat' illustrates how he made a fortune, and became Mayor of London from his share in a ship's cargo en route for Siam. His cat killed the rats in the King of Siam's palace and he expressed his gratitude with cases of precious stones for Dick.

Foreign trade introduced a variation in which ‘adventurers’ combined their cargoes on a ship for a single voyage. If the ship was lost to the ‘wind and the waves’, to piracy, fraud or disease, or the voyage failed to make a profit, each venturer was liable only for his own cargo. When the voyage ended successfully, the partnership and their liabilities ended. Each new voyage began with different combinations of cargoes. Without such arrangements, trade was more risky and slower growing.

The joint stock company was a variation that allowed individuals to buy shares which limited their liabilities to the value of their shares; if the company failed, they lost their share capital but had no further liabilities. The managers of a joint stock company need not be shareholders and the company was governed by a board of Governors. These joint-stock companies were set up to conduct large scale ventures abroad and because of their political importance, their immense investments and the associated risks, they sought and were awarded, if politically expedient, Royal Charters granting them territorial monopolies, renewable at the King’s pleasure. The British American colonies were all established by Royal Charters.

Royal Charters were historical instruments of state. They had been offered to towns during the feudal centuries bringing them within the protection of the monarch against the local feudal landlords, where they collected taxes from town people and local business on behalf of the sovereign, and as such were ‘incorporated’. They still exist as an instrument of state today; all institutions in Britain wishing to use the title ‘university’ must seek and be awarded a Royal Charter to do so (hence, no ‘degree-mills’ operate in the UK).

Smith severely criticised the conduct of the monopoly joint-stock Royal Chartered corporations of his day, in particular the East India Company. He criticised their behaviour, their monopoly status, and their governance, pulling no punches whatsoever. His language is sometimes transposed to modern international companies, which are subject to strict accounting and governance rules, and face international competition on a scale totally absent in the 18th century. The full glare of publicity today exposes the conduct of the modern joint stock companies, literally within minutes or hours, whereas the sea communications between Britain and India required an 18-month round trip to bring limited news of what the East India Company was doing.

Without being naïve, I think we should recognise that there are great differences between the international Royal Chartered Trading Companies that Smith wrote about and the modern international corporations. Smith’s critique of them may not apply to them and care should be taken in doing so. This does not mean that people behave differently today compared to the past; there are just more restraints on behaviour today than there were in the past.

I am still no wiser about 'conservatives' and foreign policy, but domestic US politics are not really my business. The 18th century is, however.

Monday, April 09, 2007

Show Us Your Arguments, Not Tittle-Tattle

The Conservative Party has never been comfortable with the British Chancellor, Gordon Brown proclaiming that Adam Smith would support New Labour if he were alive today and also his writing a foreword to a book by Oxford Professor Ian MacLean, titled, provocatively, ‘Adam Smith, Radical and Egalitarian: an interpretation for the 21st century’, (Edinburgh University Press).

John Redwood, an MP on the rightwing of the Conservative Party, in his Blog, entitled, unimaginatively, John Redwoods’ Diary (‘Incisive and topical campaigns and commentary on today’s issues and tomorrow’s problems’) has been teasing Gordon Brown in short snippets about his self-proclaimed admiration of Adam Smith as a closet socialist.

Today he asks: “When did Gordon Brown learn to admire Adam Smith?”:

“We now have Adam Smith on the banknotes, and have heard Gordon Brown praise his fellow countryman as a great economist. I agree.
Strange then, that in his book of 1989 Gordon Brown wrote about the “sinister insights of the historical Adam Smith”.

I wonder when he changed his mind and why?”

The book in question is: “Where There Is Greed: Margaret Thatcher and the Betrayal of Britain’s Future” by Gordon Brown, Mainstream Publishing, Edinburgh, 1989 (available on for £4, plus shipping).

I would prefer that John Redwood examined Gordon Brown’s claims in detail than make, albeit, amusing remarks about Brown’s welcome journey from anti-Smithian apparatchik in the Labour Party to pro-Smithian apparatchik in New Labour and soon to be, probably, Prime Minister.

There is a case to answer from both parties about their mutually conflicting claims and counter-claims to have inherited the mantle of Adam Smith. I would be interested in Redwood’s explanations of why he agrees with Brown that Smith was ‘a great economist’ (I have read Gordon Brown’s claims for his case and I am not overly impressed).

[Read John Redwood at:]

Sunday, April 08, 2007

Yet More on Themes of the Error About the ‘Quantity of Work’

I can’t see why whoever advised the Bank of England arrives at the conclusion that the division of labour was about increasing the ‘great quantity of work’ and not about increasing labour productivity, and thereby a greater amount of output per unit of input, be it counted in units of labour or in costs.

That has got me thinking about the proposition printed on the £20 note, which I have commented upon on Lost Legacy for the past few days. The more I look at it the more inane the notion becomes.

I commented yesterday on Smith’s discussion of the statement in Chapter 1, Book I of Wealth Of Nations. Any thinking of Smith’s perspectives on society leads fairly quickly to his practice of taking the ‘long view’ of human history, which led me as quickly to think of ‘work’ and what role purposeful activity – which is what we mean by work – played in social evolution.

Animals work; they search for mates, they search for suitable places to nest, they search for food and they apply themselves (work) to achieve all these tasks. In between they ‘rest’ (‘don’t work’), amuse themselves and their kind, and play, including in the ‘courting’ game. The film, the ‘March of the Penguins’, shows considerable effort (work) put in by adult penguins to feed, march 70 miles into the interior for mating, guarding the precious eggs, and marching backwards and forwards. Much of the time they are also shuffling about in the midst of blizzards to keep themselves and the eggs warm.

Any examination of the lives of chimpanzees (from which common stock the hominids descended, and from a species of them, Homo sapiens descended) provides fairly detailed ‘diaries’ of their life-work balances. Gathering is a daily task for adults – females feed themselves and the children; males feed themselves. These activities constitutes ‘work’. A fair amount of discretionary time is spent in ‘not-working’, and in ‘grooming’, a sort of activity in-between work and not-work.

To the extent that grooming is discretionary, in the sense that individual chimps willingly groom some others, but not all, we have evidence of the emergence of reciprocation (what I have called the ‘quasi-bargain’ in my as yet unpublished manuscript of the ‘Pre-History of the Deal’). The evolution of reciprocation is closely related to the evolution of what Smith called the ‘propensity to truck, barter, and exchange’ in the human species, which was a prelude to the division of labour (Wealth Of Nations I.ii.1-4: pp25-29).

To suggest that the division of labour’s most significant outcome is the ‘quantity of work’, as is stated on the £20 Bank of England note, is questionable. A growing population of any species adds to the ‘quantity of work’, if only from more members of the species living within their ‘life-work’ balance, ‘increases the quantity of work’ done by that species, greatly if population growth is rapid, which is a conclusion empty of significance; it is the necessary arithmetic outcome of the laws of numbers.

A tribe of human hunters that finds food resources susceptible to their existing technology (inclusive of social organisation) will increase its population by reducing child mortality and increasing longevity. Growing populations are associated with increases in the ‘quantity of work’ – more people means more work and more ‘non-work’ undertaken because more people are doing both. If resources are depleted, more work must be undertaken to search and catch dwindling food resources. If somebody invents better tools, or improves current technologies, this too increases the ‘quantity of work’ on one (unimportant level) and it increases the quality of the work undertaken (the important level).

For long periods of a million years or so, stone technologies ‘stood still’ among the hominids. With the appearance of humans the progress in manufactured technologies and progress in farming techniques raised the ‘quantity of work’, but by far the greatest effect of changing technologies and associated social organisation (Smith’s ‘Ages of Man’ – hunting, shepherding, farming and commerce) has been the ‘great increase in the productivity of work’, or, if I may say so, ‘the great increase in the quality of work’, which is in consequence of, because it arises from, the division of labour.

Specialisation adds to the quantity of work if it increases population survival, including when tribes ‘split’ into different groups and separate, as they did for thousands of years after the exodus of some human from Africa 40,000 years ago, until the last great migration of humans from 11,000 years ago across the land bridge into the Americas.

Increases in the quantity of work have continued throughout human history. Slavery adds to the quantity of work (a most unsuitable justification for it!), but, as Smith pointed out, it reduces the quality of the work undertaken, and the life-spans of those whipped into submission.

Much of these quantitative increases and decreases from changing population levels have not been a result of changes in the division of labour. From the fall of Rome in the 5th century, technology in farming remained fairly steady for a millennium, but population varied from the vagaries of, first, the war lords and allodial land ownership (crudely, you owned what you could hold against all comers), and later of ‘feudal tenures’, both of which required a division of labour in the formation of special armed bands of 'retainers', who were engaged in the 'unproductive' work of wars, skirmishes, raids and ambushes, sometimes local, occasionally ‘national’ for what were called ‘kingdoms’; the winners ‘crowned’ themselves king.

In this millennium, the quantity of ‘work’ was occasionally increased, but living standards remained at or below subsistence, and plagues wiped out whole swathes of population. When economies contracted, the quantity of work declined, especially of the productive kind that led to net growth.

With the revival of settled ‘kingdoms’, a slow and gradual, steady though small rise in populations, the reappearance of commerce, new insights into science, including applications in technology, food production rises to feed more people, at subsistence in per capita terms. The quantity of work increased, notably from the Elizabethan period onwards, with state induced support for certain easy to grow and harvest crops and other interventions (See Joan Thirsk, Economics Policy and Projects, 1978, Clarendon Press; W. Cunnigham, The Growth of English Industry and Commerce, [1892] 4 Vols. Cambridge University Press).

The long-run change was unprecedented historically, once it became qualitative in terms of labour productivity (not merely quantitative in which nothing really changes – China surpassed the world even then in quantitative terms in population size of a 100 million plus, and therefore the biggest in the world in the quantity of work undertaken by its people – it was also stagnant economically without significant changes in technology or organisation and, therefore, in its divisions of labour).

All these thoughts lead me to object to the selection of a quantitative indicator of the effect of the division of labour.

Saturday, April 07, 2007

More on the 'Quantity of Work'

The source of the Bank of England’s statement about the division of labour in manufacturing, namely that ‘the great increase in the quantity of work that results’, is from a discussion by Smith (WN I.i.5: p 17) about a consequence of the vast increase in productivity that results from the three circumstances that enable that productivity to take place.

Specifically, these circumstances are: the ‘increase in the dexterity’ of each workman - he is undertaking a simple task or operation instead of many; the saving of time’ commonly lost between moving from one task to another through all the tasks he has to do to complete all the operations necessary for each unit of output; and the ‘invention of a great number of machines which facilitate and abridge labour’. The unprecedented process of rapid invention got under way within a few decades of Wealth Of Nations.

The increase in ‘the quantity of work’ is not, however, the purpose of the division of labour. The three circumstances explain what the division of labour does, not what it achieves – they are caused by the division of labour, necessarily, but are not the objective of employing such work arrangements.

The division of labour achieves a massive increase in productivity and continues to do so well beyond its first steps. As the manufacturing process spreads and deepens, it also attracts innovation and technology. Smith draws attention to the numbers of persons labouring in separate sectors, all over the country, and abroad, who combine in markets to produce a common labourer’s woollen coat.

Markets through the prices of their outputs, which become inputs into the woollen coat, co-ordinate thousands of people, most of who, if not all, do not know (nor need to know) anybody beyond the immediate ones they transact with in traded exchanges. Yet the total of their transaction chains co-ordinate the work of all the multiple labours of the hundreds of people that is necessary to produce millions of simple woollen coats. Extend that market-co-ordinated process across all the products in a fairly primitive commercial economy, as Britain was in the mid-18th century (it was still largely an agricultural society and was to remain so well into the late 19th-century), and you define what a society looked like where the division of labour was more complex than it ever had been in the previous millennia of human history. It became more complex on an unimaginable scale by the 21st century.

And it became yet more complex because of the impact of the innovation and invention of power-driven machinery, and later automation, where fewer and fewer quantities of work were needed to produce units of output. I have already quoted the figures (from Professor Mike Munger’s research) that showed the decline in the number of pin factories from 1776 to only 2 in 1960 (1 per cent of the 18th-century pin making work force), and the increase in the number of pins at 48,000 a day per factory to millions of pins per shift in about 100 years. The division of labour ‘compressed’, if I may say so, the work of a notional 48,000 pin makers working at the rate of one pin per day, into the work of 10 labourers in each of hundreds of factories, into only two factories by the mid-20th century.

Similar histories can be shown in other manufactured items, especially now that Japan, China and India have joined the global manufacturing business.

The division of labour is about raising the productivity of labour and, as technology is applied (automation), also economising on the numbers of labourers, reducing prices per unit (inclusive of substantial quality improvements), and raising the real incomes of consumers. This happens in every mass consumer product, and in the hardware (and now, software) of the industries that produce them.

How to Quote Adam Smith Accurately - for a change

Sometimes, people quote Adam Smith without reading what he actually wrote too carefully and which I usually criticise on Lost Legacy. Occasionally, someone quotes Adam Smith and makes a careful point about the (usually) well-worn use of a quotation that adds a bit of insight missed by more careless readers, because the quotation is used so regularly even the regular readers don’t read it properly.

One such example of the latter is in a Blog of which I know nothing, Palosverdes blog (‘observations on conservatism, politics, educations, cosmology, astrobiology, evolution and the environment’), a most intimidating title, written by Bill Lama (in Califronia – where else?), and posted on 6 April.

The post is about Thomas Friedman, entitled: “Is Thomas Friedman a Flathead?", an allusion that baffles me, having seen it – the ‘flathead’ bit’ – around but not knowing whether it is an insult or a sarcastic description (or both). The article itself is about politics of that confusing kind for readers on this side of the Atlantic when it uses labels like ‘neo-liberal’ or ‘neo-con’, which I am sure mean different things in Scotland, but what I am not so sure about what particularly.

However, I was interested in a small bit of the attack on Thomas Friedman, of whom I know little, except that he writes for The New York Times and I have commented on his articles a couple of times (as recent as yesterday, I think). Here’s the paragraph that caught my eye:

“Globalization clearly makes the world smaller. It may also make it richer. It does not necessarily make it more peaceful or more liberal. Adam Smith, the 18th century moral philosopher and pioneering political economist, was much closer to the truth when he wrote “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice.” Note that it’s not all about economics; peace and justice are required as well for prosperity to reign.”

The last sentence is the important bit that most users of the quotation completely miss. They focus of the ‘easy taxes’ (a most important condition for prosperity that most governments ignore or, worse, defy).

It is not all about economics. With Adam Smith it never was solely about economics. He taught in his moral philosophy classes ethics, history, jurisprudence, natural and perfect liberty, and ‘police’, this last, the 18th-century term for the provision of adequate supplies of the ‘necessities, convenience, and amusements of life’. He had a holistic understanding of society.

Peace and justice were essential ingredients of Smith’s view of the appropriate mix of policies conducive to ‘progress towards opulence’. The above quotation is from his 1755 paper (now lost) in which he defends himself aginst charges of plagiarism (see the Appendix in my Adam Smith's Lost Legacy, Palgrave, 2005). He also added a proviso, when dealing with extremist demands for perfection, that if it required perfect liberty for any progress to be made then there were precious few examples of this condition being met anywhere – in fact none that he could think of, and he concluded that if perfection was necessary no country in history would ever have progressed at all, which would be in flat contradiction of the evidence that progress had been made, despite the absence of perfect liberty at all times.

Smith’s conclusion was that approximations of peace and justice, and economic freedoms, were sufficient and probably were the best that could be expected. That is why Smith took the long view, not the impatient short-term anxiety making view common on the extremes of public discourse. Today we find this short-termism in the shrill demands of the wilder fringes of libertarianism, absolutist free marketers, and their ilk, all of whom are destined to be disappointed by the imperfect trend of events.

[Read the whole article if terms like ‘neo-liberal' mean anything to you at:]

Friday, April 06, 2007

Some Useful Historical Stats on the Division of Labour

Some interesting facts and stats about the division of labour from Smith’s day is posted by Professor Mike Munger at the Division of Labour Blog and you should read and file them.

He has done some sterling work on the subject – I used some of his stats on my Lost Legacy postings on the Bank of England £20 note fiasco (scroll down this week’s entries). They will also support lectures on Adam Smith and his presentation of the division of labour.

Read Mike Munger’s posting at: Division of Labour [] for 6 April 2007

Testing for Comparative Advantage and Economics or Sociology?

When I taught undergraduate economics (1970 to the mid-80's)there was a regular question in tutorial exercises in Economics 101 concerning the theory of comparative advantage (attributed to David Ricardo). It was used to sort out the undergraduates among those who should be encouraged to go on to Economics 102 and those who should be encouraged to transfer to sociology.

It still seems to be a problem among economists working in the media.

In the "Isle of Man today", Peter Sharkey publishes a column called “PETER SHARKEY'S INVESTORS' DIARY" which includes the following paragraphs:

"ALTHOUGH Adam Smith is rightly heralded as the father of modern economic thinking, it was his neoclassical successor, David Ricardo, who added a crucial international element to economic thought by developing his law of comparative advantage.

Ricardo realised that if countries specialised in producing certain goods and services, they could trade with each other by exploiting their respective comparative economic advantages.

To simplify matters, Ricardo chose to measure all costs in terms of labour, a gauge which remains relevant today, not just in terms of how cheap or expensive labour is in different parts of the world, but how productive it is.

According to a paper published by the World Economic Forum (WEF) recently, true competitiveness is measured by productivity, a conclusion which suggests that Ricardo's theory still holds true.

Greater productivity not only increases output, but it creates time for people to explore other opportunities or even to enjoy their leisure time.

It follows that productivity is a function of (among other things) technological improvement, more efficient capital goods and, critically, a better-trained workforce.

For the last century, these factors have led to a halving of average working hours, while per capita gross national product has risen six-fold.

Greater productivity results in higher wages, better returns on capital and a higher standard of living. A productive economy, therefore, is a competitive one and vice versa."

It isn’t just that comparative advantage promotes specialization (because absolute advantage also promotes specialization). It is that a country can gain even if it is better at producing all traded goods than its partner; if it specializes in producing those goods that it has a high comparative advantage in and exchanges its output for goods produced by a partner over which it has a lower but positive comparative advantage than the partner, they are both still better off.

This did not just apply to trade between two countries, as implied in Peter Sharkey’s observation; it also applies in the general case of two employees dividing up the work as illustrated below:

A professor may be a better teacher and a better administrator of classes than her assistant, but by her specializing in teaching and the assistant specializing in administrating the classes, both become better off.

Another example could be from football. John may be both a better goal scorer and a better defender than Fred comparing their comparative advantage. But if John is comparatively better at goal scoring than defending, and better at both goal scoring and defending than Fred, it would still make sense to have John specialize in goal scoring and have Fred specialize in defending, for the team to do well in results, compared to John trying to both score goals and defend. He should specialize in what he is best at. Fred should specialize in defending if John is far superior in goal scoring, whereas if Fred, while well short of John’s skill at goal scoring, is only marginally worse than John at defending, he should become a defender and not a goal scorer.

With John working fulltime on scoring goals and Fred working fulltime on defending, even though marginally worse than John at defending, both players can be expected to do better than dividing their time between the two tasks.

The distinction was not only about the ‘international dimension’ that Ricardo allegedly ‘introduced’.

The distinction between Adam Smith’s presentation of absolute advantage (he used the example of growing grapes in hothouses in Scotland to make wine instead of buying it from Europe) and Ricardo’s introduction of comparative advantage (he used the examples of trading port from Portugal for wool from England) was not just the ‘international dimension’; it was the counter-intuitive principle embedded in comparative advantage.

[Read Peter Sharkey’s article at:]

Thursday, April 05, 2007

More on the Division of Labour and the Quantity of Work

Following up on my post yesterday, “What a Shameful Error by the Bank of England on the new £20 note!” (4 April) about the £20 note and the Bank of England’s error in ascribing to ‘the great increase in the quantity of work’ as a virtue of the division of labour, today I came across Mike Munger of Duke University and EconTalk host Russ Roberts (at: talk about specialization, the role of technology in aiding specialization and how the division of labor creates wealth (a podcast – well worth listening to for an hour).

Nearer the end of their discussion, Mike Munger mentions some research he did that tracked how pin making factories in Britain first proliferated around 1776 (we know they were working similarly in France from Diderot’s 22-volume Encyclopaedia because this was an example Smith drew upon too), but by 1820 the total number of pin factories operating similar divisions of labour had reduced to 11 in Gloucester and 20 in Birmingham or 22 in total in England (he didn’t say if this geographical entity included Scotland).

By 1940 the total number of pin factories was 12 and twenty years later in 1960 it was down to 2. Yet output was now in the millions of pins per day and crucially, the total workforce engaged in the automated plants making pins was 1 per cent of the total estimated for the previous century.

Now that is some change and interesting too. The division of labour raises output per worker and, with continual technical progress in power driven machinery that economises on labour, the number employed shrinks to a fraction of those required when the division of labour gets under way. On this basis the error of the Bank of England £20 notes is compounded, because if there was an attempt to foist the lame excuse that they meant by making work that instead of one man making pins there was now ten; the history of pin making was quite the reverse. And the researchers at the Bank of England should know this history too.

The division of labour adds to productivity, not work. It expands the annual output of the ‘necessities, conveniences and amusements of life’, which is what Smith meant by wealth. It also tackles the age-hold Marxist obsession with ‘alienation’ (which was a more an imagined mental state of the intellectuals who didn’t work for a living than a reality).

Rising wealth means more leisure and an expansion of ‘outside work’ interests, including manual labour. Smith played up the decline in intellectual interests of factory work to support his policy for universal education of all young people in Book V, not having mentioned it in Book I with the division of labour. He was making a case to convince people far removed from life in a pin factory, seeking their sympathy to persuade them to agree to an education system in England, similar to the one that already existed (imperfectly, to be sure) in Scotland.

I hope we are all now clear on the division of labour as a source of productivity to increase wealth, lower costs per unit and deliver 'necessities, conveniences and amusements' of life to the consumers. It was not about 'increasing the quantity of work'.

The Poorest and Their Children the Main Victims of Trade Boycotts

Fletch continues his articles at on ‘Reclaiming Adam Smith’ with parts 3 and 4 and also continues to be on target. This time he tackles arguments that Adam Smith “would never have condoned trade with countries that employed “child or slave labor”, showing that while Smith firmly denied that slave labour was efficient and was managed by some frightful examples of humanity, he did not advocate boycotts of trade as solutions to other problems, adding that trade boycotts do not work and often make the people affected – the poor of a society - worse off, but not the despised regime elite, in some cases, for a generation or more (South Africa, Cuba, North Korea), assuming the helpless children live through it, which child mortality often ensures they don’t, and the eventual gainers from political changes would have gained anyway from the political upheavals post-regime collapse or removal:

Fletch writes (no. 3 article):

“In the end, I would argue that the moral stance is to embrace free trade among free individuals, not merely in spite of, but, particularly in cases of those countries that have poorer wage systems, fewer worker protections and decidedly less free economies. This is because, if anything, history has demonstrated that this is the surest way to bring such oppressive systems to an end (a point I will elaborate on in my next column) and increase the general prosperity of all concerned.”

And adds in no 4. article:

“South Africa, a country whose Apartheid regime imposed a minimum wage for the express purpose of preserving jobs for the white minority at the expense of the native Zulu population, was not the target of full economic isolation. A number of companies, however, were pressured by “morally superior” liberal groups to cease operations there. The effect: even greater unemployment among the Zulus. Time and again, in country after country, liberals have demanded that US corporations divest themselves of “sweatshop” operations. The result: companies that had provided greater employment opportunities to an impoverished population, typically at wages higher than were the norm before their arrival, succumbed to the pressure and pulled up stakes, leaving greater unemployment and dimmer prospects in their wake.

The pattern isn’t simply repeated in the majority of cases; it is repeated in every case.”


“For that matter, look at China. From the end of World War II until the 1970s, China was isolated, closed off from international interaction and trade with much of the West, including the United States. Since opening up to international trade, the country has become ever more economically free. Where, at one time, the overwhelming majority of the country had been impoverished and subjected to socialist oppression, now agriculture is no longer collectivized, many of the state run operations have been privatized and the overall standard of living has increased dramatically.”

[Read more of this excellent series and bookmark it at:]