Tuesday, February 12, 2008

Andrew Rivkin Misunderstands Smithian Growth

Ronald Bailey writes in Reason Online (here):

Decrying the "Pursuit of Unnecessary Things" Are we overconsuming our way to doomsday?’ (12 February)

New York Times science reporter Andrew Revkin has written a provocative column, "The Endless Pursuit of Unnecessary Things," on his always interesting Dot Earth blog. The title is from a line attributed to Adam Smith: "An investment is by all right-minded people to be commended, because it brings comforts and necessities to the citizenry. But, if continued indefinitely, it will lead to the endless pursuit of unnecessary things." (I confess my usual sources of Smith arcana could not turn up this quotation anywhere online, but no matter, let's assume Smith wrote it.)

Ronald Bailey is right to be supicious of Andrew Rivkin's claimed source. I have already commented recently on Andrew Revkin and this ‘investment’ notion somewhere, so I will simply say that I do not recognize this phraseology as Adam Smith’s. If anybody can suggest a reference I would be obliged.

Adam Smith favoured investment in productive labour because this increased employment of poor labourers and allowed them to enjoy a share of opulence. Their employment also created revenue and out of the net profits more employment could be initiated. He regarded this as a social good, whereas spending revenue on prodigal living did not replace the capital used in supplying the wastrels with frivolous consumption.

Andrew Rivkin is saying something quite different and putting his words into Adam Smith’s Wealth Of Nations and misses the point of Smithian growth theory.


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