Wednesday, April 02, 2008

Basic Errors About the Role of Adam Smith

Michael Keough writes (1 April) in The Daily Colonial (Washington DC) (HERE):

‘1776: A Very Good Year’

The second principle, freedom of markets, also found a genesis in the year 1776. Adam Smith, an English thinker of the Enlightenment, published his work, "An Inquiry into the Nature and Causes of the Wealth of Nations." The book has become known as the backbone of modern capitalism and sets out a number of important principles. Smith advocated a division of labor in society, increasing its efficiency as each member became highly productive at a single skill or process. He was very critical of the mercantilist system that Europe had operated on for centuries and advocated free trade between the nations of Europe and the world by writing against artificial barriers and tariffs. Most importantly, Smith knew that individual rights, especially for the ownership of property, were vital to the growth and survival of an economy. An economy would only prosper if each of its members could pursue their own self interests through property and contracts with others.”

Yes, an easy target but it illustrates something important about assessing the impact of philosophers on the underlying realities of an economy and its institutions.

First, dispose of the obvious error that is not my main point: Adam Smithan English thinker of the Enlightenment’…! Not uncommon in media comments, but Adam Smith was not ‘English’; he was Scottish.

‘England is not a synonym for the United Kingdom of Great Britain and Northern Ireland (any more than ‘Holland’ is a synonym for The Netherlands).

But let us look closer at ‘Smith advocated a division of labor’. He was quite clear about his role as a philosopher: to ‘do nothing, but observe everything’.

He observed, as he states many had done before him, that the division of labour raised the productivity of labour and was of long standing in its effects from hunting societies through to ‘modern’ societies based on commerce, agriculture and pasturage. In other words, the division of labour did not need to be ‘advocated’ by Adam Smith or anybody else. It was a natural phenomenon and not something that needed to be ‘advocated’ or ‘campaigned’ for.

This is a common enough unintentional error and not only among journalists, but among academics too. In relation to Adam Smith this often takes the form of ‘Adam Smith invented capitalism’, or ‘since Adam Smith the world changed forever’, or words like them. Such forms of unconscious ‘thinking’ are a nonsense.

Adam Smith observed, analysed what he saw or read about, and from which he published his findings.

To be brutal, and without detracting from my admiration for him and his writings, if Adam Smith had been ‘stolen by gypsies’ (an anecdote without verification of when he was 4-years old), or had died from his illness at Oxford University in 1744, or had been killed while traveling to and from London, or while in France, or he had only written Moral Sentiments and Wealth Of Nations bu not published them and they were among the papers he had burned just before he had died, the world would have continued without him and followed more or less the same course in the findamentalchanges then taking place.

It is the arrogance of the ‘man of system’ that persuades you that you can alter history by your actions, in short, moving from ‘observing and reporting’ to ‘changing’ society by your dictates (‘voices in the night’, ‘long dead scribblers’, ‘Damascene journeys’, and such like, including Marx and Engels.

‘An economy would only prosper if each of its members could pursue their own self interests through property and contracts with other’ is rejected by Adam Smith in Wealth Of Nations:

If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered.’ (WN IV.ix.28: p 674)

This is so obvious a proposition that, in words that Adam Smith often used, ‘no evidence is needed to justify it.


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