Tuesday, August 12, 2008

On the Infringement of Adam Smith's Natural Rights to his Reputation

Lost Legacy has argued many times that there is something wrong with modern economics (particularly with its ‘neo-classical’ version) and it has made occasional swipes at what are called ‘classical economics’ (Malthus, Ricardo, Mill, Marx) because of the common inclusion of Adam Smith in among them.

So a thoughtful essay on “The German antidote to mainstream economics” by Angus Sibley, an actuary and former member of the London Stock Exchange and a specialist in bonds, is a welcome contribution to the on-going (and given the dominance of modern economics, probably a never-ending debate).

It’s published in Enerpub (‘energy publisher’):

Those German economists were practical and humane. They were not much interested in theories; they did not see economics as a science like astronomy, in which the behaviour of stars and planets can be predicted with the help of complex mathematics. They thought it more akin to psychology; economics, after all, is about human behaviour. In fact, they deliberately reacted against the mechanistic economics of the 'classical' (Adam Smith) school, the basis of modern orthodoxy.”

“…Western economists have for many years had the bad habit of setting up mathematical theories describing how economies work, then arrogantly asserting that these theories are valid universally, at all times and in all places. Thus they feel justified in going out into the wide world and telling everyone from Russians to Africans or Latin Americans how to run their economies. The Germans took a different approach. They studied history to see what actually happened in the economies of various countries and cultures. That is why they are known as the Historical School; they preferred historical fact to pseudo-scientific theory.”

“…Mainstream economics does not encourage us to behave like good neighbours; indeed, as you will have noticed from Hayek's comment above, it even does the exact opposite. It exhorts us to spend our lives trying to get the better of each other. It is obsessively individualistic; it asserts that we cannot have a successful economy unless everyone struggles, independently and single-mindedly and without regard for the public good, for his own greatest advantage; unless no-one admits that he depends upon the goodwill of others and has a corresponding obligation to show goodwill towards other people.”

“Self-reliance is the watchword; as if any human being could ever be entirely self-reliant; or would, as a normal and reasonable person, wish to be so.”

My extracts do not do Angus Sibley’s article justice. So read it in full HERE:

I offer some criticism of the article in respect of its treatment of Adam Smith:

In fact, they deliberately reacted against the mechanistic economics of the 'classical' (Adam Smith) school, the basis of modern orthodoxy.”

There is little mechanistic in Adam Smith. He was not a theorist of equilibrium. He was a moral philosopher, not a classical economist, and is in no way in close affinity with Ricardo, etc., and certainly not remotely close to modern economists and the reduction of human relationships in society to mathematics(though he was a competent 18th-century mathematician, as it happens).

Smith took a completely historical approach to society – he looked ‘backwards’ (as Sam Fleischacker put it) to understand how society evolved from its hunting past (he didn’t know about the role of female gatherers – and nor did anybody else) through the four ‘Ages’ of subsistence – hunting, shepherding, farming and commerce (Lectures in Jurisprudence, 1762-64 and Wealth Of Nations).

His books, Moral Sentiments and Wealth Of Nations are steeped in the historical approach. For example in his histories of astronomy, languages, theatre, poetry, song and dance, moral philosophy, ‘natural religion’, ethics, money, feudal rules, jurisprudence, war-fare, trade policies, living standards from Roman times, taxation, voyages of ‘discovery’, civil government, land rents, values of gold, silver, general prices, progress of opulence in different nations, agriculture since the fall of Rome, of cities and commerce, of mercantile political economy, treaties and colonies and public expenditures and taxation.

These are just a top-level list of historical themes from Smith the political economist. Together, Smith’s works constitute a veritable tour de force of the historical core of his thinking, hardly any of which touches the modern epigones of his political economy, to the point at which I have described their versions as gross distortions of his work – it is, and so far remains - a lost legacy.

I am not yet familiar with the writings of Gustav von Schmoller (1838 - 1917), though I know of the work of his colleague, Adolph Wagner, from teaching a class in public finance at the University of Strathclyde in 1976-81. If Angus Sibley is to be accurate, as well as fair, he should review the basis under which Smith is associated with modern economics by the self-certification of modern economists who do not have any real acquaintance with his works – many of whom confess to not having read him, ‘finding too many diversions’ in it to history for their liking – but they nevertheless impose their narrow imaginary economics on luckless people in his name.

It looks like Angus Sibley has bought into the theft of Adam Smith’s legacy. I hope he realises this and corrects this view at an early opportunity, bearing in mind that Smith was greatly influenced by Samuel von Pufendorf’s natural rights theory, in which he has a ‘sacred’ ‘right to his 'reputation’ and that he is ‘injured’ by imputing to him such disreputable ideas by false association.

Self-reliance is the watchword; as if any human being could ever be entirely self-reliant; or would, as a normal and reasonable person, wish to be so.”

Nobody who is remotely acquainted with Smith’s Moral Sentiments would attribute such a view to him. ‘Self-reliance’ was a condition of our forebears, and they suffered from dreadful deprivations as a result compared to the living standards of those who had developed more dependent economies. The ‘savage’, the ‘brutes’, were totally in thrall to all kinds of frightening beliefs, including the possibility of blood sacrifices to invisible gods. The virtues of their self-reliance are romanticised only by people living in opulence. It was never a Smithian idea and on that ground alone disqualifies the inclusion of Adam Smith in such haughty company.

Read Angus Sibley’s article, HERE and ignore any references in it to Adam Smith and learn, perhaps, some interesting ideas about a neglected school of political economy from the writings of Gustav von Schmoller.



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