Monday, May 03, 2010

Adam Smith On Liberty, Laissez-Faire and Justice

David Henderson of Econ Lib (HERE)
Conducts a Q and A session with Daniel Klein (George Mason University) on Amartya Sen’s article in the New Statesman discussed on Lost `legacy last week.

The issue turns on how ‘soft’ Smith was for the ‘little guy’ in respect of a tax financed poor relief policy. Klein:

Saying that Smith "had a soft spot for government welfare" is highly misleading. Smith expounded a presumption of liberty - as you and I understand that term. Even Jacob Viner, an earlier cataloger of Smith's exceptions to the liberty principle, says so. Though he was in an important sense an egalitarian, and an affirmer of distributive justice understood in a libertarian way, he never favored a policy that he construed as forced "poor relief," and never argued on such grounds. He was silent, even conspicuously silent, in the otherwise quite comprehensive WN, regarding the essential feature of the poor law, tax-financed poor relief. At the opening of WN he says that he shows "what are the necessary expences of the sovereign, or commonwealth ...", and, in the spirit of enumerated powers, we might infer that he did not regard the poor law as "necessary." Indeed, there is a lot of textual evidence indicating that he would not be supportive of the redistributive state.”

Daniel Klein equates “laissez-faire” with the “liberty principle”, as he does the “invisible hand”. Wealth Of Nations is a polemic (Book IV) against mercantile political economy.

Laissez-faire is a phrase first stated (significantly) by a merchant, not a consumer, to the French Minister of Finance who had already instituted French-style regulations on trade fares and town markets (if you know France you will know French ‘logic’ in regulations). This was laissez-faire liberty for merchants, nothing was said about consumers.

Liberty for Smith was a philosophical tradition going back to Grotius and Puffendorf, based tightly on legal principles. It superseded patricular economic systems. Smith taught Jurisprudence at Glasgow (1751-64) and was firmly rooted in law and justice (see student notes of his Lectures in Jurisprudence, 1762-63, Liberty Fund 1982). Liberty is this sense is often treated as a synonym for the merchants’ 17th century plea for laissez-faire – it isn’t. And Smith never mentioned laissez-faire in Wealth Of Nations and he was intimate and familiar with the French Physiocrats who tried to popularise it.

For Smith, Liberty was not anarchy; it was a legal prejudice in favour of freedom within Natural Liberty. But nor did he regard Natural Liberty as a pre-condition for progress towards opulence. He chastised Physiocrats (naming ‘Mr. Quesnai’, a physician) for ‘entertaining the notion’ that the ‘political body’ would only thrive under ‘a certain precise regimen, the exact regimen of perfect liberty and perfect justice’. Indeed, Smith adds, ‘the bad effects of political economy’ which ‘retards and more of less is not always capable of stopping altogether the natural progress of a nation towards wealth and prosperity and still less making it go backwards’.

To which Smith appends the devastating evidence of history (all economic systems and all degrees of oppression): ‘If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation that could ever have prospered’. (WM IVix.28: 674) In short, while desirable under Natural Liberty, it was neither necessary nor sufficient to take a nation to opulence. That is an important assertion and it guided Smith’s many suggestions for partial changes within the mercantile political economy of which he criticised specifically in Wealth Of Nations.

His criticism of the mercantile acts of government from Elizabethan times (Apprentices, Town Guilds, Settlement, Corporate town monopolies, etc.,) was directed at their poverty-inducing consequences. To avoid taxes to relieve the poor, the income earners of a locality had an incentive to reduce the numbers of poor by moving them on and destroying their houses (hovels) to reduce the poor rolls; these laws prevented poor people settling elsewhere looking for work.

Smith’s views on ‘the little guy’ (a lovely Americanism) are broadly sympathetic on natural liberty and justice grounds. They are trifle more subtle than modern readers sometimes appreciate, especially in trying to back project onto Smith distributive justice in the modern sense.

In Smith's day distributive justice did not have the same meaning it has today.

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Blogger Donald Pretari said...

"This expence, however, might perhaps with equal propriety, and even with some advantage, be defrayed altogether by those who receive the immediate benefit of such education and instruction, or by the voluntary contribution of those who think they have occasion for either the one or the other."

I don't think I agree with Klein's reading of this passage. If you click here:

You will get a pretty good idea of Smith's position on Public Education. I don't find it all that hard to follow, and he explains the exceptions he's referring to.

Don the libertarian Democrat

9:32 pm  

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