Monday, July 05, 2010

A Potted Bio Of Adam Smith -Wrong In Parts

‘prescott’ writes in Bally bags an online a short biography of Adam Smith HERE:

Now, I am well known as an admirer of Adam Smith and his Works, but I mine is not unqualified in my admiration, especially for modern narratives. In particular, I am pretty cautious about what I include in his biography because a lot of ‘baggage’ is added to the known facts about his life and the checkable facts about his Works.

Hence, reading ‘Prescott’ on Adam Smith, I was struck immediately by the clear errors in his/her account in his article. In the interests of accuracy, I comment on ‘Prescott’s’ main errors:

Adam Smith: Capitalism’s Founding Father

[Adam Smith did not found ‘capitalism’ (the word was not invented in English until 1854 (See Thackeray’s novel, ‘The Newcomes’ and check the Oxford English Dictionary). Smith observed what he called ‘the age of commerce’, which had been under way in Greco-Roman times and re-emerged after the fall of Rome (5th century) in Europe from 14th-15-century. No known individual founded ‘capitalism’, certainly not Adam Smith]

Adam Smith … best known for his classic treatise An Inquiry Into the Nature and Causes of the Wealth of Nations, he is credited with establishing the discipline of political economics.’

[Adam Smith did not ‘establish the discipline of political economy’, which was and remained a sub-topic within the ‘discipline’ of Moral Philosophy in Scottish Universities before him. Others wrote on political economy before Adam Smith (for example, Sit James Steuart, An Inquiry into the Principles of Political Œconomy, 1767, 2 volumes, Millar and Cadell, London.]

The ideas put forward in his work represented a radical departure from the then-dominant economic policy and philosophy of mercantilism, which had held sway in Europe for three centuries.’

[Basically true, but many of the ideas behind ‘mercantile political economy’ live on in the minds of many politicians and voters]

So profound was the impact of Wealth of Nations that it is generally considered the most important economic work ever written. Terms that are commonly used today, such as “invisible hand” and “division of labor,” had their genesis in Smith’s treatise.’

[An exaggeration but excusable, as most people have never read Wealth Of Nations’. However, ‘the division of labour’ did not have its ‘genesis’ in ‘Smith’s treatise: Plato wrote about in classical times (The Republic), as did Sir William Petty in the 1683, (Essay in Political Arithmetic). Smith made no claim to have done so; he referred (Wealth Of Nations) to the phenomena has having been ‘very often taken notice of’ by others. Smith’s arithmetic data on pin making came from Diderot’s Enclyclopedie (1751-57; see Peaucelle. J.-L. 2006), though he visited a small pin-factory himself. As for ‘an “invisible hand”, which is well known (even ubiquitous) today, his use of the famous 18th-century metaphor has no connection to its modern interpretation by economists (see Lost Legacy passim].

He was apparently greatly influenced by Scottish philosopher Francis Hutcheson, whose theories on moral sense were a basis for Smith’s own ethical speculations later in life.

[Professor Hutcheson was Smith’s tutor and certainly influenced him, but on ‘moral sense’ Smith took a quite different line to Hutcheson on the source of our moral sentiments; see Smith’s Theory of Moral Sentiments, 1759.]

‘Smith furthered his studies at Oxford for seven years and during this period became attracted to the atheistic ideas of another Scottish ‘Kobe V’ (sic!) philosopher, David Hume, with whom he would later form a close friendship.

[Hume never admitted to being ‘atheistic’; Smith was too careful to associate openly with atheism; he was not a Christian but hid his views – in his day it was too dangerous to known as an ‘atheist’, and risky to be a ‘deist’.]

Through this experience Smith gained important contacts with French intellectuals, including Voltaire, as well as firsthand exposure to the French economic policy of mercantilism. The policy advocated government control over industry and trade based on the theory that the nation would be strong as long as exports exceeded imports.’

[The French Physiocrats, with whom he associated, denied that ‘trade and manufacture’ produced ‘wealth’ –they considered them ‘sterile’ because only agriculture produced ‘wealth’ - ideas which Smith totally rejected.]

Smith objected to the French government’s interference in free trade through prohibitive duties on foreign goods. Many of his ideas in Wealth of Nations no doubt began to coalesce during this period.’

[Smith’s ideas on political economy were formed years before he visited France, as can be seen in his “Lectures on Jurisprudence’ (1762-3) and delivered at Glasgow University during 1751-63. The French influence came later.]

Smith also argued [economies] …could work most effectively in the absence of government interference. Such a laissez-faire—that is, “leave alone” or “allow to be”—policy (a term popularized by Wealth of Nations) would, in his opinion, kobe iv (sic!) encourage the most efficient operation of private and commercial enterprises.’

[Smith did not advocate ‘laissez-faire’ – he never used such words in Wealth Of Nations, nor anywhere else. He did not popularize the ‘term’ in Wealth Of Nations. He objected to mercantile interventions in commerce (particularly in legalising monopolies, tariffs, and prohibitions )but not to all government regulations (banking for example, contract laws, and the Navigation Acts).]

He also held that individuals acting in their own self-interest would naturally Kobe V (sic!) seek out economic activities that provided the greatest financial rewards. Smith was convinced that this self-interest would in turn maximize the economic well-being of society as a whole (see “The Achilles Heel of Capitalism”).’

{Smith was suspicious of the benign self-interest of ‘merchants and manufacturers’ – he hardly said a good word for them in their practices; if allowed by law a ‘free hand’ they narrowed the competition and raised prices; His reference to some , but not all, traders investing locally an raising national output was a reference to the arithmetic law that the whole is the sum of its parts, not a benign law that their self-interest necessarily benefitted society.]

‘It is not coincidental that such democratic, egalitarian views arose simultaneously with the American Revolution and only just preceded the French Revolution of 1789.’

[Wealth Of Nations was coincidental to, not linked to, the American Revolution nor t the French Revoluton. Wealth Of Nations was due for publication in 1773, but he delayed it to 1776, making final adjustments to the section on the British colonies in North America. The work had no influence on the Declaration of Independence.]

Modern capitalism traces its roots to Adam Smith and his Wealth of Nations, which has served, perhaps more than any other economic work, as a guide to the formulation of nations’ economic policies.’ Subsequent theories have altered governments’ role in economic policy, particularly the Keynesian ideas of the 20th century. Notwithstanding, Smith and his theories continue to occupy an important position in the development of economic thought.

[An exaggeration. American and British governments – indeed most governments in Europe and in the modern world – largely ignored Smith’s critique of mercantile political economy, and his policy hostility to colonies, and his preference for freer trade, and his hostility to the almost universal habit of ‘jealousy of trade’. In Smith’s day it was jealousy of France, then it became jealousy of Germany, today it’s gross suspicions of China.]

[PS: what is ‘Kobe 5’?]

UPDATE: A reader called 'nnn' sent in a comment, which I passed for publication but somehow it has 'disappeared'. Not wanting to appear censorious, I shall report that 'nnn' was 'critical', saying he/she didn't see why 'Prescott' had said anything 'wrong' and that my post was 'just words'. Having been on the net for many years, I recognise a Troll when one pops up, but I was about to offer my advice that 'nnn' looked up a course on 'English language comprehension, suited to his/her reading age.

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Blogger Unknown said...

After reading your comments I still can't find where Prescott is wrong. It seems you are just playing with his words.

9:27 pm  

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