Tuesday, November 16, 2010

Brad Delong Praises Matt Ridley on the Origins of Prosperity

From Brad Delong post in his excellent economics blog, “Grasping Reality With Both Hands”, which attracted the usual crowded comments (HERE):

“Seminar: Matt Ridley: How Prosperity Evolves

We are very happy to have Matt Ridley here, to talk about what I think is the foundational issue in economics. The very first paragraph of the second chapter of Adam Smith's Wealth of Nations says that economic prosperity rests on the:
division of labour... not originally the effect of any human wisdom... [but] the necessary... consequence of a certain propensity in human nature... to truck, barter, and exchange one thing for another...

The fact that human group sociability and solidarity is based on exchange rather than, as with chimpanzees, grooming each other or, as with dogs--well, I don't think I should go there--has, Adam Smith thought, extraordinary consequences. I think Smith was right. So does Matt Ridley. He is here to tell us about them.

It is always important when reading Adam Smith to avoid imputing meanings that are absent in his actual words. The relevant quotation refers to: ‘… truck, barter, and exchange one thing for another…”. Exchange, which is general in all aspects of life and all ages of humankind. “Trade” is often slipped in by people with modern agendas (supportive and hostile, e.g. Polyani, The Great Transformation, 1941).

Smith’s basic theme in all his works is “exchange”, which he applied in his History of Astronomy (1744-c.58 [1795]) and his essay on the origins of Language (1761), his Lectures on Jurisprudence (1762-63) and similarly in his two major works, Moral Sentiments (1759) and Wealth Of Nations (1776).

Exchange evolved into the driving force behind age of moral philosophy and the age of commerce - a kind of market place of ideas – and eventually into trade (see James Otteson, The Market Place of Life, 2001, Cambridge University Press).

Some of the expressions of incredulity about trade as a variety of exchange would be resolved by following Smith’s actual argument.”

I was prompted to offer my comment, in response to some of them:

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