Tuesday, February 22, 2011

Did Adam Smith Ignore a Steam-Driven Pin Factory?

Michael Perelman, a thoughtful modern Marxist and author of a host of books on economics from a left perspective at California State University announced on a History of Economics Blog to which I subscribe that he has just published a new book, "The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers."

He says that the central theme of his book (“not suggested by the title”) is that economists frame their discipline by emphasizing transactions to the exclusion of considerations of production.

Beginning with Adam Smith's pin factory, economists have tried to turn attention from production. I don't have time to explain it here, but his very clever presentation was dishonest, ignoring large industry, including a steam run pin factory.

“Those economists, beginning with Jevons, who have trespassed into the subject of production [something more than the purchase of the appropriate factors with the assumption that everything in the black
box will be performed efficiently] have been severely reprimanded.

I first met Michael Perelman at a Summer School at George Mason University, Fairfax where he contributed a paper, which referred to Adam Smith.

Afterwards, we had a conversation where I offered my interpretation of some of the summaries he had made. Later, he kindly sent to me a draft copy of a paper he was writing that quoted Adam Smith fairly extensively. I sent to him my detailed comments, mainly technical, and saw him again at a History of Economics Conference in Toronto.

Perelman is an Marxist intellectual who converses without rancour, despite our differences on Adam Smith (we have not discussed Marx in any detail) and it was pleasurable to exchange views with him. I have ordered his latest book – he has written several (see Amazon).

I am not clear at the moment what he means by saying “economists have tried to turn attention from production”, though I am wary of ascribing to economists as a group some kind of collective intention (the discipline is far more open than Perelman implies) and also would ask ‘why’ they would do this. The discipline is also more argumentative than this image allows – differences on major issues, as well as minor nuances, would promote journal articles of disagreement without much prompting (Young Turks and Old Hands are too vigilant for such a consensus to emerge without a citation trail).

That is why I am intrigued by the reference to Adam Smith and his “trifling” example (Smith’s words) that Perelman describes as “his very clever presentation was dishonest, ignoring large industry, including a steam run pin factory”. There was not much “large industry” about in the 1760s-1770 (when Smith used the pin factory example of labour productivity – see his Lectures on Jurisprudence (1763) and Wealth Of Nations (1776). Smith was familiar with Dr Roebuck's Carron Foundry - he took Edmund Burke to see it.

That there was a “steam-run pin factory” would really be remarkable, given steam engines were largely the “Newcomens” crude engines in the coal pits. James Watt’s improvements were dated from the 1760s, like the inefficient Newcomens also for pumping water in pits. It would be more remarkable too, if Smith knew of a steam-driven pin factory and took no notice of it (was such steam-driven power source known to Diderot in his Encyclopedia?). Hence, I await the arrival of Michael Perelman’s new book in anticipation for the details.

As for Jevons (writing from the 1870s), long after Smith had gone, I have no comments to make. Does this mean that the ‘conspiracy’ to downplay production lasted at least a hundred years? Who was directing it?

Having said all this, I am sure that Michael will respond in his scholarly manner, and unlike many others, not resort to political posturing or preaching, which I think is in the best traditions of the Republic of Letters and why I have a lot of time for him.

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