Tuesday, April 26, 2011

It is Sometimes Necessary to Quibble

In The American (Journal of the American Enterprise Institute)

“Recently, Premier Wen Jiabao has taken to mentioning his admiration for Adam Smith, capitalism’s most prominent theorist. But if Premier Wen wants China to remain a dictatorship, then Smith’s teaching should scare him. Smith never used the word capitalism in his writing—he spoke of “a system of natural liberty.” This system, today called capitalism, has been a successful training camp for self-government precisely because it has permitted citizens the liberty to pursue self-betterment and self-reliance tempered by virtues such as restraint and sympathy. Capitalists have thus played leading roles in democratic transitions. They have been powerful forces for change, making ever greater claims against state injustice and rapaciousness. But in China, entrepreneurs are dependent upon or given special privileges by the state. The incentive or even opportunity to form a distinct “class” of burgeoning democrats does not yet exist. Absent the existence of such a class whose interests sometimes clash with the state, the formation of democracy is very unlikely.”

I agree that Adam Smith did not use (or know) the word capitalism (often reported on Lost Legacy because the word wasn’t invented until 1854 (Thackeray’s Newcomes) but the concept of ‘natural liberty, under natural rights theory – Grotius, Pufendorf was taught by them in the late 17th century, and by Adam Smith in the mid-18th century, and is not synonymous with ‘capitalism’. It is not even synonymous with natural liberty. It is a jurisprudential idea about natural rights applicable to humans derived from the first age of man (the forest).

Smith applied natural law theory to ‘the age of commerce’ and associated it with progress towards ‘opulence’ from commercial activity, though he did not regard it as a necessary condition for such progress (as he told Dr. Quesnay and the Physiocrats in Wealth Of Nations long before the primitive accumulation of capital had passed over to large capitals (and Smith had passed away in 1790) and into what became known as capitalism from the mid-19th century.

But in China, entrepreneurs are dependent upon or given special privileges by the state.’

Super-large capitals in the US system of semi-state capitalism (a.k.a mercantile political economy) are also largely ‘dependent upon or given special privileges by the state’. Tariffs, prohibitions, regulations, state-contracts at local state and national state level, to mention a few causes of dependency of large capitals in the USA.

Enterprise in securing US government contracts may be ‘enterprise’, interpreted loosely, but that is not much different from the mercantile Royal Charters, and state contracts, fought for by 18th –century standards familiar to Adam Smith and a target of his criticism.

Natural liberty is a misused term in these contexts.


Monday, April 25, 2011

Another Unrealistic Recipe for Utopia

David Willets (MP, Conservative) reviews (24 April) Martin Nowak and Roger Highfield, SuperCooperators: Altruism, Evolution and Why We Need Each Other, Edinburgh: Cannongate (HERE):

“The invisible hand that binds us all”

Adam Smith’s Wealth of Nations outlines the logic of modern capitalism; a world of competition in which benevolence is irrelevant. But in The Theory of Moral Sentiments he gave an account of morality resting on empathy and conscience as an impartial spectator observing our actions. …

…how to reconcile these two great books – is also the challenge of how to order a society in which competition and ethical sensibility are combined.

… So how do we find a way to explain these obligations in a society less susceptible to appeals to tradition or religion? The nexus of evolutionary biology, game theory and neuroscience provides the most exciting avenue, and this book is an excellent example of the genre. Martin Nowak, along with his co-author journalist Roger Highfield, sets out steps by which this type of new co-operation can be developed, beginning with direct reciprocity then indirect reciprocity and on through competition between groups that reward martial qualities of courage and trustworthiness. He starts off with the economic man of the market economists, but ends up with a way of thinking about human behaviour which is closer to that of the great religions. Mr Nowak is a Harvard professor, but he generates controversy for the fact that, unlike most thinkers in this area, he is also a Christian.

The authors are more than a few millennia too late if they advocate introducing a“new [form of] co-operation” based on reciprocity. This a very old form of co-operation found and practiced among animals, as well as humans. In fact it pre-dates humanity as it evolved from the common ancestor with the chimpanzees about 6 million years ago and can be observed today among primates.

From reciprocity (I do you favour – share food; later, you reciprocate by sharing your food with me, which completes the transaction). This is an early implicit form of bargaining, but because the reciprocation may come long after the original favour, it is a quasi-bargain.

Over time, the gap between the obligation to reciprocate narrows, until the transaction is immediate, and because it is immediate, it is more certain to be completed: ‘I will give you this which you want, if you will give me this what I want’ (to paraphrase Adam Smith: WN I.ii.2: 25-25). This the full Smithian bargain.

So, I am not clear what Martin Nowak and Roger Highfield add to what economists and anthropologists already know and what the world of Homo sapiens (NOT that cursed Homo economicus!) practices.

His willingness to argue for group selection, a theory suggesting that evolution operates beyond the genetic level, reawakens old controversies – but he does so using innovative mathematical models, able to incorporate dynamism and uncertainty.”

Biological evolution operates at the individual level and social evolution operates at the society level. Nothing remarkable in that. Hence we have stone-age societies and capitalist societies on the plant, and ‘capitalist societies take many form, from mercantile states through so-called Anglo-saxon to Continental, and relatively free-market scoieites through to Chinese Communist State capitalism, and so on. Societies have evolved quite differently in the recent past and will continue to do so. Again, nothing remarkable in that, and nothing will stop them continuing to do so.

“Adam Smith would have been pleased to know, for example, that putting a picture of two eyes looking at you on a communal fridge trebles contributions to the honesty box, compared with a picture of flowers.”

Adam Smith was quite clear: the close observation of others and by others (for example in a small religious sect) ensure a close adherence to group norms of behaviour. It was scrutiny of the behaviour of others that was supported by the clear moral norms of that small society that brought compliance – a picture of eyes on a poor box (or fridge today) reinforces known norms.

The reviewer, David Willetts, MP, summarises the rest of the book’s mainly technical maths of rationality applied to human behaviour (a set of heroic assumptions, at best), but I do not think the authors have found the Holy Grail. Predicting what is rational and aligning that as behaviour is a seductive trap, indulged in by politicians and their critics.

Much better to concentrate on studying how we arrived a the present situation in order to understand it. Predicting the future course of events is the medicine of the proverbial shaman and witch doctor; best not taken at all.

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Interesting ejournal About Adam Smith

Professor Daniel Klein of George Mason University, Fairfax, Virginia, has something to do with a most interesting service called Journal Talk (HERE): that discusses, among other topics, articles in academic journals on Adam Smith, normally read only by academic economists,

Here are literate and serious comments on Andrew Skinner (the leading UK academic authority on Adam Smith) on a topic, separately discussed earlier this year on Lost Legacy:

Brandon Holmes:

“Adam Smith and the role of the state: education as a public service”

Skinner points out that people who support a more interventionist government policy would cite Smith for his mention of the government’s involvement in social diversions. It is important to note that Smith says nothing about the state creating institutions or subsidizing in his discussion of pubic diversions. His suggestion that the government should encourage diversions by giving entire liberty to the people means that those people should be free to do what they want, within the confines of their liberty. The state does not encourage exercising liberty by granting subsidies; it encourages exercising liberty by not putting up barriers to its existence. 
The problem with a government body effectively “stepping into” the market in order to correct an efficiency problem is that efficiency is not a static concept. In its application towards education, government policy needs to set up certain standards that will show how close a school, teacher or university is to a given level of efficiency. The level of efficiency is arbitrarily set by experts who will weigh in on where students should be in their educational path, based on gender, age, nationality, family income, and a myriad of other variables. When Smith suggested that the government needed to ensure efficiency, it meant that the government needed to make sure that the opportunity for education was available to each person who desired it, not that the government necessarily had to intervene in the curriculum.

Throughout the chapter Andrew Skinner grossly overstates the scope of Adam Smith’s support for state action. Skinner repeats Jacob Viner’s assertion that Smith “saw a wide and elastic range of activity for government, and was prepared to extend it further.” Viner’s view guides Skinner, but Skinner provides poor support for his notion of Smith the statist. He misinterprets the following direct quotation from the Wealth of Nations in a key part of his argument about education:
“The expence of the institutions for education and religious instruction is likewise, no doubt, beneficial to the whole society, and may, therefore, without injustice, be defrayed by the general contribution of the whole society. 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.” (V.i.i.5)
Skinner claims the passage makes it seem “likely that Smith would have supported the arrangements he envisaged for elementary education, where there is a combination of modest private, and a more significant public, contribution.” Reading the Smith quote, and going back to the entire section of the Wealth of Nations that Skinner refers to, Smith mentions nothing about any significant public contribution to education at any level. Indeed, not only above, but throughout his discussion of education Smith stresses that the cost should be primarily – if not entirely – borne by the beneficiary of the service. 
It is true that Adam Smith did support some government activity; any careful reading of his works shows the scope of that activity to be far more limited than Skinner implies.

Here is another:

Steven Kunath on Adam Smith’s Theory of Inquiry

Undoubtedly Adam Smith is one of the most influential thinkers of the modern Western Tradition. As a result many philosophers engage in critical reflection of Smith’s numerous contributions. A tension, however, arises when examining Smith’s entire corpus. The divide for many philosophers becomes apparent when comparing The Wealth of Nations to The Theory of Moral Sentiments. What did Smith see as the connection, if any, between these works? Lindgren’s piece provides an important first-step in connecting Wealth of Nations with The Theory of Moral Sentiments by investigating how Adam Smith understood the role of inquiry. While Lindgren does not attempt to unite his conclusions on inquiry with Smith’s Wealth of Nations and Theory of Moral Sentiments, it provides sufficient ground for further reflection on the matter.
Non-specialists might wonder why starting how the notion of inquiry can serve as a suitable place for beginning philosophical reflection. Starting with inquiry provides a framework to see how Smith literally sees the world. Is Smith an adherent to a philosophically realistic view of the world or does he follow the nominalism and skepticism of others like Hume? For Lindgren the answer is clear. Smith’s epistemology does not fit into the metaphysical realist position and is more in line with the skeptical views of Hume. Breaking from the earlier tradition of metaphysical realism Smith’s model of inquiry will not focus on determining some type of abstract form of a thing, instead he will understand the world as somewhat incomprehensible to the individual. For Smith the individual is not capable of aligning his knowledge of the world with things that actually exist in the world as would be the case for metaphysicians. A consequence of this is that Lindgren sees Smith’s philosophy of language as the basis for his model of inquiry. While Lindgren provides a sound argument that language served as Smith’s model of inquiry he does not challenge and further test Smith’s notion. 
Fundamentally the question that Lindgren avoids asking is what is the relationship between convention and nature in a grammar and its application to human inquiry. Lindgren seems to disregard many of the contributions of modern linguistics by simply affirming Smith’s view that grammatical rules “are dependent upon the aesthetic temperament of the community.” Certainly there is some truth to that, but modern linguistics and cognitive science would make the claim that grammar has a part that exists by convention—especially prescriptive grammars dictating forms of written communication—but it would also point out that the actual wiring of the human brains creates limits on the types of grammar possible. Limiting the type of grammars possible in the hardware of the brain in turn creates limits on the type of socially possible grammars. So does knowing that grammars have inherent and theoretically universal limits sufficient to undermine parts of Smith’s model of language? Starting here and saying there are some types of universal constraints that emerge in the human brain seems to seriously impact the analysis of Lindgren and in turn the applicability of Smith’s application of language to inquiry. If constraints naturally emerge on the structure of language then there could be a tendency for languages to form in a particular way. If languages form in a particular way then is Smith’s understanding of the experience of learning a language correct? Lindgren needs to provide a tougher critique of Smith’s model and see if it is still applicable. This author believes that Smith’s view of language could best be described as quaint, but not able to sustain rigorous scrutiny.

These are serious commentaries on the article entitled as shown. I have not managed to track down the original articles yet, but they are at the link shown above.

I recommend that you bookmark the link.

My thanks to Daniel Klein for the site who seems to be behind a great deal of research work on Adam Smith - not that we see eye-to-eye on everything (the meaning and significance of Smith’s use of the IH metaphor, for instance) but we share a passion for Smith’s works.


Sociologists on the IH Metaphor

Steve Mcdonald and Jacob Day write in Sociology Compass, North Carolina State University (July 2010) (HERE):

Race, Gender, and the Invisible Hand of Social Capital

To better understand persistent race and gender inequality in the labor market, this article discusses the informal processes by which social connections provide individuals with access to information, influence, and status that help to further people’s careers. Because social networks are segregated by race and gender, access to these social capital resources tends to be greater for white men than for minorities and women. To illustrate this point, research on the invisible hand of social capital is presented. In short, high-level job openings are commonly filled with non-searchers – people who are not looking for new jobs – thanks to their receipt of unsolicited job leads. Recent studies find that this process operates more effectively for white men than for minorities and women, demonstrating how the invisible hand of social capital helps to perpetuate race and gender inequality. The article concludes with a discussion of the implications of these findings and directions for future research.”

It seems that the sociologists have captured a metaphor commonly claimed by modern economists since the 1940s and attributed historically to Adam Smith, but only after garbling Smith’s use of the popular 17-18th-century metaphor and transforming it into a new meaning inspired by mathematical models, though a term for it is absent from all the equations.

A metaphor can be applied by an author to any object which it represents in a “more striking and interesting manner” (Adam Smith, Lectures on Rhetoric and Belles Lettres, [1763] 1983, p 29).

However, some metaphors work for their objects, and some don’t. This one from sociology may work or may not. I only read the abstract; the article is behind a subscription wall.

Smith’s worked for his use of “an invisible hand”, once in Moral Sentiments (1759) and once in Wealth Of Nations (1776). It doesn’t work in its modern uses and has been given a ‘mysterious’, even ‘miraculous’ role, never explained. When all else fails, its modern exponents revert to the default meaning of a “hand of God’ (interestingly, the most common meaning to the metaphor by the self-same 17th-18th theological preachers, but not by Adam Smith)

Later, in the references I found these references to the invisible hand:

“The assumption that society benefits most when individuals are allowed to define and pursue their own self interests” David Kirkwood Hart

from The Blackwell Encyclopedia of Management: the IH metaphor:

The assumption that society benefits most when individuals are allowed to define and pursue their own self‐interests, with minimal interference from governments or other authorities. However, this assumption also presumes there is some guiding natural force – seldom mentioned and almost never defined – that ensures a just equilibrium will result from such self‐interested behaviors. The concept of the invisible hand first emerges in the work of Adam Smith, who mentions it in two brief passages in his two major books. Nowadays the term has been captured by the economists, but, originally, it had more to do with Smith's moral philosophy than it did with merely his economic ideas. It is this larger, moral conception that is of greatest interest for business ethics. Smith, profoundly influenced by Stoicism, believes the invisible hand is a beneficent force of nature, operating without human intention and within a system of natural liberty, which allocates social goods in a rough and ready, but generally fair, distribution. This eventually results in the greatest happiness for the greatest number, a concept he borrows from his mentor, Francis Hutcheson. Some argue that Smith's ideas about the invisible hand come from the rather unsavory philosophy of unmitigated self‐interest advocated by his contemporary, Bernard Mandeville, who argued that the pursuit of “private vices” resulted in …

I like that: ‘captured by the economists’. Note also the assertion that “originally, it had more to do with Smith's moral philosophy” a somewhat dubious proposition in my view.

The example of Smith’s use of the IH metaphor in Moral Sentiments is not more significant than the example he gives in Wealth Of Nations. Whenever we see a metaphor we should look for the “object” to which it refers.

To clarify what the “object” means I quote from Hugh Blair, Lectures on Rhetoric and Belles Lettres, (1820) 3 volumes, London. Vol. 1, Lecture XV: Metaphors:

Metaphors are:

founded entirely on the resemblance which one object bears to another … it is no other than a comparison, expressed in an abridged form.

When I say of some great minister ‘ upholds the state, like a pillar which supports the weight of a whole edifice’, I fairly make a comparison; but when I say of such a minister ‘that he is a pillar of the state’, it has now become a metaphor. The comparison betwixt the minister and a pillar is made in the mind, but it is expressed without any words that denote comparison. The comparison is only insinuated, not expressed, the object is supposed to be so like the other, without formally drawing the comparison; the name of one may be put in place of the other
” (pp 342-3).

Hugh Blair took over Adam Smith’s public lectures on Rhetoric that he gave to a “respectable auditory” in Edinburgh, 1748-51, taking them inside the University o Edinburgh, where Blair was appointed a professor of Rhetoric (then a prime element of a degree in Moral Philosophy).

Note his definition and example of a metaphor, which corresponds to Adam Smith’s (and all literate persons') use of metaphor ; indeed it was – and is – the standard use of a metaphor in English language and literature, whatever else modern economists and sociologists unthinkingly assert about its meaning today.

In Moral Sentiments, the IH metaphor’s object was the absolute necessity compelling rich landlords, whatever the degree of their selfishness and indifference, to feed their servants, serfs, labourers and retainers, at least to subsistence level from the produce of their fields. In Wealth Of Nations the object of the IH metaphor was the risk aversion felt by some, but not all, merchant traders to avoid foreign trade in favour domestic trade, which added to domestic “annual revenue and employment” (the whole is the sum of its parts).

This much should be clear to any literate person, amongst which category I include all modern economists and all sociologists. Simple, eh?


Saturday, April 23, 2011

Adam Smith On Opulence

PATRICK S. O'DONNELL writes (22 April) on the Ratio Juris Blog (HERE):

David Harvey on the "crises of capitalism"

David articulates a perspective on the world that is more realistic than the usual taunts against capitalism, though it loses its way later. It starts of more realistic that the exponents of anti-capitalist rhetoric, often from the rich heartlands of ultra-capitalist North America, who prattle on about their condition of the North American and Canadian working people – they are hardly a ‘proletariat’ and certainly not ‘lumpen” – blind to the one-way migration of the poor in the developing and non-developing world into North American, with zero migratory traffic the other way to whence the real world’s poor came from).

David quotes an interesting piece from the Marxist economist Meghnad Desai in Marx’s Revenge: The Resurgence of Capitalism and the Death of Statist Socialism (2002), (London: Verso, 2002: 313-314). Desai writes:

“Capitalism is not a kind or a benevolent system. It is the most effective mode of production discovered so far in wealth creation [despite its endemic ‘cycles, with their manias, crashes, and panics’]. It has no overarching objective, since it works through the profit-seeking efforts of millions of capitalists. It generates economic growth, prosperity, and employment as side-effects. It also causes much misery and destruction in its tendency towards incessant change. But over the last two hundred years, it has achieved the largest gain in well-being in all previous millennia. For one thing, many more people are alive now than in 1800 (around six times as many), and they live longer on average—between ten to twenty years longer—than they did then. [….] If length of life can be taken as a crude measure of potential well-being, a billion people living, say, forty years on average in 1800 compared to six billion people living sixty year today speaks volumes for the success of capitalism. In 1800, perhaps two thirds of that billion were poor; today, at most a quarter of the six billion are poor. Yet the reduction of poverty is neither automatic, nor to be taken for granted.

Adam Smith was not wrong, however, in saying that the new system of natural liberty imposed the cost of inequality while delivering a universal betterment of living standards. More people have been brought out of poverty in the last two hundred years, especially since 1945, than ever before in history. The very idea that poverty could be eliminated could not have occurred in any precapitalist stage. Capitalism provides the means for eliminating poverty, but these means were not directed immediately, or evenly, in the course of its development.”

… As Desai [writes David) “makes powerfully pellucid, any economic transcendence of capitalism will have to incorporate a full and honest accounting of its historical accomplishments and economic virtues, or transcendence by way of Hegelian-like negation and sublation. In other words, sloganeering along the lines of “capitalism sucks” or crude anti-globalization polemics is pointless, not unlike (assuming the sloganeering and polemics are sincere) the reasons Marx had for excoriating the socialists of his time and place for “their delusions about the prospects of achieving socialism.”

David also explores propositions derived from statements by Gandhi (and others):

“(1) It is enough to know the means. Means and ends are convertible terms. (2) We always have control over the means but not over the end. (3) Our progress toward the goal will be in exact proportion to the purity of our means. (4) Instead of saying that means are after all means, we should affirm that means are after all everything. As the means so the end.” [He lost me there; GK)

Raghavan Iyer, however, explains these four propositions (The Moral and Political Thought of Mahatma Gandhi. Santa Barbara, CA: Concord Grove Press, 2nd ed., 1983 (1st ed., 1973, Oxford University Press): 58.):

“The first statement rejects the notion that in our actual conduct we can make a firm and decisive distinction between means and ends. Any psychology of action requires this rejection of the conventional conceptual habit which makes us ascribe to ourselves greater knowledge and assurance than we actually possess. We can know, at least potentially, the means available in a way we cannot know the elusive end. Recognition of the interdependence of ends and means implies that we have some knowledge of the moral and political quality of the chosen end, whatever the complex consequences turn out to be. The second statement asserts, as a contingent truth about about the extent and limit of our free will, that the individual’s capacity to determine what he can do in any specific situation at any given time is much greater than this powers of anticipation, prediction, or control over the consequences of his action. The third statement expresses the faith in the law of karma, under which there is an exact causal connection between the extent of the moral purity (detachment, disinterestedness, and the degree of moral awareness) of an act and the measure of individual effectiveness in promoting or pursuing and securing a morally worthy end over a period of time. The moral law of karma has its analogues in the Moirae and Nemesis of the ancient Greeks, the Nornor of Scandinavian mythology, the sense of fate in the Icelandic Saga, and in all religious traditions: ‘As ye sow, so shall ye reap.’ This spiritual conviction cannot be conclusively verified or falsified empirically. The fourth statement is a practical recommendation that we must be primarily or even wholly concerned with the immediate adoption of what we regard as a morally worthy or intrinsically justifiable means. This recommendation may be accepted by those who subscribe to the second statement but it is mandatory for those who share the conviction implicit in the third statement.”

“As Iyer proceeds to point out [continues David], the closest approximation to this formulation of the means-end relationship in political theory and praxis is found in the work of Jacques Maritain. Both Gandhi and Maritain were clear in their repudiation of reliance on “technical rationalizations” and “piecemeal social engineering” in politics and both men were emphatic in their decisive rejection of so-called pragmatist or realist conceptions of politics as well as the correlative dominant moral doctrine of “double standards”cited above.”

David Harvey starts off well (via Desai [whom I met him many years ago at a defence debate and found him thoughtful and articulate but didn’t agree much with his moderate take on the Cold War.]). As his piece and the quotes continue, I think he has a long way to resolving the costs of opulence, if inequality is its main problem.

It is the lack of opulence that is the main problem facing much of the world. That is why the poor vote with their feet to share in it. Adam Smith was right about regard the inequality costs as less important than opulence (even less important than defence).


Thursday, April 21, 2011

The Secular Versus The Theological Adam Smith

Adam Smith in The Theory of Moral Sentiments presents what on closer examination reads as a contradictory assertion of the origin of the ‘general rules of morality’ as read below stating that they are ‘justly regarded as the laws of the Deity”, and thereby conforming to Christian theology, and yet from the previous chapter, Smith asserts emphatically, that the origin of the “general rules” are shown to be found “from experience, that all actions of a certain kind, or circumstanced in a certain manner, are approved or disapproved of.

To the extent that the earlier chapter is clearly secular and devoid of mention of the Deity, the following chapter conforms to orthodox Calvinist doctrine.

Moral Sentiments abounds with such almost contradictory ideas and explanations, as if (and as I believe was the case from reading them all) Adam Smith addressed two audience: secular philosophical readers and the censorious zealots in the Church of Scotland.

What do you make of Adam Smith’s ambivalence?

Chapter 4:
How he presents the “Origin and Use of general Rules” in Chapter 4:

“Nature, however, has not left this weakness, which is of so much importance, altogether without a remedy; nor has she abandoned us entirely to the delusions of self–love. Our continual observations upon the conduct of others, insensibly lead us to form to ourselves certain general rules concerning what is fit and proper either to be done or to be avoided. Some of their actions shock all our natural sentiments. We hear every body about us express the like detestation against them. This still further confirms, and even exasperates our natural sense of their deformity. It satisfies us that we view them in the proper light, when we see other people view them in the same light. We resolve never to be guilty of the like, nor ever, upon any account, to render ourselves in this manner the objects of universal disapprobation. We thus naturally lay down to ourselves a general rule, that all such actions are to be avoided, as tending to render us odious, contemptible, or punishable, the objects of all those sentiments for which we have the greatest dread and aversion. Other actions, on the contrary, call forth our approbation, and we hear every body around us express the same favourable opinion concerning them. Every body is eager to honour and reward them. They excite all those sentiments for which we have by nature the strongest desire; the love, the gratitude, the admiration of mankind. We become ambitious of performing the like; and thus naturally lay down to ourselves a rule of another kind, that every opportunity of acting in this manner is carefully to be sought after.

It is thus that the general rules of morality are formed. They are ultimately founded upon experience of what, in particular instances, our moral faculties, our natural sense of merit and propriety, approve, or disapprove of. We do not originally approve or condemn particular actions; because, upon examination, they appear to be agreeable or inconsistent with a certain general rule. The general rule, on the contrary, is formed, by finding from experience, that all actions of a certain kind, or circumstanced in a certain manner, are approved or disapproved of. To the man who first saw an inhuman murder, committed from avarice, envy, or unjust resentment, and upon one too that loved and trusted the murderer, who beheld the last agonies of the dying person, who heard him, with his expiring breath, complain more of the perfidy and ingratitude of his false friend, than of the violence which had been done to him, there could be no occasion, in order to conceive how horrible such an action was, that he should reflect, that one of the most sacred rules of conduct was what prohibited the taking away the life of an innocent person, that this was a plain violation of that rule, and consequently a very blamable action. His detestation of this crime, it is evident, would arise instantaneously and antecedent to his having formed to himself any such general rule. The general rule, on the contrary, which he might afterwards form, would be founded upon the detestation which he felt necessarily arise in his own breast, at the thought of this, and every other particular action of the same kind. (TMS III.4.7: 158-59).

““When these general rules, indeed, have been formed, when they are universally acknowledged and established, by the concurring sentiments of mankind, we frequently appeal to them as to the standards of mjudgment,min debating concerning the degree of praise or blame that is due to certain actions of a complicated and dubious nature.”
(TMS III.411: 160)

How Adam Smith presents the general rules of morality in Chapter 5:

“Of the influence and authority of the general Rules of Morality, and that they are justly regarded as the Laws of the Deity”

“Since these, therefore, were plainly intended to be the governing principles of human nature, the rules which they prescribe are to be regarded as the commands and laws of the Deity, promulgated by those vicegerents which he has thus set up within us. All general rules are commonly denominated laws: thus the general rules which bodies observe in the communication of motion, are called the laws of motion. But those general rules which our moral faculties observe in approving or condemning whatever sentiment or action is subjected to their examination, may much more justly be denominated such. They have a much greater resemblance to what are properly called laws, those general rules which the sovereign lays down to direct the conduct of his subjects. Like them they are rules to direct the free actions of men: they are prescribed most surely by a lawful superior, and are attended too with the sanction of rewards and punishments. Those vicegerents of God within us, never fail to punish the violation of them, by the torments of inward shame, and self–condemnation; and on the contrary, always reward obedience with tranquility of mind, with contentment, and self–satisfaction.

There are innumerable other considerations which serve to confirm the same conclusion. The happiness of mankind, as well as of all other rational creatures, seems to have been the original purpose intended by the Author of nature, when he brought them into existence. No other end seems worthy of that supreme wisdom and divine benignity which we necessarily ascribe to him; and this opinion, which we are led to by the abstract consideration of his infinite perfections, is still more confirmed by the examination of the works of nature, which seem all intended to promote happiness, and to guard against misery. But by acting according to the dictates of our moral faculties, we necessarily pursue the most effectual means for promoting the happiness of mankind, and may therefore be said, in some sense, to co–operate with the Deity, and to advance as far as in our power the plan of Providence. By acting otherways, on the contrary, we seem to obstruct, in some measure, the scheme which the Author of nature has established for the happiness and perfection of the world, and to declare ourselves, if I may say so, in some measure the enemies of God. Hence we are naturally encouraged to hope for his extraordinary favour and reward in the one case, and to dread his vengeance and punishment in the other.”
(TMS III.5.6 - 7: 165-6).

The ideas from these and many other instances I am compressing into a short chapter in the forthcoming Handbook on Adam Smith (edited by Chris Berry for Oxford University Press, 2012).

I should make it clear I am reporting on Adam Smith’s alleged religiosity from his expressed views on religion over his lifetime and I am not assessing the truth or otherwise of the theological ideas of the Christian religion (or any other religion). Readers are asked to keep this in mind when (if) they communicate with me.

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Tuesday, April 19, 2011

A Constructive Contribution to the Debate on Adam Smith's Alleged Religiosity

[A reader contributes long comments on my Adam Smith’s alleged religiosity Chapter (see below) and, as it is both interesting, constructive, and educational, it is also posted here on the main board as well as in the relevant comments. (Paragraphs added to make it more readable on Blog pages)]:

“I've been ruminating on your post for a few days, which I found a bit disturbing. I've finally decided to set down some of the reasons why I was bothered. My comments have to be divided in 2 parts for Blogger to accept. It's all well and good to engage in polite scholarly discourse, but I think you should do more to underscore what strikes me (and it seems strikes you as well) as ahistorical history being performed by Dr Long.

Scripture was an important everyday component of the vernacular of Western Europe in the 18thC, shared especially in Scotland by all members of even modestly educated groups (or classes, or orders, or what-you-will). And using apt quotes as part of conversational or epistolary "wit", whether from scripture or poetry or a Latin or French tag, was common place for the urbane and learned, among whom Adam Smith certainly was found. A Whig could quote wittily Alexander Pope or a Tory quote the 3rd Earl of Shaftesbury without indicating anything about his personal belief system. A person who didn't believe in particular Providence might nonetheless use a familiar phrase about Providence in lieu of Fate or Fortune. And so on...

I'd go further than your pointing to the fact that Smith's mother, with whom he often lived as an adult, raised him in a (moderate) Calvinist household. Smith's formal education and his teaching responsibilities required he be fluent in the philosophical implications of various niceties of competing Protestant doctrines. According to Phillipson's bio (I'm halfway thru and loving it), Smith raced thru the mandatory theology sessions of the course he gave in Moral Philosophy. But it was essential he cover those topics, and in a way that navigated dexterously among the most sensitive doctrinal issues that were producing massive amounts of both intellectual and political controversy in Scotland at the time. That Smith succeeded in avoiding attacks on his teaching suggests the depth and scope of his knowledge of theology as well as his political savvy, but says nothing about what his personal religious beliefs were.

Dr Long has to demonstrate more than comfort and familiarity with religious language if he is to argue that Smith was (probably) a "committed Christian." That sort of comfort and familiarity was shared by many heterodox intellectuals of the 18thC, whether Socinians or Deists or other sorts of "freethinkers", who were frequently rebels against a grim sort of Christianity they'd been force-fed as children or against the often narrow intellectual, social and political bigotry of the religious establishments, especially though not exclusively in Scotland.

Not to engage in too much snark, but while Dr Long was at Cambridge, didn't he take any courses from Skinner, which would have challenged the methodology Long has adopted for reading textual evidence? Or for that matter, did he read any of Skinner's oeuvre on Hobbes and note how subsequent writers (e.g. Locke) performed the delicate dance of drawing on Hobbes while avoiding the taint of being called a Hobbist? Even in the mid-18thC, any hint of skepticism was likely to elicit hysterical accusations of "Hobbist" or "Spinozist", which were still potentially fatal labels to be attached to a polite thinker like Adam Smith. More importantly, does Dr Long suggest Smith took positions in his writings that in any significant way depend on the core doctrines of Christianity (whether Calvinist or other)? Aren't Smith's philosophical priors for his "science of man" more consistent with those of his intellectual companion, David Hume, who was openly skeptical?

I've just finished Paul Russell's The Riddle of Hume's Treatise (which is, btw, a great road-map to the religious controversial literature in England and Scotland during the first half of the 18thC). After Russell's demonstration of a host of irreligious positions Hume developed in the Treatise, I ask myself whether Smith was any more likely than Hume to buy Clarke's physio-theology or Butler's natural religion apologetics for Christianity, to say nothing of Smith's likely rejection of Biblical revelation as "historical" evidence. And doesn't Smith break with Hutcheson's attempts to moderate Calvinist severity pretty much along the same lines as Hume's approach to human nature? Unlike Hume, Smith doesn't openly dismiss religious beliefs. But it seems to me Smith's thought no more depends on a Christian world-view than Hume's does.

Moral obligations are derived neither from the role of God as creator of mankind nor from salvic grace or promises of redemption, and Smith's history of human social development has no clear role for God as an intervening force in directing that history. Smith's moral virtues, adapted for a commercial culture, are derived as much from antiquity as from Christian models. If Smith was a committed Christian, it was a commitment to a Christianity mostly drained of both philosophical and day-to-day significance. Whatever Adam Smith's private religious beliefs, however, we can say with assurance that for both Smith and Hume, "The proper study of Mankind is Man." And it seems to me that any speculation on Smith's religion has to start from there.

Looking forward to your forthcoming chapter!”


Sunday, April 17, 2011

Ron Forthofer, a retired professor of biostatistics from the University of Texas School of Public Health in Houston, was a Green Party candidate for Congress and also for governor of Colorado, writes (16 April) in Dissident Voice (HERE):

Alternatives to Free-Market Capitalism

Americans have been exposed to so much propaganda about free-market capitalism that few ever think there is any other way of running an economy. However, if they were to examine this system, they would see that its focus is on economic growth and the maximization of profit. In theory, this system would create enough wealth so that everyone would benefit. However, during the last 30 years or so, we have seen changes in the rules that guarantee most of the increases in wealth go to those at the top. During this time, there has been little-to-no concern about the resulting harmful effects of this system on society.”

“Free-market devotees often quote Adam Smith on the seemingly all-knowing ‘invisible hand’ as justification for their free-market theology. Somehow these advocates ignore Smith’s warning about the invisible hand. For example, in an 1993 article Noam Chomsky wrote: “The invisible hand, he [Smith] wrote, will destroy the possibility of a decent human existence “unless government takes pains to prevent” this outcome, as must be assured in “every improved and civilized society.” It will destroy community, the environment and human values generally — and even the masters themselves, which is why the business classes have regularly called for state intervention to protect them from market forces.” Unfortunately, as the 2008 crisis and the recent attacks on collective bargaining have confirmed, Smith’s concern was well placed

Ron Forthofer confuses what some over-enthusiastic “devotees” of “free markets” say with the Adam Smith, born in Kirkcaldy in 1723. Competitive markets are more of an ideal than a reality in what we call modern capitalism. Those who “often quote Adam Smith on the seemingly all-knowing ‘invisible hand’ as justification for their free-market theology” make a first-order error in associating “the seemingly all-knowing ‘invisible hand’” with Adam Smith’s use of the IH metaphor, which was altogether much more modest than their claims for it.

Ron Forthofer makes another first-order error in quoting Noam Chomsky’s own first-order error in his statement that claims that Adam Smith from Kirkcaldy ever wrote: “The invisible hand, he [Smith] wrote, will destroy the possibility of a decent human existence “unless government takes pains to prevent” this outcome, as must be assured in “every improved and civilized society.”

He never made any such statement in relation to the only two times that Smith made reference to “an invisible hand” – once in Moral Sentiments (TMS Part 4, Chapter 1, paragraph 9, page 184) where he wrote about ‘proud and unfeeling landlords’ and their feeding their peasants out of the produce of his fields (a consequence of his necessity to do so if the wanted his riches and greatness to continue from their toil - no subsistence, no toil) which had nothing to do with the IH “destroy[ing} the possibility of a decent human existence”. Smith’s very point was the exact opposite!

Being ‘led by an invisible hand’ led landlords to feed their peasants to prolong their lives and, unintentionally, led them to promote the “multiplication of the species” (all references to Smith on Lost Legacy always are to the definitive Glasgow Edition of the Works and Correspondence of Adam Smith, published by Oxford University Press).

From the quotation that includes the part sentence “unless government takes pains to prevent” this outcome, quoted by Ron Forthofer and apparently attributed to Noam Chomsky, actually comes from Wealth Of Nations (Book V.i.f.50, page 782) in a discussion about government arranging for the education of working-age children in ‘little schools’ in each parish in England (they already existed in Scotland, where Adam Smith lived). This admonition had nothing whatsoever to do with Adam Smith’s use of the IH metaphor and it is not valid (to put it politely) to suggest that it was, or that “Smith’s concern was well placed” in relation to the metaphor of ‘an invisible hand’ – he was concerned about the lack of education among youngsters who formed the bulk of the common labourers.

For completion, Adam Smith’s second use of the IH metaphor was in relation to some merchant traders who preferred not to invest their capital abroad because they perceived the greater risks in doing so, compared to the relatively safer practice of investing it domestically. The unintentional consequence of them doing so added to ‘annual revenue and employment’, considered as public benefits by Adam Smith because employment on the 18th-century was the only way for poor labourers to receive incomes that were otherwise unavailable to them.

Again the IH metaphor had nothing to do ‘free market ideology’. In the first case in Moral sentiments it was about the unintentional consequences of feeding peasants, serfs and slaves from the produce of land undertaken by their toil but owned by the “unfeeling landlords”. Invisible necessity “led them to do so, not their humanity (Smith had no illusions about the “rulers of mankind”). That was the object or meaning of the IH metaphor as used by Smith from Kirkcaldy.

In the second case, the unintentional consequences of the risk avoidance felt by some (but not all) merchants to avoid foreign risks and to invest locally was to the raise “domestic annual revenue and employment”. It was their perceived risks that led them to do so. Risk avoidance was the object – meaning – of the Adam Smith use of the IH metaphor.

Feudal Europe had little to do with markets, free, regulated, or otherwise; Mercantile Britain had little to do with free markets –they were riddled with monopoly laws, tariff protection, outright bans of certain imports, primogeniture, entails, and Guilds.

I suggest you read the previous post (below), which discusses these points and also discusses Adam Smith’s teaching on the role of metaphors in the English language, which I am sure that Noam Chomsky and his students know a lot about.

Those “devotees” of “free markets” that Ron speaks of are not representative of Adam Smith’s thinking (in fact they too make much of it up) and Ron quoting Chomsky appears to make it up too. Advocates of competitive markets on Lost Legacy are somewhat different in that they make the case and always quote the authentic Adam Smith without making anything up about him.

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A Reader's Question and An Answer

A reader asks:

Dear Professor, I have not understood, really, your comment on my comment on invisible hand: what I wrote in very plain and uncontroversial for any serious scholar of Smith. Why you comment it critically? I have dedicated many papers and some books to Smith, and I think to know enough his theory of invisible hand to comment it properly, isn't?

To which I respond:

Dear Reader,
You do not say how many of the posts on Lost Legacy you have read but I did not elaborate on my criticism of your reference to Adam Smith’s ‘idea of invisible hand’ represented in your post:

““Smith's idea of invisible hand (mentioned more than once) is actually very central in both his theory of market (wealth of nations) and in his theory of human sentiments and social behaviour: the invisible hand mechanism is one of the most powerful idea in modern social sciences”.”

The two examples of Smith’s use of the metaphor of ‘an invisible hand’ in Moral Sentiments and Wealth Of Nations are not about “his theory of markets”, which he elaborates in Books I and II without mentioning the IH metaphor. Moreover, the sole example he gives of the IH metaphor in Book IV has no connection to his theory of markets. Likewise, in Moral Sentiments his example of the IH metaphor also is not about markets.

Next, I suggest we examine what Adam Smith said about using metaphors in English grammar, remembering that Smith was an accomplished public lecturer in Rhetoric from 1748 to 1751 in Edinburgh and from 1751-64 in Glasgow (Rhetoric was part of a Moral Philosophy degree in the 18th century). Few traces have been found of Smith’s original text. One such were “Notes of Dr Smith’s Rhetorick Lectures” that was found in a manor-house sale in Aberdeenshire by John M. Lothian (1896-1970) in 1961 (and published by him as Lectures on Rhetoric and Belles Lettres Delivered in the University of Glasgow by Adam Smith, Reported by a Student in 1762-63 (Nelson, 1963). These student Notes were re-edited by J. C. Bryce (and A. S. Skinner) and published as Lectures on Rhetoric and Belles Lettres for the Glasgow Edition of the Works and Correspondence of Adam Smith by the Oxford University Press in 1983 (available from Liberty Fund, 1985).
Adam Smith taught that the role of a metaphor is to “describe in the more striking and interesting manner” its object (Adam Smith, “Lectures on Rhetoric and Belles Lettres” [1762-3] 1983, p 29).

In Moral Sentiments Smith’s use of the IH metaphor was about how proud and unfeeling rich landlords in feudal Europe fed their retainers, serfs and slaves, who, with their families, otherwise would die of starvation. If they could not work who, then, would work the ‘rich and unfeeling landlords’ fields and who would keep out intruders, and who would keep the other poor at bay, and also help keep other lordly rivals from taking over the fields of their masters? This meant that the rich landlords had to share their harvests with their underlings, just as much as servants, serfs, and slaves had to work to get fed. The IH metaphor referred to the consequences of this necessary mutual dependence, policed by the Feudal Lord's power and oppression. But it had nothing to do with how markets work (peasants were not hired in a market economy).

In Wealth Of Nations, some merchants, but obviously not all, traded with and invested in the colonial settlements in North America, the Caribbean, Africa, and India –and continental Europe - but other merchants preferred to invest their capital domestically, where it was under their immediate control, rather than risk it by sending it abroad at the mercy of events (shipwreck, piracy and war) beyond their control. The merchants also distrusted people they did not know, who were not subject to UK justice. Therefore, they invested solely in the domestic economy, but in doing so, unintentionally, they added to domestic revenues and employment (public benefits in Smith’s view). He used the IH metaphor to describe ‘in a more striking and interesting manner’ the consequence of their risk aversion leading to this public benefit, without making any reference to how markets work, or to greater ‘harmony’ or to the ‘magical’ distribution of the benefits. It was simply the consequential arithmetic rule that the ‘whole is the sum of its parts’.

In TMS Smith referred to feudal landlords being led by the IH to feed their serfs, slaves and retainers, which enabled them to work for him and, unintentionally, contributed to the propagation of the human species; in WN he referred to some, but not all, merchants whose insecurity about the risks of foreign and colonial trade being led by an IH to prefer to invest in the ‘domestick’ market, which added to “annual output and employment” (an example of the simple arithmetic rule that the whole is the sum of its parts).

In each case, the object of the metaphor is specified: in TMS, the landlords were ‘led by an invisible hand’, out of the necessity of feeding their serfs, peasants and retainers if they were to survive to work through the seasons and the winters; in WN, the risk averse merchants were ‘led by an invisible hand’ to invest locally, to avoid the higher risk of the loss of their capital and their destitution that could follow.

[In Smith’s third use of the IH metaphor in his History of Astronomy (published posthumously in 1975) heathen Romans feared ‘the invisible hand of Jupiter’ (their stone god), who they believed fired thunderbolts from his pointed finger at enemies of Rome (Smith called it their ‘pusillanimous superstition’, but again absolutely nothing to do with his theory of markets)].

Hugh Blair, who followed Adam Smith as a lecturer in rhetoric at Edinburgh University published his own lectures in the 1800s, Lectures on Rhetoric and Belles Lettres, 3 volumes, London. Vol. 1, Lecture XV: describes Metaphors and gives examples as:

“founded entirely on the resemblance which one object bears to another … it is no other than a comparison, expressed in an abridged form.
When I say of some great minister ‘ upholds the state, like a pillar which supports the weight of a whole edifice’, I fairly make a comparison; but when I say of such a minister ‘that he is a pillar of the state’, it has now become a metaphor. The comparison betwixt the minister and a pillar is made in the mind, but it is expressed without any words that denote comparison. The comparison is only insinuated, not expressed, the object is supposed to be so like the other, without formally drawing the comparison; the name of one may be put in place of the other” (pp 342-3).

This literary explanation given by Hugh Blair of the role of metaphors corresponds well with Adam Smith’s rougher spoken words, but clearly means the same (as it still does in modern English).

For these reasons, I critically commented on your remarks that “the invisible hand mechanism is one of the most powerful idea in modern social sciences”. This ignores Smith’s specified role of the IH metaphor in the English language (I cannot speak for other languages). The only question is what were the objects for the IH metaphor in the case in Moral Sentiments and Wealth Of Nations?

I suggest in Moral Sentiments the IH metaphor expresses in a “more striking and interesting manner” its object, namely, the invisible compulsion of necessity that drives rich landlords to feed their peasants and their families so that they continued to toil in his fields, which makes him and his family rich and ‘great’ – no food, no toil; no toil no food.

I also suggest in Wealth Of Nations the IH metaphor expresses in a “more striking and interesting manner” its object, namely, the invisible’ compulsion to avoid perceived foreign risks by investing their capital domestically that raises ‘the annual revenue and employment’ higher than it would be if they had sent it abroad – lower domestic investment lowers domestic revenue and employment.

Yes, I accept that this is somewhat different from the modern texts read by students and taught by modern economists (and widely believed in the media). But Oscar Lange (a Marxist) and Paul Samuelson (an exponent of the capitalist mixed economy) introduced the modern version of Adam Smith’s use of the IH metaphor in the 1940s and it was boosted by modern theories of welfare economics and general equilibrium. For this the IH metaphor was hijacked, so to speak, to give their theories an authoritative pedigree back to Adam Smith.

Lost Legacy works tirelessly to draw attention to what Adam Smith actually wrote against the stubborn resistance of most of my colleagues who defend their modern version eloquently with many other modern theories, though none of them are related to Adam Smith’s meaning. I base my case solely on Smith’s works, which is the best guide to his meaning.


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Friday, April 15, 2011

A Model Debate on Adam Smith and Religion

There is an interesting example of an exchange between John Lindgren (a retired economics professor from NDSU and President of the Red River Freethinkers in Fargo, ND. He was also Mayor of Fargo for 16 years) and 'Entech’ – a regular correspondent on Lost Legacy – on the Red River Freethinkers Bog (HERE):

“Economics of Religion 101”

Follow the link to read the excellent exchange about Adam Smith.


Wednesday, April 13, 2011

On Adam Smith’s Alleged theism

I am working hard on my chapter for the forthcoming Handbook on Adam Smith (Oxford University Press), edited by Chris Berry of Glasgow University.

Among my notes of scholars who take an entirely different view to mine (roughly that Adam Smith deliberately hid his private and critical views on the religion throughout his adult life because of the existing dominance of the church on all aspects and all levels of life in Scotland and England which made its zealous members censorious and at times violent). I have read closely the views of Brendon Long (PhD from Cambridge in Theology), of which examples can be found at:

Long, B. 2009. ‘Adam Smith’s Theism”, editor, Jeffery T. Young, pp 71-99. Elgar Companion to Adam Smith, Cheltenham: Edward Elgar.

In Table 4.1 ‘References to scripture in the Smithian corpus,’ pp.75-6, is an example of what I am up against:

Brendon locates one of Smith’s Biblical references in a fairly innocuous remark where Smith complains about some printer’s errors in transcribing his careful words from his manuscript o Moral Sentiments (1759). Smith complains to Strahan, his London printer about the:

manifold sins and inequities you have been guilty of in printing my book. The first six, at least the first third, and fourth and sixth are what you call sins against the holy Ghost, which cannot upon any count be pardoned. The Remainder are capable of remission in case of repentance, humiliation and contrition.’ (Letter no. 54, 73, to William Strahan, Printer, in London, from Smith in Glasgow, 30 December, 1760; Adam Smith's Correspondence, Oxford, 1980.

Brendon Long claims that Smith’s use of a Biblical phrase is evidence of Smith’s religiosity, concluding that:

The reference is not a substantive theological point, more of a whimsical comment to Strahan [Smith’s publisher], but it reveals a strong comfortability with the discourse of a committed Christian’. (Jeffery T. Young pp 71-9). [p 75, Table 4.1].

It is always essential in conducting debates critiquing someone’s assertions to check all references, which I did some time ago and made these notes:

The actual Biblical reference is:

Matthew: 12.31:

‘And so I tell you, every sin and blasphemy will be forgiven men, but the blasphemy against the Spirit will not be forgiven’.

Brendon Long presumes that this shows is evidence of Smith’s Christian commitment by asserting, first, that Smith writes in a mere ‘whimsical’ tone and, second, that after Smith's ‘whimsical’ remark, he “reveals a strong comfortability with the discourse of a committed Christian”.

I suggest that Smith’s actual words can also be interpreted as showing his ‘strong comfortability when conducting a discourse with a committed Christian in a theological manner’ without it implying anything more. Smith was familiar with Calvinist theology (which his mother ensured he knew about, as part of the normal education and preparation of passing examination by the local Presbyterian minister in Kirkcaldy for his acceptance into the Kirk around 10-11 years old).

In fact, throughout his life he remained familiar with the (moderate) Calvinist doctrine and its interpretation of the Bible that his mother expected from him (he is known to have had an excellent retentive memory) and he demonstrated exactly this in Moral Sentiments, his lectures (including those on rhetoric in Lectures on Rhetoric and Belles Lettres (1763) , and his Lectures On Jurisprudence (1762), and, most importantly, in his History of Astronomy (1744-c.48), which generations of readers – and modern scholars – have failed to recognise because, like Brendon Long, they read his Works already convinced that Smith was religious or are in denial about his scepticism.

But strip away that presumption and read his Works as a Calvinist zealot searching for heresy might, and you find more than a few signals that Adam Smith hid his scepticism almost too well for the less accomplished men he was up against. He knew his Bible and doctrine better than most and I attempt to show this in my chapter.

I should point out that I had the great pleasure of meeting and debating with Brendon Long in Sydney, Australia in February 2010 on Smith’s alleged religiosity in front of an audience of about 40 people. He is a fine scholar, but we agreed to disagree in the best possible good taste.


Sunday, April 10, 2011

A Debate Continues on What Adam Smith Meant On the Role of Education in Limiting Political Risk

If you scroll down to "Smith On the Political Risks of the Absence of Education on the Division of Labour" and you will find article
by Kevin Quinn on the Econspeak Blog: "“Adam Smith on Education” with 7 (at present) comments, including several of mine and several from Frank Howland .

You might find this scholarly debate interesting, both for their contents and for the exemplary good manners, as they should be in the Republic of Letters.


Saturday, April 09, 2011

A Tale of Two Prophets

Michael Parenti writes (8 April) on Profit Pathology And The Disposable Planet on Seismologik Blog (HERE):

“Free Market Uber Alles”

“It was a familiar argument: the company had no choice. It was compelled to act that way in a competitive market. The mill was not in the business of protecting the environment; it was in the business of making a profit, the highest possible profit at the highest possible rate of return. Profit is the name of the game, as business leaders make clear when pressed on the point. The overriding purpose of business is capital accumulation.

To justify its single-minded profiteering, corporate America promotes the classic laissez-faire theory, which claims that the free market - a congestion of unregulated and unbridled enterprises all selfishly pursuing their own ends - is governed by a benign "invisible hand" that miraculously produces optimal outputs for everybody.

The free marketeers have a deep, all-abiding faith in laissez-faire, for it is a faith that serves them well. It means no government oversight, no being held accountable for the environmental disasters they perpetrate. Like greedy, spoiled brats, they repeatedly get bailed out by the government (some free market!) so that they can continue to take irresponsible risks, plunder the land, poison the seas, sicken whole communities, lay waste to entire regions and pocket obscene profits

Michael Parenti is a man with a mission, of which I have no comment as it is largely a political message and I exercise a self-denying ordinance not to discus politics outside of the country in which I vote (Scotland) – individuals have so little influence where they live that outside where they vote their influence is of epsilon value.

However, I am interested in economics and I was struck by his highly polemical presentation of how economies operate and he shows how doubtful ideas about economics can be hauled out into the service of good causes (the future of the planet) when they are almost absolutely wrong. The road to hell is paved with good intentions …

Parenti paraphrases an argument associated with Milton Friedman (the sole purpose of a corporation is to make money for its shareholders, etc.). That Milton Friedman said something does not make it right or wrong – it all depends.

Profit is the name of the game, as business leaders make clear when pressed on the point. The overriding purpose of business is capital accumulation.”

Parenti makes this sound dirty. In fact, if Parenti thought about it and what the consequences would be of legislating to prevent it, he might think again.

Let us start with ‘profit’. This can be defined as the surplus above all the individual’s costs of making something and selling it to customers in a period of time. If there is no profit, no surplus above costs – indeed, if there is a loss – then the individual or firm is ‘worse off’ than it was before engaging in its activity. Why then would the individual or firm continue to engage in whatever activity to make something that makes it worse off?

Now, I am not making asking this question as a debating trick. Did not the prophet from Galilee ask exactly the same question:
“What does a man gain if he gains the whole world but loses his soul?

Without the prospect of a gain, no activity in search of gain would be undertaken. Hence Parenti should think about that before enunciating that the search for gain is a moral failing.

I suggest that Parenti’s complaint is really about the individual or firm deliberately ignoring some of the costs of activity in pursuit of gain that have detrimental costs on society (pollution, poison, degradation, ill-health, and so on). That is quite different from attacking all profit in pursuit of gain, as it would be for Parenti to attack a hunter in a simpler society who expends more energy in catching something to feed the family that depend on his/her hunting skills and comes back with insufficient sources of calorie intake to sustain either him/her to continue hunting for the family to survive the season.

Parenti takes the inevitable necessities of activity to sustain economic circulation and twists them into heinous crimes to suit his deeply felt political agenda. Parenti’s publicity describes him as ‘charismatic’, and I can well imagine he is, but I recall another charismatic leader who was given to adding ‘Uber Alles’ to his depraved ravings about an innocent minority he charged with heinous responsibility for the crisis in his country.

Parentis claims that “the classic laissez-faire theory, which claims that the free market - a congestion of unregulated and unbridled enterprises all selfishly pursuing their own ends - is governed by a benign "invisible hand" that miraculously produces optimal outputs for everybody”.

This charge, of course, is nonsense in spades: ‘laissez-faire’ was not a theory; it was part of a phrase spoken in 1680 by a ‘plain spoken merchant’ (a M. Legrande) to the French Finance Minister, Colbert, when asked what he wanted the government to do to for ‘the benefit of trade’, to which Legrande replied ‘laissez nous faire’ (‘leave us alone’).

Noticeably ‘the sensible’ M. Legrande did not mention anything about leaving his customers alone to enjoy a competitive market, because Legrande’s cry was not for the benefit of his customers. Later this phrase became transcribed into the rallying cry of the 19th-century mill and mine owners (and their bought-for party men) facing legislation to limit hours of work and the employment of women and infant children (though no such cried for laissez-faire from the farming interests than benefitted from the protectionist Corn Laws that kept cheaper continental food out of the British market. Those industrial interests that opposed the Corn Laws and agitated to repeal them, saw cheaper bread as a way to reduce factory wages (I am not being deliberately too cynical here).

My point is that life is more complicated than Parenti appears to appreciate. Neither the rich, nor the poor, are monolithic entities, their motives are mixed; their needs are contradictory.

The reference to “the ‘free market’ that is governed by an ‘invisible hand’ that miraculously produces optimal outputs for everybody’ is an idea invented in the 1940s (Oscar Lange, 1947; Paul Samuelson, 1948) and boosted by General Equilibrium and Welfare theories from the 1960s. It has become of ideological significance among many modern economists against which much time and effort is devoted on Lost Legacy. Intellectually, the invisible-hand’ as a theory is a busted flush, but is useful to Parenti’s rhetoric to whip up enthusiasm among his readers (author of several books) and listeners (regular radio speaker) to generate an income of sorts.

If Parenti relies on such income for his sustenance, he will know that if the expense of producing his book and broadcasts, cost more than he receives in return (in short, he makes losses) he either has to cut costs or raise revenue (and eventually in even shorter fashion) give up his evangelising.

I understand that, and I am sure that he does too. Welcome to capitalism, Michael.

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Thursday, April 07, 2011

Smith On the Political Risks of the Absence of Education on the Division of Labour

Kevin Quinn writes (6 April) on Econspeak Blog (HERE):

“Adam Smith on Education”

“I gave a talk last week at a local college called "What is living in the thought of Adam Smith and dead as a doornail in modern economics." One focus of the talk was this passage from Book V of WN:”

“In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expence of his intellectual, social, and martial virtues. But in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it (WN V.i.f.50: 782)”.

Notice Smith’s rationale for government intervention here: this has nothing to do with correcting a market failure, nothing to do with efficiency; the argument is that the great body of the people produced by a commercial society with a refined division of labor would otherwise be, as he goes on to say, "deformed in an essential part of their humanity." And this is most emphatically not education as "human capital." Tellingly, when I ask my history of economic thought students to write about Smith on the Division of labor, after we have looked at the first three chapters and the passage from which the quote above is lifted, and I ask were they any qualifications Smith made to his enthusiasm for the DOL in the opening chapters, students will cite this passage and say that here Smith is saying that The DOL may in fact make people stupid and so less productive after all!!! Obviously they have completely misread this passage. Why? They have already been so indoctrinated by their study of economics that they cannot think about what Smith thought was crucial - the way in which economic institutions shape character and preferences, for ill (as in this passage) or for good (there is lots in Smith of course about the way markets promote the virtue of prudence, eg). The further implication that one cannot evaluate economic institutions without evaluating the preference they promote or hinder is again simply unthinkable for someone who has received the standard education in economics, where the idea of evaluating preferences is a veritable contradiction in terms - since the efficient satisfaction of exogenous preferences is the sole evaluative criterion countenanced, and anyone who thinks otherwise is committing the grave sin of paternalism.”

Kevin Quinn’s correction of the error in his student’s way of thinking is welcome as far as it goes. But I suggest a wider consideration may be appropriate. True, Smith is often quoted by many tutors in explanation of this paragraph along the lines of Quinn’s students (before they receive his explanation), but most tutors (I blame their tutors!) miss a more fundamental explanation lying dormant in Smith’s purpose of writing what he did about the division of labour at this precise position in his text (Book V instead of in Book I where he introduces the subject of the DOL).

Quinn notes that “one cannot evaluate economic institutions without evaluating the preference they promote or hinder”, to which I would add that the situation in 18th-century England was pretty dire, except for the better off children , but less dire in 18th-century Scotland with its longstanding ‘little schools’ in the Parishes mainly under the guidance of the Presbyterian Church and other benfactors and funded by donations, bequests, and charities for all children – though mainly for boys in common with the prejudices of the age. Most children of the poor majority of the population were not educated at all and were illiterate and innumerate from when they began working for a few pence a day (if their parents found work for them) to make ends meet – and a few shillings a day until they died closer to their 30s than to their 60s.

Smith used the basic education of the young in Book V in association with the political-moral consequences of the absence of any institutions of education in order to motivate middle and upper orders who read his work to support extending ‘little schools’ in every parish in England (60,000 of them) with fears of masses of subversive lower orders, led by dangerous and ‘enthusiastic’ fanatics. As the overwhelming majority of his readers were more than likely never to experience the actual division of labour, his rhetoric was likely to affect some of them.

Smith’s message in Book V was that it wasn’t that the division of labour caused ignorance and its consequent political or moral risks; it was the existing and longstanding habits of ignorance from a total lack of education among the poorer orders that caused its political and moral risks, unless (note well) “government takes some pains to prevent it”. (Smith did not expect the government to fund the little schools totally - they were to be locally funded, as many oF them were in Scotland).

Some of our finest scholars among historians of economic thought have not yet realized the simple point Smith was actually making (and ascribe to an ‘inconsistency’ to his WM), so it is no wonder that Jonathan’s students misread this passage to say that here Smith was saying that The DOL’ may in fact make people stupid and so less productive after all!!! Obviously they have completely misread this passage.”

Yes, indeed. Thank goodness then that Kevin’s students had Kevin on hand to gently lead them away from the normal ‘misreading’ of the passage – perhaps he might consider taking them just a little further, as above, to reinforce his timely correction?

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On Misreading Adam Smith

Jonathan Pearce, a principal contributor, writes ‘Inquiring into Adam Smith” in Samizdat Bog (HERE):

"Smith did believe free markets could better the world. He once said, in a paper delivered to a learned society, that progress required "little else...but peace, easy taxes, and tolerable administration of justice." But those three things were then - and are now - the three hardest things in the world to find. Smith preached against the gravitational load of power and privilege that always will, if it can, fall upon our livelihood. The Wealth of Nations is a sturdy bulwark of a homily on liberty and honest enterprise. It does go on and on. But sermons must last a long time for the same reason that walls must. The wall isn't trying to change the roof's mind about crushing us."

P.J. O'Rourke, On the Wealth of Nations … is a terrifically well-written, concise look at Smith, who wrote not just WoN but also on moral philosophy, jurisprudence and many other things. What O'Rourke does is tease out some of the contradictions as well as the great insights of Scotland's most famous thinker apart from David Hume (the men were both great friends). What is particularly good is that although Smith was considered - not always accurately - to be the great-grandaddy of laissez-faire economics (he did not invent that term), he was much more than that. He was no ardent minimal statist although he would certainly have been horrified by the extent of state power in our own time. He supported state-backed funding of education for the poor, for example. He was not particularly fond of businessmen and some of his comments on the latter's tendencies to collude smacked almost of that fear of big business that later spawned the madness known as anti-trust legislation in the US and elsewhere. He supported a version of the labour theory of value that was ultimately taken to its absurd conclusion by Marx; but Smith being Smith, he was the sort of man who also kind of understood that the value of something is what people will pay for it, nothing else. ...

James Buchan (Adam Smith: and the Pursuit of Perfect Liberty) has done more to write about Smith the man, and his book is pretty good, overall. Buchan paints a highly sympathetic portrait of Smith. It is marred slightly by Buchan's strenuous effort to play down the extent to which Smith can be seen as a great advocate of capitalism. True, as I have said above, Smith was no rigid minimal statist, let alone an anarcho-capitalist like Murray Rothbard, but it would frankly be a bit disingenuous to claim that Smith was anything other than a champion of the open market, limited, small, government, low taxes and free trade.

It is in fact interesting that some on the left feel the need to try and claim Smith for their side (I write this with the obvious admission that the word "left" is problematical). Socialists can only try to claim Smith by picking on his occasional jibes at businessmen, building up his support for some kinds of public works and so forth; but they then have to skim over his large criticisms of the dangers of overweening state power and his admiration for the wonders of the open marketplace and the division of labour. But was Smith a "radical" and an "egalitarian"? He was radical, true, in the sense of trying to get to the root of things in explaining how an economy worked but he was not a narrow system-builder in the manner of the French Physiocrats. …

I do not recognize P. J. O’Rourke as a reliable exponent of Adam Smith’s works, though I consider James Buchan is one of the ablest popularisers of Adam Smith’s life and work. Jonathan tries to strike a balance between the extreme Libertarian interpretation of Adam Smith as an exponent of laissez-faire capitalism (all three words which he never used) and the ‘left wing’ interpretation of him as some sort of social democratic egalitarian, hence comfortable bed-side reading for exponents of what used to be called ‘New Labour’ in the UK, such as Tony Blair and Gordon Brown.

I am glad we agree he was never a forerunner of Ayn Rand and that Murray Rothbard (Mises Institute) was a loose canon in his indictment of Adam Smith.

I am not convinced the Jonathan Pearce is correct on his understanding of Smith’s position on the ‘larger’/‘smaller’ state confusion in modern discourse. Much about Smith’s attitude to the size of the debate about ‘how big’ it should be is buried in his critique of the mercantile state from pre-Elizabethan times to the late 18th century (and we could apply it further into the ‘imperialist’ mercantile state post-the American rebellion through the second British Empire).

Son sharp is Smith’s critique, including to the follies of state sponsorship of such corrupt chartered trading companies (bribes all round to King and parliament) that his quotable lines on merchants and manufacturers are ready ammunition for ‘minimal state’ advocates and today’s socialists. For obvious reasons, 18th-century sedition laws and extra-legal practices acted as a brake on Smith’s veracity in such matters, leading to modern misreading of his texts.

Smith regarded the function of government historically as a positive force for protecting property in all societies that inadvertently and unintentionally promoted the possibility of unequal opulence, which he saw as a positive improvement to the alternative of staying in the first ‘hunting’ age of man, with lower living standards (taken in their whole meaning) than the lowest levels of equal ‘savagery’ (which prevailed in newly explored nations in the Americas, Africa and parts of south Asia and awaited in their ‘innocence’ in Australasia ).


Monday, April 04, 2011

Two Cases of Mistaken Identity

A book review (3 April) in The Dartmouth Review (HERE):

“Dartmouth College Professor Creating Homo Economicus”

In the past few years, it has become ever more apparent that the Homo economicus that Adam Smith postulated does not exist. For those of our readers who are not acolytes in the dismal science, Homo economicus is the "economic man" or a consumer who makes the perfectly rational decision and thus maximizes his self-interest. A great deal of ancient economic theory depended upon this conceptual man, but more and more research has proven that small details can entirely change people's behavior.”

When I first saw the Dartmouth Review, I thought, with horror, that I was about to criticise a publication from The Royal Naval College, Dartmouth in England, which I visited long ago to deliver a paper on some aspect of defence economics (my specialist subject at the time) to a class of its young officers in the company of a visiting panel of admirals and senior captains. Then I looked closer at the post and realized it was an American college, so I relaxed a little.

Adam Smith never had a theory of Homo economicus, a wholly late 19th -century notion assembled over a hundred years after Smith died in 1790. The author of the piece, a ‘Dartmouth professor’ no less, is absolutely wrong in his (perhaps her) wrongful attribution.

Smith did not have a notion of "economic man" or a consumer who makes the perfectly rational decision and thus maximizes his self-interest.” Wrong person and also wrongly dated too. “Perfectly rational economic man” is a modern notion (not Smith's) among mathematicians and theorists – it makes their equations work, mathematically perhaps, though not in the real world.

I trust the officers at Dartmouth are better equipped in their navigation classes than in economics.

Incidentally, sneers of the ‘dismal science’ variety are actually a wholly racial diatribe from Carlyle in his rabid pamphlet “On the Negro Question” and had nothing to do with either Malthus or Ricardo from the 1800s, but was a disgusting attack on the views of John S. Mill for his perfectly sound views in support of the equality of black slaves and their shared humanity with whites, an idea that his racist critics abhorred.

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What Some Academics Debate About

Luigino Bruni posts on an international web board, Societies for the History of Economics (SHOE), to which many academics interested in the subject (broadly defined) are readers and occasional contributors.

Presently, one subject is a discussion of a member’s question: when it was first asserted that “Adam Smith, was the ‘Founding Father’ of Modern Economics?”

A recent contributor, somewhat annoyed at the tone of the many erudite contributions, mainly quoting from early textbooks that may answer the question (a bit like a trip down memory lane for me), posted his viewpoint, which for obvious reasons to readers of Lost Legacy attracted my attention.

Smith's idea of invisible hand (mentioned more than once) is actually very central in both his theory of market (wealth of nations) and in his theory of human sentiments and social behaviour: the invisible hand mechanism is one of the most powerful idea in modern social sciences”.

This contribution among (serious) contributions from historians of economic thought is quite out of step with the historical facts as they apply to Adam Smith, and as regularly documented here on Lost Legacy.

I have kept out of this debate for some weeks since it started because opinions of when, or indeed, whether, Adam Smith was the ‘founder’ of economics is not of great interest to the central theme of Lost Legacy.

It tends to be asserted as part of modern assertions that Adam Smith promoted laissez-faire capitalism and other notions that are more ideological than scholarly.

There are occasional squabbles too over rival claims to this accolade involving Richard Cantilon (1735) or Turgot (1755), or David Ricardo (1817), and even to James Steuart (1767).

Luigino Bruni has widened the argument with entirely dubious propositions about Adam Smith’s use of he metaphor of ‘an invisible hand’ that in their modern form date from the late 1940s (Paul Samuelson and Oscar Lange) and the welfare economists in tandem with the creators of general equilibrium theories in the 1960s (Arrow, Debreu), and in a strange way, with Mises, Hayek and Libertarians too (see contribution from Daniel Klein, most recently in the `March issue of The Journal of Economic Affairs).

If these modern theorists hold views about their meaning of the ‘invisible hand’, in my opinion, it is a perfectly legitimate that they express them, but once they start ascribing their own meanings to Adam Smith, they are up against the historical facts. This may be the case of Luigino Bruni is declamation (unless in the unlikely case that it is a provocation by a troll, of which I am always suspicious of in web disputes).

The Adam Smith, born in Kirkcaldy in 1723, is among the most misquoted and misattributed authors in this modern age.

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Aye, Those Canny Scots...

John Churchill posts (3 April) in the Phi Beta Kappa blog (HERE):

“Those Canny Scots”

“Smith, of course, looms in almost cartoonish effigy over economic struggles of our own day. As the apostle of the free market, and source of the notorious “invisible hand” metaphor, he is trotted out with great regularity as the canonical spokesman of “laissez-faire” capitalism and the principle that public regulation of private enterprise is at best a necessary evil, to be minimized when it cannot be avoided altogether.

One might begin to question the adequacy of Smith’s perspective to the present day with the observation that he lived and wrote before industrial modes of production, urbanization, and the explosive growth of technologies ─ not least those of transportation ─ and populations had begun to give shape to the world in which we now live. The water frame and the spinning jenny had barely been invented in the years in which he wrote, and the power loom appeared a decade after. It is fascinating but ultimately elusive of resolution to speculate what he would have made of our world.

Still, we can note some things that turn up in the Wealth of Nations that seem, in interesting ways, to cut against the grain of the popular image Smith has been given. For example, he notes that, while one might assume that the point of production is to provide for consumption, the interests of consumers are often sacrificed to those of producers. His example is the maintenance of the (then) North American and West Indian colonies: “A great empire has been established for the sole purpose of raising up a nation of customers who should be obliged to buy from the shops of our different producers. . . . For the sake of that little enhancement of price. . . ., the home-consumers have been burdened with the whole expense of maintaining and defending that empire.” Cold Scots logic, that.

John Churchill, unlike many modern economists, is spot on with his short post on the authentic Adam Smith, particularly on the presumption that he was as apostle of laissez-faire (words he never used; nor did he use the word ‘capitalism’, first used in English in 1854), which is often confused with the 17th-18th century ideas of natural liberty from Grotius, Pufendorf, Carmichael, and Hutcheson and learned by Adam Smith when a student at Glasgow University.

I liked the description of him being the modern “source of the notorious ‘invisible hand’ metaphor”, a commonly used metaphor in the 17th-18th centuries by theologians, moralists, historians, preachers, and playwrights (Shakespeare) and novelists (Defoe, Walpole) [see also Professor Harrison’ paper on Adam Smith and the ‘invisible Hand in the September 2010 issue of the Journal of the History of Ideas) long before Adam Smith used it only three times for quite different purposes (and only once in Wealth Of Nations).

Modern economists made Smiths use of the ‘invisible-hand’ metaphor “notorious”, and without foundation in how Adam Smith used it, and applied it to contexts far removed from Smith’s use (most of whom apparently have not yet read Adam Smith on the proper use of metaphors, available in his Lectures On Rhetoric and Belles Lettres, [1763] 1983, p 29, Oxford University Press).

And, as the inimitable Robert Burns put it A Dream:

facts are chiels that winna ding’ An downa be disputed’. (“A Dream’)

In English this translates as:

“facts are fellows that will not be overturned, And cannot be disputed”.

Can I say more?

John’s praise of Hume and Smith as the ‘canny Scots’ is appreciated.

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