Saturday, April 23, 2016


MARTIN CONRAD is the chief investment strategist at C.I.G., a private investment group, posts in Barron’s HERE 
"How The Wealth of Nations Made Us All Wealthier"

"Adam Smith’s great book pointed out the modern path to the enrichment of whole societies through cooperative self-interest."

Martin Conrad, chief investment strategist at CIG group] eulogises a modern assessment of Adam Smith (1723-90), quite contrary to the facts.  Smith was by most measures a talented and path-breaking theorist - however he did not walk on water. He carefully analysed the past history of humankind through various stadial events - broadly, ‘savagery’ through to Hunting, Shepherding, Farming and ('at last') Commerce. He did not make predictions of the future - except one prediction in respect of the new ex-British states formed in North America where he predicted they would be the wealthiest in the world by the 1880s].

Smith did not describe the “economic achievement of Europe” as “comparatively low” as there was little to compare it with in 1770; the Netherlands were growing economically and so were the southern counties of England (Scotland’s northern ‘Highlands’ remained backward compared to parts of the central lowlands - Glasgow and Edinburgh).
Martin Conrad writes: “Smith argued that man was an economic animal who, by his bargaining and exchanging in the marketplace could benefit from the diverse talents and genius of all his fellow men.” Yet Smith wrote in his Lectures on Jurisprudence (1763) and partly in Wealth of Nations (1776) that “exchange” was a human trait that differentiated the species from all other animals and had done so since humans first appeared (evolved?) deep in pre-history. The “market place” did not appear until comparatively recently and was not the source of “bargaining and exchange”. That trait was universal from the beginning  which once market relations appeared they became dominant characteristics. 
Smith’s example of the Pin Factory was taken verbatim from the French Encyclopedia published in Paris long before WN in 1776. Smith did not invent the division of labour.
“Conrad: producers could increase their profits by investing in more efficient methods for their businesses, thus lowering their costs and expanding their volume, and consumers’ savings from lower prices were then available to finance that rising investment”. Smith wrote much more on the misbehaviour of “merchants and manufacturers” who engaged regularly in seeking to reduce competition through tariffs and prohibitions, licences, and political interferences, so they could raise prices and generate higher profits.
Conrad: “As Smith was writing, this systematic growth model of economic life was combining with the discovery of cheap, efficient energy from coal and the technological innovations that grew out of Europe’s scientific revolution.” Realisitically, all this would have happened even if Smith had not written WN; it  did not require Smith, or anybody else, to notice what was going on independently of authors.
There was nothing utopian about Adam Smith’s ideas. He described what was going on the economy quite independent of his research, Neither did Smith make predictions. 

Adam Smith did not describe “the way to harness intellectual capacity and instinctual ambition for the common good”. Nor do we “live and thrive today in mostly his world”. So much happened after Smith died that he would have been astonished at many events, though probably not so surprised at the continuing ability of humans to mess up what they do compared to what they could do or might have done.


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