Yves here. This post takes what I see as an inconsistent, indeed, inaccurate stance on Adam Smith, since it depicts him as advocating laissez faire and also not being concerned about “emotions, sentiment, human relations and community.” Smith was fiercely opposed to monopolies as well as businessmen colluding to lower the wages paid to workers. He also saw The Theory of Moral Sentiments as his most important work and wanted it inscribed on his gravestone.
Jacob Viner addressed the laissez-faire attribution to Adam Smith in 1928…..Here is a list extracted from Wealth Of Nations:
- the Navigation Acts, blessed by Smith under the assertion that ‘defence, however, is of much more importance than opulence’ (WN464);
- Sterling marks on plate and stamps on linen and woollen cloth (WN138–9);
- enforcement of contracts by a system of justice (WN720);
- wages to be paid in money, not goods;
- regulations of paper money in banking (WN437);
- obligations to build party walls to prevent the spread of fire (WN324);
- rights of farmers to send farm produce to the best market (except ‘only in the most urgent necessity’) (WN539);
- ‘Premiums and other encouragements to advance the linen and woollen industries’ (TMS185);
- ‘Police’, or preservation of the ‘cleanliness of roads, streets, and to prevent the bad effects of corruption and putrifying substances’;
- ensuring the ‘cheapness or plenty [of provisions]’ (LJ6; 331);
- patrols by town guards and fire fighters to watch for hazardous accidents (LJ331–2);
- erecting and maintaining certain public works and public institutions intended to facilitate commerce (roads, bridges, canals and harbours) (WN723);
- coinage and the mint (WN478; 1724);
- post office (WN724);
- regulation of institutions, such as company structures (joint- stock companies, co-partneries, regulated companies and so on) (WN731–58);
- temporary monopolies, including copyright and patents, of fixed duration (WN754);
- education of youth (‘village schools’, curriculum design and so on) (WN758–89);
- education of people of all ages (tythes or land tax) (WN788);
- encouragement of ‘the frequency and gaiety of publick diversions’(WN796);
- the prevention of ‘leprosy or any other loathsome and offensive disease’ from spreading among the population (WN787–88);
- encouragement of martial exercises (WN786);
- registration of mortgages for land, houses and boats over two tons (WN861, 863);
- government restrictions on interest for borrowing (usury laws) to overcome investor ‘stupidity’ (WN356–7);
- laws against banks issuing low-denomination promissory notes (WN324);
- natural liberty may be breached if individuals ‘endanger the security of the whole society’ (WN324);
- limiting ‘free exportation of corn’ only ‘in cases of the most urgent necessity’ (‘dearth’ turning into ‘famine’) (WN539); and
- moderate export taxes on wool exports for government revenue (WN879).
“Viner concluded, unsurprisingly, that ‘Adam Smith was not a doctrinaire advocate of laissez-faire’.
By Douglass Carmichael, perviously a Professor at University of California at Santa Cruz and a Washington DC based consultant, which clients including Hewlett-Packard, World Bank, Bell laboratories, The White House and the State Department. For the last ten years he has focused on the broad social science issues relevant to rethinking humanity’s relationship to nature. Cross posted from the Institute for New Economic Thinking website
With Adam Smith, and hints before in Ricardo and others, economics took the path of treating the economy as a natural object that should not be interfered with by the state. This fit the Newtonian ethos of the age: science was great, science was mathematics; science was true, right and good.
But along the way the discussion in, for example, Montaigne and Machiavelli — about the powers of imagination, myth, emotions, sentiment, human relations and community — was abandoned by the economists. (Adam Smith had written his Theory of Moral Sentiments 20 years earlier and sort of left it behind, though the Wealth of Nations is still concerned with human well-being.) Gibbon’s Decline and Fall of the Roman Empire was published in 1776, the same year as Smith’s Wealth, but hardly read today by most economists.
In philosophy and the arts (romanticism among others) there was great engagement in these issues economics was trying to avoid. But that philosophy and art criticism have not been widely read for many years.
The effect of ignoring the human side of lives was to undermine the social perspective of the “political,” by merging it with the individually focused “interest.” So, instead of exploring the inner structure of interest (or later utility or preference), or community feeling and the impact of culture, these were assumed to be irrelevant to the mechanics of the market. Politics, having to do with interest groups and power arrangements, is more vague and harder to model than economic activity.
Those who wanted economics to be a science were motivated by the perception that “being scientific” was appreciated by the society of the time, and was the path to rock-solid truth. But the move towards economics as a science also happened to align with a view of the landed and the wealthy that the economy was working for them, so don’t touch it. We get the equation, embracing science = conservative. This is still with us because of the implication that the market is made by god or nature rather than being socially constructed. Since economics is the attempt at a description of the economy, it was more or less locked in to the naturalist approach, which ignores things like class and ownership and treated capital as part of economic flow rather than as a possession that was useable for social and political power.
Even now, economics still continues as if it were part of the age of Descartes and avoids most social, historical and philosophical thought about the nature of man and society. Names like Shaftesbury and Puffendorf, very much read in their time, are far less known now than Hobbes, Descartes, Ricardo, Mill and Keynes. Karl Polanyi is much less well known than Hayek. We do not learn of the social history such as the complex interplay in Viennese society among those who were classmates and colleagues such as Hayek, Gombrich, Popper and Drucker. The impact of Viennese culture is not known to many economists.
The result is an economics that supports an economy that is out of control because the feedback loops through society and its impact of the quality of life — and resentment — are not recognized in a dehumanized economics, and so can’t have a feedback correcting effect.
The solution, however, is not to look for simplicity, but to embrace a kind of complexity that honors nature, humans, politics, and the way they are dealt with in philosophy, arts, investigative reporting, anthropology and history. Because the way forward cannot be a simple projection of the past. We are in more danger than that.
Anthony Pagden, in Why the Enlightenment is Still Important , writes that before the enlightenment, late feudalism and the Renaissance, “The scholastics had made their version of the natural law the basis for a universal moral and political code that demanded that all human beings be regarded in the same way, no matter what their culture or their beliefs. It also demanded that human beings respect each other because they share a common urge to ‘come together,’ and it required them to offer to each other, even to total strangers, help in times of need, to recognize ‘that amity among men is part of the natural law.’ Finally, while Hobbes and Grotius had accepted the existence of only one natural right — the right to self-preservation — the scholastics had allowed for a wide range of them.” —
Pagen also writes, “The Enlightenment, and in particular that portion with which I am concerned, was in part, as we shall now see, an attempt to recover something of this vision of a unified and essentially benign humanity, of a potentially cosmopolitan world, without also being obliged to accept the theologians’ claim that this could only make sense as part of the larger plan of a well-meaning, if deeply inscrutable, deity.”
But as Pagen shows, that effort was overcome by market, technical and financial interests.
The reason this is so important is that the simple and ethical view in Smith (and many other classical economists if we were to read them) that it was wrong to let the poor starve because of manipulated grain prices, was replaced by a more mechanical view of society that denied human intelligence except as calculators of self interest. This is a return to the Hobbesian world leading to a destructive society: climate, inequality, corruption. Today, the poor are hemmed in by so many regulations and procedures (real estate, education, police) that people are now starved. Not having no food, but having bad food, which along with all the new forms of privation add up to a seriously starved life, is not perceived by a blinded society to be suffering. Economics in its current form — most economics papers and college courses — do not touch the third rail of class, or such pain.