Help me here: I'm just a retired English professor of very little brain. But when I read Smith, I came away with the sense that he wasn't attacking the welfare/regulation state we live in but the special privileges, guilds, & monopolies left over from the Renaissance & before.
There you wrote "It is a wonderful story. I have not fully digested what I think the big-think conclusions that I draw from her book are", and noted that you hold a different position from Liu. Did you ever fully digest the story? And did you ever write down a summary of your ruminations? I did listen to your "conversation" with Liu and Jacob Soll, but now I forget what you said ...
Two more quotes from Smith that you won't often hear:
"Wherever there is a great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy to invade his possessions. It is only under the shelter of the civil magistrate, that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate, continually held up to chastise it. The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary. Civil government, so far as it is instituted for the security of property, is, in reality, instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all. " WN Book V Chapter 1, part II. This is much closer to Rousseau's theory of the origin of government in the Discourse on Inequality, than to Locke.
Perhaps the most surprising quote is the one below:
“What are the common wages of labour, depends every where upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. …The former are disposed to combine in order to raise, the latter in order to lower the wages of labour. It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorises, or at least does not prohibit their combinations, while it prohibits those of the workmen.We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long-run the workman may be as necessary to his master as his master is to him, but the necessity is not so immediate….We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is every where a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things which nobody ever hears of. … But though in disputes with their workmen, masters must generally have the advantage, there is however a certain rate below which it seems impossible to reduce, for any considerable time, the ordinary wages even of the lowest species of labour…. Thus far at least seems certain, that, in order to bring up a family, the labour of the husband and wife together must, even in the lowest species of common labour, be able to earn something more than what is precisely necessary for their own maintenance;...” WN Book I Chapter VIII.
The last sentence refers to the subsistence theory of wages that you will find in all the classical school including Marx. No marginal productivity theory for Smith. Smith is distinct in that he thinks “in certain circumstances” (ie not the normal state of affairs) when an economy is growing fast, competition for labor will lead to higher wages. For this reason, he thinks high wages are a sign of growing economy and a very good thing. Marx thought this unlikely because of the reserve army of labor effect. Malthus thinks wages will return to subsistence because of population growth exceeding economic growth in the long term.
My unscientific survey of economists over decades reveals that while nearly all profess a reverence for Smith, a much smaller share have read him than the share of Christians who have actually read the Gospels.
I think you give Smith too little sway over lubricious markets. Ronald Meek's 1978 comprehensive edition of Smith's works titles it "Jurisprudence", but the first transcription of students' lecture notes (1896) was more adroitly, "Lectures on Justice, Police, Revenue, and Arms", wherein "police" was explicitly not the relatively unimportant task of criminal control, instead, the necessity that government police the markets for price gouging and corporations' excesses, one might say to benefit the greater number. Add to that Smith's sardonicism over the purported sway of "beautiful systems" over the reality underneath politics, in the Moral Sentiments, and you have an outright revolutionary, doubtless more so than our progressives. Or, perhaps, all us heterodox PhDs have nearly enough managed to reverse engineer Smith's actual cast of mind for to begin sending our one percent signal into the ninety-nine percent perfect market noise. Smith had it right somewhere though, to tell us the dead care little for our opinion of them.
The next question is why these other aspects of Adam Smith don't get the attention that the single passage where he mentions the invisible hand does..
There has always been a steady drumbeat of people telling us that Adam Smith has been misunderstood.
An interesting example, because he would have been familiar to the Chicago School, is Jacob Viner's take on Smith in his 1927 article "Adam Smith and Laissez-Faire." Some sample quotes from Viner:
"The modern advocate of laissez faire who objects to government participation in business on the ground that it is an encroachment upon a field reserved by nature for private enterprise cannot find
support for this argument in the Wealth of Nations."
"Adam Smith was not a doctrinaire advocate of laissez faire. He saw a wide and elastic range of activity for government, and he was prepared to extend it even farther if government, by improving its standards of competence, honesty, and public spirit, showed itself entitled to wider responsibilities."
For similar reasons Murray Rothbard is scathing critic of Smith, essentially suggesting he was a proto-socialist.
Schumpeter had a rather dim view of Smith, thinking that all the important points about markets had been made by others before Smith (Cantillon, for example).
Agreed that it distorts Smith's thought to cast him as a pure laissez faire defender. Perhaps less obviously, it also miscasts his thought to consider it as part of the development of methodological individualism. Smith was very much a *social* theorist, so the social interplay of individual inclinations and interactions were very much on his mind in his psychology as well as in his economic analysis (Theory of Moral Sentiments and Wealth of Nations, respectively).
Smith's criticism of Bernard Mandeville's tale of productive vice in Fable of the Bees was that its view of human nature as solely self-interested fundamentally misunderstood human sociability and was therefor an inadequate guide for formulating policy [though in terms of a psychology to underwrite laissez faire, Mandeville might seem pretty good].
As a social theorist, Smith was keenly aware of and sought to explain the process of social change. His 'stages of historical development' is obviously so, but it's also there in Wealth of Nations where he talks about how the practical definition of 'subsistence' changes as economies become more productive, in terms of clothing and other practical material aspects of everyday life. It's even there implicitly right at the start of Wealth where he illustrates the complexity of the division of labor by describing all the work that produces the laborer's woolen coat. Having a woolen coat be taken as part of a laborer's subsistence is a social understanding, not merely an individual one, and Smith uses it to illustrate how a nation's rising wealth can and will lead to change in how subsistence is perceived -- which is certainly still a pertinent topic, e.g., in contemporary discussions of inequality.
"Public works and institutions “in the highest degree advantageous to a great society… [but] of such a nature, that the profit could never repay the expense to any… small number of individuals.”"
And yet we find that very wealthy individuals do provide these goods and services. From building cathedrals, to great art, to libraries, and now to a host of philanthropic activities. While there is no direct monetary benefit to teh wealthy philanthropist, there is social recognition value, whether frequently given awards, the social status at dinners and meetings, and statues and named buildings usually after their death.
Perhaps the argument should be whether this philanthropy is a "marketplace of public works" that works to best provide these goods and services, or whether this excess wealth and income should be taxed and [better] spent by the elected government. If social recognition is a strong motivator, then this undermines Smith's argument somewhat.
Read Smith's Theory of Moral Sentiments. He anticipated your point. He did not believe in homo economicus. His psychology contained a large amount of other-regarding preferences: specifically being well thought of.
Nevertheless, he was still concerned that 18th-century Britain had too much private opulence.
Yes, and please post this routinely, at regular intervals. And post between intervals as soon as someone gives that "invisible hand' trash talk.
Help me here: I'm just a retired English professor of very little brain. But when I read Smith, I came away with the sense that he wasn't attacking the welfare/regulation state we live in but the special privileges, guilds, & monopolies left over from the Renaissance & before.
Yes indeed...
You could point us, once again, to the book by your one-time student Glory Liu as you did here: https://braddelong.substack.com/p/glory-liu-on-the-adam-smith-americans.
There you wrote "It is a wonderful story. I have not fully digested what I think the big-think conclusions that I draw from her book are", and noted that you hold a different position from Liu. Did you ever fully digest the story? And did you ever write down a summary of your ruminations? I did listen to your "conversation" with Liu and Jacob Soll, but now I forget what you said ...
Two more quotes from Smith that you won't often hear:
"Wherever there is a great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy to invade his possessions. It is only under the shelter of the civil magistrate, that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate, continually held up to chastise it. The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary. Civil government, so far as it is instituted for the security of property, is, in reality, instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all. " WN Book V Chapter 1, part II. This is much closer to Rousseau's theory of the origin of government in the Discourse on Inequality, than to Locke.
Perhaps the most surprising quote is the one below:
“What are the common wages of labour, depends every where upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. …The former are disposed to combine in order to raise, the latter in order to lower the wages of labour. It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorises, or at least does not prohibit their combinations, while it prohibits those of the workmen.We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long-run the workman may be as necessary to his master as his master is to him, but the necessity is not so immediate….We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is every where a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things which nobody ever hears of. … But though in disputes with their workmen, masters must generally have the advantage, there is however a certain rate below which it seems impossible to reduce, for any considerable time, the ordinary wages even of the lowest species of labour…. Thus far at least seems certain, that, in order to bring up a family, the labour of the husband and wife together must, even in the lowest species of common labour, be able to earn something more than what is precisely necessary for their own maintenance;...” WN Book I Chapter VIII.
The last sentence refers to the subsistence theory of wages that you will find in all the classical school including Marx. No marginal productivity theory for Smith. Smith is distinct in that he thinks “in certain circumstances” (ie not the normal state of affairs) when an economy is growing fast, competition for labor will lead to higher wages. For this reason, he thinks high wages are a sign of growing economy and a very good thing. Marx thought this unlikely because of the reserve army of labor effect. Malthus thinks wages will return to subsistence because of population growth exceeding economic growth in the long term.
For an interesting commentary on the contemporary relevance of the above quote by Eric Posner: https://www.nytimes.com/2021/09/23/opinion/antitrust-workers-employers.html?referringSource=articleShare
My unscientific survey of economists over decades reveals that while nearly all profess a reverence for Smith, a much smaller share have read him than the share of Christians who have actually read the Gospels.
Somehow, I think the opponent of taxing CO2 emissions or of raising taxes of the rich did not come to those opinions from misreading Smith. :)
More than Smith, I'd like to know what Hayek would have thought about the increase in CO2 in the atmosphere.
Yes...
I think you give Smith too little sway over lubricious markets. Ronald Meek's 1978 comprehensive edition of Smith's works titles it "Jurisprudence", but the first transcription of students' lecture notes (1896) was more adroitly, "Lectures on Justice, Police, Revenue, and Arms", wherein "police" was explicitly not the relatively unimportant task of criminal control, instead, the necessity that government police the markets for price gouging and corporations' excesses, one might say to benefit the greater number. Add to that Smith's sardonicism over the purported sway of "beautiful systems" over the reality underneath politics, in the Moral Sentiments, and you have an outright revolutionary, doubtless more so than our progressives. Or, perhaps, all us heterodox PhDs have nearly enough managed to reverse engineer Smith's actual cast of mind for to begin sending our one percent signal into the ninety-nine percent perfect market noise. Smith had it right somewhere though, to tell us the dead care little for our opinion of them.
The next question is why these other aspects of Adam Smith don't get the attention that the single passage where he mentions the invisible hand does..
There has always been a steady drumbeat of people telling us that Adam Smith has been misunderstood.
An interesting example, because he would have been familiar to the Chicago School, is Jacob Viner's take on Smith in his 1927 article "Adam Smith and Laissez-Faire." Some sample quotes from Viner:
"The modern advocate of laissez faire who objects to government participation in business on the ground that it is an encroachment upon a field reserved by nature for private enterprise cannot find
support for this argument in the Wealth of Nations."
"Adam Smith was not a doctrinaire advocate of laissez faire. He saw a wide and elastic range of activity for government, and he was prepared to extend it even farther if government, by improving its standards of competence, honesty, and public spirit, showed itself entitled to wider responsibilities."
For similar reasons Murray Rothbard is scathing critic of Smith, essentially suggesting he was a proto-socialist.
Schumpeter had a rather dim view of Smith, thinking that all the important points about markets had been made by others before Smith (Cantillon, for example).
three times, in the Rhetoric and Moral Sentiments as well as the Wealth
Agreed that it distorts Smith's thought to cast him as a pure laissez faire defender. Perhaps less obviously, it also miscasts his thought to consider it as part of the development of methodological individualism. Smith was very much a *social* theorist, so the social interplay of individual inclinations and interactions were very much on his mind in his psychology as well as in his economic analysis (Theory of Moral Sentiments and Wealth of Nations, respectively).
Smith's criticism of Bernard Mandeville's tale of productive vice in Fable of the Bees was that its view of human nature as solely self-interested fundamentally misunderstood human sociability and was therefor an inadequate guide for formulating policy [though in terms of a psychology to underwrite laissez faire, Mandeville might seem pretty good].
As a social theorist, Smith was keenly aware of and sought to explain the process of social change. His 'stages of historical development' is obviously so, but it's also there in Wealth of Nations where he talks about how the practical definition of 'subsistence' changes as economies become more productive, in terms of clothing and other practical material aspects of everyday life. It's even there implicitly right at the start of Wealth where he illustrates the complexity of the division of labor by describing all the work that produces the laborer's woolen coat. Having a woolen coat be taken as part of a laborer's subsistence is a social understanding, not merely an individual one, and Smith uses it to illustrate how a nation's rising wealth can and will lead to change in how subsistence is perceived -- which is certainly still a pertinent topic, e.g., in contemporary discussions of inequality.
I think you are 100% right... Brad
"Public works and institutions “in the highest degree advantageous to a great society… [but] of such a nature, that the profit could never repay the expense to any… small number of individuals.”"
And yet we find that very wealthy individuals do provide these goods and services. From building cathedrals, to great art, to libraries, and now to a host of philanthropic activities. While there is no direct monetary benefit to teh wealthy philanthropist, there is social recognition value, whether frequently given awards, the social status at dinners and meetings, and statues and named buildings usually after their death.
Perhaps the argument should be whether this philanthropy is a "marketplace of public works" that works to best provide these goods and services, or whether this excess wealth and income should be taxed and [better] spent by the elected government. If social recognition is a strong motivator, then this undermines Smith's argument somewhat.
Read Smith's Theory of Moral Sentiments. He anticipated your point. He did not believe in homo economicus. His psychology contained a large amount of other-regarding preferences: specifically being well thought of.
Nevertheless, he was still concerned that 18th-century Britain had too much private opulence.