“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.
O’Rourke’s book – a New York Times best seller, according to the dust jacket – 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. I suspect – although I cannot prove this – that Smith had the open kind of mind to accept the marginal-utility approach to understanding prices that eventually pounded the labour theory into dust (although not quickly enough to prevent the horrors of Communist economics). O’Rourke does not spend a lot of time on the personal life of Adam Smith; there is not much material to go on. As O’Rourke points out, the 18th Century did not suffer, if that is the right word, from the obsession with knowing every facet of a person’s private life. Of course, some writers in that period told a lot about the personal lives, like Rousseau did although as we know from writers such as Paul Johnson, Rousseau was an incorrigible liar as well as a deeply unattractive individual. In the main, though, what counted was a man’s character. And Smith comes across as an agreeable professorial type: famously absent-minded, talkative, capable of great friendship and devoted to his students (and no, that is not code for his being gay).
I was impressed that O’Rourke chose to write this book in the first place. He’s shifted his tempo since the early, raucous years of hilarious books like The Bachelor Home Companion and essays hailing the joys of driving a car with a half-naked woman in the passenger seat. As he has got older, O’Rourke has tackled politics and economics in great style and it is funny how his one-liners are as much of the lexicon of political vocabulary as H.L. Mencken’s were 50 years ago (he is probably the nearest thing in journalism to Mencken today, give or take some nuances). O’Rourke still cracks great gags, but most of his one-liners have a serious point and are not just showing off. Here’s an example (page 148):
“In the eighteenth century the poor had not yet been elevated to their present status as a valuable souce of fads, fashions and illegal drugs.”
Or another one (page 98):
“Never complain that the people in power are stupid. It is their best trait.”
James Buchan 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. Buchan comes dangerously close to fudging the broadly classical liberal thrust of Smith. Yes, Smith did accept a customs and excise job and yes, it is possible to parse the sentences of his great books, take a sentence out of context, and try and dragoon Smith into the arms of say, Gordon Brown. But students of economics writing are not fooled. Buchan’s book is certainly a good read; his account of Smith’s travels around France in his role of tutor is good. He also writes touchingly on Smith’s final years (he died in 1790 just before the full horror of the French Revolution kicked into gear).
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. It is hard to spot any of the truculent, levelling tendencies we see from Tom Paine, William Cobbett or other 19th Century radicals. Smith felt that the landed aristocracy, for all its faults, provided many of the wisest legislators; he was on good terms with Whig politicians like Edmund Burke, who of course later denounced the French Revolution. Smith was certainly no democrat in terms of crude majoritarianism and as far as my reading is concerned, he had a horror of socialist levelling. It is true that he recognised the large inequalities of wealth that existed in his time and which were intertwined with the institution of private property but there is no sign that I can see that he favoured challenging property rights, and indeed he felt the ability of people to sell their labour and services for whatever price they could command was a “sacred” right.
Why are some leftists trying to claim the Glasgow lecturer for their side? This may, in part, be the ultimate form of flattery. Quite what this remarkable man would have made of Gordon Brown as he spends billions of taxpayer’s money on a collapsed bank is alas, something we can only guess at. I strongly suspect he would have damned it.
As an end-note, I strongly recommend Arthur Herman’s book, The Scottish Enlightenment, for an overview of Smith and his intellectual companions, as well as for a look at what happened later on.
O’Rourke has done a number of best sellers,which are very humorous,but have a serious point to make.That point is that government is stupid,self-serving,and often vicious to boot.
The only objection is that I have seen him on the Bill Maher show. Why he should lend support to such to such a vile a vile and smarmy leftist I don’t know.Maher has wished for the death of Cheney and Rush Limbaugh.Your side of the pond is spared this.
That caveat aside read anything of O’Rourke you can find.This just the way the world is.
Mis typed.That is just the way the world is.
Good post, thanks. Heres a coupl’a more quotes from the both;
The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
Giving money and power to government is like giving whiskey and car keys to teenage boys.
I’ll leave you to place them…
That’s a really excellent article, congratulations. Samizdata are definitely providing an example to the rest of us bloggers! Great work.
I saw an interview with O’Rourke in the Times when this book was launched and was very interested in picking it up then.
This blogpost reminded me to order it from Amazon so it’s waiting for me when I get to England on thursday.
Johnathan Pearce:
Unfortunately, I wouldn’t be surprised if most of the readers of O’Rourke’s book have never actually bothered to even try reading Smith’s opus magnum, which is a pity, considering how widely Smith is cited, and how well-written and easy to read WoN is. Now, I have actually read it, and here’s my two cents…
The problem is that both socialists (in the broad sense of people who favor state control of the economy) and economic liberals (again, in the broad sense of advocates of economic laissez-faire) have to skim over some serious parts of Smith’s work if they want to cite him as a consistent propagandist for their point of view. Now, it goes without saying that Smith was hostile to almost any sort of government intervention. He also set forth arguments against socialism that proved to be perfectly and prophetically true whenever socialism was put into practice in the 20th century. Therefore, economic liberals do have Smith mostly on their side, in the sense that he did support laissez-faire for the most part, and there is no way he could ever be considered a socialist by any stretch of imagination.
However, there are also several damning points about Smith from the libertarian point of view, some of them really bad. Here are some of them, in the increasing order of badness (with references to Smith’s actual words below):
(1) Smith was definitely not a “social” libertarian. He was generally in favor of moralistic laws against victimless crimes, for fear of people engaging in “many gross disorders and shocking enormities” [1], although as far as I know, he never specified what specific such laws he was in favor of.
(2) Smith had nothing against government intervention when he thought that such intervention was justified by a utilitarian calculation. For example, he favored caps on interest rates [2].
(3) Smith believed in the leftist story about employers being in a regular conspiracy and acting in unison to prevent wages from rising, and in fact derided as naive those who saw this as an unrealistic conspiracy theory [3]. He believed that competition for labor can increase wages above the “lowest [rate] which is consistent with common humanity” only in exceptional circumstances [4]. He described anti-union laws — a clear violation of the freedom of association — in a neutral tone, without a hint of disapproval [3].
(4) The worst of all, Smith did not believe that economic progress would raise the living standards of the common people in the long run! He believed that periods of rapid growth can temporarily raise wages above the subsistence level, but he resolutely denied that once a country becomes richer, this would mean any increase in real wages. He described China as “a much richer country than any part of Europe” [5], and yet he saw nothing inconsistent between that “fact” and what he described as shocking poverty suffered by its common people, far worse than in “less rich” Europe [6]. If you read the whole thing, you’ll see that he basically had the Malthusian view that the positive effects of any increase in national wealth on the living standards will soon be offset by the increasing population.
And so on. However uncomfortable we might feel about it, Smith evidently did believe all of these things. Since I’ve read the whole first book of WoN, I don’t think I’m pulling anything from out of context from it, and the quote from ToMS also seems pretty clear and unambiguous. Considering the points (3) and (4), it seems like Marx and the rest of the 19th century anti-capitalist crowd owed more to certain Smith’s ideas than O’Rourke and other Smith’s fans would ever dare to admit.
—–
[1] The Theory of Moral Sentiments, Part II.II.8(Link). Search for the part starting with “The civil magistrate is entrusted…”
[2] Wealth of Nations, Parts II.4.14-II.4.15(Link). Search for “In countries where interest is permitted…”
[3] Wealth of Nations, Part I.8.13(Link). Search for “We rarely hear…”
[4] Wealth of Nations, Part I.8.16(Link). Search for “There are certain circumstances…”
[5] Wealth of Nations, Part I.11.129(Link).
[6] Wealth of Nations, Part I.8.24(Link). Search for “Though the wealth of a country…”
For the same reason they have tried over the years to claim liberalism and democracy for their side. They know what people want, and they know their system can’t provide it. They know that Smith provides some of the best arguments against that system’s worst components, and they are trying to neutralize the threat.
It may be more impressive to talk of Rand, Hayek and Smith himself, but if truth be told, O’Rourke is as responsible for my current political beliefs as anyone. Parliament of Whores should be a set text in schools. As (more likely, perhaps) should his book on Smith.
Something else to consider- Smith attributed supernatural powers as economic factors! He believed there was an Invisible Hand, which went around forcing people to be moral! H.G.Wells realised that there must be an Invisible Man attached to the hand, and based a story on this insight. At last, all is explained….
Very nice piece, Johnathan!
I had always had the impression that for the full rigors of the labor theory of value you had to go, not to Smith, but to Ricardo. Then I decided to read “Principles of Political Economy” and found, early on, the statement that though the labor theory of value was generally accurate, it was not a universal truth, and that there were specific commodities to which it did not apply, notably precious metals. It looks as if Ricardo was taking labor cost not as a definition of price (or “value,” in the sense of market value) but as a good predictor, in something like the statistical sense, of the value of many, but not all commodities; that is, as an approximation workable in many contexts. That’s much less doctrinaire than I expected, and certainly less so than Tucker, or (in Tucker’s interpretation) Marx. This rather illustrates the difficulties that arise when the findings of an empirical inquiry are taken as the axioms of a deductive science.
I willingly admit I am an economic idiot, despite having done Economics 1A and 1B in Adelaide Uni once (now called micro- and macro-economics respectively).
However, I would say that certain things have intrinsic value as well as perceived value. And certainly, when there is no scarcity (or no expectation of scarcity) of a particular resource, how do you go about calculating its value? I would mostly not willingly pay for access to blogs (mostly – Instapundit, Neptunus Lex, LGF, Hot Air and AoSHQ are perhaps exceptions), nor, I suspect, would others. That does NOT mean I value them at zero. Merely that I do not wish to pay for access.
Nor can value be calculated in financial terms alone. How valuable is reputation? Honesty? Morality? Virginity? 🙂
If we are going to discuss quotations of political commentators, and given that P.J. O’Rourke is a political commentator, may I suggest that the following is one of the most sensible comments ever made by a member of that species-
“Name me, if you can, a better feeling than the one you get when you’re half a bottle of Chivas in the bag with a gram of coke up your nose and a teenage lovely pulling off her tube top in the next seat over while you’re going a hundred miles an hour down a suburban side street. You’d have to watch the entire Mexican air force crash-land in a liquid petroleum gas storage facility to match this kind of thrill. If you ever have much more fun than that, you’ll die of pure sensory overload”
Now that is political commentary, and a first class statement about relative value.
CC,
Everyone knows that quote. Unfortunately there are people who are positively priapic about doing 28 in a thirty zone in a Prius whilst entirely clean and sober and with a woman they like because of her “ethical credentials”. I have spent enough time in assorted Universities to know. I once knew a pure mathematician who took a shine to a girl purely because she’d spent most of the last month in a treehouse in British Columbia protesting something or other.
She cooed over a very small aubergine and asked if she could hold it before it went into a vegetarian repast that my pure math flat-mate was making. Needless to say he didn’t get into her knickers but two days into the relationship he did pronounce to the flat (I almost terminally lost control of my respiratory system on hearing this) that she was, “The most important woman I’ve ever met”.
I go for wit, intelligence and a great ass but that’s because I’m shallow. I should fall in love with someone just because they’re Green and therefore ethically pure. Apart from the obvious Kermit jokes might I point out that sounds very much how the Waffen SS were supposed to do it, except with the ethnically pure.
The Mathematicus didn’t know how much of a twat he truly was.
Gregory,
In business, reputation matters a lot. Virginity I’m not sure about (I’m in IT – sort of) and I can’t really comment because it’s not my game. It did matter to Louis the ?th (I forget which) who bankrupted France on virgin whores or something. Ask him because the second-coming ain’t happening in my neck of the woods anytime soon due to the difficulty of finding three wise men and a virgin. And the shepards are all on set-aside.
So long as anything can be bought and sold, including web access, for instance, it will have a price. The argument about intrinsic value is somewhat beside the point; we can always claim that X or Y is valuable to us but we don’t want to pay for it. But ultimately, that is all that we have to go on in explaining why prices of things in a free and unfettered market are as they are.
The trouble with the labour theory – at least in its crude, Marxian form — is that it gave no guide as to whether a person should spend more or less labour/other resources on making say, cars rather than producing bread or software. The only way to do that is through the marginal shifts in demand for these things, that are revealed through the preferences of consumers, suppliers and investors. From this vantage point, whether something has “intrinsic” value or not is entirely irrelevant to the issue at hand.
In his early lectures Adam Smith seemed to understand the marginal utility point – i.e. that we do not value (for example) all “water” against all “diamonds”.
We value a bit of water aganist a bit of something else in a given time and place.
For example, a man dying of thirst in the desert will tend to value a bit of water higher than a diamond in his pocket.
Sadly by the time of the Wealth of Nations, Smith seemed to forget this stuff.
He also moved from a free market point of view (as can be seen in earlier works) to a more mixed view.
This is what German scholars used to call the “Adam Smith problem”.
Murry Rothbard is a bit hard on Adam Smith in his history of economics – but he gets the basic case against Smith right.
Adam Smith thought up nothing true that had not been published by others before him. Although his achievement in “reaching the public” can not be denied (although Rothbard does not really see it).
As for the Labour Theory of Value – the details are really the work of David Ricardo. Although Smith and other writers started the nonsense.
Perhaps it was a desire to be “scientific” or perhaps it was (as Rothbard thought) to do with his Calvinist background.
It is even possible that James Stewart (spelling alert) had an indirect hand in it.
J.S. wrote a big work on political economy – a work that was full of absurd errors and that Smith hated.
However, the book also included subjective theory of value stuff.
Did Smith just look at J.S.’s work and say “well if this cretin believes in it, the idea must be wrong”.
Gregory:
There is a difference between the economic value of a good or service and its price.
The price is what you pay – the economic value to you is what you WOULD PAY.
Of course the economic value of a good or service is different to the buyer and the seller – otherwise trade would not take place.
Contrary to Aristotle people do not exchance equal value – each person gets more than he gives.
This is because economic value is subjective.
I hope the above is of some use to you.
Paul:
Thank you, I managed to retain that much from my 1st years Econs classes 🙂
I tend to get argumentative, even when I don’t really want to, so maybe I’ll just stop here. However, I suspect that this (your saying that each person gains from trade) is true if there was no memory effect (and people weren’t such ungrateful coots). I daresay that in every voluntary exchange this is true, further – but only with certain conditions (goods work as expected, for instance).
And you know, while the conomic value of garbage collection might be low, I’m willing to bet that its true value to society is much, much higher. Reminds me of one of Isaac Asimov’s stories on how ostracised the shit wagon driver and his family were – to the point where people were dying left right and centre because he went on strike to show his obvious value. They were not willing to meet his price; giving him his dignity.