His name is known even to those uninterested and unread in economics, offered as it often is in defense of Laissez-faire policies, its mere incantation considered potent enough to constitute a conclusive argument against market regulation.
His magnum opus, Wealth of Nations, is considered the beginning of classical economics, constituting an early and powerful argument for “free markets” and “free enterprise”.
So Adam Smith and his work would appear to cast a large shadow. Which is why his foundational text makes a great place to start to understand the economic system a large portion of the world lives within. There is a problem though. Wealth of Nations was published in 1776, and I find 18th century prose, for the most part, pretty intolerable. And the Edwin Cannan Modern Library hardcover version is 1130 pages. That’s 1130 pages of mostly dry, academic, 18th century writing. I’m as masochistic as the next person, but my self hatred doesn’t run that deep.
I think, however, that I’ve found a solution in Robert Hielbroner’s The Essential Adam Smith. It’s an abridged version of Wealth with modernized spellings. It also contains Smith’s Theory of Moral Sentiments along with a few other selections of his writing and teaching.
What I’m not sure of is how exactly I’m going to write about the book. I don’t think a book report or long synopsis will be helpful or particularly interesting, so what I plan to do is to provide some very brief words on the overall content of the sections I’m writing about and then focus on passages I find particularly interesting or illuminating. But things may change. Wealth is composed of five books, and each book is broken up into chapters, and I figure it makes sense that I break up my writing in the same way. We start at the beginning:
The title of book one is “Of the causes of improvement in the productive powers of labour, and of the order according to which its produce is naturally distributed among the different ranks of the people” and its length and syntax may provide a clue as to why I don’t much like 18th century writing. Along with the full title of Wealth: “An Inquiry Into the Nature and Causes of the Wealth of Nations.”, this gives you a clue as to the project Smith is undertaking with the book, i.e. an investigation into why some nations are wealthier than others.
“Of the Division of Labour”. This is probably the most famous chapter of the book, at least it was the only chapter that I knew anything about before picking the book up. It contains the description of a pin factory, and how division of labor and machines increases productivity by at least 240 times. I think most will find his argument pretty commonsensical, though he does seem to sell pretty hard when discussing how inefficient bouncing from task to task is:
The habit of sauntering and of indolent careless application, which is naturally, or rather necessarily acquired by every country workman who is obligated to change his work and his tools every half hour, and to apply his hand twenty different ways almost every day of his life; renders him almost always slothful and lazy, and incapable of any vigorous application even of on the most pressing occasions.
The hyperbole here reminds me of infomercials that try to sell products by making the simplest tasks look herculean and fraught with danger.
“Of the Principle which gives occasion to the Divison of Labour”. Here Smith investigates how the division of labor arose, concluding that it wasn’t the “effect of any human wisdom”, but the gradual consequence of the propensity of people to barter and exchange. If people are exchanging goods they will naturally produce that which they are best at producing so as to have the most/best of something with which to get the most in return when they barter. In this chapter we encounter a famous quote:
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity, but to their self-love.
My initial reaction to this aphorism was to find it insightful, if maybe a touch banal. But reading this Philip Pilkington piece at Naked Capitalism got me thinking. I wonder how much economic models, or conceptions ( perhaps better put as simplifications for purposes of describing complex phenomena ), especially those that come from famous economists, rather than describe human economic behavior, actually end up influencing and defining how we view ourselves and society.
In distilling things down in this fashion, in putting self-interest forward as the most important connection between atomized individuals, I wonder if we’ve already encountered Smith’s most important ( though not necessarily intended ) influence on the modern world.
Also, the more I read those lines quoted above, the more I think that Rand’s novels and her Objectivism can be viewed as a reductio ad absurdum of the sentiments underlying them. Which makes it interesting when we come across these lines later in the chapter:
The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labor. The difference between the most dissimilar characters, between a philosopher and a common street ports, for example, seems to arise not so much from nature, as form habit, custom, and education.
This rather sober (and I think accurate) survey of humanity as fitting mostly in the middle of a large bell curve, stands in stark contrast to the neat Randian bifurcation of humanity into the elite genius producers, the atlases holding the world on their shoulders, and the rest, the takers, the parasites. (Clear echoes of the Randian sentiment can be heard in Romney’s infamous comments concerning the 47%)
Unfortunately the next several chapters get very wonky, discussing the origin of money and then interested mainly with the component parts of the price of comodities and how a price is arrived at. And I’m spent after only 2 chapters. This may take a while.