Articles - Journaltalk

Schelling’s article was originally a commencement speech for graduates of the department of economics at the University of California at Berkeley. As a student in economics, Schelling’s address is very motivating and uplifting given what so often is written about economists and their influence over public discourse. Too often economics is given a hard time for reasons ranging from not being scientifically dependable enough to being too quantitative to be relevant to reality.

Schelling, in response to another economist’s critique that economists know only about five things that are “true, important and not obvious”, outlines in the article the various economic truths that can be relied upon as truths in every sense of the word, and not simply because they can be proven per se. He points to accounting identities such as those found in the textbook of any course on the foundations of macroeconomics; identities such as those found in calculating our national income inclusive of the value of our exports, imports, consumption, and savings. All of these accounting identities are important, but in many ways obscure and intangible to the general public. Therefore not doing much to negate the perception that economics does not deal in the “real world”.

However, what Schelling discusses toward the end of his speech is much more compelling and accessible to almost anyone who has any inkling about the economic way of thinking – he addresses the idea of the proverbial “no free lunch”. Schelling counters this popular economic idea by focusing on a more entrepreneurial perspective and that is that there are actually many free lunches just waiting to be discovered, created, and consumed. These free lunches, as Schelling describes them, come from gains from trade and from accepting that economies are not zero-sum games, but instead malleable and dynamic spaces that can expand or contract depending on the interventions, institutions, and innovations that enter them.

By communicating the possibilities rather than the limitations of an economy, economists can enlighten more people about how markets can work to make societies more productive and prosperous. Freer markets can make societies more prosperous. So add yet another thing that economists know that is true, important, and not obvious.

Miss Paganelli addresses an important topic among Smith scholars in her article, that of the Das Adam Smith Problem. There is a perceived contradiction between The Wealth of Nations and Smith’s less often read work The Theory of Moral Sentiments.

I wish to provide some clarification on a point that Miss Paganelli addresses indirectly. Theory of Moral Sentiments is the umbrella under which Wealth of Nations sits. When Smith addresses the role of sympathy he emphasizes its relevance among equals (see I.III.35, II.II.7, II.II.9, and VII.IV.26 as examples). The role of institutions is passive as opposed to active among equals. In the WoN the role of institutions is active. In fact, WoN can bee seen as Smith’s indication that involving the government, or dealing with a superior-inferior relationship as opposed to among equals breaks down the mechanics of sympathy.

On page 381 in Miss Paganelli’s closing paragraph she captures the key distinction to be made between TMS and WoN, that Smith shows the beneficial elements of self-interest in TMS and the dangerous side in WoN. In TMS our self-interest is checked by institutions and sympathy. In the WoN the institutions become tools for our self-interest.

Stigler questions inconsistencies in Smith’s analysis. Stigler interprets Smith as saying that self-interest explains behavior in commercial actions, but not political. He posits, “Why should legislators erect ‘a hundred impertinent obstructions’ to the economic behavior which creates the wealth of nations? Do men calculate in money with logic and purpose, but calculate in votes with confusion and romance?” He goes on to say, “Indeed no clear distinction can be drawn between commercial and political undertakings: the procuring of favorable legislation is a commercial undertaking.” 265-66

Stigler is correct when he asserts that people are self-interested regardless of the nature of their dealings. He fails to elevate his analysis beyond the level of the individual. He does not address the fundamental difference between commercial and political exchange. Power is asymmetric within politics. A faction controls the power to coerce.

In line with North and Weingast 1, the faction in power has an incentive to maintain control. The ruling faction controls the allocation of rents. Any change from the status quo requires an assessment of how the proposed changes will affect their ability to coerce and control rents. North and Weingast use the Glorious Revolution as an example of the dynamics between factions shifting. The king relinquished some of his coercive control in the present for future gains. In the case of the Glorious Revolution the choice made by the king resulted in an improvement in the economy for all, but such is not always the case. A ruling faction could also be despotic and extractive.

Stiglers main point on Smith is that he failed to adequately address the role of self-interest in non-commercial dealings. Given the myriad circumstances within an institutional framework I find such a statement to be wanting. The same argument could be applied to our current legislative woes. Why do we have tariffs if we all know that we would be better off without them? Clearly the factions able to exercise the coercive nature of politics finds it in their self-interest to maintain the tariffs. The “impertinent obstructions” are in the self-interest of the ruling faction.

Smith was aware of the need to address institutions as well as individuals. In fact, he believed that one of the proper roles of the economist was to study these institutions and understand how to arrange them so that it was in the self-interest of the actors within the institutions to behave in a way that was beneficial to the rest of us. Smith operated in a different system than modern economics. Macfie 2 describes it as a “philosophical” or “social approach” compared to the modern approach of “scientific or analytic methods”. 390. Smith’s style of assessment was designed to approach issues from multiple perspectives and present all the facts and observations. Smith’s style is contrary to the modern practice because it can result in inconsistencies that are purposefully avoided using the modern analytic methodology. 392. Stigler’s reading of Smith is unkind without addressing the difference between Smith’s holistic methodology and Stigler’s economic, analytic approach.

References

1 North, Douglass and Barry Weingast. Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England. The Journal of Economic History. Volume 49, No. 4 (1989): 803-832.

2 Macfie, Alec Lawrence. The Scottish Tradition in Economic Thought. Econ Journal Watch. Volume 6, No. 3 (2009): 389-410.

I am much intrigued by this article. Moreover it brings home Smith’s commonplace humanity. I find it implausible that Smith did not partake of the romantic pleasures of the French Salon he was associated with in Paris. The women there were in Opera, known as desirable entities among men, who would ave commanded good prices for their services. Neither he and his charge, the young Duke could hardly have been immune to its temptations.

Boettke’s article provides a fairly thorough historical and conceptual critique of the current state of equilibrium theory in economics. He explains how Keynesian and laissez faire economists have both mistakenly allowed their attraction to abstract modeling to get in the way of an accurate study of economic action. His appraisal of Coase and Friedman is particularly interesting. He notes that despite the positive contributions of each, their works have been used by mainstream economics to widen the gap between economic theory and economic reality.

Boettke rightly points out that Friedman opened the door for false assumptions in economic modeling, and that Coase inadvertently contributed to mathematical unreality in economics with his theories about the zero-transaction cost world. The critique is well known and still seemingly ignored by much of mainstream economics. After the latest economic crisis in the US, the debate has continued in much the same mode despite the admission by many that the models are far detached from reality.

It is also worth noting that Boettke’s criticisms might also apply to the way economics has treated property for these last five decades. In a way strikingly similar to Boettke’s description of how economic theory and human action have parted ways through a series of divorces between fundamental truths and convenient assumptions, property has lost its meaning in economic theory. Because property with its older normative content makes modeling difficult, it has been pushed aside and replaced with institutionless interaction between individuals.

Woodruff’s review of “The Mystery of Capital” is a mixture of praise and reproach for the way Hernando de Soto has brought attention to the struggles of the world’s entrepreneurial poor and linked those struggles to possible solutions toward including them into the capitalist system. De Soto’s cause is worthwhile, however development researchers have scrutinized some of what he presents as evidence to support his claims about the importance of property rights for the poor.

Woodruff echoes researchers’ main criticisms, including questioning the reliability of the data de Soto reports, the vague methodology with which he collects it, and the oversimplification that property titling can serve as an easy remedy to poverty. Woodruff suggests that it may be the case that some of the statistics de Soto provides are inflated estimates, exaggerated to make his points. Also perhaps de Soto could have done more to reflect on the previous studies on property titling and how much of an effect it had on opening up capital markets to those in the developing world – one of his major claims is that formal rights to property allow people to use that property as collateral to access credit with which to build their businesses.

However what is well-chronicled and less controversial in de Soto’s book is what Woodruff notes to be its most persuasive points: It is not for lack of entrepreneurial spirit or desire that the poor continue their struggles around the world. Formalizing their economic activities, such as through property titling as de Soto recommends, is one concrete way to begin to bring them up from the underground economies where most of the world’s poor live and work. No top-down development solution could be as effective as the creative ideas that emerge from the bottom up, essentially from the people themselves.

Where Woodruff strongly agrees with de Soto is in the importance of also having an institutional environment within which people’s innovation and hard work will thrive and improve their lives. In this effort, governments can fulfill a specific role by establishing and enforcing the rule of law that will allow economic development to flourish in ways that wealth transfers will not promote. Hernando de Soto’s work on the importance of property rights for the poorest in the world is a key piece to a larger development puzzle, but as Woodruff explains, it is likely not the full picture.

I’m amazed that an article this nasty—‘Mistah Friedman’ the slave owner?—and easily shown to contain a false assertion that Friedman was a supporter of Augusto Pinochet, is even allowed into a legitimate scholarly publication.

Galbraith couldn’t bother to check his facts by reading ‘Two Lucky People’ before attacking Friedman? The editors should not allow his slander to go uncorrected.

Aside: I did count the pages, and did notice that the “in a word or two, placed in the middle” section comes in at the halfway point on page 12, halfway through the 24 page paper. Coincidence? I think not.

I find myself, in general, agreeing with the possibility of a phrase in the middle being of extra-importance, somehow, to Smith, but I do find some of the arguments for that importance to be somewhat lacking, even to one inclined to be supportive of the notion, to say nothing of how a reader unsympathetic with the priority of the Invisible Hand in Smith would take the arguments.

The Invisible Hand is certainly an important idea, especially to those of us sharing libertarian/free-market priors, but I am not convinced that its location in the book is much more than a divined pattern where no pattern exists. If our minds are predisposed to see stories where no story exists, could this not likely be one of those instances?

There seem to be two main cases discussed in the paper for why smith would put something so central in the middle (contrary to the general inclination of putting the important at the beginning or the end). Either Smith was intentionally obscuring his controversial views from the censors/casual readers, and leaving that controversial view to be found by those with eyes to see, or he saw a certain aesthetic value in having his most important thought in the middle. If he was being intentionally obtuse, what was Smith hiding from? Religious persecution? Doubtful. Political outrage/maintaining his cultural royalty position? If that were the case, aren’t there enough other other relatively incendiary/anti-government-intervention passages in the book that would succeed in pissing someone off if they were going to get pissed off by the idea of an invisible hand doing better at organizing markets than their own machinations? If “economics is a challenge to the conceit of those in power,” then isn’t that challenge made clear elsewhere? Why bother with esoteric writing when so much of it is exoteric? I realize that, having still not read any leftist understandings of Smith, I may still be laboring under the false notion that Smith’s pro-market, anti-governmental-intrusion (by and large) is plain to any fair-minded reader encountering WN and TMS. Perhaps I already have had the blinders lifted, so to speak, and I would be labeled a loon if I were to explicate Smith with my modern eyes in 1780. In what ways would Smith’s Invisible Hand be a challenge to the status quo, that he would need to obscure its centrality?

Additionally, with regard to the idea of esoterica in Smith, I don’t really see the application of the Minowitz’ point on eso- and exoteric meanings, as the Klein/Lucas paper even states that Smith was not necessarily creating “a deep dramatic difference between exoteric and esoteric,” so we are not dealing with any hidden meaning, to be divined by those with eyes to see. I can see a possible weak defense by Smith of, for instance, the small-notes-issuer prohibition elsewhere as an apparent support of the status quo, while actually setting the reader up to “take Smith to task” (as Bentham did), with Smith giving a knowing smile as the critique is lodged. I don’t see the same sneakiness (for lack of a better phrase) employed with regards to the Invisible Hand, because the apparently clear meaning of the efficiency of markets is so clearly brought out elsewhere, while governmental planning 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.” If Smith is going to be so explicit here, why be implicit elsewhere, and on such a related matter?

As to the idea of it being aesthetically pleasing to be in the middle, at least the TMS passage (TMS, 179) quoted seems to say more about the pleasingness of symmetry than it does about middleness. To really employ that passage as support, one would want to see how IH was not just in the physical center of the book, but was somehow a mirror between two halves of theory, or was an anchor between windows of equal forms. Granted, one does walk through the door to get into the house, but a door all by itself is worthless without the pleasing symmetry of the rest of the house to actually be in.

Incidentally, when is the first recorded/known instance of someone really talking about Smith’s Invisible Hand? I know, on a related note, how important early church writings are in understanding the intent of scripture, especially of New Testament scripture, because it gives us a chance to see what the closest available contemporaries thought of the writings, especially as they were so culturally similar to the original authors. A seminary professor of mine regularly stressed the importance of not working with/stressing individual verses or words (heaven forbid someone should employ the all-too-common method of building an entire sermon around the tense of a verb in the original Greek)—his phrase for this was “preaching from snowshoes, not stilts.” On stilts, you sink through the snow, because your base isn’t broad enough, and all your weight goes on one little point, while you can walk through the broad verities on snowshoes. I realize that this paper is meant to be a supplement to the vast discussion on Smith’s “real intentions” in WN and TMS, but I’m not really convinced that it adds much, especially from the eyes of someone not already on the liberty team.

A good exposée of ideological bias in academic publishing.

Undoubtedly Adam Smith is one of the most influential thinkers of the modern Western Tradition. As a result many philosophers engage in critical reflection of Smith’s numerous contributions. A tension, however, arises when examining Smith’s entire corpus. The divide for many philosophers becomes apparent when comparing The Wealth of Nations to The Theory of Moral Sentiments. What did Smith see as the connection, if any, between these works? Lindgren’s piece provides an important first-step in connecting Wealth of Nations with The Theory of Moral Sentiments by investigating how Adam Smith understood the role of inquiry. While Lindgren does not attempt to unite his conclusions on inquiry with Smith’s Wealth of Nations and Theory of Moral Sentiments, it provides sufficient ground for further reflection on the matter.

Non-specialists might wonder why starting how the notion of inquiry can serve as a suitable place for beginning philosophical reflection. Starting with inquiry provides a framework to see how Smith literally sees the world. Is Smith an adherent to a philosophically realistic view of the world or does he follow the nominalism and skepticism of others like Hume? For Lindgren the answer is clear. Smith’s epistemology does not fit into the metaphysical realist position and is more in line with the skeptical views of Hume. Breaking from the earlier tradition of metaphysical realism Smith’s model of inquiry will not focus on determining some type of abstract form of a thing, instead he will understand the world as somewhat incomprehensible to the individual. For Smith the individual is not capable of aligning his knowledge of the world with things that actually exist in the world as would be the case for metaphysicians. A consequence of this is that Lindgren sees Smith’s philosophy of language as the basis for his model of inquiry. While Lindgren provides a sound argument that language served as Smith’s model of inquiry he does not challenge and further test Smith’s notion.

Fundamentally the question that Lindgren avoids asking is what is the relationship between convention and nature in a grammar and its application to human inquiry. Lindgren seems to disregard many of the contributions of modern linguistics by simply affirming Smith’s view that grammatical rules “are dependent upon the aesthetic temperament of the community.” Certainly there is some truth to that, but modern linguistics and cognitive science would make the claim that grammar has a part that exists by convention—especially prescriptive grammars dictating forms of written communication—but it would also point out that the actual wiring of the human brains creates limits on the types of grammar possible. Limiting the type of grammars possible in the hardware of the brain in turn creates limits on the type of socially possible grammars. So does knowing that grammars have inherent and theoretically universal limits sufficient to undermine parts of Smith’s model of language? Starting here and saying there are some types of universal constraints that emerge in the human brain seems to seriously impact the analysis of Lindgren and in turn the applicability of Smith’s application of language to inquiry. If constraints naturally emerge on the structure of language then there could be a tendency for languages to form in a particular way. If languages form in a particular way then is Smith’s understanding of the experience of learning a language correct? Lindgren needs to provide a tougher critique of Smith’s model and see if it is still applicable. This author believes that Smith’s view of language could best be described as quaint, but not able to sustain rigorous scrutiny.

Davis’ study demonstrates the staying power of institutions and conventions even when many people have come to disapprove of them. It seems to reveal the sense within the economics discipline that engagement in public policy discourse is at best not a priority and at worst somewhat disparaged. Davis claims that the bias of academic economics can only be adjusted from within the profession since the convention is not one subject to democratic or market pressures. The government subsidies of education, which perpetuate insulation from market pressures in particular, may have been at the root of the problem. If the academic profession treated students more like consumers, it is conceivable that the incentive to falsify preferences would not have been so widespread. Economists would have had incentive to adjust to students’ preferences, which would certainly have included a public policy approach to economics for some. Perhaps the effect of student preferences could have a smaller, delayed effect in the current academic system, as economists become more cynical about their discipline’s usefulness.

Taxation may have indeed been higher in the 1950’s than it is today, at least with respect to Federal income taxes, but I must respectfully disagree that the 1950’s represented an era of greater regulation.

First, I would point to the greater number of laws that exist now (at Federal, State and Municipal levels) as compared to 60 years ago. Second, the number of occupational licenses that exist now is substantially greater than in 1950, and for licenses that did exist then, the barriers to entry are now much more expensive and/or difficult to overcome. Third, the relative size of the workforce employed by the government sector (Fed, state and local) is much greater now than it was in the 1950’s. More government employees, as a rule of thumb, leads to more government intervention in civilian affairs. Although I cannot measure it empirically, I would also submit the modern regulatory systems are protected by layers of complexity and incomprehensibility that would leave the average businessman of the 1950’s mortified. Modern day business can only survive by hiring vast armies of lawyers, accountants and consultants skilled at navigating the rules. In fact, these regulatory obstacles have successfully protected the biggest market participants from facing any serious competition from new entrants into the marketplace. If there is to be found any increase in liberty, it is within these regulatory moats, where the biggest businesses might enjoy increased freedom from marketplace competition.

‘According to Paul Krugman (2010c), our paper—critically assessing the analysis of the U.S. economists in the 1990s and appearing in January 2010—was “spectacularly ill-timed.” We do not concur.’

Five years after this opening line, I eagerly await the authors’ follow-on article.

This is an interesting article, and though I certainly understand the arguments and the existence of a trade-off between using English and the local majority language in higher education, I think there are additional benefits associated with using English other than the ability to disseminate one’s research to an international audience and preparing a small minority of students for a globalized labor market.

My practical experience of this is as a professor who uses English to teach students in a Taiwanese MBA program. As the authors note, the obvious benefit of using English is greater opportunities for international collaborations and interactions. Now, obviously, it would be easier (in one sense) for the domestic students (about 50% of the total) to interact in Chinese than in English. And it would also make it easier to do research on local conditions, and the difference is arguably greater when the languages are from different language families. But there are also some other factors to consider that seem as important as the ones mentioned in the paper:

1 The effects on teacher-student interaction depend on the cultural context. While Taiwanese students as a rule speak better Chinese than English, they tend to be more reluctant to have informal discussions in Chinese. This is related to more “hierarchical” traditions in which students are not supposed to ask questions. Thus in certain contexts, English may encourage more interactivity (this is generally true in most parts of Asia).

2 There is also the hypothesis – and there is empirical research that supports this – that the experience of cognitive dissonance stimulates creativity. Using a foreign language may increase cognitive dissonance and thus make them more open to new ways of thinking about various problems.

3 As a teacher, I have found that classroom discussions become much more interesting and insightful if there are students with dissimilar cultural backgrounds in the same class. Using Chinese instead of English would (almost) eliminate participation by students from other backgrounds (our international students take classes in Chinese, but their Chinese is with few exceptions at a much lower level of proficiency than the English spoken by our domestic students). Indeed, one of the main reasons that we promote English and recruit foreign students is that we want more classroom interactivity.

4 Exposing domestic students to foreign professors may be desirable in itself. It is obviously in my self-interest to claim this, but there is a growing realization here that it is easier to break out of the local preference for learning-by-memorization if the teacher is from a cultural background where rote learning is less common than here (again, this is a common problem in many Asian contexts). Note that most of the internationally recruited professors would not be here if they had to interact with students or at meetings in another language than English.

In some ways, I think the authors assume that the education system should adjust to the state of the environment as it is. But what if the aim is to contribute to a transformation of society? For example, one aim could be to make it more probable that students embark on an international career than otherwise, while simultaneously increasing the attractiveness of the locality of the educational institution as a destination for skilled workers from elsewhere.

Dear Chris,

What a splendid, persuasive piece! I like especially that you have gone over Emma’s evidence so closely.

Regards,

Deirdre McCloskey

Great article. I enjoyed reading it. Especially the declaration of economists against the draft …… really nice!

I am writing a paper against the draft in Austria and found it very useful.

The situation in Austria is such, that the laws that constitute the draft are even used to legitimize a compulsory civil service. This service is theoretically limited to those who are morally unable to serve with the weapon but has reached a volume of almost 50 % of the draftees. Naturally the labor marked is distorted and the private and public companies that are using the free labour are using their influence to secure their benefits.

This article showed how this conflict can be won. Thanks….

Johannes

To be sure, the birth of a child brings joy, but how is that incomparable with other sources of utility? People consciously make tradeoffs between having children and having more money for such things as vacations. And I wouldn’t say they have made the wrong tradeoff, if it would be their seventh baby and they can’t afford to own a car.

Forman-Barzilai offers a three-fold division of Smith’s principle of sympathy into physical, affective, and historical or cultural spaces. She argues that although Smith’s impartial spectator can successfully navigate the physical and affective spaces, it is not so able to bridge the gap between historical and cultural ones. This problem with this distinction is that while it is useful for separating types of distance, the author incorrectly identifies how these types of distance operate between individuals.

Smith recognized the importance of manners and customs in determining the nature of propriety, and he discussed how these differences change what is blameworthy or praiseworthy. And Smith seems to view these differences as part of the continuum of distance between individuals. The particular type of distance which this author calls historical is just the component of an individual which originates from their environment. And it is certainly the most difficult component of another individual which my imagination must understand or take into account in order to sympathize with them.

However, Forman-Barzilai seems to argue that this difficulty is particular to gaps in culture or class, when in reality this distance, like those distances she calls physical or affective, is better viewed as a continuum. Sympathizing, which is the prerequisite in Smith for approbation and its opposite, must always meet the difficulty of historical space in some degree. And Smith’s impartial spectator must either be able to bridge this gap to some degree in all cases or not at all.

How on earth did this paper make it to the JPE? This comment is not about ideology but about simple logic.

Let us assume, for simplicity, that their empirical tests were conducted correctly. How does their results relate to their conclusion AT ALL? The rise in Ngram shows an increase in fame, not academic statue. The authors provide no justification for the leap in their logic.

Moreover, let us assume that every tests the authors ran are correct, and that Marx’s fame and consequently academic status did rise as a result of the revolution. How on earth does this suggest that Marx is NOT worthy of this? (I’m not saying he is or isn’t. I just cannot toloerate the lack of logic)

Suppose Marx’s work in any field is trash. Why do researchers in other field keep discussing Marx and his work? Is it because all other fields are stupid?

Or, perhaps, there is a perfect economic explanation. Due to the lack of, well, the internet, and the fact that French and Germen were arguably the more important scientific languages, the work of Marx did not receive it’s desired attention IN CERTAIN FIELDS. (Obviously, Marx’s econ theory in capital iii was wrong, but his other ideas could be useful). In other words, there was a market failure. The war as well as the revolution introduced the work of Marx to many, thus resolving the inefficiency in the market for ideas due to cost of information.

Perhaps the best annecdotal evidence to reject the authors’ claims is the fact that van Gogh only sold one painting when he was alive. The authors might believe that van Gogh’s fame is accidental and completely attributable to the exhibition of his work organized by his sister eleven years after his death! Why was van Gogh’s work well received after the publicity? Why was Marx’s work well received after the publicity? The authors don’t seem to bother. They are completely statisfied some statistical artifact.

Robert Coase explores a side of Adam Smith that was obscured by time and overshadowed by Wealth of Nations. While Coase summarizes The Theory of Moral Sentiments effectively, one of the most interesting parts of his article is his refutation of prior conjecture that Smith believed in an individual god. Because Smith is not explicit when it comes to this matter, we must glean from his readings his religious beliefs. Coase and Viner both recognize the fact that Smith uses some religious allusions in his work (“Nature”, “the Great Director of Nature”, “Architect of the Universe” [538]). Where they differ, however, is in the conclusions that they draw from this wording. Viner myopically concludes that this infers Smith as a deist; Coase widens his view to a quote from WN, in which Smith attempts to devise the source of a process unbeknown to him. This quote, along with Smith’s fervent rejection of casuistry in TMS, indicates that Coase’s theorem is more plausible in this case.

The ramifications of this realization are two-fold. Smith was unsure about a process that he was curious about, yet he did not speculate in his tome as to the origin of Nature. The genius of Adam Smith is presupposed; therefore it is not quite a stretch to believe that if he had lived longer, or had access to modern science, that a singular deity would have been replaced with “evolution” or “natural selection.” The second observation is that Smith understood to whom he was addressing TMS. His curiosity of the mechanisms of the universe did not lead him to publish anything rash or inappropriate. Had he proclaimed himself as a non-believer, he would have been marginalized as an academic, as well as a social being. By avoiding controversy on a subject he could not support with facts, Smith unknowingly insured his relevance today.

Another interesting piece of Coase’s article is the attention given to the reduction of the effect of the impartial spectator on individuals. Mutual sympathy is pleasurable to enter into, when our sentiments are in line with another’s. However, self love is also pleasurable. Because of this, there is a balancing act between self love and sympathy. When there is too much self love, an individual has the unfortunate chance of falling into self-deception, which is a distortion of reality. Benevolence, therefore, has to overcome self-interest when outcomes are already distorted by self-deception.

This theme is particularly relevant today. In a society in which instant gratification is a norm, it is difficult to avoid the trap of overwhelming self-interest. People are surrounded by individuals that drive their self-deception by reaffirming their self-interest as actual beneficence. Institutions have shifted the responsibilities of the individual, who best knows how to care for his self, onto others who can only hold a weak benevolence to the distant principal.

Coase recognized the magnitude of TMS, and was able to connect it with key passages in WN, in order to construct a smoother interpretation of seemingly divergent ideas. The Coase paper has laid the foundation for modern Smithian scholars, by thoroughly exploring the congruence in TMS and WN.