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Folk economics addresses the problem of ignorance combined with political power. Economic ignorance is a negative externality—the citizens who vote on economic policy have misconceptions about economic consequences. Correcting negative externalities is often put under the control of government, but in this case it is not clear what could be done. Politicians have less of an incentive to change folk economic ideas than educators do. The folk misconceptions that Rubin mentions (international trade, a protectionist policy in industry, taxes on business, etc) all tend to demand activist government policies and controls. Laws and regulations will increase the political power and scope of the government, which many politicians have an incentive to do.

More importantly, the feedback mechanism for the success or failure of an economic policy is nearly unidentifiable, as changes in the economy can be attributed to a number of variables (try asking an economist and a friend what caused the Great Depression in the United States—the answers are not likely to be the same). The idea that an economy could work independent of a central government and dependent on the individual actions of millions of people is difficult to comprehend when a person lives in a society where he is subject to that central government.

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

This is a great article as the others have said. This study needs far greater exposure to provide greater diversity in economic thinking. There is far more to economics than Keynesianism and the mechanics. Thank you.

I realize that the strict libertarian would argue against any mandated coverage. Until the US citizenry is willing to let people who fail to provide for themselves die on the hospital’s steps, a coverage mandate for major illness is warranted. I raise significant concerns about any major role for government beyond certain minimal things it can do reasonably well. These concerns are problematic for those favoring a single payer solution. I think such an approach would guarantee coverage, but otherwise it would be a disaster. I’m noticing, for example, that some of the numbers here seem to mirror data about the number of conservatives in each discipline. So if field X is comprised of 10% conservatives, and 10% of HUP’s publications in that field fall right of center, couldn’t they argue that conservatives have the same chance of being published as liberals? Is there any way to see a sample of submissions and or rejections? If one wishes to critique the literature for an ideological bias, however, it is best to get one’s facts straight.OK, but keep it respectful.

Thanks

Robert

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Hello Mr Brad R Humphreys and Mr Dennis Coates. my name is Rizky. You can call me Rizky. i am undergraduate student at Departement of economics-Gadjah Mada University in Yogyakarta province-Indonesia.

Mr, i am very interested with your journals. Your journals really inspired me to write the same things related to soccer (football) in Indonesia. football research in Indonesia very rare, especially describing the relationship football and economy. i want it is used for my thesis and i hopefully be useful to progress football in Indonesia.

Mr, I have many questions. what motivates you to write and interest about the economics of sport?

maybe this is my first question. I hope to discuss with you a lot. thanks a lot for your attention. nice to meet you Mr

Best Regards

Rizky F

I’m struck by a sense of deja vu in the treatment of Adam Smith by political philosophers after his death – indeed, it is much the same treatment a consistent modern friend of liberty might expect from orthodox conservatism and progressivism. The right wing of US politics invokes Smith and other classical liberal economists to defend private property and attack the idea of government intervention in the economy on behalf of the poor, but the cannier among them (such as Burke, among the early 18th-century crop of conservatives) know that true friends of individual liberty are no true friends of their favorite projects – wars and mass expenditures in the name of national greatness and tradition.

As Rothschild’s article documents, Smith considered government interference in markets ‘a combination of the rich to oppress the poor,’ far from Burke’s conception of it as the agent of the deity on Earth. Of course, when Smith refers to ‘the rich,’ he usually seems to have in mind not capitalists involved in production in a free market but aristocrats wealthy from hereditary privilege and merchants wealthy from government-granted privilege. Smith takes the elites to task, though, not for simply having accumulated large amounts of wealth, or benefiting from a naturally unjust system of property, but for their lack of classical virtues. Smith saw the profligate, frivolous, aristocratic elite that used their influence to tip regulation in their favor as not measuring up to the humble masses engaged in honest toil in many virtues (his primary system of virtues in TMS emphasized prudence, temperance, courage, justice, and love). While falling short in most virtues is blameworthy yet not worthy of punishment, violating commutative justice was definitely considered by Smith as worthy of punishment, and he regrets that any aristocrat should be so powerful and wealthy as to be above the law in TMS.

Smith should not be read as advocating liberty as simply an instrument to prosperity, to be easily abandoned in such cases in which we believe we can achieve greater prosperity with a clever regulation. Not only is liberty an intrinsic good, for those who have it and for their society, but it positively encourages virtue in general as much as it promotes prosperity. This is why we would never see the shade of Smith siding with the French revolutionaries or the radical left, who want to abrogate liberty and commutative justice in pursuit of a new system of property and a society subordinated to the will of the state. Smith may have had great sympathy for the poor, but it didn’t extend to his advocating the expropriation of the wealthy. Indeed, this might explain why Smith became somehow painted as an arch-conservative apologist for the wealthy despite what he actually wrote: while in Smith’s philosophy, some wars are justified, many customary, traditional and religious rules are laudable, and it makes sense to feel some measure of pride in the greatness and good fortunes of one’s country, it is always contrary to all morality and propriety to rob one’s neighbor, no matter his wealth and no matter your need. Smith can rail against utopian schemers with righteous indignation but would never do the same against God, king and country. Sometimes the distinction between a classical liberal and a conservative appears very fine, and even adherents of either philosophy may confuse or conflate the two, hence the conservative advantage in the race to claim Smith.

It’s sobering to think that the controversy over Smith’s allegiances has been waged without interruption for over two hundred years and counting, now, and in many respects, the arguments have not much changed. Considering the obfuscation and self-censorship Smith had to practice in his writings and the incentives for political groups to claim him as one of their own, I would not be surprised if we all fought over Smith for another two centuries.

In this article, George J. Stigler discusses a paradox he identifies as arising from Smith’s central self-interest motive in the Wealth of Nations. Mainly, that unlike in the private realm, where individuals seem to succeed in pursuing their self interest, and the result is positive for both each individual and for the society as a whole, in the public realm, however, where the majority’s “self interest” is “pursued” through a political process that ultimately reflects the judgments of a small group of people with political power, the effect of self interest for a society is at best ambiguous, and at worse negative.

Basing his discussion on two quotes from the Wealth of Nations, one on the powerful role of commercial self interest for mankind’s prosperity (WN, I, 313 [279]), and Smith’s view of the higher governing level of prudence in society, “though the principles of common prudence do not always govern the conduct of every individual, they always influence that of the majority of every class or order”, the author is puzzled by their seemingly contradictory nature. He asks: “If self interest dominates the majority of men in all commercial undertakings, why not also in all their political undertakings? Why should legislators erect ‘hundreds of impertinent obstructions’ to the economic behavior which creates the Wealth of Nations?”

The author’s question reveals a first assumption (interpretation of the text), that Smith’s self-interest is equal to prudence and propriety. I think it is only because Stigler starts with this assumption (i.e., uses the two terms interchangeably), and because of his second assumption, that the “political undertakings” visible in societies are equal to the “majority of every class or order” that Smith refers to in the above quote, that the author is able to further his discussion. However, I think a more attentive reading of Adam Smith, through the lenses he offers in the Theory of Moral Sentiments, can shed light on Stigler’s confusion. Mainly, Smith seems to be consistent with the public choice theory when he says that “principles of common prudence do not always govern the conduct of every individual,” this is a case where utility does not conform to propriety, and the political circumstance in which people act does not favor necessarily propriety, but partiality. Smith has a broader view on what “the majority of every class or order” is. His view encompasses what he calls in the TMS, the fourth source of moral approval, that of thinking through the effects of an action in the wider and the longer-term perspective on the world, without the consideration of which it would not be possible for societies to prosper.

Jacob Viner’s essay “Adam Smith and Laissez Faire” is now more than ninety years old, but still merits debate. The consensus view of the article, as proxied by the 1987 Palgrave’s Dictionary, is that Viner “demonstrate[d], among other matters, that Smith was not a doctrinaire advocate of laissez faire” (Spiegel, “Viner, Jacob”). More specifically, Viner purports to show that the Smith of the Wealth of Nations is superior to the Smith of the Theory of Moral Sentiments because of increased empiricism: an openness to departures from the principles of limited government and natural liberty when warranted by specific situations. The claim has some truth to it, but Viner seriously overplays his hand. One such example is suggestive.

While he concedes that “Smith in general…believed that there was…a strong presumption against government activity beyond its fundamental duties” (Viner 1927, 219) Viner downplays and even mocks Smith’s commitment to natural liberty as a reason for this presumption. Noting that biographers agree that Smith was absent-minded, Viner comments “his general principle of natural liberty seems to have been one of the things he was most absent-minded about” (Viner 228). As evidence, Viner claims that Smith supported government restriction on private activity even when no core government functions were at stake – when the control merely improved overall economic outcomes. Viner cites Smith’s “[support for] the compulsory registration of mortgages” and “[approval of] colonial laws which promoted agricultural progress by checking the engrossing of land” (Viner 228).

Viner footnoted these two claims to an older, Cannan edition of the Wealth of Nations of unspecified date. Using a searchable online version of Cannan’s text I was able to trace these references with near-certainty. In the first case (registration of mortgages) Smith is not “supporting” anything but merely describing the Dutch practice of placing stamp-duties on certain transactions, including mortgages, which perforce requires that they be registered. The aim of the exercise is revenue, not economic control. Indeed Smith seems to disapprove of the practice, since only a few sentences later he comments about the spread of stamp-duties that “there is no art which one government sooner learns of another than that of draining money from the pockets of the people” (Smith, Wealth of Nations 1976 Glasgow Edition, 861, V.ii.h.). Viner seems guilty of serious misrepresentation here. The second reference is more contestable. The “colonial restrictions” Smith refers to were the laws in the British North American colonies that required a landlord to improve or cultivate his land within a limited period of time, or else risk losing them to a new claimant (Smith WON 572, IV.vii.b). The effect of this policy, Smith thought, would be to increase the number of small owner-occupiers. While admittedly a departure from pure laissez-faire – and in conflict with Smith’s defense of grain engrossing in Book IV, Chapter V – such a tinkering with the legal framework seems very mild by comparison with much government activity in our own (or Viner’s) day. It does not have the flavor of “government restrictions on private initiative.” While this quick reference check certainly doesn’t invalidate all of the article’s claims, it raises concerns that there are interpretative slips beneath Viner’s wall of evidence. Perhaps Smith wasn’t the only absent-minded one.

Edwin West finds some interesting apparent inconsistencies in Adam Smith’s thoughts on money and banking in this 1997 article. He finds that Smith is inconsistent in four main areas: (1) he praises the Bank of England but attacks monopolies; (2) he lauds competition in banking but supports a ban on small notes and legislation outlawing note options that defer redemption; (3) he supports ‘natural liberty’ at every turn but supported note restrictions; and (4) he supports consumer choice in some instances but not in others.

While West may be commended for bringing these tensions into the open, his critique of Smith ignores the general perspective and purpose of Smith’s writing. The Wealth of Nations, from which the entirety of Smith’s own words are drawn, is not intended as a treatise in economic theory; rather, it is foremost an exposition of economic behavior and an exhortation for less legislation (and thereby more natural liberty). Smith takes the part of a bargainer, making some concessions to the need for government interference, especially where it is deeply entrenched, in exchange for a greater understanding of the need for greater liberty in general.

In the case of the Bank of England monopoly, it would be unwise for Smith to oppose the institution just as it would be unwise for otherwise respectable free-market economists in our own time to oppose the existence of the Federal Reserve. He realizes such opposition would never go anywhere and that he would marginalize himself in the process. West says, “… the development of the Bank of England in W.N. is delivered in flat terms and with little indication of the extent of the monopolization that had occurred. This phenomenon is even more surprising considering that Smith was as vehement against public debts as he was against monopoly in general.” (p.128) Actually, this is not surprising at all: if he wants to bring minds against monopolies but does not want to attack an institution over eighty years old, what better way than to obscure its monopoly status?

In the other three cases, these are not so much inconsistencies in Smith’s thought as they are selected points where Smith either has reached the limits of his deference to individual freedom or does not want to oversell his position. The stands he takes against free market orthodoxy are, after all, more extreme than the supposedly inconsistent positions he takes in its favor. He would not oppose the ban on small notes or note options if he was opposed to competition in banking. He would not oppose note restrictions if he didn’t support natural liberty. And how is it strange that he favors consumer protection in banking but supports consumer choice in health care and employment? Plenty of economists take such a position. In each of these he simply does not venture too extreme in his advocacy and finds a point of balance that either is not too far for him or not too far for his readership.

If West’s intent is to prove that in banking matters Smith was not completely laissez-faire (as far as WN is concerned), he succeeds. The issues he raises are appropriate in this regard, and he provides a good account of Smith’s deviations from absolute free markets in banking. Yet a reader’s familiarity with Smith’s work would put these deviations in perspective. Adam Smith was not attempting to write airtight economic theory in the Wealth of Nations. He was attempting to make a reasonable and agreeable plea for greater deference to liberty.

In this article, the authors conclude that Adam Smith is a behavioral economist. They base this conclusion on a number of behavioral insights derived from the Theory of Moral Sentiments (TMS). Mainly, they call on preferences, the dual-process framework of the passions and the impartial spectator, loss aversion, intertemporal choice, and overconfidence, as the clues connecting Smith with contemporary behavioral economics. Thus, they seem to believe that a pattern of people’s behavioral manifestations can be traced by economists through lab experiments, neuroscience research, etc., and, in this respect, Adam Smith’s theory of moral behavior provides important inspiration.

Contrary to Ashraf et al., I consider that in order to arrive to a more correct conclusion on Smith’s methodological position in the economic science, one has to look at both Smith’s behavioral insights in TMS, and his economic/cognitive insights in the Wealth of Nations (WN). The key is to realize that although Smith did dedicate an entire treatise to theorizing about human passions, his ulterior focus became people’s drive for economic improvement. Thus, in the WN he pursued the question on what are the circumstances propitious for the actions of the “the great mob(s) of mankind” to attain their passion for material well-being? Or, what environment helps people’s actions to converge, be compatible with one another, in spite of the other behavioral innate dimensions Smith evokes in TMS.

From this perspective, rather than being a behavioral economist, who resumes himself at attributing people’s behavior to their innate moral nature, Smith might well be seen an institutional economist (in the New Institutional Economics field), who’s works provide a basis for a closer inquiry into the social and legal norms which provide individuals with the framework of incentives that guide them to behave morally or immorally in their social and market interactions.

Deirdre McCloskey’s article, “Adam Smith, Last of the Former Virtue Ethicists,” is a well-reasoned piece that seeks to dispel the notion that Adam Smith was primarily an economist. As she states in the opening sentence (I love writers who get to the point), “Smith was mainly an ethical philosopher.” Her article traces the line of ethicists from Plato to Smith who believed that seven primary virtues (justice, fortitude, prudence, temperance, benevolence, faith, and hope) provide the foundation for all morality. Where Smith based his economics in his philosophy of ethics, McCloskey shows how modern economists have largely forsaken this connection, forgetting the tie that economics (presented in Smith’s Wealth of Nations) must maintain with ethics (presented in his Theory of Moral Sentiments). In fact, the ethical side of Smith, represented by TMS, was largely forgotten until relatively recently.

Ms. McCloskey is well-qualified to write a piece on Adam Smith the philosopher, instead of Adam Smith, the economist. Of course Adam Smith WAS really a philosopher: his job title at University of Glasgow circa 1760 reads “Professor of Moral Philosophy.” McCloskey’s position description is similarly expansive at University of Illinois, Chicago: “Professor of Economics, History, English, and Communication.” She is, like Smith, evidently a polymath.

Most economists today approach Adam Smith from one of two angles. Either he was (1) a free-market capitalist, originator of the “Invisible hand” and early opponent of mercantilist voodoo; or (2) a free-market capitalist and author of The Wealth of Nations (WN), who also wrote a book of philosophy (TMS), which is probably brilliant, but contains language and concepts foreign to (and apparently inconsistent with) WN, and thus to be avoided.

McCloskey sees no inconsistency between Smith’s two great published works. She sees no need to jettison the moral reasoning of TMS in order to focus on the economic insight of WN. Indeed, she sees Smith’s ethical philosophy as foundational to his economics, and urges present-day economists to make a similar connection. Smith she sees as primarily an ethicist (like the other former virtue ethicists: namely Plato, Aristotle, and Aquinas), whose moral thinking drove his economic thinking. Divorcing the moral aspect of Smith’s thought (as modern-day economists do when they ignore TMS) rends WN, leaving it devoid of its context and true meaning. Similarly, such a divorce rends modern economics from a sure foundation, leaving it amoral, adrift on a sea of maximum utility.

Hayek does well to remind people of the true definition of individualism in his opening chapter. Many assume the common meaning of terms and concepts such as “individualism” without evaluating the meaning of the term or concept as it was used in a past age. However, Hayek does not seem to dive deep into the Bible to understand its methods or how they were supposed to work. He assumes that history has proven that biblical methods of economics do not work. He does acknowledge the usefulness of biblical principles, but does not see biblical methods as legitimate. Maybe the reason biblical methods have not worked is because governments and nations refuse to implement certain practices? Hayek does not take time to wonder what would happen if a Year of Jubilee was practiced. Finally, Hayek does not address biblical assumptions about man and how he works either. Men’s hearts are corrupt according to the Bible. Hence, greed and usury is prevalent. Hayek does a wonderful job of defining individualism, but makes too many assumptions about how the Bible should be used in regards to an economic system.

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.

A wonderful remembrance! Although not a major in Economics, I had Alchian for Econ 101 (for non-econ majors?) in the mid 1950s, and a year or two later, a grad seminar with Allen (and someone else) on Internat’l Econ Development. Also, had Hildebrand for K. Marx econ. With the help of Prof Allen’s retrospective, I am now inclined to even greater appreciation than at the time—-partly for their inculcation of an economic perspective but mostly for their character.

Gee, I wonder why this survey didn’t ask question about things like monopsony, the money multiplier effect of government spending, the free ride problem with public goods, natural monopolies, positive and negative externalities, etc. It is almost like the questions were cherry picked to get conservatives to do better than liberals! Was this funded by some right wing think tank?

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.

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.

This article, although published in 1953, considers the still relevant issue of “realism” in economic policy recommendations. Philbrook’s arguments are well constructed and nuanced, but I disagree with his main point. Specifically, Philbrook rejects the criticism of “unrealism” for the field of policy analysis. Unrealism, according to Philbrook, is a criticism that economists levee against suggestions that break too much with the status quo such that there is little hope of convincing others to adopt the suggestions. He argues, “only one type of serious defense of a policy is open to an economist or anyone else: he must maintain that the policy is good.” In his argument, Philbrook rejects the notion of combining a policy’s goodness with its probability of being accepted (although he does admit it is not worthwhile to argue for totally unrealistic policies).

Although I agree that the most important attribute of a policy is its “goodness,” I disagree that realist considerations should be ignored. Similarly, I agree that an economist should not hide his true beliefs about particular policies, but also he should temper his less realistic positions. For example, instead of advocating complete laissez-faire banking as Philbrook does, Philbrook could focus on the repeal of regulations he feels are particularly restrictive. In fact, I suggest there are two types of realisms to be considered. The first mirrors Philbrook’s definition and describes how realistic it is that a policy recommendation will be accepted by others. The second realism describes how likely the economist’s analysis of policy implications is accurate. The repeal of only a few regulations is more “realistic” than advocating full laissez-faire banking by both definitions. It is more likely that Philbrook can convince others to repeal a few regulations than enact full laissez-faire banking, and Philbrook and others can better anticipate the consequences of the repeal of a few regulations than the enactment of full laissez-faire banking. The second form of realism—realism in anticipating consequences—more closely interacts with the “goodness” of a policy and might be termed the riskiness of the policy’s goodness. Economists have long analyzed the tradeoff between the riskiness of an asset and its rate of return. Economists can apply the same reasoning to policy positions. Moreover, I think that the first type of realism—realism in the ability to convince others—is really derived from the second type of realism. People are not readily convinced of large changes from the status quo because it is difficult to anticipate the consequences of those changes.

Although this is an old article, it still poses a critical challenge for economists who believe in policy advocacy. The old-time religion of economics – going back to Adam Smith – assumes that both individuals and society often adopt misguided policies, which good economic advice can dispel. Against this Stigler argues that agents act to maximize their well-being in both the political and economic spheres. To treat them as mistaken is futile. Whatever “is”, if not perhaps right, at least an equilibrium immovable by “preaching”.

I don’t think that either economists or other idealists need to accept this pessimistic conclusion. There are many episodes in history when economic persuasion of elites led to better policy; the sunset of the Civil Aeronautics Board in the USA comes to mind, or the pro-free trade policy in grain adopted by the British in colonial India (which greatly mitigated famines). Even if ineffective against politicians or interest group leaders, persuasion may succeed in mobilizing society for change. “Preaching” may, first of all, identify an injustice. It may rouse the conscience of ordinary citizens – and perhaps even the perpetrators of the policy itself – by bringing home to them the policies’ true effects on other people. In the 19th century campaign against slavery, for example, reformers used their famous “Am I not a Man, and a Brother” illustration to humanize enslaved Africans. While skin color had previously been a kind of focal block to the extension of sympathy, publicity asserting a common humanity extended the moral circle to include the enslaved. Rhetoric actually changed people’s preferences – something Stigler can’t handle in his closed system, possibly because he rejects the idea of justice. But in fact perceptions of justice – however contested, however mutable – powerfully influence human beings. Even if it has no ultimate foundation, then, economic preaching can shape what people think justice requires and thus move societies into an entirely different equilibrium. Pre-revolutionary Russia, for example, clearly moved into a more miserable equilibrium as a result of Communist ideology. Chile, on the by contrast, adopted relatively liberal economic policies as a result of economic advice in the 1970s and became much more prosperous. As the second example suggests, good economic advice doesn’t even require particularly ethical leaders. In some cases the greater prosperity flowing from liberalization might be enough to convince the holders of power to loosen their reins and share in the bounty. While preachers (of all disciplines) shouldn’t neglect the dynamics of self-interest, they can take heart that the status quo isn’t immutable.

Would Adam Smith have favored minimum wage legislation? In this influential article from the early nineties, Emma Rothschild argued that he would – or at least that his views would broadly support such a measure. The article as a whole repays close reading for its overall, provocative argument that Adam Smith was really a “libertarian socialist.” To Rothschild, the ‘real’ Adam Smith was a radical “subversive” sympathetic to the French Revolution. Tragically, though, conservative interpreters transformed him after his death into a mere advocate of unrestrained commerce. The minimum wage question is one component of this wider claim.

In a House of Commons debate in 1795, Samuel Whitbread (the son of the famous brewer) proposed allowing magistrates to fix minimum wages for agricultural laborers. Whitbread deployed Smith in support of his position, citing a number of key passages from Book One of the Wealth of Nations. In the first, he quotes Smith that “when the regulation…is in favor of the workmen, it is always just and equitable; but it is sometimes otherwise when in favor of the masters” (WON, I.x.c.61). Whitbread (and Rothschild) seem to interpret his statement as a forward looking, normative claim; in its context, however, the statement seems more descriptive than prescriptive. Smith’s discussion is about maximum wage laws, and he observes that “whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters.” As throughout the Wealth of Nations, Smith is alive to the scheming of the rich and powerful to advance their interests using the power of government.

As George Stigler has pointed out, the whole paragraph is puzzling – why would the legislature, dominated by the interests of the employers, ever pass a just and equitable law in favor of the workers? Stigler (in his 1971 polemic “Smith’s Travels on the Ship of State”) thinks Smith was simply mistaken or inconsistent in this passage. A more likely answer, though, would seem to be that the best workmen could hope for was “merely” justice and equity. They could never hope for actively favorable treatment. But such political considerations aside, would Smith think minimum wages just or favorable? We should shrink from attributing, to the founder of the discipline, an error most competent economics undergraduates can spot. Yet Smith never discusses minimum wages. We are left to infer his reaction from comments about the assize (price regulation) of bread: “Where there is an exclusive corporation [monopoly], it may perhaps be proper to regulate the price of the first necessity of life. But where there is none, the competition will regulate it much better than any assize.” (WN, I.x.c.62). Would Rothschild and like-minded scholars think this position unfriendly to the poor?