On Adam Smith’s The Wealth of Nations

by Emrys Westacott

I just read Adam Smith’s The Wealth of Nations for the first time. Not every word. It’s over a thousand pages, and there are long “Digressions” (Smith’s term) on matters such as the history of the value of silver, or banking in Amsterdam, which I simply passed over. I was mainly interested in what Smith has to say about work, so I also  merely skimmed some other sections that seemed to have little relevance to my research. Time and again, though, I found myself getting sucked into chapters unrelated to my concerns simply because the topics discussed are so interesting, and what Smith has to say is so thought-provoking. Reading the book is also made easier both by Smith’s admirably lucid writing and by the brief summaries of the main claims being made that he inserts throughout at the left-hand margin.

By any measure The Wealth of Nations is one of the most influential books ever written and represents a monumental intellectual achievement, initiating a paradigm shift in political economy. Before its publication in 1776, the dominant view in Britain and many other countries was some form of mercantilism. According to this theory, the path to prosperity and power for a nation lay in its having a positive balance of trade, exporting more than it imported, thereby accumulating wealth at the expense of its rivals. Government policy thus sought to promote the production of goods while ignoring or even suppressing domestic consumption. Against this, Smith argues that the wealth of a nation does not reside in a store of goods or gold, but consists, rather, in the totality of the economic activity that its people and institutions are engaged in. Read more »

How elite soccer illustrates an ancient paradox and a current problem

by Emrys Westacott

The market is efficient. The market knows best. This belief underlies much contemporary theory and practice, especially in the realm of government policy. It is has been used, for instance, to justify privatizing the railways and the post office in the UK, and it forms a central plank in the arguments of those who oppose a government run national health care system in the US. Imgres

The basic idea is simple enough. People express their preferences through their spending habits; they vote with their wallets. If DVDs replace video tapes, or if Amazon puts Borders Books out of business, that is just efficiency in action, with the market performing the function that natural selection performs in the course of evolution. And just as evolutionary biologists do not criticize environmental conditions (although they may sometimes put on another hat and seek to protect threatened species or habitats), so economists, insofar as they are trying to be scientific, will not criticize consumer preferences. About expressed preferences there is no disputing.

But of course, as engaged, concerned, interested, moralizing, and occasionally sanctimonious human beings, most of us do make value judgements about people's preferences. We do this in one of two ways.

1) We normatively judge the preferences themselves. E.g. we criticize people (including ourselves) for drinking too much, eating unhealthy foods, watching stupid TV shows, spending too much time playing video games, or engaging in conspicuous consumption. And we applaud people for learning new skills, cultivating their talents, supporting a local enterprise, or giving to charity.

2) We evaluate how well people's preferences, as expressed through their actions, will help them realize their ultimate goals. E.g. Teachers tell students that if they want to be professionally successful they should study more and party less. Psychologists tell us all that if we want to make ourselves happier we should spend less on ourselves and more on others.

Often, the first sort of evaluation is really a version of the second, but that needn't concern us here. It's the second kind that interests me.

We all often act on specific short-term preferences in a way that produces long-term consequences that are contrary in some ways to what we really desire. The paradox that by pursuing what we think we want we fail to attain what we really want was first explored by Plato in the Gorgias and the Republic.[1] I believe top-flight soccer offers an interesting and instructive illustration of this paradox.

Read more »

Karl Marx’s Guiding Idea

by Emrys Westacott


“Nothing human is alien to me.” This was Karl Marx's favourite maxim, taken from the Roman writer, Terrence. But I think that if Marx had lived a century later, he might have added as a second choice the famous phrase sung by Sportin' Life in Gershwin's Porgy and Bess: “It ain't necessarily so.” For together these two sayings capture a good deal of what I think of as Marx's Guiding Idea, the idea at the heart of his philosophy that remains as valuable and as relevant today as in his own time. Let me explain.

Human beings have been around for a few million years, and for most of that time most people's material and social circumstances have been quite stable. The experiences of one generation were pretty much the same as the experiences of their forbears. In this respect the lives of humans were like those of other animals. Unlike other animals, however, human beings reflect on their lives and circumstances; moreover they communicate these reflections to one another. The result is religion, mythology, philosophy, history, literature, and the performing arts (all of which can arise within a purely oral culture), and eventually the natural sciences, and social studies of various kinds, such as psychology, sociology, economics, and political theory.

These diverse forms of reflection on the human condition perform various functions. One function is to explain why things are the way they are. For instance, the bible explains why the Israelites lived in Israel (God made a promise to Abraham, and kept it, enabling Joshua's army to conquer the land); the theory of the four humours purported to explain personality differences between individuals. Another function is to justify a certain order of things. Thus, the doctrine of the divine right of kings sought to justify the institution of a powerful executive who stands above the law. The doctrine that individuals have a right to freedom of thought and expression is often cited to justify a policy of religious tolerance.

These two functions are sometimes hard to disentangle. For example, the alleged cultural inferiority of a people might be taken both to explain why they have been conquered and to justify that conquest as legitimate or even desirable. The “laws” of market competition provide an explanation of why some individuals and businesses do better than others, and these same laws are appealed to by those inclined to endorse the the outcome of the competition.

Read more »