The Wealth of Nations, Part 4 to the Life & Works of
Before dealing with Adam Smith's The Wealth of Nations, a few words would be in order on his earlier work, Theory of Moral Sentiments, published in 1759. It was Smith's view that the essence of moral sensibility was that which came about through sympathy, but sympathy as an impartial and well informed spectator. He became part of the school known as the "moral sense thinkers," a school which the utilitarians were to attack.
Though it has been shown that he was a most curious human being, Adam Smith displayed, in the writing of The Wealth of Nations, a "profound knowledge of the real occupations of mankind."10 How did he come across this knowledge? Undoubtedly it was because -- to the good fortunate of the rest of us through the ages -- he left the enviroment of the university in 1764 to become the tutor to the young Duke of Buccleuch, which resulted in a leisurely tour of France during the years 1764-1766. England and France had just finished their Seven Years War with one another, so unmolested travel was presumably possible: and so to Paris he and his charge went.
"Paris was then queen of two worlds: of that of politics by a tradition from the past, and of literature by a force and life vigorously evidenced in the present. France therefore thus attracted the main attention of all travellers who cared for the existing life of the time; Adam Smith and his pupil spent the greater part of their stay abroad there. And as a preparation for writing the 'Wealth of Nations' he could nowhere else have been placed so well. Macaulay says that 'ancient abuses and new theories' flourished together in France just before the meeting of the States-General in greater vigour than they had been seen to be combined before or since. And the description is quite as true economically as politically; on all economical matters the France of that time as a sort of museum stocked with the most important errors.
It was in France that Adam Smith observed the results of "both the restraints upon the interior commerce of the country and the number of the revenue officers ..."12 The situation which Smith observed in France was one that was essentially brought on by taxation, a system that made the people "exceedingly miserable," a system, which, in years to come, would bring on the bloody French Revolution; and, to bring, in its wake, Napoleon.
By nature, then, as now, France was fitted to be a great agricultural country, a great producer and exporter of corn and wine; but her legislators for several generations had endeavoured to counteract the aim of nature, and had tried to make her a manufacturing country and an exporter of her manufacturers. Like most persons in those times, they had been prodigiously impressed by the high position which the maritime powers, as they were then called (the comparatively little powers of England and Holland), were able to take in the politics of Europe. They saw that this influence came from wealth, that this wealth was made in trade and manufacture, and therefore they determined that France should not be behind, but should have as much trade and manufacture as possible. Accordingly, they imposed prohibitive or deterring duties on the importation of foreign manufacturers; they gave bounties to the corresponding home manufactures."11
Thus, Adam Smith, steeped in history and philosophy, is exposed to both the English and French political-economic systems of the day: "And side by side with this museum of economical errors there was a most vigorous political economy which exposed them."13 His experiences were capped as he met, as we have seen, the great French thinkers of the day, such as: Voltaire, Quesnay, Turgot, and Necker. And, so, it was during 1766, in France that Adam Smith began to write his great work, which he continued to write on his return to Kirkcaldy and Edinburgh, and right on to his time in London, when in 1776, he saw it through the press.
The Wealth of Nations, "the principia of politick operations," opens with a description of the specialization of labour in the manufacture of pins; the book covers a variety of subjects: from the professorships at Oxford to the statistics on the herring catch since 1771; from stamp duties to the coined money used by the Romans (just check out the 42 page index). The book is full of detail. It was not to be just a book on economics, such as, say, Ricardo was to write some 41 years later, in 1817, Principles of Political Economy & Taxation. Adam Smith had a grand vision of which The Wealth of Nations was to be only a part, this part, as a book was one of two that was ever polished up enough for publication during his lifetime. Previously, in 1758, he had written, as I have already mentioned, Theory of Moral Sentiments, in which "he builds up the whole moral nature of man out of a single primitive emotion -- sympathy, and in which he gives a history of ethical philosophy besides."14 Upon Smith's death, his executors advised, that, all along, Smith had worked on a plan to give "a connected history of the liberal and elegant arts."15 He wrote on Ancient Physics and Ancient Logic; and on the Imitative Arts, Painting, Poetry, and Music. He destroyed (which to me is a crying shame), just shortly before his death, his Lectures on Justice.
"... we are told by a student who heard them, 'he followed Montesquieu in endeavouring to trace the gradual progress of jurisprudence, both public and private, from the rudest to the most refined ages, and to point out the effects of those arts which contribute to subsistence and to the accumulation of property in producing correspondent alterations in law and government;' or, as he himself announces it at the conclusion of the 'Moral Sentiments,' 'another discourse' in which he designs 'to endeavour to give an account of the general principles of law and government, and of the different revolutions they have undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns police, revenue, and arms, and whatever else is the subject of law.' Scarcely any philosopher has imagined a vaster dream."16
Smith's book was considered to be revolutionary, as it did not deal with the class structure of the age, and the eternal questions of who had what, - And why?
"... it is not his aim to espouse the interests of any class. He is concerned with promoting the wealth of the entire nation. And wealth, to Adam Smith, consists of the goods which all the people of society consume; note all - this is a democratic, and hence radical, philosophy of wealth. Gone is the notion of gold, treasures, kingly hoards; gone the prerogatives of merchants or farmers or working guilds. We are in the modern world where the flow of goods and services consumed by everyone constitutes the ultimate aim and end of economic life."17
And what drives this flow of goods and services: I quote Adam Smith from his The Wealth of Nations:
"Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.
What Adam Smith did in his book was to explain how self-interest was the engine of the economy and competition its governor. He set forth the great lesson that all economists come to sooner or later. I quote Professor Heilbroner:
"He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.
"In civilized society he [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. 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 self-love, and never talk to them of our own necessities but of their advantages."
"First, he [Adam Smith] has explained how prices are kept from ranging arbitrarily away from the actual cost of producing a good. Second, he has explained how society can induce its producers of commodities to provide it with what it wants. Third, he has pointed out why high prices are a self-curing disease, for they cause production in those lines to increase. And finally, he has accounted for a basic similarity of incomes at each level of the great producing strata of the nation. In a word, he has found in the mechanism of the market a self-regulating system which provides for society's orderly provision." (p. 49.)The difficulty I have with Robert Heilbroner, a most interesting man to read, is his assertion that the law of the market, is a man-made institution.18 The market is not something that we can choose to have or not to have, it exists and will exist no matter the political regime, and no matter the number of coercive laws we would like to pass. One cannot help coming to this conclusion as one expands the thoughts expressed in The Wealth of Nations.
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