The free-market bastardization of Adam Smith

[marmar]

an excerpt from Raj Patel's "The Value of Nothing: How to reshape market society and redefine democracy":


Over 1.4 million of Ayn Rand's books have been given away to American high schools by the institute that bears her name - the books are free to any teacher prepared to make their students suffer them. Her work is taught as sort of Adam Smith Lite, an entry-level text in support of the free market that finds its most articulate and subtle formulations in the works of the great Scottish philosopher. This is unfair to Smith.

While Rand spun tedious rationalizations for selfish behavior, Smith was very far from a praise-singer for unfettered markets. The term with which his name is most singularly associated, "the invisible hand," appears just once in The Wealth of Nations. When it does, it isn't used to describe the beneficent effect of free markets at all. The invisible hand is the guiding force that makes Scottish investors behave parochially, preferring to put their money into the Scottish economy rather than investing abroad. By investing in their local economy, investors get a return, of course, but so does the society in which they invest and, because the live there, investors enjoy the economic stimulus too. This is the beneficial yet unintended consequence of investors' selfish motives, and it only comes about because of a preference for domestic over international investment. Not exactly the policy that people who quote Smith are usually in the business of advocating when they talk about the invisible hand.

Smith was a far more subtle and complex thinker than his free-markets-rule caricature, holding sophisticated views on many of the issues that tax modern economics. His opinion on whether money could buy happiness, for instance, was that it couldn't.: "In ease of body and peace of mind, all the different ranks of life are nearly upon a level." He also thought that a primary animating principle behind economic activity was vanity. People worked in order to pay for things that held the esteem of one's peers. This keeping-up-with-the-Joneses, where everyone works ever harder to stay where they are in the eyes of their society, is today's "hedonic treadmill." But it is in his understanding of value that Smith and his descendants have most to teach us today.

...(snip)...

The word value ... has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called "value in use"; the other, "value in exchange." The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have little or no value in use. Nothing is more useful than water, but it will scarce purchase anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.

[Zynx]

1. Smith also talked about the need for social welfare.

He identified the fact that private charity is often insufficient to care for those who cannot participate in the market. To counter this, he said that a "general collection" must be undertaken to serve their needs. That sounds like taxation to fund social programs to me.

[Captain Hilts]

2. Free Marketeers never read Smith's previous book: Theory of Moral Sentiments. nt

[OHdem10]

3. Free Marketer have perverted capitalism and thus drove us into

this ditch called the Great Recession.

[Odin2005]

4. Smith supported social welfare policies and trust-busting.

In fact a lot of his economic thinking was an attack on the mercantilist, monopolistic Proto-Capitalism of state-sponsored corporations. he hated monopolies and cartels with a passion.

One of my favorite quotes of his goes something like "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

some more zingers:

"As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce."

"No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged."

"Whenever the legislature attempts to regulate the differences between masters and their workman,its counsellors are always the masters. When the regulation, therefore, is in favor of the workmen, it is always just and equitable; but it is sometimes otherwise when in favor of the masters."

"Wherever there is great property, there is great inequality."

"Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all."

"Though the principles of the banking trade may appear somewhat abstruse, the practice is capable of being reduced to strict rules. To depart upon any occasion from these rules, in consequence of some flattering speculation of extraordinary gain, is almost always extremely dangerous, and frequently fatal to the banking company which attempts it." (Got that, Banksters?)

"It is unjust that the whole of society should contribute towards an expence of which the benefit is confined to a part of the society." (Like Wall Street? Or Big Ag?)

And this last one will REALLY make some people's heads explode:

"It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion." (Smith supports PROGRESSIVE TAXATION!?! The Horror! The Horror!!!)

[hootinholler]

5. Yes that he was in favor of progressive taxation has blown a few minds

I love to bring that one out.


-Hoot

[Canuckistanian]

6. Got a link?

This looks interesting....

[marmar]

7. Actually I just copied the graphs right out of the book.....

..... It's a great, important read. It's worth the money.....even at the inflated book prices you guys pay across the border. :)

[Canuckistanian]

8. Darn.

You mean I'll have to pay cash money to read more?

I'll have to remember the title the next time I'm in a bookstore