Monday, May 10, 2010

Gavin Kennedy on Adam Smith

Not being an expert on Adam Smith, I thought I'd it would be interesting to solicit the opinion of on expert regarding the earlier post Adam Smith and the Founders. Gavin Kennedy, author of Smith: a moral philosopher and his political economy, and of Adam Smith's Lost Legacy offered the kind response below, with permission to publish his remarks.

We know that Adam Smith had some influence on readers of his books, but it is not easy to detect the depth or extent of that influence on the founding of the USA. He had to tread a narrow line on matters that carried implied criticism of the King (not from particular fears of political persecution; more from interested parties who preferred mercantile political economy and the monopoly privileges that brought them or even bought for them and would use such criticism to undermine Smith’s wider interest in promoting reforms to the British economy). In the run up to the publication of Wealth Of Nations, through his friend, Sir Gilbert Elliot, the local MP, (Smith knew his father) he met with many MPs and the protectionists among them were quite hostile to his freer markets views and to his independent stance on the turmoil in the British colonies in North America. His sponsor and friend, the Duke of Buccleugh, warned David Hume that Adam was getting too 'warm' on the American problem and advised he should cool down as it was becoming noticeable.

Smith's aim was to persuade the administration to make changes to its mercantile policies and not to argue for a root-and-branch reversal of all policies at once - he advocated the gradual introduction of more competition not laissez-faire. He was for measured reform not an instant change of everything. ‘Slowly and gradually’ were his watchwords. He thought total free trade was utopian; he argued latterly for a federation of the UK with its North American colonies, based on representation according to their proportional contribution from taxation. He thought that in 'about a hundred years', the former colonies would be so rich they would contribute the bulk of the taxation raised in the federated countries and therefore that the seat of government would move from London to North America. (He had doubts about combining the aristocracy with democracy.)

By July 1776 the colonies had revolted and it was too late for compromise. The blame for this (unsaid, of course) was the King's government that had refused to compromise anything, which as a result they lost everything. By the time Wealth Of Nations was imported into the colonies, events had moved on from possible compromises (no taxation without representation versus no representation without taxation). When an issue is contested by arms, the outcome is decisive whichever way it lands.

Some US personages were readers of Moral Sentiments (1759) and others were known to have read Wealth Of Nations (after 1776), such as Washington (his copy is in the Library of Congress) and Hamilton and Jefferson had copies too. Smith met and talked with Benjamin Franklin and possibly others. His published ideas were not hostile to the colonies but were expressed respectfully to the King's Ministers, whom he was trying to influence.

Professor Andrew Skinner wrote a piece on Smith and North America in the 1970s, which is to be re-published soon (edited by Jeffrey Young). I don't have the reference to hand but Google may help.

If anything else occurs to me I shall send it to you.

Best wishes,
Gavin Kennedy
Emeritus Professor, Heriot-Watt University

Wednesday, May 05, 2010

How Much of Adam Smith was in James Madison

On occasion commenters have asked to what degree the Founder's were influence by the Scotsman, Adam Smith, the moral philosopher and father of modern economics.

In 2004, David Prindle authored an essay on Smith's influence on James Madison, colorfully titled The Invisible Hand of James Madison. From the abstract,

"Scholars have disagreed about how to interpret James Madison's Federalist essays 10 and 51, in which he explains and justifies the underlying principles of the new Constitution. Was Madison the architect of a structure of counterpoise, which would force individuals, interests, and institutions to obstruct one another so as to avoid tyranny, or was he a republican statesman, designing a system that would recruit virtuous citizens to public office."

Prindle dismisses the dichotomy; "Was Madison arguing that the Constitional system designed to thwart bad people, or to recruit good ones?", and asserts that Madison likely intended both. Prindle's Madison encompasses both restraint of tyranny and Republican virtue.

To substantiate his position Prindle examines Adam Smith's mixed motives in writing The Wealth of Nations. Those motives are described as;

"[Smith] wanted to combat the prejudice, derived from the natural law tradition, that individual interests were necessarily anti-social, and therefore furnished an excuse for government economic regulation [...] Smith wanted to show that there was a way that economies could be designed so that nations could become richer [...] he wished to demonstrate that an economy was not necessarilly a zero-sum game, but could be structured so as to grow at a rate considerably faster than population increase. Morally, he wanted to refute the notion that self-seeking must always be contrary to the public interst. To help him accomplish these twin goals, he invented modern economic reasoning."

Smith summarized his idea as;

"As every individual [...] by directing that industry in such a manner as its produce may be of greatest value, intends only his own gain, 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...By pursuing his own interest he frequently promotes that of society more effectively than when he really intends to promote it."

Above, Smith is not saying that the participants in free enterprise have virtuous intents, but that their actions become virtuous due to market forces. Similarly, in Federalist 51, Madison argues "Ambition must be made to counteract ambition", because when it does, government officials must compete in a contest of virtue. Even if their intentions are not virtuous, their actions become virtuous due to competition.

Thus, there are strong parallels in Smith's approach to commerce and that of Madison's approach to politics. Given Madison's familiarity with Smith's work, it is likely that Madison's perspective was influenced by the Scotsman.

Prindle's essay is reasonably short, but more thorough than what has been posted above. It is a worthy read.

Thursday, April 01, 2010

A New Start!

I use to have a lot of religious and political stuff here. Time for a change of focus!
Final words: small deeds > BIG INTENTIONS