Chris Blattman

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The great misreading of Adam Smith

since the ideas presented in The Wealth of Nations have been interpreted largely without reference to the framework already developed in Moral Sentiments (on which Smith draws substantially in the later book), the typical understanding of The Wealth of Nations has been constrained, to the detriment of economics as a subject. The neglect applies, among other issues, to the appreciation of the demands of rationality, the need for re cognising the plurality of human motivations, the connections between ethics and economics, and the codependent rather than free-standing role of institutions in general, and free markets in particular, in the functioning of the economy.

That is Amartya Sen on Adam Smith.

Top among the Smith quotes I’d never heard repeated: “When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.”

Hat tip to @RachelStrohm.

5 Responses

  1. This is all irrelevant. Nobody cares what Smith said; they care about what they can say Smith said.

    Economics will fail as long as we continue to refuse to take the assumptions behind our models seriously. If Smith was right about that, great. If he didn’t address it, then all we’re doing is braying in the wind.

  2. One of the best and yet ignored quotes from Smith is “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

  3. This reminds me of another analysis on Adam Smith I read earlier this week:

    “Indeed, Smith makes clear in his ‘Theory of Moral Sentiments’ — the book in which the term was in fact coined, and the book of which he himself was most proud — that the invisible hand must be accompanied by what might be described as a ‘supporting hand’: the idea that we should not pass by on the other side when others are in need of our help and it is within our power to help them.”

    – (Soon to be former) Prime Minister of the UK, Gordon Brown.

    1. Trey,

      Smith was writing in mid-18th century and the then government, from time-to-time, used to decide on the basic wage rate, responding to legislators and those who influenced them, who always spoke for the Masters. Labour did not have representatives in the House of Commons. But occasionally a regulation was passed that favoured the workmen. That was Smith’s point. ‘Minimum wage legislation’ is in a different set of circumstances today, where your point might be valid.

      DevRanble
      Smith made no comments about ‘supporting hands’. Mr Brown made up what he says. Smith had much to say about equity in Moral Sentiments and ethical behaviour. The Invisible Hand in Moral Sentiments referred to ‘rich landlords’ being led by an invisible hand’ to feed their servants, retainers and serf farmhands, but as this was a necessity if they were to work and survive the winter – upon which the landlords ‘greatness’ depended, – it was unremarkable. The invisible hand was the necessity that led them, not anything else. Mr Brown is a politician not an economist or an historian of economic thought.

  4. Maybe I misunderstand the Smith quote, but it begs the question “who determines what’s ‘in favour of the workmen'”? For example, one might posit that a minimum wage favors workers, and raising the minimum wage therefore favors them even more. Maybe I also read too much of the wrong economists, but it seems to me that a minimum wage often harms many workers, and employers too. A recent post on Cafe Hayek (http://cafehayek.com/2010/04/an-entrepreneur-and-the-minimum-wage.html) provides a timely reminder of this.

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