Department of "Huh!?"

Department of "Huh!?"

A bunch of people have said that I should give Duncan Foley a second chance. So I started back through Duncan Foley's Adam's Fallacy. This time I got to pages 42-44 before the incomprehension meter redlined at I hit three things in rapid succession.

First came, on p. 42:

The Wealth of Nations is the product of Adam Smith's teaching of political economy at the University of Glasgow. Smith, as a teacher, was more concerned with introducing key ideas and insights of poitical economy to his students than with constructing a consistent framework for these ideas. At critical points in his argument, he plausibly changes the subject in such a way as to obscure the inconsistency of the various points he is making...

To which one can only say, "Huh!?"

The Wealth of Nations is not the product of Adam Smith's teaching of political economy at the University of Glasgow. Smith did not teach political economy. He taught moral philosophy and jurisprudence. The Wealth of Nations is not anything like a reworked version of his lecture notes, or his courses, in either logic or moral philosophy. Adam Smith taught courses at Glasgow from 1751 to 1764. He published the Wealth of Nations in 1776, and wrote it in the decade after he left Glasgow.

The Wealth of Nations, instead, is a contribution--a game-changing contribution, as Adam Smith intended--to the discourse of what Keith Tribe calls Political Oeconomy, a discourse whose audience vwas composed of the literate landlords who ran the eighteenth-century British Empire and their advisors. There's no truth at all in Foley's claim that the Wealth of Nations is oversimplified because it focuses not on making a consistent argument but on introducing ideas to callow teenagers. No truth. At all. None. Zero.

Adam Smith is simply not playing hide-the-ball, and I have no idea why Foley accuses him of doing so. The weak points in Smith's arguments are weak points in his argument--he is, after all, trying to do something very new. He is not trying to hide them, or obscure them. He is saying what he thinks, and doing so as straight as he can. He is not pulling the wool over anybody's eyes via misdirection. And I have never heard of anybody, before Foley, accusing him of doing so.

But it got worse, rapidly. Second came, on page 43:

[T]he real heart of The Wealth of Nations.... Smith stands out as a philosopher and moral defender of capitalist social relations through his ingenious, if tortured, claim that the ruthless pursuit of self-interest, which can lead people to do bad things to other people, is transmuted by capitalist social relations into a moral good.... Smith sheds his general good sense and moral authority without rigorously establishing the logical basis for his approbation.

A good example of this type of argument in Smith's hands is his famous observation that it is not from the love of goodwill of the butcher or baker that we get our dinner, but from our appeal to their self-interest through our paying for meat and bread.... That is indeed how capitalist society works and reproduces itself. But to support the claim that this pursuit of self-interest is a positive good, Smith would have to show that antagonistic market exchange relations are the only possible way to support the division of labor, and that we have no alternative to accepting the distributional inequities and moral violence that accompany private property relations as the means to securing our dinners. Smith comes no closer to making this argument stick than he does to reconciling the dependence of rent on the value of the commodity with the adding-up theory of value...

To which, once again, one can only say, "Huh!?"

Let's rewind the videotape back to what Smith actually wrote, at the start of chapter 2 of Book II of the Wealth of Nations:

OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR: This division of labour, from which so many advantages are derived, is not... the effect of any... fores[ight of] that general opulence.... It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature... to truck, barter, and exchange one thing for another.... It is common to all men, and to be found in no other race of animals, which seem to know neither this nor any other species of contracts....

Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.... A puppy fawns upon its dam, and a spaniel endeavours... to engage the attention of its master.... Man sometimes uses the same arts... endeavours by every servile and fawning attention to obtain their good will.

He has not time, however, to do this upon every occasion. In civilized society he stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.... 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 shew them that it is for their own advantage to do for him what he requires of them....

[I]t 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 own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages....

Even a beggar does not depend upon [the benevolence of others] entirely.... [H]is occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old clothes which another bestows upon him he exchanges for other clothes which suit him better, or for lodging, or for food, or for money, with which he can buy either food, clothes, or lodging, as he has occasion...

If you were to tell Smith in an unpleasant hectoring voice, "You haven't proven that antagonistic market relations are the only possible way to support the division of labor!" Smith would reply, "Huh!?"

If he were feeling benevolent--did not conclude that you are a complete fool not worth talking to--he might expand on this, and say that in this passage he is making a historical inquiry into why it is humans and humans alone among vertebrate animals who have an extensive social division of labor. He might say that he concludes that humans have this extensive social division of labor because of a long, very slow, and gradual process of historical development that is rooted in a natural human propensity to truck, barter, and exchange. "Only" does not enter into it, he might say. He is telling his readers how this extensive social division of labor came to be, and how it is today supported by market exchange.

Smith might go on to say that yes, there are of course other ways of organizing society that could also support an extensive social division of labor. He might point to the despotism of the Castro brothers in Cuba as a convenient example of one such extensive social division of labor that is primarily supported by things other than market exchange.

If you asked him about "antagonistic market relations," he would say that his relations with the butcher, the baker, his publisher, and his publisher's relations with those who buy the Wealth of Nations are anything but "antagonistic": both parties are happier as a result of the interaction--which is not usually the case when people have non-market interactions with clerics, kings, judges, thieves, party bosses, or members of the local Committee for Defense of the Revolution. Go back half a century and a few miles north to the Highlands of Scotland, Smith might say, where if you are not a clan member than you are either a clan enemy to be killed or a stranger to be robbed--those are the real "antagonistic social relations," and they involve the maldistribution of property, and those three alternatives to market exchange: force, violence, and fraud.

And last came, on page 44:

Smith... balanc[es] his glittering vision of a virtuous spiral of economic development with the idea that economics can be constrained within a larger political and social framework. Laissez-faire, yes, but the Navigation Acts too. Free trade modified by the infant industry exception. Unregulated banking, as long as banks strictly follow a "real bills" policy...

And I thought back to page xiii:

By "Adam's Fallacy" I mean... the idea that it is possible to separate an economic sphere... with its presumed specific principles of organization from... politics, social conflict, and values...

And all I can say is: "Huh!?"

Comments

[hmmm]

First of all, have you read the Lectures on Jurisprudence? LJ!=WN, but there are many similar themes. I don't have LJ at hand, but I believe that the discussion of property looks like it was quite close to the discussion in WN, and Smith's socio-economic history (herders, farmers, commerce) is identical on crucial points in both. And let it be said (for the record!) that LJ is not about "the law" any more than WN is about "the economy". Both are more complex than that.

Further! I believe the only extant lecture notes from Smith are on Jurisprudence and Belles-Lettres, and his chairs were successively in Logic and Moral Philosophy, but that doesn't mean he *didn't* lecture on political economy. And according to http://www.econlib.org/library/YPDBooks/Rae/raeLS.html , he is known to have given a course specifically on economics in 1749, soon before he was made a professor.

But even assuming that economics never crossed Smith's fertile mind before 1765, Foley doesn't seem committed to the idea that WN was a *lecture course*, but rather that Smith was a pedagogue and articulated his ideas in a way that a pedagogue ought. Foley didn't say "In writing WN, Smith was only concerned with teaching teenagers"; he said Smith was "more concerned with introducing key ideas and insights of poitical economy" than with producing a consistent theoretical framework. Two different things.

[Colin Danby]

Thanks. Just to pull out and emphasize one point that I think is often misunderstood by Smith's readers, Smith is not reasoning in either-or terms when he talks of benevolence and self-love (hence "benevolence only"). A key feature of his theorizing -- one especially evident in _Moral Sentiments_ is that he looks for ways and places that different impulses reinforce each other -- Smith is interested in the resilience of social institutions. What he likes about commerce is precisely that both parties get what they want *and* a dignified social relationship is established or renewed.

Beggars in Smith's world still get fed (fawning works), but the begging relationship is a problem for Smith because it's undignified and makes for a bad society.

This is not to say Smith is right about all this, but, yes, if anybody tried to theorize commerce *not* as antagonistic but in doux-commerce terms it's Smith.

[Jonathan]

The first fundamental theorem of welfare economics states that a competitive market economy will lead to a Pareto efficient equilibrium.

This is what Adam Smith's invisible hand result is about. Pareto efficiency may be a desirable characteristic of any allocation that we might consider the 'social good,' but it is not more than that.

But the second welfare theorem points out that there are in fact any number of potential pareto-optimal allocations. Which one we arrive at depends on the initial allocation of property rights we start from.

The distribution of property rights over land that was still in the process of being established in the 18th century in Scotland and England when Smith was writing, was established through the exercise of a not inconsiderable amount of violence and arbitrary expropriation. Customary rights of use that English and Scottish peasants had enjoyed over lands that they and their ancestors had cultivated or used for centuries were extinguished and a new system of private property rights was established. As Barrington Moore as pointed out this led to an agricultural revolution that was good for growth as well, very likely for democracy in the long run, but he reminds us not to forget the violence upon which it was built.

Adam Smith was an extraordinary person, a paradigm shifter and quite revolutionary thinker for his time. He was against all forms of limits on freedom of movement and coerced labor (and therefore a favorite political economist to the abolitionist movement), and he seemed to favor a free land-owning peasantry, but as far as I can tell he did not pause to discuss where that initial distribution of property rights came from, or how or whether a different initial distribution of property rights might have led to 'more social good.'

To an analytical marxist such as Foley this must indeed seem a glaring omission, enough to make him suggest that Smith, like other political economists, was hiding the ball.

[Lee A. Arnold]

Jonathan, it appears that Adam Smith could not be accused of "hiding the ball," because at the time he wrote, no one had any illusions about the reorganization of society, sometimes violent, that was maturing. Only now do people forget this total picture. Indeed Smith's book in his time was, among other things, a massive rhetorical argument to support the monumental social engineering job that was in progress. A contemporary, Sir T. Munroe, recalled:

"I remember about the time of the appearance of The Wealth of Nations, that the Glasgow merchants were as proud of the work as it they had written it themselves; and some of them said it was no wonder that Adam Smith had written such a book, as he had the advantage of their society, in which the same doctrines were circulated with the punch every day."

--From a citation in THE INVENTION OF CAPITALISM: Classical Political Economy and the Secret History of Primitive Accumulation, by Michael Perelman (Duke University Press, 2000.) --Now this is a book more people should read.

[andres]

I'm not in love with Foley's style of writing, but it almost seems as if he and Brad are talking in two languages which only bear a slight resemblance to each other. What we have here is a failure to communicate. Take this comment by Brad:

"If you asked him [Smith] about "antagonistic market relations," he would say that his relations with the butcher, the baker, his publisher, and his publisher's relations with those who buy the Wealth of Nations are anything but "antagonistic": both parties are happier as a result of the interaction--which is not usually the case when people have non-market interactions with clerics, kings, judges, thieves, party bosses, or members of the local Committee for Defense of the Revolution."

Brad seems to interpret market relations as non-antagonistic because they don't end up in violence (most of them, that is) and preserve the mutual respect of the participants (again, most though not all), and end up being mutually beneficial. The non-antagonism, however, is a broad, overdetermined outcome not simply of market exchange but also of a set of social institutions, ie the law, contract enforcement, Christian injunctions against greed, and the government's coercive power, etc, which prevent the transaction from turning either into a knife fight or into a monopolistic, Corleonesque "offer you can't refuse".

[Exactly. Mutual benefit ≠ Antagonism]

Foley, by contrast, is (imo) focusing only on the self-interest aspect of the transaction in order to point out Smith's errors of omission. The butcher wants you to pay through the nose, plus some body parts,

[Actually not: the butcher wants you to get some surplus out of the deal so that you will come back tomorrow, and tell your friends to come back as well. Repeated economic relationships are very not-antagonistic.]

for his meat whereas you as the customer want him to sell you the meat practically for free. That part of the antagonism is real enough.

The set of government, legal, and social institutions that interact with market competition for the most part help insure that this single transaction gets settled in a manner that's mutually satisfactory and which also has the byproduct of indicating to society how much resources it should use up to produce butcher's meat. Brad, wouldn't deny this either, on second thought. But it doesn't seem to cross his mind that what Foley is getting at is that once these restraining institutions are removed or corrupted, the business of the market very often does become highly antagonistic and possibly nasty/brutish/short.

[But when the imbalance of power between the two parties is great, the relationship becomes highly antagonistic/nasty/brutish/short whether or not it is mediated by market exchange. The "market" part is not very relevant.]

So unlike Brad I find no difficulty in the argument that Smith was avoiding some crucial aspects of social relations in modern market economies. And it's 1000 to one that Smith didn't do so intentionally, but took the social/legal/political/religious framework of Europe as a given when discussing the virtues of market exchange. It is only in his subsequent tirades against the East India Company and other mercantilist concerns that Smith becomes aware that something in the restraining institutions has gone AWOL, with disastrous results, but he doesn't inquire further as to how or why this happened, just simply advocates that the process be reversed. It's left to future political economists to ponder the how and why.

[Dan Nexon]

Perhaps Foley is confusing Adam Smith with Adam Smithe, the other, less well-known, 18th-century theorist of political economy. Adam Smithe pioneered the concept of the "invisible foot," which details how God ingeniously created human nature so as to produce aggregate social good from the pursuit of kicking one another in the shins. Now that's antagonistic market relations.

Okay, I admit this is kind of a lame form of mockery, but some of my friends developed an entire shorthand for this kind of nonsense when we were in grad school. For example:

"Max Weber 'believed in the objective nature of human knowledge'? He must have been talking about Mark Weber."

That sort of thing.

[Jack]

I would certainly prefer it if people were more respectful of WN if only because assuming that it said what people said it said delayed a proper reading of it on my part by some years. It really is a very good book and there is far more in it than jonathan suggests.

Nevertheless I can see the some kind of argument even in what little of Foley's work Brad has quoted. Would "frictional effects of the creative destruction involved in increased productivity raise the NAIRU. Thus change creates losers as well as overall gains. The plight of the losers is systematically underestimated." be a similar point to the one Foley is making and less inflammatory?

[wjd123]

"Smith... balanc[es] his glittering vision of a virtuous spiral of economic development with the idea that economics can be constrained within a larger political and social framework. Laissez-faire, yes, but the Navigation Acts too. Free trade modified by the infant industry exception. Unregulated banking, as long as banks strictly follow a "real bills" policy..."

And just where is the larger political and social framework which constrains the laissez-faireism of free trade. Where are the international governments with the power to pass rules and regulations and enforce them. No where.

That leaves corporations free to do their business in countries that don't allow free association or where worker rights aren't enforced, or in countries where environmental policies take a second place to the creation of jobs.

Just how does free trade as practiced today constrain the evils of the invisible hand and protect the larger political and social framework. That framework is now global but the institutions that would put the moral breaks on laissez faireism are missing.

Smith's "glittering vision" of economic development with constraints is out of balance.

[wjd123]

I wonder what practices today would be considered"antagonistic market relations"?

Would using psychology to create a need for a product be antagonistic. Would offering the poor easy credit and then lobbying congress and showering it with money to pass harsher bankruptcy law be considered antagonistic market relations.

[Barkley Rosser]

Hmmm, I still have not read Duncan Foley's book, so am constrained in commenting here. But it does seem that Brad is straining to get the worst possible interpretations out of it. I find Brad's "huh?" to the argument quoted from Foley, at the end of the post that one cannot separate economics from political and moral ideas, to be unworthy of his usual level of argument. What's the big deal with that one, Brad?

[Barkley: Foley praises Smith on p. 44 for "the idea that economics can be constrained within a larger political and social framework" after denouncing Smith on page xiii for "Adam's Fallacy": "the idea that it is possible to separate an economic sphere... with its presumed specific principles of organization from... politics, social conflict, and values..." If you're going to praise Smith for not separating economy from polity and society, it's pretty stupid to denounce him for separating economy from polity and society, isn't it?

I see you don't try to defend Foley's claims that the _Wealth of Nations_ is not a sophisticated argument but an intro-level textbook, or Foley's distortion of the butcher-baker passsage]

Again, the disjuncture in tone and attitude between Wealth of Nations and Theory of Moral Sentiments has long been one of the great puzzles of the history of economic thought, "the Adam Smith problem," with copious amounts of ink spilled on paper over it, with no resolution to it today. It would appear that Foley's latest book is the latest entry in this long running controversy.

BTW, I am a great fan of both of Smith's book, but it should be kept in mind that it is not nearly as innovative as many think. Indeed, it is hard to find a single original idea in it. The role of division of labor was fully elucidated by Sir William Petty. Many of the other arguments were in the influential in its day but now largely forgotten work by Sir James Stuart from a decade earlier, Smith's fellow Scotsman, and other large chunks of it were in the writings of the physiocrats, which were acknowledged influences on him, not to mention Cantillon. What Smith did was simply put it all together in a better written and more articulate way than it had been before.

[Barkley Rosser]

While we are at it, at least one other form of economic organization was around that was non-market and which Smith was fully aware of: monasteries. Indeed, it is well known that many technological innovations, even arguably the foundations of the industrial revolution, were developed in the late middle ages in these institutions, whose internal relations were neither wholly antagonistic nor market.

[Colin Danby]

Barkley I'm sure Brad will provide a self-exegesis in due course, but I'd interpret his last "huh?" as directed at the idea that Adam Smith upheld such a division, NOT at the critique of the division itself. Such a reading is certainly consistent with the rest of the post...

I can't agree with your elaborate shrug over the "Adam Smith problem." There's been a lot of good work in recent years and if anything the consensus is that the earlier characterization of the "problem" was mistaken. Both Andres and I have urged readings which not only reconcile the two texts but use them to illuminate each other. Going on about the "problem" becomes an excuse for not reading more carefully, as is the long tradition of talking down Smith's originality (which has a lot to do with the fact that unlike Stuart he *was* a moral philosopher and thus capable of much more thoughtful social theory).

To pick up on Andres' always-perspicacious points, there are several arguments going on at once here. There's (1) a larger argument in the background about the ethics of commercial interactions and "market society" in general; (2) an argument about the reification of analytical boundaries between economy and non-economy; and (3) an argument (or several) about how to read Smith. The problem is that Smith-bashing is used to score points in (1) and (2) which could be made much better and more cleanly without resort to tendentious reading, tendentious biographizing, and tendentious descriptions of the history of economic thought.

[Barkley Rosser]

Colin,

I am aware of the recent lit on "the Adam Smith problem." I have actually written a paper on the matter, although it is not up anywhere or published anywhere (won't make any claims for its quality). Much of the recent lit has been pro-Smith, arguing ways that the apparent contradiction can be resolved, with Vernon Smith's paper in the Southern Economic Journal of several years ago being a prominent example (one is personally "moral" in personal situations, but "immoral" in the anonymous marketplace, which just happens to bring about "moral" results anyway, conveniently, more or less).

Clearly Duncan is firing away at this kind of reconciliation, although again I have not read this book, so cannot comment more precisely, only on what I see getting quoted here.

BTW, I would say that Brad may have a point that Foley may have been careless about his characterization of what Smith taught ("political economy"). Malthus was the first actual professor of that subject in an English speaking academic institution.
But it is also true, as someone noted, that Duncan never said he taught a course called that, and I would be very surprised if Smith did not discuss his ideas about political economy in some of his courses on moral philosophy.

After all, I was originally taught that before economics was called "political economy," it was viewed as just a part of "moral philosophy." So, again, it would seem that Brad is getting a bit too overwrought over something that is not that big of a deal.

[andres]

Just to address a few of Brad's subsequent bracketed comments; while Foley does often incorrectly assume some things (eg the origin of _Wealth of Nations_) and gets jumped on it, I still think Brad is mostly arguing against points which haven't been made in the first place, ie misinterpreting. For example,

"[Actually not: the butcher wants you to get some surplus out of the deal so that you will come back tomorrow, and tell your friends to come back as well. Repeated economic relationships are very not-antagonistic.]"

Not really. Brad is here still conflating the non-market with the market. The butcher wants you to come back tomorrow (and tell your friends) only because he knows you and your friends have a choice--the non-market realm has prevented our squinty-eyed, mustachioed butcher friend from turning into a monopolist.

In fact, raw self-interest militates that no consumer surplus whatsoever be turned over to the demand-side; enlightened self-interest, ie, self-interest mediated by non-market relations and institutions, will force the butcher to keep his prices below a maximum level both because of (a) competition, and (b) even if competition is lacking, the consumer has to be left alive and able enough to earn income for the future, ie self-interest also faces subsistence constraints.

"[But when the imbalance of power between the two parties is great, the relationship becomes highly antagonistic/nasty/brutish/short whether or not it is mediated by market exchange. The "market" part is not very relevant.]"

Actually the market is very relevant because it can, as the Eden of man's natural rights and Bentham, _conceal_ the imbalance of power between two parties, especially in labor markets--what seems like an, equal, mutually agreed transaction when the wage and other compensation terms of the employment contract are negotiated can and often does turn into a brutally exploitative and coercive relationship on the factory floor. Slavery, by contrast, does not conceal the power imbalance through a symmetrical-looking wage contract, and so is a lot harder to sustain politically.

"[Barkley: Foley praises Smith on p. 44 for "the idea that economics can be constrained within a larger political and social framework" after denouncing Smith on page xiii for "Adam's Fallacy": "the idea that it is possible to separate an economic sphere... with its presumed specific principles of organization from... politics, social conflict, and values..." If you're going to praise Smith for not separating economy from polity and society, it's pretty stupid to denounce him for separating economy from polity and society, isn't it?

I see you don't try to defend Foley's claims that the _Wealth of Nations_ is not a sophisticated argument but an intro-level textbook, or Foley's distortion of the butcher-baker passsage]"

I don't see a logical contradiction in Foley's argument provided one distinguishes between the terms "constrained within" and "separate" (verb form). "Separate" implies that the outcomes of the market process can be isolated from (ie, given the ceteris paribus treatment) from conditions in the non-market social sphere. "Constrained within" does not make such a claim.

Lastly, it should be remembered that in 1776, pure economics had yet to be born and political economy was just emerging as a subset of moral philosophy. As such, it is certainly possible for _Wealth of Nations_ to be both an introductory textbook as well as a profound/sophisticated argument. Again, I don't see a logical contradiction.