Adam Smith's Lost Legacy

Gavin Kennedy writes:


Smith did not write in favour of “enterprise”; he wrote in favour of “commercial society”. The former is a projection of a modern word onto the past; in fact, he displayed throughout Wealth Of Nations strong suspicions about the conduct of “merchants and manufacturers”.

The entire post is well worth a read and it reminded me of Samuel Gregg's book of the same title - The Commercial Society.

From a review of the book on the Acton site

Gregg explains the centrality for a commercial society of the healthy human attribute of trust. The centrality of trust is found in Adam Smith’s Wealth of Nations. Gregg examines the contributions of Adam Smith’s fellows of the Scottish Enlightenment. In the section Peace and Tolerance, Gregg expands upon the contribution of French philosophers to those principles. He quotes the letter of Archbishop Francois Fenelon of Cambrai to Louis XIV on the destructive impact of his wars. Voltaire, Montesquieu, Constant, and Tocqueville developed the theme of the contribution of commercial society to peace and toleration. Gregg quotes the French classical liberal Benjamin Constant: “It is clear that the more the commercial tendency prevails, the weaker the tendency to war must become.”

A Sales Pitch for Laissez-Faire Health Care

Dan Klein is now at George Mason.

An Unwelcome Message for Obama

An Unwelcome Message for Obama

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Larry Reed, FEE and freedom, by way of The Austrian Economists

Larry Reed took over FEE and has been putting his stamp on it. In this Reason.TV interview, Larry discusses the 3 lessons of the freedom philosophy that we are in 2009 in danger of forgetting. Roughly stated they are:

1. Government can provide you with absolutely nothing except that which it has first taken from somebody else.

2. A government big enough to give you want you want, is big enough to take everything you have.

3. A free people are not economically equal, and an economically equal people are not free.

Americans Are Becoming Richer

Americans Are Becoming Richer

F. A. Hayek,

new: F. A. Hayek, “Decline of The Rule of Law, 2″

misplaced medical egalitarianism.

Martin Feldstein makes the following point:

"But budget considerations aside, health-economics experts agree that private health spending is too high because our tax rules lead to the wrong kind of insurance."

Due to scarcity rationing will always occur - the question is what process will be used.

The extremes of the continuum are liberty (decentralized agents interacting on their own knowledge) v. totalitarianism (Leviathan dictating allocation). As Boyes and I discuss over on Liberty, the current health care debate provides an outstanding example of the continuum of allocation methods and an opportunity to reflect on incentives and unintended consequences.

Feldstein discusses how tax rules (taxes are another example of increasing scale and scope of Leviathan in civil society as well as coercive power) lead to unintended consequences. Moreover, like regulations, these tax rules institutionalize in a very pernicious manner the power of the government and lead to a loss of liberty that may be permanent. (I am thinking now of the observation that the closest thing on earth to immortality is a government program). As more and more agents "accept" or become accustomed to the loss of liberty, the state has further room to grow.

Rescues Unlimited: Government as Wall Street’s Enabler

By DEVIN LEONARD
Published: August 2, 2009
In “Bailout Nation,” Barry Ritholtz argues that the American financial system has been twisted beyond recognition by cynical bankers and Washington politicians.

Central banks . . .

"Leaving a financial crisis is like leaving an awkward social gathering: a good exit is essential. In 1936-37, the Federal Reserve made a colossal mistake in its “exit strategy”. This time round it is crucial that central banks get their timing right."

Central banks must time a ‘good exit’

By Randall Kroszner

Published: August 11 2009

This raises a great question and reveals a great deal about the opportunity cost of centralized, state action. To the extent that the Fed or any other central bank is a representation of the state, then Hayek's knowledge problem prevails. So it is entirely understandable that the FED in 1936-7 did not "exit" either at the right time or in the right way - whatever that is.

So, Kroszner (see here for a great analysis titled the only winning move is not to play) reminds us of the dangers of centralized decision making.

Project Syndicate

Project Syndicate is an international association of quality newspapers devoted to:

* bringing distinguished voices from across the world to local audiences everywhere;
* strengthening the independence of printed media in transition and developing countries;
* upgrading their journalistic, editorial, and business capacities.

Project Syndicate currently consists of 432 newspapers in 150 countries, with a total circulation of 66,605,600 copies. Its activities fall into two broad categories:

* disseminating the highest quality commentaries and analysis to its member papers;
* fostering institutional links among member papers;

Organizations that support Liberty

The Association of Private Enterprise Education (APEE) is an association of teachers and scholars from colleges and universities, public policy institutes, and industry with a common interest in studying and supporting the system of private enterprise. APEE hosts an annual conference for members to share their scholarly findings and offers a number of awards to recognize individuals who have contributed to the cause of private enterprise. Support for young scholars is often available to attend the annual conference. The association sponsors the Journal of Private Enterprise so scholars may share their research with the wider academic community.

The Clemson Institute for the Study of Capitalism is dedicated to exploring the moral, legal, constitutional, political and economic foundations of capitalism. The Clemson Institute is particularly devoted to fostering a serious examination of a free society.

The Foundation for Economic Education (FEE), one of the oldest free-market organizations in the United States, was founded in 1946 by Leonard E. Read to study and advance the freedom philosophy. FEE’s mission is to offer the most consistent case for the “first principles” of freedom: the sanctity of private property, individual liberty, the rule of law, the free market, and the moral superiority of individual choice and responsibility over coercion.

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals. The Foundation develops, supervises, and finances its own educational activities to foster thought and encourage discourse on enduring issues pertaining to liberty.

Click here to see Liberty Fund co sponsors.

For over 25 years, the Mercatus Center at George Mason University has sought to bridge this gap. Mercatus applies scholarly research to the problems facing policy makers. Bringing together a network of scholars and experts from around the globe, the Mercatus Center provides policy makers with the economic tools to make sense of today's most pressing issues. Mercatus turns ideas into action.

The Ludwig von Mises Institute was founded in 1982 as the research and educational center of classical liberalism, libertarian political theory, and the Austrian School of economics. It serves as the world's leading provider of educational materials, conferences, media, and literature in support of the tradition of thought represented by Ludwig von Mises and the school of thought he enlivened and carried forward during the 20th century, which has now blossomed into a massive international movement of students, professors, professionals, and people in all walks of life.

Reason is the monthly print magazine of “free minds and free markets.” It covers politics, culture, and ideas through a provocative mix of news, analysis, commentary, and reviews. Reason provides a refreshing alternative to right-wing and left-wing opinion magazines by making a principled case for liberty and individual choice in all areas of human activity.

Thomas Sowell : Listening to a Liar - Townhall.com

Thomas Sowell : Listening to a Liar - Townhall.com

Understanding Liberty and Choice: Property Rights and Economic Development

Co-sponsored by Liberty Fund, Inc.

Expert panel, featuring: Lee Alston Ph.D. Director, Environment and Society Program, Institute of Behavioral Science, University of Colorado;Research Associate, National Bureau for Economic Research (NBER)

Gary Libecap Ph.D. Bren School of Environmental Science & Management, University of California at Santa Barbara;Fellow, Hoover Institution

When: October 22-24, 2009

Where: Scottsdale, AZ-Scottsdale Marriott Suites

Sessions and readings

Session 1: Large Group activity


Session 2: Why Are Some Nations Rich and Others Poor?
North, Douglass C. “Institutions, Ideology, and Economic Performance, “ Cato Journal, 11(3), 1992. pp. 477-88.

Easterly, William. “Planners Versus Searchers.” The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. New York: Penguin, 2006. pp. 3-37.

Session 3: The Philosophy of Property Rights
Hume, David. “Of the Origin of Justice and Property.” A Treatise of Human Nature. London: Oxford University Press, 1896. pp. 176-194.

Locke, John. “Of Property.” in The Founders Constitution, Vol. 1, ed. By Philip B. Kurland and Ralph Lerner. Indianapolis, IN: Liberty Fund, Inc., 1987. pp. 580-85.

Session 4: Property Rights and Markets
Alchian, Armen with Harold Demsetz. “The Property Rights Paradigm.” The Collected Works of Armen Alchian, Volume 2: Property Rights and Economic Behavior. Indianapolis, IN: Liberty Fund, Inc., 2006. pp. 84-96.

Alchian, Armen. “Market Prices, Property, and Behavior,” The Collected Works of Armen Alchian, Volume 2: Property Rights and Economic Behavior. Indianapolis, IN: Liberty Fund, Inc., 2006. pp. 460-80.

Lawson, Robert. “Economic Freedom and Property Rights: The Institutional Environment of Productive Entrepreneurship,” in Making Poor Countries Rich: Entrepreneurship and the Process of Economic Development, ed. by Benjamin Powell. Stanford, CA: Stanford University Press, 2008. pp. 112-133.

Session 6: Institutional Weakness, Characteristics and Consequences
DeSoto, Hernando. “The Mystery of Legal Failure,” The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic Books, 2000. pp. 153-206.

Easterly, William. “You Can’t Plan a Market,” The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. New York: Penguin, 2006. pp. 60-112.

Session 7: Property Rights and the Future of Economic Development
Leeson, Peter. “Escaping Poverty: Foreign Aid, Private Property, and Economic Development.” The Journal of Private Enterprise, Spring, 2008. pp. 39–60.

Sachs, Jeffrey. “Making the Investment Needed to End Poverty.” The End of Poverty. New York: Penguin, 2005. pp. 244–265.

Mold Society Anew?

Bob Higgs makes the point that the assault on liberty takes two forms - the extension or expansion of government powers. It is this ratchett effect the is the mechanism that diminishes our liberty.

This ratchett effect is celebrated by statists and, in an interesting book, I came across the following sentiment about WW I:

"For Dewey, the growing drumbeat for war seemed to present a glorious opportunity: mobilization he predicted, would shake up the status quo, expand state power, and give progressives the chance to mold society anew." (p 107 Gage).

All war is an opportunity to "expand the state" and the attitude expressed is disturbingly familiar, the expansion of the state is perceived in some way to be glorious. And what is glorious? The dictionary tells us that it is characterized by splendor; magnificent; delightful; wonderful. So, to the extent that the population finds expanded state power wonderful, the ratchett effect that leads to diminished liberty accelerates - for it is only a tenacious belief in liberty and individual freedom that keeps Leviathan at bay.

What is this glorious state power used for? It is used to "mold society anew". Terrifying words that evolve the Inquisition or the Holocaust and yet the wider population seems to find this wonderful and delightful prospect.

Thinking about the process of economic change, it seems to me that this fundamental change in thinking - state power is glorious rather than a ultimate evil - poses the greatest threat to future progress. This belief system will be far more pernicious than the looming deficits and debt, the health care "debate" or any other goofy scheme concocted by the republicans or democrats.

Amity Shlaes: The Forgotten Man

A great review

Mises Daily by C.J. Maloney | Posted on 9/3/2009 12:00:00 AM

So to me, while The Forgotten Man may occupy a place in the reviews as an economic history of the Great Depression — which it is up to a point — more than anything else it is a character study of the one man who above all defined and shaped the New Deal: Franklin Delano Roosevelt. And the book reads as a 383-page indictment of him.

Considering what we face today, this book is a must read, for example:

"With the possible exception of Al Capone's Chicago gang, 1930s America saw no greater pile of buccaneering stickup men and rogues than those with whom FDR surrounded himself. As one of the book's central themes, Amity Shlaes condemns them for introducing "regime uncertainty" into the economy, thereby exacerbating the Great Depression. Keep in mind that "regime uncertainty" is but a euphemism for "utter lawlessness."

This "regime uncertainty" was a direct result of the ideological underpinnings of FDR and his Brain Trust.

. . .

Throughout the book, Shlaes demonstrates that FDR considered the law not as something to be respected and adhered to, but as something to be cynically manipulated or ignored at leisure. In his hands, the law became a weapon to be used against his enemies and other, arbitrarily chosen targets. During his first year of rule alone, "10,000 pages of law had been created" (p. 202), and an army of bureaucrats and police had been raised to enforce them.

. . .

H.L. Mencken once observed that the great thing about democracy is that the people get what they deserve — good and hard. Mrs. Shlaes never lets the reader lose sight of the fact that while FDR ushered in the final destruction of the Republic, the American voters, for whatever reason, wanted FDR, loved the New Deal — and still do to this day.


. . .

And, like all socialist systems of government, everything quickly began to harden into an immovable inflexibility. Mrs. Shlaes tells us "the New Dealer's economic failures were working to their own political advantage" (p. 267). The massive increase in the size of the federal government allowed FDR to build himself a formidable political machine, so well-oiled by patronage jobs, bribes, and handouts that "millions of voters [were] under obligation to him" (p. 375), making an election defeat impossible.

As Mrs. Shlaes persuasively argues, the Great Depression did not end because of the New Deal. Quite the opposite, "the New Deal was causing the country to forgo prosperity, if not recovery" (p. 263). FDR and his New Deal became vampires, living high off a Great Depression that his policies were feeding and keeping alive.

Liberty: Liberty and Healthcare

Liberty: Liberty and Healthcare

Violence and Social Orders - Cambridge University Press

Violence and Social Orders - Cambridge University Press

A Neglected Masterpiece of Economic Analysis

Bob Higgs writes:

I recently read a book titled Banking and the Business Cycle: A Study of the Great Depression in the United States, by C. A. Phillips, T. F. McManus, and R. W. Nelson. It was originally published by Macmillan in March 1937, later became a hard-to-find, almost-forgotten book, and in 2007 was reissued by the Mises Institute in an inexpensive paperback edition.

I am willing to say that I know of no better book on the economic dynamics of the 1920s boom and early 1930s bust in the United States. I know about several other excellent books that every student of economics and economic history should read on the same topics, but if I could recommend only a single book to an aspiring economist, or even to an interested lay reader, this is the one I would recommend.

It is tempting to characterize its theoretical framework as Austrian, as indeed it is in many respects (Mises and Hayek are cited favorably, along with many other sound economists, many of them now forgotten), yet Phillips, McManus, and Nelson’s framework is broader and more eclectic than a strictly Austrian analysis would be. Moreover, besides being packed with excellent economic analysis in a great variety of applications, the book contains a wealth of quantitative evidence, which the authors handle with admirable caution and good sense. They present many tables and charts, but not a single equation. For modern mainstream economists, who can scarcely move a muscle without writing a raft of equations, this book stands as a brilliant reproach.

Read more here

Greg Ransom's Frosh reading list

10 Books For A Freshman Seminar In Economics

This post was written by Greg Ransom on August 31, 2009
Posted Under: Economics Profession

Here is Greg Mankiw’s list. Here is Arnold Kling’s list. And here is my list:

• The Rise of the Western World by Douglass North & Robert Paul Thomas

• Looking Backward by Edward Bellamy

• The Ascent of Money Niall Ferguson

• Discovery, Capitalism and Distributive Justice by Israel Kirzner

• A Farewell to Alms by Gregory Clark

• Dream Machines by Philip Mirowski

• Economics — Mathematical Politics or Science of Diminishing Returns? by Alexander Rosenberg

• Individualism and Economic Order by F. A. Hayek

• The Making of an Economist, Redux by David Colander

• The Elusive Quest for Growth by William Easterly

2009 Economic History Association Meetings