Monday, November 11, 2013

Liberals, you must reclaim Adam Smith

I've said it before and must (alas) repeat it ad nauseam. Many of our modern struggles -- in the U.S. and across advanced societies -- could be altered if both sides actually (for the first time) read Adam Smith.  

the-theory-of-moral-sentimentsThe left would learn that he  was not the  viciously cruel exploiter of the masses that dopey campus ranters portray him, but rather, the first modern thinker to propose a generally flat and fair (if highly competitive) society, one moderated with many kindnesses that he defended in The Theory of Moral Sentiments. Though yes, he maintained that society could better afford kindness if it maintained a vibrantly creative -competitive marketplace for great new products and services. A forecast of stunning accuracy.
Conservatives would realize that Smith praised competition as the greatest creative force… but that competition's top enemy is not always a government civil servant!  There is another, older enemy of enterprise and freedom, that crushed opportunity and competition in 99% of societies across 6000 years. The principal enemy of freedom and markets denounced by Smith was monopolistic or conspiratorial oligarchy, of exactly the kind that the American Founders rebelled-against.
Here's a summary I found recently:  "Ironically, Smith's epic work The Wealth of Nations, which was first published in 1776, presents a radical condemnation of business monopolies sustained and protected by the state, in service of a lordly owner-caste. Adam Smith's ideal was a market comprised of small buyers and sellers. He showed how the workings of such a market would tend toward a price that provides a fair return to land, labor, and capital, produce a satisfactory outcome for both buyers and sellers, and result in an optimal outcome for society in terms of the allocation of its resources.
WealthNations"He made clear, however, that this outcome can result only when no buyer or seller is sufficiently large to influence the market price—a point many who invoke his name prefer not to mention. Such a market implicitly assumes a significant degree of equality in the distribution of economic power—another widely neglected point." (excerpted from David C. Korten's book, When Corporations Rule the World.)
It is an argument made forcefully later by Friedrich Hayek, another genius whom the right idolizes in abstract, while betraying almost everything that Hayek stood for, such as maximizing the number of skilled, empowered and knowledgable competitors and thwarting conspiracies among monopolists and oligarchs, whether those were rooted in government bureaucracy or in narrow owner elites.
This was the point of the Progressive Movement 100 years ago, creating anti-trust laws that shattered the then-looming Gilded Age oligarchy and restored competition to American markets.  It had to be done again in the 1930s and 1940s, resulting in the flattest and most vibrantly entrepreneurial society and fastest-rising middle class the world had ever seen (and shocking the hell out of Marxists, who thought their teleological forecasts could never be reformed away.)
That flattish society (I call it "diamond-shaped) was the product of reforms instituted by the "Greatest Generation" that is much admired on the American Right, for overcoming a depression and Hitler and containing communism.  Alas, for their narrative, the Greatest Generation also adored Franklin… Delano… Roosevelt. Their innovations so reduced class disparities and class friction in America that the Boomer generation grew up assuming that such things were behind us forever.
== But human nature had not been abolished.  ==
ClassWarLessonsHistoryAlas, "class struggle" is a sure theme of our present times. As Smith would tell you, cheaters always find a way to come back, as the flat social order is once again being crushed by skyrocketing (French Revolution-level)  wealth disparities, monopoly and oligarchy.  Raising the question… can Americans do it again?  React not with radicalism or excesses like socialism, but with steel-eyed moderate reforms that restore flat and open competition for another generation? History shows far more instances of the former, than the latter.
"In the real world of unregulated markets, successful players get larger and in many instances use the resulting economic power to drive or buy out weaker players to gain control of ever larger shares of the market. In other instances "competitors" collude through cartels or strategic alliances to increase profits by setting market prices above the level of optimal efficiency. The larger individual and more collusive market players become, the more difficult it is for newcomers and small independent firms to survive, the more monopolistic and less competitive the market becomes, and the more political power the biggest firms wield behind demands for concessions from governments that allow them to externalize ever more of their costs to the community," writes David C. Korten.
AdamSmithREgulationAdam Smith again said it best, defying the stereotypes and cliched images of him.
"When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favor of the masters.”
He saw a tacit conspiracy on the part of employers "always and everywhere” to keep wages as low as possible.
Does that sound like the guy who you were taught believed only in dog-eat-dog?  Or that only billionaires are "job-creators"?
No wonder today's "libertarians" -- all-too caught up in the hallucinatory web spun by Rand and Rothbard and by Koch-financed "think tanks" like Heritage and Cato -- never refer anymore to the "First Liberal" and the founder of true libertarianism.  Because Adam Smith would remind them that the real foe of enterprise has -- for 6000 years -- been owner-oligarchy and monopoly.  The very forces that are rigging our elections and subsidizing propaganda that has driven a third of our neighbors crazy, re-igniting the American Civil War.  So crazy, they proclaim that only government bureaucrats can harm capitalism, enterprise or freedom.
(A side note: I dare anyone to attribute my assertions here to a scintilla of leftism! Competition is the great, creative driver of our positive sum markets, science, democracy... It is in defense of those creatively competitive arenas that we must, today, face down a bizarre madness that has taken over the American Right.)
(But hang on till the end of this posting, to when I cite a very high authority on this!)
== Smith… the judo master ==
The crux is this. If liberals (and not their crazy leftist allies) want to do a real jiu jitsu move on the mad right, instead of engaging in futile sumo… then liberals should with agility reclaim the "First Liberal" -- Adam Smith -- and hammer their opponents with him! It is the one move that would take them utterly by surprise, winning over millions of moderates and small businessmen.  Try saying this:
"We like competition and open-flat and fair markets!  They are the wealth generators that then enabled us to take on great projects like education and science and helping the poor. The real destroyers of that healthy version of capitalism were denounced by Adam Smith, and by the American founders -- monopolists and secretive cheaters, and those who would be lord-owners of everything. Getting rich by innovating new goods and services in a truly competitive market? That's great! Grabbing everything through cartels of cheaters? That is what Smith and the Founders denounced.

"So stop listening to paid shills pushing a return to feudalism! Come negotiate with us over how to keep it all open and healthy and competitive... and so productive that we can take on the countless challenges ahead."

Ah, but alas.  While American liberals seem not to be quite as crazy as the far-left or the entire-right, they do suffer from inertia and laziness and slavery to preconceptions.  I just described a winning judo move! But odds are they will keep trying to go belly to belly with those who are much better at political sumo.
At the bottom of this article you will find some amazing quotations from the father of flat-even-open-fair capitalism… everything that oligarchs and socialists both hate.

== The Cult of the Anti-Smiths ==
Want to see how blatant and hateful the apologists for oligarchy have become?  The latest monstrous rationalization (from Forbes): "Give Back? Yes, It's Time For The 99% To Give Back To The 1%."
Yes, it is randianism/murdochianism in full, shameless fury.  Please… please go read the rant, then come back here.  I'll wait.
Alas, as usual, this screed makes no distinction between the wealthy who actually built companies that coalesced the efforts of thousands of skilled engineers to deliver win-win goods and services -- e.g. Jeff Bezos, Larry Page, Steve Jobs --  

-- versus the other clade that became billionaires either via state-subsidized resource extraction or financial connivance among a cheater-cartel of 5000 CEO-caste golf-buddies.
The former group certainly deserve to be rich!  Though note, that most of the creative-goods-and-services billionaires are also … democrats! Who have signed the Buffett Giving Pledge and who express loyalty to the Smithian mixed society.  So much so that they support higher taxes on the rich! (See Larry Page's most recent effort to use his wealth to help us all in a win-win fight to halt aging.)
Alas, the wealthy lords whom Randians admire most as "job creators" do nothing of the kind. They are those whom Rand herself called "looters" while the tech moguls who are most like Ayn's beloved characters -- creatively brilliant and great managers of other peoples' brilliance -- are the very ones who hold no truck at all with randianism!  Huh.
WealthDisparitiesAbove all, it is in their betrayal of the true libertarian forefather (and also called the "first liberal") -- Adam Smith -- that today's 'libertarians' demonstrate the ultimate hypocrisy.  Which matters not a whit to those whose incantations march them (shouting hosannahs) back into chains of feudalism.
 == They hate what works ==
Getting closer to the news…. Hey. If it is so awful, why not let Obamacare run its course?
Economist Paul Krugman at his most cogent"In a way, you can see why the food stamp program — or, to use its proper name, the Supplemental Nutritional Assistance Program (SNAP) — has become a target.  Conservatives are deeply committed to the view that the size of government has exploded under President Obama but face the awkward fact that public employment is down sharply, while overall spending has been falling fast as a share of G.D.P. 
(News flash, the latest figures show that the US federal deficit has plunged below 680 billion or 4.2% of GDP, well below the 5% threshold that most economists call "safe."  Look at the Second Derivative of deficits. The second derivative is ALWAYS positive during Republican administrations and almost always negative in democratic ones.  That single fact -- all by itself -- should make any non-hypocrite deficit hawk or person obsessed with fiscal responsibility a democrat. Period.  Flat and absolute.  But let's get back to Krugman.)
"SNAP, however, really has grown a lot, with enrollment rising from 26 million Americans in 2007 to almost 48 million now.  Conservatives look at this and see what, to their great disappointment, they can’t find elsewhere in the data: runaway, explosive growth in a government program. The rest of us, however, see a safety-net program doing exactly what it’s supposed to do: help more people in a time of widespread economic distress.
"The recent growth of SNAP has indeed been unusual, but then so have the times, in the worst possible way. The Great Recession of 2007-9 was the worst slump since the Great Depression, and the recovery that followed has been very weak…."
Read the rest. But above all recall that the core GOP narrative -- that there has been expanding overall federal government under Obama -- is a lie that is diametrically opposite to true, as the cutting of food assistance is diametrically opposite to moral.
That whirring sound?  Barry Goldwater wailing and spinning over what has happened to conservatism. Poor Barry.  How I miss him.
==  Political Ammo! ==
Okay, my periodic political rant is nearly over.  But let's begin our coda with someone who doesn't deserve a lot of respect, but who in this case makes a lot of sense:
BenefitAndTheBurdenBruce Bartlett, author of The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Takeheld senior policy roles in the Reagan and George H.W. Bush administrations and also served on the staffs of Representatives Jack Kemp as well as Ron Paul. So his conservative credentials are complete. And yet, in this article in The New York Times, Bartlett assays the lunatic fringe of the GOP that is now spreading the toxic meme that we should default on the debt as a GOOD thing ! 
What would drive a right winger like Bartlett to say such things? Michael Goldfarb in SALON appraises the roots of the Tea Party's radicalism in events of 1973… that a four-decade-long war on the press’s legitimacy began with conservative anger over the "lynching" of Richard M. Nixon from the presidency. The idea that it was a biased liberal press that made the molehill of Watergate into a mountain of Constitutional crisis took root:
"Under Reagan, Republican appointees on the FCC abolished the fairness doctrine, the  obligation for broadcasters to air both sides of controversial issues. This led to an explosion of opinionated propagandists on the airwaves relentlessly attacking “liberal” media. It continues to this day, degrading American public discourse.
"A Nixon media operative, Roger Ailes, discussed starting a Republican-slanted news program with the president pre-Watergate. Later, Ailes invented Fox News for Rupert Murdoch. Fox is one of the prime shapers of the hyper-partisan political culture that has made the U.S. practically ungovernable."
I found Goldfarb's insights interesting.  Though ultimately, he is wrong.  The roots lie in the Antebellum or pre-Civil War South.  In the romanticism of Sir Walter Scott that Mark Twain denounced in his own people. In a resentment that simmers like hot, kudzu-scented evenings.  We are still mired in a Civil War that is once more coming to a boil. 

Do not take it personally. We are not the true target of that rage.  It is the Future that is hated, with a bone-deep, cultural passion.  Why else would so many of our fellow citizens have exalted the one book of the Bible that proclaims, with relish and eager anticipation, that there will soon be no future of any kind, for our children or their posterity, anymore?  Nothing could be more symptomatic, or more decisively prove my point.

This has never, ever been about "left versus right." Karl Marx was long ago disproved and competition is to deeply woven into the sinew of all Americans for that ever to be the issue.

No… it's the future, all right.
= Rabbi Explains Why Both Left and Right are wrong. But Smith was right! =
"The rabbis favored markets and competition because they generate wealth, lower prices, increased choice, reduced absolute levels of poverty, and extend humanity’s control over the environment, narrowing the extent to which we are the passive victims of circumstance and fate. Competition releases energy and creativity and serves the general good.
"... However as the critics of capitalism pointed out, the market does not create a stable equilibrium. It engages in creative destruction, or as Daniel Bell put it, capitalism contains cultural contradictions. It tends to erode the moral foundations on which it was built. Specifically, as is manifest clear in contemporary Europe, it erodes the Judeo- Christian ethic that gave birth to it in the first place.
JonathanSacks"Instead of seeing the system as Adam Smith did, as a means of directing self- interest to the common good, it can become a means of empowering self-interest to the detriment of the common good. Instead of the market being framed by moral principles, it comes to substitute for moral principle. If you can buy it, negotiate it, earn it and afford it, then you are entitled to it – as the advertisers say – because you’re worth it. The market ceases to be merely a system and becomes an ideology in its own right.
"Fourth, no one who reads the Bible with its provisions for the remission of debts every seventh year could fail to understand how morally concerned it is to prevent the build up of indebtedness, of mortgaging freedom tomorrow for the sake of liberty today. The unprecedented levels of private and public debt in the West should have sent warning signals long ago that such a state of affairs was unsustainable in the long run. The Victorians knew what we have forgotten, that spending beyond your means is morally hazardous, however attractive it may be, and the system should not encourage it."
Heh.  I honestly wrote all of that stuff at the top of this column before reading this rabbinical teaching... which conveys almost the identical message, but with more eloquent persuasiveness.  Maybe I should have studied for another profession.
============Adam Smith Quotations! ==========

These might shock both leftists and rightists.  But liberals may wake up to rediscover the founder of their movement:

Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.
Chapter IX, p. 117

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. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.
Chapter X, Part II, p. 152

Whenever the legislature attempts to regulate the differences between masters and their workmen, 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.
Chapter x, Part II, p. 168

The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers.
Chapter XI, Part III, Conclusion of the Chapter, p. 292

The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."
Chapter XI, Part III, Conclusion of the Chapter, p. 292

It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
Chapter II, Part II, Article I, p. 911

Every tax, however, is to the person who pays it a badge, not of slavery but of liberty. It denotes that he is a subject to government, indeed, but that, as he has some property, he cannot himself be the property of a master.
Chapter II, Part II, p. 927

Book III of Wealth Of Nations, chapter IV, see this amazing passage:

But what all the violence of the feudal institutions could never have effected, the silent and insensible operation of foreign commerce and manufactures gradually brought about. These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands, and which they could consume themselves without sharing it either with tenants or retainers. 

"All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons.

" For a pair of diamond buckles, perhaps, or for something as frivolous and useless, they exchanged the maintenance, or what is the same thing, the price of the maintenance of a thousand men for a year, and with it the whole weight and authority which it could give them. The buckles, however, were to be all their own, and no other human creature was to have any share of them; whereas in the more ancient method of expence they must have shared with at least a thousand people. With the judges that were to determine the preference this difference was perfectly decisive; and thus, for the gratification of the most childish, the meanest, and the most sordid of all vanities, they gradually bartered their whole power and authority.”   [WN III.iv.10. p 418] 





  1. Slate article Privacy Isn't a Right It is a commodoty.
    I think someone has read your book, David. And I think that I need to check out Josh Klein's book Reputation Economics. It came out six days ago.

  2. Adam Smith? You might try giving Chapter IX of the Wealth of Nations a read. It's on "The Profits of Stock." In a nutshell: when stock [capital] is plentiful, then the rate of return on owning stock drops; i.e., more of the wealth goes to the workers vs. the investors.

    Deficit spending = government vacuuming up "surplus" capital. If you want to be egalitarian, raise the capital gains rate up to 30% and use the money to cut the deficit, not give out stimulus contracts. Or you might implement an easy to understand replacement for IRAs, 401(k)s, HSAs, etc. that gets the middle class saving in order to bulk up the supply of "stock" from below.

    Or you can continue believing Keynes' economic "Gee whiz! I'm like Einstein" pseudoscience and compete with the Republicans for the title of Stupid Party.

  3. Anonymous12:18 PM

    I agree with the majority of what you say here, except that you've been bamboozled into believing Rand supported the things said in her name by the right, when she's been appropriated as much as Smith has been. In Atlas Shrugged, all of the worst villains were corporatists oligarchs employing "pull peddlers" (lobbyists) to use the instruments of government against their competitors … then the evils of the military industrial complex, diverting resources away from productive society to war profiteer … and Dagny Taggart who should have been President of Taggart Transcontinental but for the patriarchy, and her father's decision that only a man must run the family business, even if that man is his bumbling idiot son … or the evil of unreason, and religion used as a tool to manipulate the masses, while the church teaches against reason and the scientific method … there are a great many things in Rand for a Liberal to embrace. Liberals have many opportunities to use Rand's own words an philosophy against the right as well.

  4. "News flash, the latest figures show that the US federal deficit has plunged below 680 billion or 4.2% of GDP, well below the 5% threshold that most economists call 'safe.'"

    For those of us who weren't economics majors, could you provide a citation on the 5% threshold you allude to? I'm curious to see how this "safe threshold" was arrived at (and if I can follow the arguments).

    Since you qualify your statement with "most," I'm guessing there are some economists who think an even higher deficit-to-GDP ratio is acceptable. It does make me wonder what rulebooks these different economists are playing by.

  5. The Theory of Moral Sentiments was covered in a nice econtalk podcast series in six parts on the book back in 2009. You might want to take it in. Here's a link to the archive

    There is a realistic right wing case that the left wing protects the crony capitalists at least as much as the right, if not more so. There is a cross party electoral grouping of representatives and senators who vote against crony capitalism. You might be surprised to find that there are more Republicans in that group than there are Democrats. But that's not to argue over, but rather to pay attention and score the votes.

    I'm all in favor of the liberal left dumping its socialist/communist extremes over the side and creating some common ground with appreciation of Smith. It would significantly moderate our national politics which at this point would be a good thing.

  6. Carl M, it truly is charming that you lean toward SUpply Side still, desperate the utter lack of any cause-effect prediction from SS ever coming true. And that is ever. And I mean ever. And it is abso-freaking-lutely NEVER.

    Keynsians have their problems. But they adapt when they are wrong.

    BTW… The Fed's Quantitative Easing bond buying is NOT Keynsian. It is another oligarchic predatory scheme. The "new money" is all low velocity, inflating asset bubbles for oligarchs.

    Far better would be to print 100 billion in $100 bills… OUTSIde THE BUDGET. And give those $100 bills to unemployed workers to rebuild infrastructure. That expansion of the money supply would be HIGH VELOCITY and would be ACTUAL Keynsianism, which has not been tried even once in this horrific cycle.

    Deficit reduction HAS been tried, and it is proved to be idiotic,

  7. ™ Lutas, you seem reasonable and I find little fault in your sentences. What I find hilarious is your effort to portray today's left as anywhere near as pervasive or insane as America's current right.

    Yes! The extremes of both left and right are crazy. But if you think that "leftist" is the same thing as "liberal' then you are swelling Hannity koolaid. They are different species, temporarily allied by the fact that the right is 100% uniformly insane.

  8. Duncan Cairncross3:07 PM

    And now… the political lamp is OUT! (For the nonce.)

    So when did we give anything to nonces?

    (nonce is a slang word for a sex offender or child sexual abuser.)

  9. I think it is significant that so few right wingers quote Smith at all these days. It's all Rand, Hayek, von Mises, James Buchanan and some Milton Friedman (Friedman is even suspect among some right wingers and libertarians these days).

    I wonder if this is because some prominent liberals and leftists already showed what David has shown, which eventually caused more and more right wingers and business libertarians to seek out other sources for their justification of their positions and their interests. Two examples came to my mind:

    John Kenneth Galbraith wrote a wonderful essay in the 1970s I believe, for one of the national magazines where he analyzed for pages the various statements in Smith's writings, including Wealth of Nations. The essay upended the caricature of Adam Smith given in the works of the Heritage Foundation and their allies. I wish I could find it, but it's somewhere in a pile of documents in a box in my garage...:-)

    One may also read an article Noam Chomsky wrote for Z Magazine in March 1993 talking about the NAFTA and how Adam Smith would view it--and how Smith would be appalled. See also Chomsky's 1995 interview book, Class Warfare, pages 19-23, 27-31, where Chomsky does a nice job in describing the positive relevance of Smith against the modern business libertarian types who were still citing him for alleged support back then.

    Notwithstanding the above, it is a worthwhile for all of us, left, right, libertarian or statist, to revisit Smith and show how his theories do have relevance in ways that upend all of us, including ways that contradict the right wing and corporate capitalist narrative. I just wish we could also find space to show how Marx fits in the continuum of Western economic thought, but that makes people like Daniel Bell and me leftists, at least on economic matters (Bell's famous formulation of himself was he was an economic leftist, a political liberal and a cultural conservative).

  10. Rand is actually a hoot. One of the truest -- though also heretical -- acolytes of Karl Marx… As I demonstrate decisively here:

    Ironically, in her works her harshest hate is not aimed at dopey socialists, whom she portrays as sappy, do-gooder tools. Rather, her main spite aims at the "looters" who are plutocrat-monied monopolist cheaters, who capture government and use it to enforce their feudal privileges, while privatizing benefits and making public most costs.

    Her heroic capitalists overcome entrenched quasi-feudal looter-lords through grit and brilliance.

    Of course, she was also a complete and utter-jibbering lunatic. But there are some interesting nuances that aren't unworthy of some ironic respect.

  11. I never could get behind the Randian libertarians because I'm just not too keen on a group that puts (what essentially are) robber barons up on a pedestal. Whether in the hands of a public sector bureaucrat or a private sector robber baron, unaccountable authority is unaccountable authority. Me, I'll take Heinlein libertarianism over Randian libertarianism -- mostly for the simple fact that on those occasions when I tried to read Atlas Shrugged, I'd only get a few chapters in before the prose started becoming physically painful, and I'd go read The Moon is a Harsh Mistress instead.

  12. What is it about economic theory that reduces people to uttering strings of crypto-hyphenistic adjectives?

  13. "He is the author of the forthcoming book 'The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.' ”

    Forthcoming? It was published last January!

  14. I'd be more careful of claiming what Hayek stood for.

    Friedrich von Hayek created a large and self-contradictory volume of writings over a long lifetime in several fields. Widely regarded as brilliant, nevertheless some of them were dreadfully wrong. For example, The Road To Serfdom, was as badly wrong as "Dow 36,000". His Business Cycle Theory is considered outright wrong, except by zealots.

    Interpreting Hayek's work is comparable to interpreting the Bible: no interpreter can fully reconcile everything without resorting to the most ludicrous apologetics. Like the Bible, support for almost any position can be found. For example, Hayek included quite a number of non-libertarian statements and support for social welfare. Cynics would think those were made to mollify liberals, provide plausible deniability, or provide breathing room for the requirements of propaganda. And they come embedded in enough unclear verbiage that any particular implementation of them could be criticized for not meeting Hayek's requirements.

    Given that Hayek was a propagandist, it would be difficult to take his works at face value, even if face value could be determined. But if you look at Hayek's actual jobs and how he devoted his energies, they were always in service to the rich and powerful, starting with the Vienna Landlords Association. Hayek never held an academic position that wasn't funded by the wealthy.

  15. It is not inconsistent to perceive that Hayek's STARTS as a Smithian. he speaks often of maximizing the number of competitive market participants and - like Smith - he knew that could not happen without some social welfare.

    Hayek's deepest work did emphasize the stupidity of ANY too-narrow and collusive concentration of market-interfering "allocators" interfering in Smithian market systems. Alas, the Austrians took that to mean any GOVERNMENTAL concentration of allocators… recall they were in the shadow of communism, next door.

    Alas, I agree that he followed the path of Marx and Freud into guru-com and thus to drooling wrong-itude. The basic truth about market interference-collusion got warped and twisted into saying that any PRIVATE cabal or cartel of conspiratorial oligarchic-plutocrats, meeting secretly to carve up markets and repress competition, would be just fine!

    That is the current can't from the right on Supply Side "economics" which has never made one single correct prediction, ever, even once, but served as an incantation to excuse opening the public arteries to pour into open plutocratic gullets. "Job creators," yeah right. Despite all proof that jobs are made by small businesses… which by the way always, always, always do better under democrats.

  16. "Instead of seeing the system as Adam Smith did, as a means of directing self- interest to the common good, it can become a means of empowering self-interest to the detriment of the common good. Instead of the market being framed by moral principles, it comes to substitute for moral principle. If you can buy it, negotiate it, earn it and afford it, then you are entitled to it – as the advertisers say – because you’re worth it. The market ceases to be merely a system and becomes an ideology in its own right.

    There was some recent work showing that people would do things that conflicted with their ideals if framed in market games. The example was whether they would forgo a monetary gain to keep lab mice alive or pocket it and let the mice be killed. It seemed that once given a monetary incentive to allow killing, people generally did so. The research in ongoing, but if confirmed, suggests that there markets are not totally "amoral" or morally neutral, but have an impact. We tend to think that people who succumb to this are sociopaths or similar, but they may be just the extreme example of what the rest of us will do given the opportunity.

    It should also be interesting that it is the anglophone countries that most adhere to business concept of "maximizing shareholder wealth" (with laws to enforce it) while non-anglophone countries have multiple stakeholder goals.

  17. LarryHart5:11 PM

    One thing that Ayn Rand does get right--Dagny's moment of exestential horror when she realizes that the villains of the book are trying to gain control of the means of production NOT to profit from them but rather to DESTROY them, because their kind prefers lording it over poor serfs to raising everyone's standard of living (their own included).

    One thing she (willfully, I believe) gets wrong is to conflate owning wealth with creating wealth.

    The industrialist who makes value that didn't exist before--he deserves to keep much of the wealth he creates (minus taxes as maintenance fees for the society he is a part of). The Bain Capital tycoon who "makes" billions of dollars by sucking the value out of what other people already own is a different animal entirely. Pretending the one thing is the same as the other thing is a brilliant (though cynical) way the right wing pretends to make sense. And the Forbes article you linked to does this to a T.

  18. Duncan Cairncross7:40 PM

    The industrialist who makes value that didn't exist before-

    Does this animal exist?

    What actually happens is that: Somebody has an idea
    Somebody (not necessarily the same person)pushes that idea
    Somebody (not necessarily the same person) takes the idea and pushes it to a manager

    The manager instructs his/her engineers to make it work

    The Engineers make the idea work and hand it over to Manufacturing

    Manufacturing fix the idea and the worker bees put it into production

    Then it is sold - wages are paid and profits are made

    I have no problem with "The Industrialist" owning a fair share of the reward and Kudos
    BUT - how much is a fair share?
    How much did he/she contribute?
    How essential was he/she?
    Could his/her function have been performed by somebody else?

  19. LarryHart7:55 PM

    @Duncan Cairncross,

    All points duly noted, of course. The point I was trying to make was that I have no problem with a PRODUCER of value becoming wealthy by keeping a portion of that new wealth. I do have a problem with an ACCUMULATOR of wealth becoming wealthy by keeping it away from other people. The first is a positive-sum game, while the second is zero-sum at best.

    Not to negate any of the points you made (which I agree with), but that was a tangential issue.

  20. My concern is generational. Yes, I'd adjust taxes so that guys who lead teams that create great products get more wealth than mere token manipulators of resource extractors. But the biggest problem is inherited wealth, which leads directly to lordship and the Olde Trap.

    The Inheritance Tax is the only unquestionably fair tax. IT NEED NEVER BE PAID! If you simply assign most of your fortune to some great foundation that does some terrific thing in your name… helping to wither the state away from that particular area.

    "I would rather leave my child a curse, than the almighty dollar" -- Andrew Carnegie

    Leave them comfortable and safe, with a trust to invest in any companies their start, so we all might benefit if they inherited the entrepreneur gene. Then let em compete.

  21. I fail to see how liberals can lay claim to an Adam Smith. In fact much of your post appears as but a muddled and befuddled attempt to regain footing; alas the modern political philosopher has fallen - he has no presence, no place, in the national discourse. (And he never really did.)

    Do you want to know why? It's because it's all so evolutionary, my dear... evolution is what's missing in all such philosophical analysis.

    In any case, the average American has witnessed the loss of one third his wealth, the doubling of tax liability and future obligation, an increase in the cost of living of at least 10 to 15%, a loss of medical benefits both present and future, in an environment of diminished opportunity.

    Likewise it matters not how you choose to self-identify - unless you have something to sell, an audience to attract - or the particular cause - this is failed government. Oligarchy, mercantilism, social justice (where will the taxes ever come from?) - who cares? Nobody cares and Adam Smith would have been the first to tell you that; what we ALL care about is self-interest. Eventually we will flee this government in the very same way we fled the British Crown, while philosophers wallow in sorrow.

    The book of true economy had never been written.

  22. mohin9:06 AM

    Ok, since nobody else has complained... I am deeply offended by the unjustified and hateful attack spewed in this article. Sumo is in fact a fast-paced sport (once they get done with the preliminaries) performed by elite athletes. Fights seldom take more than 20 seconds, and the winner is not necessarily the fattest.

  23. Good news. Looks like the (nearly) global ban on CFCs has decreased the increase in global warming by 0.1C. That is 1/8 of the global warming since 1880! See Grist on CFC contribution to global warming Oh, and GRAPHS! That are germane. And well-done.
    See, the left can report good news about the environment. And we all thought it would never happen....

  24. You're right, of course, David and lots of people have been trying to point this out for some time, Paul Krugman amaong them. (And don't get me started about Republican attempts to claim that hippy Thomas Paine as one of their one.

    I would quibble with your suggestion that Marxism was "long ago disproved." Don't get me wrong, I'm not making a case for Marxism, but merely point out that Marx himself suggested communism could only come into being after a society had entered into capitalism, which, he posited, would eventually fail large majorities of the public, leading to revolts, socialism and eventually communism. The Soviet Union tried to build communism on, basically, a feudal state, which lacked the means of production and distribution Marx said capitalism would create. Ditto China, for the most part. Again, I'm not saying Marx is right, but only that, were Marx here to discuss it, he would say, "Disproved? It hasn't even been tested yet, but regulation-cutting in the US suggests we may very soon."

  25. Duncan Cairncross12:00 PM

    Interesting article about the TPP

    Just hope our government does not cave in to the US corporations

  26. Nitpicker, not all of Marx is disproved. Indeed, mainstream economists credit him with many discoveries and useful insights into the processes of capital formation. Moreover, his appraisal of the "contradictions of capitalism"… the way that capitalist competition both engenders great creative wealth-making… but also the seeds of its own destruction, as the winder of competition proceed to CHEAT… these all retain validity.

    Still, her was a quasi cult leader in his last 30 years and a lot of his writings were just-so stories. His Labor Theory of Value is utter drivel.

    His tendentious model of what will happen next (WWHN) was simply wrong on all counts. He expected the most advanced proletariates -- in Germany and England -- to rebel… but instead it was always the LEAST advanced, in Russia, China etc. He never understood that the proletariate could be diverted into either knee-jerk fascism (Nazism or the US confederacy) or else that it could be completely co-opted, as Roosevelt did, by inviting them into the Middle Class and delivering individualistic paradise for an entire human life-span.

    I will qualify that by saying the today's world plutocracy seems bound and determined to bring Marxism back, by betraying and destroying that Rooseveltean social compact.

    More and more, in coming years, you will see re-appraisals claiming Marx's teleology had only been delayed and that the rise of an uber-plutocratic caste fits his model, to a T. As will the subsequent radicalization of world proletariates.

    Personally, I do not relish that scenario, though I discuss it in EXISTENCE.

  27. LarryHart5:23 PM

    Duncan Cairncross (re TPP):

    Just hope our government does not cave in to the US corporations

    Hey, I'm an American and ***I*** hope your government (and mine) don't cave in to the US corporations

  28. LarryHart5:34 PM

    And for once, Washington gridlock may be a good thing. Ordinarily, Republicans in congress would be all for giving the president authority to fast-track a corporate-friendly treaty. Luckliy (for once), THIS congress may not be so inclined for THIS president.

    If congress fights the president on this one, it will make it harder for TPP to be ratified, which in turn will further incite the business-Republicans against the Tea Party. I call that a win-win situation.

  29. Hayek only looks inconsistent if you try to read his earlier works as stand-alone truths. If you read deeper, though, you can see he was an empiricist and had to change course as he learned. He left the business cycle stuff because the foundation material he needed wasn't there and eventually led him in a different 'emergent order' direction.

    He was also quite clear that he didn't want 'Hayekians' doing to him what Keynesians did to Keynes. He pointed out late in life that it was the followers who tended to screw up the messages that the get assigned to the original author as if they were the original ideas. We can see this with Adam Smith and other early liberals and Hayek pointed it out to anyone who cares to read his later material.

    At the risk of sounding like a Hayekian, one must read his work relative to Popper's perspective regarding objective knowledge for it to make sense. Reading Hayek relative to Von Mises is the typical approach, but I don't think it works as well. Popper was a better mirror of Hayek's open society philosophy.

  30. Perry E. Metzger6:48 AM

    As I recall, Mr. Brin had this same conversation before, with equally disingenuous misreadings of Adam Smith involved. See, for example:

  31. Anonymous8:03 PM

    1. Adam Smith was closer to Marx than Mises. Smith believed in the Labor Theory of Value, not the Theory of Subjective Value. The "liberals" can have Smith!
    2. Rothbard wrote a scathing critique of Rand, calling her a cult leader.
    3. Rothbard and CATO parted ways 33 years ago, well before Rothbard's death.
    5. Rothbard was an anarchist, the Kochs are and Rand was a statist.

    Given those facts alone, what Brin writes here is drivel.

  32. If Hayek was an empiricist that makes him even more unlike "Austrians"...

    ' I think it is significant that so few right wingers quote Smith at all these days. It's all Rand, Hayek, von Mises, James Buchanan and some Milton Friedman (Friedman is even suspect among some right wingers and libertarians these days). '

    1) Friedman was a commie who invented the negative income tax.
    2) He had few kind words for Hayek or Austrians, who are the rage on the right.
    3) Krugman says Friedman's not looking so good these days, period.
    'Or think about the economics rap video of Keynes versus Hayek everyone had fun with. Never mind that back in the 30s nobody except Hayek would have considered his views a serious rival to those of Keynes; the real shock should be, what happened to Friedman? '

    Wrong on monetary policy being all we need; right on things anathema to modern conservatives, like flexible exchange rates.


    Smith can be interesting, but let's remember he published in 1776. Government intervention meant mercantilist kings trying to hoard gold and silver to pay for wars, often via arbitrary monopolies. A world of democratic welfare states with working fiat currencies is multiply beyond his imagination. Insights on competitive (not 'free') markets, yes, but little to say about macro. The paradox of thrift, the fallacy of composition, these thoughts post-date him.


    Carl, how is abundant capital supposed to lead to workers making more? And what of the abundant evidence that austerity policies depress the economy? I see one thing that would boost the returns to labor: full employment, and thus competition for workers.

  33. Brin reminds me of Chomsky. Scathing critiques of the free market because it ISN'T a free market, but rather a game legally rigged by the state to benefit certain corporations.

    This is actually the straightforward laissez-faire position, but because they like the idea of being "radical" it is presented as "heretical" or in Chomsky's case, socialism itself.

    But really, how hard is it to understand?

  34. Bravo! A market must consist of many buyers and many sellers, or it's no market...
    Policy suggestion- instead of ponderous anti-trust litigation, how about restructuring the corporate tax, over a period of years, to become a progressive tax on corporate *gross* receipts?
    Thus corporate accounting is simplified (there's little argument about gross receipts) and smaller
    corps now have a business advantage! The invisible hand promotes competition and preservation of true markets!

    Article has moby spam comments, BTW....

  35. This was the point of the Progressive Movement 100 years ago, creating anti-trust laws that shattered the then-looming Gilded Age oligarchy and restored competition to American markets.
    What is the null hypothesis?
    p.s., I am surprised to learn I am a robot.

  36. Anonymous6:56 PM

    So, how's that corporate election-rigging going so far this year?

  37. Great post - Smith, and his old Prof Hutcheson, were on to the things that built great societies. Contemporary politics has turned its back on the great human issues in favor of shallow sound bites.

    Loved your Uplift series btw - I used to do labwork for a guy so like Charles Dash I could never look at him without grinning.