Corkey Trivia: Where is Adam Smith?
Adam Smith is considered by many to be the “father of modern economics”. In 1776, he published The Wealth of Nations which argued that in a free market, the individual acting in his own self interest was actually promoting the good of his community through a principle he called, “the invisible hand”. If everyone focused on success and increasing their own personal wealth, then the collective wealth of the community would rise too. He argues that prices would be low in a free market. The personal greed of buyers, wanting to spend the least amount possible, and sellers, trying to undercut competitors, would drive prices to their lowest sustainable level and thus also benefit the community. Some might say, in an eighteenth century kind of way, he was essentially saying, “Greed is Good”.
In the years leading up to the publication of his book, he traveled through Great Brittan and France with his student the young Duke of Buccleuch. During his travels, he bumped into our very own Benjamin Franklin. What an interesting meeting that must have been. The absentminded professor from Scotland meets an American Renaissance man in France.
France was an interesting place at that time. The seeds of their revolution, which followed ours by only 12 years, were being sown. Throughout France, Smith not only enjoyed the fruits of intellectual discussion but also learned quite a bit about the production of wine.
“The vine is more affected by the difference of soils than any other fruit tree. From some it derives a flavour which no culture or management can equal….”
He uses wine as an analogy to discuss protectionist policies both locally and internationally. He gives an example of how protectionist trade policies might nurture a Scottish wine industry.
“By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be bought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland?”
Thank goodness for the free market (with regards to wine at any rate) otherwise we might not be able to enjoy the terroir of either Bordeaux or Burgundy at a reasonable price.
I suspect that Adam Smith believed that greed is good, but unbridled greed could be bad for a lot of people.
Smith believed that there were some things that government needed to do which could not be accomplished my means of “the invisible hand” alone. He wrote that government should support a standing military, infrastructure, postal system and education. He wrote, “An instructed and intelligent people are always more decent and orderly than an ignorant and stupid one.” (I wonder what he would have thought about the performance of the American Congress on August 2, 2011?)
Smith also wrote that paying taxes was, “A badge, not of slavery, but of liberty.” In other words a taxpayer is an owner of property rather than the property of a master. In addition, he argued that taxpayers should pay taxes ” in proportion to the revenue which they respectively enjoy under protection of the state.” He also thought they should not be arbitrary, uncertain or unclear in the law.” Oh, and they should be as low as possible to meet the public needs of the country.
Forget about, “Where is Waldo?” I say, “Where is Adam Smith?” Oh, well Congress has a short memory. Must be all those cuts in education! There looks to be a full glass of wine sitting next to me, and I didn’t pour it. It must have been that invisible hand at work again. Oh well, Cheers!
Tags: adam smith, corkey trivia, economics, free market, invisible hand, stock market, taxes, wealth of nations
