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by Don Boudreaux on December 23, 2022

in Adam Smith, Taxes, Trade

My colleague Dan Klein has this letter in today’s Wall Street Journal:

Reviewing Prof. Glory Liu’s “Adam Smith’s America” (Books, Dec. 17), Barton Swaim shares his judgment that Smith’s “Theory of Moral Sentiments” “isn’t very good,” adding: “It’s mostly unreadable, to my mind.” Smith, however, thought that the “Moral Sentiments” was much superior to his “Wealth of Nations.” I share Smith’s judgment.

Mr. Swaim levels a long-prevalent criticism of the “Moral Sentiments”: “Sympathy as Smith defines it is far too weak a foundation on which to build an elaborate theory of morality.” That criticism—that Smith’s ethical philosophy lacks a foundation—consigned the “Moral Sentiments” to oblivion from roughly 1800 to 1976. During that long period, many other thinkers also attempted to give a foundation to ethics. Were any of them successful?

The demand for a foundation in ethics eased up after 1976. Since that year, the “Moral Sentiments” has enjoyed a tremendous resurgence. It is now perhaps more admired than even the “Wealth of Nations.” Smith’s approach to ethics is nonfoundationalist; that’s a feature, not a bug.

Mr. Swaim expresses dismay with the left reading of Smith. I, too, am dismayed about that. As for Prof. Liu’s book, a shortcoming not remarked on by Mr. Swaim is the unsatisfactory nature of her treatment of Ronald Coase, a Nobel Prize-winning economist and the best Smithian at the University of Chicago. Prof. Liu airbrushes Coase out of the story.

Prof. Daniel Klein
Mercatus Center, George Mason U.

GMU Econ alum Dominic Pino shares his thoughts that are prompted by Dan’s letter. A slice:

Barton Swaim began his Wall Street Journal review of Adam Smith’s America, a new book by Harvard’s Glory Liu on the great Scottish economist, by writing, “Admirers of Adam Smith may be surprised to learn that there is an entire academic industry dedicated to the proposition that the great Scottish economist was not a proponent of free-market capitalism.”

It’s true, such a movement does exist, and Liu’s book is only the most recent entry into the tradition. There are many “left-Smithians” who try to claim Smith as one of their own. They argue that because Smith makes some limited exceptions to free-market principles (which he certainly does), he shouldn’t really be considered a proponent of free markets. There’s now a right-wing equivalent to this movement as well, claiming that Smith’s exceptions permit wide-ranging government interventions in the economy when doing so is in “the national interest.”

The Wall Street Journal‘s Editorial Board continues to decry the contents of the new omnibus spending bill. A slice:

Also tucked in the bill are Potemkin pandemic reforms such as requiring the Centers for Disease Control and Prevention director to be confirmed by the Senate. More political accountability at the top won’t fix the ailing and bloated bureaucracy that has done so much to politicize public health. It is rewarded for its pandemic failures with a $760 million raise.

Also decrying the irresponsible omnibus spending bill is Reason‘s Eric Boehm.

David Henderson reflects on NYC mayor Eric Adams’s (1) correct understanding that the bulk of that city-government’s revenue is paid by a tiny percentage of income earners, and (2) incorrect presumption that those high-income-earning taxpayers belong to him. A slice:

Quit complaining about high-income people. Quit saying that they don’t deserve what they have. Those who earned it by serving other people—and that’s most high-income people—do deserve what they have. And, for Pete’s sake, don’t keep saying that they don’t pay “their fair share.”

What is their fair share? Your answer will depend on your concept of fairness. But here’s what sounds like a reasonable concept: make people pay according to the value they get from the government.

[DBx: The late Nobel-laureate economist James Buchanan would applaud David’s concept of fairness in taxation.]

Tom Hazlett remembers Martin Morse Wooster. A slice:

Wooster’s most serious long-form contribution is found in his book, The Great Philanthropists and the Problem of “Donor Intent.” The first edition appeared in 1994, the second in 1998, the third in 2007, and the fourth in 2017. As he explained in the Weekly Standard, “Philanthropic history can be entertaining [given] the rise of such heroic entrepreneurs as Andrew Carnegie, John D. Rockefeller, John MacArthur, and Bill Gates [coupled with] … a profession that attracts the overeducated and underemployed, who often fill their many idle hours with memorably vicious office politics.”

The stories are fascinating. Henry Ford was not a perfect man, but “he lived simply and reinvested most of his profits back into his business,” writes Wooster. Ford employed blacks (at equal pay scales) and paid “living wages.” Ford Motor Co. gave criminals a second chance, hiring 500 ex-convicts between 1914 and 1920, “including one convicted of forging the name ‘Henry F. Ford Jr.” on a check. Yet Henry Ford (the real one) did “not believe in charity”—on moral hazard grounds. This view was not radical in the day; Wooster notes that George Bernard Shaw stated the case for tough-love socialism. But it put Henry Ford at odds with many of the policies of the New Deal. And it left the Ford Foundation, which would support just the causes that the man rejected, violating donor intent.

Here’s the abstract of a recent paper by Miguel Acosta and Lydia Cox: (HT GMU Econ alum Gabby Beaumont-Smith)

The U.S. tariff code has a surprising and little-known feature: Tariffs are systematically higher on lower-end versions of goods relative to their higher-end counterparts. For example, a hand- bag made of reptile leather has a tariff rate of 5.3 percent, while a plastic-sided handbag has a tariff rate of 16 percent. In this paper, we document the presence, historical origins, and conse- quences of this regressive pattern. Regressive tariffs are present throughout the tariff code, but are especially pervasive in consumer goods categories, where tariffs are 1.2 percentage points higher, on average, for low-value varieties. Using a newly constructed dataset on legislated tariffs that covers all major trade agreements back to the 1930 Smoot-Hawley Tariff Act, we show that this variation in rates across varieties largely originated in trade agreements made in the 1930s and 40s and has persisted over time. Welfare estimates suggest that the regressive nature of tariff rates on consumer goods has important distributional consequences.

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