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My GMU Econ colleague Mark Koyama, writing at National Review, corrects Jacob Soll’s deeply mistaken interpretation of Adam Smith [2]. Three slices:
Jacob Soll’s Free Market: The History of an Idea is a revisionist account of free-market thought from ancient Rome to the 21st century. It contains plenty of interesting historical material. The overall argument is an attempt to refocus our understanding of the market away from “free market economics” toward “a democratically oriented philosophy,” “one which accepts that the state is embedded in the market and vice versa.” At its core, this argument rests on profound mischaracterization of Adam Smith.
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In contrast to the mercantilists who sought to encourage industry, Soll claims, “Smith insisted that merchants and manufacturers were economically ‘sterile’: ‘The labor of artificers and manufacturers,’ he asserted, ‘never adds anything to the value of the whole annual amount of the rude produce of the land.’” Smith furthermore, we are told, was a supporter of empire and slavery and was not even a consistent critic of mercantilism. Rather, his vision “was Colbertist in that it sought protectionism and empire to aid internal development and to keep investment capital within the nation.”
Now it is true that many of the mercantilist writers were more insightful than they are given credit for and that the common claim that Smith was the founder of economics is an exaggeration. Different interpretations of Smith, moreover, should be welcomed. He was a complex and subtle thinker; he wrote in an age when esoteric writing was practiced; and serious scholars disagree about a range of issues, including the nature of his beliefs about religion. Soll’s account, however, isn’t within the range of scholarly opinions on Smith. Indeed, if the real Smith resembled the second-rate physiocrat Soll depicts, it would be a wonder if anyone bothered to read him today.
A small amount of digging establishes that Soll’s version of Smith is mistaken. Soll’s physiocratic Smith is drawn from book 4, chapter 11 of the Wealth of Nations. There Smith describes the physiocratic system and contrasts it to the mercantile system that he associates with Colbert. Smith is very clear, however, that he is summarizing the views of François Quesnay, a French physiocratic economist, not his own views. Indeed, Smith says (only a few paragraphs down from the lines that Soll quotes): “The capital error of this system, however, seems to lie in its representing the class of artificers, manufacturers, and merchants as altogether barren and unproductive. The following observations may serve to show the impropriety of this representation.”
Smith was pointing out the flaws in both the mercantile system of Colbert and the agrarian-centered analysis of Quesnay, not endorsing their conclusions.
Then Soll neglects Smith’s actual views on economic development as laid out in the opening chapters of the Wealth of Nations. There Smith depicts specialization through the division of labor, not agriculture, as the driver of economic growth.
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Finally, Soll is unable to explain one of Smith’s central ideas: that of unplanned coordination. Smith famously used the term “invisible hand” only in a few places (and not always to mean the same thing). But he expressed again and again the idea that the adjustment of prices brings out economic coordination — the meeting of supply and demand — and it was this striking idea that was so stimulating for subsequent economists.
My GMU Econ colleague Bryan Caplan writes wisely about the mainstream media [3]. A slice:
This is how I see mainstream media. The problem isn’t limited to race, gender, and sexual orientation, where Richard [Hanania] agrees that the media is crazy. The problem isn’t specific factual errors, either. The central problem is that the mainstream media’s standard operating standard is to use selective presentation to spread absurd views about practically everything that matters.
David Waugh warns of the combination on campus of wokeness and a demographic trend [4].
Daryl Morey reports on the rapid rise of woke-inspired self-censorship at M.I.T. [5] Two slices:
If MIT faculty, who are at the cutting edge of science and technology, can’t count on their employer to defend open inquiry, it might prevent them from taking innovative risks. This, in turn, would stymie technological progress and the education of the next generation of innovators.
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I was a student at the MIT Sloan School of Management from 1998 to 2000. A culture of open inquiry existed during my time there. It helped me develop skills that have been critical to success in my career and life. Among other things, I learned to question long-held assumptions, to use data to address problems with novel solutions, and to speak the truth—even if it sometimes gives offense. Given the reported state of speech at MIT today, I question whether students are experiencing the discomfort and risk necessary to navigate the real world or developing the courage to speak their minds when it matters.
Brendan O’Neill accurately describes Davos Man [6]. A slice:
[British Labour MP Keir] Starmer has unwittingly revealed what ‘Davos Man’ is all about: he’s about escaping the irritating plane of democratic decision-making in preference for the rarefied company of the 21st century’s self-styled philosopher-kings. He’s about liberating himself from the constraints of democratic politics – especially the constraint of being answerable to the masses – in favour of chumming about with the better-educated, better-dressed better people of the World Economic Forum. For Starmer to dismiss Westminster, the Mother of Parliaments, the one institution over which British citizens have some direct and meaningful control, as just a ‘tribal, shouting place’ is depressingly revealing. It reveals his contempt for parliamentary democracy, and it reveals Davos Man’s belief that politics is better done away from us pesky plebs.
Writing in the Wall Street Journal, John Cogan identifies a root cause of the U.S. government’s fiscal incontinence [7]. Two slices:
Jurisdiction for entitlement legislation is dispersed among more than a dozen committees in each congressional chamber. In the House, the Agriculture Committee has jurisdiction over farm-support payments and food stamps, the Education and Workforce Committee over student loans and grants, the Ways and Means Committee over Social Security, Medicare hospital insurance and welfare programs, the Energy and Commerce Committee over Medicaid (sharing responsibility for ObamaCare and Medicare Part B with Ways and Means).
In this system, no committee is accountable for total spending. Each committee has a reason to expand its programs and resist attempts to restrain them, but none have an incentive to keep overall spending down.
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Former Speaker Samuel Randall delivered a prophetic warning in 1885: “If you undertake to divide all these appropriations and have many committees where there ought to be but one, you will enter upon a path of extravagance that you cannot foresee the length of or the depth of, until we find the treasury of the country bankrupt.”
The House dismissed these warnings and dispersed appropriations jurisdiction to eight committees. The Senate later followed suit. The new incentives caused expenditures to grow rapidly. From the 1890s to World War I, budget deficits were more frequent and larger than ever before in U.S. peacetime history.
After World War I, Congress recognized the source of its budget problem and solved it. A House select committee, established to create a new process in which the president would submit his own comprehensive budget request to Congress, recommended that the chamber consolidate all appropriation authority into a single committee. The remarkable resolution stripped seven House committees of their spending authority. Citing past support from some of its most respected former members, including Appropriations Committee Chairman James Garfield (1871-75) and Speaker Joseph Cannon (1903-11), the select committee urged members to “submerge personal ambition for the public good.” The House did so and consolidated appropriations in 1920. Two years later, the Senate changed its rules to match.
That restored budget accountability and eliminated the pre-existing system’s incentives for higher spending. From 1921 to 1930, when the Great Depression hit, federal spending was restrained and the annual budget was balanced.
Ramesh Thakur continues to write insightfully about the calamitous, hysterical overreaction to covid [9]. A slice:
From the start there was little empirical data to support the efficacy of lockdowns [10]. The virus was not unprecedented, but the draconian societal shutdowns, which overturned the existing scientific and policy consensus, were. Few would have believed a year earlier in March 2019 that Western democracies would so enthusiastically mimic China’s authoritarian behaviour and be cheered on by citizens for doing so.
Yet, European countries and US states with hard lockdowns fared no better than softer counterparts. After a year of this extreme experiment, data from around the world showed that the spread of the pandemic correlated more with geography, demography, and seasonality than lockdown stringency and sequencing. This Politico headline [11] from 23 December 2020 would have been funny if it wasn’t tragic: “Locked-down California runs out of reasons for surprising surge.”
Take note of this Economist headline: “Excess deaths are soaring as health-care systems wobble. [12]”
Jay Bhattacharya tweets [13]:
How is it possible that the governor of NY still supports firing of unvaxxed nurses on the false premise that they are a danger to their patients? If there is someone who is a danger to patients, it’s a leader whose policies promote nursing shortages.