Friday, September 21, 2012

Adam Smith Never Mentioned Laissez-Faire


 Jim Sullivan, in Ventura County Star writes HERE 
An example of a misleading claim about history is the Republicans' use of Adam Smith's term "laissez faire" to justify deregulation of business. Adam Smith used that term in his magnum opus “The Wealth of Nations” (first published in 1776) in reaction to overly restrictive government regulation of business.
What is less well known is that Smith's term "laissez faire" was used to criticize the economic philosophy of mercantilism, which at that time was seen as a way to increase the wealth of nation states, and which involved very heavy regulation of business.”
Comment
Adam Smith never used the words “laissez-faire” in anything he wrote in Wealth Of Nations, or indeed, in anything he wrote anywhere else. 
This is a false attribution to Adam Smith that was made long after he died in 1790, when employers agitated against legislated shorter working hours and any interference in the long hours worked by women and children in pits and mills, and their exposure to dangerous machinery.  Smith was familiar with the words from his visit to France in 1764-66 but he chose not to use them in his political economy and moral philosophy because they did not benefit the consumers who, as a result of them, paid higher prices and because they restricted competition, and people risked serious injuries.
Laissez-fire was never his term.
Also, under mercantile political economy, then dominant in Britain, the pressure for “regulation” consisted of demands from some merchants for tariffs and prohibitions, monopolies in their own interests, and against the rights of labourers to “combine” together to raise their wages.  These regulations generally worked against the interests of consumers and labourers, who were also consumers.

7 Comments:

Blogger Daniel said...

Weird.

You'd think the fact that the term is in French might get people to do a little due diligence before saying something like that.

3:05 p.m.  
Blogger philistus said...

Just got through another reading of the WON, and I find it interesting to see how poorly Adam Smith is understood. Libertarians, not republicans, are generally the greatest offenders of quoting Smith, and the spirit of his works, incorrectly by a few enough degrees to be close, but wrong. The American Left just gets Smith patently wrong, so much that they quote him for things he never said, and is easily verifiable by the intertubes.

Without using the French, Smith clearly did not advocate "hands off" approach, because he clearly stated: B.IV, Ch.2, Of Restraints upon the Importation from Foreign Countries

"The defence of Great Britain, for example, depends very much upon the number of its sailors and shipping. The act of navigation, *50 therefore, very properly endeavours to give the sailors and shipping of Great Britain the monopoly of the trade of their own country in some cases by absolute prohibitions and in others by heavy burdens upon the shipping of foreign countries. The following are the principal dispositions of this Act."

Not quiet "hands off" and does not place the profit of a small few above the defence of a nation as a whole. If quoted out of context, Smith could sound Utopian, but he often draws distinction between Ideal Liberty and what is reality. I guess he was writing to men of sober thinking...

12:37 a.m.  
Blogger philistus said...

Just got through another reading of the WON, and I find it interesting to see how poorly Adam Smith is understood. Libertarians, not republicans, are generally the greatest offenders of quoting Smith, and the spirit of his works, incorrectly by a few enough degrees to be close, but wrong. The American Left just gets Smith patently wrong, so much that they quote him for things he never said, and is easily verifiable by the intertubes.

Without using the French, Smith clearly did not advocate "hands off" approach, because he clearly stated: B.IV, Ch.2, Of Restraints upon the Importation from Foreign Countries

"The defence of Great Britain, for example, depends very much upon the number of its sailors and shipping. The act of navigation, *50 therefore, very properly endeavours to give the sailors and shipping of Great Britain the monopoly of the trade of their own country in some cases by absolute prohibitions and in others by heavy burdens upon the shipping of foreign countries. The following are the principal dispositions of this Act."

Not quiet "hands off" and does not place the profit of a small few above the defence of a nation as a whole. If quoted out of context, Smith could sound Utopian, but he often draws distinction between Ideal Liberty and what is reality. I guess he was writing to men of sober thinking...

12:37 a.m.  
Blogger philistus said...

B.IV, Ch.2, Of Restraints upon the Importation from Foreign Countries, not quiet "hands off". Smith understood that the defense of the society was more important than the profit of a few individuals, or even of many individuals. He railed quiet effectively against the act of navigation, not because he was laissez faire, but because many of its positive effects have fleeted, and needed to be ammended.

12:39 a.m.  
Blogger Will said...

What's Francois Quesnay, chopped liver? If he'd just mentioned him instead, everything he wrote would have been fine.

I wonder how far back this tradition of misrepresenting Smith goes, and who's responsible. My impression is that Milton Friedman leaned pretty hard on it, but I wouldn't be surprised if he acquired the practice from someone else at Chicago.

8:53 p.m.  
Blogger SM said...

To Will:

You may want to begin by looking at the German Historical School, many of its writers began refering to Smith as "laissez faire" in the 1800s.

1:17 p.m.  
Blogger Gavin Kennedy said...

Philustus
In Smith's mind I suppose, Britain was an island and depended on sea for its trade and defence. The fact that the Navigation Act also applied to the British colonies in North America and Atlantic trade down to Africa, was a handy monopoly for British traders. It also monopolised European imports into the colonies, charging high prices for imports, and paying low prices for colonial exports.
It was repealed mid-18th century.
Gavin

4:20 p.m.  

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