Money Money Money Money; MONEY!

Sunday: The Theory of Moral Sentiments    Yesterday: New Pages (see above)   Tomorrow: Ten Greatest War Stories

Twitter: @GreatBooksDude

Website: (specializing in online Great Books programs!)

I have to begin with a true classic before I get down to business!:

The Scientific Revolution of the 17th Century was so powerful that it spilled over into nearly every other field in the 18th and 19th Centuries.  Such is why the greatest economic work ever written, Adam Smith’s The Wealth of Nations, derives its laissez-faire model on the assumption of an “invisible hand” which is equivalent to Newton’s gravitational law.  Now of course one can debate how much physics or any other science should impact other fields.  But Smith’s work is so well-written, and so well-researched, that it was instantly recognized as among the greatest works ever written, and one must strongly doubt whether any economics book can surpass it.  Not surprisingly, it has become commonplace for political figures, lawyers, and businessmen to have not read this book, and they accordingly have screwed up our economy for myself and the next generation.  (I should note here that I’m a whopping 25 years old, and though those around me swear I’m going senile, you can look at my reading list to see how I–the partially employed–might compare with fully employed fellows in all fields.)  In any event it should be clear that knowing of the existence of a book such as this is nowhere near the same as reading this kind of book.  So those who do not make it a requirement are going in the face of the obvious.

In this case I am not going to summarize the work, as it is long.  Whereas most of the classics are short, and there is no excuse for not reading them in full, every fifteenth one happens to be, shall we say, filled with content to the brim, and those make up for the lack of depth that often occurs in the others.  This is one of those fifteenth books, and boy! does it fill you in.  So instead of summarizing, I will highlight three key points whose meaning you ought to understand.

The first of these points is how quickly Smith gets into his famous “pin factory” example–on the first page.  He notes here that the division of labor enhances efficiency; that if one person made the entire pin, from start to finish, it would take at least ten times as long as it takes several people each working on a smaller task to finish it.  Now this is all well and good with very technical things, and things mechanical; but with jobs that require mental thoroughness, specialization in fact destroys efficiency because it causes them to be performed incoherently.  Look, for instance, at our school system.  It also minimizes the meaning of efficiency to bare speed, whereas efficiency also should include quality.  One can do something quickly but at the same time very poorly, and in our modern economy this is very often what happens.  Smith, however, does not say this, he assumes that his sophisticated reader base will intuitively get it.

Second, Smith’s focus on the word “value” stands out very clearly.  Many Enlightenment thinkers, on both sides of the Atlantic, were prone to using buzz-words.  For Edward Gibbon and James Madison, the word “insensible” was a buzz-word with an undertone of decay and corruption.  In this case Smith uses “value” to describe something much deeper than cost–namely, the balance between the cost of an item to a consumer and the satisfaction it gives him to use it, and the cost of producing an item to a producer and the satisfaction it gives him to sell it.  But this word is often mistaken by the modern world, conflated with price.  And while price is the medium through which values can be compared, the two are vastly different concepts.  Price is a common assumption of value, whereas value means something different to each person.  Hence when people conceive of beginning businesses on the basis of price and price alone–or when people invest in businesses for the sole reason that they sell items cheap or expensive–they are making a decision that, if they’d read The Wealth of Nations, they’d know better than to make.

Third, and last, must come the concept of equilibrium. To Smith, economic equilibrium comes when so many people find the right prices at which to sell their labor and buy necessities and luxuries.  This occurs only when too many people enter a market and are forced to exit it, and when too few are left and more entries are required.  The weeds eventually are sorted out because those whose entry doesn’t yield them adequate results will leave, and those who see a bargain to be had will enter, until the right price is set.  Remember that prices are the transmitter of this information.  Now what this means is that any time the government compels prices to be altered through some form of policy–especially through taxation–the information, the prices, the language of the market, is skewed.  (Many people do not understand that government claims a legitimate monopoly of force, and so they fail to see that taxation and other economic policies are merely applications of that monopoly.  So these idiots vote for policies thinking they are benevolent, when in fact they are compulsive.  Then they complain that liberties are being forsworn.  Morons.)

The more skewed it gets, the more difficult the market is to understand and to operate in, as knowledge is power.  To Smith, it seems, market economics works fastest when perception allows sharp and reasonable decision-making.  But to most of those who are in government, this idea of perception, of knowledge, and of the power individuals hold to shape their own lives is mostly meaningless, as they are required in the face of constant “emergencies” to manipulate the market and distort the transmission of information.  Of course Smith was subtly implicating the British ministry of his own day–the book was published in 1776, when that most powerful world empire was overtaxing its colonists abroad and they were pushing back in the form of a revolution–but what that means is that our own most powerful world empire, which is pursuing eerily similar policies, is equally destructive of our collective economic good.

Two things to be warned about before you engage upon the task of reading this tome, which in a Modern Library edition I believe totals over 1000 pages: first, Smith is monotonous, and much of his treatise appears repetitive.  He does tend to hammer home the info.  And second, don’t go hit something when you read Smith’s ideas and listen to our Congressional leaders oil up the media for their newest project.  After all, with our wonderfully restricted liberty, you might wind up in a small cell somewhere far away.



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s