Autumn Book Club Choice - Adam Smith: The Wealth of Nations

zakalwe wrote:

sadly, its minus its back cover so probably not worth all that much.

i'll try to dig out (and dust off) my notes on the book, i suspect they were used as kindling (my mum has no respect for the written word, especially when i graduated)!

if i remember correctly, it went into great detail about the pin maker!

I suspect my notes have befallen a similar fate.

Adam Smith? I'm not doing another economics book. And from what the last one said, Smith is about as relevant as the Bible to modern day economi thought.

905 wrote:

Adam Smith? I'm not doing another economics book. And from what the last one said, Smith is about as relevant as the Bible to modern day economi thought.

BLASPHEMER! KILL THE HERETIC!

905 wrote:

Adam Smith? I'm not doing another economics book. And from what the last one said, Smith is about as relevant as the Bible to modern day economi thought.

905, I also yearn to read Patten, or any other of your choices. Go right ahead and put up and alternative book/time for those who would rather a dose of the plague to a prolongued encounter with Smith. I'm going to read him so as to have a better chance of understanding "Das Kapital".

cactus flower wrote:

905 wrote:

Adam Smith? I'm not doing another economics book. And from what the last one said, Smith is about as relevant as the Bible to modern day economi thought.

905, I also yearn to read Patten, or any other of your choices. Go right ahead and put up and alternative book/time for those who would rather a dose of the plague to a prolongued encounter with Smith. I'm going to read him so as to have a better chance of understanding "Das Kapital".

Oh dear...

Well Patten and Smith are two sides of the same economic coin, but at least Patten dates from the last century. Also it's more juicy politics than dismal science.

cookiemonster wrote:

cactus flower wrote:

905 wrote:

Adam Smith? I'm not doing another economics book. And from what the last one said, Smith is about as relevant as the Bible to modern day economi thought.

905, I also yearn to read Patten, or any other of your choices. Go right ahead and put up and alternative book/time for those who would rather a dose of the plague to a prolongued encounter with Smith. I'm going to read him so as to have a better chance of understanding "Das Kapital".

Oh dear...

I'm sure you're aware that Karl Marx admired and learned much from the works of Adam Smith.

905 wrote:

Well Patten and Smith are two sides of the same economic coin, but at least Patten dates from the last century. Also it's more juicy politics than dismal science.

Are you up for discussing the Patten book then 905 - what's the title again?

Not Quite the Diplomat - A look back on the years he spent as governor of Hong Kong and as the EU commissioner with responsibility for 'foreign' affairs.

Apart from a long look at the Conservative party and their attitude towards the EU, it's generally quite interesting. He goes into various corners, such as Neo-conservatism in the States, the Middle-East, the state of Europe and changes in the Far East. It is very undiplomatic, with harsh views on Russia, Chirac and certain Americans.

I liked it because of it's straight-forward tone. In a very English way, he eschews diplomatic pandering in faviour of blunt talk and common sense. I didn't agree with everything in there, he has a very rosy view of America's history, Thatcher and free-trade. But in a pious way, not ideologically deluded. Overall a refreshing read, though slightly out of date (it's 2005 I think).

cactus flower wrote:

cookiemonster wrote:

cactus flower wrote:

905 wrote:

Adam Smith? I'm not doing another economics book. And from what the last one said, Smith is about as relevant as the Bible to modern day economi thought.

905, I also yearn to read Patten, or any other of your choices. Go right ahead and put up and alternative book/time for those who would rather a dose of the plague to a prolongued encounter with Smith. I'm going to read him so as to have a better chance of understanding "Das Kapital".

Oh dear...

I'm sure you're aware that Karl Marx admired and learned much from the works of Adam Smith.

Well I as assuming you would be suggesting we all go read Das Kapital next. The thought of having to trawl through it again isn't a happy one.

cookiemonster wrote:

cactus flower wrote:

cookiemonster wrote:

cactus flower wrote:

905 wrote:

Adam Smith? I'm not doing another economics book. And from what the last one said, Smith is about as relevant as the Bible to modern day economi thought.

905, I also yearn to read Patten, or any other of your choices. Go right ahead and put up and alternative book/time for those who would rather a dose of the plague to a prolongued encounter with Smith. I'm going to read him so as to have a better chance of understanding "Das Kapital".

Oh dear...

I'm sure you're aware that Karl Marx admired and learned much from the works of Adam Smith.

Well I as assuming you would be suggesting we all go read Das Kapital next. The thought of having to trawl through it again isn't a happy one.

Lets just take it one step at a time. In any event, I think VI Lenin's "Imperialism, the Highest Form of Capitalism" would be an even better read in the week that's in it, and is a lot shorter.

So I was looking through wealth for a place to start my summary and I can upon a section that I think should be mentioned today.

A wee snippit while discussing banking: But those exertions of the natural liberty of a few undividuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments.

He was a shockingly smart bloke, was our Adam. What he saw what the coming of big corporations, and how what he proposed would allow them to come into being but realised that it was necessary for their be some safety net to control them.

Anyway... There are more than a few well known quotes (for a collection of books that size that's not a suprise) but the one which started my love affair with Smith is also one of the most well known.

"It is not from the benevolence of the Butcher, the Brewer, or the baker, that we expect our dinner, but from their regard to their own interest"

Smith realised that self interest was not selfish, that it also served the wider public interest in a market system. A simple model being that we all work to earn money which is our self interest, but in order to achieve that in a competitive market we must offer someting which is of value to others and so society benefits from our own self interest, from our private enterprise.

He also have a very finely tuned sense of humour which passes many by, he put the above a slightly different way when discussing the need not only for benevolence but also self interest:

"Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog"

The basis for Smith writing wealth was to show legislators and law makers in the parliament that their current system of economics (basically a crushing monopoly exploiting colonies was a bit of a sham. That though it they were not fully benefiting from wealth-creation oppertunities on both sides of that divide. That protectionism (you'll gather as you read Wealth that it was Smith's bete noire) served an end (enriching the already rich) at the expense of long term growth. Smith was looking out for the little guy when he wrote wealth, It wasn't a manual for the rich to get richer.

"To prohibit a great people, however, from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind".

Smith hated monopoly, he hated colonialism and mercantilism. The little guy, up until then had not been allowed to so the above, what Smith wanted was for the parlimentarians to adopt his ideas and believed in them doing so would create an explosion of work, production, trading and so on among the lower classes which would truly shock the elites. His approach was to work from the bottom up by allowing the working poor to improve their own living standards and skills not by means of limited and finite handouts but by giving the people the oppertunity to succeed on their own merits from their own work and to gain the self respect that goes with it.

Anyway that should be enough for the moment. I'll try and out something together on who he was and where he was coming from for tomorrow evening. This is actually great fun!

Thanks cookiemonster - a flying start. I'm only just starting to read, so I won't be able to contribute much at this stage, but I'll keep following your posts.

I think that P.J O'Rourke's guide is probably easier and better than the great work itself. As for me, I won't be reading the original.

Regards...jmcc

jmcc wrote:

I think that P.J O'Rourke's guide is probably easier and better than the great work itself. As for me, I won't be reading the original.

Regards...jmcc

Perhaps cookiemonsters summaries will excell both Smith and O'Rourke

cactus flower wrote:

jmcc wrote:

I think that P.J O'Rourke's guide is probably easier and better than the great work itself. As for me, I won't be reading the original.

Regards...jmcc

Perhaps cookiemonsters summaries will excell both Smith and O'Rourke

Cookiemonster is quite busy at the moment and may not be able to keep up with the pace here.

The O'Rourke book is good, and I'am a huge fan of his anyway, so it's worth a read and it does get the most important points of Wealth across but you miss SO much of Smith's logic as to how he came to the conclusions which as discussed in O'Rourke's book. That's where Smith's beauty lies.

This is a nice edition

Link to Complete Edition

but for anyone who thinks the original is more suited for use as a door-stopper, here is Glyn Hughes very good "Squashed Version of the Wealth of Nations".

Link to Condensed Edition

Cookie had some nice posts that were lost unfortunately and I'm glad you refound the condensed edition cactus. A paragraph that got me from chapter 1:

Quote :

Everybody must be sensible how much labour is facilitated and abridged by the application of proper machinery. In the first fire engines [= steam engines], a boy was constantly employed to open and shut the valves as the piston ascended or descended. One of those boys observed that, by tying a string from the handle of the valve to another part of the machine, the valve would open and shut without assistance, and leave him to divert himself with his play-fellows. One of the greatest improvements was thus the discovery of a boy who wanted to save his own labour.

I'm sorry I missed Cookie's posts. Adam Smith is a treat, squashed or unexpurgated.

He didn't have to deal with population and sustainability issues though.

Quote :

Among the savage nations of hunters and fishers, every individual who is able to work is more or less employed in useful labour, and endeavours to provide the necessaries of life, for himself, his family or tribe. Such nations, however, are so miserably poor, that they are frequently reduced to abandoning their infants, their old, and their sick, to perish. Among civilized and thriving nations, though a great number of people do not labour at all; yet the produce of the whole labour of the society is so great, that all are often abundantly supplied.

From what I've read and seen, hunter gatherer societies are/were not poor in the miserable sense of urban poor, they are poor in the sense of not being able to look after an old or unhealthy portion of population. They didn't have means of birth control and infanticide and abandoning old people was the only mode of ensuring that population growth didn't overwhelm the environment they depended on ("Collapse" - Tikopeia chapter, Jared Diamond).

Now we can afford to have a lot of very poor people. The invisible hand is not very good at population control or distribution of wealth.

Adam Smith's Four Canons of Taxation, ie Certainty, Equity, Economy and Convenience came up as a Starter for Ten on University Challenge last night. I was rather chuffed when I correctly answered that they related to Taxation, unlike the eight gathered contestants. A classic moment where you need an economist!

Yeah there was another quote cookie quoted where Smith said to beware of corporations which might grow and take over the planet and then Mars as well. He said governments have to be involved in this to keep an eye on these monstrosities.

Maybe his philosophy is not so simple after all and maybe he spoke about the markets meaning hard markets with commodities. Banking may be different and indeed the market mechanism might not work on a local scale or in certain circumstances given the geography of a nation. I'm convinced that Ireland is one type of case like that - there's no way we can have a railway system competing with another/itself (?) and with the price of oil being relatively low the car beats trains to death. I'm also convinced that Bus Eireann is a monopoly too that overcharges which is another type of problem.

So, does the market principle apply to all markets? I can't believe it does and I'd like to see next what Smith had to say about Banking.

Auditor #9 wrote:

Yeah there was another quote cookie quoted where Smith said to beware of corporations which might grow and take over the planet and then Mars as well. He said governments have to be involved in this to keep an eye on these monstrosities.

Which is another pearl from Adam Smith's ocean of wisdom. That view also went very much against the Mercantilist dogma entrenched in his day. They advocated the creation of large, monopolistic trading companies, one of which was the East India Company.

Quote :

Maybe his philosophy is not so simple after all and maybe he spoke about the markets meaning hard markets with commodities. Banking may be different and indeed the market mechanism might not work on a local scale or in certain circumstances given the geography of a nation.

The mix of advanced economies in Smith's day certainly did lean towards more physical industries than the abstract ephemerae of which banking is one. That certainly gave a cultural context to the Physiocratic School to whom Adam Smith owed much of his early influences. Smith worked with two of its leading exponents Quesnay and Turgot and it is from these two individuals that his belief in the necessity to protect private property emerged. However, the Physiocrats were not always so sensible, they argued that manufacturing and services contributed nothing to the overall economy since their inputs from agriculture balanced their outputs in terms of goods and services. Ronnie O'Toole did a piece in the Sunday Times about these people a few weeks ago. So, as a result of the fact that the 18th century milieu in which we find Adam Smith was much more based on real, physical industries. I would argue however that most markets share the same basic principles, so what he says about physical markets is broadly interchangeable with those of banking and other service markets.

Quote :

I'm convinced that Ireland is one type of case like that - there's no way we can have a railway system competing with another/itself (?) and with the price of oil being relatively low the car beats trains to death. I'm also convinced that Bus Eireann is a monopoly too that overcharges which is another type of problem.

Well of course not every market is suited to the free play of competitive forces. Iarnród Éireann is what is described as a natural monopoly. It really doesn't make much sense having competition with Iarnród for the sake of it. It would lead to waste, diseconomies of scale, poorer services and economic and social atrophy. This is because competition with Iarnród is an unecessary duplication of services.

Quote :

So, does the market principle apply to all markets? I can't believe it does.

Not exactly since most principles allow for some exceptions.

I know it's late and I know you're weary but ... ah we'll get onto what he has to say about banking later on at the Book Club.

Credit markets must be different even though they share the same basic underlying mechanism; I'd argue that it's more like gambling than trading however - getting the best price money means doing less future work than getting higher priced money. It's all in the future, long finger, tomorrow. This is not real - it's projection/speculation into something that hasn't arrived yet thus there's an element of risk, hence the interest rate.

So is that correct? The banking market deals in a commodity which reflects the value of future activities ..? I suppose that reality functions so consistently over time (for most people) that's it's legitimate to make predictions about the future based on that.

It's a funny product though.

Auditor #9 wrote:

Credit markets must be different even though they share the same basic underlying mechanism; I'd argue that it's more like gambling than trading however - getting the best price money means doing less future work than getting higher priced money. It's all in the future, long finger, tomorrow. This is not real - it's projection/speculation into something that hasn't arrived yet thus there's an element of risk, hence the interest rate.

So is that correct? The banking market deals in a commodity which reflects the value of future activities ..? I suppose that reality functions so consistently over time (for most people) that's it's legitimate to make predictions about the future based on that.

It's a funny product though.

Auditor, a lot of markets operate on the basis of tomorrow, next week, month, year or decade. When we look to value even stolid manufacturing companies we look to see what they could earn over the next decade when deciding whether or not to buy into them. That is a speculative punt which may also indeed prove to be dramatically incorrect. There is risk in it, but that is an essential part of the business process as without risk there is no reward. Essentially, all markets exist somewhat in the future since current values are determined by future prospects of return.

Is there anything that Adam Smith says that can help us, in the week that's in it?

This is a useful basic concept - there is a "natural price" and a "market price".

Quote :

There is also in every society or neighbourhood an ordinary or average rate of rent, which is regulated, too, by the general circumstances of the society or neighbourhood in which the land is situated, and partly by the natural or improved fertility of the land. What we may call the natural price of any commodity depends upon these natural rates of wages, profit and rent at the place where it is produced. But the actual price at which any commodity is commonly sold, is called its market price. It may either be above, or below, or exactly the same with its natural price.

http://www.btinternet.com/~glynhughes/squashed/smith.htm