Smith's Wealth of Nations

[Music] so [Music] hey the last lecture for today is going to cover adam smith's wealth of nations and it's one of the great epoch making works in the history of social science it's usually thought of as the high point in the social scientific thought of the enlightenment now it should come as no surprise that adam smith is interested in the wealth of nations because in the middle of the 18th century wealth in england had grown to unprecedented proportions and it was a matter of both concern and amazement to contemporary englishmen where this wealth had come from and how they could get more of it like many of us wealth this was seen by adam smith and other englishmen as being attractive and the mystery of where wealth comes from and how we can get more of it is what the wealth of nations is all about now it's not surprising as well that science and that scientific approaches to the study of society are central to smith's concern he's in the tradition of enlightened social thought enlightened political thought and he wants to adapt the scientific method that's been so successful in physics and in other scientific realms other realms of physical inquiry to the inquiry into society now adam smith hit on something very important that there's something about industrial society there's something about society in which economic life has been rationalized and compartmentalized that's remarkably productive and this productivity is the source of source of unprecedented wealth and unprecedented and almost uncontrollable changes in the structure of society once the scientific revolution had begun when bacon and galileo and eventually newton formulate a new conception of nature it's only going to be a matter of time before someone takes it into their head to apply this conception of nature to manipulate the world around them in other words in the scientific revolution itself the age of machines the age of the industrial revolution is inside the development of modern natural science as a sort of embryo it's implicit in the rise and development of newtonian mechanics so it should come as no surprise that the society that develops boyle's law of gases a few generations later develops watts steam engine and should come as no surprise when we further find out that the same society that developed watts steam engine is going to be the same society that in a few generations after that will develop what william blake called the dark satanic mills of the industrial revolution in other words the age of machines the rise of technology is implicit in the development of modern natural science and the development of industrial society and the unprecedented wealth that comes along with it is built right into the structure of the scientific revolution of the enlightenment now adam smith's book the wealth of nations took him over 20 years to write it is an enormous deep complicated piece of work and unlike something like say montesquieu's spirit of the laws it's extremely well constructed extremely well thought out it reminds one almost of thomas hobbes leviathan in the sense that it's very nicely structured very carefully concerned with presenting the argument in a logical way and there are two books two basic chunks of the wealth of nations and the first book covers three themes the second book covers two additional extrapolations from those themes in the first book of the wealth of nations adam smith presents his most important discovery which is that the division of labor increases the productivity of labor what this means is that the division of labor increases the aggregate wealth of society when labor is divided we find that people are working both hard and they're also working smart and working smart makes them productive and working productively working efficiently increases the aggregate wealth of society in addition to that i mean that would be a fine first book by itself but in addition to that in the first book of the wealth of nations smith talks about the process of capital accumulation what capital is and where it comes from another central issue in economic theory and he finishes up that third book of the wealth of nations with a general economic history of the west since ancient times right up to the time that he was writing which is an amazing intellectual tour de force the history of human societies relates to the enlightened scientific approach to society that's characteristic of the enlightenment in the same way that the data that we get from laboratories relates to the actual scientific work done by a physicist in other words the data that one gets from a laboratory and the data that one derives from the history of human beings have analogous foundational roles in both modern natural science and in modern enlightened social science now not only does he come up with a theory of prices not only does he come up with a theory of capital accumulation not only does he offer us a general economic history of the west but in the second book adam smith goes beyond that he takes the theoretical gains that he's made and he applies them to contemporary political and economic issues and he offers a root and branch critique of mercantilism mercantilism was the dominant economic and political ideology of mid 19th of mid 18th century england and adam smith has gone beyond mercantilist uh theories of economy and society and offers on the basis of his for the first book of wealth of nations a general and profound criticism of the way in which economic policy is being made in 18th century england he finishes up the fifth book it's an amazing piece of work but he finishes up this second book with a fifth and final theme he analyzes the revenue and the expenditure of the sovereign which is to say he analyzes public spending and public revenue taxation and spending by the government and he asks what sense different kinds of expenditures make in what respects they can be justified and what the optimal mix of expenditures would be in order to create the maximum felicity he is a very important social scientist because he can directly take his new economic theory and apply it to the immediate practical questions of politics and economy this is a quantum leap in the development of social science there is really nothing in the 17th century and earlier centuries which is as directly and obviously applicable to immediate political concerns and since wealth is a great concern of almost everyone it was greeted with a considerable amount of intellectual interest now the big breakthrough in the wealth of nations is the fact that the division of labor increases the aggregate wealth of society how does it do that well it works like this dividing labor makes labor more efficient and thus more productive and that means that the problem in creating rational public policy or intelligent public policy is figuring out how we can foster and extend the division of labor so the real question then becomes what is it that impedes the division of labor and it turns out that for smith the division of labor is limited by the extent of the market in other words you will have a division of labor for the production of shoes or clothing or food or what have you insofar as you're able to get a market for the things you produce the division of labor entails the idea of mass production the division of labor involves the creation of enormous amounts of commodities and there's only an economic rationale in the creation of enormous vast volumes of a commodity if there's somebody that wants it there's no sense in producing a million pounds of food to feed one person the division of labor is limited by the extent of the market so now we have a further problem the only way that we can create more wealth is by increasing the division of labor and the only way we can increase the division of labor is by increasing the size of the market so we must inquire what is it that impedes the extension of the market and it turns out there are two kinds of things that prevent the extension of markets and thus the increased division of labor and thus the increase of human wealth what impedes the division of labor and the development of the market are natural causes and conventional causes natural causes are essentially space and time in other words it's hard to divide or it's hard to create a market for pins produced in england among say the australians because australia is a long way from england and in order to have a market for english pins we have to factor in all the labor that's involved in taking pins from england to australia so space and time the limitations on our transportation and the limitations on our communication form a sort of natural barrier to the extension of the market and these natural barriers to the extension of the market limit the degree to which we can divide labor as transportation improves and rivers are turned into canals or forests are turned into roads the result is an increasing market and as a consequence of that an increasing division of labor and as a consequence of that an increase in the amount of wealth that societies aggregate produce in aggregate it all fits together and dovetails very nicely there's a second and perhaps more sinister source in the limitation of markets and that's governmental interference adam smith argues that all unnecessary interference in the free economic activity of self-interested individuals limits the division of labor because it limits the markets for the things produced by the division of labor so what adam smith would mean by that is things like monopolies and protective tariffs and all other impediments to the extension of the market artificially limit the market thus artificially limit the division of labor thus artificially limit the amount of wealth that the society produces thus counterproductively decrease the amount of human happiness because smith assumes that there's some rough correlation between the amount of wealth available to people and human felicity if we think that human beings will be made happiest and will be best off in a condition where they get the maximum result of their labor by laboring in the most efficient fashion that it makes sense to make sure that the division of labor is carried out to its maximum possible and that means it makes sense to make sure to ensure that the markets are free and unrestricted and what that means is that the governments should leave the market alone if the governments follow what is called a laissez-faire economic policy the consequence will be a natural equilibrium which optimizes the production of goods and services this is called the invisible hand it's a famous line from adam smith it doesn't seem to be a matter of great concern this issue of the invisible hand the idea behind it the idea that there's a natural equilibrium in society is very important to smith the particular formulation of the invisible hand which seems to be a great favorite of economists appears very late in the book it's not a real central portion of it the key idea is that there's a natural equilibrium between supply and demand and that free unrestricted rational rationally self-interested people will maximize their productivity maximize their output and maximize their felicity so what adam smith offers us is an explanation for the enormous amount of wealth that is in england during his time recommendations for public policy which is a path-breaking attempt in social science and an analysis of actually how the mechanisms of price and markets fit together to form this natural equilibrium now let's take the example that adam smith gives us of the pin factory this is a famous example all of you who ever took economics in college doubtless were forced to encounter the pin factory but we have to go over it again it's it's really central to his argument what he says is something like this he compares rational fact rational production essentially in a factory where labor has been divided up so that minimal small tasks are done repeatedly by one person and he compares that to the artisanal craftsman-like production of pins back oh in the year 500 perhaps if you wanted pins in london you had to go out one assumes to the family pin maker or to the master pin maker actually had studied pin making all his life and a craftsman who makes pins makes doubtless very good pins a very high quality precisely the pins you might have ordered but he makes them very slowly and relatively inefficiently so although the pins are very high quality he produces very few pins in a given day's labor as a consequence of that the price of pins will be relatively high and as a consequence of that pins are going to be relatively scarce now that may not be the end of the world but we can extrapolate from the artisanal production of pins to the artisanal artisanal production of shoes and perhaps we'd find it more inconvenient if most of us had to go barefoot so the idea that the craftsman-like or the artisanal mode of production is intrinsically inefficient is central to smith but it's only inefficient compared to something that works better and what works better in this case is the pin factory or the rational systematic production of pins that comes to us through the division of labor smith talks about the alternative to having a pin craftsman make your pins what we'll do is we'll get five or six or ten unskilled laborers we'll pay them a more or less minimal daily wage and we'll give them one task to do again and again and again and again it'll be a small task like say drawing out the wire for the pins or putting a head on the pins or sharpening the pins or putting the pins into boxes or quality checking the pins to make sure they're straight or i know not what they'll do the principle is the key thing when we divide labor we increase efficiency the aggregate production of 10 unskilled laborers producing pins through the division of labor will be far greater than the aggregate production of 10 craftsmen who are making the pins from the very beginning to the very finished product so what this means is that paradoxically as the level of skill in our workers declines in the case of mass production in the case of the division of labor our total output grows it has to do with the fact that by adjusting the way in which we produce things not just pins but shoes and clothing and everything else it is possible to make enormous gains in efficiency and these enormous gains in efficiency were down to the benefit of society as a whole because they increase the aggregate wealth of the society so the pin factory is the great economic example adam smith is kind of the shakespeare of economists he seems to provide a quote for all occasions and the pin factory is a real is a real chestnut in the economic discipline it comes out all the time now in addition to the fact that the change from artisanal production to production through the division of labor involves certain social consequences which adam smith is very well aware of many of the critics of adam smith while accepting the fact that the division of labor does in fact increase productivity and is a very efficient way of producing things accused smith of neglecting the social and political consequences of the division of labor and i think that's basically false i think that smith is well aware that the change from earlier craftsman-oriented production to production in factories through the division of labor i think he's well aware of the fact that this entails tremendous and permanent changes in the structure of society i think unfortunately that because he's writing in the 1750s and 1760s and 1770s he doesn't have access to the wealth of historical data that 19th and 20th century critics of capitalism had so if he has a somewhat rosy picture of the political and social consequences of these economic changes it comes from the simple fact that he's in a historical moment in which case it's in which it's not entirely possible to find out the really unpleasant and the really and the great the really unpleasant consequences the great hardships that come along with the division of labor now let's take some of these examples smith himself says that one of the the downsides of the division of labor one of the really unpleasant consequences is that it makes laborers as he put it stupid for one of a better word now he doesn't mean stupid in the sense that they're intrinsically unable to do arithmetic it's not that they have some genetic malfunction which prevents their brain from working but rather the repeated operation doing the same simple tasks reduces them in marxist terms anyway to almost the level of a machine they don't get much outside stimulation they don't get much of a chance to develop the other elements in their personality because they are wedded to this process of production they spend all their time lengthening steel so they can be turned into pins if you do this for long enough particularly if you do this from a very early age if one never gets a chance to get an education or cultivate the other elements in in your soul or in your mind it is likely to make you if not stupid at least rather dull at least to create a new yearning for some sort of stimulation outside of that which will create all kinds of social consequences and all kinds of social problems later on but adam smith does point out that the division of labor has bad consequences first of all for the people that are actually doing this it means a reduction in the level of skill craftsmanship is going to be undermined by the division of labor it's only a few years after the opening of his hypothetical pin factory that all the hypothetical pin makers guilds are going to fold up shop because it's going to be no call for handmade pins anymore what that means is that there'll be a whole set of former pin makers who are going to be thrown upon the labor market because they can't find a job making pins the old-fashioned way the economy when it's organized around mass production when it's organized around the division of labor is also going to have the consequence of being a sort of self-sustaining mechanism by creating unemployment by create by undermining the artisanal production of commodities it's going to make sure that there's a already source of labor already in the cities ready to go to the next job that comes available when the next guy thinks up a new machine to make shoes or to make clothing or to make food or what have you the idea is this is a self-sustaining mechanism the advantages of it are clear it creates enormous wealth the disadvantages are that it creates a good an enormous amount of hardship not just a good deal an enormous amount of hardship in the people that actually have to deal with the first few generations of this and in addition it creates changes in the structure of society that are irreversible and permanent let me give you some idea of these because although adam smith doesn't talk about them to the degree that he might i think that at least he hints at some of these structural changes in society in the first place there's going to be a change in the status of men and women the age of machines is the age in which men and women can have approximately or closely approximately or close approximations of the same work in an ancient or archaic economic system where most of the power or most of the force where most of the energy for human activity for human labor comes from muscles there's going to be a clear division between men's labor and women's labor if the society depends upon quarrying stone by hand for example the chances are that men are going to take that sort of a job there will be a very clear distinction in other words prior to the age of machines between men's labor and women's labor on the other hand after the advent of mass production after the advent of the division of labor as the age of machines starts to get a certain momentum to it we're going to find that muscle power becomes less and less significant one of the permanent and important changes that's going to be introduced into society as a consequence of the division of labor will be the advent of the machine age and one of the consequences of that will be a change in family life a change in the structure of society and particularly a change in the status of women in a pre-industrial age in an age that is not dominated by machines where muscle power is the main energy in human work there's a very clear distinction between men's work and women's work for example quarrying stone or cutting down trees it's the kind of thing that men are likely to spend their time doing but a fundamental and irreversible change happens in society as it industrializes as the division of labor continues the advent of the machine age means an undoing of the distinction between men's labor and women's labor it happens gradually as machines become more and more important it necessarily occurs to some entrepreneur that it would be possible to hire women to do the jobs that had previously been done by men and since their rational utility maximizers they may even be willing to pay women or able to pay women less than they pay men and of course that's going to give them a competitive advantage and of course that's going to become a very important trend in the structure of society and in the change in family life characteristic of the age of machines one extrapolation from that will be the advent of things like child labor when muscle power is no longer a question again not only will women brought directly into the industrial workforce so will children what this means is a change in family life it means a change in the structure of society at its very at its most basic level and it means in some respects that the change in the status of women will be connected with the rise of modern natural science and the changes that are characteristic of a modern industrial economy i think it's not an accident today that the places the parts of the world where women have developed their greatest drive towards equality and rights are those countries that have the greatest degree of the division of labor where technology is extended the furthest i don't think that's an accidental connection i think that industrial society and the division of labor necessarily change social uh the structure of society and they change family life in ways that are irreversible that can never be gotten away from adam smith didn't see the whole of these changes he saw parts of them he saw the effect of the division of labor on the individual laborer he talks about the downside of it offers a few kind of inadequate remedies like an increase in education but he is well aware that the division of labor and the development of modern economy means fundamental permanent and enormous changes in the structure of society so that he does understand now in addition to that smith talks about a number of other important themes connected to the contemporary political philosophy and contemporary connected with contemporary political questions first off is a sort of proto-marxian insight adam smith sees that the development of an industrial economy means the stratification of society based upon people's wealth and based upon the kind of work that they do and it also means that society is going to fragment into classes and that there must inevitably some degree of antagonism in the interests of these classes in other words if we assume that people are rational utility maximizers that they are what we might call homo economicus and i'll come back to that theme later on that the interests of people who own factories and who employ labor are different from the interests of the laborer adam smith says that there's a sort of implicit collusion between what he calls the masters what means by that is the employers in society that those who own what marx will later call the means of production those who hire wage laborers have an implicit interest in making sure that the wages of labor are kept to the absolute minimum because they're trying to maximize the amount of profit that they derive from their economic activity and since the number of employers is always much smaller than the number of employees and as a matter of practical sociological fact the class of employers generally know each other they generally have good connections to the government they often marry into the same families and get and hang and uh socialize in the same circles for all these reasons it's much easier for there to be a sort of combination in restraint of trade or if not in restraint of trade certainly in restraint of wages by those who employ labor so adam smith comes very close to formulating a conception of society divided into classes as a consequence of the division of labor which is a remarkable insight when you stop and consider the fact that the wealth of nations is written in 1776. you stop and think about the fact that it's over 200 years old that he didn't have much of a chance to see the consequences of the division of labor he saw some of it but he never saw industrial society full-blown remember that the steam engine isn't invented by watt until what 1757 so the age of machines really isn't entirely upon us yet for the level of historical data that adam smith has his insights are remarkable now having said those good things about them i think there are some problems with this idea of intrinsic collusion and the problem stem not so much from adam smith because of the fact that he has a very limited base of historical data to work with but ask yourself is it really true that all the employers of labor are interested in making sure that wages are kept to an absolute to a minimal level i mean subsistence or a very little bit above subsistence i think that in the long run that's probably false the division of labor entails the idea of mass production what i want to suggest as a sort of extrapolation from this is that mass production entails the idea of mass consumption what are we going to do with all this stuff we produce if we start a toaster factory and start producing toasters in an unprecedentedly un efficient fashion well we can send some of them to china some of them to india some of them to south america and trade them for whatever we want from those countries but economists have an idea called declining marginal utility after a while we saturate the market for toasters and they don't want them anymore what are we going to do with our toaster factory when we find it hard to unload the toasters in south america or in india and china we're gonna have to find someplace else to unload them where are we gonna do that well what we're gonna want to develop is the home market it would be nice if all these people that are working real hard would buy my toasters were i the the owner of the toaster factory i'd like to see everybody buy a toaster for me i'd like to see you all buy 10 toasters from me now how am i going to do that well what i'd like to see happen as an individual entrepreneur as an individual capitalist i'd like to make sure that i get to pay my labors an absolute minimum wage i don't want to give them any extra wages because i'm not interested in subsidizing their lifestyle i'm just interested in making sure they show up for work what i would like to see instead is my laborers paid a subsistence wage or close to a subsistence wage and i would also like to see all the other capitalists in my society pay a real living wage i like to see them get kind of open-handed and liberal because if that were to happen that would mean that all these proletarians that are being hired by all these other capitalists now have a few extra dollars in their pocket and they can buy my toasters in other words built within the industrial revolution is the idea of mass production and built within the idea of mass production is the idea of mass consumption the consumer society of the 20th century is here in embryo adam smith was not at a historical moment where he could appreciate that fact but some radical thinking capitalists like say henry ford at the beginning of the 20th century when he wants to offer his workers five dollars an hour is actually thinking through a fallacy in adam smith's argument he henry ford wants to pay his workers five dollars an hour because he thinks they're gonna go out and buy model t's and in fact he was right so adam smith is wrong when he makes the argument that capitalists are intrinsically in collusion initially they surely are and probably for the first few generations of the industrial revolution it became quite clear to them that maintaining a clamp on the wages of labor would maximize their profit but as markets become saturated as the machine age continues on as industrial society becomes more and more and more productive as what marx calls the forces of production are brought to a higher and higher level of perfection we have to find some place to unload this stuff so the consumer society is built right into this adam smith can't recognize that he's writing in 1776 it introduces certain fallacies in his argument but i don't think we ought to hold that against him we couldn't expect him to be able to read the future given the data that he has this is an extremely reasonable assertion and it's very clear that there are proto-marxian elements in this assertion when he tells us that all the the employers are implicitly or or even explicitly in collusion when he tells us that they have unusually close connections to the government he's telling us simple empirical sociological facts the problem is he the inferences that he draws from these facts go beyond the evidence he assumes that this is natural and intrinsic to industrial society and it turns out not to be leave that question aside for a while we can't do very much more from with regard to that issue adam smith's big contribution to the history of social science and to history of political science is that by criticizing the way in which governments interfere with the economy and by criticizing both the expenditures and the taxation policies of the government he is implicitly laying the foundations for the modern liberal state he who he derives from lock ideas like the labor theory of value like a minimalist approach to government which says that he who governs best governs least and he gives us good solid economic reasons to believe that true he says not only is it a general moral maxim that he who governs best governs least because freedom is a good thing he says let's get to the bottom line he who governs best governs least because it produces the most wealth and that produces the most happiness nobody is happy when they're poor or okay very few saintly types might be let's leave the house bracket that's not entirely fair observation but all enlightenment englishmen are not happy if they're poor and adam smith speaks for them he likes the idea of developing the productive capacity of society to their maximum possible capacity and he wants to eliminate all political or conventional impediments to those and the way to do that is by criticizing the structure of political and economic policy that's what his criticism of mercantilism is it's a devastating critique both now and then and the strength of his argument lies in the fact that it gets to the bottom line instead of praising a minimal government and because it leads to human liberty and that's what human felicity is he says that it leads to more of everything and that means we can consume more and that's at least a part of human happiness often adam smith seems to suggest that it's the whole of human happiness at least in this book but if you've ever read his book called the theory of moral sentiments you will find that in fact adam smith has close intellectual and actual close personal associations with david hume smith's moral theory is often criticized because some people only read the wealth of nations it's a very unfair extrapolation smith does not believe that all people all the time are rational utility maximizers in other words he does not believe that all people are constantly selfish constantly trying to get the most for the least in fact he believes that social cohesion that human benevolence that concern for other people that transcends the merely selfish is all derived from a common set of sentiments particularly in this case the sentiment of sympathy we feel bad when other people get hurt that's or we feel bad when other people are in pain that's why we give charity without being coerced to do so so although adam smith offers us a very selfish and a very reductive conception of the human being in the wealth of nations that is not his considered opinion about the human condition right many people who criticize him will do so on that basis it's not fair in fact like hume he thinks that uh ethical theory is derived from our emotions that it has no rational foundation that we're going to try and develop when we deal with kant tomorrow and that it's this feeling of sympathy or benevolence towards other people that makes moral activity possible now let's think about homo economicus homo economicus is our ideal utility maximizing man he buys cheap he sells deer he works a minimum amount so he can get a maximum amount of goods he lives to consume he has no feeling for other people he only has a closely considered hedonism with regard to all his activities everything ultimately is a question of pleasure and pain for homo economicus now adam smith as i said doesn't believe that this is really what anybody is like the only people who believe that people are like that are people are romantic novelists if any of you have read uh hard times by uh charles dickens think of mr bounderby that's homo economicus that's a caricature of adam smith's rational utility maximizer think of but it's still mr scrooge from a christmas carol humbug that's homo economicus adam smith doesn't believe that there's anyone really like that i mean charles dickens does but then again he saw a different side of the industrial revolution well what smith thinks is something like this that homo economicus is a reasonable abstraction which gives us a good way of practically describing and predicting the behavior of markets in other words think about something like the ideal gas law which relates the pressure and volume and temperature of gases now it turns out that when we go into a laboratory we never have ideal gases in front of us so they always turn out to be real gases i mean remarkable as that may seem the ideal gas law will offer us a reasonable expectation about the about the behavior of gases homo economicus as an idealization of the rational utility maximizing individual allows us to make accurate within certain parameters and reasonably coherent predictions and analysis of the behavior of free markets so while we never encounter ideal gases the ideal gas law gives us a way of manipulating and predicting the behavior of gases while we never encounter homo economicus unless we read a christmas carol and meet mr scrooge it the assumption that people will be rational utility maximizing individuals when placed over aggregate social behavior does give us a rough and ready way of predicting and estimating and calculating human behavior most of us if given the chance to sell a piece of our property for one dollar and to sell it for a million dollars almost all of it all almost all of us will sell it for a million dollars right there are certain parameters in which we will not probably sell it for a million dollars there may well be things we are unwilling to sell at any price this does not interfere with the idea of homo economicus this is not a refutation of the idea of rational utility maximization what it shows is that human beings never perfectly realize any kind of ideal but then again nothing in nature does it's the degree to which this allows us to make rational expectations and rational plans that's the ultimate practical test of this or any scientific theory and by that smith's achievement is enormous certainly i think today economics is the most successful of the social sciences it is the one most susceptible to mathematical formalization which is one of the the litmus tests of a highly developed science as well in addition uh economics is also the one which has the greatest predictive power sociology in certain cases may have a similarly accurate predictive power but economics in terms of the generality and the profundity of its results has certainly been the most successful of social sciences adam smith's achievement in founding this discipline is enormous and his influence has been incalculable he's influenced certainly marx and all the 19th and 20th century critics of capitalism he has influenced those who would try and rescue capitalism it's from itself by constructing a kind of social safety net by constructing the welfare state of all the english social scientist adam smith was the greatest and most important and this homo economicus idea however much criticism it has got still offers us a rough and ready expectation way of making expectations and making an analysis of the way people really do behave in an economically on a free market the proof is in the pudding all the non-market economies in the last 10 years have thrown in the towel and given up the ghost or almost all of them we still the people's republic of china and a few command economies but for the most part in the last 10 or 15 or 20 years in the post-war age all alternatives to market economies have pretty much packed it in and the proof is in the pudding if the standard by which we're going to judge a scientific theory is its application in practice if we're going to judge a scientific theory by its utility by its pragmatic significance then it seems to me that the fact that the rest of the world that hasn't had a market economy prior to the post-world war ii age that the rest of the world since it's scurrying to create a market economy is implicitly voting with its feet and giving testimony to the strength of this set of ideas it's primitive in some respects it has crewed over generalizations but his achievement is unarguable adam smith founded mathematical social science he connects our theory of society to our theory of natural science and what he does what he does is show us a way of racks of rationally constructing public policy so as to optimize the wealth of society and thus to maximize human felicity if he has only shown us and i think this is true by by showing us the way to maximize wealth i think he's only shown us a necessary but not sufficient condition for human happiness but this achievement alone is enormous and by showing us how to maximize public wealth or the wealth of a society he's shown us halfway through the problem of scarcity which is bedeviled economics and bedeviled public policy and the devil political science since the very beginning he deals with the problem of production shows us how to produce more it will take the sociological and political critics of capitalism in the 19th century to address a new and perhaps more significant problem the pro they'll in the 19th century critics of capitalism will move from the consideration of production to the consideration of distribution adam smith has shown us how to maximize the production of wealth later critics in the utopian socialist and marxian socialist tradition will show us how to become concerned with making sure that this unprecedented wealth that this enormous production is distributed in such a way as maximizes human felicity if adam smith is sho only shown us halfway through the labyrinth that by itself is an enormous achievement and even though economics with some justification is called the dismal science this book is worth your reading and worth your serious consideration

Channel: Michael Sugrue

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Keywords: Michael Sugrue, Dr. Michael Sugrue, Lecture, History, Philosophy, Western Culture, Western Intellectual Tradition, Western Literary Tradition, Author, Literature, Great Minds, Smith, Wealth of Nations

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Length: 40min 16sec (2416 seconds)

Published: Wed Nov 11 2020