An Accurate versus Inaccurate Reading of Adam Smith
The debate continues as Muller again attempts to reconcile Soll's portrayal of Adam Smith with the Adam Smith Muller has studied and written about.
Both [Gibbon and his critic] assumed – without arguing the point – that a serious work of history must have notes. Both evidently agreed that these notes must lead the reader to the original source and present them accurately. And both implicitly accepted that the apparatus provided the diagnostic test of a historian’s critical expertise.
a lightning rod for agenda-driven journalists and commentators. The vociferousness of the attacks against my book by those attached to a very modern vision of Smith, or to the idea that he and other free market thinkers can always make sense in modern terms.
Almost three decades ago, in my book Adam Smith in His Time and Ours: Designing the Decent Society (Free Press, 1993), drawing upon an already rich historiography, I sought through contextual and textual reconstruction to help correct retroactive interpretations of Smith, to defend him from his modern enemies, and to protect him from his modern friends. I am on record as noting the one-sidedness of the laissez-faire version of Smith and on the utility of a contextual understanding of his work, including his role as a guide to legislators and his adaptation of his rhetoric to that purpose in The Wealth of Nations (WN). Thus, my differences with Soll are not, as he asserts, a difference between my purportedly “literalist” approach and his purportedly “contextual” one.
For contextual interpretation is no substitute for careful reading of what the author actually says, for reconstruction of the logic of his argument and where a particular statement fits into the larger scheme of his book or body of work. Context can be useful in making clear what Smith was referring to in the text and why he might have said what he said in the way that he said it. But what one cannot do – or rather ought not to do – is arbitrarily link some event in Smith’s historical context to any given phrase or idea in the text.
Yet that, I regret to report, is what happens time after time in Soll’s treatment of Smith. Take, for example, this paragraph, from Soll’s Free Market pp.204-5:
Moral, aristocratic government would bring the freedom and riches that Louis XIV’s great critic Fénelon had described in Telemachus. Smith declared that although France might have been richer than Britain, it lacked the moral society necessary to be a leading commercial nation, as it did not have a free parliamentarian government to maintain “the safe, respectable, and happy situation of our fellow citizens.” The French monarchy was intolerant and despotic, and this lack of political and social virtue rendered the society incapable of true benevolence. Smith believed that elite, representative government, as practiced in Britain since the Glorious Revolution of 1688, was the only way to avoid “foreign war and civil faction” and create a happy, opulent country. It was also the only path toward a free market. Remarkably, Smith’s theory failed to account for the fact that Britain had been at war with France for nearly a century, and had not passed free market laws. But he seemed optimistic that Britain had the moral foundations to make the progress in which he so fervently believed.
In his response to my critique, Soll asserts that
Smith believed that all wealth came from agriculture and was then augmented by commerce and manufactures. Smith was very clear: wealth could not be created by manufactures alone and industry could never surpass agriculture.
Indeed, commercial production was, for Smith, based on agricultural production.
While Smith claims that merchants and manufacturers augment wealth and without them, there cannot be opulence, they rely on farming due to their [sic] productive superiority. Indeed, commercial production was, for Smith, based on agricultural production. In spite of his critiques of the physiocrats, Smith still claims that manufactures can never produce as much wealth as farmers and that the towns depend on the country.
Soll also writes in response to my critique that
We ought not miss the massive implications of the idea that manufacturing could never produce as much as agriculture, an idea against which leading political economists had argued throughout the seventeenth century. Smith’s was an extreme statement to make when large scale mechanized spinning mills were emerging in the Midlands. All this was happening before Smith’s eyes and he could have mentioned it in his revisions of The Wealth of Nations.
In keeping with his contention that Smith had a purely agrarian conception of the sources of economic value and growth, Soll asserts “Smith saw wealth creation as limited and nations having an end-point in productive capacity (WN, I, ix. 14).” But when one turns to the text of WN, one finds that Smith thought that a nation’s productive capacity was determined not just by its soil and climate, but by population, the availability of capital, and its laws and institutions, including (as he remarks in regard to China) its attitude toward foreign trade. (WN, I. ix. 14-15). Again, there is no substitute for reading a text and accurately conveying what it says.
Rather than continuing to catalogue Soll’s errors of textual fidelity and analysis, and of his mismatch between texts and contexts, let me conclude with the main failure of his chapter on Smith, namely to make clear to the reader the nature and logic of Smith’s basic models of political economy.
For Smith, it is self-interest which leads people to participate in the market; the market makes possible the division of labor, which leads to increased productivity through specialization and innovation, and this makes possible “universal opulence.” The extent of that specialization depends on the extent of the market, which is why Smith emphasizes the desirability of international trade. When, and only when, the market is competitive, the price of commodities, over time, declines to the lowest price possible given the level of labor, capital, and rents, and it is these low prices that make more and more goods available to more and more people. Thus, under the right institutional circumstances, the pursuit of individual self-interests leads to socially beneficent outcomes.
This simple model of political economy is an example of what Smith meant by the “invisible hand,” which is a metaphor for the unintended, socially positive outcomes of social actions, and by no means “sarcastic” as Soll suggests, here echoing Emma Rothschild. In fact, the analysis of unintended consequences, positive and negative, is the Leitmotiv of WN.
But, while the public interest would be best served if every man channeled his self-interest through the market, from the point of view of the individual producer or group of producers it was most beneficial to circumvent the competitive market with its attendant risks. WN seeks to demonstrate to the legislator the ways in which people attempt to do so through attempted monopolies, tariffs, and other barriers to free trade. By combatting these pressures, the legislator can restore or create the institutional structure of the competitive market, thus advancing the material well-being of the greatest portion of the population.
That is the minimum that a chapter on Adam Smith in a book on the idea of free trade ought to clearly convey to readers. But amidst discussions of slavery, the preference for an agricultural economy, etc., Soll’s chapter fails to do so.
This is not the place to explore the strengths (as in the chapter on Jean-Baptiste Colbert) and weaknesses of the remainder of Soll’s book. Suffice it to say that a balanced verdict would be that, like the curate’s egg, it is good in parts.
Jerry Muller is too kind. The "contextual" procedure of inferring that Smith must have been an enthusiastic supporter of slavery because some of the people he associated with were engaged in the slave trade is perilously close to, well, the old McCarthyite practice of guilt by association.
"Smith believed that all wealth came from agriculture and was then augmented by commerce and manufactures. Smith was very clear: wealth could not be created by manufactures alone and industry could never surpass agriculture.
"Indeed, commercial production was, for Smith, based on agricultural production.
"While Smith claims that merchants and manufacturers augment wealth and without them, there cannot be opulence, they rely on farming due to their [sic] productive superiority. Indeed, commercial production was, for Smith, based on agricultural production. In spite of his critiques of the physiocrats, Smith still claims that manufactures can never produce as much wealth as farmers and that the towns depend on the country."
These pull quotes make me wonder whether Soll is pairing his interpretation of Smith's praise for the physiocrats with another distinctive interpretation of Smith's argument that you've got to worry about feeding the population (agriculture) before you can realize the surpluses needed for trade, the division of labour, and increasing opulence, for example in Book I chapter 11. That's not at all the same as Soll's claim, but I can sort of see how you get from one to the other. (I agree with the author here that the best way to avoid this (what I believe to be a) misinterpretation is to read carefully the rest of what Smith had to say.)