Reading Journal

What I'm reading

Sunday, June 21, 2009

The Wealth of Nations (the rest of the book), by Adam Smith

It took me over 6 months, but I finally finished!

He pointed out the follies of the "mercantile system", which was the name he gave to protectionism, and of the politicians who voted for those policies.
That it was the spirit of monopoly which originally both invented and propagated this doctrine, cannot be doubted; and they who first taught it were by no means such fool as they who believed it.

In the middle ages the laws enforced buying produce locally, directly from farmers. However, it was not very good for their overall economy and it even increased the price of food. In the middle ages, anyone who bought corn from a farmer and then resold it at a higher price could be imprisoned and set in the pillory! However, since farmers could only sell to their immediate neighbors their market was extremely limited. That meant there was no great incentive for them to improve their lands and therefore their harvest were smaller than they could have been.

He talked about the motives of colonization.
... the council of Castile determined to take possession of countries of which the inhabitants were plainly incapable of defending themselves. The pious purpose of converting them to Christianity sanctified the injustice of the project. But the hope of finding treasures of gold there, was the sole motive which prompted to undertake it.

Gold mining projects were a conquistador favorite but they were pretty much a waste of effort.
But though the judgment of sober reason and experience concerning such projects [mines] h as always been extremely unfavourable, that of human avidity has commonly been quite otherwise. The same passion which has suggested to so many people the absurd idea of the philosopher's stone, has suggested to others the equally absurd one of immense rich mines of gold and silver. They did not consider that the value of those metals has, in all ages and nations, arisen chiefly from their scarcity.

The 18th century version of "easy come easy go"
Light come light go, says the proverb; and the ordinary tone of expence seems every where to be regulated, not so much according to the real ability of spending as to the supposed facility of getting money to spend.

He published the book in 1776 and he has some interesting comments on the situation with the American colonies.
They are very weak who flatter themselves that, in the state to which things have come, our colonies will be easily conquered by force alone. The persons who now govern the resolutions of what they call their continental congress, feel in themselves at this moment a degree of importance which, perhaps the greatest subjects in Europe scarce feel. From shopkeepers, tradesmen, and attornies, they are become statesmen and legislators, and are employed in contriving a new form of government for an extensive empire, which, they flatter themselves, will become, and which, indeed, seems very likely to become, one of the greatest and most formidable that ever was in the world.

He proposed that the colonies have full representation in Parliament and be a co-equal part of Great Britain. He even predicted that the capital of Great Britain would move from London to America! There's a fun "alternate history" novel in this idea somewhere.

He talked more about how mercantile legislation oppresses poor people in favor of the rich.
It is the industry which is carried on for the benefit of the rich and powerful, that is principally encouraged by our mercantile system. That which is carried on fro the benefit of the poor and indigent, is too often, either neglected, or oppressed.

The mercantile system's laws flip capitalism upside down. Demand is more important than supply because supply will always follow demand. Laws that attempt to subvert that are counterproductive. Hmm, is there a demand for GM's cars anymore?
Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident, that it would bbe absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.

Rich people owe a lot to the government and should be more than willing to support it.
It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate continually held up to chastise it.

In 18th century attornies were paid by the page!
In order to increase their payment, the attornies and clerks have contrived to multiply words beyond all necessity, to the corruption of the law language of, I believe, every court of justice in Europe.

As a college professor himself, Adam Smith had harsh words for the educational system. Even back then, teachers had no incentive to teach well!
The discipline of colleges and universities is in general contrived, not for the benefit of the students, but for the interest, or more properly speaking, for the ease of the masters. Its object is, in all cases, to maintain the authority of the master, and whether he neglects of performs his duty, to oblige the students in all cases to behave to him as if he performed it with the greatest diligence and ability.

He criticized the amount of time universities spent on metaphysics as opposed to the natural sciences.
The proper subject of experiment and observation, a subject in which a careful attention is capable of making so many useful discoveries, was almost entirely neglected. The subject in which, after a few very simple and almost obvious truths, the most careful attention can discover nothing but obscurity and uncertainty, and can consequently produce nothing but subtleties and sophisms, was greatly cultivated.

He was in favor of progressive taxation.
The luxuries and vanities of life occasion the principal expence of hte rich; and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.


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