New Economic Thinking

"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."

Adam Smith (1723 - 1790)

This simple, yet profound, statement is typical of the thinking of one of the most prominent and influential economists in world history.

Perhaps the second-most important thing of 1776 was the publication of his second-most popular book, commonly referred to as The Wealth Of Nations.

But how that book actually came about the the rest of the story.

He began lecturing at the University of Edinburgh in 1748.  He taught "rhetoric," and his economic philosophy which he called "the obvious and simple system of natural liberty."  His lectures met with much success.  Then, in 1752, he took over as what we would call "chairman" of the Moral Philosophy Department.

His first book, The Theory of Moral Sentiments, was published in 1759.  His basic premise was this:  that interactions between people, whom he called agent and spectator, depended on sympathy.  His definition of moral sentiment was "sympathy."

Then, in contrast to the prevailing ECONOMIC THEORY of his time, which we refer to as "mercantilism," he began the development of his thinking that the wealth of nations does not depend on their quantity of gold and silver, but what he called the wealth of its labor.  Labor therefore, if left to freely operate and sympathetically deal voluntarily one with another, would produce and economic growth would result.

Moving to France (and befriending one Benjamin Franklin while there) he witnessed something that would change his life, and influence his thinking.  He watched France's wealth become virtually destroyed by Louis 14 and 15, and their destructive wars.  The country's destruction was due to the Royal excessive consumption of goods and services, which Smith deemed to have no economic contribution.  The country was falling apart due to their, what he called, UNPRODUCTIVE LABOR.  He saw how the unproductive leadership TOOK from their society and nation, and did not CONTRIBUTE.

In our current politics, we might refer to this as a struggle between GIVERS AND TAKERS, and those who feel ENTITLED TO ANOTHER PERSON'S LABOR.

THE DISTINCTION BETWEEN THIS UNPRODUCTIVE LABOR, AND THE TRULY PRODUCTIVE LABOR OF THOSE STRIVING TO MAKE LIVINGS, FIGURED PREDOMINANTLY IN THE DEVELOPMENT OF HIS THINKING OF ECONOMIC THEORY.

Smith wrote a letter to his good friend David Hume that he had begun to write a book to "pass away the time."  It was published in 1776, and entitled An Inquiry into the Nature and Causes of the Wealth of Nations.

And history was changed.  And economic thinking, forever.

In addition to the prominent thought quoted above, was his idea that markets are literally controlled by the billions of interactions (hopefully voluntary and sympathetic) between those who "productively labor."  He called that control "THE INVISIBLE HAND."

The most productive national economies of our current world are those countries who practice economic models which most exemplify the thinking of Adam Smith. 

And, obviously, the least productive economies are those countries whose economic practices are the furthest from it.

THE LAST FOUR YEARS HAVE BEEN A DETERMINED EFFORT TO DRAG (A GOOD WORD) OUR ECONOMY FURTHER FROM ADAM SMITH. 

Has this dragging caused our economy to drag?  YES! 

Why is it so hard to understand how freedom and liberty, productive labor, sympathy between "agent and spectator," to use Smith's words, and invisibly-controlled market interactions grow economies, and are beneficial, and their opposite is not?

WHY IS IT SO HARD TO UNDERSTAND?