Wednesday, April 22, 2009

Why I Dig Adam Smith...


I have been reading Adam Smith of late and have found it refreshing and disturbing at the same time. I have found it refreshing to read Smith's very clear descriptions of what makes the market system work, and also his clear defense of economic freedom. The disturbing part is not due to Smith or his arguments, but in the lack of progress that we in the business of economic education have made in conveying the ideas that Smith published in 1776 - ideas that are considered to be the bedrock of orthodox economics. Smith largely wrote in response to the merchantilist ideas of his day. We are still fighting a battle of ideas that have their roots in merchantilism. We have convinced the population that the world is round and germ theory, why is comparative advantage so difficult? I would enjoy your comments. The following is one of my favorite Smith quotes:

It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them from the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbors, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for.

What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.

- Adam Smith
Wealth of Nations

Here and here are a couple of other posts on trade I made early in my blogging career on trade.

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