Virtue Quest

You've got to love a man who loves his mother

So, as I mentioned in the comments below, I’m an economic and political ignoramus, and I’m essentially live-blogging my self-education. So, of course, Adam Smith’s classic The Wealth of Nations is on my reading list; I’m working through it now.

Now, I’ve been told that Smith isn’t quite the die-hard laissez faire 100% regulation free super-capitalist my mother warned me about. I’m advised that he’s quite a moral guy, and sees an important role for government regulation in the marketplace, but that those parts come later in the book. I’m happy to keep reading.

But there are a few major red flags popping up in the first few chapters, and I thought I’d mention them because they all have one thing in common: they put things ahead of people.

Unwarranted assumptions

Smith makes a number of assertions at the beginning of his work, assertions that have been taken for granted by pretty much all economists since. The first of them is that labor is the source of wealth.

Now, there is no denying that labor is one of the sources of wealth; but Smith treats it as if it is the sole and entire source of wealth. He claims that “The abundance or scantiness of this supply [of goods], too, seems to depend” on the productivity of the laborers. While it is true that there is no wealth without labor, it is equally true that labor must have some thing to labor upon to generate a valuable product. Wealth, or value, is not disconnected from the real stuff of the world; it is not created ex nihilo.

He then demonstrates by multiple examples how a division of labor leads to an increase in productivity. This gives him opportunity to reveal a couple other assumptions that disturb me. Consider the following sentence:

First, the improvement of the dexterity of the workman necessarily increases the quantity of work he can perform; and the division of labour, by reducing every man’s business to some one simple operation, and by making this operation the sole employment of his life, necessarily increases very much the dexterity of the workman.

Now, I’m a homebody: I don’t get out much and am perfectly happy to ignore the parts of the world I’m not too interested in. This is not one of my virtues. But even left to my vicious insularity, I want something more than “one simple operation” to fill up the “employment of my life.” I have no desire to be “reduced” to such mechanical production.

More than that, I find Smith has a very low opinion of work. He separates work entirely from leisure and sets the two in utter mortal enmity with each other. For Smith, labor is something to be exchanged rather begrudgingly for the “necessaries, conveniences, and amusements of human life.” Its value is only in that I’d rather not do it, and will pay money to have somebody else do it for me. In other words, there’s no possibility that I might have a life’s work, some labor of love to which I dedicate myself and which gives meaning and value to my days.

Yet another assertion:

As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market.

I have trouble with the ideas that the “power of exchanging” is an equivalent phrase to “the extent of the market.” I think there is a great deal more involved with the “power of exchanging” than simply how many people are interested in making exchanges, or even how many different kinds of exchanges there can be. For example, the power to exchange is limited also by what I have that I am willing or able to exchange, and by my responsibilities to my family and community.

It’s not all bad

It’s easy to be critical, and I don’t have a better theory of economics to propose – not yet, at least. As I said, I’m still educating myself. But I wanted to note an excellent distinction Smith makes, which is easy to forget or overlook.

The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called “value in use;” the other, “value in exchange.”

It seems to me that many problems arise because we confuse these two distinct kinds of value, or because we treat “exchange value” as the real value of a thing, when it is largely dependent on “use value.”

More thoughts to come, as I continue reading. If you have any insights or recommendations, I heartily welcome them!