Posts tagged with: adam smith

Blog author: jcarter
posted by on Wednesday, March 7, 2012

Last week, in reply to a post by Jacqueline Otto, I wrote an article asking What is a Christian Libertarian? Ms. Otto has written an additional reply entitled, “Four Things Christian Libertarians Believe.”

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Blog author: jballor
posted by on Thursday, February 16, 2012

In this week’s Acton Commentary I conclude, “The American people do not need politicians to tell them what happiness is and how it should be pursued.”

I admit that I didn’t have this quote in mind (or I would have used it!), but Art Carden (follow him here and read him here) notes the following from Adam Smith’s Wealth of Nations:

What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

And following up on the folly of political-driven homeownership for all, Reuters (HT: Drudge) reports that the “New American Dream is renting to get rich.”

The payoff? “So while home ownership may sound glamorous, you need a lot of money to make it work, without much guarantee of positive returns in a post-bubble era.”

Blog author: lglinzak
posted by on Tuesday, July 5, 2011

This year’s Acton University was very successful, and we are still seeing its effects through blog posts, tweets, and Facebook messages. Some of our PowerBlog readers may be wondering what they missed out on, or would also like to think back a few weeks to their favorite Acton University moments.

To listen to a favorite lecture, or to find out what was missed, remember that Acton University 2011 lectures can be purchased and downloaded for $1.99.

Joe Gorra of the Evangelical Philosophical Society compiled nine interviews with different Acton University faculty who lectured on countless invigorating topics including, sustainability and the environment, ethics, Nietzche’s critique of Christianity and Caitalism, and free markets. Gorra’s post helps of relive some of the memories he had at Acton University, along with give those who weren’t able to attend the conference a taste of what was missed.

Gorra interviews James Otteson, a professor of philosophy and economics at Yeshiva University. Otteson’s course at Acton University was titled, “Adam Smith: Philosopher and Political Economist.” In the interview Ottenson explains some of the misconceptions associated with Adam Smith:

As you know, some hold various misconceptions about Adam Smith and his work. As someone who has spent a considerable amount of time studying Smith and his objectors, what would you say are the top misconceptions that scholars or non-scholars often assert about him and his work and how would you respond?

Misconceptions of Smith come from both political directions, as it were. Some have portrayed Smith as a doctrinaire laissez-faire libertarian, while others, more recently, have portrayed him as something like a contemporary progressive liberal. Neither is accurate. His review of the available historical and economic evidence led him to conclude that, after providing protection for people’s lives, liberty, and property, minimal government interference in people’s lives led to prosperity for all—including especially the poor. So he was genuinely concerned about the least among us, and his policy recommendations were based primarily on concerns about their welfare. Yet his recommendation of limited government was presumptive, not absolute: It served as a default to which exceptions could be made if the evidence for the particular case warranted it. I call his position “pragmatic classical liberalism.”

John Bolt, Professor of Systematic Theology at Calvin Theological Seminary, was also interviewed by Gorra. Bolt’s course, which delved into the works of Alexis de Tocqueville, was called “Centralization and Civil Society.” In the interview, Bolt discusses what the concept of “intermediary institutions” means:

Tocqueville’s concept of “intermediary institutions” is central to his vision of civic life and human flourishing. Can you explain the meaning and significance of that in Tocqueville and how it is indispensable to the maintenance of liberty and social cohesion in a civil society?

Tocqueville realized that the great danger in modern, egalitarian democracy lay in our tendency toward what he called “individualism.” In the U.S., at least, we don’t normally consider this a dangerous notion. But for him, individualism implied not heroism, but a kind of retreat into isolated nothingness and an evasion of responsibility for one’s fellow man. This kind of isolation poses dangers to liberty because as lone, equal individuals, we come face to face with our tremendous weakness. We need someone or something to save us, and having denied God (isn’t God the ultimate affront to a deep belief in equality?), we turn to the state.

Intermediary institutions (clubs, local political organizations, community activities, churches, etc.) tie us – really oblige us – to our neighbors. They train us to recognize the ways we can satisfy our various needs without turning to political power to provide the goods we require. He says these associations teach the art of being free and living responsibly. Without them, we will fall out of practice at self-government.

And in a testament to the success of Acton University, Gorra explains in his blog post, “Why the Acton Institute? Philosophy’s Good Beyond Philosophy,” his reasoning to attending the conference:

The work of the Acton Institute (www.acton.org), and especially their annual Acton University conference, is highly hospitable to this sort endeavor. Over the last several years, I have attended Acton University (second time this year, and happening now!), their Toward a Free and Virtuous Society events, and also co-sponsored Liberty Fund and Acton Institute events.

Honestly, I don’t know of any other conference or organization that intentionally affords the Christian philosopher the unique opportunity to engage in such interdisciplinary work at the intersection of theology, economics, and social policy. As a matter of enrichment (personally and professionally), I “come alive” at their gathering, my imagination is cultivated by the possibilities of how the theoretical and practical  goods of philosophy can converge and collaborate with other bodies of knowledge.

Acton’s intellectual architecture is intelligently designed to permit – no, encourage! – the good of philosophy to be utilized in this way.

Click here to read Gorra’s nine interviews with Acton University faculty.

 

Blog author: lglinzak
posted by on Thursday, June 30, 2011

Earlier this week on the Acton Institute Facebook page, Rev. Sirico’s archived article “What is Capitalism?” was posted and sparked a lively discussion between two people (click here to see our Facebook page and the discussion). This blog post is to serve as my response.

Your idea of communionism, at least from what I understand from your comments, bears some resemblances to communism which has the end goal of society or the community possessing property in common. This, however, doesn’t preserve human dignity properly; nor does not foster interdependence among people. Instead it creates a society dependent on a centralized government.

In his Summa Theologica, Thomas Aquinas explains some of the core the problems with common property. Like Aristotle, he notes, that individuals are better managers of property because it allows for a more orderly fashion of management, and as he states “human beings content with their own property live in a condition of peace. And so we observe that quarrels arise rather frequently among those who possess goods in common not individually.” The quarrels can arise because no individual is specifically responsible for the care of the common property. There is no person who feels like he or she has stake in the property. A direct result, and historical example, of common property is the tragedy of the commons.

In Capital Marx argues that there is no value in human labor per se. He states “human labour, creates value, but is not itself value. It becomes value only in its congealed state, when embodied in the form of some object.” This is contrary to Christian beliefs. There is intrinsic value in human labor itself. To work is a calling and a form of stewardship. In the encyclical Laborem Exercens, (“On Human Work”), Pope John Paul II explains how working is a direct expression of our human dignity. Such preservation of human dignity cannot be found in a system that devalues work.

The idea of property that you advocate is also found in Marx’s Capital and the Manifesto of the Communist Party. This idea is flawed on many levels. It doesn’t take into account that the entrepreneur purchases the raw goods that the workers use to make the end product. As a result, based on any definition of property, the entrepreneur is the sole owner of the raw goods and it is his or her private property, not the worker. The worker engages in a contract with the entrepreneur in an exchange of services. Just because the worker uses his or her services, which he or she is paid for by the entrepreneur, does not translate into the worker becoming the owner of the raw good which becomes the final product.

The idea of private property that you advocate, rescinding property rights for all corporations, is dangerous on many levels. It puts political rights, religious rights, and all private property rights in danger. Marx notes that the abolition of private property for the bourgeois leads to the abolition of family because, according to his argument, the family is rooted in property and private gain. Furthermore, Marx articulates that his beliefs, which bring forth a communist centralized system, also abolish religion.

In Federalist Paper No. 10 James Madison argues how the first object of any government is the protection of property. Furthermore, in Democracy in America Alexis de Tocqueville explains that what makes America successful is its protection of private property for all. No landed property class exists. He articulates how the protection of private property translates into the protection of political rights even to the least of all citizens. Furthermore the right to property fosters “…obedience to established law, of the influence of good mores in republics, and of the assistance that religious ideas lend to order and freedom…” What makes America special and successful, according to Tocqueville, is the protection of rights for all people. As Tocqueville demonstrates, the right of property needs to be protected because other rights stem from it. This right extends to even corporations. Rights should be guaranteed for all, not winners and losers picked by the government.

Again, private property should be protected at all levels, for both individuals and corporations. Hernando de Soto explains this in his book and in an essay both titled, The Mystery of Capital. Through examples found in his essay, book, and case studies (which can be found by clicking here), de Soto effectively argues using proven facts, statistics, and real world examples that the protection of capital and private property rights has led to economic prosperity in the west, whereas the lack of protection is a leading reason to the economic disparity in poor countries. If we fail to protect private property rights on all levels, then we begin down a path of economic decline. Without the protection of private property rights, and an effective legal structure to guarantee such protection, the wrong message is being sent to businesses. No business will want to invest in an economic climate that is hostile towards them.

A market system, which is what Rev. Sirico argues for in his article “What is Capitalism?” actually fosters virtues that all Christians value. This is articulated by Stephen Grabil in his essay “The Market, School of Virtue.” Here Grabil shows that greed is not what makes a free market churning, but instead it is virtue. Some of the virtues fostered in a free market are trustworthiness, self-control, sympathy, and fairness. Jay Richards, author of Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem, demonstrates that greed is a vice which even Adam Smith condemned. Richards also shows why greed does not lead to a successful market economy, but actually destroys it.

In regards to the referenced Fulton Sheen article titled “New Slavery” it is important to note that the article was written in 1943 when many monopolies were present in the market. Acton has never believed in or supported crony capitalism. Monopolies do not allow competition which is bad for the consumer and the worker. Also, Sheen does not advocate for the end of private property in his article. Instead he says we have a right to private property and our use of it should be righteous “Possession [of property] has two faces, two aspects: we all have a right to private property, but this is accompanied by our responsibility for its righteous use.” As Sirico articulates in the posted article, when the market is structured successfully it is the consumer who has primary control and then next is the worker. This is because of competition. Monopoly capitalism comes when the government gets into bed with businesses, and essentially block new entrepreneurs and potential new competitors from entering into the market.

Free markets are not just about an economic system. It is something greater than economics, it is about freedom. The freedom to choose what to purchase, the freedom for the worker to find an employer and not be forced into employment with the state or a monopoly, and the freedom to hold property and have it protected, this freedom is what capitalism is about. Tocqueville saw this in his visit to America and correctly articulated how the protection of private property, in all levels, has led to the great freedom Americans enjoy. However, Tocqueville also recognized the need for virtuous men and women because he knew America cannot succeed, nor its structure of government without them. As he states, “There are no great men without virtue; without respect for rights, there is no great people: one can almost say that there is no society; for what is a union of rational and intelligent being among whom force is the sole bond?”

Blog author: jballor
posted by on Tuesday, December 7, 2010

In an edition of the Philosophy Bites podcast last month, “Nicholas Phillipson, his acclaimed biographer, discusses Adam Smith’s view of human beings.” Phillipson argues of Smith that “even his economic thinking is perhaps best understood as part of a broader philosophical project of a science of human beings.”

For more on Smith’s “broader philosophical project,” including the relationship between his famous Wealth of Nations and rather less well-known Theory of Moral Sentiments, see the following from the archives of the Journal of Markets & Morality:

Blog author: jcouretas
posted by on Friday, September 10, 2010

On Public Discourse, Acton Research Director Samuel Gregg looks at fiat money and how today it “represents the end of a long process of development whereby governments have used their power of legal tender to use money to pursue various policy goals.”

This brief excursion into economic history hints at some of the deeper economic—not to mention moral—problems associated with fiat money. One is, as noted, the greater ease with which it permits governments to devalue currencies, thereby reducing the wealth of those with assets denominated in that currency. This surely constitutes an injustice to those individuals and businesses that have saved and behaved in a fiscally responsible manner while simultaneously letting the fiscally imprudent off the proverbial hook.

This underscores the second problem associated with fiat money: its facilitation of systemic moral hazard throughout entire economies. Moral hazard describes those situations whereby people are encouraged to take excessive risks because of the implied assurance that someone (usually the state) will bail them out if the enterprise or investment fails. From this standpoint, fiat money’s very existence arguably encourages the development of moral hazard throughout every sector of the economy. The high level of the U.S. federal government’s public deficit, for example, is at least partly premised on the unspoken supposition that the Fed (which is, after all, a government institution that operates within legal parameters set by Congress and whose members are nominated by the President) can simply print more money in paper or electronic form if creditors become worried that the U.S. government’s borrowings cannot be covered by anticipated taxation revenues, foreign borrowings, and its existing resources. This in turn encourages more people and governments to buy U.S. government debt in the form of bonds, which permits more deficit-spending, thereby encouraging a cycle of ever-spiraling public debt.

Read “Fiat Money and Public Debt” on Public Discourse.

Blog author: jballor
posted by on Monday, July 12, 2010

Some of the assumptions built into the mainstream international aid and development movement are puzzling. Among them is the faulty assumption that the comparison that matters most is how the developing world is doing in relation to the developed. Not surprisingly, this kind of comparison tends to make the gains in developing countries seem small, inscrutable, or nonexistent, and end up reinforcing the myth that progress is never achieved.

What’s more important than how a country like Zambia is doing in comparison with a country like Belgium is instead how Zambia of today is doing compared with Zambia of 3, 5, 10, or 20 years ago. The comparison that’s most important is to how bad things have been and how they are relative to now, not how things there are versus here.

You see the outworking of this first kind of comparison, however, in the paradigms adopted by aid and development experts. As Stephane Fitch writes, the other model of comparison (not between developed and developing nations, which among other things feeds envy and despair, but rather between how it was and how it is now in a particular place) can inspire surprising gains from seemingly modest proposals. In a recent issue of Forbes, Fitch writes about the work of F.K. Day, a bicycle company executive who has done extensive work in Zambia.

As Fitch writes, Day complains that “World Bank types…tend to favor (and fund) paved roads and train tracks.” They tend to favor (and fund) those things they assume to be marks of development and progress, based on comparison with the existence of those things in the developed nations. But more important for a country like Zambia than paved roads, train tracks, or even internet access and affordable laptops, are simple and reliable means of short-range transportation: bicycles. In this case, bicycles that don’t, in Day’s words, “suck,” mean much more for the typical Zambian farmer or weaver than a paved road or WiFi service. His charity produces bikes that are much more reliable, sturdier, and appropriate for the Zambian terrain.

Fitch describes Day’s vision:

Through his World Bicycle Relief charity the ponytailed entrepreneur hopes to put millions of sub-Saharan Africans aboard special heavy-duty bikes designed to withstand the continent’s rugged roads while carrying 200 pounds of cargo–enough for a weaver to bring his rugs, or a farmer to tote his produce, to market. Moreover, he aims to promote a self-sustaining bicycle economy with regional operations assembling the bikes and area mechanics trained to repair them.

Sometimes you need to walk before you can run, and pedal before you can press down on the accelerator. This is as true for an individual as it is for a national economy.
Day is focusing on encouraging and fostering entrepreneurship and sustainability (e.g. profitability), and he does so with an explicit acknowledgment of the power of markets to transform lives: “You can have all the goodwill in the world,” he says, “but if what you do isn’t driven by the invisible hand of Adam Smith, you’re doomed to fail.”

That’s another way of saying that good intentions are no substitute for sound economics, and the wedding of both is what you see in Day’s work. And that’s what we’re all about here at the Acton Institute. As Fitch concludes, “It’s amazing too how a charity with a small budget ($2.5 million) and a staff of 24, including 19 in Zambia, can change thousands of lives, two wheels at a time.”

For more information on Day’s charity, his brand of “ponytail capitalism,” and the “bicycle economy” he’s trying to build in Zambia, check out the Forbes slideshow.

Blog author: jcouretas
posted by on Tuesday, June 22, 2010

In the most recent edition of the Harvard Journal of Law and Public Policy, Acton’s Research Director Samuel Gregg has an article in which he argues that the ongoing financial and economic crisis has raised serious questions about the credibility and usefulness of much mainstream contemporary economics. Drawing partly on his recent book, Wilhelm Röpke’s Political Economy (2010), Gregg suggests that much mainstream economics after Keynes became gradually dominated by a fixation upon econometrics that has threatened at times to reduce economics to a poor cousin of mathematics. As Gregg writes:

Since John Maynard Keynes’s time, mainstream economics has undergone a steady process of mathematization and immersion in abstraction. One need only glance through their nearest copy of the American Economic Review and observe the plethora of algebra that is now central to most mainstream economists’ argumentation. (p.445)

Gregg suggests that this partly reflected an unhealthy relationship between parts of the economics profession and the trend to government economic planning that accelerated after World War II. In this connection, Gregg notes:

The postwar “new economics” helped to support the belief that the state could “manage” the economy and therefore facilitated expectations that governments should attempt to do so. Governmental institutions committed to interventionist policies wanted macroeconomic research that added empirical credibility to such proposals. . . . A form of collusion consequently developed between the postwar economics profession and states pursuing interventionist strategies. (p.454)

In the second part of the article, Gregg makes the case for a re-look at the type of political economy pursued by Adam Smith: i.e., one committed to a fuller appreciation of reality.

Economists wishing to re-engage economics in a wider discussion about the truth of human reality could thus do worse than return to the writings of Adam Smith. Here one finds a truly synthetic approach to comprehending not just the economic dimension of human reality, but also how that economic component fits into a fuller picture of human reality—one that is committed to treating moral virtues as real to the same extent as the forces of entrepreneurship and peaceful free exchange, not to mention institutions such as the rule of law that are the very stuff of modern flourishing economies. Returning to Smith does not imply wholesale abandonment of all the tools and methods developed in a range of different schools of economic thought since 1776. It does, however, suggest that efforts to quarantine economic science from normative considerations or even knowledge of the basic moral goods knowable by human reason ought to be themselves viewed as unreasonable and unscientific. (p.463)

Read Gregg’s “Smith versus Keynes: Economics and Political Economy in the Post-Crisis Era” in its entirety in the Harvard Journal of Law and Public Policy.

Blog author: jcouretas
posted by on Friday, March 5, 2010

Over at Public Discourse, Acton’s Samuel Gregg has just published a piece about the future of money. The issuance of money, he writes, is often associated with issues of national sovereignty, despite the fact that governments have long abused their monopoly of the money supply. Gregg argues, however, that the role played by mismanaged monetary policy in the 2008 financial crisis may well open up the opportunity to consider some truly radical options for how we supply money to the economy.

The scholar who most developed the concept of sovereignty in the modern era, Jean Bodin (1530-1596), identified the right to issue coinage as a key element of sovereignty. In our time, some of the most contentious debates surrounding the euro have concerned its diminution of the national sovereignty of EU member-states adopting this transnational currency.

But is a state monopoly of the money supply truly essential to sovereignty? When [Adam] Smith listed the “only three duties [which] according to the system of natural liberty, the sovereign has to attend to,” he did not include the supply of money. It was not until 1914 that the United States legislated to mandate that only one bank would be privileged by the government to issue legal tender.

Read “Beyond Sovereignty: Money and its Future” on Public Discourse

Kevin noted earlier this week that the UK has issued a paper bill featuring Adam Smith. I also received notice this week that the Adam Smith Review is planning a conference in January of 2009, celebrating the semiquincentennial (250th) anniversary of the publication of Smith’s Theory of Moral Sentiments.

The conference announcement notes that scholarship has “come to appreciate the importance of Smith’s moral philosophy for his overall intellectual project.”

For more on just how Smith’s Theory of Moral Sentiments fits in with works like Wealth of Nations, see this article in the Journal of Markets & Morality by Robert A. Black, “What Did Adam Smith Say About Self-Love?” Black makes the following methodological point: “The first two chapters of [Wealth of Nations] must be read as a whole and in light of Smith’s idea of ‘sympathy’ from the Theory of Moral Sentiments (TMS 1759) to get the full meaning of the appeal to self-love.”

Also, check out this nice introduction to Theory of Moral Sentiments from the Adam Smith Institute.

The Adam Smith Review is published by the International Adam Smith Society.