Wednesday, July 23, 2014


Ellis Thorpe wrote the following letter to “The Scotsman”, Edinburgh,  22 July:
Smith’s legacy”
“IT CAN’T be gainsaid most people will be “delighted” Adam Smith’s house refurbishment is nearing completion (Jim Tough, Letters. 18 July). However, it may be debated if Smith’s legacy, as the father of modern economics, is “beyond question”.
Would he have recognised much of today’s economics with its algebraic and mathematical models? Did the proclivity for this methodology obscure the “bigger picture” in the run-up to the global financial crisis?
Perhaps Adam Smith would be better described as a political economist, as economics was once called. Have today’s university degree courses in economics shed economic history and the history of economic thought?
Arguably, and perhaps somewhat heretically, political economy will be taken up again, or controversially even economic philosophy.”
Ellis Thorpe.
The following is my response published in “The Scotsman’ (Edinburgh) on 23 July:
“Adam Smith’s Lost Legacy”
“Adam Smith’s lost legacy as represented by mainstream mathematically-inclined economists and their fantasies of ‘rational expectations theories’ have very little to do with anything written by him. 
Practically everything claimed about Adam Smith is mythical, peversely misunderstood, or asserted merely to support ideologies for ‘laissez-faire’ versus state regulations and unfunded spending. 
Smith was not the first nor the only 18th-century, political economist.  He wrote just before what we call the ‘Industrial Revolution’.  His focus was on history, not the future (he did not make predictions for the future; he tried to understand the past as a guide to the present). 
Ellis Thorpe asks if universities have “shed economic history and the history of economic thought” and he answer is ‘Yes’, but there are happy signs of a revival of student interest in such courses.  
Restoration of Panmure House, Smith’s last home, off the Royal Mile, may be part of that revival because economists certainly ought to examine the recent crises in US and EU economies to avoid repeating them.

(Prof) Gavin Kennedy (Edinburgh).

Friday, July 18, 2014


Interesting Discussion of Increasing Interest Among Economics Students in the History of Economic Thought
I have mentioned on Lost Legacy signs of discontent at Manchester U and Harvard U among some economics students in their standard modern economics classes, dominated as they are by higher mathematics allegedly ‘proving’ the dominant school of rational expectations ( “MaxU”) certainties are the driving force of human behaviours in markets.
This was to be expected given the apparent disconnect between recent events in several major economies from 2008 and the complacent certainties of the dominant ‘theologies’ driving many academic departments in recruitment of staff and students.   Economics no longer has a credible claim to its so-called ‘scientific’ status for its mainstream dismissal of the History of Economic Thought (HET) of the discipline as being worthy of study within an economics first degree, and, for the few graduates who aspire to an academic career, a ‘kiss-of-death’ for their chances of passing a selection board for entry-level appointments with even sniffs of HET in the academic cv.
Here are to recent posts relevant to what is beginning to happen to HET in academe and of which I was very pleased to read:
1. Steve Kates (Associate Professor RMIT University, Melbourne, Australia): 
“I found Jerry Green's description of how he ended up teaching his mini-course in HET quite remarkable, especially this:
"I am teaching a course on the history of economic thought this year -- actually it is running all year long so that half of it is still to come. . . . Last year I began my lectures in economic theory (the course that is required for all our graduate students) with a few minutes of historical introduction, before getting to the main part of the lecture. I always did this to some extent; it was not a new idea or a change in the course. However, for some reason it hit a responsive chord with two of the students and they asked if I would lead a reading group on history of thought this year. We made up a reading list and circulated it to all the graduate students -- 40 people indicated an interest in joining the group." 
If the academic world were made up of profit-oriented institutions in the normal sense, the latent interest would lead to more such courses finding their way into the world. In Auckland, in a fashion similar to the experience described by Jerry Green, I discovered that an HET group was set up by the students themselves to which they invite their own list of speakers. 
The manifesto put out by the Manchester University Economics Students earlier this year ( ) also raised the importance of HET as seen from a student perspective:
"History of economic thought and economic history are essential for students to be able to evaluate the quality of economic theory. To understand the historical development of a particular model or economic paradigm provides an invaluable insight into the problems it was designed to solve and how context influenced its formation. This is a vital counterweight to the hubristic belief that economic theory can represent universal truth and the refusal to recognise the limits to our knowledge."
Leaving aside "hubristic", I think this is exactly so, and I also agree with Jerry Green where he states that most academic economists are not against such courses. A course, for example, in the history of the theory of the business cycle would be the kind of mini-course that would attract serious interest and would be of genuine educational value - truly useful for an economist - although I suspect there wouldn't be all that many who would even know how to teach such a course or even where to begin.
It is a sad fact that the way that we now recognise academic success in economics is far distant from the history of economic thought, but it does not have to remain this way. There is clearly an interest, and also serious value in a restoration of the history of economic thought in the curriculum of economists. This is something that those who set the agenda both for HET and economics in general ought to be thinking seriously about.”
2. On 17 July 2014 David Colander, wrote <>:
“I don’t know anything about MIT, but a couple of years ago Jerry Green at Harvard responded to student requests and started a reading group that morphed into a  one semester, and then a two semester, graduate course.  We invited Jerry to  come up to Middlebury  and talk about the course, which was a very useful exploration of where recent economic ideas came from.  He did a lot of research preparing for the course.   Here is what he wrote me in an email as we were discussing the course.
I am teaching a course on the history of economic thought this year -- actually it is running all year long so that half of it is still to come. As you may know, this is not my field. However, last year I began my lectures in economic theory (the course that is required for all our graduate students) with a few minutes of historical introduction, before getting to the main part of the lecture. I always did this to some extent; it was not a new idea or a change in the course. However, for some reason it hit a responsive chord with two of the students and they asked if I would lead a reading group on history of thought this year. We made up a reading list and circulated it to all the graduate students -- 40 people indicated an interest in joining the group. Clearly this was too large for a small group discussion, and so we made it two "real courses".
This is not going to be a permanent fixture of my teaching, much as I have enjoyed doing it. I do plan to do it again, however, maybe condensed into one term and maybe for undergraduates instead of graduate students. 
So I think it was a one-time thing, and it certainly was not part of the core.  
The reality is that there is interest by students in the history of thought—especially as  it relates to current ideas, but  when push comes to shove, and one has to start thinking about getting published in acceptable journals, that interest fades.  The faculty recognize that, and provide the education that will further their student’s careers.
I think the best chance for history of thought to make some inroads into graduate programs is with mini-courses that some programs offer.  I will be going to Tel Aviv next year to teach a mini-course in the history of thought.   I think if the HES put together some mini-courses and provided ways for those course to be taught in grad programs, that it could be a useful outreach, and is the best way for history of thought to be presented to students. My sense is that students want relevant history of thought—faculty are not against it, but they  see the technical training as being that which they should focus on.  I remember when NYU gave up the history of thought course—Bill Baumol was there and was a strong supporter of history of thought—but he voted in favor of giving it up history of thought in order to make room for another technical course that he felt would help students more.  In terms of their future, that’s probably true, but it is sad that that is the case.”
 3. History of economic thought being reintroduced at graduate school? Alex Millmow
“At the latest HETSA Conference in Auckland, New Zealand there was a forum session on the future of economic thought. Various  strategies were discussed. One intriguing comment from the floor was that Harvard and MIT were reintroducing HET into their doctoral programs Does anyone know anything about this?”

Does any reader know of similar initiatives in their institutions or elsewhere?

Thursday, July 17, 2014


Donald J. Boudreaux (with Russell Roberts), Cafe Hayek Post a fascinating debate on Ideas about Ideas.

Donald J. Boudreaux, “Deirdre McCloskey and Economists’ Ideas about Ideas” (July, 2014)
Deirdre McClosky is over the halfway point of her 4 volume work on The Bourgeois Era. Two volumes have already appeared, Bourgeois Virtues (2006) and Bourgeois Dignity (2010), and a third is close to appearing. This Liberty Matters online discussion will assess her progress to date with a Lead Essay by Don Boudreaux and comments by Joel Mokyr and John Nye, and replies to her critics by Deirdre McCloskey. The key issue is to try to explain why “the Great Enrichment” of the past 150 years occurred in northern and western Europe rather than elsewhere, and why sometime in the middle of the 18th century. Other theories have attributed it to the presence of natural resources, the existence of private property and the rule of law, and the right legal and political institutions. McCloskey’s thesis is that a fundamental change in ideas took place which raised the “dignity” of economic activity in the eyes of people to the point where they felt no inhibition in pursuing these activities which improved the situation of both themselves and the customers who bought their products and services.
Two articles in particular (there are more) are very much worth a look.  I found their content and the style of debate highly commendable (no cheap shots).  Just sheer, readable intellectual exchanges by two of the best Adam Smith scholars publishing tday.

1. Donald J. Boudreaux, "Deirdre McCloskey and Economists’ Ideas about Ideas" [July, 2014]
3. Deirdre Nansen McCloskey, The Fruits of Humility, and Reading, in Economics: A Genial Reply to Don Boudreaux" [Posted: July 7, 2014]
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Wednesday, July 16, 2014


Panmure House, Adam Smith’s Last Home, Restoration Phase Begins

“Work to underpin the 300-year-old building, which was Adam Smith's final home, has been completed and the next stage will focus on the outside.

The next phase to restore the final home of the economist Adam Smith is getting underway in Edinburgh. It is part of a £3.6m project to secure the future of Panmure House, which had been left derelict.
Work to underpin the 300-year-old building has been completed and the next stage will focus on the outside.
The £430,000 programme of works will involve repairing and re-slating the 17th century roof, plus conservation of the exterior stonework and windows.
The works, which are to take nine months, are supported by a £150,000 grant from Edinburgh World Heritage and funding from the Friends of Panmure House, as well as individual donations from around the world.
The house was bought by Edinburgh Business School (EBS) at Heriot Watt University in 2008.
'Intellectual endeavour'
EBS is conserving the A-listed building as a living memorial to one of the most influential members of the Scottish Enlightenment and to develop Smith's house as a world-class centre for education, events, debates about Smith's life and current economic issues.
Professor Keith Lumsden, academic director and founder of Edinburgh Business School, and the chair of the fundraising committee of the Panmure House Campaign, said: "Adam Smith is often said to be the world's first economist.
"He is a vital part of Scotland's heritage and a beacon of intellectual endeavour.
"Revitalising his last home as an educational centre will help ensure his pioneering thinking lives on in the minds of future generations.
"We are delighted to be getting this vital stage of the project to renovate Panmure house underway, making it wind and water tight and restoring the exterior to its former glory."
Adam Wilkinson, director of Edinburgh World Heritage, said: "Panmure House is an important historic building, not only because of its links to Adam Smith, the Enlightenment and modern socio-economic thinking, but also as rare survival of a seventeenth century town mansion.
"We welcome the carefully considered scheme for its re-use as a centre for economics and social studies, very much in keeping with the spirit of its past.
"Rethinking a significant building at risk in this way will support the surrounding area, bringing wider benefits for the people of the Canongate today.”
At last!  After seemingly endless delays, the restoration of Panmure House is about to begin.
Donations (large and small) are still needed to keep the careful restoration of the all important inside of the building, which also includes modernisation for global Internet communications systems to send its special, graduate and school-level education facilities across the world.  

Chris Watkins, Edinburgh Business School, Heriot-Watt University, EH14 4AS, Scotland, UK.  (+44 131 451 3090) or email:

Tuesday, July 15, 2014


SEKTA (Money & Information on East African Business) writes (13 July) HERE 
The Theory Of Laissez-Faire – 2. The Meaning Of Laissez-Faire and The Invisible Hand – 2
In the 1700 and 1800, French businessmen felt they would be much better off if left alone without any business rules.
Philosophers who agreed, began to write essays that advocated Laissez-Faire, but it was a Scotsman who made the idea of Laissez-Faire famous.”
Adam Smith never mentioned “Laissez-Faire”!  How then did he make the idea of laissez-faire” “famous”?
SEKTA: “In his book, The Wealth Of Nations Adam Smith argued that all restrictions on business should be removed.
Yet, Adam Smith argued that even with “perfect liberty” there were cases where their liberty should be constrained by laws, examples: in matter of the interest rates charged for loans; in the matter of builders adding ‘party walls’ on the properties they build to prevent fires spreading to other people’s apartments.  He also stated quite clearly that those who believed that “opulence” would be impossible for any country without complete “natural liberty” were wrong as there were many cases of countries enjoying opulence without “perfect liberty”.
SEKTA: “One of the most important ideas in Smith book, was the concept of the ‘invisible hand’ Smith believed that this invisible hand would always guide the selfish acts of individuals to help the country”.
On the SINGLE occasion only, in Wealth Of Nations, when he mentioned the “invisible hand”, it was as a METAPHOR never as a CONCEPT (check the Oxford English Dictionary if you are not sure of the stark difference between the meanings of these words).   He never argued that the metaphoric “invisible hand” would “always guide the selfish acts of individuals to help the country.”  
SEKTA: By working for his own private gain, the businessman must produce as much as he can, and for the lowest price. In order to sell goods he charges very little. This will help society as a whole, even though that was not his intention. The invisible hand thus directs selfish acts for the good of the community.
In Wealth Of Nations Smith gives many examples of the “selfish” and “self-interested” actions of businessmen leading to disavantages for society Examples include the frequent lobbying of governments for tariff and prohibitions on imports that raised, not “lowered”, prices and “reduced production”, not increased it, and raised, not lowered, their profits.  These practices did not “help society as a whole” and neither did they “direct selfish acts for the good of the community”.
Smith did not “urge trust in the invisible hand, and not the government”.  Government role in law making and enforcing justice were fundamental for a free society.
SEKTA: “Every person is a much better judge of what is good for him than any President, Governor, or Legislator. When the government starts telling people what they should do with their money, they are telling people how to mind their own business. This will make a bigger mess than that which they tried to correct.”
That every person “is a much better judge of what is good for him than any President, Governor, or Legislator” is likely to be true or untrue, dependening on the examples chosen, it did not follow that their individual “judgements” were good for others in the commmunity, examples: buying drugs, including excessive alcohol and smoking, driving at high speeds, flying with unqualified pilots, seeking health checks from witch-doctors, entering building designed by unqualified architects, and so on.  
Selfish actions may, and often do, have negative consequences for others. “Presidents, Governors, or Legislators” may impose, often at the behest of lobbyists, paid by beneficiaries,  laws and regulations that worsen the interests of some or all consumers. 

Adam Smith is wholly innocent of that which SEKTA attributes to him.  The best remedy is to read Adam Smith for yourself and refrain from quoting what other ill-informed modern economists and journalists claim for him.

Monday, July 14, 2014


“The Politics and Economics of Inequality”
The Aspen Institute HERE  30 June.
“Some inequality of income and wealth is inevitable, if not necessary. If an economy is to function well, people need incentives to work hard and innovate. The pertinent question is not whether income and wealth inequality is good or bad. It is at what point do these inequalities become so great as to pose a serious threat to our economy, our ideal of equal opportunity and our democracy. Professor Robert Reich examines what's happened to income and wealth in this country, why it's a problem, and what we can expect in future years.”
Interesting observations from Robert Reich (“Who’s He?’ - “I don’t know”).  Watch him on You Tube.

Tends to confirm my oft stated stance ( and I suggest it was Adam Smith’s stance too) that addressing the problems of poverty is more important than focussing on inequality.


Livechat Agents” posted (9 July) the following in Managemenr.survival.comHERE 
 “History of Political Economy - Adam Smith’s Invisible hand”
Smith asserted for a configuration of normal liberty Smith (1776) p. 533 wherever single attempt was the maker of communal high-quality. Smith assumed even the egocentric inside association were held under self-control and operated for the high-quality of altogether once performing in a rilvalrous trade. Prices are frequently unrepresentative of the genuine worth of wares and facilities. Following John Locke, Smith thought genuine worth of items obtained as of the quantity of toil capitalized in them.
When the blunderbuss, the Brewers and the bakers acted under the self-control of an open trade financial management, their chase of egocentrism, thought Smith, paradoxically drives the procedure to right actual life costs to their simply principles. His timeless declaration on contention proceeds as tails.
Smith assumed that a trade created what he nicknamed the advance of luxuriousness. This included a catena of notions, that the division of toil is the driver of financial effectiveness, up till now it is restricted to the broadening procedure of markets. Both toil division and trade broadening needs further exhaustive Capital accumulation/accumulation of assets by the business persons and directors of trade and business. The entire configuration is underpinned by keeping the safeguarding of assets claims.”
I’m sorry to say I found the above mostly gobbledygook. I haven’t a clue to what its anonymous author refers through a glass (very) darkly.  It appears to be from Brisbane, Australia …

Even the reference to Wealth Of Nations (1776. p. 533) does not help as that page is a discussion about forestallers and engrossing in corn corn markets (WN IV.v.b: 22-25) in the 1976 Oxford University Press standard text.  Because its Book IV it refers to nothing about whatever is deeply hidden in the author's text.

Sunday, July 13, 2014


Henry Moore (“Hank”), a 23-year old libertarian blogger hailing from Montana, is the proprietor of The Libertarian Liquidationist. He is interested in politics and history and libertarianism since picking up Dr. Ron Paul's “The Revolution and End the Fed in 2009”, and in blogging since late 2011.  [The following is his entry for the Thorpe-Freeman Blog Contest, originally published at Notes on Liberty on May 22nd 2013, and The Libertarian Liquidationist on January 8th 2014]. Henry Moore posts on Liberty.Me HERE 
“Ham-Fisted Coercion and Incompetence versus the Invisible Hand of Self-Interest”
A Tale of Two Hands
I came across Gary Galles’ recent article in The Freeman about Leonard Read’s analogy of government coercion as a clenched fist, “ the Clenched Fist and the General Welfare.” I see a symmetry between this analogy and Adam Smith’s about self-interest unintentionally channeled into market organization, one that is so familiar to free market proponents and detractors alike that it is a common metaphor: the invisible hand.
Government coercion and market organization. Two very important concepts for any libertarian to master. Which one better provides for the general welfare? Smith and Read would contend the latter. The reasons for this are contained in the analogies. As Read and Galles point out, not much good can come from a clenched fist. Only violence and incompetence. It can punch. It can pound. That’s about it. What better description of government? Likewise, as Smith notes, the usefulness of markets is that they do better than government many of the noble things government tries to do, thereby rendering it redundant, if not unnecessary, in those areas. The all-too obvious fist of government regulations and mandates is no match for a more efficient, less obvious hand: self-interest."
The above Blog Post is almost pure ideology, devoid of contact with the real world.  It sweeps to one side the “violence and incompetence” of “punching and pounding” when used by mercantile-motivated self-interests enforcing trade-embargoes and prohibitions on behalf of dominant market-players, as happened when Europeans invaded foreign countries in the then undeveloped world from the 14th century.  The first things built by traders in distant lands were armed fortifications to protect the invaders from local harassment.  In these events the States Minsters and fixers played a role corrupted and influenced be local domestic market enterprises (East India Company, for example, for free shares and cash).
Modern markets also play their role in these grubby affairs and, for various reasons, do it “better than governments” on their own account, by “replacing open government collusions” to achieve “many of the IGNOBLE things that mercantile-influenced governments did in the past on behalf of their domestic businesses, often for a consideration, like Monarchist Honours and trinkets, as valued socially by the likes of ”Aldermen’s wives” over what Smith called their shuffles for “place”. In commercial matters, much of government legislation and diplomatic activities are directly related, not always openly, in favour of what today we call “big business” and Big lobbyists - Prime Ministers leading “trade missions” to China, for example.
The “clenched fist” of government coercion, however, is quite hyperbolic, especially nearer the top, and is more subtle and softer for all the occasional good it achieves, and downplays the great expense at which such good comes about, blaming its own inadequacies on the failings of “free” markets. The so-called invisible hand, for which there are multiple definitions, however, is mythical and does not exist. Supposedly, it is able to do more, and better, than the clenched fist, without stifling progress in other areas.
I agree that “what is unethical for an individual is also unethical for a group of individuals.” Outside the fantasies of perfect competition, universal morality is noble, but inconsistent with either market or state behaviours.
Adam Smith wrote his “Theory of Moral Sentiments” not because moral sentiments were shared and operated universally - they didn’t.  He set the standards by which moral behaviour might be judged. Those standards evolved in practise though not universally in societies prior to the 18th century. The daily and life-time contests between moral and non-moral sentiments continue from his days to ours, and no doubt beyond.  Nothing I have read on these questions has changed much up the 21st century, except that the richness of the tapistery of moral choices and their incidence is now probably more evident to us from our familiarity and direct experience of human behaviours, rather than from reading about them through the fog of previous times.
Self-interested behaviours are not a universal panacea for our mixed economies. Pure markets on their own or pure states in sole command are nowhere possible, nor experienced since the classical period. Exchange has always existed among humans - it predates the earliest markets. 

States and markets exist everywhere.  Where one or the other dominates there are failings in both of them. That is why the appropriate balance may be best approached by following the pragmatic dictum of “markets where possible, the state where necessary”.