(This website does claim to be “a summary of recent economics research”, but the present will have to be put on hiatus for the next week. I’m currently at the Duke Summer Institute on the History of Economics here in lovely Denver, Colorado, so forthcoming will be a few brief notes on the big guns following Smith – I don’t really see much before Smith that is recognizable as modern economics, so apologies to Quesnay, Thomas Aquinas, and the rest.)
The Wealth of Nations is a 1200-page brick of a book that, presumably, all economists have claimed to read. The book isn’t read because it’s good economics, of course. Many commentators have noted that little of the book is original, aside from the strong emphasis on the aggregation of self-interested motives into socially beneficial policies. The rationale for why trade occurs at all, that people have an innate “propensity to truck, barter and exchange”, is as a bit silly; Menger pointed out that if this were the motivation for trade, rather than a desire to improve one’s allocation according to one’s subjective preferences, then people would just keep trading the same two objects back and forth. Trade is motivated in terms of absolute advantage, rather than comparative advantage. There is nothing resembling a model, or resembling the type of formalist deductive logic that would dominate economics.
That said, the book is also clearly identifiable as modern “science”: there is no recourse to God as an explanation for the course of human events (or at least not much – there are historians who write that the “invisible hand” explicitly refers to God). And links of Smith to the Labor Theory of Value are unfair: his theory of value is based on cost of production, which is actually accurate in long-term competitive general equilibrium, where the supply side determines price and the demand side determines only quantity sold.
The most interesting aspect of Smith, though, concerns growth. I’ve heard Wealth of Nations referred to as a book about growth in the modern sense – it is called “The Wealth of Nations,” after all. But it seems clear to me that Smith is really referring only to allocative efficiency. That is, he sees that division of labor in the pin factory can make England relatively rich, and that policy B can impoverish you, and that policy C can enrich you, and so on. But it looks like he has in mind a model where England can move from the set of poor nations to the set of rich nations, and vice versa. It does not look like he is imagining a world where England gets richer and richer and richer every generation, exponentially. And why would he have this idea? The early industrial revolution, and of course the rest of human history before the industrial revolution, was simply not a period where countries became richer generation by generation.
Surely someone has done this already, but I don’t have a citation: the history of the “idea of growth” would make a fantastic book. Aside from secularism, which really enters human intellectual history slowly over many centuries, the idea that the future will be spectacularly rich compared to the present is the most important idea in the history of humanity. Think of the implications for ethics, for government policy, for social science, for social relations! It’s quite clear that by, for example, John Stuart Mill, the idea that humanity is on a course toward unending growth was not unknown. But how did this come about? How did the idea spread? How did it impact society? What of the frequent claims of its imminent demise, from Luddites through “ecological economists” and sustainability worrywarts of the present? This is a history I would love to read.
http://oll.libertyfund.org/index.php?…..3Ftitle=220&Itemid=99999999 (Liberty Fund has nice PDF and html copies of The Wealth of Nations free of charge on their website, linked here)