Saturday, August 11, 2018

Reading Adam Smith

From American Consequences:
In The Wealth of Nations, Smith’s simple logical clarity accomplishes a number of things. By showing the method by which productivity is increased, he disproves the idea that bettering the condition of one person necessarily worsens the condition of somebody else – an idea that liberals, progressives, and Marxists refuse to let go of. Wealth is not a pizza where, if I have too many slices, you have to eat the Domino’s box. Wealth is not zero sum.

By showing that there is no set amount of wealth, Smith disproves the idea that a nation has a certain fixed horde of treasure – a king’s ransom, as it were, of gold, silver, and jewels. No, no, no, says Smith, the wealth of a nation has to be measured by its volume of trades in goods and services – by what goes on in the royal castle’s kitchens and stables, not by what’s locked in the royal vaults. In other words, it was Smith who invented the concept of gross domestic product. (And without GDP, modern economists would have nothing to say. They’d be standing around mute in ugly neckties, waiting for MSNBC to ask them to be silent on the air.)

If wealth is all ebb and flow, then so is its measure, money. Money has no intrinsic value. Any baby who’s eaten a nickel could tell you so. And those of us old enough to have lived through the Carter administration understand this perfectly well. But in the 18th century “money” was still precious metals. What Smith had to say about money bugged his contemporaries. He said that gold is, well, worth its weight in gold, definitely – but not so definitely worth anything else.

People were upset by this. Even though they could see that 18th century Spain was covered with bling and completely impoverished, so Smith was obviously right. But it was as if Smith, who had just proved that everybody could have more money, then proved that money didn’t buy happiness. And it doesn’t. It rents it. (Read more.)

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