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"Natives who beat drums to drive off evil spirits are objects of scorn to smart Americans who blow horns to break up traffic jams."--Mary Ellen Kelly (anthropologist) (found in Whatever It Is, I'm Against It, Nat Hentoff, ed.)

At fourteen, I discovered that I was addicted to axiomatic questions. They were the only ones worth a fig, the only ones that could make people upset, and the only ones that opened the door to a new world. "What if space is an illusion, and we never move, but, instead, we're all stuck in some remote viewing platfom, imagining it" was equal parts silly and exhilarating. I swore that my adult self would never get numb to challenging axioms. I promised myself that, if my grown up mutation just accepted truisms, I'd get a box of ammo and end it.

I was an obnoxious kid.

However, I try to honor what was good about him. Poking at the gelatinous institutions of thought always gives us something, after all, even if it's merely humility.

The shining armor of what "everybody knows" is quite often the shabby petticoats of merely what "everyone believes." After all, everybody knows that everybody knows more now than everybody knew before and that people are more educated now than before. There is a deeply ingrafted belief in progress in modern man and woman. History, like time, is directed at the present moment, we feel, and the history book ends with the chapter entitled, "Modern understanding." The history of humanity is, in the "everybody knows" narrative, a history that is evolutionary and resulting in the most adapted and fit thing, us, or cumulative material accomplishment, or dialectical civilization.

Even people who shake free of the teleological assumptions of naive history agree that, whether it's by accident or natural coincidence, we have had progress. Technology is a story of labor saving and unqualified amelioration of harm and mollification of the bumps and bruises of life. Medicine, most of all, is a roaring success.

I do not disagree. (As McMurphy says in One Flew Over the Cuckoo's Nest, "I'm a g--d--n miracle of modern f---ing medicine, Doc.")  It's just that, well... errm... that progress... errr. . . .

People are funny. Every school boy knows that back in the day medicine was barbaric. In fact, we laugh at how stupid it was. They bled people! They put leeches on each other! They used to knock holes in the skulls of healthy people to "let the humours out!" Doctors used to study poop and pee excessively. It's positively hilarious.

Even after the microscope came along (1674), doctors were convinced that disease was caused by places. Seriously! Newton is making his reflecting telescope, and cells are discovered, and the circulation of the blood (1628), and anatomy is marked out, but everyone is convinced that "Southwark causes disease" because it has "bad air." They kept right on thinking this absolutely stupid thing until the cholera bacterium was discovered, and beyond (to 1889).

Those primitives!

You know what's really weird? People called for doctors. What's more, and this will really blow your mind, some people got better. It's true: doctors employing the humour theory had a cure rate. Those who used cupping (pressing hot glasses to a person's flesh to draw out the humours) and fasting and emetics and bleeding actually seem to have sped some recoveries. I cannot say that the trepanning doctors did any good, but their patients didn't die, and the "mad" patients were more manageable.

As far back as Aesop we have the sentiment that, "Nature cures the patient, and the physician takes the fee," and it is difficult for me, without an in-depth study of hospital records of the era, to tell whether they achieved a greater cure rate than chance. (I should assume that even getting to today's chance rate would indicate medicinal value, given sanitation of the period.) However, the doctors were intelligent men, and they received confirming, empirical data. They worked scientifically and confirmed their humour theory.

For hundreds of years, "everybody knew" that the body had four substances in it, and a surfeit or lack of any of them would lead to disease. "Everybody knew" that miasmas and bad air would cause disease. (Their advice was effective, because air-borne diseases would be tantamount to "bad air.") For centuries, the smartest people in the universities investigated and confirmed these findings, and anyone suggesting otherwise was a fool at best.

Is this because of psychosomatic cures? I don't know. Is it because the people would have gotten better anyway? I don't know that, either. Is it because they had religious faith in "the ancients?" I don't know. [Side note for the detail oriented: This is an open call for a research project for anyone currently in a Philadelphia, New York, London, or York graduate school. Grab those primary accounts from the hospital from the 18th or early 19th century. Take recognizable maladies. Index admissions for gravity of case. Find a way to filter sanitation, if possible. Then see the non-treatment rate vs. the hospital's treatment rate. Don't expect the hospital to be your friend in this.]

Anyway, I recently came across E. P. Thompson's discussion of Adam Smith's The Wealth of Nations, and he described it as an intellectually accomplished and systematic work that rings with an air of empiricism, that it is, in the end, a long self-confirming essay in logic rather than an empirical or scientific work ("The Moral Economy of the Crowd" 1992).

"Even the first letter of Smith's alphabet -- the assumption that high prices were an effective form of rationing -- remains no more than an assertion" ("Moral Economy of the Crowd" III, 1992)

This struck a very loud chord with me. While Thompson was referring to a specific epoch and commodity -- wheat in the markets of 1700 - 1800 -- the underlying critique applies more broadly. Just how much scientific proof is there that Smith's fundamental assertion (high demand will stimulate supply) is true?

It is impossible, of course, that it is not true. After all, everybody knows that supply and demand is a law of nature. It's the way of the world. It's self evident. It is as plain as the nose on your neighbor's face.

Maybe. Let's read on and talk about it. Thinking won't hurt us any.

"I don't pretend to understand the Universe--it's a great deal bigger than I
am...People ought to be modester."--Carlyle (from Table Talk)

Thompson's criticism of Smith's book is not that it's wrong, but that it reeks of validation that is lacking. It has a factitiousness about it that ought to be familiar to anyone debating an opponent armed with an Econ. 101 class. It argues a position that claims amorality and sentiment-free efficiency, allowing in considerations of such things as "good" and "propriety" only as long term effects of a mechanism that is natural and systemic. Smith's capitalism is an abstract set of principles that cannot be immoral, because it has no intentions. It is a set of principles observed in nature.

In fact, Smith's book arose in opposition to a paternalistic model of the economy. Paternalism had been the ideological content of late feudalism, and, after feudalism died, it informed the rest of the land, county, city economy in England (I like that article; the author is arguing the same stuff as I, but from a different, more eminent point of view). To put this in plainer language, feudalism was an arrangement of power and titles and land ownership, but its cultural content had been a reciprocal set of moral obligations between the master and servant. When the fact of the feudal power died in England, the same culture of 'those with power owe the powerless money and care to the same degree that the powerless owe those with power obedience' existed for the country estate, the county justices, and the city warrens. Capitalism was not the emergence of market economics. It was the emergence of this new amorality. Paternalism was at war with capitalism for. . . well . . . that's the question.

Thompson puts it nicely. He says that paternalism is a set of moral obligations of what each man ought to do, whereas capitalism in Smith's formulation appeared to say,

"This is simply the way the world works, or the way the world would work, if the state did not interfere with it."
Adam Smith posited, as today's libertarians and libertarian-flavored Republicans do, that any group with any intention, any moral stance who constrain the market in any form, even for the good, are violating the Natural Order.

The stakes of the game
This is the question: Is supply and demand a law? Rephrased to be more precise, the question is: Is, specifically, the idea that entirely elastic price an effective and efficient natural method of rationing true? On one side of the table is Adam Smith and a gang of thousands. On the other side of the table is the mob, the church, and the Marxists. On the table between them, though is the following:
*If price leads to modulation of supply efficiently, then it is a natural method of provision. Any human shaping of this natural force would need to be assessed carefully as a significant deficit against this established good.
*If price does not, or may not, or could not modulate supply efficiently, then there is no natural mechanism of supplying commodities to members of society, and there is a compulsion for the state to intervene morally.

The Natural Philosophy of Economics
If supply and demand is a natural law, how did Smith determine it? If he were investigating a physical phenomenon, we should get verification experimentally. We would posit this hypothesis, control for variables, and gather results, and we would need to repeat the experiment and refine it. Further, because the law is "demand will lead to supply," rather than "demand for food will lead to growing food," we would need to see it true across commodities.

I hope I can safely say that Adam Smith did not come up with this "law" from experiment, that it was not the result of inductive reasoning. Rather it is an analytical principle derived by an examination of history. In that regard, it is as valid as the law that bad air causes disease.

If Adam Smith, and our college sophomore with his Business 202 class, are certain that demand means supply, the proof will frequently come from case studies. We will hear about price curves and how demand increases price, and then . . . it's just logical that someone will come to get that money. By looking through history and finding examples that fit the proposition, we get no truth at all. Looking through the long stretch of history for this or that instance where the market asked for things and got them does not mean that the market did it, or demand did it. After all, I can look through the centur... decades and point at Enron, where supply of electricity was decreased by the carrier to increase demand, and, when the price went up, they decreased supply more to make even more money on futures.

Smith's conclusion that increasing demand will result in quick sales in response is surmise. The "law" involved comes from social science, not physical science. Like all of economic, it examines actions as fossils of intent and constructs an alternative narrative for their context. (The narratives are secondary, because the person who sold bacon sold it "to make money," and the economist must find a second narrative, whereby "market conditions were favorable for an early sale.")

Who wins?
I will list some conditions whereby demand does not lead to supply, and I predict that, if there are comments, some of those comments will explain that these are foul play examples, that the rules work, if the market is free, etc.
1. Food, housing, water, are staple goods and resources. If the price of food goes up and up and up, that will not make the harvest improve. If the price of water goes up and up and up, the rains will not care. If the cost of housing goes up, the people will not lessen, and housing will not increase.
2. Finite resources such as oil will experience explosive price curves that will not generate anything but panic and pain and war.
3. Cartel and collusion, oligopoly form quickly, and these things do not require conspiracies. People who never speak to each other perceive quite soon that it is in their interests to withhold goods from market. It took ten years or less for the wheat merchants of England to realize that they should drive up the wheat price. No telephone or Internet was involved. Enron, modern banking, oil . . . each works in lockstep without ever any communication.

Most importantly, though, if we granted every condition of Adam Smith's logic, we would gain only a world where a panic in food led to an increase in planting, an increase in the next harvest, and a lower price the next year, so the survivors of a year without bread would have price relief. Furthermore, it means that the market, while it "responds," puts goods far, far, far out of the reach of the poor.
If there is not enough food, the price of food will go up. Will that make more food?

Smith's model, if it works, is not amoral, in the end, but immoral, because working ideally means working to inflict pain on the poor.

Evidence?
E. P. Thompson says that, given the period of the corn riots, Smith's model is unpersuasive. He says that it seems to be accurate in some instances, but not all, and that there are strong counter-examples (i.e. examples where the supply not only did not respond, but actually continued to diminish, in the face of price increases, or where high prices did not mean the flow of corn from place to place efficiently).

If we allow ourselves the same liberties that economists use when they "prove" that prices will generate supplies, which is to say the liberties of looking for anecdotes and case studies from any time or place that affirm our position, then we can say that it never works, that it is always inefficient, or that it is antiquated.

I invite you, too, to ask these questions. If everybody knows that increasing prices will lead to increasing supplies, and if everybody knows that the market will naturally take care of things, then ask the question. I could be entirely wrong, after all, in my conclusions, but not, I hope, in asking.

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Comment Preferences

  •  Tip Jar (10+ / 0-)

    Every reductio ad absurdum will seem like a good idea to some fool or another.

    by The Geogre on Wed Jan 04, 2012 at 05:50:37 AM PST

  •  Sorry it's so long, folks. (3+ / 0-)
    Recommended by:
    slksfca, enhydra lutris, Larsstephens

    I edited it, believe it or not, and tightened the sentences. I know there is little evidence of either, but I did try to keep the wild tangle under control.

    Every reductio ad absurdum will seem like a good idea to some fool or another.

    by The Geogre on Wed Jan 04, 2012 at 05:51:54 AM PST

  •  question everything (3+ / 0-)

    then take your conclusion with a grain of salt.

    we humans are silly, dangerous little creatures.

    Bad is never good until worse happens

    by dark daze on Wed Jan 04, 2012 at 06:54:13 AM PST

    •  And do not legislate on them (3+ / 0-)

      I'm a skeptic. It's easy for some people to mistake that for being unaware. I'm a skeptic because of the failure of humanity, in general, and humanity's principle failure being its ability to tell when what is subjective is subjective.

      A lot of folks (the first half was meant to show this) will reason a posteriori and assume that their conclusions must reflect an underlying law. It might. It might not. What it really reflects is their own reasoning capacity at their moment in time.

      Haven't we outgrown the idea that "natural laws" are superior to human ones -- even presupposing there were natural laws that weren't actually human ones?

      Every reductio ad absurdum will seem like a good idea to some fool or another.

      by The Geogre on Wed Jan 04, 2012 at 07:17:21 AM PST

      [ Parent ]

  •  You should probably take an economics course (0+ / 0-)

    None of your counter-examples are novel.  There are economic models for all of those markets.  I would encourage you to do more research before posting next time.

    •  Of course there are! (4+ / 0-)

      I would never deny that economics has explanations for each of its failures. Given time, it most emphatically will.

      Note the critique involved is not, "Can economics survive?" The critique is, "Is this an empirical or social science?"
      The answer to that is "social." Therefore, the next question is, "Where is validation coming from?" If it comes from speculation, analysis of history, and case studies, then it will always be worth exactly what "air causes disease" is worth.

      I am sure that those very, very, very, very smart people who understand how to "create capital" are also certain that every failure of the market is actually a failure of people to let the market work, or not really a market, or not really a case of the market going about its business.  No, I'm certain of it.

      I'm not certain, though, that their certainty, or yours is sufficient to render these markets (or Econ classes) laws of nature, or man a natural creature, or interventions "wrong."

      Still, I'm sure that it's easier to assume I don't understand economics than to look at the fundamental question of its predictive value as a social science and its proper role in policy.

      Every reductio ad absurdum will seem like a good idea to some fool or another.

      by The Geogre on Wed Jan 04, 2012 at 07:13:38 AM PST

      [ Parent ]

    •  On second thought... (4+ / 0-)

      Your comment isn't worth anything.
      1. You presume to know what classes I have and have not taken? The arrogance involved in that is insulting, and the insult involved is incivil.
      2. You do not address the essay at all.
      3. You believe I should research more? This reflects a complete unawareness of the essay.

      I have not and will not do the "hide" thing, but this is the sort of thing that I find destructive to conversation. From a very long work, you zero in on a few examples that you believe you can say "gotcha" with, declare them all to have been answered in one place or another, and then wish to negate the argument, without understanding it I assume but without addressing it in fact?

      That's simply arriving to insult. It is the mark of a weenie.

      By the way, please, if you wish to contribute something to someone else (not me, as I think you're a weenie now), try doing more research and cite the material in question to give the person something to read and learn. Do not bluff, because then you look like a limp weenie.

      Every reductio ad absurdum will seem like a good idea to some fool or another.

      by The Geogre on Wed Jan 04, 2012 at 07:26:22 AM PST

      [ Parent ]

  •  Another entertaining post. (3+ / 0-)

    Tipped and recced for E.P. Thompson, a man with whom I would have liked to share a beer. I haven't read the book you cite, but Customs in Common was enormously entertaining.
    Have you ever read Bruno Latour? You'd probably think he was a hoot as well. Reassembling the Social is a good introduction if you haven't.

    "Bootstraps are a fine invention as long as they are attached to boots." blueoasis

    by northsylvania on Wed Jan 04, 2012 at 08:13:55 AM PST

    •  I haven't, no. Thanks. (4+ / 0-)

      I think "The Moral Economy of the Crowd" is supposed to be from Customs in Common, isn't it? I read all of Making of the English Working Class back in the day, and I read Whigs and Hunters more than once, and his essay in Albion's Fatal Tree (not in my office now) more than once when I was working on Jonathan Wild/Jack Sheppard, but I never got to his material that focused on Jacobins and Reform Act stuff.

      At Christmas, I got myself The Essential EPT, and I saw "Moral Economy" in that and began absolutely devouring it. Up my sleeve is an essay yet to come, I think, on his conclusions on the crowd and the parallels with today's Occupy. The same violation of morality is motivating the same response, and, if we are not careful, we will have the same smug historical door slammed on us.

      Every reductio ad absurdum will seem like a good idea to some fool or another.

      by The Geogre on Wed Jan 04, 2012 at 09:46:17 AM PST

      [ Parent ]

  •  Economists (5+ / 0-)

    have perhaps the most glaring case of physics envy in all of the "sciences".  This isn't to say that modeling of economic principles is a bad thing, but rather that economists across the board from Austrians to Keynesians when confronted with a contradiction between their models and reality will to the last man try to find out what's wrong with reality instead of entertaining the notion that their model could be at fault.  Questioning the axioms of capitalism and economics would be tantamount to questioning the laws of thermodynamics.

    Good diary; I look forward to more.

    The bourgeoisie had better watch out for me, all throughout this so called nation. We don't want your filthy money, we don't need your innocent bloodshed, we just want to end your world. ~H.R.

    by chipmo on Wed Jan 04, 2012 at 08:42:14 AM PST

    •  If I could rec you twice, I would! (4+ / 0-)

      The sad truth is that economists in academia are suffering from the same economic bind the rest of the professoriate is. They need to look like they're doing something "real," and "real" has gotten defined as "empirical."

      Because no one can, with a straight face, say, "I'm dealing with humans, and humanity is a messed up thing. I'm also a human, so I'm messed up. I may be wrong, but I'm doing my best," everyone goes for "quantifiable" results. Weighing something doesn't make it meaningful, just heavy.

      They remind me sometimes of Dr. Woodward. Dr. Woodward proved the age of the earth from minerals, even though he didn't go out and look at anything. It was logic, you see. By working purely deductively, and from Aristotelian laws, he could say that what was heaviest was lowest, and therefore.... What was logical must be true, and, when the data disagreed, the problem was with the data.

      I edited out an example of a posteriori proof. Racist "anthropologists" at the turn of the 20th century would start from the basic assumption that, for example, "The mongol is intellectually inferior." They would then go to Mongolia, dig up corpses, and find normal skeletons. Each would be rejected as abnormal. They would find an example of a person who suffered from a head wound or disease, say, "At last, a normal mongol skeleton," and bring it back and put it on display.

      Every reductio ad absurdum will seem like a good idea to some fool or another.

      by The Geogre on Wed Jan 04, 2012 at 09:52:53 AM PST

      [ Parent ]

  •  Tipped because I like a good intellectual (3+ / 0-)

    piece that is based upon analysis. However, I would argue that your accusation against Smith's argument is erroneous. Smith is a highly moral man and that comes clear reading any number of his works including the Wealth of Nations.

    However, there are other things in your piece that I believe are erroneous in terms of your understanding of Smith. Smith's argument that demand generates supply is a pre-Say's Law argument and he is essentially correct. Creation of a domestic market, technical innovation (and the introduction of technology) are demand determined. Supply does not create demand and as Smith points out higher wages would serve the system better as domestic demand ensures realisation of profits. Capitalism is a demand constrained economic system, not a supply constrained one. Moreover, the price determination that Smith is discussing relates to goods that can be produced at will by the use of human labour and only relates to a competitive economic system.

    Smith proved to be wrong about many things, his theories of profits, capital (some confusion about what actually constitutes capital) and rent (absolute rent only, no differential rent which was developed later by other authors) were simply wrong and in some cases inconsistent. For example, his theory of profits treated profits as a residual correctly but the rate of profits appears to be determined by competition (supply and demand) which is simply inconsistent with his correct observation of profits as a residual. His theory of prices was also problematic as in his movement from the rude and early state to capitalism, it appears as though just the existence of profits and rents (caused by accumulation of capital and private appropriation of land) would make prices rise independently of either the use of labour or technical change; this is wrong and was addressed by first Ricardo, Torrens, and then Marx.

    However, his theory of wages is second only to that of Marx and is an excellent understanding of not only wage determination, but wage differentials. It demonstrates a high level of morality, the morality of liberals arising in the enlightenment; but morality nonetheless.

    "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

    by NY brit expat on Wed Jan 04, 2012 at 09:07:55 AM PST

    •  Thank you, and a response (2+ / 0-)
      Recommended by:
      NY brit expat, Larsstephens

      First, I do not mean to suggest that Adam Smith is immoral, but rather that his position is. Smith's Theory of Moral Sentiments posits a common human resonance for morality that was similar to the position taken by a number of mid-century philosophers. It had within it an assumption of good nature, and it was highly essential and social.

      In fact, Smith's entire intellectual scope was social, and yet the system he proposed, where state limitations on market trading were removed, would be anti-social. He did not believe, apparently, that individuals would act without conscience, and he said that the idea that middle men would forestall (hold wheat to the high point of the market instead of realizing profits) was a superstition. This is the principle stumble, the idea that compulsion by the state is necessary because man does not have a good nature.

      A Hobbesian would never have argued as Smith did that economic power could be left without state checks.

      However, my attack is not on Smith's failure to discuss staple goods, but rather the failure of the glib assertion that demand and rising price will result in a supply can naturally ration goods. I can be wrong. I often am, and I may be completely wrong in my examples (Smith specifically argued for the corn market restrictions of Edward VI, whereby the poor bought before the market bell, then the town, and then the farmers bundled for dealers, should be repealed, and he argued against the laws prohibited forestalling and buying on sample, according to Thompson), but I do not wish to make him out to be a fool or a villain.

      I have one question, really: is there a natural system of rationing of commodities by the market (leaving aside the definition of "market")? If there is, then is this natural system amoral?

      If men are immoral and make up the market, then state intervention is compulsory, and paternalism follows. If men are good, then the market should decide. I think Smith thought the latter.

      Every reductio ad absurdum will seem like a good idea to some fool or another.

      by The Geogre on Wed Jan 04, 2012 at 10:05:11 AM PST

      [ Parent ]

      •  Agree with you completely on Smith's view (2+ / 0-)
        Recommended by:
        The Geogre, Larsstephens

        of humanity as essentially good, in that he is of the later enlightenment as opposed to Hobbes's (and Bentham's) perspective that civil society exists to reign in human predisposition towards immoral and negative behaviour. I am writing a criticism on a piece by Aspromourgos that places Smith as a follower of Hobbes which is essentially inaccurate given his view of civil society as well as the state of nature.

        Smith does discuss staple and necessary goods, but he has a theory of absolute rent, and hence does not view scarcity of fertile land as a cause of high prices. In fact, in this context since the monopoly ownership of land exists while he believed that abandonment of the assize on bread would provide for the production of bread he did recognise that the existence of a monopoly ownership of land could undercut the right to subsistence and hence addressed the question quite seriously and upheld the importance of a right to subsistence; this argument of a right to subsistence is later abandoned by followers of Bentham who while discussing it tends to argue that the right of the poor is based upon entitlement rather than eligibility.

        I need you to explain what you mean by natural in order to make sure that I am understanding your question correctly. It has been used in many different ways historically in economics.

        In the discussion of natural prices (and natural rates of wages, profits and rents) these are theoretical prices which prices in the real world tend towards due to the process of competition. Natural Prices are not determined by supply and demand in the classical economists; prices are determined by the costs of producing and reproducing the society. Short term deviations in the real world (market prices) differ from theoretical prices if the quantity brought to market is either greater or less than the effectual demand (that is the demand for the commodity backed up by money to purchase). The same type of notion of natural prices or prices of production exists in Ricardo and Marx as theoretical prices that underlie the prices in the real world (market prices); market prices are supposed to tend towards these prices and this is brought about through capital mobility in search of higher rates of profits (labour mobility is not part of the classical theory; workers receive social subsistence wages in the absence of labour mobility) which then adjusts the quantity of goods produced to be consistent with effective demand at the natural price (not at the market price).

        I am a Marxist not a follower of Smith, but his explanation is distinct from modern discussions of mainstream economic theory which have their roots in the marginalist school of the 1870s.

        "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

        by NY brit expat on Wed Jan 04, 2012 at 10:30:33 AM PST

        [ Parent ]

        •  Yeah, we both are (2+ / 0-)
          Recommended by:
          Larsstephens, NY brit expat

          Marxists, but I'm history and philosophy.

          Our confusion is coming from that difference, as I am using "nature" not as a term of art, but as a term of philosophy.

          During the early century, there was a vigorous debate about market exchange and "natural" process versus those exchanges that we were "taught" to do. By the middle of the century, some of those who believed in a good nature also believed in a recovery of the natural by a stripping away of whatever had been set through the institutions of man. At the same time, incidentally, the project for the recovery of the Adamic language was in high gear (and many wanted it to be Gaelic).

          If man, in his natural state, without education, is a benign being inclined toward good, then those practices of material exchange he practices untutored are better than those ordered by a king (especially) or a Pope (almost as bad).

          Now, on the other hand, the old paternalistic models were arguing both the power of land as a generative virtue (bad idea, but we see it stick around to the 1860's) and religion. However, the forces opposing the capitalist market deregulation were scattershot and disorganized. The groups were hardly aligned -- the old religious groups, the poor, the anti-dissenter groups, etc. and they did not have a philosophical antithesis to offer.

          If there is something native to man, where, with no intervention, increasing demand for a commodity (and this is assuming a non-staple commodity and a non-fungible one, too, so we're not talking about South Sea stock or bread this time, but let's say worsted) will cause a relative increase in monetary cost and therefore an increase in production, or is that the result of human intervention?

          If people are to blame and thank for it, then there is morality involved, and we can't say that a deregulated market is a greater good than a regulated one.

          Every reductio ad absurdum will seem like a good idea to some fool or another.

          by The Geogre on Wed Jan 04, 2012 at 01:04:13 PM PST

          [ Parent ]

          •  Ok, I get where you are coming from (2+ / 0-)
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            The Geogre, Larsstephens

            if you are discussing political philosophy so you are discussing natural as opposed to artificial (in terms of artifice) which is a debate that you see not only earlier but is reflected in the distinction between the state of nature and civil society. This is carried over into economic debate certainly before Smith but also it is clear in the natural rights tradition. I was not certain if that is the natural argument that you were referring to or were making the arguments that many economists did not understand. I have read a lot of the literature on the discussions in political theory and am a specialist in classical and post-Ricardian economic theory.

            One of the hallmarks of the enlightenment was the importance of humans in the creation process (whether that was in terms of science, commodity production and knowledge as well as morality as opposed to being divinely determined or determined by the king in his role as divinely ordained).

            I get what you are saying. We do see a movement during the enlightenment away from the idea of god providing goods through the power of the land over to the far more coherent position that it is the intervention of human beings in the production process that is what creates the surplus product beyond subsistence production. Pre-capitalist production in agriculture was rather different than the later capitalist system dependent upon the enclosure acts and concentration of land ownership. However, let's look at Locke who quite clearly holds the benign humanity position, but also recognises the idea of the earth being the common property of man and hence only holds a property in use argument in the state of nature (until the creation of money which allows for accumulation of wealth and hence it breaks the link between production and subsistence). Here we have a movement from a state of nature in which people use the land to produce their subsistence which everyone has a right to do as the right to life or existence was predominant (you see a right of subsistence argument earlier in Aquinas and the scholastics) towards one due to the invention of money allowing for accumulation breaks that process.

            I have nowhere heard it argued that since the market was the creation of man that the market was superior to regulation of the state (by the time that this had come about we were really in the shift away from the absolutist state towards more powerful parliaments); Smith held a functionalist argument that the goods demanded would be supplied both cheaper and in greater quantity in the absence of market distortions caused by regulation; however, he also recognised that there were differing class interests at work (look at his discussions on the role of power relations and the state representing the powerful and wealthy in his discussions of wages).

            I do not think that an Hobbesian position (or even one held by Filmer) written in a pre-capitalist period was one in which the rights of the majority would be maintained. They rigidly held the power of the state (Cromwell in Hobbes and the divinely appointed king in Filmer) was needed to ensure that negative humanity needed to be checked. These arguments are pre-capitalist so drawing conclusions about the operation of the capitalist system or the role of the state in the capitalist system would not necessarily be completely on target.

            I am not convinced about the demand determining supply as representing much of anything here. Both supply of goods and the effectual demand of goods are essentially human mediated. We also need to separate pre-capitalist arguments from those supporting the system and those of dissenters (both socialists and anarchist arguments arose pretty early on at the end of the 18th and early 19th century). Comparing Smith to radical Lockeans like Hodgskin or to Socialists like Thompson may be more fruitful as they are discussing the same economic system. If you have a paper you are working on and if I can be of any assistance, please send me a message here and I can send you an email. If nothing else I can provide constructive criticism. :)

            "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

            by NY brit expat on Wed Jan 04, 2012 at 02:59:31 PM PST

            [ Parent ]

            •  Wow, big stuff to chew (2+ / 0-)
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              NY brit expat, Larsstephens

              Ok. Locke is a very good example to bring in, because Locke's naive empiricist model (this term from Michael McKeon) dominated political discourse like none since the idiot Filmer (although Filmer is a mouthpiece, not a thinker). One of the major criticisms of Smith's position from the anti-capitalist resistance was that Smith was restoring the "natural right" of men to forestall and sell on sample, but this natural right was a private right, not a civil right (a pamphlet of 1768 makes the case that those who say, "It's my wheat, and I can refuse to sell it to the poor, if I want" are correct; they have that natural right, but it is a right of the individual, not a right of man in society).

              The capitalist argument surrounding deregulation of the food markets, and especially the elimination of the town corn market, was that the price fluctuations would be more efficient and more natural. This "natural" and "efficient" were potent terms that carried with them a heavy political calculus.

              The advantage of state intervention was clear. The paternalist system provided for the poor. It localized harvest and limited state exports. These were serious drains on international trade with a compensatory gain to the poor and a sense of communal bonds of morality. For anyone to oppose that system, there needed to be a superiority offered. If the superiority was "nature," then the nature must be God's version of nature, rather than the jungle's, or the economic man operating in it must be benign, else there is no weight to offer for it.

              From the point of view of logic, arguing that international export and expanding market size from local capital to national capital trades is more efficient is inconsequential. Efficiency is not, properly speaking, a good thing or a bad thing. It needs a context. [In fact, the crown and the parliamentary interests intervened to push for deregulated corn markets so that more capital could be accumulated in the cities and import/export could increase, as Walpole's "wharehouse London" plan had blossomed already, and England was becoming middle man to the world.] (Too few people look at 1715, in my opinion, and what Walpole did with trade. He had the idea of London docks being the rental/trade making center of the world, where the nation could profit with or without making a thing.)

              Smith suggests that markets just plain act this way, if no one intervenes. Well, is there evidence? He says that when they do not act efficiently, it is because of something artificial has intervened. Well, if all of it is intervention, if every part of the market is artifice, then there is no advantage of "nature" to claim.

              That would then leave us arguing "more capital for mercantile interests" as the advantage for capitalism vs. "provisioning for the poor" as the advantage of paternalism, "isolation" as the disadvantage of paternalism and "market crashes, with extreme poverty and displacement" as disadvantages of capitalism. That's a hard sell.

              Every reductio ad absurdum will seem like a good idea to some fool or another.

              by The Geogre on Wed Jan 04, 2012 at 05:28:51 PM PST

              [ Parent ]

              •  we do not need paternalism to provide for the (2+ / 0-)
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                Larsstephens, The Geogre

                poor, we do not need to use a natural rights argument but can shift to a human rights argument.

                Walpole's argument is one based on transfers of revenue not profit creation as profit arises in the production process; Marx is excellent on this point.

                Efficiency is a theoretical concept based upon ensuring profitability; it is not a concept that has a meaning outside of the various economic theories. Corn Laws (or bounties and tariffs are not independent of class interests, like all of economic argumentation).

                In terms of state intervention it is not always tied to paternalism; it was part and parcel of both aristocratic and then government principle. Isolationism is not really what was happening ... there was massive amount of foreign trade (in fact, Smith argued that domestic development should precede international trade) controlled by monopolies (e.g., dutch and british east india company) granted by the king. Are you using Paternalism to describe feudalism or include pre-capitalism under that description (we are moving between centuries)?

                The argument is interesting, but state intervention in guarantees of food production and quality and distribution exist from ancient greece up to the elimination of the assizes on bread in favour of regulation by the market (we have seen what has happened from that); that crosses economic system that are very diverse and which have different foundations and principles from ancient slave societies to capitalism. Separate the systems and the discussions under consideration, that will help the discussion and clarify your point for readers. There are other possible systems than Paternalism and Capitalism so we are not limited by the failings of either.

                "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

                by NY brit expat on Wed Jan 04, 2012 at 06:00:05 PM PST

                [ Parent ]

                •  I'll try (margins getting big) (1+ / 0-)
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                  NY brit expat

                  Thompson uses "paternalism" as a broad concept to reflect the moral economy (q.v. "The Moral Economy," which is a bit of a hoary essay, but one Everybody Knows). He generally means feudalism's cultural assumptions as developed by the Christian church and implemented through the manorial agricultural practice.

                  A lot of what he discusses in The Making of the English Working Class is the resistance of the paternalistic code among the poor to the emergent ideology of empiricist value assignments ("a man's worth his money" vs. "a man's worth his birth") and the break down of the force of these old codes. His examination of the expectations of the weavers for cottage production are landmark.

                  Anyway, the culture does not move with the economic base. In other words, unlike other Marxist historians of the prior generation, Thompson recognizes that the base/superstructure do not move as if chained to one another, that they lurch and fight their dialectical battles separately (but the base will determine the outcome). So he means, and I mean, that the code of moral obligation of all producers and workers that originated in feudalism.

                  Of course it is not the only possible system. A socialist system with a large state, or with a series of efficient small state units, would do it. However, what was key in the anti-capitalist resistance was the sense of outrage that the workers and the poor felt when assumptions from paternalism were violated.

                  [Sorry, this is all history stuff.]

                  I agree with all that you said else. Walpole's grand idea was rent and port fees. As banking was being born, and as credit was developing (and Walpole, the snake, got rich off of South Sea stock), he conceived of being a port that would take a fee from all the other private trading companies for storing goods. [I do not like him. He is one of the villains of my Marxist history.]

                  To return to the specific case, though, the corn markets had once demanded, by Tudor law, that the poor got to make first bids on a wheat. The miller got the last bid. No farmer was allowed to withhold grain. So... less to export to France, but the poor were fed. Later, exports went up, but the poor rioted. When they did, they said that it was because the dealers were immoral.

                  Every reductio ad absurdum will seem like a good idea to some fool or another.

                  by The Geogre on Thu Jan 05, 2012 at 04:57:46 AM PST

                  [ Parent ]

                  •  agreed completely on what you and (0+ / 0-)

                    he are arguing, that is certainly the case from people like Cobbett to Hunt; there is a transformation in terms of critique of the system from the collapse of the paternalistic system (based upon a moral critique) towards a critique of the capitalist system which begins with some of the Ricardian socialists ... but he is right ... there are many examples of that in terms of the discussions where a moral case is built for the right of the workers to the whole of the product based upon the fact that their labour was responsible for the creation of the product including capital (see Hodgskin the radical Lockean and also Thompson who did recognise that capitalists should get a remuneration for loaning their capital in productive use). These are moral arguments based upon the notion of natural rights and or moral guarantees.

                    We do agree, during the food riots which led to the introduction of the poor law reforms of 1795-7, the riots were based upon moral argumentation, think of the idea of a fair wage for a fair day's work, that is a moral argument as fair is defined in a different manner.

                    Most of my work was examining the collapse of the idea of a natural wage as a social subsistence wage that covered the poor (those that did not own property and had to sell their labour) or working class (the more modern term) towards an argument that wages are determined by the market in the wages-fund authors ... it traces out the transformation in economic theory, I also address the attack on the rights of the poor from entitlement towards eligibility. That is why I have some knowledge of the period.

                    I am thinking that a better description of what you are doing is looking at morality and economic conditions; my objections that Smith was moral meant that he was moral contextually but certainly not moral in terms of the old system. A moral critique is useful, but it is a systemic critique which reflects the system in itself and not compared to other systems that became that which the anti-capitalist forces shifted towards. Also, going back to the initial point about demand determining supply under capitalism, that is certainly correct for goods produced for sale for profits in the system. The way in which you proposed it made it sound (to the ears of the economists here) as an endorsement of Say's Law (supply creates it own demand) which held as the dominant mainstream economic position from James Mill (1808) until Keynes and Kalecki (with some criticisms from Malthus, Marx, Lauderdale). The fact that there are scarce resources has not hindered capitalism from either seizing them through colonialism or later imperialism and/or producing synthetics to replace said scarce resources. Capitalists and capitalism is rather resourceful (sorry for the pun). It is only now that they are beginning to feel resource constrained due to the damage caused to the environment which is truly making resources scarce (witness the land grabs and Saudi purchase of land in Ethiopia of all places for growing crops among others) and that we have reached peak oil. Resources have not been really constrained until recently.

                    "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

                    by NY brit expat on Thu Jan 05, 2012 at 05:17:03 AM PST

                    [ Parent ]

              •  the individual right vs the right of people in (1+ / 0-)
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                Larsstephens

                society is an important point; if we have a natural right according to Locke we do not lose it when we join civil society (that was part of his criticism of Grotius). What we lose is the right to individually pursue the right and it becomes a social responsibility. This is what led Quesnay to argue that the provision of subsistence is an essential role of the state itself (and this also fit well into their agriculture as the primary sector argument) which he bases on natural right argument (I think the piece is called Natural Right and was published in a collection of essays by Ronald Meek). This is the point that I make on this question and it is important when looking at social policy and provision for the poor ... one of the most interesting things that I read was both Pitt's position and justification for the Poor Law reforms of 1795-7 and the attack on that argument by Bentham ... there is a between position between Pitt's paternalism and Bentham's liberalism.

                The pamphlet to which you refer do you have the reference or know the author (unless it is anonymous) ... which group are they associated with or which individual? Given the date, that is pretty early for an attack on Smith unless it was a response to the theory of moral sentiments (1759) ... this is a response from the defenders of the old patriarchy rather than a response from the victims of the system ... sort of like Cobbett a bit later. Godwin would not have made that error.

                "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

                by NY brit expat on Wed Jan 04, 2012 at 06:12:15 PM PST

                [ Parent ]

                •  wanted to thank you, this is the most interesting (1+ / 0-)
                  Recommended by:
                  Larsstephens

                  discussion that I have had in a while on this site. :) Please honestly send me the paper, I can learn a lot from your discussion of philosophy and history and maybe I can contribute something to the economics discussion which may help ... it has been some time that I have discussed the notion of natural with someone that had a strong basis in philosophy and political philosophy; most economists are incredibly confused about the discussions of that period. I also would like to talk to you about Smith and Hobbes (as I said I think that person is very confused and would like to bounce some ideas off of you on why Smith is most certainly not an Hobbesian) ... it would help me a lot to get this damn review finished. Please can you send me a private message and we can talk more? Thanks

                  "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

                  by NY brit expat on Wed Jan 04, 2012 at 06:25:51 PM PST

                  [ Parent ]

                  •  Message coming (1+ / 0-)
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                    NY brit expat

                    I'm going to send you a message a bit later.

                    I'll send you the citation that Thompson gives for the (anonymous, alas) pamphlet of 1768. What was remarkable and frustrating to me was that Thompson was blending (a bit tendentiously, I admit) identical complaints from across a hundred years. He would cite a pamphlet from 1690, then one that is nearly word for word the same from 1780, then one that sounds the very same from 1801. Since he is arguing about the moral concepts that the "mob" employed and why the rioters rioted and arguing that these "mobs" were in fact a manifestation of the clash between a culture of paternalism and the practice of capitalism, it's alright, but it means that he's not as chronologically... precise... as I'd like.

                    I'm having a ball talking about this stuff, too.

                    [I'm the only person in my institution with 18th century interests, except that we have a Burke fan. He's a British ex-pat. and a nice guy, but a modern Tory and I aren't going to share fundamental assumptions.]

                    Every reductio ad absurdum will seem like a good idea to some fool or another.

                    by The Geogre on Thu Jan 05, 2012 at 05:05:04 AM PST

                    [ Parent ]

                    •  My doctoral thesis ages ago examined (1+ / 0-)
                      Recommended by:
                      The Geogre

                      the influence of political ideology in the movement away from Ricardo's theory; but I spent a lot of time looking at the working class movement of the late 18th and early 19th century and their ideology that was deemed as a threat to capitalist property relations. So, I have a lot of research on exactly what was considered a threat and how that led to new arguments to justify the right of capitalists to earn profits and that wages were set by the market and not social subsistence arguments that were found in Smith and Ricardo (and then Marx). I am the later end of your study and I also went back further to try and understand the natural argument which I was certain that economists were missing completely as they were arguing a scientific rather than a moral basis to the use of this term. :) Looking forward to further discussion, this has been great (it is the first time I am smiling in months).

                      "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

                      by NY brit expat on Thu Jan 05, 2012 at 05:32:05 AM PST

                      [ Parent ]

    •  If anyone else is reading & wondering... (1+ / 0-)
      Recommended by:
      NY brit expat

      I've replied by "Message" to the last of these.

      I think we were perhaps getting a bit academic, but really it was the margins. I started to feel like my freshmen who can't make the pages who begin using ever larger margins (and comic sans, and 13 point, and 2.5 spacing).

      Every reductio ad absurdum will seem like a good idea to some fool or another.

      by The Geogre on Thu Jan 05, 2012 at 09:16:59 AM PST

      [ Parent ]

  •  Econ is, at best, a set of general rules of thumb. (3+ / 0-)

    Trying to treat them as universal laws is what leads to the trouble.

    That, in its essence, is fascism--ownership of government by an individual, by a group, or by any other controlling private power. -- Franklin D. Roosevelt --

    by enhydra lutris on Wed Jan 04, 2012 at 10:06:40 AM PST

    •  Yeah, the shadow man (3+ / 0-)

      There is a shadow that I'm really punching at. I'm not upset with the great Scot. I'm not upset at my fellows in Econ. departments.

      The Shadow that I'm aiming at is the complacency, the certainty of "everybody knows" that passes from what can be known in economics (an academic economist would never say that deregulated utilities will provide for the poor; an academic economist knows better) to what is simply believed by political speech.

      I am throwing as much spittle, acid, and venom as I can at the sureness that "the market will provide" and that "intervention in markets is wrong." These assumptions need defending, because they rest on the idea that there is something Natural going on and that nature has an advantage over the contrary (which is man).

      If you hear a flap jowled Chamber of Commerce person or weedy AEI "scholar" tell it, "the market" is wise, is natural, is good, and is not artificial. They have forgotten that it's humanity, just like paternalism, but one comes from an attempt at regulating man's good and evil as a set of consequentialist propositions, and the other treats these as individual decisions of game or gain (I guess).

      Every reductio ad absurdum will seem like a good idea to some fool or another.

      by The Geogre on Wed Jan 04, 2012 at 12:50:49 PM PST

      [ Parent ]

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