P.G. O’Rourke’s Adam Smith Column

Lynne Kiesling

I hope you’ve all seen P.J. O’Rourke’s Financial Times column from last week on what Adam Smith would have to say about our current economic and financial events. Adam Smith was one of the most astute observes of human nature ever, and applied those insights well to analyses of incentives and political institutions. Our political “leaders” would do well to remember his insights, as O’Rourke applies them:

The idea that The Wealth of Nations puts forth for creating prosperity is more complex. It involves all the baffling intricacies of human liberty. Smith proposed that everyone be free – free of bondage and of political, economic and regulatory oppression (Smith’s principle of “self-interest”), free in choice of employment (Smith’s principle of “division of labour”), and free to own and exchange the products of that labour (Smith’s principle of “free trade”). “Little else is requisite to carry a state to the highest degree of opulence,” Smith told a learned society in Edinburgh (with what degree of sarcasm we can imagine), “but peace, easy taxes and a tolerable administration of justice.”

How then would Adam Smith fix the present mess? Sorry, but it is fixed already. The answer to a decline in the value of speculative assets is to pay less for them. Job done.

We could pump the banks full of our national treasure. But Smith said: “To attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils.” [440]

We could send in the experts to manage our bail-out. But Smith said: “I have never known much good done by those who affect to trade for the public good.” [456]

And we could nationalise our economies. But Smith said: “The state cannot be very great of which the sovereign has leisure to carry on the trade of a wine merchant or apothecary”. [818] Or chairman of General Motors.

I’m teaching History of Economic Thought this quarter, and part of my pitch to my students for the benefits of the class was that it would give them broader insights into current events and into what constitutes sensible policy recommendations. O’Rourke’s column illustrated that point perfectly. (Note that the bracketed numbers are page references.)

While we’re at it, here are some P.J. O’Rourke quotes that are also relevant to our current flurry of government activity:

When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.

The mystery of government is not how Washington works but how to make it stop.