9/03/2010
Adam Smith did favor laissez-faire |
Ivan
It’s all relative of course:
Mark Thoma recently linked to a Gavin Kennedy post that argued Adam Smith did not favor laissez-faire. I don’t agree. The evidence cited was a one page list of government interventions that Smith favored. The US, by contrast, has enough government interventions to fill a New York City phone book, if not a small library. And the US is regarded by the Europeans as “unbridled capitalism.” Even Hong Kong intervenes in far more ways than Adam Smith contemplated. Of course Smith was not an anarchist, he did favor some government intervention in the economy. But relative to any real world economy, his policies views were extremely laissez-faire.
I see this as a common cognitive bias. The Gavin Kennedy list posted by Thoma certainly looks impressive, but when you think more deeply about the issue it is a trivial set of policies. I’m reminded of what happens when I discuss Singapore, which usually ranks number two in the world in lists of economic freedom. People will often respond by telling me about all the ways the Singapore government intervenes. My response is “so what?” They could intervene in a 1000 different ways and still be vastly more laissez-faire than the US government. Laissez-faire is a relative concept, and always has been. I’ve read The Wealth of Nations, and Adam Smith is clearly a pragmatic libertarian.
Posted in : Economics
Comments
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Now where, again, did I come upon this quote:
"Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez-faire."
Where, oh where... :-)
Posted by : Koen Robeys | Email | Website
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I don´t have my "Serfdom" but I believe that quote comes when Hayek tries to define the proper role of government in economic matters. He creates a great destinction between substantive and formal laws. He prefers the latter -- workplace regulation, etc. This doesn´t mean he favored the mass of laws now afflicting the western economies.
Posted by : Dom | Email | Website
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Spot on! The point here, though, is that Hayek clearly did not favour laissez-faire. Also, he clearly favours some role for government in economic affairs, and even if you limit yourself to The Road to Serfdom, you get quite a list. As to the question if he would favour *current* levels of government intervention - I don´t know how I would be able to speak for him, mut my guess would be, "no, he would probably think there´s way too much of it".
Posted by : Koen Robeys | Email | Website
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In fact I disagree with the conclusion that "laissez-faire" always have been a relative concept. We should remember from which era the concept comes from: from the absolutist state of Louis XIV. The term (in fact: laissez-nous faire) apparently was first coined by Thomas Le Gendre, a merchant, in a conversation with Colbert, Louis XIV´s über bureaucrat. Boisguilbert used the term lavishly to contrast the absolutist state against the "natural order of the free market", which is, of course, the same thing as Hayek´s spontaneous order. Given the powerfull state they had to fight against, that those liberal French insisted on the principle of laissez-faire is thus no surprise, even if they did it in a wooden manner. Adam Smith on the other hand lived in an era where liberty had been more advanced precisely thanks to the wooden insistence on the principle of laissez-faire by the French liberals of the seventeenth century. So this self-declared adversary of mercantillism and proponent of the "invisible hand" nevertheless felt free to take a less extreme position, than those French liberals. And the inventor of the concept of "sponateous order" went even further, opining that a wooden insistence on the principle of laissez-faire has become dangerous for liberalism itself. Colbert must be smiling in his grave.
Posted by : ivan | Email | Website
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You know, I really think that those "wooden" defenders in Hayeks opinion were not the liberals of the 16th century, but *some* liberals from the twentieth. Just a few lines on, he situates "the crude rules" in the nineteenth century, from which "we had yet much to learn".
And from there he goes on, immediately but also in many other places of the book, to investigate what kind of tasks for government there might be.
Posted by : Koen Robeys | Email | Website
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