Friday, June 12, 2009

Personal econ--natural law--Adam Smith

Personal economics--Natural law--Adam Smith
Newton convinced us forever that the interactions between particles are governed by natural law. The man most responsible for convincing intellectuals, at least, that there is a possibility that interactions between individuals is also governed by natural law is Adam Smith. Of course, scripture has always told us that interactions between people is governed by law, but many do not believe in scripture; therefore, Adam Smith’s contribution is mighty.
Adam Smith was a professor of moral philosophy in Scotland. Effectively that meant that his job was to teach young men, many, if not most, of whom were planning for careers in the ministry, that living by the Christian moral code is not only the good thing to do, but also that it is also the smart thing to do. He wrote a book outlining his ideas on the subject that was an enormous "hit" with the intellectuals of Europe. People rather liked books on morality and ethics in those days.
His book made such a big impression that an English noble decided that he, Adam Smith, was the best man he could hire to take his son and his ward on what was then called "The grand tour" of Europe. So Adam Smith went all over Europe with his young students in tow. And everywhere they went, they met with intellectuals who were eager to meet the author of "The Theory of Moral Sentiments". For his part, Adam Smith became convinced that there were good people in every country and, therefore, the precepts of Christian morality should be applied across national boundaries. Of course, he knew that if he wrote a book expressing this idea in the same way that it was expressed in his first book, that it would be so much waste paper. So he decided, I believe, to write a book rather like Newton’s, that is, one relying heavily on data and mathematical analysis.
In doing this, Adam Smith effectively founded the social science of economics. Most economists essentially follow his method, that is, they collect data and analyze it using logic and mathematics, and from that analysis draw conclusions. But while most economists follow his methods, most also disagree radically with his conclusions, something we will explore in coming blogs.
His achievement was remarkable. He showed that gold and wealth are not synonymous. He demonstrated that a free economy is not a "zero sum" society, i. e. one man’s gain is not another man’s expense. He made clear that "getting along" is a major key to wealth, because it allows each man to do what he does best and, depend on others to do likewise. This is in fact a major key to wealth. The other key is that thrift and saving allow men to get better and better tools; hence, increasing their productivity and ultimately, their material well-being.
He concluded from all this that men’s long term interests are in harmony. He believed in a system of natural liberty for all men and that such a system would greatly multiply their wealth. Finally, he believed that ordinary individuals could be trusted to manage their own affairs as long as they did not infringe on the rights of others.
The first famous person to use Adam Smith’s methods and quote his work, but who disagreed radically with his conclusions, was Alexander Hamilton. Hamilton believed strongly that ordinary men are incapable of being trusted with their own affairs and hence, must be directed, even controlled, by their superiors.
I believe that Adam Smith’s insights and those who followed him with similar beliefs can be very helpful to us as individuals to understand and even to live by the natural law. We will explore some of the ways in future blogs.

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