Adam Smith’s Problems and Ours

AuthorWinch Donald
Date01 September 1997
Published date01 September 1997
DOIhttp://doi.org/10.1111/1467-9485.00066
II
NTRODUCTION
No apology is yet needed for choosing Adam Smith as the subject for an invited
lecture on the occasion of the centenary of the Scottish Economic Society, and I
confidently anticipate that this will remain true of the bicentenary. Nevertheless,
some preliminary remarks may still be necessary to explain the manner in which I
shall be approaching the subject. They are based on the unexceptionable
assumption — to intellectual historians, if not to economists — that the past may
indeed be a foreign country, and that if historians are to act as reliable guides they
must be prepared to encounter different languages, different agenda, and different
criteria of significance from those they are accustomed to using when at home. As
with all foreign travel, some of the intellectual scenery may appear to be familiar.
Since economists, like some tourists, seem to prefer visiting countries in which
this is the case, this is fortunate. But those who choose to make the history of ideas
their profession should be anthropologists and explorers rather than tourists or
tour-guides, or even toast-masters or museum superintendants. It may come as
relief, therefore, if I say that I do not believe that learning a foreign language
entails losing the capacity to speak one’s own, and that the approach I shall be
following here does not involve any of the more extreme versions of historical
© Scottish Economic Society 1997 384
*University of Sussex
Scottish Journal of Political Economy, Vol. 44, No. 4, September 1997
© Scottish Economic Society 1997. Published by Blackwell Publishers Ltd, 108 Cowley Road, Oxford OX4 1JF, UK and
350 Main Street, Malden, MA 02148, USA
ADAM SMITH’S PROBLEMS AND OURS1
Donald Winch*
ABSTRACT
The paper contrasts what modern economists, reflecting the priorities of general
equilibrium theory, expect to find in the Wealth of Nations with Smith’s own
much broader theoretical and policy concerns. A theory of growth in which
increasing returns are pervasive conflicts not only with neo-classical expectations
but with the emphasis on diminishing returns to be found in Smith’s classical
successors. Smith’s assumptions on rationality, technology, firms, ‘projectors’,
and the incompleteness of markets do not square with post-Walrasian criteria. In
advancing practical solutions Smith also shows more concern for the problems of
living in a second-best world than is common in pure theories of the invisible
hand and the thinking of some of his free-market admirers.
1A paper written as the President’s Lecture delivered on the occasion of the centenary of the
Scottish Economic Society in Stirling, 8 April, 1997.
relativism. All that is required is a little historical imagination, the suspension (not
abandonment) of present-minded criteria, and a willingness to consider the context
of discovery as well as the context of validation. The last of these is a byproduct of
debates on the Popperian conception of the advance of knowledge, and there is
still just enough of a Popperian in me to say that historical interpretation has this in
common with other scientific pursuits: it entails choosing between hypotheses that
ought (to call on the prescriptive mode) to be tested against the least-promising
evidence to be found in the crucial texts — read, as they have to be, in context.
This point of view places a question mark over the performance criteria of
modern economic analysis as the favoured mode of interpreting and judging a
figure such as Smith, who wrote before the marginal and Keynesian revolutions
had transformed micro- and macroeconomic theory respectively. Indeed, I shall be
taking this a step further here by arguing that one should not accept without
question the common assumption that the continuities between Smith’s enterprise
and that of his nineteenth-century successors — those with whom he is normally
lumped together as a ‘classical’ economist — are more impressive than the
discontinuities. In making these remarks I may seem to be flying in the face of a
great deal of evidence that proclaims how much our contemporary Smith has
become in recent decades. In Britain he is now the patron saint of a free-market
sect with some noted intellectual apostles such as Friedrich Hayek, and with its
own monastic ‘think-tank’, the Adam Smith Institute. This new church has opened
branches all over the world and achieved some large-scale conversions to the
message of the ‘invisible hand’ in Eastern Europe, a dark continent that was
worshipping heathen gods before 1989. More seriously, perhaps, there is a large
body of literature created by the reflections of distinguished modern economists
performing exactly the kind of exercise in recruitment with which I shall be taking
issue. Some of them find Smith refreshingly f ull of insights into what they already
know with greater precision and sophistication: others regret that he was capable
of making so many elementary mistakes. On celebratory occasions at least, they
are pleased to accept him as the cultural emblem of a grand lineage — or, more
accurately, a teleological process — that leads to themselves.
Let me further compound my discourtesy to an audience of economists by
saying that if I accepted any of the following statements I would have given up
any attempt to write the history of economic thinking long ago. Thus I do not
agree with George Stigler in believing that Adam Smith is alive and well and
living in Chicago, or that ‘the correct way to read Adam Smith is the correct
way to read the forthcoming issues of a professional journal.’2 Nor do I think,
with Joseph Schumpeter, that Smith’s writings as moral philosopher are an
irrelevant distraction from the ‘filiation of scientific ideas.’3 Finally, while I
ADAM SMITH’S PROBLEMS AND OURS 385
© Scottish Economic Society 1997
2The first of these pronouncements was frequently employed at the outset of Stigler’s
contributions to bicentennial discussions of the Wealth of Nations. The second piece of advice is
given in ‘Does Economics Have a Useful Past?’, History of Political Economy, I (1969, p. 221).
3‘I hold that the garb of philosophy is removable . . . in the case of economics: economics
has not been shaped at any time by the philosophical opinions that economists happened to
have, though it has frequently been vitiated by their political attitudes’; History of Econonic
Analysis, London (1963 , pp. 31– 2).

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