Adam Smith, Robbie Burns and Enlightenment
Listener 29 December, 2001.

Keywords History of Ideas, Methodology & Philosophy

Adam Smith (1723-1790) was the first great economist. The political right promenades him as one of their own, but in a recent book Economic Sentiments, Emma Rothschild argues that he was originally a radical. However, shortly after his death censorious decisions in the courts led his followers to reinterpret him in a more conservative manner. (Rothschild dedicates the book to her husband, Nobel prize-winning economist Amartya Sen, who is obviously influenced by her work.)

Listener 15 December, 2001.

Keywords History of Ideas, Methodology & Philosophy

Prizes for economic achievement are so idiosyncratically given out, that occasionally they get awarded for excellence. This year’s Nobel Prize went to economics to George Akerloff, Michael Spence and Joe Stiglitz, for their investigations into what happens when there is asymmetry of information in market transactions, and the buyers and sellers know different things about the purchased. Their studies show markets do not always function smoothly. For instance, the seller of a second hand car is likely to know more about its defects than buyers, who are therefore suspicious that anything being offered. (Why sell a good car?) Akerloff’s classic 1970 paper ‘The Market for Lemons’ showed how the outcome could be less than efficient. Noone will trade peaches, because buyers suspect them of being lemons.

Keywords: History of Ideas, Methodology & Philosophy;

The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique for thinking, which helps the possessor to draw correct conclusions.

Listener 23 December, 2000.

Keywords History of Ideas, Methodology & Philosophy

Take two people, A and B, who do not know one another. Give person A $100. A has to offer to B a share of the $100, say $x. If B accepts the offer, then each keeps their share (that is, B keeps $x and A keeps $100-$x). If B rejects the offer then neither gets any of the money. That is the ‘ultimatum game’.

Listener 5 August, 2000

Keywords: History of Ideas, Methodology & Philosophy;

At the heart of much economic analysis is the belief is that it is better to have more material goods and services. The assumption underlies the economic policy objective that we should aim for higher real incomes and production because that means we can (sustainably) consume more and have more material possessions. Economists – or at least the good ones – have been aware of the importance of the assumption, but until recently they were not able to evaluate it in any scientific way. Now that we can, ‘more means better’ proves to be only marginally correct, not nearly as important as economic policy assumes.

Listener: 6 May, 2000.

Keywords: History of Ideas, Methodology & Philosophy;

The economics profession had a high standing 40 years ago. Clergymen would mention that before they took orders they took an arts degree in economics. An oft repeated joke was the accountant who wanted to be an economist but did not have the personality. It is ages since a priest made that confession to me, and today the joke reverses the professions. It is not that today’s economists lack the passions that drove their predecessors. Rather, the morality has changed, and with it the public perception. Whatever the individual ethics of today’s economists, the discipline has been increasingly developed around the notion that people primarily pursue their self-interest. Even altruism is marginalised, explained as another way of pursuing selfishness. Economics may be the only “profession” that does not have any code of ethics.

Listener: 18March, 2000.

Keywords: History of Ideas, Methodology & Philosophy

Of course there were economists before Adam Smith (1723-1790) but he was the first to offer a reasonably comprehensive account of economic behaviour, founding the “classical” school of economics with its concern of how economies grow. His Wealth of Nations, published in 1776 on the eve of the American Revolution (which he supported), is a book which people quote rather than read, so its richness, its humanity and its subtlety tends to be lost. Smith, a professor of moral philosophy, later customs collector (and not as endeared to free trade as one might think), was a close friend of David Hume (1711-1776) who was also a Scottish philosopher and economist.