Not being clear, it [Pigou's method for dealing with externalities] was never clearly wrong.

About the only thing that seems to be required to don the label “Marxist” these days is some sense that the classes in society (and even those are vaguely defined, at best) come into conflict with each other.  By such a broad and meaningless measure, perhaps even Adam Smith was an early Marxist – after all, he wrote this:

What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour.

 

It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, a merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.

 

Q:  My paper has just been rejected. What should I do?

I have a lot of experience with the mental state you must be in, so I have three pieces of advice:

a) Don’t read the referee reports. They are likely to depress you. Even if they are potentially useful, you are not in a state of mind to enjoy them.

b) Find comfort with my motto: “A paper that has not been rejected should not be published.”  But beware of the faulty logic in assuming that “every paper that has been rejected should be published.”

c) If the report was really idiotic, do a service to the profession by following my example and posting it on your website.

Feuerbach inverted the Hegelian categories; instead of man being self-alienated God, God is self-alienated man.  Here’s a bit more from the Stanford Encyclopedia of Philosophy:

Just as Hegel held that the Absolute alienates itself when it objectifies itself in creation, Feuerbach argued that the human alienates itself when it objectifies its nature in the Divine. He argued, first, that the very act of attributing human predicates to an external divine being necessarily withdraws these same predicates from the human species to which they properly belong by denying to itself what it attributes to God. Secondly, he argues that when individual feeling is the focus of religion there is a loss of species consciousness and, consequently, a loss of unity with nature and other human beings. It involves a discrepancy between a given individual and his/her essential nature. The only valid object of human veneration should be the species/being.

Marx, in a sense, completes the transformation that Feuerbach began – man is alienated from himself in the material world.  He is a producer, but the process of production ends up causing his alienation.

The labor theory of value at the heart of Marx’s theory of exploitation is simply wrong – or, at best, very restrictive.  It works with constant cost industries/perfectly elastic long-run supply in which demand is irrelevant to price, but it is not persuasive as a general theory of price.  Why is the LTV retained by the neo-Marxists when we know it doesn’t work particularly well?  The answer is not entirely clear, but my supposition is that the Marxists are not actually very interested in an accurate theory of price (the neoclassicals were; they saw an asymmetry in Classical theory where supply side factors were emphasized almost to the exclusion of demand, and they sought to correct that) but are rather motivated by finding a value theory that allows them to sustain the exploitation of labor hypothesis.  It’s interesting that the neo-Marxists still adhere to the LTV despite the criticisms that have been levied against it.

In some universities the salary makes but a part, and frequently but a small part, of the emoluments of the teacher, of which the greater part arises from the honoraries or fees of his pupils. The necessity of application, though always more or less diminished, is not in this case entirely taken away. Reputation in his profession is still of some importance to him, and he still has some dependency upon the affection, gratitude, and favourable report of those who have attended upon his instructions; and these favourable sentiments he is likely to gain in no way so well as by deserving them, that is, by the abilities and diligence with which he discharges every part of his duty.

 

In other universities the teacher is prohibited from receiving any honorary or fee from his pupils, and his salary constitutes the whole of the revenue which he derives from his office. His interest is, in this case, set as directly in opposition to his duty as it is possible to set it. It is the interest of every man to live as much at his ease as he can; and if his emoluments are to be precisely the same, whether he does or does not perform some very laborious duty, it is certainly his interest, at least as interest is vulgarly understood, either to neglect it altogether, or, if he is subject to some authority which will not suffer him to do this, to perform it in as careless and slovenly a manner as that authority will permit. If he is naturally active and a lover of labour, it is his interest to employ that activity in any way from which he can derive some advantage, rather than in the performance of his duty, from which he can derive none.

 

If the authority to which he is subject resides in the body corporate, the college, or university, of which he himself is a member, and which the greater part of the other members are, like himself, persons who either are or ought to be teachers, they are likely to make a common cause, to be all very indulgent to one another, and every man to consent that his neighbour may neglect his duty, provided he himself is allowed to neglect his own. In the university of Oxford, the greater part of the public professors have, for these many years, given up altogether even the pretence of teaching.

Even Adam Smith, the canny Scot whose monumental book “Wealth of Nations (1776), represents the beginning of modern economics or political economy – even he was so thrilled by the recognition of order in the economic system that he proclaimed the mystical principle of the “invisible hand”: that each individual in pursuing only his own selfish good was led, as if by an invisible hand, to achieve the best good of all, so that any interference with free competition by government was almost certain to be injurious.

Of course, Smith never advocated that each individual was “only” led by his “selfish” desires.  Was this misstatement of Smith’s purpose simply because Samuelson ignored the TMS altogether?  It wasn’t widely read by economists in the mid-20th century when Samuelson wrote this (for that matter, it’s not widely read by economists today).  Was it simply more convenient to focus on “selfish” motives as economics became more mathematically rigorous; in other words, did methodology trump substance?  Was it that Samuelson, like Edgeworth before him, thought that “selfishness” applied to certain types of problems, including economic ones?

Nobody would doubt Samuelson’s genius, which makes his error even more egregious.  And Smith didn’t exactly hide what he considered to be the virtues (note the plural – virtues) in his TMS:

The man who acts according to the rules of perfect prudence, of strict justice, and of proper benevolence, may be said to be perfectly virtuous.

Smith tells us, over and over, that the virtues are more than prudence – they include benevolence, temperance, and justice.  They do not, contrary to Samuelson, only include “selfishness.”

Cato’s letters / Mandeville’s defense of  greed generated lots of responses that were doubtful of the link between private vice and public virtue.  Hutcheson, for instance, says mankind is not selfish alone, so we have to look at our mental makeup to recognize certain faculties that are congenital and that allow us to move beyond self-interest.  We have a moral sense that operated similar to our universal aesthetic sense, a capacity that operates alongside selfishness.  In short, both self- and public-interest drive us (note the origins of the impartial spectator here).   Hume enters this discourse, trying to find middle ground between Mandeville and the moralists, asking whether we can devise mechanisms that merge wealth and virtue.  The basis for society is utility – happiness in humans (this is Hume’s proto-utilitarianism).  But he then switches to industry as the key to utility.  And luxury is the best spark to industry – men respond to incentives and the dangling of luxury goods in front them prompts them to action.

Most interesting in my view was the idea that Hume’s price-specie flow model must be framed in the context of the jealousy of trade argument; it wasn’t merely an economic model to counter the mercantilist misconceptions, but rather one aimed at maintaining peace (recall the context of the times: continual warfare). Trade is a way not to eliminate but to substitute for war.  Trade is competitive, but it allows people to fight it out in the economic realm rather than on the battlefield.  Thus, Hume believed we might be able to move conflict into a space that has beneficial rather than disastrous consequences.

Here are just a few of the great online resources about Smith:

The Library of Economics and Liberty’s Concise Encyclopedia of Economics entry.

The Adam Smith Institute

Jacob Viner’s classic “Adam Smith and Laissez Faire” (by the way, I just saw today that there’s a new volume out, edited by Douglas Irwin and Steven Medema, that compiles detailed transcriptions of Jacob Viner’s Economics 301 class at the University of Chicago)

Jerry Evensky has written extensively about Smith - here’s his website (and here is just one of Evensky’s papers)

Adam Smith’s Lost Legacy 

MRUniversity videos on Smith

Carl Wennerlind (Columbia University) argued that the mercantilists have been mischaracterized  as a confused rag-tag group of self-interested merchants.  The paper around which the discussion centered was by Steven Pincus (“Rethinking Mercantilism: Political Economy, The British Empire and the Atlantic World in the 17th and 18th Centuries“), who argued that there was no consensus that we can call mercantilism.  Instead of consensus, there was vigorous and widespread debate about optimal imperial economic policy.  If nothing else, Pincus gives us a great example of how the history of ideas frames the questions in my own field of economic history: “Scholarly faith in a long period of mercantilist consensus, in which everyone believed that trade was a zero-sum game based on competition over the natural endowment of the land, has unnecessarily narrowed the interpretative range available for telling the history of the British Empire or of colonial America.”  Economic historians, Pincus argues, have been snared by the trap of a mercantilist “consensus”: the Findlay and O’Rourke reference to the 1650 to 1780 period as the “age of mercantilism” and the Robert Allen high-wage story of British industrialization, for instance (at the risk of oversimplifying, Allen argues that British success in international trade under mercantilist policy created a high-wage/cheap energy economy that fueled the Industrial Revolution).

I found Wennerlind’s discussion of the Hartlib Circle and the intellectual currents in northern Europe to be especially interesting, mostly because I knew little about it beforehand.  There were three important “isms” to the Hartlib Circle: (1) Baconianism  (2) Millenarianism, and (3) Paracelcianism.  Briefly, the Hartlib Circle was the intellectual heir to Francis Bacon, seeking to turn Bacon’s scientific method into practice; they were hard Puritans who believed that to study nature was to know God; they based their work on alchemy/mysticism under the view that physical transformations of things were possible (could transform anything in nature into anything else with appropriate alchemist techniques, complex though they may be).  The combination of these three elements led to the view that radical improvements (mostly in agriculture) were possible.  But if science/alchemy could transform the physical world, we needed a new political economy to accompany it.

In the end, if Pincus and Wennerlind are right,  Mercantilism might be the undeserving Rodney Dangerfield of the history of economic thought world.  Wennerlind argued that there were ongoing debates among the mercantilists rather than monolithic thought, and that (I think this was perhaps the most important point) we must be sensitive to the context in which they wrote.  The mercantilists were responding to specific events of their times and must be understood as such.  Thomas Mun, for instance, may have argued that England needed a higher money supply not as a matter of permanent policy but rather for the particular economic conditions of his time.  His argument may have been to re-establish a proper level of money stock given the conditions in which he wrote; in other words, it was a crisis theory, not a general theory.