Episode 174: Adam Smith’s “Wealth of Nations” (Part One)

0:00 Mark: You're listening to the Partially Examined Life, a podcast by some guys who are at one point set on doing philosophy for a living, but then thought better of it. Our question for episode 174 is something like what is wealth? And we read portions of Adam Smith's An Inquiry into the Nature and Causes of the wealth of nations, first published in 1776. For more information, please check out partiallyexaminedlife.com this is Mark Linsenmayer addressing myself not to your benevolence, but to your self love.

0:26 Seth: In Madison, Wisconsin, this is Seth Paskin

0:28 Wes: In Austin, Texas, this is Wes Alwan coming to you at about 25 cents a word. In Cambridge, Massachusetts, this is Dylan Casey

0:36 Dylan: considering the improvement of my productive powers of labor in Middleton, Wisconsin.

0:40 Mark: No guest crazy. Aren't we supposed to have an economist on with us because we're just too feeble minded to make sense of this groundbreaking text? I'm just saying what some of the audience might say, but no, we're going to do this. We already had an economist, Don, and he talked like half the time. So we're not doing that this time. We're just going to do our best here. Besides which, on that Strictly Economics episode, Seth B. Was a great guest on that. I just listened to that back. But he had even rejected this text as being, well, more of historical interest, that there were ways that this diverged quite a bit from the way people talk about economics now.

But I don't know, I saw certainly in terms of investigating where the ideas that are thrown around a lot in the economic realm, in the culture, a lot of it was right here, even if they don't have words like zero sum game and things like that. But a lot of the ideas seem to, if not be sourced here, were popularized here. We're stolen from here.

1:37 Seth: When I read it, one thing that kept coming back to my mind was the Federalist Papers that we read are the Federalist and the anti Federalist papers and this sense that they're a historical record, but at the same time an embodiment of a live discussion and critique that's still viable today. So I quite enjoyed the reading.

2:00 Wes: So I read this years ago for St. John's and I know Dylan has read it more recently than me, but probably years ago, right, Dylan?

2:09 Dylan: Yeah, until I read it again.

2:11 Wes: Yeah. So what I remembered from St. John's and what, what stood out again reading it was just the reflection on what wealth means and the larger question of whether something like wealth is material or formal. Is it a thing you possess or is it a structure? And of course, Smith is arguing that it's something formal and structured. It's really wealth lies in exchange, which we think of as the market, which depends in turn on the division of labor, but that's what produces wealth. And again, the interesting thing for me is the extent to which he's reconceiving of something that you might have thought of as simply a matter of possessing materials, something you hoard, something your treasure chest, and reconceptualizing it as a activity.

3:08 Dylan: I felt like an economic version of a 18th century scientific text. In trying to talk about what the origins were and understand there's a kind of whether it's explicitly or implicit, a state of nature argument that goes along. And he's telling how economies work, political economy works. He, he is going through a history of human economy and part of it is purely descriptive. He has, you know, pages and pages and pages that amount to this is this kind of stuff that happens. And then there's also an argument that he is making along the way. Based upon these lessons of the past and these observations of the present, we can see that the way to generate wealth and the way to maintain it follow rules. And those rules can be subverted and corrupted so that you don't have the system operating properly, but that nonetheless there is a way in which things work best.

4:12 Wes: When you say 18th century text, it's not like reading a contemporary economics textbook, which Mark mentioned. And there are probably some deficits to that that I don't really know about. But what's nice about reading this is it's. There's a lot of observations on English society of the time, and not just English society or Scottish society and but other countries as well. And he's generalizing from those observations. He's coming up with those rules or principles that, Dylan, you're talking about, that always gives it a fascinating element, you know, almost sort of an element of like a history that you might read in your leisure time, all thousand pages of it.

4:54 Mark: If you're a masochist, if you want to read about the price of corn over the last 400 years.

5:01 Dylan: Yeah, well, you might have to be in the right mind to appreciate it, but it reminds me a lot of an observational biology book where he's being quantitative, but not in the mathematical way that you'd expect in a contemporary economics book. So it's not merely qualitative descriptions. There's a lot of just general observation and extracting out rules for how things work. And often there are Explicit criticisms of the way in which current governments and economies work as being run by people who are misunderstanding how these things work

5:40 Wes: because they misunderstand what wealth is fundamentally.

5:44 Mark: Yeah.

5:44 Dylan: And they misunderstand the relationships individual people have towards it. And I think that'll be, you know, as we go along, that'll be one of the discussions to have is you see the seeds of the ideal consumer here in this book, which nowadays there are a lot of criticisms of the notion of the ideal consumer. But again, that makes me think of an early science text where you would be making simplifying assumptions in order to understand how things are working. And you get pretty far with it, but you end up eventually running up against problems.

6:19 Mark: Yeah, I very much saw this a lot like Darwin's Origin of Species that we just read in the ratio of overall points and methodological points to data, that there's a lot of examples, there's a lot of histories. And for one thing, you would expect, given that he was a moral philosopher, he wrote. So this was 1776, it was 1759. Was the theory of Moral Sentiments, his other big book, which he, as with this book, was revising right up until his death. So he very much considered those two works to be central to be a pair. I've read a lot of things that you kind of have to read one to understand the other.

We do have an old episode that was partially on that that people can go listen to. But here it's very compartmentalized that he doesn't give a lot of methodological considerations in the way that many philosophers do. He just gets down to business in the economic theorizing. And as you say, he's not mathematical about it often. I mean, again, he will give the entire history of the price of silver and the price of corn, you know, for as long as he can find back. But there's no equation ultimately that comes out of that. So you could say, well, he just hadn't developed that stuff yet.

Or you could say, actually, maybe that is a benefit. Some of my introduction to this was through econ talk. Listening to that podcast over the years, Russ Roberts really likes Smith and likes in particular the fact that Smith's version of economics is not over mathematized. That when people think that they can use formulas and numbers and things, they're kind of maybe making these assumptions are ultimately unwarranted. So it's kind of like working in science with too many significant digits for what you're measuring. So that may be that the way to do this is following Smith's model, at least Russ Roberts from the Econ Talk seems to think is a good one, that you make observations and then you talk sort of at a high level about specific issues in terms of what seems a wise course to take some overall trends.

But you don't go overboard and think that I can push this lever of state and that will raise prices this much, or something like that. In fact, one of the overall themes is maybe we shouldn't be pushing levers of state too much, that there's a natural economic order.

8:40 Dylan: Invisible hand.

8:41 Mark: Yes. Well, that's certainly a main thing for us to attack here. If this is a philosophy, as opposed to an economics textbook, it's really about just picturing the economy as this ecosystem in which any one thing is going to have effects elsewhere in the system in sort of a predictable way. Maybe not mathematically predictable, but yeah, I

9:02 Dylan: mean, he is definitely thinking about it as a system. And there's an interesting combination of moral philosophy that is assumed and notions of what the value of individuals are and what the nature of opportunity is, along with wealth, and how that does play out in terms of differences in economic situation within society and the effects that that has on individual people's lives and souls, and then what ought to be happening and the way in which particular people of advantage pervert the more natural processes in an economy to their own advantage.

Not that he doesn't think that there won't be differences, but that one thing that's, I think, surprising when I first read Adam Smith, just because he has the reputation of being the philosopher and economist of capitalism, is how concerned he is for the welfare of the poor and how their circumstances are often overdetermined by the poor structure of the economy that is really in favor of the wealthy in a particular government or political economy. You might first think that he's the father of simple laissez faire, let the chips fall where they may kind of economy, which is what I thought before I had read it.

And it's not that simple at all.

10:25 Wes: So I think the beginning of the book, book one, chapter one, this is also something that made a big impression on me at St. John's and I remembered this whole example that he uses of pin making to explain why it is that the idea is that the division of labor, it improves our quality of life, it improves the amount of stuff we can produce, and it improves the quality of the stuff that we can produce. And it does that because it breaks up some task into a bunch of different parts and allows different laborers to Concentrate on one or just a few of the tasks, the many tasks that go even into manufacturing something as simple as a pin, it dramatically increases their efficiency.

So, for instance, if you were, let's see, how many did he say? So workman, not educated to this business, nor acquainted with the use of the machinery employed in it, could scarce, perhaps with his utmost industry, make one pin a day, and certainly could not make 20. You divide that up into 10 people who are skilled in the different tasks that they can do, and they can make upwards of 48,000 pins a day. 20 pins to 48,000 pins, which are of a much higher quality than they otherwise would have been. So when you think about wealth, the first thing I think you have to think about is the way in which this.

By dividing up different forms of labor between human beings, you can actually increase this thing, wealth. It's not by just having. Having more of something. It's by the structure of one's work.

12:07 Dylan: I think that the step that he makes with that example is besides the increased efficiency is he goes on to then talk about everyday things that we have and in some detail, go through a number of examples of how much labor is really invested in some everyday object or everyday commodity that is a consequence of division of labor. And that is really the measure of the wealth and the work. And it piles on and piles on and piles on in a way that you would never be able to do in a kind of sequential way. The secret sauce of an economy is that division of labor. And as Wes just said, the generation of wealth. And he tries to have a fairly

12:52 Wes: quantitative way, this whole idea that even a simple scarf, you've got the people who take care of the sheep and get the wool from the sheep, and then there's the people who transport it. There's the various steps in the making of the scarf. And it's just the number of people actually involved in that is enormous. And so that's one other thing that Smith emphasizes is this sense in which we are just for our kind of quality of life that we enjoy. And even more so today, we're dependent on an enormous number of people all over the world for that. We wouldn't have that by ourselves if it weren't for that interdependence in a market. And then the division of labor, our quality of life would be much, much

13:35 Mark: lower because we would all be rude, naked savages.

13:39 Wes: Yes. So he does go into the different things which. The advantages of the division of labor. So dexterity is one of them. So he says, by Reducing every man's business to some one simple operation. And by making this operation the sole employment of his life, that increases their dexterity, saves time. The second one, the saving of time in passing from one sort of work to another. So if you're manufacturing something and you do everything with regard to that, you might have to. So he gives the example of a country weaver who loses a good deal of time in passing from his loom to the field and from his field to the loom.

So that's one part of it. And then finally there's the technological leverage that you get. Because the idea is that when people are focused on these specific repetitive tasks that they have to do over a long period of time, they're better at coming up with ideas, labor saving ideas for performing those tasks. And you get these technological advancements which you know are also essentially wealth producing. So he gives the example of boys who. They're employed in fire engines to open and shut something that communicates between the boiler and the cylinder according to whether the piston is ascended or descended.

And they discover that by tying a string from the handle of the valve, which opens this communication to another part of the machine, the valve would open and shut without his assistance and leave him at liberty to divert himself with his playfellows.

15:21 Mark: He does tell us the downside of the division of labor. Two, the man whose life is spent in performing a few simple operations has no occasion to exert his understanding or to exercise his invention. He naturally loses, therefore, the habit of such exertion and generally becomes as stupid and ignorant as it is possible for a human creature to become.

15:39 Wes: Yeah, this is volume two. You're reading from, right, book five.

15:43 Mark: I looked up the word stupid to find.

15:45 Wes: Yeah, so that's much later in volume two, when he.

15:48 Dylan: Yeah, it's the embedded Marxist critique.

15:51 Wes: Right.

15:53 Mark: So that's part of the compartmentalization I would describe of the book, is that we asked, what is wealth? And you might say, well, wealth, that's not just material things. That's honor, that's compassion, that's love. Like. Well, he deals with all that in the Theory of Moral Sentiments. He doesn't think that money is all there is, but he's talking about financial wealth here, period. And so he's not, with a few exceptions here and there, concerned with other goods. That's just not the subject of his analysis.

16:23 Dylan: The example that you gave of the effects of it, he peppers the book with that kind of thing. I wanted to point out in the division of labor that he makes the distinction between using Machines and then those who invent the machines, only because it turns out it's because of the philosophers. He says many improvements have been made by the ingenuity of the makers of the machines, when to make them became the business of a peculiar trade. And some by that of those who are called philosophers or men of speculation, whose trade it is not to do anything but to observe everything, and who, upon that account are often capable of combining together the powers of the most distant and dissimilar objects in the progress of society. Philosophy or speculation becomes like every other employment, the principal or sole trade and occupation of a particular class of citizens.

17:14 Wes: I think he's thinking of scientists here.

17:16 Dylan: No, of course he is.

17:17 Wes: Yeah. You know, and of course, like someone like Leibniz, right. Was not only co invented calculus, but also was. He was inventing things for mining operations. He was doing all kinds of very practical inventing and coming up with machines and things like that.

17:35 Mark: And just to throw the ad hominem in there, this book obviously took a tremendous amount of work. And he was not working. It was not a matter of his generous retirement from his professorship. He was a professor for a while and he was a customs overseer, I think. Apparently he was given a stipend based on some tutoring that he did for a fairly limited time, but they just kept paying him for the rest of his life based on that is one of the things. Biographical things I'd heard. So it's not like he was selling his words out by the paragraph here. He was not the model of the.

18:09 Wes: He did have a podcast on the side though, which helped him.

18:12 Mark: He was a specialist. He was able to, by not having to spend his time on these other things, really learn a lot about this stuff. So in that way he was exemplifying what's going on here.

18:22 Seth: Well, he's got some ad hominem attacks. I don't know if ad hominem, but he has this characterization of the country versus the city. It gets more explicit later on. But he talks about. On page 16, Wes, I caught glimpses of you talking about how the country workman has to move from the field to the loom or whatever it is, and that it makes them slothful. A man commonly saunters a little in turning his hand from one sort of employment to another. When he first begins the new work, he is seldom very keen and hearty. His mind, as they say, does not go for it.

And for some time he rather trifles than applies to good purpose. The habit of sauntering and of indolent, careless application, which is naturally, or rather necessarily acquired by every country workman who is obliged to change his work and his tools every half hour and to apply his hand in 20 different ways almost every day of his life, renders him almost always slothful and lazy, incapable of any vigorous application, even on the most pressing occasions. So typically when you talk about Marx, Marx romanticizes the worker who owns the product of their labor, which is to say, you know, the cobbler, the blacksmith, Somebody who works on all phases of production and actually owns the output of their labor.

And what in that paragraph, Smith is essentially saying is that the lack of division of labor, the idea that you would actually own all the means of production, and it makes you slothful and indolent.

19:51 Wes: Yeah, it's interesting because he actually, more generally, he'll have a lot more positive things to say about the country. Right. Than the city. And he does even, like Marx, he acknowledges the way in which devotion to a single trade, even much less a single task within the division of labor, can sort of narrow your mind. Whereas people in the country can do all sorts of different things and have more common sense.

20:15 Mark: I also remember another place where he's talking about how people who manage themselves. You might think that since they don't have a boss, they would be lazier. But actually they end up working harder because they have more of an incentive since they get more of the fruits of their labor. You know, if you have the opportunity to make a profit, you generally are not going to just say, oh, I have enough money, and then you rest like. No, people tend to take advantage of that. In fact, work themselves to exhaustion. If they really have a good system of getting immediate money back for completing a piece of work, say.

20:49 Dylan: In fact, he points to it as a problem for having workmen ruin themselves because they're making money by the piece. And in a thriving market, they can overdo it easily and ruin themselves.

21:03 Seth: Yeah, he does say that later, but that's more an incentive thing. Being paid a wage for hourly work to just produce whatever versus being paid for project work. The outcome, you know, producing something. This comparison here is not the same thing where he's talking about division of labor in this first part. Later on, he's talking about the difference between being paid wages for labor and being paid on a per piece or per output basis. I'm just making the point. The observation, really, that what he's suggesting here is that the character of the human being is determined by work.

And even though it's not such that he does it in a way where he's being critical or whatever. It strikes me as odd that he would not somehow reference a fixed conception of human nature, at least with respect to thinking about theory of moral sentiments. And his, you know, the way he talks about human beings have this capacity for a moral sentiment that connects to other people and to empathize and then to say, well, but work actually makes you essentially slothful or industrious.

22:13 Dylan: I mean, the context of this particular section is talking about how division of labor saves time. And he starts out in the section just talking about how much time is lost in going from one activity to another. In the beginning of that paragraph, he says, it is impossible to pass very quickly from one kind of work to another that is carried on in a different place and with quite different tools. A country weaver who cultivates a small farm must lose a great deal of time in passing from his loom to the field and from the field to his loom. When two trades can be carried on in the same workhouse, the loss of time is no doubt much less.

It is even in this case, however, very considerable. A man commonly saunters a little in turning his hand from one sort of employment to another. I mean, it becomes in the next few sentences much more ad hominem, where you're rendered slothful and lazy by the fact that you have 20 things to do in doing this one activity. I agree with you. It sort of seems to blunt the point.

23:12 Wes: It's important that we find the counterpoint to this. Because he says a lot of things that sound exactly opposite when he's talking about the country worker.

23:20 Dylan: I agree. I was just trying to set the context of it, which is the idea that by dividing labor you save time and going from one activity to the other. And I agree that the end of this is at odds with frequent characterizations he has of essentially country workmen.

23:36 Seth: He went from descriptive to normative. If he just said it's frequently the case that it's difficult to change tasks. And you're likely to take pauses or whatever. So it's not as efficient to do all of the different tasks yourself. But instead, somehow it becomes a statement where the fact that you do this means that you're indolent and lazy. And I just want to point that out because I have a feeling I'm going to come back. And I'm going to try to go back at Russ Roberts with this. Because I'm a devotee of econ talk and his hagiography of Adam Smith and F.A. Hayek, now that I've gotten to the source material.

24:11 Wes: Yeah.

24:12 Mark: So I should revise, given as part of my introduction, the fact that he is setting aside a lot of questions of value because he already dealt with them in theory of moral sentiments. The exception is what we've been talking about here. The places where economics can be abused, the places where we deviate from creating the best possible economic environment, things to do with incentives. So the fact that if you don't really have an incentive financially to work hard, then you won't. If the taxes are too heavy, if the landlord is taking too much, whatever, you know, it's very similar to if you don't have an incentive to invest your capital because you're not going to make enough profit off it, then you won't.

Not necessarily. Again, you particular in this circumstance, but overall people won't. So in some of the circumstances like the one we're just talking about, you can kind of put that in terms of laziness or vice or something like that. And likewise with masters are always just ready to collude. They're ready to bribe the government to, you know, make special tariffs to protect their industry for the most part. I think he talks about these in a fairly value neutral way in terms of incentives, but he definitely has opinions about that this is bad behavior and is not shy about saying that.

So Chapter two. Yeah. What is the principle that gives occasion to the division of labor? We actually have a little bit of discussion of the nature of man, even though he says, well, that's not really our question today. But that's at least we get a

25:39 Seth: little bit of it comes from our propensity to exchange, which is uniquely human, which is also probably speculative and not actually correct. But animals don't trade.

25:51 Wes: Well, yeah. Can you think of an example?

25:54 Seth: Well, the birds that clean the teeth of the crocodiles, there's a lot of

25:57 Dylan: like, well, that's symbiosis, which isn't quite the same thing as trading, but it's

26:02 Mark: things that are analyzed post hoc as economic transactions. That's what I thought was interesting that we. They don't have that in mind in the explicit way that we do, but it seems like what we do has to be an emergent phenomenon from that fundamental types of symbiosis. That even just the fact that like one animal shows affection to the other, like, well, we could say, oh look, the female is trading sex for protection from predators or something like that. And you know, at some point that very implicit sort of exchange just gets made explicit probably as Smith says, when we learn to talk and reason, the

26:37 Wes: idea is that there's no specialization. So I think a good analogy would be cell specialization, actually. And the way that leads to more complex organisms with different sorts of functions. But ad hoc symbiotic trades between animals. Unless they are the result of any sort of specialization, they're not wealth increasing trades in the sense that Smith is talking about. The exchange he's talking about is I concentrate on arrowheads, you concentrate on arrow shafts, we make more arrows and better arrows. Or I concentrate on arrows, you concentrate on bows, or however you want to divide it up. That's the kind of exchange that animals can't do.

27:17 Seth: Well, there's a sense of recognition. So if you look at the second paragraph of chapter two, and I quote, in civilized society man stands at all times in need of the cooperation and assistance of the great multitudes. While his whole life is scarce sufficient to gain the friendship of a few persons. Man has almost constant occasion of the help of his brethren. And it is in vain for him to expect it from their benevolence. Only he will be more likely to prevail if he can interest their self love in his favor and show them that it is for their own advantage to do for him what he requires of them.

Whoever offers to another a bargain of any kind proposes to do this. So there's a lot packed into that tiny little section, those few sentences there. This notion that human existence is there's no such thing as solitude. You exist in debt or in need of the multitude. But it's not necessarily the need of power versus unpower or possession versus non possession. It's mutual precisely because of what Wes described, of the need for specialization or the possession of a variety of distributed goods and abilities and so forth. So when you recognize that you need others, you have a choice.

You can rely on their goodwill and just hope that people will help you to fill all the deficits and give you all the things you need or protect you in the way or whatever it is. Or you can propose to provide some value that you yourself can create in exchange for some value that they can offer.

28:52 Dylan: Did you find that this bargain of any kind, does it rise to the level of a social contract for Smith? Or is it much more localized and then it grows out of that localization as a kind of self organization?

29:06 Seth: It didn't strike me as social contract, it struck me as localized, you know, sort of his description, I think you mentioned, I caught a snippet. Did you mention state of nature?

29:15 Dylan: He refers to State of nature.

29:17 Seth: Often it's not that we're engaging in a contract because this doesn't elevate to the level of I'm going to barter with somebody and I need a third party to enforce that. Although I'm sure he was aware of that. I think he was just trying to describe the mechanics of how it might work or how it might arise, and not using necessarily the same nasty, brutish, and short, more like a mutual benefit.

29:41 Wes: But I think the comparison is the nasty, brutish, and short, existence of the state of nature which leads to a social contract, a state in which we give up some of our rights to improve our lives. You know, I think he thinks when he's talking about savages and things like that, that without the market and division of labor, without exchange, we're basically in the position of animals or near animals. And our only way of getting out of that is through this exchange. And, you know, we don't hand over authority to a government in doing that. But in some sense, the analogy is that we're handing over a certain amount of authority to the market or to some social structure.

It's not explicit. It's not a contract in that sense. But we do give up something, right? We give up the. We call it the right. But, you know, we give up the activity, unless we're the farmer or country laborer of doing a bunch of different things ourselves. And we focus, you know, he praises less technologically advanced societies at some point for their martial values that arise from the fact that anyone can kind of do anything. You know, if you live in one of those societies, you can hunt, you can be a statesman, you can do this, you can do that.

And that's more virtuous in a way. You lose a lot when you move to the point of specialization. It increases your quality of life and the quality of life of everyone around you. It allows you to have nicer things, more things. But there are tremendous compromises to the human spirit and to the possibility of virtue, which he addresses in volume two. I think you're right, Seth, but I just thought there's an analogy there in terms of something that we give up and something that we gain, and then a movement from a sort of miserable state to something better.

31:24 Mark: I think the whole idea of a contract, in the way that social contract theorists talk about it is very much alien to the way Smith talks about emergent order. That the idea with a social contract is that. I know you don't remember, you didn't explicitly say to the government you can have these rights of mine that I used to have, and I will receive this protection. But if you reflect on your current relationship with the government, you will find that you've implicitly, as an individual, assented to that kind of thing. That's what at least some of what the social contract theories say.

31:57 Wes: I think the contract is actually in emergent order. I don't think the idea is that people explicitly said to each other at some point in time, oh, let's start a government. Life's going to be better. It just happened. And it happens gradually, and it involves a lot of different overlapping structures.

32:12 Mark: But don't you think that when you're trying to see whether social contract theory is accurate, is this a convincing thing, at least the way we've been talking about it often is. You kind of reflect on your own experience and you say, yeah, that is a pretty good deal. I know I didn't explicitly made that, and this is just a myth. It's not like any of my ancestors explicitly did that. But that's the kind of thing that I would agree to. And I still think there's something that's very foreign between that and what's going on in wealth of nations that he has a political story. This is in book three, where he talks about how having a developed economy leads you to a freer, less feudal. When people didn't have the capacity to use their surplus wealth as capital, then they would instead use it to entertain a lot of people and basically make

33:05 Wes: them win their obedience. Vassals.

33:07 Mark: Yeah, yes, you win there. You're obedient. So I was really thinking about Game of Thrones. I have been watching some of that again, and like how the big rich house essentially owns it, has the pledge of loyalty, can call them up at any point, the other nobles, and then each noble house owns really all the peasants in their area. So it's an emergent thing that when you develop an economy such that the noble people wouldn't then be supporting other people in that way. Instead, they would be investing that money and thereby supporting the same people in a different way, you know, as merchants that they're paying to do things, but because no one noble, like, owns you like you are owned, you gain your benefit, but from a whole lot of people in this way that we were just talking about before that, that ultimately ends up giving you more freedom. It has more political.

33:56 Wes: He calls it a revolution. Actually, he uses the word revolution.

33:59 Mark: That seems to me just a very different way of talking about any of the social contract theorists that we've looked at whether it's society is bad, you know, social contract. It was so bad that we had to give everything to a sovereign or like Rousseau, that we lost out by getting together or by Locke. Well, we've given a little to the social contract. Yeah.

34:19 Wes: The contract pre exists that moment when you move from a feudal society to.

34:23 Mark: So you're thinking that these are ultimately compatible. You could be a social contract theorist and this could be just a description of what happens later.

34:30 Wes: Yeah, I don't understand the incompatibility. You think they're incompatible. I thought we were just sort of milking an analogy and you were trying to say the analogy isn't very good.

34:40 Dylan: I just raised it as a genuine question because when I read the section on the origins, when I see a bargain of any kind, it just made me think of the implicit agreements in social contract stuff. And maybe part of the reason that was in my notes is maybe I just read Rousseau, I don't know. But I was struck by that same thought again in reading that section. It sort of feels a bit unresolved to me that he simultaneously talks about there being rules, but those rules seem to be borne out of more or less independent actions that have patterns and rules for how they work, but don't rise to the same level as the social contract in terms of maintaining stability of society.

There's this inherent organic stability that he wants to point to, which is sort of exemplified with the invisible hand argument that things just work in. I'll use the term in an organic way and as opposed to in the social contract idea that you incur obligations that you implicitly assented to and then you have other kinds of problems. I don't think that they are mutually incompatible, but they seem to have different notions of where stability comes from.

35:56 Wes: So we're talking about the extent to which the market ensures the well being of a society and the extent to which we need government intervention. Is that the.

36:03 Dylan: I think that becomes a side question.

36:04 Wes: Right, yeah. The market can't be your government. We need something more than a market.

36:09 Mark: How do you get people to keep their contracts? I mean, it could just be that if they break their contract then you don't work with them again.

36:14 Dylan: Okay, well in fact, he talks about that, right. I mean, there's a thread in the discussion of contracts and agreements where he makes it very radically individual, saying, well, people, eventually somebody will go out of business because they break all their contracts. When I was reading that section, I was thinking it's so sort of globally, universally and systematic Right. It's like a certain number of wildebeests will die during the drought. And the population of wildebeests will be regulated by the lions and the tigers and the bears and the droughts.

And that's all fine and good for understanding how wildebeests work in an ecology. Right. But if you're an individual wildebeest who's dying because of the lions and the tigers, you might not be so excited about that prospect. So I think we can point to both those occasions in Smith where he has this notion of this symbiotic environment working on its own. And then in the absence of rules, you get corrupted non natural economies that don't work. I don't know the book well enough to know if he ultimately resolves those two things.

37:22 Wes: I just found the part that Mark was talking about. The great proprietors, he calls them, who control people by entertaining them, giving them things and demanding their obedience. They are a source of great injustice. They can, you know, he says, they're interrupting the regular execution of justice, disturbing the peace of the country. It's a more warlike society.

37:45 Dylan: What section?

37:46 Mark: Book three, Chapter four.

37:47 Wes: Yeah, so he says. The tenants having in this manner become independent and the retainers being dismissed, the great proprietors were no longer capable of interrupting the regular execution of justice or of disturbing the peace of the country, having sold their birthright, not like Esau for a mess of pottage in a time of hunger and necessity, but in the wantonness of plenty for trinkets and baubles fitter to be the playthings of children than the serious pursuits of men, they became as insignificant as any substantial burgher or tradesman in a city.

The idea is that at a certain point they turned away from tenants to just buying luxuries. A regular government was established in the country as well as in the city, nobody having sufficient power to disturb its operations. The one any more than the other. A little later. A revolution of the greatest importance to the public happiness was in this manner brought about by two different orders of people who had not the least intention to serve the public. To gratify the most childish vanity was the sole motive of the great proprietors. The merchants and artificers, much less ridiculous, acted merely from a view to their own interest, and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got.

Neither of them had either knowledge or foresight of that great revolution which the folly of the one and the industry of the other was gradually bringing about. So the people who used to be dependent on the proprietors. Become the people who sell them their luxuries as they gain independence. And therefore deprive them of the power to do as much damage to justice.

39:18 Mark: And we've been talking as if he's this picture of equilibrium in economics and the rational actor. Where he's sort of talking like a physicist or chemist or something. And so you could give a picture of. Here's what human nature is basically like in terms of what can we say about how industrious we are, what our relationship toward various incentives is. And given that, you can understand, at least you can give a historical story of how we've gotten where we are today. But that kind of overall picture, I think, is quite different than a very oversimplifying thing like why are we where we are today?

Because we implicitly bought into a social contract. That kind of reduces this whole long history to one step, one mythical step. That's what I think is just fundamentally against the spirit of what Smith is trying to do. That he is really just. Is much more historically minded in what you were just describing.

40:11 Wes: Really. I just don't have the same idea of social contract as you. Whether it's this, people getting together and signing a contract. I see it as the same sort of theory, a sort of long emergent process. I may be wrong about that, but I don't think we're having an argument about.

40:26 Mark: We're not having an argument about a text we just read. So I guess since we're just comparing this to past episodes, let's agree to disagree at the moment and circle back.

40:35 Wes: Yeah. Anyway, the disagreement's not about Smith.

40:38 Seth: Well, there is a part in book one, chapter two, before he starts talking about the market aspect of things, where he suggests that the natural differences between people are overstated. And that the differences are really in majority due to habit, custom and education. Essentially suggesting that what prompts people to specialize or to divide into specific labors is a function of upbringing and society and education and habit. And not so much that we think of somebody being particularly strong and they'd be a manual laborer and somebody being small and being able to manipulate things. But he suggests that the division of labor is actually driven by social considerations, which I found interesting. Also kind of a throwaway comment that he doesn't really pursue.

41:29 Dylan: He has a great sentence at the end of the section. It says, many tribes of animals acknowledged to be all the same species derived from nature. A much more remarkable distinction of genius than what antecedent to custom and education appears to take place among men by nature, a philosopher is not in genius and disposition half so different from a street porter as a mastiff is from a greyhound, or a greyhound from a spaniel, or this last from a shepherd's dog.

41:59 Mark: Yea, the effects of these different geniuses and talents among dogs, for want of the power or disposition to barter in exchange, cannot be brought into a common stock and do not in the least contribute to the better accommodation and conveniency of the species. That's the whole reason he brings that up.

42:12 Dylan: Yeah.

42:13 Wes: Well, in other words, it's the tendency to exchange that actually leads to people specializing and differentiating and having different talents, which begins at about the age of 13, he says, when we start branching out, but that branching out itself would not happen if we couldn't use it to our advantage, to our own self interest. You know, I'm going to become really, really good at this. So I can get that thing you produced that you're really, really good.

42:39 Unknown speaker: Yeah.

42:39 Dylan: So among men, on the contrary, the most dissimilar geniuses are of use to one another the different products of their respective talents by the general disposition to truck barter and exchange being brought, as it were, into a common stock where every man may purchase whatever part of the produce of other men's talents he has occasion for. This section reminded me of. There's a trope in movies where you have dogs that get together and they have all the dogs that exhibit their different talents and they form a gang, right? You have the sheepdog who's the head of the gang, and you have the bulldogs who are the heavies and so forth.

43:19 Mark: The lock picking dog.

43:20 Dylan: Yes, the lock picking. So it only makes Smith's point that dogs actually don't get together in that way when they form packs to leverage a global Ocean's Eleven kind of hack.

43:33 Seth: Right.

43:34 Dylan: There's no such thing of that among dogs. Right.

43:37 Wes: That actually is a good point.

43:40 Seth: And as a consequence of this is he says essentially the concept of social relationships is built upon the possibility of exchange, which I think overstates the point.

43:52 Wes: We'll say more about that.

43:53 Seth: The quote that Dylan just read where it basically says if you can't exchange strength for speed, if there's no barter and exchange, then there's basically no basis for a relationship. Granted, Smith is not here talking. Maybe this is where the Theory of Moral Sentiments becomes a companion piece to this. It's the notion that you can potentially have a relationship with others that's not based on exchange, that's really based on this idea of empathy or sympathy.

44:23 Wes: So I didn't see it as not saying that there couldn't be a relationship. I thought he was saying that if there weren't a propensity to exchange for the sake of self interest, there'd be no reason to specialize. And if there were no reason to specialize, then the talents couldn't be brought into common stock. The nature of specialization is that it produces things that can be brought into the common stock and benefit humanity as a whole. But if prior to that specialization, right, I might have a lot of talents, again I might be the warrior and the statesman and this and that, but those aren't things I trade because everyone in my society is also that there's no sense in which any of those talents are sort of leveraged for the common benefit of humanity.

The point where someone becomes the statesman and someone becomes the warrior and they do it much, much, much better, then society's wealthier for that. Society actually benefits from that.

45:11 Mark: And I think you could have relations in which you make use of each other's talents that are not economic relations. Like in a tribal sense society. It could be kind of from each according to his ability, such that if we need the lock picker, we need the ninja to come out front, then they'll come out front. And it's not like that person is getting a financial bonus for doing that. If you're talking about a family with a bunch, you know, 10 kids in it, that's not an economic relationship. Even though you could post hoc analyze it as an economic relationship and say, oh yeah, yeah, though each, each of the kid is helping out and receiving love and protection in exchange.

But no, that's not actually what economics is here. It's the explicit barter, which only is a matter of when you're dealing with strangers, when you're dealing with your close associates, when you're maybe pre economic, then you're doing straight up ethics. Straight up. And of course ethics are relevant to dealing with strangers as well. But you add this new dimension and the whole point here is that the overall wealth, when you're able to expand your network so much farther than you could in a tribal society by using these economic relations, then you use much more of other people's labor than you could in, you know, a tribal or family situation.

46:19 Seth: I can accept that characterization. But I mean, it feels to me like what he's saying here is you're an animal or you're a savage, or you're a human being. And what distinguishes and what makes it Possible for you to be a human being is a society where exchange is possible. And specialization in the division of labor, the division of labor is the mechanism, but it's the propensity for exchange. He's suggesting that it's like, of course, evolutionary. Anytime an old school philosopher uses the word savage, then you can assume a developmental or certainly a value latent or normative concept. But the idea that you evolve to cease to be somebody who's like a jack of all trades and you evolve to specialization and what makes that possible? Why is it that some societies do and some societies don't.

47:09 Wes: Yeah, when he's using the word savage, he means the lack of technological advancement and the. I think, yeah, the lack of specialization

47:17 Seth: that he's talking about, he means the lack of exchange. If you kill your own animal for the hide to make your own shirt and your teepee and your meat and all that stuff.

47:26 Dylan: I hear in what you're saying, Seth, the sense that he's summing up everything that there is to be a human being in terms of the capability for exchange. And I guess if I think about the rest of the comments in the book, and I think also about Theory of Moral Sentiments, I feel like in general he would put the ability to exchange as being certainly a core fundamental aspect of what it means to be a human being. But it wouldn't be that. That would be all there was to say. And certainly it isn't in terms of the gathering of wealth, the sole and primary good of being a human being.

48:00 Wes: Obviously, people, before they begin the specialization, are human beings. He's not saying that. He's not saying that they're not human beings. He's just saying that this is something that animals can't do. It's not necessary for being a human being. It's not sufficient for being a human being. But it's not the case that animals can do this.

48:17 Seth: Okay, let's grant that to the animals. So for the savages, which is to say he mentioned specifically American Indians, when do you make the transition from a life of self sufficiency? Subsistence living, of course, but self sufficiency, how does that transition to exchange, where you say, oh, you know, what if instead of weaving and hunting and cooking and all these things, I just focus on making bow and arrows? He describes it later in the book, but what is the mechanism for that happening?

48:49 Dylan: The growth of a market, the shift

48:51 Mark: from a process ontology to a thing ontology.

48:55 Wes: So I just wanted to say, again, he acknowledges all the problems. You know, there's a whole Section in volume two on the progress of the division of labor basically destroys people. He has lots of good things to say about the state that we're in prior to that.

49:10 Dylan: But even right after the next chapter, the limit of the division of labor is all about how the ability to generate wealth, that is to take advantage of the division of labor depends upon the extent of the market, how much trade there is available. And so I think that sort of goes towards Seth's question, like, what is limiting about it? Well, what's limiting is where that turns and you start growing based upon dividing labor and accruing wealth has to do with trade and having markets available. So that that specialization capitalizes.

49:43 Wes: Transportation is really what he's talking about here.

49:46 Seth: That's what circumscribes the possible domain of that. But I still think there's this. The mechanism that he describes is essentially moving from subsistence to moving to the creation of surplus. So, again, if you're the individual that works in that society, Wes, where you're the warrior and the hunter and the fisher and the agriculture, and you. You have subsistence living, and there's got to be some motivation, some aspiration for something above subsistence that drives you to specialize for the purposes of creating surplus for what you can consume, whatever you pick.

You say, I'm going to just do hunting. You're going to hunt to generate or to create more meat or more hides or whatever than you can possibly consume. And the reason you're doing that is you're trying to create surplus that you can exchange for other people's surplus. So the transition from subsistence living to this economy of exchange begins, in some sense with the recognition that you have to produce more than you can consume of one particular commodity in order to create a surplus that you can exchange. That's the way it works. And then how much you can do is circumscribed by the market, as Dylan described.

50:59 Wes: So I think we should acknowledge that even if American Indians are the example, there is already, of course, a division of labor going on. The men are going out hunting. The women are doing different things. They're a different type of American Indian society. Some were more, at least after a certain point, focused on agriculture. And people are doing different things, and they do different things because it improves their quality of life. That's basically it. If no one is an expert, if everyone is just a jack of all trades, your quality of life is far more miserable.

51:29 Mark: Well, it could be that Naked Savage is really an asymptotal thing that, like any actual Groups he describes is. Some of his examples are. I'll make the arrow, you make the boat in these primitive societies. So it's definitely a gradual process. It's not that there's a actual societies, something you would call society. That have no division of labor at all. That's just maybe this is the imaginary beginning point.

51:52 Wes: There are lots of hints in here that he thinks spiritually you're better off. So in volume two. The man whose whole life is spent in performing a few simple operations. Of which the effects too are perhaps always the same or very nearly the same. Has no occasion to exert his understanding or to exercise his invention. In finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion. And generally becomes as stupid and ignorant as it is possible for human creature to become. The torpor of his mind renders him not only incapable.

Of relishing or bearing a part in any rational conversation. But of conceiving any generous, noble or tender sentiment. And consequently forming any just judgment concerning many of the ordinary duties of private life. And so on and so on. That just corrupts the activity of his body. And it is otherwise, in the barbarous societies, as they are commonly called. Of hunters, of shepherds and even of husbandmen. In that rude state of husbandry. Which precedes the improvement of manufactures and the extension of foreign commerce. In such societies, the varied occupations of every man.

Oblige every man to exert his capacity. And to invent expedients. For removing difficulties which are continually occurring. Invention is kept alive. And the mind is not suffered to fall into that drowsy stupidity. Which in a civilized society seems to benumb the understanding of almost all the inferior ranks of people. People, the working classes in those barbarous societies, as they are called. Every man, it has already been observed, is a warrior. And then he's. Every man is a statesman. And down a little bit. Every man does or is capable of doing almost everything.

Which any other man does or is capable of doing. Every man has a considerable degree of knowledge, ingenuity and invention. But scarce. Any man has a great degree. Then he gives a little self pat on the back for the role of the philosopher. But anyway, he acknowledges that you lose something very important. So we're really just talking about material comfort here and there. Are, you know, there are other benefits. He seems to think commerce can lead to more ordered governments. But what we lose in doing all that is enormous.