Monday, June 2, 2014

The Wisdom of Adam Smith for Our Own Times

Richard Ebeling emails:

This June 5th marks what would be the 291st birthday of the famous Scottish economist and philosopher, Adam Smith. Born on June 5, 1723, Adam Smith has much to teach us at a time when government continues to grow and extend its tentacles of power into virtually every corner of social and economic life.

First, the social order does not come from government, but emerges “as if by an invisible hand” through the spontaneous interactions of multitudes of people interacting and associating through an evolving system of division of labor.

Second, that human betterment doe not require the individual to sacrifice himself for some supposed “common good,” but rather naturally developments out of each person pursuing his own self-interest as he considers best for himself in a “system of natural liberty.”

Third, that the benefits from freedom and trade are universal and do not stop at national borders drawn on a map, and therefore the human community is the world.

And, fourth, that governments have neither the knowledge, wisdom, nor ability to know how to successfully plan the complex affairs of human society, and would nowhere be so dangerous as in the hands of a man who was presumptuous and arrogant enough to believe that he knows better how men should live, work and associate than the results from the free interactions of those people themselves.

If these lessons could be learned once again the world could once more move back into a direction of the freedom and prosperity that Adam Smith’s ideas helped bring about in the past.


  1. Ecuador to Transfer More Than Half its Gold Reserves to Goldman Sachs in Exchange for “Liquidity

    The example of the so-called sovereign nation of Ecuador relinquishing its gold reserves to Goldman Sachs for “liquidity” which can be conjured up by the Fed on a whim and at zero cost tells you all you need to know about how the world works (read my post: Why Fiat Money is Immoral).

    Now from Bloomberg:

    Ecuador agreed to transfer more than half its gold reserves to Goldman Sachs Group Inc. for three years as the government seeks to bolster liquidity.

    The central bank said it will send 466,000 ounces of gold to Goldman Sachs, worth about $580 million at current prices, and get the same amount back three years from now. In return, Ecuador will get “instruments of high security and liquidity” and expects to earn a profit of $16 million to $20 million over the term of the accord.

    “Gold that was not generating any returns in vaults, causing storage costs, now becomes a productive asset that will generate profits,” the central bank said in the statement. “These interventions in the gold market represent the beginning of a new and permanent strategy of active participation by the bank, through purchases, sales and financial operations, that will contribute to the creation of new financial investment opportunities.”

  2. I admire Professor Ebeling and agree with the ideas in the quotes but I would add one more as a caveat. "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices..." Since this cannot be accomplished with a voluntary agreement, crony businessmen are quick to reach for the force of government regulations and is as true today as in Smith's time. This human impulse leaves the other four ideas stillborn and no amount of teaching has helped. Finding people who are inspired by the first four ideas and are willing not to reach for force but embrace commerce without coercion is the defining challenge of the human race.

    1. to Brian Erickson: What you just stated is the most succinct summation of what I also, came to see as the "essential" dilemma of the world! Thank you.
      Listening to the MP3 of Rothbard's spellbinding account of "Man, Economy and State", I came to the conclusion that all of modern history has been based on who could achieve trading monopoly privilege first and best!