The Wealth of Nations by Adam Smith

262 results back to index


pages: 330 words: 77,729

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes by Mark Skousen

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, banking crisis, Berlin Wall, Bretton Woods, business climate, David Ricardo: comparative advantage, delayed gratification, experimental economics, financial independence, Financial Instability Hypothesis, full employment, Hernando de Soto, housing crisis, Hyman Minsky, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, means of production, microcredit, minimum wage unemployment, open economy, paradox of thrift, price stability, pushing on a string, rent control, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Shiller, rolodex, Ronald Coase, Ronald Reagan, school choice, secular stagnation, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, unorthodox policies

Since the copyright expired, many publishers have put out their own editions, including the University of Glasgow, University of Chicago, Everyman's Library, and Liberty Press; there's even a Bantam paper-back, unabridged! My preference is the 1937 (latest reprint, 1994) Modern Library edition, edited by Edwin Cannan. The significance of The Wealth of Nations has reached such biblical proportions that a complete concordance was prepared by Fred R. Glahe (1993), economics professor at the University of Colorado. Oh, the wonders of computers! Did you know that the word "a" appears 6,691 times in The Wealth of Nations? A concordance is undoubtedly valuable, especially for scholars. For example, "de-5.1 recommend the book Adam Smith Across Nations: Translations and Receptions of The Wealth of Nations, edited by Cheng-chung Lai (2000), for a fascinating account of the influence of Adam Smith's book over the centuries. mand" appears 269 times while "supply" appears only 144 times. Keynes would be pleased. Smith Is Appointed Customs Official and Bums His Clothes Following the publication of his classic book.

They point to the fact that God is not mentioned in The Wealth of Nations. However, as noted earlier, Smith did not abandon his religious beliefs. His Theory of Moral Sentiments, which he edited again after the publication of The Wealth of Nations, makes numerous references to God and religion. Smith was admittedly no longer a practicing Presbyterian, rebelling against austere Calvinist behavior, but he was a believer, a Deist who adopted the Stoic belief that God works through nature. As an optimist, Smith believed in the goodness of the world and envisioned a heaven on earth. Benjamin Franklin Biographers John Rae and Ian Simpson Ross give credence to the story that the American founding father, Benjamin Franklin (1706-90), developed a friendship with Adam Smith and had some influence on his writing The Wealth of Nations. John Rae recounted how Franklin visited with Smith in Scotland and London and, according to a friend of Franklin, "Adam Smith when writing his Wealth of Nations was in the habit of bringing chapter after chapter as he composed it to himself [Franklin], Dr.

Time, May 22, 110-12. Galbraith, John Kenneth. 1975 [1965]. "How Keynes Came to America." In Essays on John Maynard Keynes, ed. Milo Keynes, 132-41. Cambridge, UK: Cambridge University Press. Garrison, Roger B. 1985. "West's 'Cantillon and Adam Smith': A Comment." Journal of Libertarian Studies 7, 2 (Fall): 287-94. . 2001. Time and Money. London: Routledge. Glahe, Fred R., ed. 1978. Adam Smith and the Wealth of Nations: 1776-1976 Bi-centennial Essays. Boulder: Colorado Associated University Press. . 1993. Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations: A Concordance. Landam, MD: Rowman and Littlefield. Gordon, H. Scott. 1967. "Discussion on Das Kapital: A Centenary Appreciation." American Economic Review 52, 2 (May): 640^-1. Gutierrez, Gustavo. 1973. A Theology of Liberation: History, Politics, and Salvation, trans.


pages: 462 words: 150,129

The Rational Optimist: How Prosperity Evolves by Matt Ridley

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

23andMe, agricultural Revolution, air freight, back-to-the-land, banking crisis, barriers to entry, Bernie Madoff, British Empire, call centre, carbon footprint, charter city, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, colonial exploitation, colonial rule, Corn Laws, credit crunch, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic dividend, demographic transition, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, everywhere but in the productivity statistics, falling living standards, feminist movement, financial innovation, Flynn Effect, food miles, Gordon Gekko, greed is good, Hans Rosling, happiness index / gross national happiness, haute cuisine, Hernando de Soto, income inequality, income per capita, Indoor air pollution, informal economy, invention of agriculture, invisible hand, James Hargreaves, James Watt: steam engine, Jane Jacobs, John Nash: game theory, joint-stock limited liability company, Joseph Schumpeter, Kevin Kelly, knowledge worker, Kula ring, Mark Zuckerberg, meta analysis, meta-analysis, mutually assured destruction, Naomi Klein, Northern Rock, nuclear winter, oil shale / tar sands, out of africa, packet switching, patent troll, Pax Mongolica, Peter Thiel, phenotype, Plutocrats, plutocrats, Ponzi scheme, Productivity paradox, profit motive, purchasing power parity, race to the bottom, Ray Kurzweil, rent-seeking, rising living standards, Silicon Valley, spice trade, spinning jenny, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, supervolcano, technological singularity, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, ultimatum game, upwardly mobile, urban sprawl, Vernor Vinge, wage slave, working poor, working-age population, Y2K, Yogi Berra

‘Kelly Cobb of Drexel University set out to make a man’s suit’. http://www.wired.com/print/culture/design/news/2007/03/100milesuit0330. See also http://www.thebigquestions.com/2009/10/30/the-10000-suit. p. 37 ‘In civilized society,’ wrote Adam Smith’. Smith, A. 1776. The Wealth of Nations. p. 38 ‘Leonard Read’s classic 1958 essay “I, Pencil”’. Read, L.E. 1958. I, Pencil. The Freeman, December 1958. For a fine modern rerun of the same subject see the novel by Roberts, R. 2008. The Price of Everything. Princeton University Press. p. 38 ‘As Friedrich Hayek first clearly saw’. Hayek, F.A. 1945. The use of knowledge in society. American Economic Review 35:519–30. p. 39 ‘a smaller quantity of labour produce a greater quantity of work’. Smith, A. 1776. The Wealth of Nations. p. 39 ‘you would have spent your after-tax income in roughly the following way’. Data from the Bureau of Labour Statistics: www.bls.org.

There was once a German philosophical conundrum known as Das Adam Smith Problem, which professed to find a contradiction between Adam Smith’s two books. In one he said that people were endowed with instinctive sympathy and goodness; in the other, that people were driven largely by self-interest. ‘How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it,’ he wrote in Theory of Moral Sentiments. ‘Man has almost constant occasion for 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 favour,’ he wrote in The Wealth of Nations. Smith’s resolution of the conundrum is that benevolence and friendship are necessary but not sufficient for society to function, because man ‘stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons’.

Krause, J. et al. 2007. The derived FOXP2 variant of modern humans was shared with Neandertals. Current Biology 17:1908–12. p. 57 ‘as Leda Cosmides and John Tooby put it’. Cosmides, L. and Tooby, J. 1992. Cognitive adaptations for social exchange. In The Adapted Mind (eds J.H. Barkow, L. Cosmides and J. Tooby). Oxford University Press. p. 57 ‘In Adam Smith’s words’. Both Adam Smith quotes are from book 1, part 2, of The Wealth of Nations (1776). p. 57 ‘In the grasslands of Cameroon’. Rowland and Warnier, quoted in Shennan, S. 2002. Genes, Memes and Human History. Thames & Hudson. p. 59 ‘The primatologist Sarah Brosnan tried to teach two different groups of chimpanzees about barter’. Brosnan, S.F., Grady, M.F., Lambeth, S.P., Schapiro, S.J. and Beran, M.J. 2008. Chimpanzee autarky.


pages: 304 words: 80,965

What They Do With Your Money: How the Financial System Fails Us, and How to Fix It by Stephen Davis, Jon Lukomnik, David Pitt-Watson

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Admiral Zheng, banking crisis, Basel III, Bernie Madoff, Black Swan, centralized clearinghouse, clean water, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, David Brooks, Dissolution of the Soviet Union, diversification, diversified portfolio, en.wikipedia.org, financial innovation, financial intermediation, Flash crash, income inequality, index fund, invisible hand, London Whale, Long Term Capital Management, moral hazard, Northern Rock, passive investing, performance metric, Ponzi scheme, principal–agent problem, rent-seeking, Ronald Coase, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, Steve Jobs, the market place, The Wealth of Nations by Adam Smith, transaction costs, Upton Sinclair, value at risk, WikiLeaks

William White of the OECD and John Plender of the Financial Times would count among them. 6. Adam Smith was professor of moral philosophy at Glasgow University and is supposed to have fallen into a tanning pit while focusing on a conversation with a friend about economics. Author Isaac Asimov claimed, almost certainly apocryphally, that Gauss was interrupted in the middle of solving a mathematics problem to be told his wife was dying. “Tell her to wait a moment ’til I am done” was his reply. See http://en.wikipedia.org/wiki/Adam_Smith and http://en.wikipedia.org/wiki/Carl_Friedrich_Gauss. 7. Babylonian Talmud, Shabbos 31a. 8. En.Wikipedia.org/wiki/Adam_Smith. 9. Pitt speech on introducing his budget, February 17, 1792, quoted in John Kenneth Galbraith, A History of Economics (Hamish Hamilton, 1987), 61. 10. Adam Smith, The Wealth of Nations (Oxford University Press, 2008), bk 1, chap 2. 11.

7 In the Middle Ages, writings on economic matters could be found in manuals for confessors, who were concerned that prices charged by merchants were “just.” Adam Smith was a professor of moral philosophy who believed his most important book to be one entitled The Theory of Moral Sentiments.8 But he became most famous for a follow-up work in which he applied his mind to the world of commerce: The Wealth of Nations. Even in his own time, it was profoundly influential. Prime Minister William Pitt declared to the House of Commons in 1792 that Smith’s work would “furnish the best solution to every question connected to the history of commerce and with the system of political economy.”9 The Wealth of Nations contains two profoundly important observations, the first of which flew in the face of society’s preference for thinking about money in moral terms.

Usually, of course, it is the latter, since measures are rarely 100 percent accurate. But scientists have certain statistical methods by which they can determine how accurate their measurements, and therefore their predictions, are likely to be. One of the key figures in developing those statistical methods was the mathematician who graced the ten-euro note: Carl Friedrich Gauss. Gauss, born the year after Adam Smith published The Wealth of Nations, is recognized as one of the world’s greatest mathematicians. His most direct contributions were in mathematics and physics; he did not turn his attention to economics, which at the time was not considered a mathematical science. As director of the astronomical observatory at Göttingen, Germany, however, he was interested in astronomical measurements and, in particular, the distribution of errors in measurement.17 Simply put, he wanted to know how wrong he could be, how often.


pages: 86 words: 27,453

Why We Work by Barry Schwartz

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Atul Gawande, call centre, deskilling, Frederick Winslow Taylor, future of work, if you build it, they will come, invisible hand, job satisfaction, meta analysis, meta-analysis, Silicon Valley, The Wealth of Nations by Adam Smith, Toyota Production System

You can see this view operating in the “carrot and stick” approach that has dominated efforts to solve the world’s recent financial crisis. To prevent a financial meltdown from happening again, people argued, we needed to replace the “dumb” incentives that led to it with “smarter” ones. We had to get incentives right. Nothing else really mattered. This idea animated the inventor of the free market, Adam Smith. In The Wealth of Nations, published in 1776, he wrote that: It is in the inherent 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, to perform it in as careless and slovenly a manner that authority will permit. In other words, people work for pay—nothing more and nothing less.

The possibility that one’s views could be shaped by conceptions of justice or fairness, rather than self-interest, does not occur to most people. And yet they are. Empathy, and care and concern for the well-being of others, are routine parts of most people’s character. Yet they are in danger of being crowded out by exclusive concern for self-interest—a concern that is encouraged by the incentive-based structure of the workplace. Even Adam Smith understood that there was more to human nature than self-interest. The Wealth of Nations followed another book, The Theory of Moral Sentiments, in which he suggested that a certain natural sympathy for one’s fellow human beings provided needed restraints on what people would do if they were left free to “barter, truck, and exchange one thing for another.” Smith’s view, largely forgotten by modernity, was that efficient market transactions were parasitic on aspects of character developed through nonmarket social relations.

Psychological Science, 8 (1997): 21–7.* Schwartz, B. and K. Sharpe. Practical Wisdom. New York: Riverhead, 2010.* Sen, A. “Rational Fools.” Philosophy and Public Affairs, 6 (1976): 317–44. Skinner, B. F. (1953). Science and Human Behavior. New York: Macmillan.* Smith, A. The Theory of Moral Sentiments (Originally published in 1753). Oxford: Clarendon Press, 1976.* ——. The Wealth of Nations (Originally published in 1776). New York: Modern Library, 1937.* Snyder, M. and E. D. Tanke. (1977). “Social Perception and Interpersonal Behavior: On the Self-fulfilling Nature of Social Stereotypes.” Journal of Personality and Social Psychology, 35 (1977): 655–66. Sowell, T. A Conflict of Visions. New York: Morrow, 1987.* Springsteen, B. Interview in Rolling Stone, December 6, 1984: 18–22, 70.

The Darwin Economy: Liberty, Competition, and the Common Good by Robert H. Frank

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

carbon footprint, carried interest, Cass Sunstein, clean water, congestion charging, corporate governance, deliberate practice, full employment, income inequality, invisible hand, Plutocrats, plutocrats, positional goods, profit motive, Ralph Nader, rent control, Richard Thaler, Ronald Coase, Ronald Reagan, sealed-bid auction, smart grid, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, trickle-down economics, ultimatum game, winner-take-all economy

If the same question were posed today, of course, more than 99 percent of my colleagues would name Adam Smith. My views about Darwin’s significance reflect no shortage of admiration for Smith on my part. On the contrary, reading any random passage from the eighteenth-century Scottish moral philosopher’s masterwork, The Wealth of Nations, still causes me to marvel at the depth and breadth of his insights. Charles Darwin was himself no slouch, obviously, yet few people outside academic departments of biology and economics associate his name with ideas in economics. Those who have studied Darwin’s theory of evolution carefully, however, realize that he was in fact heavily influenced by the works of the economists Thomas Malthus and David Ricardo. Malthus had been a student of Smith’s, and Ricardo was heavily influenced by The Wealth of Nations. So even if my prediction comes true, Smith’s fans can still justifiably think of him as the great-grandfather of economics. 16 DARWIN’S WEDGE 17 I base my prediction on a subtle but extremely important distinction between Darwin’s view of the competitive process and Smith’s.

Jacoby, “Probabilistic Forecast for 21st Century Climate Based on Uncertainties in Emissions (without Policy) and Climate Parameters,” MIT Joint Program on the Science and Policy of Global Change, Report 169, January 2009. 5. Jane Mayer, “Covert Operations: The Billionaire Brothers Who Are Waging a War against Obama,” New Yorker, August 30, 2010, pp. 44–55. 6. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, State College, PA: Penn State University, 2005, p. 364 (originally published in 1776). 7. Ibid., p. 111. 8. For a comprehensive account of how laissez-faire enthusiasts have often misrepresented Adam Smith’s positions, see Amartya Sen’s introduction to the 250thanniversary edition of Smith’s The Theory of Moral Sentiments, New York: Penguin, 2009. 9. Charles Darwin, The Origin of Species, 6th London Edition, The Literature Project, 2000–2010. Modern biologists have pressed the claim that selection sometimes occurs at the group level.

Chapter Twelve: The Libertarian’s Objections Reconsidered 1. John Rawls, A Theory of Justice, Cambridge, MA: Belknap Press of Harvard University Press, 1971. 2. Harriet Rubin, “Ayn Rand’s Literature of Capitalism,” New York Times, September 15, 2007, http://www.nytimes.com/2007/09/15/business/15atlas.html. 3. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, State College, PA: Penn State University, 2005, book 1, chapter 1 (originally published in 1776), http://www.online-literature.com/adam_smith/wealth_nations/3/. 4. Ibid., book 1, chapter 3. 5. Robert Nozick, Anarchy, State, and Utopia, New York: Basic Books, 1974. 6. www.sirclisto.com/cavalier/spain.htm. INDEX absolute consumption, 24–25, 40 absolute income, 23, 44 ACAP. See Aviation Consumer Action Project acid rain, 176, 177, 178 advertising, consumer tastes affected by, 19 Aesop, 157 Afghanistan, corruption in, 56 agriculture, income transfers in, 113, 115–16 Agriculture, U.S.


pages: 545 words: 137,789

How Markets Fail: The Logic of Economic Calamities by John Cassidy

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, Andrei Shleifer, anti-communist, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black-Scholes formula, Bretton Woods, British Empire, capital asset pricing model, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, George Akerlof, global supply chain, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Network effects, Nick Leeson, Northern Rock, paradox of thrift, Ponzi scheme, price discrimination, price stability, principal–agent problem, profit maximization, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, unorthodox policies, value at risk, Vanguard fund

remarks at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, August 25–27, 2005, available at www.kc.frb.org/publicat/sympos/2005/PDF/GD5_2005.pdf. 23 “The conventional wisdom . . .”: John Kenneth Galbraith, The Affluent Society (Boston: Mariner Books, 1998), 9. 2. ADAM SMITH’S INVISIBLE HAND 27 “It is striking to me . . .”: Alan Greenspan, The Age of Turbulence (New York: Penguin Press, 2007), 260. 27 “One man draws out . . .”: Adam Smith, The Wealth of Nations, Books 1–3 (New York: Penguin Books, 1997), 109–10. 28 In China between 1981 . . . : Poverty Data: A Supplement to World Development Indicators 2008, World Bank, December 2008. 28 “The shepherd, the sorter . . .”: Smith, Wealth of Nations, Books 1–3, 116–17. 29 iPod’s manufacturing chain: See Greg Linden, Kenneth L.

One of the first economists to put these arguments together was Adam Smith, a bookish Scot who was born in Kirkcaldy, a town on the Firth of Forth, north of Edinburgh, in 1723. Smith’s father, a lawyer and government official, died before his son’s birth. After being brought up by his mother, Smith attended Glasgow University, where he studied philosophy under Francis Hutcheson, one of the great figures of the Scottish Enlightenment. He moved on to Oxford and Edinburgh universities, before returning to Glasgow, where from 1752 to 1764 he taught moral philosophy, a catchall subject that included ethics, jurisprudence, and political economy. Resigning his professorship to take a higher-paying job tutoring a wealthy young aristocrat, the Duke of Buccleuch, Smith began writing his great opus, The Wealth of Nations, which was eventually published in 1776, the same year as the American Declaration of Independence.

Take the following passage from Microeconomics, a popular and generally first-rate college textbook by Robert S. Pindyck, of MIT, and Daniel L. Rubinfeld, of the University of California, Berkeley: General equilibrium theory, Pindyck and Rubinfeld write, “is the most direct way of illustrating the working of Adam Smith’s famous invisible hand, because it tells us that the economy will automatically allocate resources efficiently without the need for governmental regulatory control.” A defining feature of equilibrium theory, and the source of its appeal to many economists, is its mathematical elegance. For a hundred years or so, following the publication of The Wealth of Nations, economics remained an informal discipline: most of its major figures expressed their arguments in prose. As the nineteenth century progressed, this began to change. In 1826, in Mecklenburg, in part of what would become Germany, Johann Heinrich von Thünen, a prominent landowner, devised an equation for the rent that land yielded.


pages: 250 words: 88,762

The Logic of Life: The Rational Economics of an Irrational World by Tim Harford

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, colonial rule, Daniel Kahneman / Amos Tversky, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, endowment effect, European colonialism, experimental economics, experimental subject, George Akerlof, income per capita, invention of the telephone, Jane Jacobs, John von Neumann, law of one price, Martin Wolf, mutually assured destruction, New Economic Geography, new economy, Plutocrats, plutocrats, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, spinning jenny, Steve Jobs, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, women in the workforce

Nowadays four U.S. women: Data from Claudia Goldin’s 2006 Ely Lecture to the American Economic Association, published in American Economic Review, 2006, as “The Quiet Revolution That Transformed Women’s Employment, Education, and Family,” and Chiappori, Iyigun, and Weiss, “Investment in Schooling and the Marriage Market.” Delaying motherhood means big income gains: Amalia Miller is the young economist behind this very clever research. Her working paper is available at www.virginia.edu/economics/miller.htm. (His employer was): Biographical details of Adam Smith are from James Buchan, Adam Smith and the Pursuit of Perfect Liberty (London: Profile, 2006). But despite his travels: See David Warsh’s superb Knowledge and the Wealth of Nations (New York: Norton, 2006), chapter 3. “could scarce, perhaps”: Adam Smith, The Wealth of Nations, book 1, chapter 1, paragraph 3. Versions are available online, for instance at www.econlib.org/library/Smith/smWN.html. His adoring wife: Stephanie Coontz, Marriage: A History (New York: Viking, 2005). The roles were neatly reversed: “Americans’ Use of Time, 1965–6,” and “American Time Use Survey 2003,” from lecture notes by Yoram Weiss.

And they are perhaps delayed indefinitely: Betsey Stevenson and Justin Wolfers, “Marriage and Divorce: Changes and their Driving Forces,” NBER Working Paper 12944. Also Tyler Cowen, “Matrimony Has Its Benefits, and Divorce Has a Lot to Do with That,” The New York Times, April 19, 2007. “We know there exists something”: Interview with Justin Wolfers, June 2007. “The man whose whole life”: Adam Smith, The Wealth of Nations, book 5, chapter 1, par. 178, www.econlib.org/library/Smith/smWN.html. 4. WHY YOUR BOSS IS OVERPAID Dilbert: This Dilbert cartoon was reprinted in Edward Lazear, Personnel Economics for Managers (New York: Wiley, 1998). He reckoned that 30,000: Tim Harford, “Odd Numbers,” Financial Times, April 23, 2005. Levitt had also had a disagreement: Conversations with Steven Levitt and, separately, Stephen Dubner, March and April 2005.

A nice summary is Joel Waldfogel, “Master of the Island: Which Country is the Best Colonizer?” Slate, October 19, 2006, www.slate.com/id/2151852/. Another good popular account is “Economics Focus: Winds of Change,” Economist, November 2, 2006. “Nobody ever saw a dog”: Smith, The Wealth of Nations, book 1, chapter 2. Computer-based simulations: See “Homo Economicus?” Economist, April 7, 2005, and Richard D. Horan, Erwin Bulte, and Jason F. Shogren, “How Trade Saved Humanity from Biological Exclusion: An Economic Theory of Neanderthal Extinction,” Journal of Economic Behavior & Organization 58, no. 1(September 2005): 1–29. Neanderthals, apparently, did not: “Mrs. Adam Smith,” Economist, December 9, 2006. Also Steven L. Kuhn and Mary C. Stiner, “What’s a Mother to Do? The Division of Labor Among Neanderthals and Modern Humans in Eurasia,” Current Anthropology 47, no. 6(December 2006): 953–80, www.journals.uchicago.edu/CA/journal/issues/v47n6/066001/066001.web.pdf.


pages: 283 words: 81,163

How Capitalism Saved America: The Untold History of Our Country, From the Pilgrims to the Present by Thomas J. Dilorenzo

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

banking crisis, British Empire, collective bargaining, corporate governance, corporate social responsibility, financial deregulation, Fractional reserve banking, Hernando de Soto, income inequality, invisible hand, Joseph Schumpeter, laissez-faire capitalism, means of production, medical malpractice, Menlo Park, minimum wage unemployment, Plutocrats, plutocrats, price stability, profit maximization, profit motive, Ralph Nader, rent control, rent-seeking, Ronald Coase, Ronald Reagan, Silicon Valley, statistical model, The Wealth of Nations by Adam Smith, transcontinental railway, union organizing, Upton Sinclair, working poor, Works Progress Administration

Truth, in short, is not on the side of the anticapitalists. The more Americans come to understand the truth about capitalism, the more reason they will have to be optimistic for the future of their country. ———— NOTES INTRODUCTION: THE UNTOLD STORY 1. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Random House, 1937), 422. 2. Neela Banerjee and David Firestone, “New Kind of Electricity Market Strains Old Wires Beyond Limits,” New York Times, August 24, 2003, 1. CHAPTER ONE: WHAT IS CAPITALISM? 1. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Random House, 1937), 422. 2. Ludwig von Mises, Liberalism: In the Classical Tradition (San Francisco: Cobden Press, 1985), 32. 3. Joseph Schumpeter, Capitalism, Socialism, and Democracy, 3rd ed. (New York: Harper and Row, 1962), 62. 4.

Of course, nearly every one of Marx’s assumptions (government would wither away under communism, capitalism would make workers poorer, etc.) turned out to be wrong, including this one. Free-market capitalism, based on private property and peaceful exchange, is the source of civilization and human progress. Human beings have a natural propensity to “truck, barter, and exchange,” as Adam Smith said more than two centuries ago, and free-market capitalism is by far the best-known means by which this can be accomplished. In his famous treatise The Wealth of Nations, Smith neatly summed up the essence of how capitalism works: “Give me that which I want, and you shall have this which you want.”1 In other words, commerce is what economists call a “positive-sum game.” The act of buying and selling always benefits both buyer and seller; otherwise they wouldn’t trade with each other.

But such a claim unfairly lumps together those who succeeded on the strength of their own talents, intelligence, and innovations and those who did in fact gain an unfair advantage over competitors (and consumers). The true capitalists—in the railroad industry and other industries—were the so-called market entrepreneurs. In contrast, the real robber barons—the political entrepreneurs—were not capitalists but corporatists, or, to use a term that Adam Smith employed in The Wealth of Nations, mercantilists. These political entrepreneurs gained an unfair advantage through special privileges created by government intervention (direct subsidies, regulations that harmed their competitors, and much more). The critics are right to condemn these business/government partnerships, but they are wrong to label them as capitalism. Every student of American business history knows that the late nineteenth century was a period of “rampant monopolization,” when trusts operated by the likes of John D.


pages: 483 words: 134,377

The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor by William Easterly

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

air freight, Andrei Shleifer, battle of ideas, Bretton Woods, British Empire, business process, business process outsourcing, Carmen Reinhart, clean water, colonial rule, correlation does not imply causation, Daniel Kahneman / Amos Tversky, Deng Xiaoping, desegregation, discovery of the americas, Edward Glaeser, en.wikipedia.org, European colonialism, Francisco Pizarro, fundamental attribution error, germ theory of disease, greed is good, income per capita, invisible hand, James Watt: steam engine, Jane Jacobs, John Snow's cholera map, Joseph Schumpeter, Kenneth Rogoff, M-Pesa, microcredit, Monroe Doctrine, oil shock, place-making, Ponzi scheme, risk/return, road to serfdom, Silicon Valley, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, Thomas L Friedman, urban planning, urban renewal, Washington Consensus, World Values Survey, young professional

He spoke of “the pretious (sic) right of private judgement for the sake of which our forefathers kicked out the Pope and the Pretender.”43 (The “Pretender” was James, whose father, James II of England, was deposed in 1688 for his Catholicism. The son, also a Catholic, had unrealized pretensions of regaining his father’s throne as James III.) Smith’s leading success story was the American colonies (whose side he took in their dispute with the Crown just as the Wealth of Nations was published). Their secret was “plenty of good land, and liberty to manage their own affairs their own way.” The word liberty appears eighty-five times in the Wealth of Nations. As one biographer, Nicholas Phillipson, put it, Smith’s life’s work was “a call to his contemporaries to take moral, political and intellectual control of their lives.”44 In a remarkable and little-known paragraph criticizing Quesnay, Smith is starting to see that a free political system could also have an Invisible Hand: [Quesnay] seems not to have considered, that in the political body, the natural effort which every man is continually making to better his own condition, is a principle of preservation capable of preventing and correcting, in many respects, the bad effects of a political economy. . . .

James Ferguson, The Anti-Politics Machine: Development, Depoliticization, and Bureaucratic Power in Lesotho (Minneapolis: University of Minnesota Press, 1994). 4. Ian Simpson Ross, The Life of Adam Smith, second edition (Oxford: Oxford University Press, 2010), Kindle edition, locations 1231–39. 5. Ross, Life of Adam Smith, 6131–39. 6. Nicholas Phillipson, Adam Smith: An Enlightened Life (New Haven, CT: Yale University Press, 2010), Kindle edition, location 727. 7. Adam Smith, Wealth of Nations (Beijing, China: Dolphin Books, 2008), Kindle edition, locations 6696–98. There is something evocative and/or ironic about a Chinese company producing an electronic edition of Adam Smith sold on Amazon for $1.00. Emphasis added. 8. Ibid., 212–14. 9. Adam Smith, The Theory of Moral Sentiments (MacMay, 2008), Kindle edition, location 3585; http://www.amazon.com/dp/B001NPDN46/ref=rdr_kindle_ext_tmb. 10.

Some on the right have the misunderstanding that Smith gives a blanket endorsement to all profits by the existing businessmen. Actually, Smith held many negative views about both the rich and businessmen. In his first classic, The Theory of Moral Sentiments, published in 1759, Smith spoke of the rich as a “few lordly masters,” consumed by “vain and insatiable desires,” not to mention their “natural selfishness and rapacity.”9 As for businessmen, Smith in The Wealth of Nations spoke of “the mean rapacity, the monopolizing spirit, of merchants and manufacturers,” which sounds like something he had personally observed in Glasgow. His whole work he described as a “very violent attack” targeting “the wretched spirit of monopoly.” Another famous statement of Smith’s further develops this: “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.”10 Greedy merchants were, for Smith, far from concerned about promoting general well-being.


pages: 193 words: 63,618

The Fair Trade Scandal: Marketing Poverty to Benefit the Rich by Ndongo Sylla

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

British Empire, carbon footprint, corporate social responsibility, David Ricardo: comparative advantage, deglobalization, Doha Development Round, Food sovereignty, global value chain, illegal immigration, income inequality, income per capita, invisible hand, Joseph Schumpeter, labour mobility, land reform, market fundamentalism, means of production, Mont Pelerin Society, Naomi Klein, non-tariff barriers, offshore financial centre, open economy, Plutocrats, plutocrats, price mechanism, purchasing power parity, Ronald Reagan, Scientific racism, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, transatlantic slave trade, trickle-down economics, Washington Consensus

For further details, see: http://slaveryfootprint. org   3. Schumpeter (2006 [1954]: 179–80) wrote: But no matter what he actually learned or failed to learn from predecessors, the fact is that the Wealth of Nations does not contain a single analytic idea, principle, or method that was entirely new in 1776 […].   And it was Adam Smith’s good fortune that he was thoroughly in sympathy with the humors of his time. He advocated the things that were in the offing, and he made his analysis serve them. Needless to insist on what this meant both for performance and success: where would the Wealth of Nations be without free trade and laissez-faire? Also, the ‘unfeeling’or ‘slothful’ landlords who reap where they have not sown, the employers whose every meeting issues in conspiracy, the merchants who enjoy themselves and let their clerks and accountants do the work, and the poor laborers who support the rest of society in luxury – these are all important parts of the show.

It seems that it is in the framework of this debate that the opposition between free trade and protectionism was structured. On this point, the story begins with the tradition of free trade. Its influence has grown consistently since the Scottish economist and philosopher Adam Smith, considered as the founding father of modern economic science, published in 1776 his work entitled An Inquiry into the Nature and Causes of the Wealth of Nations. Just as the official history of capitalism conveys the false theory that free trade was the strategy followed in the past by countries that are rich today, the official history of political economy as written by the ‘victors’ also teaches us that Adam Smith is the founding father of the free trade tradition. Smith certainly set the standard of economic liberalism. For him to be seen as a wholehearted partisan of free trade however, not to mention the founding father of this tradition, a good deal of nit-picking and rhetorical contortions must have been undertaken by eminent historians of political economy.

Its protagonists thus feel that by promoting the adoption of new modes of consumption, it will be possible to reach this end. This approach was criticised by some authors due to its ‘neo-Smithian’ vision of the capitalist system (Fridell, 2007). In the language of authors in the Marxist lineage, this label symbolises the vision initially developed by Adam Smith, according to which capitalism would have ‘originated’ and been structured by a division of labour based on market exchange (Brenner, 1977). In the Wealth of Nations, Adam Smith demonstrates that the division of labour is a source of wealth creation – it increases labour productivity – and therefore of economic growth. He also underscores that the division of labour is limited by the size of the market. Thus, the development of trade is meant to increase labour productivity through an efficient division of labour.


pages: 590 words: 153,208

Wealth and Poverty: A New Edition for the Twenty-First Century by George Gilder

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, Albert Einstein, Bernie Madoff, British Empire, capital controls, cleantech, cloud computing, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversified portfolio, Donald Trump, equal pay for equal work, floating exchange rates, full employment, George Gilder, Home mortgage interest deduction, Howard Zinn, income inequality, invisible hand, Jane Jacobs, Jeff Bezos, job automation, job-hopping, Joseph Schumpeter, knowledge economy, labor-force participation, margin call, Mark Zuckerberg, means of production, medical malpractice, minimum wage unemployment, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, mortgage debt, non-fiction novel, North Sea oil, paradox of thrift, Plutocrats, plutocrats, Ponzi scheme, post-industrial society, price stability, Ralph Nader, rent control, Robert Gordon, Ronald Reagan, Silicon Valley, Simon Kuznets, skunkworks, Steve Jobs, The Wealth of Nations by Adam Smith, Thomas L Friedman, upwardly mobile, urban renewal, volatility arbitrage, War on Poverty, women in the workforce, working poor, working-age population, yield curve

Capitalism does all the things that advocates of big government claim they are trying to do: uplift the poor; expand our sense of humanity; break down xenophobic barriers between groups of people and between nations; encourage cooperation, altruism, and creativity; and let everyone, as Abraham Lincoln put it, improve their lot in life. We should glorify—or at least advocate and defend—capitalism and capitalists for moral reasons, not just material ones. The abundances they create come about precisely because of capitalism’s moral foundations. This profound, basic understanding is what makes George Gilder’s Wealth & Poverty one of the great books of Western civilization, on par with Adam Smith’s The Wealth of Nations and the late Jude Wanniski’s The Way the World Works. The original edition was published in the early 1980s when, like today, people had profound doubts about capitalism. Gilder’s opening words were, “The most important event in the recent history of ideas is the demise of the socialist dream.” Alas, “The second most important event... is the failure of capitalism to win a corresponding triumph.”

CHAPTER TWO THE ECONOMY OF FRUSTRATION THE BELIEF THAT THE good fortune of others is also finally one’s own does not come easily or invariably to the human breast. It is, however, a golden rule of economics, a key to peace and prosperity, a source of the gifts of progress. It is the belief that finally confounded the predatory economics of mercantilism, in which nations used regulation and beggar-thy-neighbor trade campaigns to gather surpluses and bullion. It was this golden rule that inspired the first great book of economics, The Wealth of Nations, by Adam Smith. It was this belief that David Hume proclaimed in 1742, at the end of his essay “Of the Jealousy of Trade”: “I shall therefore venture to acknowledge, that, not only as a man, but as a British subject, I pray for the flourishing commerce of Germany, Spain, Italy, and even France itself. I am at least certain that all nations would flourish more [with] such enlarged and benevolent sympathies toward each other.”1 The golden rule finds its scientific basis in the mutuality of gains from trade, in the demand generated by the engines of supply, in the expanded opportunity created by growth, in the usual and still growing economic futility of war.

The problem of contemporary capitalism lies not chiefly in a deterioration of physical capital, but in a persistent subversion of the psychological means of production—the morale and inspiration of economic man—undermining the very conscience of capitalism: the awareness that one must give in order to get, supply in order to demand. The trend seems to have begun in politics. In fact, our current situation recalls the world in which economic science gained its first triumphs. This was the age of mercantilism, a time of similar hypertrophy of politics, when Adam Smith reproached the governments of Europe for believing that the power of demand, in the form of accumulated gold, constituted the source of wealth. In The Wealth of Nations Smith argued that real riches came from the power of production and supply, not bullion collected through a trade surplus. But during the two centuries since Smith won this initial victory for supply-side economics, the demand side has all too often triumphed. The problem begins in political philosophy, in the theory of politics and public opinion.


pages: 279 words: 87,910

How Much Is Enough?: Money and the Good Life by Robert Skidelsky, Edward Skidelsky

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

banking crisis, Bertrand Russell: In Praise of Idleness, Bonfire of the Vanities, call centre, David Ricardo: comparative advantage, death of newspapers, financial innovation, Francis Fukuyama: the end of history, full employment, happiness index / gross national happiness, income inequality, income per capita, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, lump of labour, market clearing, market fundamentalism, profit motive, purchasing power parity, Ralph Waldo Emerson, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, union organizing, University of East Anglia, wage slave, World Values Survey

It was retained, if at all, only for pathological or criminal forms of acquisition such as hoarding or swindling.Meanwhile, ordinary commercial activity was described in language suggestive of a benign if unheroic pastime. “There are few ways in which a man can be more innocently employed than in getting money,” was how Dr. Johnson famously put it. His French contemporary Montesquieu talked of the douceur of commerce.14 Once money-making had been stripped of its ethical opprobrium, it became open to treatment in terms of cause and effect. Hume’s friend, the Scottish philosopher Adam Smith, took the lead. The Wealth of Nations, his masterpiece of 1776, presents humans as driven by a natural desire for self-improvement, which under conditions of free competition leads them “as if by an invisible hand” to promote the public well-being. Newton’s mechanical science of nature was thereby extended to economic relations, with self-interest in the role of gravity. This was a revolutionary invention. Traditional morality had conceived of society as an enterprise devoted to the common good.

In effect, the governments of Reagan and Thatcher handed economies back to the businessmen. The role of the state in management, ownership, regulation, allocation, and distribution was drastically pared back. Governments gave up attempts to steer market forces to desirable social outcomes, limiting themselves to maintaining framework conditions for successful market performance. The wealth of nations would be made to grow faster by releasing acquisitiveness from its communal restraints, in a reprise of the arguments first advanced by Adam Smith and his followers. In this kind of world there is no reason why capitalism should ever end, provided everything goes according to plan. Keynes’s notion of satiety has no place: the progress of the system will create new wants and stimulate positional competition without limit. And any observed tendency for rich societies to rest on their laurels by working and consuming less can be countered by the logic of globalization and the stimulus of additional income inequality.

Charles Baudelaire, Journaux intimes (Paris: Mercure de France, 1938), p. 61. 6. John Maynard Keynes, The General Theory of Employment, Interest, and Money, The Collected Writings of John Maynard Keynes, vol. 7 (Cambridge: Cambridge University Press, 1973), p. 374. 7. IMSciences.net, accessed 09/09/11. 8. H. J. Johnson, “The Political Economy of Opulence,” Canadian Journal of Economics and Political Science, vol. 26, pt. 4 (1960), p. 554. 9. Adam Smith, The Wealth of Nations (Lawrence, Kan.: Digireads.com, 2009; first publ. 1759), p. 40; Alfred Marshall, Principles of Economics (London: Prometheus Books, 1920), p. 1; Lionel Robbins, An Essay on the Nature and Significance of Economic Science (London: Macmillan, 1932), p. 16. 10. Keynes, Essays in Persuasion, p. 332. CHAPTER 1. KEYNES’S MISTAKE 1. Quoted in Robert Skidelsky, John Maynard Keynes: The Economist as Saviour 1920–1937 (London: Macmillan, 1992), pp. 72, 235. 2.


pages: 340 words: 91,387

Stealth of Nations by Robert Neuwirth

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

accounting loophole / creative accounting, big-box store, British Empire, call centre, collective bargaining, corporate governance, full employment, Hernando de Soto, illegal immigration, income inequality, informal economy, invisible hand, Jane Jacobs, jitney, joint-stock company, Joseph Schumpeter, megacity, microcredit, New Urbanism, pirate software, profit motive, Shenzhen was a fishing village, Simon Kuznets, special economic zone, The Wealth of Nations by Adam Smith, thinkpad, upwardly mobile

Part-time work, a variety of self-employment schemes, consulting, moonlighting, income patching. By 2020, the OECD projects, two-thirds of the workers of the world will be employed in System D. There’s no multinational, no Daddy Warbucks or Bill Gates, no government that can rival that level of job creation. Given its size, it makes no sense to talk of development, growth, sustainability, or globalization without reckoning with System D. Adam Smith understood this intuitively back in 1776, when he published The Wealth of Nations. As Smith wrote, “The whole consumption of the inferior ranks of people, or of those below the middling rank, it must be observed, is in every country much greater, not only in quantity, but in value, than that of the middling and of those above the middling rank.” Despite this, most economists don’t recognize System D as a part of the legitimate financial order.

It may have sounded lunatic to his contemporaries, but Mandeville’s argument amounts to a plea for government intervention and regulation (you might call him a closet Keynesian) of an industry gone awry. Even the simple rhymes of The Grumbling Hive show that Mandeville favored some government intervention in the market: “Vice is beneficial found / when it’s by justice lopp’d and bound.” Adam Smith, too, acknowledged that merchants could be expected to manipulate trade for their own gain. “The interest of the dealers, however, in any particular branch of trade or manufacture, is always in some respects different from, and even opposite to, that of the public,” he wrote in The Wealth of Nations, adding that “the proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the scrupulous, but with the most suspicious attention.

His idea was that, if money depreciated over time, there would be no reason to hoard it. So, by this neat trick, Gesell proposed to encourage people to continually spend, and this stimulus in consumption of all sorts (two thumbs up from Bernard Mandeville!) would naturally force production to increase, thus creating jobs and sharing the wealth. Another thirty years on—a hundred and sixty years after Adam Smith published The Wealth of Nations—John Maynard Keynes offered a frank diagnosis of the problems of the free-market system in the last chapter of his 1936 book The General Theory of Employment, Interest and Money: “The outstanding faults of the economic society in which we live,” he wrote, “are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and income.” Keynes believed that government could provide the leavening, leveling factor, investing in and stimulating production in order to create jobs and spur consumption, and in the process leveling the huge inequities in wages and wealth.


pages: 331 words: 60,536

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, agricultural Revolution, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, clean water, colonial rule, Columbine, compound rate of return, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, informal economy, information retrieval, Isaac Newton, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income

Workplace Extortion Before the Twentieth Century The rise and fall of union extortion of the capitalists can be readily explained by the changing megapolitics of the production process. In 1776, when Adam Smith published The Wealth of Nations, conditions for extortion in the workplace were sufficiently unfavorable that "combinations" by workmen "to raise the price of their labour" were seldom tenable. Most manufacturing firms were tiny and family-run. Larger-scale industrial activities were just beginning to emerge. This did not rule out opportunities for violence, but it gave them little leverage. Indeed, during Smith's time and well into the nineteenth century, unions were generally considered illegal combinations in the Great Britain, the United States, and other common-law countries. Adam Smith described attempted strikes in these terms: "Their usual pretences are sometimes the high price of provisions; sometimes the great profit which their master make by their work. . . .

It is also in the interest of the merchant that the customer should be prosperous, because a prosperous customer has the money to go on buying. Conquest implies the destruction of the other party; commerce implies the satisfaction of the other party. As modern technology has 296 made conquest an extraordinarily dangerous policy, commerce has become the only rational approach to the problems of survival. This interdependence is strengthened by another central idea of Adam Smith~not new with him~which is the specialization of function. The Wealth of Nations starts with a celebrated passage in which Adam Smith observes that "the greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity and judgement with which it is any where directed, or applied, seem to have been the effects of the division of labour." He points out that "the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands."

They quote from the World Bank's most recent world development report, on workers in an integrating world economy. 10. See Mancur Olson, "Diseconomies of Scale and Development," Cato Journal, vol.7, no.1 (Spring/Summer 1987). 11. Ibid. 12. Basil Davidson, The Black Mans' Burden: Africa and the Curse of the Nation State (New York: Times Books, 1992), p.290. 13. Olson, op. cit. 14. Adam Smith, The Wealth of Nations, p.724. This point was suggested by an argument by Edwin G. West in his Adam Smith and Modern Economics (Alder-shot, England: Edward Elgar Publishing, 1990), pp.88-89. 15. Fritz Rorig, The Medieval Town (Berkeley: University of California Press, 1967), p.28. 16. Albert 0. Hirschman, Exit, Voice, and Loyalty (Cambridge: Harvard University Press, 1969), p.81. 17. Tom Peters and George Gilder, "City vs. Country: Tom Peters & George Gilder Debate the Impact of Technology on Location," Forbes, February 1995. 18.


pages: 1,205 words: 308,891

Bourgeois Dignity: Why Economics Can't Explain the Modern World by Deirdre N. McCloskey

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Admiral Zheng, agricultural Revolution, Albert Einstein, BRICs, British Empire, butterfly effect, Carmen Reinhart, clockwork universe, computer age, Corn Laws, dark matter, David Ricardo: comparative advantage, Donald Trump, Edward Lorenz: Chaos theory, European colonialism, experimental economics, financial innovation, Fractional reserve banking, full employment, George Akerlof, germ theory of disease, Gini coefficient, greed is good, Howard Zinn, income per capita, interchangeable parts, invention of agriculture, invention of air conditioning, invention of writing, invisible hand, Isaac Newton, James Watt: steam engine, John Maynard Keynes: technological unemployment, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, means of production, Naomi Klein, New Economic Geography, New Urbanism, purchasing power parity, rent-seeking, road to serfdom, Robert Gordon, Ronald Coase, Ronald Reagan, Scientific racism, Scramble for Africa, Shenzhen was a fishing village, Simon Kuznets, Slavoj Žižek, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, tulip mania, union organizing, Upton Sinclair, urban renewal, V2 rocket, very high income, working poor, World Values Survey, Yogi Berra

. **** When did it start? Various emblematic dates have been proposed— the five months in 1769 during which Watt took out a patent on the separate condenser in his steam engine and Arkwright took out a patent on the water frame for spinning cotton; or 1 January 1760, when the furnaces at Carron Ironworks, Stirlingshire, were lit; or the famous day and year 9 March 1776, when Adam Smith’s The Nature and Causes of the Wealth of Nations provided a rhetoric for the age. It sometimes seems that every economic historian has a favorite date, and a story to correspond. Eleanora Carus Wilson spoke of “an Industrial Revolution of the thirteenth century.” She found that the fulling mill (that is, a machine for thickening wool cloth) was “due to scientific discoveries and changes in technique,” especially the control of water power, and “was destined to alter the face of medieval England,” crushing the urban centers formerly leading in cloth. 26 Looking at the matter from 1907 the American historian Henry Adams could see a “movement from unity into multiplicity, between 1200 and 1900, . . . unbroken in sequence, and rapid in acceleration.” 27 The economic historians Eric Jones and Joel Mokyr have taken a similar long view of European exceptionalism. 28 But the most widely agreed period of the beginning of It, whatever exactly It was that led to the factor of sixteen, is still the late eighteenth century.

According to Maddison’s figures, per capita income in the Netherlands was $2110 per capita in 1700 (expressed in 1990 dollars), about what in 1870 had been achieved in most western European countries—for example, France at $1876 and a collection of the twelve richest European countries at $2086.43 Holland was to the eighteenth century and even the early nineteenth century what America was to the twentieth, a standard for the wealth of nations. “The province of Holland,” wrote Adam Smith in 1776, speaking in precise terms about the west of the United Netherlands, “in proportion to the extent of its territory and the number of its people, is a richer country than England. The government there borrows at two percent., and private people of good credit at three. The wages of labor are said to be higher in Holland than in England, and the Dutch. . . trade upon lower profit than any people in Europe.”44 Smith’s emphasis on profit at the margin is characteristic of the classical school.

But then he would have to explain with the same materialist hypothesis why they were adopted in the first place. What comes out of the economics, in other words, is that on the whole, and time and again, the attempt to live off poor people has not been very profitable. Even the rich in former times, who for millennia did in fact live off poor people, remained poor by the standard of ordinary people after modern economic growth. As Adam Smith memorably put it at the end of the first chapter of The Wealth of Nations, “the accommodation . . . of an industrious and frugal peasant . . . exceeds that of many an African king.”28 Smith was following Locke: in America, for want of improvement of the land by labor, “a king of a large and fruitful territory there feeds, lodges, and is clad worse than a day laborer in England.”29 For 1690 or 1776 this may in fact be doubted. The obas of Benin 1170-1897 did seem to have lived pretty high off the hog, well above the standard of an English day laborer or an industrious and frugal peasant in the Lowlands of Scotland.30 But by now, imagining the riches in health and wealth of a working person in Italy or New Zealand, and comparing these to the riches extracted in olden times from the poor, or still extracted today by the last absolute monarch in Africa, King Mswati III of Swaziland, Smith’s proposition cannot be doubted.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus

“Monthly Statement of the Public Debt of the United States: January 31, 2011,” United States Department of the Treasury, http://www.treasurydirect.gov/govt/reports/pd/mspd/2011/opds012011.pdf. 24. Adam Smith, Wealth of Nations (Buffalo, NY: Prometheus Books, 1991), 587. 25. See Murphy, “Genesis,” 155–179, for a good overview of Smith’s economics. 26. Albert Hirschman, The Passions and The Interests: Political Arguments for Capitalism before Its Triumph (Princeton, NJ: Princeton University Press, 1977). 27. Murphy, “Genesis.” Although some commentators see Smith as being critical of banks, there are other parts of the Wealth of Nations in which he is positively enthusiastic about them. 28. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Indianapolis, IN: Hackett, 1996), 64. 29. It may lead to inflation, but that’s another matter, and, oddly, it’s one that didn’t seem to preoccupy Smith all that much. 30.

Not the state as we know it today—(usually) a representative democracy with large-scale spending ambitions—but the state personified by sovereigns: vicious, capricious, untrustworthy monarchs who would as soon steal your wealth as look at you. The state was therefore something to be avoided, minimized, bypassed, curtailed, and above all, not trusted. The market, in contrast, emerged in liberal thought as the intellectual and institutional antidote to the confiscatory politics of the king.4 In such a world, if prices and merchants were set free, the wealth of nations (note, not “kingdoms”) would multiply. But from the start this liberal view of “the state versus the market” rested upon a misunderstanding: markets naturally appear when you remove the state from the equation. However, as Karl Polanyi noted at the end of World War II, there is nothing natural about markets.5 Turning people into wage laborers, securing the private ownership of land, even inventing capital and preserving its monetary form are all deeply political projects that involve courts, regulation, enforcement, bureaucracy, and all the rest.6 Indeed, gaining control of the state by the merchant class was a defining feature of early capitalism.7 With the partial exceptions of the United Kingdom and the United States (the former because it was first to make the transition to capitalism and the latter because it was geographically isolated), from Germany in the 1870s to China today, states make markets as much as markets determine the fate of states.8 Yet liberal economic thought remains largely oblivious to these facts.

From his notes on the division of labor in the eponymous pin factory to the “invisible hand” guiding selfish actions to common purposes, Smith’s sound bites are well known. The details of what Smith said about the economy are far less well known and quite surprising. Smith brought together much of the scattered work of early economists on the nature of money, economic growth, the role of capital and labor, and a host of other issues, and then had the good sense to put it in one accessible place: The Wealth of Nations.25 As Albert Hirschman observed, this book was no academic project. It was an argument for capitalism before its triumph, and a very successful argument, too.26 For our purposes here, we find in Smith a particular sensibility toward the state and its debt that brings us closer to the modern idea of austerity, but from a surprising angle: the importance of personal frugality and parsimony as the engine of capitalist growth.


pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Washington Consensus

These campaigns, however, were generally directed toward making capitalism more socially tolerable, rather than economically more effective. Chapter Three 1 Robert Heilbroner, The Worldly Philosophers, Chapters 1-2. 2 Max Weber, The Protestant Ethic and the Spirit of Capitalism. 3 Adam Smith, The Wealth of Nations, Books 1-III, 119. 4 Seabright, The Company of Strangers, 14-15. 5 The first edition of Smith’s The Wealth of Nations was published on March 9, 1776 by W. Strahan and T. Cadell in London. Andrew Skinner notes the coincidence of its publication on the eve of the Declaration of Independence in his introduction to Smith’s work. Andrew Skinner, introduction to The Wealth of Nations, Books I-III, by Adam Smith, 6. 6 Keynes and others have traced the first recorded use of the phrase “laissezfaire”—which literally means “let do” or “let make”—to a speech by French minister Rene de Voyer, Marquis d’Argenson, in 1751 in which he declared, “Laissez faire, telle devrait être la devise de toute puissance publique, depuis que le monde est civilisé. ” (Let it be, such should be the motto of every public power, ever since the world is civilized.)

As expounded by Max Weber in his classic The Protestant Ethic and the Spirit of Capitalism, there are two additional requirements: acceptance of profit and capital accumulation as motives with genuine moral legitimacy, as opposed to deplorable, though ineradicable, human vices; and the recognition of voluntary exchange and cooperation, rather than heredity and coercion, as the main organizing principles of economic life.2 These concepts emerged from the Calvinist ideology of the late seventeenth century, according to the standard view of social history pioneered by Weber. But they were crystallized by Adam Smith in The Wealth of Nations, producing some astonishingly counterintuitive revelations. Smith observed that a market economy, although it involves millions of unconnected individuals who work at highly specialized and narrow tasks, is a naturally self-organizing mechanism provided a few simple rules of commerce and mutual trust are generally obeyed and enforced. This self-organizing system produces mutually satisfactory outcomes as if it were guided by an “invisible hand,” but without the need for supernatural or divine intervention.

Galbraith in 1977: “We all agree that pessimism is a mark of superior intellect.”6 Yet this cynical conventional wisdom about the fundamental nature of economics, as well as about the capitalist system economics seeks to understand, is wrong. Most great economists—Smith, Ricardo, Mill, Keynes, Schumpeter, and Hayek—had an optimistic outlook about human creativity and the capacities of the market system. They were fundamentally optimistic for both practical and intellectual reasons. The main intellectual goal of economics set out by Adam Smith, and partly achieved by him in The Wealth of Nations, was to explain the miracle that led millions of unrelated individuals, all working freely in pursuit of their own desires and personal interests, to serve the needs of others and promote the prosperity of all. After Smith, other great economists enriched this understanding with unexpected and counterintuitive detail. Ricardo showed how nations could benefit from free trade even if it seemed initially to hurt many of their businesses and workers.


pages: 268 words: 74,724

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank by John Tamny

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Airbnb, bank run, banks create money, Bernie Madoff, bitcoin, Bretton Woods, Carmen Reinhart, correlation does not imply causation, Credit Default Swap, crony capitalism, crowdsourcing, Donald Trump, Downton Abbey, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, Home mortgage interest deduction, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liquidity trap, Mark Zuckerberg, market bubble, moral hazard, mortgage tax deduction, NetJets, offshore financial centre, oil shock, peak oil, Peter Thiel, price stability, profit motive, quantitative easing, race to the bottom, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, Uber for X, War on Poverty, yield curve

Mica (a mineral a bit like slate) around which the heating element is wound, and of course plastic for the plug and cord insulation, and for the all-important sleek looking casing. Eventually, he plugged in what Harford described as a “toaster-shaped birthday cake,” and “two seconds later, the toaster was toast.” Thwaites concluded, “If you started absolutely from scratch, you could easily spend your life making a toaster.”1 Harford’s opening subject was, in many ways, a tribute to Adam Smith’s brilliant book The Wealth of Nations, and more modernly, to Leonard Read’s I, Pencil. In the former, Smith opens with an essential point: “The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour.”2 Smith goes on to describe something as basic as a pin factory.

In that case, it’s fair to say the market valuation placed on land, buildings, houses, and companies with coastal addresses would be in freefall—a reflection of our unwillingness to curb our consumption. That they’re not falling, but most often rising, is a market signal that fears of an environmental calamity related to oil consumption are vastly overdone. Instead, the nature of my argument about why the fracking boom has been anticredit is monetary. Specifically, it’s about the value of the dollar. For some simple background, we turn to Adam Smith, who made a critical observation in The Wealth of Nations: “The sole use of money is to circulate consumable goods.”7 There’s nothing abnormal or intimidating about Smith’s quote. As readers know by now, if money were actual wealth or itself a commodity, we’d all be rich. We could simply create lots of dollars. But money is not wealth. Money is a measure of wealth. I have bread, but I want the vintner’s wine. The problem is that the vintner doesn’t want my bread; he wants the butcher’s meat.

As Gustav Cassel explained in his 1922 book Money and Foreign Exchange after 1914, “Effective warfare under really serious conditions is practically impossible without inflation.”11 And so the dollar began to decline. It bought 1/266th of an ounce of gold when Bush was inaugurated in 2001, and by July 2008 it bought 1/940th of an ounce.12 In a sequel to the 1970s, Americans once again started speculating on housing. It offered better returns than the stock market, plus you can live in a house. The rush into housing was a hugely negative economic signal, much as it was in the 1970s. As Adam Smith wrote in The Wealth of Nations: Though a house . . . may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole of the people can never be in the smallest degree increased by it.13 Housing was all the rage. It was a safe haven against devaluation, and because it was, the real economy lost.


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population, World Values Survey

Not the one that you use for your credit cards. But that little metal thing that most of you do not use – that is, unless you have long hair and like to keep it tidy or make your own clothes. The making of the pin is the subject of the very first chapter of what is commonly (albeit mistakenly)1 considered to be the first economics book, namely, An Inquiry into the Nature and Causes of the Wealth of Nations, by Adam Smith (1723–90). Smith starts his book by arguing that the ultimate source of increase in wealth lies in the increase in productivity through greater division of labour, which refers to the division of production processes into smaller, specialized parts. He argued that this increases productivity in three ways. First, by repeating the same one or two tasks, workers become good at what they do more quickly (‘practice makes perfect’).

The majority of people still worked in agriculture even in Western Europe, where capitalism was then most advanced.3 A small minority of them worked as wage labourers for agricultural capitalists, but most of them were either small subsistence farmers or tenants (those who rent land and pay a proportion of their output in return) of aristocratic landlords. During this era, even many of those who worked for capitalists were not wage labourers. There were still slaves around. Like tractors or traction animals, slaves were means of production owned by capitalists, especially the plantation owners in the American South, the Caribbean, Brazil and elsewhere. It was two generations after the publication of The Wealth of Nations (henceforth TWON) that slavery was abolished in Britain (1833). It was nearly a century after TWON and after a bloody civil war that slavery was abolished in the US (1862). Brazil abolished it only in 1888. While a large proportion of people who worked for capitalists were not wage labourers, many wage labourers were people who wouldn’t be allowed to become wage labourers today. They were children.

This paradoxical outcome is made possible by the power of competition in the market. In their attempts to make profits, producers strive to supply cheaper and better things, ultimately producing their products at the minimum possible costs, thus maximizing national output. This idea is known as the invisible hand and has become arguably the most influential metaphor in economics, although Smith himself used it only once in The Wealth of Nations (TWON) and did not accord it a prominent role in his theory.* Most Classical economists believed in the so-called Say’s Law, which states that supply creates its own demand. The reasoning was that every economic activity generates incomes (wages, profits, etc.) equivalent to the value of its output. Therefore, it was argued, there can be no such thing as a recession due to a shortfall in demand.


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, bonus culture, Bretton Woods, business climate, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, corporate governance, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, Fractional reserve banking, full employment, Gordon Gekko, greed is good, Hyman Minsky, income inequality, inflation targeting, invention of the wheel, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, labour market flexibility, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, means of production, Menlo Park, moral hazard, moveable type in China, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Plutocrats, plutocrats, price stability, principal–agent problem, profit motive, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, We are the 99%, Wolfgang Streeck

They then triumphantly rediscover the secret of prosperity: Thus Vice nurs’d Ingenuity, Which joined with Time and Industry, Had carry’d Life’s conveniencies, Its real Pleasures, Comforts, Ease, To such a Height, the very Poor Liv’d better than the Rich before. Adam Smith in Britain and Voltaire in France put the case for material values rather differently. For Voltaire, the great merit of commerce was that the pursuit of self-interest was less dangerous than the pursuit of other goals such as military expansion or religious salvation. He also believed that the self-interested pursuit of profit through commerce had a socialising influence, not least because it helped reduce religious differences. For his part, Adam Smith in The Wealth of Nations argued that consumption was socially benign and that the market economy was the best means for achieving what he called ‘universal opulence’. He also took up the cudgels against the mercantilists, ridiculing their arguments with a brilliantly effective illustration: By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries.

To name just one example, Gordon Gekko’s ‘greed is good’ speech in the film Wall Street clearly descends in a direct line from the author of the fable. The Fable of the Bees was not universally admired by other Enlightenment thinkers. Adam Smith could not bring himself to accept the extremity of Mandeville’s paradox, in which vice was a necessary condition of prosperity. In his justly celebrated redefinition of the boundaries of the argument about business and morality, he emphasised self-interest rather than vice, with his statement in The Wealth of Nations that ‘it is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard for their own interest’. 10 In much the same vein, he added: ‘I have never known much good done by those who affected to trade for the public good.’11 Yet, as the author of The Theory of Moral Sentiments, he also emphasised the need for markets to operate within a moral context and believed that the act of engaging in market exchange entailed a discipline that encouraged good individual behaviour as well as the good of wider society.

Yet, as I will show, it is arguable that manufacturing employment ought to fall in a mature economy; and one of the safest predictions for the twenty-first century is that in the developed world it will continue to do so without causing a collapse in living standards. To make this case is admittedly quite a challenge, because the prejudice about the superiority of manufacturing over services has deep historical roots. Adam Smith, still hugely influential across the centuries, showed a bias in The Wealth of Nations against services, suggesting that while the labour of a manufacturer added value, the labour of a menial servant did not: There is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproductive. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own maintenance, and of his master’s profit.


pages: 461 words: 128,421

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, bank run, Benoit Mandelbrot, Black-Scholes formula, Bretton Woods, Brownian motion, capital asset pricing model, card file, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discovery of the americas, diversification, diversified portfolio, Edward Glaeser, endowment effect, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, floating exchange rates, George Akerlof, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, invisible hand, Isaac Newton, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market design, New Journalism, Nikolai Kondratiev, Paul Lévy, pension reform, performance metric, Ponzi scheme, prediction markets, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, South Sea Bubble, statistical model, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, value at risk, Vanguard fund, volatility smile, Yogi Berra

The South Sea Company collapsed in such a bubble of speculation in 1720 that the British parliament banned the creation of such entities—characterized by dispersed shareholders whose liability for the company’s debt was limited to the value of their shares. In 1776, Adam Smith argued that the “joint-stock company,” as the corporation was then known, had proved an unmitigated disaster. “The directors of such companies,…being the managers of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own,” he wrote in the Wealth of Nations. “Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.”1 During the industrial revolution that began just after Smith’s death, it became apparent that his analysis was off.

Poincaré’s report on Bachelier’s thesis, translated by Selime Baftiri-Balazoski and Ulrich Haussman, is also included in the article. 9. Richard Hofstadter, Social Darwinism in American Thought, rev. ed. (Boston: Beacon Press, 1955), 51–53. 10. William Graham Sumner, What the Social Classes Owe to Each Other (Caldwell, Idaho: The Caxton Printers, 1989), 107. 11. Adam Smith, Wealth of Nations, book 4, chap. 2, par. 4, 2.9 (Indianapolis: Liberty Fund, 1981). It’s not clear Smith himself saw it that way, although many subsequent economists did. The actual quote from the Wealth of Nations is: As every individual…endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can.

Merton, Continuous-Time Finance (Cambridge, Mass.: Basil Blackwell, 1990), 15. 24. John C. Cox, Stephen A. Ross, and Mark Rubinstein, “Option Pricing: A Simplified Approach,” Journal of Financial Economics (Sept. 1979): 229–63. 25. Stephen A. Ross, “Options and Efficiency,” Quarterly Journal of Economics (Feb. 1976): 76. CHAPTER 9: MICHAEL JENSEN GETS CORPORATIONS TO OBEY THE MARKET 1. Adam Smith, The Wealth of Nations (Indianapolis: Liberty Fund, 1981), 741. 2. In the United States the first all-purpose general incorporation statute was Connecticut’s, enacted in 1837, although some states allowed easy incorporation of companies in particular industries before that. In the United Kingdom, Parliament allowed for general incorporation in 1844. Robert Hessen, In Defense of the Corporation (Stanford, Calif.: Hoover Institution, 1979).


pages: 471 words: 97,152

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George A. Akerlof, Robert J. Shiller

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, Andrei Shleifer, asset-backed security, bank run, banking crisis, collateralized debt obligation, conceptual framework, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, experimental subject, financial innovation, full employment, George Akerlof, housing crisis, Hyman Minsky, income per capita, inflation targeting, invisible hand, Isaac Newton, Jane Jacobs, Jean Tirole, job satisfaction, Joseph Schumpeter, Long Term Capital Management, loss aversion, market bubble, market clearing, mental accounting, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, new economy, New Urbanism, Plutocrats, plutocrats, price stability, profit maximization, purchasing power parity, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, South Sea Bubble, The Chicago School, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, working-age population, Y2K, Yom Kippur War

We understood that problem then, but we thought that it was a minor one. Estimates from the Brookings Institution say that preservation of Social Security at current levels would entail expenditure of about 2% of taxable earnings.16 We thought then, and we still think now, that Kerry’s mistake cost him the election. Saving and the Wealth of Nations We have been talking so far about personal decisions to save, why saving varies, and how important it is to people’s welfare in retirement. But there has long been another theme regarding savings. There are vast differences in the wealth of nations. In per capita terms there is more than a 200-fold difference between per capita income from the richest countries to the poorest. Indeed if we include Luxembourg and Burundi it is closer to a 1,000-fold difference.17 Income and wealth depend upon countries’ freedom to trade, the skills of their people, their geography, their current and past history of wars, their political and legal institutions.

“Liquidation Values and Debt Capacity: A Market Equilibrium Approach.” Journal of Finance 47(4):1343–66. ———. 1997. “The Limits of Arbitrage.” Journal of Finance 52(1):33–55. Sims, Christopher A. 1972. “Money, Income and Causality.” American Economic Review 62:540–52. ———. 2001. “Pitfalls of a Minimax Approach to Model Uncertainty.” American Economic Review 91(2):51–54. Smith, Adam. 1776. An Inquiry into the Nature and Causes of the Wealth of Nations. London: Ward, Lock, Bowden & Co. Smith, Edgar Lawrence. 1925. Common Stocks as Long-Term Investments. New York: Macmillan. Solow, Robert. 1979. “Another Possible Source of Wage Rigidity.” Journal of Macroeconomics 1(1):79–82. Sorkin, Andrew Ross. 2008. “JP Morgan Pays $2 a Share for Bear Stearns.” New York Times, March 17. Soros, George. 2008. The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means.

“Demographic Profile of the Federal Workforce.” https://www2.opm.gov/feddata/demograp/demograp.asp#RNO Data. Utaka, Atsuo. 2003. “Confidence and the Real Economy: The Japanese Case.” Applied Economics 35(3):337–42. Venti, Steven F., and David A. Wise. 2000. “Choice, Chance, and Wealth Dispersion at Retirement.” National Bureau of Economic Research Working Paper 7521, February. “Want Old Rate Restored.” 1894. Boston Daily, February 10, p. 10. Warsh, David. 2006. Knowledge and the Wealth of Nations: A Story of Economic Discovery. New York: W. W. Norton. Weinstein, Neil, and William M. Klein. 1996. “Unrealistic Optimism: Present and Future.” Journal of Social and Clinical Psychology 15:1–8. Welch, Jack, with John A. Byrne. 2001. Jack: Straight from the Gut. New York: Warner. Wentura, Dirk. 2005. “The Unknown Self: The Social Cognition Perspective.” In Werner Greve, Klaus Rothermund, and Dirk Wentura, eds., The Adaptive Self: Personal Continuity and Intentional Self-Development.


pages: 565 words: 151,129

The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism by Jeremy Rifkin

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, additive manufacturing, Airbnb, autonomous vehicles, back-to-the-land, big-box store, bioinformatics, bitcoin, business process, Chris Urmson, clean water, cleantech, cloud computing, collaborative consumption, collaborative economy, Community Supported Agriculture, computer vision, crowdsourcing, demographic transition, distributed generation, en.wikipedia.org, Frederick Winslow Taylor, global supply chain, global village, Hacker Ethic, industrial robot, informal economy, intermodal, Internet of things, invisible hand, Isaac Newton, James Watt: steam engine, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Julian Assange, Kickstarter, knowledge worker, labour mobility, Mahatma Gandhi, manufacturing employment, Mark Zuckerberg, market design, means of production, meta analysis, meta-analysis, natural language processing, new economy, New Urbanism, nuclear winter, Occupy movement, oil shale / tar sands, pattern recognition, peer-to-peer lending, personalized medicine, phenotype, planetary scale, price discrimination, profit motive, RAND corporation, randomized controlled trial, Ray Kurzweil, RFID, Richard Stallman, risk/return, Ronald Coase, search inside the book, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, smart cities, smart grid, smart meter, social web, software as a service, spectrum auction, Steve Jobs, Stewart Brand, the built environment, The Nature of the Firm, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, transaction costs, urban planning, Watson beat the top human players on Jeopardy!, web application, Whole Earth Catalog, Whole Earth Review, WikiLeaks, working poor, Zipcar

Heilbroner, The Making of Economic Society (Englewood Cliffs, NJ: Prentice-Hall, 1962), 36–38, 50. 22. S. R. Epstein and Maarten Prak, Guilds, Innovation, and the European Economy, 1400–1800 (Cambridge: Cambridge University Press, 2008) 31. 23. Ibid., 44. Chapter 3 1. Yujiro Hayami and Yoshihisa Godo, Development Economics: From the Poverty to the Wealth of Nations (New York: Oxford University Press, 2005), 341. 2. Maurice Dobb, Studies in the Development of Capitalism (New York: International Publishers, 1947), 143. 3. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Edinburgh: Thomas Nelson, 1843), 20. 4. Ibid. 5. Ibid., 21. 6. Ibid., 22. 7. Carl Lira, “Biography of James Watt,” May 21, 2013, http://www.egr.msu.edu/~lira/supp/steam /wattbio.html (accessed January 7, 2014). 8. Jean-Claude Debeir, Jean-Paul Deléage, and Daniel Hémery, In the Servitude of Power: Energy and Civilization through the Ages (London: Zed Books, 1992), 101–104. 9.

The food we eat, the water we drink, the artifacts we make and use, the social relationships we engage in, the ideas we bring forth, the time we expend, and even the DNA that determines so much of who we are have all been thrown into the capitalist cauldron, where they are reorganized, assigned a price, and delivered to the market. Through most of history, markets were occasional meeting places where goods were exchanged. Today, virtually every aspect of our daily lives is connected in some way to commercial exchanges. The market defines us. But here lies the contradiction. Capitalism’s operating logic is designed to fail by succeeding. Let me explain. In his magnum opus, The Wealth of Nations, Adam Smith, the father of modern capitalism, posits that the market operates in much the same way as the laws governing gravity, as discovered by Isaac Newton. Just as in nature, where for every action there is an equal and opposite reaction, so too do supply and demand balance each other in the self-regulating marketplace. If consumer demand for goods and services goes up, sellers will raise their prices accordingly.

Of course, my father could never have imagined in the early years that the millions of plastic bags he was selling would end up in landfills and pollute the environment. Nor could he have foreseen that the petrochemicals used to extrude the polyethylene would emit carbon dioxide and play a key role in altering the climate of the planet. Reflecting on my own father’s career, it is clear to me that the invisible hand that Adam Smith alluded to 237 years ago in The Wealth of Nations is really not all that invisible. It’s the entrepreneurial spirit that drove my dad and countless other entrepreneurs to innovate, reduce marginal costs, bring cheaper products and services to the market, and spur economic growth. That entrepreneurial spirit is now taking us to near zero marginal costs and into a new economic era of history where more goods and services will be nearly free and shared on a Collaborative Commons.


pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

accounting loophole / creative accounting, Albert Einstein, asset-backed security, banking crisis, banks create money, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, collective bargaining, corporate social responsibility, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, high net worth, income inequality, investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, labour market flexibility, laissez-faire capitalism, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, means of production, moral hazard, mortgage debt, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Plutocrats, plutocrats, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, Winter of Discontent, working poor, Yom Kippur War

But isn’t this hopelessly idealistic? Anyway, don’t the differences in the quality of work that people do simply reflect differences in intelligence and effort? And doesn’t the division of labour make for economic efficiency, from which, supposedly, we all benefit? Let’s look at these objections. Isn’t the unequal division of labour a reflection of differences in ability and effort? In 1776, in The Wealth of Nations, Adam Smith famously analysed the benefits of division of labour through his example of the pin factory. Splitting the manufacture into 18 different operations, carried out repetitively and covered by about 10 workers, allowed them to produce over 48,000 pins per day, whereas if each worker had to do all 18 operations on each pin from start to finish before moving on to the next they would scarcely have produced 20 a day.

The proportion of part-timers in the workforce has also risen in the US in the last 40 years. 13 Tawney, R.H. (2004) [1920] The acquisitive society, Mineola, NY: Harcourt Brace and Howe. 14 Hudson, M. (2008) http://dandelionsalad.wordpress.com/2008/09/08/’modern-debt-peonage”-economic-democracy-is-turning-into-a-financial-oligarchy/. Chapter Four: For rent … for what? 15 Smith, A. (1976) [1776] The wealth of nations, ed. E. Cannan, Chicago, IL: University of Chicago Press, Bk I, ch V, p 56. 16 Paine, T. (1797) Agrarian justice, paragraph 11, http://geolib.pair.com/essays/paine.tom/agjst.html. 17 Churchill, W. (1909) The people’s rights, ch 4, http://www.wealthandwant.com/docs/Churchill_TPL.html. 18 Tawney, R.H. (2004) [1920] The acquisitive society, Mineola, NY: Harcourt Brace and Howe. 19 http://www.richest-people.co.uk/duke-of-westminster/. 20 Mill, J.S. (1965) Principles of political economy, in Collected Works, ed.

19 For a fuller discussion of these possibilities see Wright, E.O. (2000) Class counts, Cambridge: Cambridge University Press. 20 Orton, M and Rowlingson, K. (2007) Public attitudes to inequality, York: Joseph Rowntree Foundation; Horton, L. and Bamfield, T. (2009) Understanding attitudes to tackling economic inequality, York: Joseph Rowntree Foundation; Miller, D. (1999) Principles of social justice, Cambridge, MA: Harvard University Press. 21 See Robert Jackall’s wonderful study of corporate managers in the US in his 1988 book, Moral mazes, Oxford: Oxford University Press. 22 Gomberg, P. (2007) How to make opportunity equal, Oxford: Blackwell; Sayer, A. (2009) ‘The injustice of unequal work’, Soundings, 43, pp. 102–13. 23 Horton and Bamfield (2009). 24 Gomberg (2007). 25 Gomberg (2007). 26 Smith, A. (1976) [1776], The wealth of nations, ed. E. Cannan, Chicago, IL: University of Chicago Press, vol 2, bk V, ch i, pp 302–3. 27 Murphy, J.B. (1993) The moral economy of labor, New Haven, CT: Yale University Press. 28 Smith (1976) [1776], vol 1, bk I, ch ii, pp 19–20. 29 Feinstein, L. (2003) ‘Inequality in the early cognitive development of British children in the 1970 cohort’, Economica, 70, pp 73–97. See also Bruenig, M. (2014) ‘America’s class system across the life cycle’, Demos, 25 March, http://www.demos.org/blog/3/25/14/americas-class-system-across-life-cycle. 30 Aldridge, S. (2004) ‘Life chances and social mobility: an overview of the evidence’, London: Prime Minister’s Strategy Unit, Cabinet Office, http://www.cabinetoffice.gov.uk/media/cabinetoffice/strategy/assets/lifechances_socialmobility.pdf; Erikson, R. and Goldthorpe, J.H. (1992) The constant flux: A study of class mobility in industrial societies, Oxford: Clarendon Press; Inequality Briefing 39 (2014) ‘What people in the UK earn depends on what their parents earned’, http://inequalitybriefing.org/graphics/briefing_39_peoples_income_reflects_what_their_parents_earned.pdf 31 Lareau, A. (2003) Unequal childhoods: Class, race and family life, California: University of California Press; Walkerdine, V. and Lucey, H. (1989) Democracy in the kitchen, London: Virago; Bourdieu, P. and Passeron, J.


pages: 329 words: 85,471

The Locavore's Dilemma by Pierre Desrochers, Hiroko Shimizu

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

air freight, back-to-the-land, British Empire, Columbian Exchange, Community Supported Agriculture, edge city, Edward Glaeser, food miles, Food sovereignty, global supply chain, intermodal, invention of agriculture, inventory management, invisible hand, Jane Jacobs, labour mobility, land tenure, megacity, moral hazard, mortgage debt, oil shale / tar sands, oil shock, peak oil, planetary scale, profit motive, refrigerator car, Steven Pinker, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, Upton Sinclair, urban sprawl

Cambridge University Press; Maguelonne Toussaint-Samat. 1994/1987. History of Food (translated by Anthea Bell). Blackwell Publishing; Vaclav Smil. 2010. Prime Movers of Globalization. The History and Impact of Diesel Engines and Gas Turbines. MIT Press; and Robert P. Clark. 2000. Global Life Systems. Population, Food, and Disease in the Process of Globalization. Rowman & Littlefield Publishers, Inc. 5 Adam Smith. 1776. An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. 1, Book I, chapter II: Of the Principle which gives occasion to the Division of Labour. Available at http://www.econlib.org/library/Smith/smWN1.html#B.I, Ch.2, Of the Principle which gives Occasion to the Division of Labour. 6 Gisday Wa and Delgam Uukw. 1989 The Spirit in the Land. Reflections, p. 44. 7 For genus Homo as a whole, this would amount to 99% of its record. 8 In the last several decades, X-rays, gamma rays, fast neutrons and thermal neutrons were used to cause mutations in plants.

“Come On Down to the Farmers Market (Bring Your Wallet and Your Food Orthodoxy), (September 17) http://www.consumerfreedom.com/news_detail.cfm/h/3992-come-on-down-to-the-farmers-market-bring-your-wallet-and-your-food-orthodoxy. 7 Alisa Smith and J.B. MacKinnon. 2005. “Living on the 100-mile Diet,” The Tyee (June 28) http://thetyee.ca/Life/2005/06/28/HundredMileDiet and Alisa Smith and J.B. MacKinnon. 2007.The 100-Mile Diet. A Year of Local Eating. Random House Canada. 8 Adam Smith. 1776. An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. 1, Book IV, chapter II: Of Restraints upon the Importation from Foreign Countries of Such Goods as Can Be Produced at Home http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=237&chapter=212328&layout=html&Itemid=27. 9 See, among others, Tom Philpott. 2011. “Freakonomics Blog: Still Wrong on Local Food.” MotherJones.com (November 18) http://motherjones.com/tom-philpott/2011/11/freakonomics-blog-still-wrong-local-food. 10 See Peter Garnsey. 1988.

Bloomberg.com (November 24) http://www.bloomberg.com/news/2011-11-24/china-s-soybean-imports-in-2011-may-decline-shanghai-jc-says.html In 2010, the USA, Brazil, Argentina and China produced respectively 35, 27, 19 and 6% of the world’s total production (“World Statistics” at soy stats.com http://www.soystats.com/2011/Default-frames.htm ). 56 Quoted in Alan L. Olmstead and Paul W. Rhode. 2008. Creating Abundance. Biological Innovation and American Agricultural Development. Cambridge University Press, p. 381. 57 Adam Smith. 1776. An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. 1, Book I, chapter 8: On the Wages of Labour http://oll.libertyfund.org/?option=com_staticxt&staticfile=show. php%3Fti tle=220&chapter=217399 &layout=html&Itemid=27. Chapter 4 1 See, among others, Dennis E. Jelinski. 2005. “There is no Mother Nature—There is no Balance of Nature: Culture, Ecology and Conservation.” Human Ecology 33 (2): 271–288. 2 The ancestors of today’s large African animals who had co-evolved with them, on the other hand, had long learned to be more careful around these seemingly puny creatures.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, California gold rush, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Edward Lloyd's coffeehouse, equity premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, financial innovation, Francis Fukuyama: the end of history, George Akerlof, George Gilder, greed is good, haute couture, illegal immigration, income inequality, invention of the telephone, invention of the wheel, invisible hand, John Nash: game theory, John von Neumann, Kevin Kelly, knowledge economy, labour market flexibility, late capitalism, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, pets.com, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, telemarketer, The Chicago School, The Death and Life of Great American Cities, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Washington Consensus, women in the workforce, yield curve, yield management

So whatever the political differences established by the American Revolution, Britain, Holland, and the United States were joint leaders in economic development at the start of the nineteenth century. There was one important difference-a difference that itself provided part of the rationale for settlement. Europe increasingly suffered from too much population for its land; in America, the ratio of land to people was quite different. This had implications for the balance of economic and political power. Adam Smith, the revered founder of modern economics, published The Wealth of Nations in 1776, coincident with the American Revolution. "England," he observed, "is certainly, in the present times, a much richer country than any part of North America. The wages oflabor, however, are much higher in North America than in any part ofEngland." 10 Virginia was different. The settlers in New England, and the Hudson and Delaware valleys, were predominantly middle-class religious dissenters.

Customary economies had little capacity to deal with change and offered little encouragement to initiate change. In modern society, we make decisions and choices, and the economic system is the framework within which we make them. It contains rules for assignment, production, and exchange. In the late eighteenth and nineteenth centuries, economists established a durable method of analysis for understanding production for exchange. Adam Smith's principal work, The Wealth of Nations) described the division of labor. David Ricardo, who became a writer and member of the British Parliament after successful speculation in bonds, laid out the principle of comparative advantage fifty years later. The effectiveness of an economic system is determined by its efficiency in exploiting comparative advantage and the division oflabor. The Colombe d'Or For two hundred years, European artists have been attracted to the bright light and brilliant scenery of the south of France.

In his other major work, The Theory ofMoral Sentiments) in which what Smith calls "sympathy" plays a central role, Smith wrote, "They [the rich] are led by an invisible hand to make the same distribution of the necessities of life, which would have been made, had the earth been divided into equal portions amongst all its inhabitants." 4 While it is unlikely that Smith held the views popularly attributed to him, speculation as to what exactly he did think is not helpful in arriving at the truth about markets. Our purpose now is to explain economic systems that Adam Smith could not conceivably have imagined. And that is why The Wealth ofNations holds only the limited interest for us today that the works ofNewton have for a modern physicist or engineer. 5 Smith's important insights-such as the division of labor and the loose but prescient notion that coordination might be achieved through spontaneous order-have been absorbed and developed in the corpus of current knowledge. Friedrich von Hayekn was largely neglected in modern economic thought until he was an unexpected recipient of the Nobel Prize in 1974.


pages: 159 words: 45,073

GDP: A Brief but Affectionate History by Diane Coyle

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Asian financial crisis, Berlin Wall, big-box store, Bretton Woods, BRICs, clean water, computer age, conceptual framework, crowdsourcing, Diane Coyle, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Fall of the Berlin Wall, falling living standards, financial intermediation, global supply chain, happiness index / gross national happiness, income inequality, income per capita, informal economy, John von Neumann, Kevin Kelly, Long Term Capital Management, mutually assured destruction, Nathan Meyer Rothschild: antibiotics, new economy, Occupy movement, purchasing power parity, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thorstein Veblen, University of East Anglia, working-age population

At another time, the debate in coffeehouses and pamphlets centered firmly on the national debt, the figures for which the government published frequently between the late seventeenth and late eighteenth centuries. Once again, financing warfare was the motivation. Then came a substantial intellectual innovation. In The Wealth of Nations (published 1776), Adam Smith introduced the distinction between “productive” and “unproductive” labor. An anonymous author had written in 1746, “What I mean by National Income is, all the whole body of our People get or receive from Land, Trade, Arts, Manufactures, Labour, or any other way whatsoever; and by Annual Expence I mean, the whole that they spend or consume.” Yet in Adam Smith’s definition thirty years later, the “whole body of our People” did not count. Only those involved in the making of physical commodities, agriculture and industry, would count toward national income.

The provision of more services was a cost to the national economy, in his view. A servant was a cost to his employer, and did not create anything. Importantly, money spent on warfare or the interest on government debt was also being used unproductively. The nation’s wealth was its stock of physical assets less the national debt. National income was what derived from the national wealth. According to Benjamin Mitra-Kahn, “The Wealth of Nations introduced a new idea of the economy, and through the effort of Adam Smith’s students and admirers, it was adopted almost instantly.” In Smith’s own words: There is one sort of labour which adds to the value of the subject upon which it is bestowed: There is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproductive labour. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own maintenance, and of his master’s profit.

Frits Bos, “Uses of National Accounts: History, International Standardization and Applications in the Netherlands,” MPRA Paper no. 9387, 30 June 2008, http://mpra.ub.uni-muenchen.de/9387/. Accessed 1 August 2012. 2. Benjamin H. Mitra-Kahn, “Redefining the Economy: How the ‘Economy’ Was Invented, 1620” (Ph.D. dissertation, City University London, 2011), http://openaccess.city.ac.uk/1276/. Accessed 3 August 2012. 3. Adam Smith, The Wealth of Nations (first published 1776), book II, chap. 3. 4. Geoff Tily, “John Maynard Keynes and the Development of National Accounts in Britain, 1895–1941,” Review of Income and Wealth 55, no. 2 (2009): 331–359. 5. Angus Maddison, The World Economy: Historical Statistics (Paris: Organization for Economic Cooperation and Development, 2003), preface. 6. Joined by the United States after the attack on Pearl Harbor in December 1941. 7.


pages: 83 words: 26,097

Payoff: The Hidden Logic That Shapes Our Motivations (TED Books) by Dan Ariely

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, Affordable Care Act / Obamacare, David Brooks, en.wikipedia.org, knowledge economy, knowledge worker, science of happiness, Snapchat, The Wealth of Nations by Adam Smith

I think it’s partially because of the persistence of an industrial-era view of labor that is largely accepted as truth. This view holds that the labor market is a place where individuals exchange work for wages (regardless of how meaningless the labor is) and that people typically don’t really care what happens to their work as long as they are fairly compensated for it. This view of labor as a work-wage exchange springs from Adam Smith’s 1776 magnum opus The Wealth of Nations, in which Smith described the benefits of breaking a large task into components, assigning one person to each specific task, and encouraging them to specialize in performing it. In his famous example of the pin factory, Smith argued that having one person make every part of a pin would result in low productivity. In contrast, he envisioned an efficient workplace built on a division of labor.

CLICK HERE TO SIGN UP or visit us online to sign up at eBookNews.SimonandSchuster.com NOTES 1 As long as you don’t expect a simple answer to this question by the end of the book, we are going to be okay. 2 My father used to say that having very young kids at home is a sure way to get people to stay in the office longer. 3 Roy Baumeister, Kathleen Vohns, Jennifer Aaker, Emily Garbinsky, “Some Key Differences Between a Happy Life and a Meaningful Life,” Journal of Positive Psychology (2013). 4 Dan Ariely, Emir Kamenica, and Drazen Prelec, “Man’s Search for Meaning: The Case of Legos,” Journal of Economic Behavior & Organization (2008). 5 Amy Adkins, “Majority of U.S. Employees Not Engaged Despite Gains in 2014,” Gallup, January 28, 2015, http://www.gallup.com/poll/181289/majority-employees-not-engaged-despite-gains-2014.aspx. 6 Adam Smith, “An Inquiry into the Nature and Causes of the Wealth of Nations,” http://geolib.com/smith.adam/won1-01.html. 7 John Maynard Keynes, The General Theory of Employment, Interest and Money (1936). 8 Michelle Park, “A History of the Cake Mix, the Invention That Redefined ‘Baking,’ ” http://www.bonappetit.com/entertaining-style/pop-culture/article/cake-mix-history. 9 Mike Norton, Daniel Mochon, and Dan Ariely “The IKEA Effect: When Labor Leads to Love,” Journal of Consumer Psychology (2012).

From Marx to Smith and Back One of the early thinkers about the meaning of labor in the modern world was Karl Marx. In 1844, Marx wrote about what he called “the alienation of labor,” which described a situation in which someone works on a small sub-task, in a small part of a larger enterprise. Like the worker in Adam Smith’s pin factory, the laborer has no idea what his project is all about. He doesn’t understand how his work fits in with the enterprise as a whole. It is unclear to him who will use the product he makes, and he generally feels no connection to the organization, the project, the end user, or the outcome. It is clear that Adam Smith and Karl Marx had very different understandings of the nature of productivity. Smith assumed that management could change the structure of the workplace and achieve more efficiency without sacrificing human motivation. Marx, on the other hand, assumed that the efficiency gained from breaking tasks into components would come at the expense of human motivation.


pages: 207 words: 52,716

Capitalism 3.0: A Guide to Reclaiming the Commons by Peter Barnes

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, car-free, clean water, collective bargaining, corporate governance, corporate personhood, corporate social responsibility, dark matter, diversified portfolio, en.wikipedia.org, hypertext link, Isaac Newton, James Watt: steam engine, jitney, new economy, patent troll, profit maximization, Ronald Coase, telemarketer, The Wealth of Nations by Adam Smith, transaction costs, War on Poverty, Yogi Berra

The Ascent of Corporations When I speak in this book of corporations, I’m speaking of a very special institution: the publicly traded stock corporation. This is an institution with a board of directors, a set of executive officers, and a fluctuating set of shareholders to whom the directors and officers are legally accountable. These corporations have an explicit mission: to maximize return to stock owners. When Adam Smith wrote The Wealth of Nations in 1776, there were barely a handful of corporations in Britain or America. The dominant business form was the partnership, in which small groups of people known to each other ran businesses they co-owned. In the public’s mind—as in Smith’s—the corporate form, in which managers sold stock to strangers, was inherently prone to fraud. Numerous scandals supported this view. Yet as the scale of enterprise grew, partnerships proved unable to aggregate enough capital.

| 169 | 170 | Notes to Pages 19–30 119 “It makes no sense . . .”: Bob Dole’s statement on the spectrum giveaway can be found at www.anu.edu.au/mail-archives/link/link9601/0035.html. See also Ralph Kinney Bennett, “The Great Airwaves Giveaway,” Reader’s Digest, June 1996. 119 “If you steal $10 . . .”: Walter Hickel, Crisis in the Commons: The Alaska Solution (Oakland, Calif.: ICS Press, 2002), p. 217. 120 a handful of corporations: Adam Smith, The Wealth of Nations (London: Penguin Books, 1982 [originally published 1776]). 121 corporations were persons”: The Supreme Court decision that established corporate personhood was Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886). 122 Fortune 500 sales: I computed the annual sales of Fortune 500 corporations from data available (for a fee) on Fortune magazine’s website. See http:// money.cnn.com/magazines/fortune/fortune500_archive/full/1955/index.htm. 123 “So great has been the change . . .”: John Kenneth Galbraith, The Affluent Society (Boston: Houghton Mifflin, 1958), p. 2. 124 scarce factor is trees: See www.worldchanging.com/archives/004143.html. 125 capitalism’s stages: I’m pleased to note that ecological economist Herman Daly has a two-stage schema similar to mine.

.: South End Press, 1997. Shiva, Vandana. Water Wars: Privatization, Pollution, and Profit. Cambridge, Mass.: South End Press, 2002. Shiva, Vandana. Earth Democracy: Justice, Sustainability, and Peace. Cambridge, Mass.: South End Press, 2005. Shulman, Seth. Owning the Future. Boston: Houghton Mifflin, 1999. Simms, Andrew. Ecological Debt: The Health of the Planet and the Wealth of Nations. London: Pluto Press, 2005. Smith, Adam. The Wealth of Nations. London: Penguin Books, 1982. (Originally published 1776) Smith, Adam. The Theory of Moral Sentiments. Amherst, N.Y.: Prometheus Books, 2000. (Originally published 1759) Steinberg, Theodore. Slide Mountain: The Folly of Owning Nature. Berkeley: University of California Press, 1995. Stone, Christopher. Should Trees Have Standing? Toward Legal Rights for Natural Objects.


pages: 543 words: 147,357

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, Long Term Capital Management, Louis Pasteur, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, means of production, Mikhail Gorbachev, millennium bug, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, open economy, Plutocrats, plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Washington Consensus, working poor, éminence grise

Hobsbawm (1969) Industry and Empire from 1750 to the Present Day, Penguin, p. 40. 2 William Baumol (1990) ‘Entrepreneurship: Productive, Unproductive, and Destructive’, Journal of Business Venturing ll: 3–22. 3 Thomas Schweich, ‘Is Afghanistan a Narco-State?’, New York Times, 27 July 2008, at http://www.nytimes.com/2008/07/27/magazine/27AFGHAN-t.html?_r=1. 4 This problem is even more pernicious in developing countries. See Raymond Fisman and Edward Miguel (2008) Economic Gangsters: Corruption, Violence and the Poverty of Nations, Princeton University Press. 5 Adam Smith (1776) An Enquiry into the Nature and Causes of the Wealth of Nations, Vol. I, pp. 363–4. 6 Generally, see Emma Rothschild (2001) Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment, Harvard University Press. The spirit of rationalism underpinned early centralisation and the emergence of unified markets. See Stephan Epstein (2000) Freedom and Growth: The Rise of States and Markets in Europe, 1300–1750, Routledge. 7 J. Bradford DeLong (2000) ‘Cornucopia: The Pace of Economic Growth in the Twentieth Century’, NBER Working Paper No. 7602. 8 Robert Winston (2010) Bad Ideas: An Arresting History of Our Inventions, Bantam Press. 9 Richard G.

The acquirer must leave for his neighbour ‘as good and as large a possession (after the other had taken out his) as before it was appropriated’.11 A shipwrecked sailor, for example, cannot appropriate the only tools available because that would leave others at an unjustifiable disadvantage. Property ownership therefore had limits, but it was justified not as part of God’s dominion but because of the effort made to win it. We earn our rights – a view that has turned out to be durable. Adam Smith, the author of The Wealth of Nations, saw poor workers as victims of the disproportionate allocation of property, unacknowledged Atlases supporting a superstructure of ‘ease and plenty’ above them. Rather than pitiful creatures who deserved their fate, Smith’s humanity and Enlightenment recognition that human beings were of equal worth made him see virtue in the apparently virtueless poor. They were victims of circumstance rather than architects of their own plight.

He was wrong about derivatives alleviating risk, wrong that shareholders would ensure that banks pursued policies that did not destroy wealth, and wrong about the housing boom not being a bubble that would inevitably burst. But the pre-credit crunch, ‘socialist’ Brown was happy to go along with all this. Perhaps we should not be surprised. After all, Edinburgh University was Adam Smith’s alma mater, too, and both Brown and Smith were citizens of Kirkcaldy, and proud of the fact. Greenspan might stress The Wealth of Nations in his belief system; Brown might stress the humanism and commitment to fairness in Smith’s Theory of Moral Sentiments. But both worshipped at the same shrine.8 Brown was flattered that American conservatives thought so highly of the Scottish contribution to the European Enlightenment. He frequently cited (and continues to cite) Gertrude Himmelfarb, who thinks that the mildly progressive, humanitarian but socially conservative Scottish Enlightenment – exemplified by The Theory of Moral Sentiments – is much more enduring than the tough rationalism of the French Enlightenment, which, of course, ended in revolutionary violence.9 Brown saw himself and Greenspan as fellow children of the Enlightenment, who both understood Scotland’s distinctiveness.


pages: 357 words: 110,017

Money: The Unauthorized Biography by Felix Martin

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, call centre, capital asset pricing model, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, credit crunch, David Graeber, en.wikipedia.org, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, Hyman Minsky, inflation targeting, invention of writing, invisible hand, Irish bank strikes, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, mobile money, moral hazard, mortgage debt, new economy, Northern Rock, Occupy movement, Plutocrats, plutocrats, private military company, Republic of Letters, Richard Feynman, Richard Feynman, Robert Shiller, Robert Shiller, Scientific racism, seigniorage, Silicon Valley, smart transportation, South Sea Bubble, supply-chain management, The Wealth of Nations by Adam Smith, too big to fail

Even country ladies talked about nothing but stock-jobbing. The new world being forged by this corporate and financial revolution clamoured to be explained and justified—and Mandeville’s outrageous hypothesis appeared to do both at once. When it was taken up by one of the Enlightenment’s morning stars, the Scotsman Adam Smith, it became the basis of a fully fledged theory of monetary society that has survived to this day. In his Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith formulated the first systematic theory linking individual behaviour with the organisation of the economy, and presented the first cogent synthesis of earlier thinkers’ ideas of how the financial revolution had transformed traditional society. The growth of commerce and money, he argued, had “generally introduced order and good government, and with them, the liberty and security of individuals.”30 It was Smith who recognised the historical irony in the accumulation and paying-out of this political dividend.

A version of it can be found in Aristotle’s Politics, the earliest treatment of the subject in the entire Western canon.9 It is the theory developed by John Locke, the father of classical political Liberalism, in his Second Treatise of Government.10 To cap it all, it is the very theory—almost to the letter—advocated by none other than Adam Smith in his chapter “Of the Origin and Use of Money” in the foundation text of modern economics, An Inquiry into the Nature and Causes of the Wealth of Nations: But when the division of labour first began to take place, this power of exchanging must frequently have been very much clogged and embarrassed in its operations … The butcher has more meat in his shop than he himself can consume, and the brewer and the baker would each of them be willing to purchase a part of it. But they have nothing to offer in exchange, except the productions of their respective trades, and the butcher is already provided with all the bread and beer which he has immediate occasion for … In order to avoid such situations, every prudent man in every period of society, after the first establishment of the division of labour, must naturally have endeavoured to manage his affairs in such a manner, as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few other people would be likely to refuse in exchange for the produce of their industry.11 Smith even shared my friend’s agnosticism as to which commodity would be chosen to serve as money: Many different commodities, it is probable, were successively both thought of and employed for this purpose.

Montesquieu, Mes Pensées, quoted in Hirschman, 1977, p. 74. 5. Montesquieu, Esprit des lois, Book XXII, 13, quoted ibid., p. 74 (where it is accidentally attributed to Book XXII, 14). 6. Montesquieu, Esprit des lois, Book XXI, 20, quoted ibid., pp. 72–3. 7. Ibid. 8. James Carville, quoted in Wall Street Journal, 25 February 1993, p. A1. 9. It was published in England in 1767, nine years before Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations. 10. Steuart, 1966, Vol. 1, p. 278. Quoted in Hirschman, 1977, p. 85. 11. Boyer-Xambeu et al., 1994, p. 30. 12. The extent to which the development of finance in England lagged behind Continental Europe until the late seventeenth century is demonstrated by Thomas Mun’s treatment of standard Latin practices such as payments by transfer between bank accounts as unknown in England in his 1621 Discourse on Foreign Trade.

Who Rules the World? by Noam Chomsky

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, anti-communist, Ayatollah Khomeini, Berlin Wall, Bretton Woods, British Empire, capital controls, corporate governance, corporate personhood, cuban missile crisis, deindustrialization, Donald Trump, Doomsday Clock, Edward Snowden, en.wikipedia.org, facts on the ground, failed state, Fall of the Berlin Wall, Howard Zinn, illegal immigration, invisible hand, Malacca Straits, Martin Wolf, Mikhail Gorbachev, Monroe Doctrine, nuclear winter, Occupy movement, oil shale / tar sands, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, Ralph Waldo Emerson, Ronald Reagan, South China Sea, Stanislav Petrov, structural adjustment programs, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trade route, union organizing, uranium enrichment, wage slave, WikiLeaks, working-age population

It is small wonder that the “campaign of hatred” against the United States that concerned Eisenhower was based on the recognition that the United States supports dictators and blocks democracy and development, as do its allies. In Adam Smith’s defense, it should be added that he recognized what would happen if Britain followed the rules of sound economics, now called “neoliberalism.” He warned that if British manufacturers, merchants, and investors turned abroad, they might profit but England would suffer. But he felt that they would be guided by a home bias, so that as if by an “invisible hand” England would be spared the ravages of economic rationality. The passage is hard to miss. It is the one occurrence of the famous phrase “invisible hand” in The Wealth of Nations. The other leading founder of classical economics, David Ricardo, drew similar conclusions, hoping that what is called “home bias” would lead men of property to “be satisfied with the low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations”—feelings that, he added, “I should be sorry to see weakened.”16 Their predictions aside, the instincts of the classical economists were sound.

Jo Ann Boydston (Carbondale: Southern Illinois University Press, 1987), 270.   6. Randolph Bourne, “Twilight of Idols,” Seven Arts, October 1917, 688–702.   7. Michael Crozier, Samuel P. Huntington, and Joji Watanuke, The Crisis of Democracy: Report on the Governability of Democracies to the Trilateral Commission (New York: New York University Press, 1975), http://www.trilateral.org/download/doc/crisis_of_democracy.pdf.   8. Adam Smith, The Wealth of Nations (New York: Bantam Classics, 2003), 96.   9. Gordon S. Wood, The Creation of the American Republic, 1776–1787 (New York: W. W. Norton, 1969), 513–14. Lance Banning, in The Sacred Fire of Liberty: James Madison and the Founding of the Federal Republic (Ithaca: Cornell University Press, 1995), strongly affirms Madison’s dedication to popular rule but nevertheless concurs with Wood’s assessment of the Constitutional design (245). 10.

Thom Shanker, “U.S. Fails to Explain Policies to Muslim World, Panel Says,” New York Times, 24 November 2004. 12. Afaf Lutfi Al-Sayyid Marsot, Egypt in the Reign of Muhammad Ali (Cambridge: Cambridge University Press, 1984). For more extensive discussion on post–World War II Egypt, see Noam Chomsky, World Orders Old and New (New York: Columbia University Press, 1994), chapter 2. 13. Adam Smith, The Wealth of Nations (New York: Bantam Classics, 2003), 309. 14. Noam Chomsky, Year 501: The Conquest Continues (Chicago: Haymarket Books, 2014), 150. 15. Chomsky, Hopes and Prospects, 80. 16. David Ricardo, The Works of David Ricardo: With a Notice of the Life and Writings of the Author by J. R. McCulloch, (London: John Murray, 1846), 77. 17. Tony Magliano, “The Courageous Witness of Blessed Oscar Romero,” National Catholic Reporter, 11 May 2015. 18.


pages: 187 words: 58,839

Status Anxiety by Alain de Botton

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

hiring and firing, invention of the steam engine, invisible hand, means of production, Plutocrats, plutocrats, Ralph Waldo Emerson, The Wealth of Nations by Adam Smith, Thorstein Veblen

In 1900, a giant Coca-Cola sign was erected on one side of Niagara Falls, while an advert for Mennen’s Toilet Powder was suspended over the gorge. 11. When defenders of modern societies have sought to make a case to sceptics, their task has not been difficult: they have had only to point to the enormous wealth that modern societies are able to generate for their members. In his Inquiry into the Nature and Causes of the Wealth of Nations (1776), Adam Smith sarcastically compared the awe-inspiring productivity of proto-industrial societies with the bare subsistence of primitive hunting-and-gathering ones. The latter were, by Smith’s account, steeped in terrible poverty. Harvests rarely yielded enough food, there were chronic shortages of basic necessities and, in times of serious crisis, children, the elderly and the poor were often left “to be devoured by wild beasts.”

If we are anguished by the thought of failure, it may be because success seems the only dependable incentive for the world to grant us its goodwill. A family bond, a friendship or a sexual attraction may at times render material incentives unnecessary, but only a reckless optimist would rely on emotional currencies for the regular fulfilment of his or her needs. Humans rarely smile without having some robust reason to do so. 3. Adam Smith, The Wealth of Nations (Edinburgh, 1776): “Man has almost constant occasion for the help of his brethren. [However], it is in vain for him to expect this from their benevolence only. He will be more likely to prevail if he can interest their self-love… . It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity, but to their self-love.” 4.

In the ancient world, debate raged among philosophers about what was materially necessary for happiness and what unnecessary. Epicurus, for one, argued that simple food and shelter were all that was needed, and that an expensive house and lavish meals could be safely passed up by every rational, philosophically minded person. However, reviewing the argument many centuries later in The Wealth of Nations, Adam Smith wryly pointed out that in modern, materialistic societies, countless things that were no doubt unnecessary from the point of view of physical survival had nonetheless in practical terms come to be seen as “necessaries,” simply because no one could be thought respectable and so lead a psychologically comfortable life without owning them: “By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without.

Undoing the Demos: Neoliberalism's Stealth Revolution by Wendy Brown

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Affordable Care Act / Obamacare, bitcoin, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, corporate governance, credit crunch, crowdsourcing, David Brooks, Food sovereignty, haute couture, immigration reform, income inequality, invisible hand, labor-force participation, late capitalism, means of production, new economy, obamacare, occupational segregation, Ronald Reagan, shareholder value, sharing economy, The Chicago School, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trickle-down economics, Washington Consensus, Wolfgang Streeck, young professional

“Responsibilization,” in The SAGE Dictionary of Policing, ed. Alison Wakefield and Jenny Fleming (London: SAGE Publications Ltd., 2009), pp. 277–79; See also John Clarke, “Living With/in and Without Neo-Liberalism,” Focaal–European Journal of Anthropology 51 (2008), pp. 135–47; and Ronen Shamir, “The Age of Responsibilization: On Market-Embedded Morality,” Economy and Society 37.1 (2008), pp. 1–19. 240  n o t e s 21. Adam Smith, The Wealth of Nations (Chicago: University of Chicago Press, 1976), p. 477 22. Thus the persistent effort to fathom why working and middle-class voters can often be mobilized “against their interests” operates within an anachronistic paradigm of liberalism; such voters are behaving like good neoliberal subjects. See Thomas Frank, What’s the Matter With Kansas?: How Conservatives Won the Heart of America (New York: Holt, 2004). 23.

See Karl Marx, “Capital,” in The Marx-Engels Reader, volume 1, part 1, chapter 1. 34. Ibid., 1.9.7 35. Ibid., 1.10.4 36. Ibid., 1.9.12–13 37. Ibid., 1.9.15–17 38. Ibid., 1.9,15–18 39. Ibid., 1.9.14 n o t e s   241 40. Laval, L’homme économique; Hirschman, The Passions and the Interests. 41. C. B. MacPherson, The Political Theory of Possessive Individualism: Hobbes to Locke (Oxford: Oxford University Press, 1962), p. 3. 42. Smith, The Wealth of Nations. 43. Marx, The German Ideology. 44. In chapter 2 of the Wealth of Nations, Smith writes: “whether this propensity [to truck and barter] be one of those original principles in human nature of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to inquire.” (Note how this modifies the Aristotelian move — resting the putatively distinctive human qualities, reason and speech, at the base of our economic rather than our political nature.) 45.

Hunger, thirst, the passion which unites the two sexes, and the dread of pain, prompt us to apply those means for their own sakes, and without any consideration of their tendency to those beneficent ends which the great Director of nature intended to produce by them.” Adam Smith, Theory of Moral Sentiments (Indianapolis: Liberty Classics, 1976), p. 378. Useful considerations of Smith’s account of human nature include Samuel Fleischacker, On Adam Smith’s Wealth of Nations: A Philosoph­ical Companion (Princeton: Princeton Univ. Press, 2004) and Manfred J. Holler, “Adam Smith’s Model of Man and Some of its Consequences,” Homo Oeconomicus 23.3 (2006), pp. 467–88. 242  n o t e s 46. John Locke, Two Treatises of Government, in Political Writings, ed. David Wooston (New York: Penguin, 1993). 47. Foucault says that interest is what drives us into the social contract for Locke.


pages: 790 words: 150,875

Civilization: The West and the Rest by Niall Ferguson

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Admiral Zheng, agricultural Revolution, Albert Einstein, Andrei Shleifer, Atahualpa, Ayatollah Khomeini, Berlin Wall, BRICs, British Empire, clean water, collective bargaining, colonial rule, conceptual framework, Copley Medal, corporate governance, credit crunch, David Ricardo: comparative advantage, Dean Kamen, delayed gratification, Deng Xiaoping, discovery of the americas, Dissolution of the Soviet Union, European colonialism, Fall of the Berlin Wall, Francisco Pizarro, full employment, Hans Lippershey, haute couture, Hernando de Soto, income inequality, invention of movable type, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, joint-stock company, Joseph Schumpeter, land reform, land tenure, Louis Pasteur, Mahatma Gandhi, market bubble, Martin Wolf, means of production, megacity, Mikhail Gorbachev, new economy, probability theory / Blaise Pascal / Pierre de Fermat, profit maximization, purchasing power parity, quantitative easing, rent-seeking, reserve currency, road to serfdom, Ronald Reagan, savings glut, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, spice trade, spinning jenny, Steve Jobs, Steven Pinker, The Great Moderation, the market place, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, total factor productivity, trade route, transaction costs, transatlantic slave trade, transatlantic slave trade, upwardly mobile, uranium enrichment, wage slave, Washington Consensus, women in the workforce, World Values Survey

In religion as in business, state monopolies are inefficient – even if in some cases the existence of a state religion increases religious participation (where there is a generous subsidy from government and minimal control of clerical appointments).43 More commonly, competition between sects in a free religious market encourages innovations designed to make the experience of worship and Church membership more fulfilling. It is this that has kept religion alive in America.44 (The insight is not entirely novel. Adam Smith made a similar argument in The Wealth of Nations, contrasting countries with established Churches with those allowing competition.)45 Yet there is something about today’s American Evangelicals that would have struck Weber, if not Smith, as suspect. For there is a sense in which many of the most successful sects today flourish precisely because they have developed a kind of consumer Christianity that verges on Wal-Mart worship.46 It is not only easy to drive to and entertaining to watch – not unlike a trip to the multiplex cinema, with soft drinks or Starbucks served on the premises.

Ochlocracy (mob rule) This idea was revived in the Renaissance, when Polybius was rediscovered, and passed, meme-like, from the writing of Machiavelli to that of Montesquieu.1 But a cyclical view also arose quite separately in the writings of the fourteenth-century Arab historian Ibn Khaldun and in Ming Neo-Confucianism.2 In his book Scienza nuova (1725), the Italian philosopher Giambattista Vico describes all civilizations as passing through a ricorso with three phases: the divine, the heroic and the human or rational, which reverts back to the divine through what Vico called ‘the barbarism of reflection’. ‘The best instituted governments, like the best constituted animal bodies,’ wrote the British political philosopher Henry St John, Viscount Bolingbroke, in 1738, ‘carry in them the seeds of their destruction: and, though they grow and improve for a time, they will soon tend visibly to their dissolution. Every hour they live is an hour the less that they have to live.’3 In The Wealth of Nations Adam Smith conceived of economic growth – ‘opulence’ as he put it – ultimately giving way to the ‘stationary state’. Idealists and materialists agreed on this one thing. For Hegel and Marx alike, it was the dialectic that gave history its unmistakable beat. History was seasonal for Oswald Spengler, the German historian, who wrote in The Decline of the West (1918–22) that the nineteenth century had been ‘the winter of the West, the victory of materialism and scepticism, of socialism, parliamentarianism, and money’.

The Enlightenment was always most effective when it was being ironical – in Gibbon’s breathtaking chapter on early Christianity (volume I, chapter 15 of his Decline and Fall of the Roman Empire) or in Candide, Voltaire’s devastating mockery of Leibniz’s claim that ‘all is for the best in the best of all possible worlds’.* Yet perhaps the greatest achievement of the era was Smith’s analysis of the interlocking institutions of civil society (The Theory of Moral Sentiments) and the market economy (The Wealth of Nations). Significantly, by comparison with much else that was written in the period, both works were firmly rooted in observation of the Scottish bourgeois world Smith inhabited all his life. But where Smith’s ‘Invisible Hand’ of the market manifestly had to be embedded in a web of customary practice and mutual trust, the more radical Francophone philosophes sought to challenge not just established religious institutions but also established political institutions.


pages: 334 words: 98,950

Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, Albert Einstein, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labour mobility, land reform, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, moral hazard, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

Thus they were compelled to leave the most profitable ‘high-tech’ industries in the hands of Britain – which ensured that Britain would enjoy the benefits of being on the cutting edge of world development.18 The double life of the British economy The world’s first famous free-market economist, Adam Smith, vehemently attacked what he called the ‘mercantile system’ whose chief architect was Walpole. Adam Smith’s masterpiece, The Wealth of Nations, was published in 1776, at the height of the British mercantile system. He argued that the restrictions on competition that the system was producing through protection, subsidies and granting of monopoly rights were bad for the British economy.* Adam Smith understood that Walpole’s policies were becoming obsolete. Without them, many British industries would have been wiped out before they had had the chance to catch up with their superior rivals abroad.

Pitt is cited as the Earl of Chatham, which he was at the time. 26 The full quotation is: ‘Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.’ Adam Smith (1776), The Wealth of Nations, the 1937 Random House edition, pp. 347–8. Smith’s view was later echoed by the respected 19th-century French economist Jean-Baptise Say, who is reported to have said that, ‘like Poland’, the US should rely on agriculture and forget about manufacturing. Reported in List (1841), p. 99. 27 Hamilton divided these measures into eleven groups. They are: (i) ‘protecting duties’ (tariffs, if translated into modern terminology); (ii) ‘prohibition of rival articles or duties equivalent to prohibitions’ (import bans or prohibitive tariffs); (iii) ‘prohibition of the exportation of the materials of manufactures’ (export bans on industrial inputs); (iv) ‘pecuniary bounties’ (subsidies); (v) ‘premiums’ (special subsidies for key innovation); (vi) ‘the exemption of the materials of manufactures from duty’ (import liberalization of inputs); (vii) ‘drawbacks of the duties which are imposed on the materials of manufactures’ (tariff rebate on imported industrial inputs); (viii) ‘the encouragement of new inventions and discoveries, at home, and of the introduction into the United States of such as may have been made in other countries; particularly those, which relate to machinery’ (prizes and patents for inventions); (ix) ‘judicious regulations for the inspection of manufactured commodities’ (regulation of product standards); (x) ‘the facilitating of pecuniary remittances from place to place’ (financial development); and (xi) ‘the facilitating of the transportation of commodities’ (transport development).

Protecting industries that do not need protection any more is likely to make them complacent and inefficient, as Smith observed. Therefore, adopting free trade was now increasingly in Britain’s interest. However, Smith was somewhat ahead of his time. Another generation would pass before his views became truly influential, and it was not until 84 years after The Wealth of Nations was published that Britain became a genuine free trading nation. By the end of the Napeolenic Wars in 1815, four decades after the publication of The Wealth of Nations, British manufacturers were firmly established as the most efficient in the world, except in a few limited areas where countries like Belgium and Switzerland possessed technological leads. British manufacturers correctly perceived that free trade was now in their interest and started campaigning for it (having said that, they naturally remained quite happy to restrict trade when it suited them, as the cotton manufacturers did when it came to the export of textile machinery that might help foreign competitors).


pages: 347 words: 99,317

Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity by Ha-Joon Chang

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, Albert Einstein, banking crisis, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labour mobility, land reform, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, moral hazard, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

Thus they were compelled to leave the most profitable ‘high-tech’ industries in the hands of Britain – which ensured that Britain would enjoy the benefits of being on the cutting edge of world development.18 The double life of the British economy The world’s first famous free-market economist, Adam Smith, vehemently attacked what he called the ‘mercantile system’ whose chief architect was Walpole. Adam Smith’s masterpiece, The Wealth of Nations, was published in 1776, at the height of the British mercantile system. He argued that the restrictions on competition that the system was producing through protection, subsidies and granting of monopoly rights were bad for the British economy.iv Adam Smith understood that Walpole’s policies were becoming obsolete. Without them, many British industries would have been wiped out before they had had the chance to catch up with their superior rivals abroad.

Pitt is cited as the Earl of Chatham, which he was at the time. 26 The full quotation is: ‘Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.’ Adam Smith (1776), The Wealth of Nations, the 1937 Random House edition, pp. 347–8. Smith’s view was later echoed by the respected 19th-century French economist Jean-Baptise Say, who is reported to have said that, ‘like Poland’, the US should rely on agriculture and forget about manufacturing. Reported in List (1841), p. 99. 27 Hamilton divided these measures into eleven groups. They are: (i) ‘protecting duties’ (tariffs, if translated into modern terminology); (ii) ‘prohibition of rival articles or duties equivalent to prohibitions’ (import bans or prohibitive tariffs); (iii) ‘prohibition of the exportation of the materials of manufactures’ (export bans on industrial inputs); (iv) ‘pecuniary bounties’ (subsidies); (v) ‘premiums’ (special subsidies for key innovation); (vi) ‘the exemption of the materials of manufactures from duty’ (import liberalization of inputs); (vii) ‘drawbacks of the duties which are imposed on the materials of manufactures’ (tariff rebate on imported industrial inputs); (viii) ‘the encouragement of new inventions and discoveries, at home, and of the introduction into the United States of such as may have been made in other countries; particularly those, which relate to machinery’ (prizes and patents for inventions); (ix) ‘judicious regulations for the inspection of manufactured commodities’ (regulation of product standards); (x) ‘the facilitating of pecuniary remittances from place to place’ (financial development); and (xi) ‘the facilitating of the transportation of commodities’ (transport development).

Protecting industries that do not need protection any more is likely to make them complacent and inefficient, as Smith observed. Therefore, adopting free trade was now increasingly in Britain’s interest. However, Smith was somewhat ahead of his time. Another generation would pass before his views became truly influential, and it was not until 84 years after The Wealth of Nations was published that Britain became a genuine free trading nation. By the end of the Napeolenic Wars in 1815, four decades after the publication of The Wealth of Nations, British manufacturers were firmly established as the most efficient in the world, except in a few limited areas where countries like Belgium and Switzerland possessed technological leads. British manufacturers correctly perceived that free trade was now in their interest and started campaigning for it (having said that, they naturally remained quite happy to restrict trade when it suited them, as the cotton manufacturers did when it came to the export of textile machinery that might help foreign competitors).

The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

air freight, airline deregulation, Albert Einstein, asset-backed security, bank run, Berlin Wall, Bretton Woods, business process, call centre, capital controls, central bank independence, collateralized debt obligation, collective bargaining, conceptual framework, Corn Laws, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Hernando de Soto, income inequality, income per capita, invisible hand, Joseph Schumpeter, labor-force participation, labour market flexibility, laissez-faire capitalism, land reform, Long Term Capital Management, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, new economy, North Sea oil, oil shock, open economy, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, reserve currency, risk tolerance, Ronald Reagan, shareholder value, short selling, Silicon Valley, special economic zone, the payments system, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, working-age population, Y2K

Overseeing my schooling on the U.S. economy in addition to Don Kohn was David Stockton, the Fed's chief economist since 2000 and a Fed staffer since 1981. He never sought nor received the press that Fed governors get, but when the governors gave speeches, it was his forecast of the U.S. economy that Fed watchers were getting. We governors learned to see him as the indispensable, behind-the-scenes staffer.* Long before Adam Smith wrote his 1776 masterpiece, An Inquiry into the Nature and Causes of the Wealth of Nations, people were arguing over the shortest, straightest path to prosperity. Truly it is an argument without end. But even so, the data point to three important characteristics influencing global growth: (1) the extent of competition domestically, and, *David is so low-key that it wasn't until after we'd worked together closely for years that I learned t h a t his distant forebear, Richard Stockton, was a signer of t h e Declaration of Independence. 250 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright.

When I was a child, jokes about the scruples of used-car salesmen were widespread, but in truth a flagrantly unscrupulous used-car salesman is one who will be out of business before long. These days, almost every professional field is constrained by some regulatory framework, so it's harder than it once was to isolate the reputation effect, but a sector in which one can is e-commerce. Alibris, for example, is a Web site that acts as a broker between sellers and buyers of used books. If you were eager to buy an early edition of Adam Smith's The Wealth of Nations, you might search on Alibris for the names of booksellers around the country who had copies for sale. Customers are given the opportunity to rate the reliability of booksellers from whom they've purchased at least one book, and those ratings no doubt play an important role in the decision as to which of several booksellers to use. This form of public feedback is a powerful incentive to booksellers to be honest about the condition of their wares, and to fulfill orders fully and promptly.

Yet Scotland, too, has come around to according Smith the kind of honor he deserves. The way to the grave is now marked by a newly installed stone that quotes from The Wealth of Nations, and a college near Kirkcaldy has been renamed after Smith. A ten-foot-tall bronze statue of him is planned for Edinburgh's Royal Mile. Appropriately it is being paid for with 265 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. T H E AGE OF T U R B U L E N C E private funding. And, on a personal note, in late 2004 I was delighted to accept a request from my good friend Gordon Brown, Britain's longtime chancellor of the exchequer and now prime minister, to deliver the first Adam Smith Memorial Lecture in Kirkcaldy. That a leader of Britain's Labour Party, whose roots in Fabian socialism are such a far cry from the tenets espoused by Smith, would sponsor such an occasion is indeed a measure of change.


pages: 725 words: 221,514

Debt: The First 5,000 Years by David Graeber

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Admiral Zheng, anti-communist, back-to-the-land, banks create money, Bretton Woods, British Empire, carried interest, cashless society, central bank independence, colonial rule, corporate governance, David Graeber, delayed gratification, dematerialisation, double entry bookkeeping, financial innovation, full employment, George Gilder, informal economy, invention of writing, invisible hand, Isaac Newton, joint-stock company, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, oil shock, payday loans, place-making, Ponzi scheme, price stability, profit motive, reserve currency, Ronald Reagan, seigniorage, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transatlantic slave trade, transatlantic slave trade, tulip mania, upwardly mobile, urban decay, working poor

People continued keeping accounts in the old imperial currency, even if they were no longer using coins.28 Similarly, the Pukhtun men who like to swap bicycles for donkeys are hardly unfamiliar with the use of money. Money has existed in that part of the world for thousands of years. They just prefer direct exchange between equals—in this case, because they consider it more manly.29 The most remarkable thing is that even in Adam Smith’s examples of fish and nails and tobacco being used as money, the same sort of thing was happening. In the years following the appearance of The Wealth of Nations, scholars checked into most of those examples and discovered that in just about every case, the people involved were quite familiar with the use of money, and in fact, were using money—as a unit of account.30 Take the example of dried cod, supposedly used as money in Newfoundland. As the British diplomat A. Mitchell-Innes pointed out almost a century ago, what Smith describes was really an illusion, created by a simple credit arrangement: In the early days of the Newfoundland fishing industry, there was no permanent European population; the fishers went there for the fishing season only, and those who were not fishers were traders who bought the dried fish and sold to the fishers their daily supplies.

In the Middle Ages, for instance, everyone continued to assess the value of tools and livestock in the old Roman currency, even if the coins themselves had ceased to circulate.6 It’s money that had made it possible for us to imagine ourselves in the way economists encourage us to do: as a collection of individuals and nations whose main business is swapping things. It’s also clear that the mere existence of money, in itself, is not enough to allow us see the world this way. If it were, the discipline of economics would have been created in ancient Sumer, or anyway, far earlier than 1776, when Adam Smith’s The Wealth of Nations appeared. The missing element is in fact exactly the thing Smith was attempting to downplay: the role of government policy. In England, in Smith’s day, it became possible to see the market, the world of butchers, ironmongers, and haberdashers, as its own entirely independent sphere of human activity because the British government was actively engaged in fostering it. This required laws and police, but also, specific monetary policies, which liberals like Smith were (successfully) advocating.7 It required pegging the value of the currency to silver, but at the same time greatly increasing the money supply, and particularly the amount of small change in circulation.

The Jewish Quarterly Review, New Series, 55 (2): 117-136. Skinner, Quentin. 1998. Liberty before Liberalism. Cambridge: Cambridge University Press. Smith, Adam. 1761. Theory of moral sentiments. Cambridge: Cambridge University Press (2002 edition). _____. 1762. Lectures on Jurisprudence. Glasgow Edition of the Works and Correspondence of Adam Smith Vol. 5. Indianapolis: Liberty Fund (1982 edition). _____. 1776. An Inquiry into the nature and causes of the wealth of nations. Oxford: Clarendon Press (1976 edition). Smith, Edwin, and Andrew Murray Dale. 1968. The Ila Speaking Peoples Of Northern Rhodesia. Two Volumes. London: Kessinger. Smith, Timothy. 1983. “Wampum as Primitive Valuables.” Research in Economic Anthropology 5: 225-246. Snell, F. J. 1919. The Customs of Old England. London: Methuen.

Masters of Mankind by Noam Chomsky

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, Berlin Wall, failed state, income inequality, land reform, Martin Wolf, means of production, nuremberg principles, offshore financial centre, oil shale / tar sands, Plutocrats, plutocrats, profit maximization, Ralph Waldo Emerson, Silicon Valley, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, union organizing, urban renewal, War on Poverty, Washington Consensus

These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands, and which they could consume themselves without sharing it either with tenants or retainers. All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons.” —Adam Smith, The Wealth of Nations1 Foreword by Marcus Raskin Noam Chomsky’s political activities and his understanding of the nature of language capacity may be described metaphorically as an unbroken band labeled universality. But his universality is no mystification aimed at masking truths and marginalizing truthful inquiries, nor is it the belief that all of public life must be the same everywhere. One side of the Chomsky strip is innateness, which presents humanity with the gift of language and therefore communication.

Throughout the world, indigenous societies are struggling to protect what they sometimes call “the rights of nature,” while the civilized and sophisticated scoff at this silliness. All exactly the opposite of what rationality would predict—unless it is the skewed form of reason that passes through the distorting filter of RECD. * Inaugural Lecture delivered at University College Dublin Philosophy Society, April 2, 2013. Notes Epigraph 1. Adam Smith, The Wealth of Nations (Oxford: Clarendon Press, 1976), Book III, chapter 4, p. 418. Foreword by Marcus Raskin 1. Noam Chomsky, “The Responsibility of Intellectuals,” in The Essential Chomsky, ed. Anthony Arnove (New York: The New Press, 2008), p. 40. 2. Noam Chomsky, On Power and Ideology: The Managua Lectures (Boston: South End Press, 1987), p. 140. (A new edition of this work is forthcoming in 2015 from Haymarket Books.) 3.

Madison soon learned differently, as the “opulent minority” proceeded to use their newfound power much as Adam Smith had described, pursuing their “vile maxim”: “All for ourselves, and nothing for other people.” By 1792, Madison warned that the Hamiltonian developmental capitalist state would be a government “substituting the motive of private interest in place of public duty,” leading to “a real domination of the few under an apparent liberty of the many.” A few months earlier, in a letter to Jefferson, he had deplored “the daring depravity of the times,” as the “stockjobbers will become the pretorian band of the government—at once its tools and its tyrant; bribed by its largesses, and overawing it by clamors and combinations.” They will cast over society the shadow that we call “politics,” as John Dewey later formulated another truism that dates back to Adam Smith. There have been many changes in the past 200 years, but Madison’s words of warning remain apt, taking new meaning with the establishment of huge, largely unaccountable private tyrannies—Jefferson’s “banking institutions and moneyed incorporations”—that were granted extraordinary powers early in this century.


pages: 190 words: 53,409

Success and Luck: Good Fortune and the Myth of Meritocracy by Robert H. Frank

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Amazon Mechanical Turk, American Society of Civil Engineers: Report Card, attribution theory, availability heuristic, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, carried interest, Daniel Kahneman / Amos Tversky, David Brooks, deliberate practice, en.wikipedia.org, endowment effect, experimental subject, framing effect, full employment, hindsight bias, If something cannot go on forever, it will stop, income inequality, invisible hand, labor-force participation, labour mobility, lake wobegon effect, loss aversion, minimum wage unemployment, Network effects, Report Card for America’s Infrastructure, Richard Thaler, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Rory Sutherland, side project, sovereign wealth fund, Steve Jobs, The Wealth of Nations by Adam Smith, Tim Cook: Apple, ultimatum game, Vincenzo Peruggia: Mona Lisa, winner-take-all economy

Some critics complain, for example, that the explosive growth of CEO pay proves that executive labor markets are not really competitive—that CEOs appoint cronies to their boards who approve unjustifiably large pay packages. We’re also told that industrial behemoths conspire to drive out their rivals, thereby extorting higher prices from captive customers. To be sure, such abuses occur. But they’re no worse now than they’ve always been. As Adam Smith wrote in The Wealth of Nations, “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.”8 CEOs have always appointed people they know to their boards, so that’s not enough to explain recent trends. Critics are also quick to point out that unsuccessful CEOs receive the same huge compensation packages as their more successful counterparts.

Barry Schwartz, The Paradox of Choice: Why More Is Less, New York: Harper Perennial, 2004. 6. The technological changes described by long-tail proponents enable you to make an informed judgment about the extent of my bias. You can review some of The Nepotist’s music videos here: http://thenepotist.com/videos/. 7. Xavier Gabaix and Augustin Landier, “Why Has CEO Pay Increased So Much?” Quarterly Journal of Economics 123.1 (2008): 49–100. 8. Adam Smith, The Wealth of Nations, book 1, chap. 10. 9. The Conference Board, “Departing CEO Age and Tenure,” June 13, 2014, https://www.conference-board.org/retrievefile.cfm?filename=TCB-CW-019.pdf&type=subsite. 10. Thomas Piketty, Capital in the Twenty-First Century, Cambridge, MA: Harvard University Press, 2013. CHAPTER 4: WHY THE BIGGEST WINNERS ARE ALMOST ALWAYS LUCKY 1. High School Baseball Web, “Inside the Numbers,” http://www.hsbaseballweb.com/inside_the_numbers.htm. 2.

Gibson, “Gratuities and Customer Appraisal of Service: Evidence from Minnesota Restaurants,” Journal of Socioeconomics 23 (1994): 287–302. 4. Harvey Hornstein, Cruelty and Kindness, Englewood Cliffs, NJ: Prentice Hall, 1976. 5. See Robert H. Frank, Passions within Reason: The Strategic Role of the Emotions, New York: W. W. Norton, 1988, chap. 4. 6. Robert H. Frank, Thomas Gilovich, and Dennis Regan, “The Evolution of One-Shot Cooperation,” Ethology and Sociobiology 14 (July 1993): 247–56. 7. Adam Smith, The Wealth of Nations, part 4, section 3, Library of Economics and Liberty, http://www.econlib.org/library/Smith/smWN.html. 8. Adam Satariano, Peter Burrows, and Brad Stone, “Scott Forstall, the Sorcerer’s Apprentice at Apple,” Bloomberg Business, October 12, 2011, http://www.bloomberg.com/bw/magazine/scott-forstall-the-sorcerers-apprentice-at-apple-10122011.html. 9. Jay Yarrow, “Tim Cook: Why I Fired Scott Forstall,” Business Insider, December 6, 2012, http://www.businessinsider.com/tim-cook-why-i-fired-scott-forstall-2012–12. 10.

Year 501 by Noam Chomsky

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

anti-communist, Bartolomé de las Casas, Berlin Wall, Bolshevik threat, Bretton Woods, British Empire, capital controls, colonial rule, corporate governance, cuban missile crisis, declining real wages, Deng Xiaoping, deskilling, Dissolution of the Soviet Union, European colonialism, experimental subject, Fall of the Berlin Wall, Howard Zinn, invisible hand, land reform, land tenure, means of production, Monroe Doctrine, non-tariff barriers, offshore financial centre, Plutocrats, plutocrats, price stability, Ralph Nader, Ralph Waldo Emerson, RAND corporation, Ronald Reagan, Simon Kuznets, strikebreaker, structural adjustment programs, the scientific method, The Wealth of Nations by Adam Smith, trade liberalization, trickle-down economics, union organizing, War on Poverty, working poor

So it has always been.11 Stigler may well be right, however, that Smith “certainly convinced all subsequent economists.” If so, that is a comment on the dangers of illegitimate idealization that isolates some inquiry from factors that crucially affect its subject matter, a problem familiar in the sciences; in this case, separation of abstract inquiry into the wealth of nations from questions of power: Who decides, and for whom? We return to the point as Adam Smith himself understood it. The wealth of the colonies returned to Britain, creating huge fortunes. By 1700, the East India Company accounted for “above half the trade of the nation,” one contemporary critic commented. Through the following half-century, Keay writes, its shares became the “equivalent of a gilt-edged security, much sought after by trustees, charities and foreign investors.”

Their “conservative” counterparts are only more extreme in their adulation of the Wise Men who are the rightful rulers—in the service of the rich and powerful, a minor footnote regularly forgotten.18 The rabble must be instructed in the values of subordination and a narrow quest for personal gain within the parameters set by the institutions of the masters; meaningful democracy, with popular association and action, is a threat to be overcome. These too are persistent themes, that only take new forms. Adam Smith’s nuanced interpretation of state interference with international trade extended to the domestic scene as well. The praise in his opening remarks for “the division of labor” is well-known: it is the source of “the greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied,” and the foundation of “the wealth of nations.” The great merit of free trade, he argued, is that it contributes to these tendencies. Less familiar is his denunciation of the inhuman consequences of the division of labor as it approaches its natural limits.

The policies they contrived were reasonable enough in terms of narrow self-interest, however others may have been harmed, including the general population of England.17 Smith’s conclusion that “Under the present system of management, therefore, Great Britain derives nothing but loss from the dominion which she assumes over her colonies” is highly misleading. From the point of view of policy choices, Great Britain was not an entity. “The wealth of nations” is no concern of the “architects of policy,” who, as Smith insists, seek private gain. The fate of the common people is no more their concern than that of the “mere savages” who stand in the way. If an “invisible hand” sometimes provided others with benefits, that is merely incidental. The basic focus on “wealth of nations” and what “Great Britain derives” is faulty from the start, undermined by illegitimate idealization, though at least it is qualified and corrected in Smith’s fuller discussion.


pages: 376 words: 118,542

Free to Choose: A Personal Statement by Milton Friedman, Rose D. Friedman

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, agricultural Revolution, air freight, back-to-the-land, bank run, banking crisis, Corn Laws, Fractional reserve banking, full employment, German hyperinflation, invisible hand, labour mobility, means of production, minimum wage unemployment, oil shale / tar sands, oil shock, price stability, Ralph Nader, RAND corporation, rent control, road to serfdom, school vouchers, Simon Kuznets, The Wealth of Nations by Adam Smith, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration

The story of the United States is the story of an economic miracle and a political miracle that was made possible by the translation into practice of two sets of ideas—both, by a curious coincidence, formulated in documents published in the same year, 1776. One set of ideas was embodied in The Wealth of Nations, the masterpiece that established the Scotsman Adam Smith as the father of modern economics. It analyzed the way in which a market system could combine the freedom of individuals to pursue their own objectives with the extensive cooperation and collaboration needed in the economic field to produce our food, our clothing, our housing. Adam Smith's key insight was that both parties to an exchange can benefit and that, so long as cooperation is strictly voluntary, no exchange will take place unless both parties do benefit. No external force, no coercion, no violation of freedom is necessary to produce cooperation among individuals all of whom can benefit. That is why, as Adam Smith put it, an individual who "intends only his own gain" is "led by an invisible hand to promote an end which was no part of his intention.

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow citizens." —Adam Smith, The Wealth of Nations, vol. I, [>] We cannot indeed depend on benevolence for our dinner—but can we depend wholly on Adam Smith's invisible hand? A long line of economists, philosophers, reformers, and social critics have said no. Self-love will lead sellers to deceive their customers. They will take advantage of their customers' innocence and ignorance to overcharge them and pass off on them shoddy products. They will cajole customers to buy goods they do not want.

The action shall name as defendant the Treasurer of the United States, who shall have authority over outlays by any unit or agency of the Government of the United States when required by a court order enforcing the provisions of this article. The order of the court shall not specify the particular outlays to be made or reduced. Changes in outlays necessary to comply with the order of the court shall be made no later than the end of the third full fiscal year following the court order. NOTES INTRODUCTION 1. Adam Smith, The Wealth of Nations (1776). (All page references are to the edition edited by Edwin Cannan, 5th ed. (London: Methuen & Co., Ltd., 1930). 2. On Liberty, People's ed. (London: Longmans, Green & Co., 1865), p. 6. 3. Wealth of Nations, vol. I, p. 325 (Book II, Chap. III). CHAPTER 1 1. See Hedrick Smith, The Russians (New York: Quadrangle Books/New York Times Book Co., 1976), and Robert G. Kaiser, Russia: The People and the Power (New York: Atheneum, 1976). 2.


pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Apple II, banking crisis, barriers to entry, Bretton Woods, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

Carlota Perez Author of Technological Revolutions and Financial Capital: The Dynamics of Bubble and Golden Ages Technological University of Tallinn, Estonia; London School of Economics, University of Cambridge and University of Sussex, UK February 2013 INTRODUCTION DO SOMETHING DIFFERENT …our disability is discursive: we simply do not know how to talk about things anymore. Tony Judt (2010, 34) A Discursive Battle Never more than today is it necessary to question the role of the State in the economy – a burning issue since Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations (Smith, 1776). This is because in most parts of the world we are witnessing a massive withdrawal of the State, one that has been justified in terms of debt reduction and – perhaps more systematically – in terms of rendering the economy more ‘dynamic’, ‘competitive’ and ‘innovative’. Business is accepted as the innovative force, while the State is cast as the inertial one – necessary for the ‘basics’, but too large and heavy to be the dynamic engine.

Equally important, the jobs created by a technology-driven supply chain are much higher paying – but, they must be sustained over entire technology life cycles. (2012, 31) Keynes focused on the need for the State to intervene in order to bring stability and prevent crises, certainly a pressing issue in today’s circumstances.3 But in order to understand the dynamics of such investments, it is fundamental to better understand different perspectives on the theory of economic growth first, and then to establish the role of technology and innovation in driving that economic growth. Technology and Growth While growth and the wealth of nations has been the lead concern of economists since Adam Smith, in the 1950s it was shown by Abramovitz (1956) and Solow (1956) that conventional measures of capital and labour inputs could not account for 90 per cent of economic growth in an advanced industrialized country such as the United States. It was assumed that the unexplained residual must reflect productivity growth, rather than the quantity of factors of production.

Soviet Union 37, 39; market failure theory applied to 61; as measure of innovation performance 34, 41; myth of business investment requirements 53–5; myth of innovation being about 44, 159–60; as not enough 142; of pharmaceutical companies 25–6, 188; R&D/GDP 52; SEMATECH funding 99; spending differences 42; of struggling OECD countries 41; technological change investments 59; in wind energy projects 144–5; worker tax credit 54 R&D/GDP 52 R&D Magazine 63 redistributional policies 31 Reenen, John van 46 Reinert, Erik 9n3, 38n5, 73 Reinhart, Carmen 17–18 renewable energy credits (RECs) 115n1 Renewable Portfolio Standards 114 ‘repatriation tax holiday’ 175 ‘representative’ agent 60 research 60, 78, 84, 136; see also science rewards, socialization of 156 risk 58–62, 70; see also socialization of risk risk landscape 22–3, 58, 194, 198 risk–reward nexus framework 186 risk–reward relationships: Apple and the US government 167–8; collective vs. private benefit 165–6, 196; corporate success resulting in regional economic misery 176–8; need for functional dynamic in 182–3, 197–8; overview 165–7; State recognition in 12 Robinson, Joan 34 Roche 82 Rock, Arthur 94 Rodrik, Dani 27, 28 Rogoff, Kenneth 17–18 Roland, Alex 98n7 Roosevelt, Franklin D. 6, 74 Royal Radar Establishment (RRE) 101 royalties 188–9 Ruegg, Rosalie 148 Ruttan, Vernon 62–3 Sanofi 69 Schmidt, Horace 92, 92–3; see also Apple Schumpeter, Joseph 10n4, 31, 35, 58 Schumpeterian innovation economics: creative destruction concept in 10, 10n4, 58, 165; extended protection in 189; influence of on BNDES 5; investment role in 31; macro models of 44; ‘systems of innovation’ view of 35–6; theory of 36n4 science 49, 51, 57, 59n1, 69; see also research Seagate 97 Segal, David 170 Semiconductor Manufacturing Technology (SEMATECH) consortium 99 Shapiro, Isaac 170–71, 171n2 share buybacks 25–7, 67, 171, 175 shareholder-value ideology 184, 186 Shiman, Philip 98n7 Shi Zhengrong 141, 152–4 Shockley, William 76 Silicon Valley 20, 63, 78, 95 Silver, Jonathan 129, 154 SIRI 103, 105–6, 109 SITRA, Finnish Innovation Fund 190 small and medium enterprises (SMEs) 10, 45–6, 45n6, 111n13 Small Business Administration (US) 94 small business associations 19 Small Business Innovation Development Act of 1982 79 Small Business Innovation Research (SBIR) (US) 20, 47, 79–81, 80, 188 Small Business Investment Company (SBIC) (US) 94 Smith, Adam 30; see also Adam Smith Institute; Inquiry into the Nature and Causes of the Wealth of Nations, An; ‘Invisible Hand’ socialization of risk and privatization of rewards: as cause of inequity and instability 185; direct or indirect returns of 187–91; framework for change of 185–7; income-contingent loans and equity 189–90; in the innovation economy 3; ‘innovation fund’ creation 189; IPR 189; mapping innovative labour into division of rewards 184–5; in pharmaceutical development 181; in public–private partnerships 27; skewed reality of risk and reward 181–5 social vs. private returns on investment 3–4 solar power: see wind and solar power Solow, Robert M. 33–4 Solyndra 129–32, 151, 154–5, 162; see also clean technology; ‘No More Solyndras Act’ Something Ventured, Something Gained (documentary) 78 Sony 108 Soppe, Birgit 146 South Korea 40, 61, 120–21 Soviet Union 37–9, 39, 76 Spain 120n4, 121, 121, 157 Spectrawatt 130n11, 162 spillovers 194 spinoff business model 76 SPINTRONICS 97, 97n5 Sputnik launch 76 Stanford Research Institute (SRI) 105–6; see also SIRI State: administrative role of 6, 12; attracting talent 12; capitalintensive investment by 27; ‘crowding in’ of 5–6, 8; ‘Developmental State’ 10, 37–8, 37–8n5, 40, 68; ‘directionality’ provided by 32n2; ‘dynamizing in’ 8; economic role of 1, 29; flexibility of 195–6; funding: see individual US agencies and departments; industrial directives of 21; as leading entrepreneurial force 193; market creation by 62, 167; organizational dynamics consideration 197; performance indicators lacking for 194; as private sector partner 5; response to criticism 19; responsibilities of 13; scope of endeavours of 18–19, 195; sectors funded by 63, 83, 196; targeted catch-up policies of 40; views of 9; see also ‘entrepreneurial’ State; ‘picking winners’ State development banks 2–3, 5, 122, 137–40, 189–91; see also Brazilian Development Bank (BNDES); China Development Bank (CDB); KfW (German Development Bank) stock market 49–50 Strategic Computing Initiative (SCI) 98–9 strategic management 197 Stumpe, Bent 101 Sullivan, Martin A. 174 SunPower 151 Suntech of China 152–5, 152n5 supply-side policies 83, 113–15, 159 sustainability 117, 119, 123, 195; see also green industrial revolution Swanson, Richard 151 Sweden 121 ‘systems of innovation’ approach: defined 36; foundation of 35–7; market failure approach vs. 9–10, 61–2; need for 22; regional 39; State role in 74; see also innovation; innovation ecosystems; Schumpeterian innovation economics ‘systems’ perspective 196 tariffs 108, 157, 157n6; see also feed-in tariffs Tassey, Gregory 32 tax avoidance: by Apple 11, 12, 171–5, 188; corporate 173–5, 187; ‘tax gap’ 187, 187n1 tax breaks 45–7 tax credits: energy 114, 138; impact of on R&D 28, 52–4; and R&D 111n13; and R&E 110; wind and solar power 126n8, 145, 149 tax cuts 10, 19, 23, 54, 69 taxes: antidumping tariffs 108; business as dependent on 69; ‘carbon tax’ 114; Citizens for Tax Justice 174n5; citizens unawareness of uses of 166; global avoidance schemes 174, 174n5; incentives to biotech firms 81; innovation systems not supported by 187–8; insensitivity of investment to 30n1; IRS 529 plans 111, 111n15; ‘patent box’ policy 51–2; policies impacting SMEs 45; policy 51; ‘repatriation tax holiday’ 175; State return from 165; US tax code 174; see also private vs. social returns; risk–reward nexus framework Taxol 188 Tea Party movement 17 technology: causing creative destruction 58; commissioning of advances in 54; core enabler technologies of Apple 95; dual-use 97; and growth 33–4; impact of regions on national performance 39; interagency collaborations in 74; origins of Apple products 109; revolutions 125, 126; SIRI 103, 105–6; State leadership of strategy for 40; unique situations in 59; see also computer field; wind and solar power technology commercialized: from capacitive sensing to click-wheels 99–101, 100n9, 103; cellular 102, 104, 109; from click-wheels to multi-touch screens 102–3; digital signal processing (DSP) 109; GPS 105; GPTs 62; LCD 107–8; lithium-ion battery 108; resistive touch-screens 101; silicon ICs impact on 98; thin-film transistors (TFTs) 107–8; ‘zero-emission’ electric vehicles 108 technology policy 75 Technology Reinvestment Program (TRP) 97 TFP of India vs. 46 TFTs (thin-film transistors) 107–8 Thomas, Patrick 148 ‘trade wars’ 122, 131, 157 ‘traitorous eight’, the 76 Tulum, Oner: on biopharmaceutical industry 67, 69, 82; NIH spending data compilation of 25, 69; on orphan drugs 81–2 United Kingdom (UK): approach to green initiatives 124–6; BBC 16; BERD (business expenditure on R&D) in 24; Big Society theme of 15–16; clean technology investment by 120; energy strategies of 116; government energy R&D spending 121, 121; green revolution in 120; Medical Research Council (MRC) 20, 67; outsourcing in 16; public R&D spending in 61; R&D/GDP 52; sector specialties of 42; SME government support 45; SME performance in 46 United States: Air Force 98, 104, 105; American Energy Innovation Council (AEIC) 26; Apple’s risk– reward relationship with 167–8; Army 107; competitiveness decline in 176; energy policy 158; energy strategies of 116, 137; funding and innovation in 52; funding sources for basic research R&D in 61; funding sources for R&D in 60, 60–61, 60n2; green revolution in 120; ‘hidden Developmental State’ in 38, 38n5; innovation threatened in 24; systems of innovation in 37; tax code 174; tax system 172; ‘trade wars’ of 122, 131, 157; types of venture capital successes in 49; undermining of innovation in 53; wind capacity of 143; see also taxes; specific agencies and departments of University of Southern California 77–8 UNIX 104 USSR: see Soviet Union US Windpower (later Kenetech) 147 Valentine, Don 94 Vallas, Steven P. 67–8 value: extraction 26, 42, 162; measures of 34 Venrock 94 Vensys Energiesysteme 149 venture capital: in Europe 53; Europe’s lag attributed to lack of 20; exit opportunities 48, 67, 81, 130, 138; failure of 107; government stimulation of 116; impatience of 129–32, 146n2; limited role of 131, 138; myth of as risk loving 47–50, 142, 161–2; and NASDAQ’s coevolution 50; presenting as lead risk taker 183; public vs. private 19, 47; short-termist approach of 108, 127; timing of investment by 23; Venrock 94; see also private sector venture capital sector investment: clean technology 161; green revolution 127–8, 128n9; in Solyndra 130; subsectors of within clean energy 128 venture capital stages of investment 47, 48; early stage and seed funding awards by 80; risk of loss in 48 Vestas: Denmark producing 143; DoE research influence on 148; early years of 147; patents purchased by 145; policy responses by 125, 137; rugged designs of 146 vision: Apple’s 93, 94, 99–100; ‘green’ 116, 120, 123; lack of 107; in nanotechnology 83–4; State’s 21–4, 58, 62–4 Warburg Pincus 50 Washington Consensus 40 Washington Post 57 Wayne, Ronald 89, 89n1; see also Apple welfare state institutions 31 Westerman, Wayne 102–3 Westinghouse 107 wind and solar power: clean technology in crisis 158–9; collective failure in 163; decline of US firms in 144, 144n1; grid parity in 141; networks of learning in 146n2; R&D myth in 159–60; small being beautiful myth in 160–61; solar bankruptcies 153–6; symbiotic innovation ecosystems in 162–3; venture capital myth in 161–2; from ‘Wind Rush’ to rise of China’s wind power sector 144–50; withdrawal of government support 149; see also specific corporations; clean technology wind and solar power markets: competition, innovation and market size 156–8; disrupting existing markets 161; global market for 143; growth opportunities in 156–7; growth powered by crisis 142–4; and manufacturing of 144, 146–7, 153 wind and solar power policies: California’s tax programme 147; fostering development 144–5; providing incentives 149–51; subsidies 148–9, 152; tax credits 145, 149 wind and solar power technology: aerodynamics of 148; computer use in 147–8; C-Si 129, 130n11, 151–2, 158; Denmark’s Gedser design 145; oil company role in 161n8; origins of solar technologies 150–53; remote power applications 150; research behind 148–9; see also clean technology wind energy R&D projects 144–6 Witty, Andrew 66–7 World Trade Organization (WTO) 40 World War II 74 Wozniak, Steve 89, 89n1, 94; see also Apple Wuxi-Guolian 152 Wuxi Suntech 153 Xerox 107 Xerox PARC 24 Zond Corporation 147–8 Table of Contents Halftitle Page Title Page Copyright Dedication Epigraph Contents List of Tables and Figures List of Acronyms Acknowledgements Foreword by Carlota Perez Introduction: Do Something Different A Discursive Battle Beyond Fixing Failures From ‘Crowding In’ to ‘Dynamizing In’ Images Matter Structure of the Book Chapter 1: From Crisis Ideology to the Division of Innovative Labour And in the Eurozone State Picking Winners vs.


pages: 254 words: 72,929

The Age of the Infovore: Succeeding in the Information Economy by Tyler Cowen

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, Asperger Syndrome, Cass Sunstein, cognitive bias, David Brooks, en.wikipedia.org, endowment effect, Flynn Effect, framing effect, Google Earth, impulse control, informal economy, Isaac Newton, loss aversion, Marshall McLuhan, Naomi Klein, neurotypical, new economy, Nicholas Carr, pattern recognition, phenotype, placebo effect, Richard Thaler, Silicon Valley, the medium is the message, The Wealth of Nations by Adam Smith, theory of mind

So you can think of this book as a rebellion against traditional economics or as a micro-foundation for a better economics or as neuroeconomics; alternatively, I view it as a return home to the original foundations of economics. It may come as a surprise that the origin of the study of economics was substantially psychology, perception, and mental ordering. As I’ve already discussed, Adam Smith, the father of modern economics, wrote not just The Wealth of Nations but also a book on human psychology, namely The Theory of Moral Sentiments. Smith’s life’s work was to mix economic reasoning with Stoic moral philosophy (Seneca, Epictetus, and Marcus Aurelius, plus their French Renaissance successor Montaigne) and applied psychology, most of which he generated from his own reasoning. The Stoics were themselves obsessed with the proper internal order of the mind and in particular how to manage pain, how to deal with what you can never have, and how to lower your expectations so that life seems like a pleasure rather than a burden.

Ostwald, Glenn Gould: The Ecstasy and Tragedy of Genius (New York: W. W. Norton and Co., 1997). On Adam Smith’s view of The Theory of Moral Sentiments, see Ian Simpson Ross, The Life of Adam Smith (Oxford: Clarendon Press, 1995), 177. For various pieces of biographical information on Smith, see adamsmithslostlegacy.com/2008/03/adam-smith-and-tourettes-syndrome.html. On Stewart, see William Robert Scott, Adam Smith as Student and Professor (New York: Augustus M. Kelley, 1965), 77. The John Rae quotation is from John Rae, Life of Adam Smith, chapter 17, online at www.econlib.org/library/YPDBooks/Rae/raeLS17.html#Chapter%2017. And from Stewart, see Dugald Stewart, “Account of the Life and Writings of Adam Smith,” republished in W.P.D. Wightman and J. C. Bryce, eds., Adam Smith: Essays on Philosophical Subjects (Indianapolis: Liberty Classics, 1976), 330.

Marines, 107 value in culture, 9 and framing effects, 79–81, 84–85 and interiority, 63 of stories, 129, 146 Veley, Charles, 104–5 verbal communication, 20, 35 violence in art, 175 Virtual Human Interaction Lab, 86 Wal-Mart, 4, 59 war, 196–97 Warhol, Andy, 166, 191 Watson, John H. (fictional character), 155, 156, 157–59 “weak central coherence” of autistics, 20 “weak executive function” of autistics, 20 The Wealth of Nations (Smith), 124, 167, 215 web access to content, 47, 49–50, 62–63 and attention spans, 53–55 and autistics, 57, 132, 212, 213, 218 and cognitive performance, 52 currency of, 45–47 and education, 112, 113–14 groups and affiliations on, 87–89 and mental ordering, 4–9, 10–12, 13 and political connections, 87–88 popular websites, 46–47 rewiring effect of, 10 size of content, 48 See also specific sites such as Facebook Webern, Anton, 182 Wikipedia, 11, 47, 98–99 “Williams syndrome,” 179 Windows Live, 47 wine experiments, 79–80 Wittgenstein, Ludwig, 166 workplace, 69 written communication, 213.

Nuclear War and Environmental Catastrophe by Noam Chomksy

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

British Empire, cuban missile crisis, David Ricardo: comparative advantage, energy security, Howard Zinn, interchangeable parts, invisible hand, Malacca Straits, mutually assured destruction, Naomi Klein, Occupy movement, oil shale / tar sands, Ralph Nader, Ronald Reagan, South China Sea, The Wealth of Nations by Adam Smith, trade route, University of East Anglia, uranium enrichment, WikiLeaks

There was a sense that things are going to get better, we can do something about it, there’s organizing and government efforts—it’s bad, but we can get out of this. There isn’t that feeling now, and it may be objectively right. If we continue on the path of financialization of the economy and offshoring of production, there’s not going to be very much here for the working population. It’s kind of interesting if you look back at the classical economists, Adam Smith and David Ricardo. They were sort of aware of this—they didn’t put it in precisely these terms—but if you take a look at Adam Smith’s The Wealth of Nations, the famous phrase “invisible hand” appears once. It appears essentially in a critique of what’s going on right now. What he pretty much says is that, in England, if merchants and manufacturers preferred to import from abroad and sell abroad, they might make profit, but it would be bad for England. He says they’re going to have what sometimes is called a home bias—they’ll prefer to do business at home, so as if by an invisible hand, England will be saved the ravages of a global market.82 David Ricardo was even stronger.

This great mortality, however, will every where be found chiefly among the children of the common people, who cannot afford to tend them with the same care as those of better station.” Smith proposed better wages for workers, enabling families to better provide for their children, consequently providing a healthier, more productive workforce. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776; repr., London: Methuen, 1904), Library of Economics and Liberty (EconLib.org), s.v. “Adam Smith, Wealth of Nations,” s.v. “I.8 Of the Wages of Labour.” 7. Extraordinary Lives Laray Polk: In your office, among all the reference materials, you have a rather large black-and-white photograph of Bertrand Russell. Did you have the opportunity to meet him? Noam Chomsky: We never met. Our only contact was in 1967, when we were about to issue the “Call to Resist Illegitimate Authority,” advocating support for resistance, not just protest, to the Vietnam War.

It’s rarely recognized that Magna Carta not only laid the basis for what became over centuries formal protection for civil and human rights, but also stressed the preservation of the commons from autocratic destruction and privatization—the Charter of the Forests, one of the two components of Magna Carta.101 In contrast, the US is a business-run society, to an extent beyond any other in the developed world. Enormous power lies in the hands of a highly class-conscious business elite, who, in Adam Smith’s words, are the “principal architects” of policy and make sure that their own interests are “most peculiarly attended to” no matter how “grievous” the effects on others, including the people of their own society and their colonies (Smith’s concern) and future generations (which must be our concern). In the contemporary United States there has been an increasing growth in the power of the ideology of short-term gains, whatever the consequences.


pages: 561 words: 87,892

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Admiral Zheng, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, Francis Fukuyama: the end of history, full employment, George Akerlof, German hyperinflation, Gini coefficient, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, knowledge economy, labour market flexibility, labour mobility, low skilled workers, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, women in the workforce, working-age population, Y2K, Yom Kippur War

Market-led solutions are profoundly amoral and, thus, fail to address many of the key issues of political economy. Market forces may lead to more efficient outcomes, but efficiency says nothing about whether the rewards are fairly distributed. For markets to provide widespread benefits, property rights and the rule of law are most certainly required, but they may not be enough. As Adam Smith wrote in The Wealth of Nations, ‘Wherever there is great property, there is great inequality . . . the affluence of the rich excites the indignation of the poor, who are often driven by want, and prompted by envy, to invade his possessions . . . The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government.’ This view can be taken in one of two ways, depending on which side of the political spectrum you sit.

The US achieved a haul of eighty-three medals in Los Angeles in 1984 but the Soviet Union chose not to turn up for those Games after the US had boycotted the 1980 Moscow Olympics in protest at the Soviet invasion of Afghanistan. To put China’s gold medal haul into context, the Middle Kingdom managed to win only five gold medals in the Seoul Olympics in 1988. 7. For an informed discussion of the client state problem, see Tony Judt’s Post War: A History of Europe since 1945 (William Heinemann, London, 2005). 8. An Inquiry into the Nature and Causes of the Wealth of Nations, first published in 1776. As it turned out, this was a remarkably auspicious year for political and economic developments. 9. See, for example, ‘The market for lemons: quality uncertainty and the market mechanism’, the groundbreaking paper by George A. Akerlof, Quarterly Journal of Economics, 84.3 (1970), pp. 488–500. 10. For an interesting modern discussion of the role of ‘good government’, see Timothy Besley’s ‘ ‘Principled Agents?’

., White Heat: A History of Britain in the Swinging Sixties, Little Brown, London, 2006 Santiso, J., Latin America’s Political Economy of the Possible: Beyond Good Revolutionaries and Free-Marketeers, MIT Press, Boston, 2007 Sen, A., Identity and Violence: The Illusion of Destiny, Allen Lane, London, 2006 Shiller, R., Irrational Exuberance, Princeton University Press, Princeton, 2000 Smith, A., The Wealth of Nations, Books I–III and Books IV–V, Penguin, London, 1999 ———, Theory of Moral Sentiments, Prometheus, London, 2000 Stevenson, D., 1914–1918: The History of the First World War, Allen Lane, London, 2004 Stiglitz, J., Globalisation and its Discontents, Penguin, London, 2003 Stock, J. and Watson, M., Has the Business Cycle Changed and Why? Research Working Paper No. W9127, National Bureau of Economic Research, Cambridge, MA, 2002 Stone, N., World War One: A Short History, Allen Lane, London, 2007 Sturzenegger, F. and Zettelmeyer, J., Debt Defaults and Lessons from a Decade of Crises, MIT Press, Cambridge, MA, 2006 UN, World Population Prospects, 2008 Revision, New York UNCTAD, World Investment Review, Geneva, 2008 and 2009 US Treasury, Report to Congress on International Economic and Exchange Rate Policies, Washington DC, 2009 Walker, I. and Yu, Z., The College Wage Premium and the Expansion of Higher Education in the UK, UCD Geary Institute Discussion Paper, July 2008 Williamson, J., ‘Global Migration’, Finance and Development, 43.3 (2006), IMF, Washington DC Winder, R., Bloody Foreigners: The Story of Immigration to Britain, Little Brown, London, 2004 World Bank, World Development Indicators, Washington DC, 2009 Wolf, M., Why Globalisation Works, Yale University Press, New Haven, 2004 ———, Fixing Global Finance: How to Curb Financial Crises in the 21st Century, Yale University Press, New Haven, 2009 Wu, X. and Perloff, J., China’s Income Distribution Over Time: Reasons for Rising Income Inequality, Department of Agriculture and Resource Economics Paper 977, University of California, Berkeley INDEX Abramovich, Roman (i) Abu Dhabi Investment Authority (ADIA) (i) Addax Petroleum (i) Adecco (i) Afghanistan (i), (ii), (iii), (iv) Africa (i), (ii), (iii), (iv), (v), (vi) Ahearne, Alan G.


pages: 261 words: 86,905

How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Plutocrats, plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, South Sea Bubble, sovereign wealth fund, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, working poor, yield curve

.† All those fundamental needs supplied, all those goods bought and sold, all those provisions transported at the expense of cash and effort and ingenuity, all those transactions made, and all of it constituting a mechanism that functions so effectively that the good citizens of Paris don’t even notice how dependent they are on it—and the whole mechanism created just by allowing people to trade freely with each other. Economists have a shorthand reference to this epiphanic insight into the power of markets: they call it “Who feeds Paris?” For most people with an interest in economics, there’s a revelatory moment resembling Bastiat’s. The bravura opening of Adam Smith’s The Wealth of Nations, the founding text of economics, has a description of a pin-making factory that is very like Bastiat’s moment of awakening in Paris. The eureka moment isn’t always to do with the power of markets, though that’s a pretty good starting point, since the balance of wants and needs manifested in a functioning market is an extraordinary thing: the contents of Aladdin’s cave, all on sale at an ordinary store near you, and brought there by nothing more than market forces.

A considered argument from the other side of the debate is Paul Collier’s The Bottom Billion, and the annual letter from the Gates Foundation is indispensable reading for anyone interested in the question. The internet offers many superb resources on economics, as well as lively debates that respond to news and data in real time. There is no better place to begin than Twitter: I would start by following Tim Harford, Tyler Cowen, Aditya Chakrabortty, and Paul Kedrosky. Finally, I would urge anyone who’s interested in the subject but hasn’t read The Wealth of Nations to give Adam Smith’s masterwork a go. Smith was a great writer as well as a great thinker, and his book is still fresh and still readable, as well as being a serious candidate for the most influential work of the humanities ever written. Notes 1Grayson Perry and Brian Eno, “How the Internet Has Taught Us We Are All Perverts,” New Statesman, 7 November 2013. 2Daniel, quoted in Michael Lewis, The Big Short: Inside the Doomsday Machine (New York: Norton, 2010), p. 206. 3You can read the original Fortune article at www.awjones.com/images/Fortune_-_The_Jones_Nobody_Keeps_Up_With.pdf. 4See http://www.awjones.com/historyofthefirm.html. 5Frédéric Bastiat, Economic Sophisms, trans.

_r=0. 65Originally published in the Economic Journal in 1965, the article is available at www.apec.umn.edu/grad/jdiaz/A%20theory%20of%20Allocation%20of%20Time%20-%20Becker.pdf. 66Marshall Jevons, The Fatal Equilibrium (New York: Random House, 1985), pp. 102–3. 67See boxofficemojo.com/alltime/adjusted.htm. 68See this riveting piece, “Prince Alwaleed and the Curious Case of Kingdom Holding Stock,” at www.forbes.com/sites/kerryadolan/2013/03/05/prince-alwaleed-and-the-curious-case-of-kingdom-holding-stock/. 69See en.wikipedia.org/wiki/List_of_countries_by_GDP_sector_composition. 70Ben Bernanke, at http://www.federalreserve.gov/newsevents/speech/bernanke20131108a.htm. 71Milton Friedman, ”The Social Responsibility of Business Is to Increase Its Profits,” New York Times, 13 September 1970. 72Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Oxford: Clarendon Press, 1976), pp. 26–27. 73There’s a list of current government spreads at markets.ft.com/RESEARCH/markets/Government-Bond-Spreads. 74See www.theguardian.com/money/2013/apr/03/student-loan-debt-america-by-the-numbers. 75The original 1981 article founding tournament theory is available at www.jstor.org/discover/10.2307/1830810?uid=3738032&uid=2&uid=4&sid=21102713625541. 76Karel Williams, quoted by Joris Lukendijk in the Guardian at http://www.theguardian.com/commentisfree/joris-luyendijk-banking-blog/2013/jun/19/banking-britain-beyond-control. 77A brilliant article by Tim Harford about the two thinkers and their work is available at timharford.com/2013/08/do-you-believe-in-sharing/. 78See online.wsj.com/article/SB10001424127887323838204579000623890621830.html. 79Pankaj Mishra, “Which India Matters?


pages: 323 words: 90,868

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century by Ryan Avent

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, Airbnb, American energy revolution, autonomous vehicles, Bakken shale, barriers to entry, Bernie Sanders, BRICs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, computer age, dark matter, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, falling living standards, first square of the chessboard, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Francis Fukuyama: the end of history, future of work, gig economy, global supply chain, global value chain, hydraulic fracturing, income inequality, indoor plumbing, industrial robot, interchangeable parts, Internet of things, inventory management, invisible hand, Jacquard loom, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph-Marie Jacquard, knowledge economy, low skilled workers, lump of labour, Lyft, manufacturing employment, means of production, new economy, performance metric, pets.com, price mechanism, quantitative easing, Ray Kurzweil, rent-seeking, reshoring, rising living standards, Robert Gordon, Ronald Coase, savings glut, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, single-payer health, software is eating the world, supply-chain management, supply-chain management software, TaskRabbit, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, transaction costs, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, very high income, working-age population

The author and publisher have provided this e-book to you for your personal use only. You may not make this e-book publicly available in any way. Copyright infringement is against the law. If you believe the copy of this e-book you are reading infringes on the author’s copyright, please notify the publisher at: us.macmillanusa.com/piracy. A man must always live by his work, and his wages must at least be sufficient to maintain him. Adam Smith, The Wealth of Nations1 Don’t mourn for me, friends, don’t weep for me never, For I’m going to do nothing for ever and ever. Epitaph for a charwoman, traditional, quoted in ‘Economic Possibilities for our Grandchildren’, John Maynard Keynes, 19302 Introduction In January of 2014, The Economist, my employer, published a piece I had written on the future of work in an age of rapid automation. A sample: Ten years ago technologically minded economists pointed to driving cars in traffic as the sort of human accomplishment that computers were highly unlikely to master.

POLITICAL EFFECTS OF SCARCITY As the previous section ought to make clear, there is an inevitable political subtext, or even text, to discussions of the economic effects of labour scarcity. Battles over the gains from production are unavoidably political, as is the effort expended by owners of land and capital or by workers to secure the political rights that support scarcity.15 In The Wealth of Nations, Adam Smith mused: We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate … We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things which nobody ever hears of … Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen; who sometimes too, without any provocation of this kind, combine of their own accord to raise the price of their labour … The masters upon these occasions are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combinations of servants, labourers, and journeymen.16 If Smith took it for granted that power naturally rests with the master, that might be because he lived during an era of explosive population growth – of labour abundance – in which workers could exercise very little bargaining power within labour markets.

And the status quo, when it changes, will be pushed in the direction of increased social distance: the use of law and custom to try to push open gaps between societies where technology is closing them, sought because existing social structures are failing to transform new economic possibilities into broad-based income growth. THE WEALTH OF HUMANS In his Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith mused on the way in which market economies translate human impulses into social wealth: [M]an has almost constant occasion for 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 favour, and show them that it is for their own advantage to do for him what he requires of them.

Investment: A History by Norton Reamer, Jesse Downing

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Berlin Wall, Bernie Madoff, Brownian motion, buttonwood tree, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, Gordon Gekko, Henri Poincaré, high net worth, index fund, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, margin call, means of production, Menlo Park, merger arbitrage, moral hazard, mortgage debt, Network effects, new economy, Nick Leeson, Own Your Own Home, pension reform, Ponzi scheme, price mechanism, principal–agent problem, profit maximization, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Sand Hill Road, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, technology bubble, The Wealth of Nations by Adam Smith, time value of money, too big to fail, transaction costs, underbanked, Vanguard fund, working poor, yield curve

With fewer restrictions on interest rates, activities of financial intermediaries grew rapidly.87 However, the influence of the concept of usury was still strong and lasting. Though fewer and fewer people continued to support a total ban on interest rates, there remained long debates, often among economists and economic philosophers in the eighteenth century, about whether interest rates should be set by a free market or be regulated with caps. In The Wealth of Nations, Adam Smith supported a cap on interest rates at around 5 percent. Smith feared that higher rates of 8 to 10 percent would mean that most of the debt would be issued to what he called “prodigals and projectors” (speculators), as few others would be willing to take on debt at such a rate. He believed that without such a cap on interest rates, the prodigals and projectors would outbid more rational economic agents, and as a result defaults and resource misallocation would be pervasive.

Ultimately, the South Sea Bubble reminded investors of exploitable information asymmetries between the body of shareholders and management, and it drove many to approach the task of allocating money with greater scrutiny and diligence. In the end, of course, the fraudulent activities of Enron and Bernie Madoff are echoes of this forerunner some three centuries earlier. Adam Smith, the oft-cited “father of modern economics,” took an entirely adversarial view of the structure of the joint-stock companies The Democratization of Investment 69 and the notion of investment management more broadly. Of course, Smith was highly influenced by the South Sea Bubble collapse, and in The Wealth of Nations he wrote, “Negligence and profusion, must always prevail, more or less, in the management of the affairs of such a [joint-stock] company.” He claimed that the fiduciaries could not possibly be fully dutiful and completely concerned about the welfare of shareholders because the money is not their own: “The directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in private copartner[ship] frequently watch over their own.”10 Adam Smith seemed to apply the famous principle of self-interest to the management of investment funds and, in so doing, deemed it a poor idea.

“South Sea Bubble Short History,” Baker Library, Harvard Business School, accessed 2014, http://www.library.hbs.edu/hc/ssb/history .html; Joel Bakan, The Corporation: The Pathological Pursuit of Profit and Power (New York: Free Press, 2004), 6–8. 7. “South Sea Bubble Short History.” 8. Bakan, The Corporation, 6–7. 9. Colin Arthur Cooke, Corporation, Trust and Company: An Essay in Legal History (Cambridge, MA: Harvard University Press, 1951), 83. 10. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Modern Library, 1937), 334–335. 11. Peter N. Stearns, The Industrial Revolution in World History, 3rd ed. (Boulder, CO: Westview, 2007). 12. Ibid., 34–37. 2. The Democratization of Investment 345 13. Ibid., 17–26 and 79–83. 14. Meir Kohn, “Finance before the Industrial Revolution: An Introduction” (working paper 99-01, Department of Economics, Dartmouth College, Hanover, NH, February 1999), http://www.dartmouth.edu/~mkohn /Papers/99-01.pdf, 5–6. 15.


pages: 741 words: 179,454

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial independence, financial innovation, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, labour market flexibility, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, merger arbitrage, Mikhail Gorbachev, Milgram experiment, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Naomi Klein, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, pets.com, Plutocrats, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, Richard Thaler, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond

O’Rourke described economics as “an entire scientific discipline of not knowing what you’re talking about.”2 Economics focuses on how production and financial systems work or should work. Macroeconomics focuses on growth, employment, production, inflation, and monetary and government budgetary (fiscal) policy. Microeconomics tries to analyze the behavior of firms or individuals, and how things like prices are determined and markets work. In his 1776 work The Wealth of Nations, Adam Smith argued for a self-regulating market system in which narrow self-interest could order economic activity: It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.3 Capitalism created wealth and progress, but at high social cost.

Scott Fitzgerald (1973) The Great Gatsby, Penguin Books, London: 188. 9. Alain de Botton (2002) The Art of Travel, Penguin Books, London: 40. 10. Ibid: 57. 11. Quoted in Andrew Ross Sorkin “A ‘bonfire’ returns as heartburn” (24 June 2008) New York Times. Chapter 1—Mirror of the Times 1. Michael Jackson “Money” from History—Past, Present And Future Book 1 (2009). 2. Adam Smith (1776) An Inquiry into the Nature and Causes of the Wealth of Nations: Book 1 Chapter 2 (http://geolib.com/smith.adam/won1-02.html). 3. Glyn Davies (2002) A History of Money: From Ancient Times to the Present Day, University of Wales Press, Cardiff: 13, 14. 4. Ibid: 18, 20. 5. Christian Oliver and Jan Cienski “North Korea offers ginseng to pay Czech debt” (10 August 2010) Financial Times. 6. Jack Wetherford (1997) The History of Money, Three Rivers Press, New York: Chapter 1. 7.

William Jennings Bryan, Speech concluding debate on the Chicago Platform (9 July 1896), Democratic National Convention, Chicago, Illinois (http://en.wikisource.org/wiki/Cross_of_Gold_Speech). 10. Wetherford, The History of Money: 175–7. 11. Quoted in Brook Larmer “The price of gold” (January 2009) National Geographic: 42. 12. Ian Fleming (2009) Goldfinger, Penguin Books, London: 73. 13. John Updike (1982) Rabbit is Rich, Penguin Books, London: 201. 14. Adam Smith (2007) The Wealth of Nations, Cosmino, New York: 241. 15. John Kenneth Galbraith (1975) Money: Whence It Came, Whence It Went, Houghton Mifflin, Boston: 45. 16. Dylan Grice “Popular delusions: a Minskian roadmap to the next gold mania” (18 November 2009), Société Générale Cross Asset Research. 17. Walsh, Keynes and the Market: 167. 18. George Bernard Shaw (2005) The Intelligent Woman’s Guide to Socialism and Capitalism, Transaction Publishers, New Jersey: 263. 19.


pages: 237 words: 50,758

Obliquity: Why Our Goals Are Best Achieved Indirectly by John Kay

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Andrew Wiles, Asian financial crisis, Berlin Wall, bonus culture, British Empire, business process, Cass Sunstein, computer age, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, discovery of penicillin, diversification, Donald Trump, Fall of the Berlin Wall, financial innovation, Gordon Gekko, greed is good, invention of the telephone, invisible hand, Jane Jacobs, Long Term Capital Management, Louis Pasteur, market fundamentalism, Nash equilibrium, pattern recognition, purchasing power parity, RAND corporation, regulatory arbitrage, shareholder value, Simon Singh, Steve Jobs, The Death and Life of Great American Cities, The Predators' Ball, The Wealth of Nations by Adam Smith, ultimatum game, urban planning, value at risk

Yet paradoxically, the visionary companies make more money than the purely profit driven companies. —Jim Collins and Jerry I. Porras, Built to Last2 He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it. —Adam Smith, The Wealth of Nations3 Tell all the truth, but tell it slant. Success in circuit lies. —Emily Dickinson4 The American continent separates the Atlantic Ocean in the east from the Pacific in the west. The route of the Panama Canal follows the shortest crossing of America. When you arrive at Balboa port on the Pacific coast you are some thirty miles to the east of Colón, where you left the Atlantic.

Notes Preface 1 Benjamin Franklin, The Autobiography of Benjamin Franklin (1791; reprint, New Haven, CT: Yale University Press, 1964), p. 88. 2 Dan Ariely, Predictably Irrational (London: Harper Collins, 2008). Chapter 1: Obliquity—Why Our Objectives Are Often Best Pursued Indirectly 1 John Stuart Mill, Autobiography (1873; reprint, London: Penguin, 1989), p. 117. 2 Jim Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies (London: Random House Business Books, 2000), p. 8. 3 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776; abridged with commentary, Indianapolis and Cambridge: Hackett, 1993), p. 130. 4 Emily Dickinson, Emily Dickinson, ed. L. Dickey (New York: Dell, 1960), p. 107. 5 John Keats, “On First Looking into Chapman’s Homer,” in Poems by John Keats (London: Methuen, n.d.). 6 Richard Weston, Modernism (London: Phaidon Press, 1996). 7 Charles Jencks, The Language of Post-Modern Architecture (London, Academy Editions, 1984), p. 9. 8 Le Corbusier, Toward a New Architecture (London, Architectural Press, 1982), p. 10. 9 Marseille’s Unité d’Habitation, also known as La Cité Radieuse, was built in 1947–52 and combined Le Corbusier’s vision of communal living with the needs of postwar France for social housing. 10 Michael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (London: Nicholas Brearley, 1995), p. 31. 11 Vladimir Ilyich Lenin, Essential Works of Lenin: “What Is to Be Done?”

Handbook of Human Development: Concepts, Measures, and Policies. New Delhi: Oxford University Press, 2009. Sieff, Israel M. Memoirs. London: Weidenfeld & Nicolson, 1970. Simon, H. A., and A. Newell. “Heuristic Problem Solving: The Next Advance in Operations Research.” Operations Research 6, no. 1 (Jan.–Feb. 1958). Singh, Simon. Fermat’s Last Theorem. London: Fourth Estate, 1997. Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. 1776. Abridged, with commentary, Indianapolis and Cambridge: Hackett Publishing, 1993. Smith, Ed. What Sport Tells Us About Life. London: Penguin, 2008. Sobel, Robert. The Rise and Fall of the Conglomerate Kings. New York: Stein and Day, 1984. Solomon, Robert C. Ethics and Excellence. New York: Oxford University Press, 1994. Soros, George. The Alchemy of Finance. Hoboken, NJ: John Wiley & Sons, 2003.


pages: 464 words: 116,945

Seventeen Contradictions and the End of Capitalism by David Harvey

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

accounting loophole / creative accounting, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business climate, California gold rush, call centre, central bank independence, clean water, cloud computing, collapse of Lehman Brothers, colonial rule, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, deskilling, falling living standards, fiat currency, first square of the chessboard, first square of the chessboard / second half of the chessboard, Food sovereignty, Frank Gehry, future of work, global reserve currency, Guggenheim Bilbao, income inequality, informal economy, invention of the steam engine, invisible hand, Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Just-in-time delivery, knowledge worker, low skilled workers, Mahatma Gandhi, market clearing, Martin Wolf, means of production, microcredit, new economy, New Urbanism, Occupy movement, peak oil, phenotype, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, rent-seeking, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, short selling, Silicon Valley, special economic zone, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, Tyler Cowen: Great Stagnation, wages for housework, Wall-E, women in the workforce, working poor, working-age population

While the narrow technical basis and associated skills of the individual tasks did not change that much, the organisation of production through cooperation and the division of labour brought these different tasks together to reap remarkable gains in efficiency and productivity. The costs of commodities in the marketplace fell rapidly to outcompete the traditional craft and artisanal forms of production. This was the division of labour that was not only extensively analysed but also lauded to the heavens by Adam Smith in The Wealth of Nations, published in 1776. In the celebrated case of the pin factory, Smith emphasised how the organised division of labour within the production process led to immense improvements in technical efficiency and labour productivity. By taking advantage of workers’ differing skills and talents, the overall increase in productivity and profitability within what Marx later called ‘the detail division of labour’ within the firm was assured.

This amazingly influential story has held sway for more than two centuries, ever since Adam Smith articulated it so persuasively and brilliantly in The Wealth of Nations. It constitutes the founding myth of liberal economic theory. The liberal political economists mounted a crusade against state interventions in price-fixing markets and against monopoly power from the late eighteenth century onwards. Keynes did not depart too much from it. Even more surprisingly, it is accepted as gospel in Marx’s Capital, though in Marx’s case the reasoning runs that if Adam Smith’s utopian tale was correct, then things would not turn out to be for the benefit of all: the result would be to deepen the class divide of wealth and power and ensure that capital would become ever more crisis-prone as well as powerful. In the wake of the crisis of 2007–9 it became very difficult for economists to stick with their customary storyline.

283 Maddison, Angus 227 Maghreb 174 Malcolm X 291 Maldives 260 Malthus, Thomas 229–30, 232–3, 244, 246, 251 Manchester 149, 159 Manhattan Institute 143 Mansion House, London 201 manufacturing 104, 239 Mao Zedong 291 maquilas 129, 174 Marcuse, Herbert 204, 289 market cornering 53 market economy 198, 205, 276 marketisation 243 Marshall Plan 153 Martin, Randy 194 Marx, Karl 106, 118, 122, 142, 207, 211 and alienation 125, 126, 213 in the British Museum library 4 on capital 220 conception of wealth 214 on the credit system 239 and deskilling 119 on equal rights 64 and falling profits 107 and fetishism 4 on freedom 207, 208, 213 and greed 33 ‘industrial reserve army’ 79–80 and isolation of workers 125 labour theory of value 109 and monetary system reforms 36 monopoly power and competition 135 reality and appearance 4, 5 as a revolutionary humanist 221 and social reproduction 182 and socialist utopian literature 184 and technological innovation 103 and theorists of the political left 54 and the ‘totally developed individual’ 126–7 and world crises xiii; Capital 57, 79–80, 81, 82, 119, 129, 132, 269, 286, 291–2 The Economic and Philosophic Manuscripts of 1844 269, 286 Grundrisse 97, 212–13 Theories of Surplus Value 1 Marxism contradiction between productive forces and social relations 269 ‘death of Marxism’ xii; ecologically sensitive 263 and humanism 284, 286, 287 ‘profit squeeze’ theory of crisis formation 65 traditional Marxist conception of socialism/ communism 91 Marxists 65, 109 MasterCard Priceless 275 Mau Mau movement 291 Melbourne 141 merchants 67 and industrial capital 179 price-gouging customers 54 and producers 74–5 Mercosur 159 Mexican migrants 115, 175, 195–6 Mexico 123, 129, 174 Mexico City riots (1968) x microcredit 194, 198 microfinance 186, 194, 198, 211 Microsoft 131 Middle East 124, 230 Milanovic, Branko 170 military, the capacities and powers 4 dominance 110 and technology 93, 95 ‘military-industrial complex’ 157 mind-brain duality 70 mining 94, 113, 123, 148, 239, 257 MIT (Massachusetts Institute of Technology) 292 Mitchell, David: Cloud Atlas 264 Mitchell, Timothy 122 Modern Times (film) 103 Mondragon 180 monetarism xi monetary wealth and incomes, inequalities in (1920s) x 1071 monetisation 44, 55, 60, 61, 62, 115, 192–3, 198, 235, 243, 250, 253, 261, 262 money abandonment of metallic basis of global moneys 30, 37, 109 circulation of 15, 25, 30–31, 35 coinage 15, 27, 29, 30 commodification of 57 commodity moneys 27–31 creation of 30, 51, 173, 233, 238–9, 240 credit moneys 28, 30, 31, 152 cyber moneys 36, 109–10 electronic moneys 27, 29, 35, 36, 100 and exchange value 28, 35, 38 fiat 8, 27, 30, 40, 109, 233 gap between money and the value it represents 27 global monetary system 46–7 love of money as a possession 34 measures value 25, 28 a moneyless economy 36 oxidisation of 35 paper 15, 27, 29, 30, 31, 37, 40, 45 power of 25, 36, 59, 60, 62, 65–66, 131–6, 245, 266 quasi-money 35 relation between money and value 27, 35 represented as numbers 29–30 and social labour 25, 27, 31, 42, 55, 88, 243 and the state 45–6, 51, 173 storage of value 25, 26, 35 the US dollar 46–7 use value 28 money capital 28, 32, 59, 74, 142, 147, 158, 177, 178 money laundering 54, 109 ‘money of account’ 27–8, 30 monopolisation 53, 145 monopoly, monopolies 77 and competition 131–45, 218, 295 corporate 123 monetary system 45, 46, 48, 51 monopoly power 45, 46, 51, 93, 117, 120, 132, 133–4, 136, 137, 139, 141, 142–3 monopoly pricing 72, 132 natural 118, 132 of state over legitimate use of force and violence 42, 44, 45, 51, 88, 155, 173 see also prices, monopoly monopsony 131 Monsanto 123 Montreal Protocol 254, 259 ‘moral restraints’ 229, 233 mortgages 19, 21, 28, 32, 54, 67, 82, 239 multiculturalism 166 Mumbai 155, 159 Murdoch, Rupert xi Myrdal, Gunnar 150 N NAFTA 159 name branding 31, 139 nano-trading 243 Nation of Islam 291 national debt 45, 226, 227 National Health Service 115 National Labor Relations Board 120 National Security Administration 136 nationalisation 50 nationalism 7, 8, 44, 289 natural resources 58, 59, 123, 240, 241, 244, 246, 251 nature 56 alienation from 263 capital’s conception of 252 capital’s relation to 246–63 commodification of 59 domination of 247, 272 Heidegger on 59, 250 Polanyi on 58 power over 198 process-thing duality 73 and technology 92, 97, 99, 102 Nazis 151 neoclassical economists 109 neocolonialism 143, 201 neoliberal era 128 neoliberal ethic 277 neoliberalisation x, 48 neoliberalism xiii, 68, 72, 128, 134, 136, 176, 191, 234, 281 capitalism 266 consensus 23 counter-revolution 82, 129, 159, 165 political programme 199 politics 57 privatisation 235 remedies xi Nevada, housing in 77 ‘new economy’ (1990s) 144 New York City 141, 150 creativity 245 domestic labour in 196 income inequality 164 rental markets 22 social reproduction 195 Newton, Isaac 70 NGOs (non-governmental organisations) 189, 210, 284, 286, 287 Nike 31 Nkrumah, Kwame 291 ‘non-coincidence of interests’ 25 Nordic countries 165 North America deindustrialisation in 234 food grain exports 148 indigenous population and property rights 39 women in labour force 230 ‘not in my back yard’ politics 20 nuclear weapons 101 Nyere, Julius 291 O Obama, Barack 167 occupational safety and health 72 Occupy movement 280, 292 Ohlin Foundation 143 oil cartel 252 companies 77, 131 ‘Seven Sisters’ 131 embargo (1973) 124 ‘peak oil’ 251–2, 260 resources 123, 240, 257 oligarchy, oligarchs 34, 143, 165, 221, 223, 242, 245, 264, 286, 292 oligopoly 131, 136, 138 Olympic Games 237–8 oppositional movements 14, 162, 266–7 oppression 193, 266, 288, 297 Orwell, George 213 Nineteen Eighty-Four 202 overaccumulation 154 overheating 228 Owen, Robert 18, 184 Oxfam xi, 169–70 P Paine, Tom: Rights of Man 285 Paris 160 riots (1968) x patents 139, 245, 251 paternalism 165, 209 patriarchy 7 Paulson, Hank 47 pauperisation 104 Peabody, George 18 peasantry ix, 7, 107, 117, 174, 190, 193 revolts 202 pensions 134, 165, 230 rights 58, 67–8, 84, 134 people of colour: disposable populations 111 Pereire, Emile 239 pesticides 255, 258 pharmaceuticals 95, 121, 123, 136, 139 Philanthropic Colonialism 211 philanthropy 18, 128, 189, 190, 210–11, 245, 285 Philippines 115, 196 Picasso, Pablo 140–41, 187, 240 Pinochet, Augusto x Pittsburgh 150, 159, 258 planned obsolescence 74 plutocracy xi, xii, 91, 170, 173, 177, 180 Poland 152 Polanyi, Karl 56, 58, 60, 205–7, 210, 261 The Great Transformation 56–7 police 134 brutality 266 capacities and powers 43 powers xiii, 43, 52 repression 264, 280 surveillance and violence 264 violence 266, 280 police-state 203, 220 political economy xiv, 54, 58, 89, 97, 179–80, 182, 201, 206–9 liberal 204, 206, 209 political parties, incapable of mounting opposition to the power of capital xii political representation 183 pollutants 8, 246, 255 pollution 43, 57, 59, 60, 150, 250, 254, 255, 258 Pontecorvo, Gillo 288 Ponzi schemes 21, 53, 54, 243 population ageing 223, 230 disposable 108, 111, 231, 264 growth 107–8, 229, 230–31, 242, 246 Malthus’s principle 229–30 Portugal 161 post-structuralism xiii potlatch system 33 pounds sterling 46 poverty 229 anti-poverty organisations 286–7 and bourgeois reformism 167 and capital 176 chronic 286 eradication of 211 escape from 170 feminisation of 114 grants 107 and industrialisation 123 and population expansion 229 and unemployment 170, 176 US political movement denies assistance to the poor 292–3 and wealth 146, 168, 177, 218, 219, 243 world xi, 170 power accumulation of 33, 35 of capital xii, 36 class 55, 61, 88, 89, 97, 99, 110, 134, 135, 221, 279 computer 105 and currencies 46 economic 142, 143, 144 global 34, 170 the house as a sign of 15–16 of labour see under labour; of merchants 75 military 143 and money 25, 33, 36, 49, 59, 60, 62, 63, 65–6, 245, 266 monopoly see monopoly power; oligarchic 292 political 62, 143, 144, 162, 171, 219, 292 purchasing 105, 107 social 33, 35, 55, 62, 64, 294 state 42–5, 47–52, 72, 142, 155–9, 164, 209, 295 predation, predators 53, 54, 61, 67, 77, 84, 101, 109, 111, 133, 162, 198, 212, 254–5 price fixing 53, 118, 132 price gouging 132 Price, Richard 226, 227, 229 prices discount 133 equilibrium in 118 extortionate 84 food 244, 251 housing 21, 32, 77 land 77, 78, 150 low 132 market 31, 32 and marketplace anarchy 118 monopoly 31, 72, 139, 141 oil 251, 252 property 77, 78, 141, 150 supermarket 6 and value 31, 55–6 private equity firms 101, 162 private equity funds 22, 162 private property and the commons 41, 50, 57 and eradication of usufructuary rights 41 and individual appropriation 38 and monopoly power 134–5, 137 social bond between human rights and private property 39–40 and the state 47, 50, 58, 59, 146, 210 private property rights 38–42, 44, 58, 204, 252 and collective management 50 conferring the right to trade away that which is owned 39 decentralised 44 exclusionary permanent ownership rights 39 and externality effects 44 held in perpetuity 40 intellectual property rights 41 microenterprises endowed with 211 modification or abolition of the regime 14 and nature 250 over commodities and money 38 and state power 40–41, 42–3 underpinning home ownership 49 usufructuary rights 39 privatisation 23, 24, 48, 59, 60, 61, 84, 185, 235, 250, 253, 261, 262, 266 product lines 92, 107, 219, 236 production bourgeois 1 falling value of 107 immaterial 242 increase in volume and variety of 121 organised 2 and realisation 67, 79–85, 106, 107, 108, 173, 177, 179, 180, 221, 243 regional crises 151 workers’ dispossession of own means of 172 productivity 71, 91, 92, 93, 117, 118, 121, 125, 126, 132, 172, 173, 184, 185, 188, 220, 239 products, compared with commodities 25–6 profitability 92, 94, 98, 102, 103, 104, 106, 112, 116, 118, 125, 147, 184, 191–2, 240, 252, 253, 256, 257 profit(s) banking 54 as capital’s aim 92, 96, 232 and capital’s struggle against labour 64, 65 and competition 93 entrepreneurs 24, 104 falling 81, 107, 244 from commodity sales 71 and money capital 28 monopoly 93 rate of 79, 92 reinvestment in expansion 72 root of 63 spending of 15 and wage rates 172 proletarianisation 191 partial 175, 190, 191 ‘property bubble’ 21 property market boom (1920s) 239 growth of 50 property market crashes 1928 x, 21 1973 21 2008 21–2, 54, 241 property rights 39, 41, 93, 135 see also intellectual property rights; private property property values 78, 85, 234 ‘prosumers’ 237 Proudhon, Pierre-Joseph 183 Prozac 248 public goods 38 public utilities 23, 60, 118, 132 Q quantitative easing 30, 233 R R&D ix race 68, 116, 165, 166, 291 racial minorities 168 racialisation 7, 8, 62, 68 racism 8 Rand, Ayn 200 raw materials 16, 17, 148, 149, 154 Reagan, Ronald x, 72 Speech at Westminster 201 Reagan revolution 165–166 realisation, and production 67, 79–85, 106, 107, 108, 173, 177, 179, 180, 221, 243 reality contradiction between reality and appearance 4–6 social 27 Reclus, Elisée 140 regional development 151 regional volatility 154 Reich, Robert 123, 188 religion 7 religious affiliation 68 religious hatreds and discriminations 8 religious minorities 168 remittances 175 rent seeking 132–3, 142 rentiers 76, 77, 78, 89, 150, 179, 180, 241, 244, 251, 260, 261, 276 rents xii, 16–19, 22, 32, 54, 67, 77, 78, 84, 123, 179, 241 monopoly 93, 135, 141, 187, 251 repression 271, 280 autocratic 130 militarised 264 police-state 203 violent 269, 280, 297 wage 158, 274 Republican Party (US) 145, 280 Republicans (US) 167, 206 res nullius doctrine 40 research and development 94, 96, 187 ‘resource curse’ 123 resource scarcity 77 revolution, Fanon’s view of 288 revolutionary movements 202, 276 Ricardo, David 122, 244, 251 right, the ideological and political assault on the left xii; response to universal alienation 281 ‘rights of man’ 40, 59, 213 Rio de Janeiro 84 risk 17, 141, 162, 219, 240 robbery 53, 57, 60, 63, 72 robotisation 103, 119, 188, 295 Rodney, Walter 291 romantic movement 261 Roosevelt, Theodore 131, 135 Four Freedoms 201 Rousseau, Jean-Jacques 213, 214 Ruhr, Germany 150 rural landscapes 160–61 Russia 154 a BRIC country 170, 228 collapse of (1989) 165 financial crisis (1998) 154, 232 indebtedness 152 local famine 124 oligarchs take natural resource wealth 165 S ‘S’ curve 225, 230–31 Saint-Simon, Claude de Rouvroy, comte de 183 sales 28, 31, 187, 236 San Francisco 150 Santiago, Chile: street battles (2006–) 185 Sao Paulo, Brazil 129, 195 savings the house as a form of saving 19, 22, 58 loss of 20, 58 private 36 protecting the value of 20 Savings and Loan Crisis (USA from 1986) 18 savings accounts 5, 6 Scandinavia 18, 85, 165 scarcity 37, 77, 200, 208, 240, 246, 260, 273 Schumpeter, Joseph 98, 276 science, and technology 95 Seattle 196 Second Empire Paris 197 Second World War x, 161, 234 Securities and Exchange Commission 120, 195 security xiii, 16, 121, 122, 165, 205, 206 economic 36, 153 food 253, 294, 296 job 273 national 157 Sen, Amartya 208–11, 281 Development as Freedom 208–9 senior citizens 168 Seoul 84 serfdom 62, 209 sexual hatreds and discriminations 8 Shanghai 153, 160 share-cropping 62 Sheffield 148, 149, 159, 258 Shenzhen, China 77 Silicon Valley 16, 143, 144, 150 silver 27–31, 33, 37, 57, 233, 238 Simon, Julian 246 Singapore 48, 123, 150, 184, 187, 203 slavery 62, 202, 206, 209, 213, 268 slums ix, 16, 175 Smith, Adam 98, 125–6, 157, 185, 201, 204 ‘invisible hand’ 141–2 The Wealth of Nations 118, 132 Smith, Neil 248 social distinction 68, 166 social inequality 34, 110, 111, 130, 171, 177, 180, 220, 223, 266 social justice 200, 266, 268, 276 social labour 53, 73, 295 alienated 64, 66, 88 and common wealth 53 creation of use values through 36 expansion of total output 232 household and communal work 296 immateriality of 37, 233 and money 25, 27, 31, 42, 55, 88, 243 productivity 239 and profit 104 and value 26, 27, 29, 104, 106, 107, 109 weakening regulatory role of 109, 110 social media 99, 136, 236–7, 278–9 social movements 162–3 social reproduction 80, 127, 182–98, 218, 219, 220, 276 social security 36, 165 social services 68 social struggles 156, 159, 165, 168 social value 26, 27, 32, 33, 55, 172, 179, 241, 244, 268, 270 socialism 215 democratic xii; ‘gas and water’ 183 socialism/communism 91, 269 socialist revolution 67 socialist totalitarianism 205 society capitalist 15, 34, 81, 243, 259 civil 92, 122, 156, 185, 189, 252 civilised 161, 167 complex 26 demolition of 56 and freedom 205–6, 210, 212 hope for a better society 218 industrial 205 information 238 market 204 post-colonial 203 pre-capitalist 55 primitive 57 radical transformation of 290 status position in 186 theocratic 62 women in 113 work-based 273 world 204 soil erosion 257 South Africa 84–5, 152, 169 apartheid 169, 202, 203 South Asia labour 108 population growth 230 software programmers and developers 115, 116 South Korea 123, 148, 150, 153 South-East Asia 107–8 crisis (1997–8) 154, 232, 241 sovereign debt crises 37 Soviet Bloc, ex-, labour in 107 Soviet Union 196, 202 see also Russia Spain xi, 51, 161 housing market crash (2007–9) 82–3 spatio-temporal fixes 151–2, 153, 154, 162 spectacle 237–8, 242, 278 speculative bubbles and busts 178 stagnation xii, 136, 161–2, 169 Stalin, Joseph 70 standard of life 23, 175 starvation 56, 124, 246, 249, 260, 265 state, the aim of 156–7 brutality 266, 280 and capital accumulation 48 and civil society 156 curbing the powers of capital as private property 47 evolution of the capitalist state 42 and externality effects 44 guardian of private property and of individual rights 42 and home ownership 49–50 interstate system 156, 157 interventionism 193, 205 legitimate use of violence 42, 44, 45, 51, 88, 155, 173 loss of state sovereignty xii; and money 1, 45–6, 51, 173 ‘nightwatchman’ role 42, 50 powers of 42–5, 47–52, 57–8, 65, 72, 142, 155–9, 209, 295 and private property 47, 50, 58, 59, 146, 210 provision of collective and public goods 42–3 a security and surveillance state xiii; social democratic states 85 war aims 44 state benefits 165 state regulatory agencies 101 state-finance nexus 44–5, 46–7, 142–3, 156, 233 state-private property nexus 88–9 steam engine, invention of the 3 steel industry 120, 121, 148, 188 steel production 73–4 Stiglitz, Joseph 132–4 stock market crash (1929) x Stockholm, protests in (2013) 171, 243 strikes 65, 103, 124 sub-prime mortgage crisis 50 suburbanisation 253 supply and demand 31, 33, 56, 106 supply chain 124 supply-side remedies xi supply-side theories 82, 176 surplus value 28, 40, 63, 73, 79–83, 172, 239 surveillance xiii, 94, 121, 122, 201, 220, 264, 280, 292 Sweden 166, 167 protests in (2013) 129, 293 Sweezy, Paul 136 swindlers, swindling 45, 53, 57, 239 ‘symbolic analysts’ 188 Syntagma Square, Athens 266, 280 T Tahrir Square, Cairo 266 Taipei, Taiwan 153 Taiwan 123, 150, 153 Taksim Square, Istanbul 266, 280 Tanzania 291 tariffs 137 taxation 40, 43, 47, 67, 84, 93–4, 106, 133, 150, 155, 157, 167, 168, 172, 190 Taylor, Frederick 119, 126 Taylorism 103 Tea Party faction 205, 280, 281, 292 technological evolution 95–6, 97, 101–2, 109 technological imperatives 98–101 technological innovation 94–5 technology changes involving different branches of state apparatus 93–4 communicative technologies 278–9 and competition 92–3 constraints inhibiting deployment 101 culture of 227, 271 definition 92, 248 and devaluation of commodities 234 environmental 248 generic technologies 94 hardware 92, 101 humanising 271 information 100, 147, 158, 177 military 93, 95 monetary 109 and nature 92, 97, 99, 102 organisational forms 92, 99, 101 and productivity 71 relation to nature 92 research and development 94 and science 95 software 92, 99, 101 a specialist field of business 94 and unemployment 80, 103 work and labour control 102–11 telephone companies 54, 67, 84, 278 Tennessee 148 Teresa, Mother 284 Thatcher, Margaret (later Baroness) x, 72, 214, 259 Thatcherism 165 theft 53, 60, 61, 63 Thelluson, Peter 226, 227 think tanks 143 ‘Third Italy’ 143 Third World debt crisis 240 Toffler, Alvin 237 tolls 137 Tönnies, Ferdinand 122, 125 tourism ix, 16, 140, 141, 187, 236 medical 139 toxic waste disposal 249–50, 257 trade networks 24 trade unions xii, 116, 148, 168, 176, 184, 274, 280 trade wars 154 transportation 23, 99, 132, 147–8, 150, 296 Treasury Departments 46, 156 TRIPS agreement 242 tropical rainforest 253 ‘trust-busting’ 131 trusts 135 Turin, Italy 150 Turkey 107, 123, 174, 232, 280, 293 Tuscany, Italy 150 Tutu, Archbishop Desmond 284 Twitter 236 U unemployment 37, 104, 258, 273 benefits 176 deliberately created 65, 174 high xii, 10, 176 insurance 175 and labour reserves 175, 231 and labour-saving technologies 173 long-term 108, 129 permanent 111 echnologically induced 80, 103, 173, 274 uneven geographical developments 178, 296 advanced and underserved regional economies 149–50 and anti-capitalist movements 162 asset bubbles 243 and capital’s reinvention of itself 147, 161 macroeconomic processes of 159 masking the true nature of capital 159–60 and technological forms 219 volatility in 244 United Fruit 136 United Kingdom income inequality in 169; see also Britain United Nations (UN) 285 United States aim of Tea Party faction 280 banking 158 Bill of Rights 284 Britain lends to (nineteenth century) 153 capital in (1990s) 154 Constitution 284 consumption level 194 global reserve currency 45–6 growth 232 hostility towards state interventions 167 House of Representatives 206 human rights abuses 202 imperial power 46 indebtedness of students in 194 Indian reservations 249 interstate highway system 239 jobless recoveries after recession 172–3 liberty and freedom rhetoric 200–201, 202 Midwest ‘rust belt’ 151 military expenditures 46 property market crashes x, 21–2, 50, 54, 58, 82–3 racial issues 166 Savings and Loan Crisis (from 1986) 18 social mobility 196 social reproduction 196–7 solidly capitalist 166 steel industry 120 ‘symbolic analysts’ 188 ‘trust-busting’ 131 unemployment 108 wealth distribution 167 welfare system 176 universal suffrage 183 urbanisation 151, 189, 228, 232, 239, 247, 254, 255, 261 Ure, Andrew 119 US Congress 47 US dollar 15, 30, 45–6 US Executive Branch 47 US Federal Reserve xi, 6, 30, 37, 46, 47, 49, 132, 143, 233 monetary policy 170–71 US Housing Act (1949) 18 US Treasury 47, 142, 240 use values collectively managed pool of 36 commodification of 243 commodities 15, 26, 35 common wealth 53 creation through social labour 36 and entrepreneurs 23–4 and exchange values 15, 35, 42, 44, 50, 60, 65, 88 and housing 14–19, 21–2, 23, 67 and human labour 26 infinitely varied 15 of infrastructural provision 78 loss of 58 marketisation of 243 monetisation of 243 of money 28 privatised and commodified 23 provision of 111 and revolt of the mass of the people 60 social demand for 81 usufructuary rights 39, 41, 59 usury 49, 53, 186, 194 utopianism 18, 35, 42, 51, 66, 119, 132, 183, 184, 204, 206–10, 269, 281, 282 V value(s) commodity 24, 25 failure to produce 40 housing 19, 20, 22 net 19 production and realisation of 82 production of 239 property 21 relation between money and value 27, 35 savings 20 storing 25, 26, 35 see also asset values; exchange values; social value; use values value added 79, 83 Veblen, Thorstein: Theory of the Leisure Class 274 Venezuela 123, 201 Vietnam, labour in 108 Vietnam War 290 violence 53, 57, 72, 204–5, 286 against children 193 against social movements 266 against women 193 colonial 289–90, 291 and contemporary capitalism 8 culture of 271 of dispossession 58, 59 in a dystopian world 264 and humanism 286, 289, 291 of the liberation struggle 290 militarised 292 as the only option 290–91 political 280 in pursuit of liberty and freedom 201 racialised 291 state’s legitimate use of 42, 44, 45, 51, 88, 155, 173 of technology 271 and wage labour 207 virtual ecological transfer 256 Volcker, Paul 37 W wages 103 basic social wage 103 falling 80, 82 for housework 115, 192–3 low xii, 114, 116, 186, 188 lower bound to wage levels 175 non-payment of 72 and profits 172 reduction in 81, 103, 104, 135, 168, 172, 176, 178 rising 178 and unskilled labour 114 wage demands 150, 274 wage levels pushed up by labour 65 wage rates 103, 116, 172, 173 wage repression 158–9 weekly 71 see also income Wall Street criticised by a congressional committee 239–40 illegalities practised by 72, 77 and Lebed 195 new information-processing technologies 100 Wall Street Crash (1929) x, 47 Wall-E (film) 271 Walmart xii, 75, 84, 103, 131 war on terror 280 wars 8, 60, 229 currency 154 defined 44 monetisation of state war-making activities 44–5 privatisation of war making 235 resource 154, 260 and state aims 44 state financing of 32, 44, 48 and technology 93 trade 154 world 154 water privatisation 235 wave theory 70 wave-particle duality 70 wealth accumulation of 33, 34, 35, 157, 205 creation of 132–3, 142, 214 disparities of 164–81 distribution of 34, 167 extraction from non-productive activities 32 global 34 the house as a sign of 15–16 levelling up of per capita wealth 171 and poverty 146, 168, 177, 218, 219, 243 redistribution of 9, 234, 235 social 35, 53, 66, 157, 164, 210, 251, 265, 266, 268 taking it from others 132–3 see also common wealth weather futures 60 Weber, Max 122, 125 Weimar Republic 30 welfare state 165, 190, 191, 208 Wells Fargo 61 West Germany 153, 154, 161 Whitehead, Alfred North 97 Wilson, Woodrow 201 Wolf, Martin 304n2 Wollstonecraft, Mary: A Vindication of the Rights of Woman 285 women career versus family obligations 1–2 disposable populations 111 exploitation of 193 housework versus wage labour 114–15 oppression against 193 social struggle 168 trading of 62 violence against 193 in the workforce 108, 114, 115, 127, 174, 230 women’s rights 202, 218 workers’ rights 202 working classes and capital 80 consumer power 81 crushing organisation 81 education 183, 184 gentrified working-class neighbourhoods ix; housing 160 living conditions 292 wage repression and consumption 158–9 working hours 72, 104–5, 182, 272–5, 279 World Bank 16, 24, 100, 186, 245 World Trade Organization 138, 242 WPA programmes (1930s) 151 Wright, Frank Lloyd: Falling Water 16 Wriston, Walter 240 Y YouTube 236 Yugoslavia, former 174 Z Zola, Émile 7


pages: 565 words: 164,405

A Splendid Exchange: How Trade Shaped the World by William J. Bernstein

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Admiral Zheng, asset allocation, bank run, Benoit Mandelbrot, British Empire, call centre, clean water, Columbian Exchange, Corn Laws, David Ricardo: comparative advantage, deindustrialization, Doha Development Round, domestication of the camel, double entry bookkeeping, Eratosthenes, financial innovation, Gini coefficient, ice-free Arctic, imperial preference, income inequality, intermodal, James Hargreaves, John Harrison: Longitude, Khyber Pass, low skilled workers, non-tariff barriers, placebo effect, Port of Oakland, refrigerator car, Silicon Valley, South China Sea, South Sea Bubble, spice trade, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade liberalization, trade route, transatlantic slave trade, transatlantic slave trade, transcontinental railway, upwardly mobile, working poor

By a strange coincidence, the founder of chaos theory, Benoit Mandelbrot, drew his original inspiration by connecting the pattern of cotton prices with that of the flooding pattern of the Nile. 11. The dinar, like most of the standard gold coins of the premodern period, weighed about one-eighth of an ounce, worth about eighty dollars at current value. Thus, an annual income of one hundred dinars corresponds to about $8,000 per year in today's currency. 12. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Chicago: University of Chicago Press, 1976), I: 17. 13. Paul Mellars, "The Impossible Coincidence. A Single-Species Model for the Origins of Modem Human Behavior in Europe," Evolutionary Anthropology, 14:1 (February, 2005): 12-27. 14. Thomas L. Friedman, The World Is Flat (New York: Farrar, Straus and Giroux, 2005). 15. Warmington, 35-39; see also William H.

Barber, British Economic Thought and India 1600-1858 (Oxford: Clarendon, 1975), 88-89. 7. Plassey was just one facet of the Seven Years' War, which yielded a particularly rich bounty for England: not only the Bengal, but also Canada and much of the Lesser Antilles. 8. Quoted in J. R. Ward, "The Industrial Revolution and British Imperialism, 1750-1850," Economic History Review 47, no. 1 (February 1994): 47. 9. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Chicago: University of Chicago Press, 1976), I: 82. 10. Ibid., II:33; Barber, 97. 11. Anthony Webster, "The Political Economy of Trade Liberalization: The East India Company Charter Act of 1813," The Economic History Review 43, no. 3 (August 1990): 404-419. 12. Jack Beeching, The Chinese Opium Wars (New York: Harcourt Brace Jovanovich, 1975), 51. 13. W. Travis Hanes III, The Opium Wars (Naperville IL: Sourcebooks, 2002), 13-19. 14.

Silverberg, Robert, In the Realm of PresterJohn (Garden City, NY: Doubleday, 1972). Simmons, Colin, "'De-Industrialization,' Industrialization, and the Indian Economy, c. 1850-1947," Modern Asian Studies 19, no. 3 (April 1985): 593-622 Simpson, Donald, "The Treasure in the Vergulde Draek: A Sample of V. O. C. Bullion Exports in the 17th Century," The Great Circle 2, no. 1 (April 1980): 13-17. Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations (Chicago: University of Chicago Press, 1976). Srinivasan, T. N., "Developing Countries in the World Trading System: From GATT, 1947, to the Third Ministerial Meeting of WTO, 1999," World Economy 22, no. 8 (1999): 1047-1064. Stamper, Norm, "A Good Cop Wasted," excerpted in Seattle Weekly (June 1, 2005). Steensgaard, Niels, The Asian Trade Revolution of the Seventeenth Century (Chicago: University of Chicago Press, 1974).

The Corporation: The Pathological Pursuit of Profit and Power by Joel Bakan

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Berlin Wall, Cass Sunstein, corporate governance, corporate personhood, corporate social responsibility, energy security, Exxon Valdez, IBM and the Holocaust, joint-stock company, laissez-faire capitalism, market fundamentalism, Naomi Klein, new economy, race to the bottom, Ralph Nader, Ronald Reagan, shareholder value, South Sea Bubble, The Wealth of Nations by Adam Smith, Triangle Shirtwaist Factory, urban sprawl

Unlike the prevailing partnership form, in which relatively small groups of men, bonded together by personal loyalties and mutual trust, pooled their resources to set up businesses they ran as well as owned, the corporation separated ownership from management- one group of people, directors and managers, ran the firm, while another group, shareholders, owned it. That unique design was believed by many to be a recipe for corruption and scandal. Adam Smith warned in The Wealth of Nations that because managers could not be trusted to steward "other people's money," "negligence and profusion" would inevitably result when businesses organized as corporations. Indeed, by the time he wrote those words in 1776, the corporation had been banned in England for more than fifty years. In 1720, the English Parliament, fed up with the epidemic of corporate high finks plaguing Exchange Alley, had outlawed the corporation (though with some exceptions).

Ford still stands for the legal principle that managers and directors have a legal duty to put shareholders' interests above all others and no legal authority to serve any other interests-what has come to be known as "the best interests of the corporation" principle. That principle provided a legal fix to a flaw in the corporate form that Page 37 NE CORPORATION 37 had famously worried Adam Smith 140 years before Dodge v. Ford was decided. Smith, in his 1776 classic, The Wealth of Nations, said he was troubled by the fact that corporations' owners, their shareholders , did not run their own businesses but delegated that task to professional managers. The latter could not be trusted to apply the same "anxious vigilance" to manage "other people's money" as they would their own, he wrote, and "negligence and profusion therefore must prevail, more or less, in the management of such a company."

A Nation of Salesmen: The Tyranny of the Market and the Subversion of Culture. New York: Avon Books, 1994. Simon, David R. Elite Deviance, 7th ed. Boston: Allyn & Bacon, 2001. Simpson, Sally S. Corporate Crime, Law, and Social Control. Cambridge, England: Cambridge University Press, 2002. Singer, P. W. Corporate Warriors: The Rise of the Privatized Military Industry. Ithaca, N.Y.: Cornell University Press, 2003. Smith, Adam. The Wealth of Nations. New York: Modern Library, 1994. Smith, D. Gordon. "The Shareholder Primacy Norm." The Journal of Corporation Law 23 (1998), 277. Smith, Toby M. The Myth of Green Marketing: Tending Our Goats at the Edge of Apocalypse. Toronto: University of Toronto Press, 1998. Smith, Thomas A. "The Efficient Norm for Corporate Law: A Neo-traditional Interpretation of Fiduciary Duty." Michigan Law Review 98 (1999-2000), 214-268.


pages: 356 words: 103,944

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, Asian financial crisis, bank run, banking crisis, bilateral investment treaty, borderless world, Bretton Woods, British Empire, capital controls, Carmen Reinhart, central bank independence, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, eurozone crisis, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, joint-stock company, Kenneth Rogoff, labour market flexibility, labour mobility, land reform, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, price stability, profit maximization, race to the bottom, regulatory arbitrage, savings glut, Silicon Valley, special drawing rights, special economic zone, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tobin tax, too big to fail, trade liberalization, trade route, transaction costs, tulip mania, Washington Consensus, World Values Survey

., 1910), pp. 22–23. 12 Quoted in Newman, Empire of the Bay, p. 165. 13 The actual quote is: “This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another”—Adam Smith, An Enquiry into the Nature and Causes of the Wealth of Nations (1776), Bk. I, chap. 2. 14 See David R. Cameron, “The Expansion of the Public Economy: A Comparative Analysis,” American Political Science Review, vol. 72, no. 4 (December 1978), pp. 1243–61. 15 Vito Tanzi and Ludger Schuknecht, Public Spending in the 20th Century: A Global Perspective (Cambridge: Cambridge University Press, 2000), chap. 1. 16 Dani Rodrik, “Why Do More Open Economies Have Bigger Governments?”

Taussig, “Abraham Lincoln on the Tariff: A Myth,” Quarterly Journal of Economics, vol. 28, no. 4 (August 1914), pp. 814–20. 6 World Values Survey online database (http://www.worldvaluessurvey.org/). 7 This can be seen in the cross-tabs that World Values Survey makes available online—ibid. 8 Anna Maria Mayda and Dani Rodrik, “Why Are Some Individuals (and Countries) More Protectionist Than Others?” European Economic Review, 49 (August 2005), pp. 1393–1430. 9 So Adam Smith was not correct when he famously wrote, in defense of free trade, that “What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom”—Smith, The Wealth of Nations, Bk. IV, chap. 2. 10 Regulatory decisions on new technologies can have large economic impacts on particular groups, just like trade policies. In October 2009, for example, when the Food and Drug Administration issued a negative judgment on a drug meant to treat osteoporosis in postmenopause women, the stock of the company that makes the drug fell by more than 2 percent.

International trade, in particular, had to be monopolized to exclude foreign powers and to reserve the benefits for the home country. Today, we are likely to take our cue more from Adam Smith, whose Wealth of Nations (published in 1776) was a frontal attack on mercantilist thought and practice. Economic liberals, with Smith as their founding father, have a different narrative. They believe that economies flourish when markets are left free of state control. Competition, rather than monopoly, maximizes economic advantage. Protective barriers on trade—import tariffs and prohibitions—reduce competition and thus are a way of shooting oneself in the foot. State-business collaboration is just another name for corruption. Adam Smith did not deny that there was a role for government, but his vision was of a state restricted to national defense, protection of property rights, and administration of justice.


pages: 298 words: 95,668

Milton Friedman: A Biography by Lanny Ebenstein

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, banking crisis, Berlin Wall, Bretton Woods, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, labour market flexibility, Lao Tzu, liquidity trap, means of production, Mont Pelerin Society, Ponzi scheme, price stability, rent control, road to serfdom, Ronald Coase, Ronald Reagan, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, The Wealth of Nations by Adam Smith, Thorstein Veblen

Rose notes that as a result, after presentation of his medal and certificate, “Milton stood for a longer ovation than had been received by any of the preceding six laureates.”28 Among Friedman’s favorite letters after receiving the Nobel Prize was one from a class of elementary students, who wrote him that they were “studying economics, too.” Their teacher had said that Friedman was an admirer of Adam Smith. Friedman wrote back that he was delighted to hear that you are studying his great book, The Wealth of Nations. It has much to tell us today. In many ways we have come full circle since that book was written. At the time Adam Smith wrote there were many government regulations and restrictions. His book was a blow for freedom. It succeeded. However, it took some seventy years before it did. Since then we have been drifting back, and today we again have a situation in which we have extensive controls and restrictions on human freedom. We need a new Adam Smith to strike a new blow for freedom.29 A great source of Friedman’s success is his sense of humor. Examples over the years include: There’s no such thing as a free lunch.

Memoirs, 74. 38. Ibid., 313. 39. Ibid., 352. 40. Ibid., 374. 41. Friedman-Ebenstein correspondence (November 22, 2004). 42. Memoirs, 190. CHAPTER 20 1. Milton Friedman, Why Government Is the Problem (Stanford: Hoover Institution, 1993), 6. 2. Memoirs, 563. 3. Ibid., 471. 4. Ibid., 473. 5. John Stuart Mill, On Liberty (1859), Introduction. 6. FTC, xv. 7. Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations, vol. 1 (Indianapolis: Liberty Classics, 1976), 456, 426. 8. Memoirs, 480. 9. FTC, i. 10. Ibid. 11. Ibid. 12. Memoirs, 605. 13. Ibid., 503. 14. Ibid., 504. CHAPTER 21 1. Memoirs, 209–210. 2. Martin Anderson, Revolution (New York: Harcourt Brace Jovanovich, 1988), 164. 3. Ronald Reagan, Reagan: In His Own Hand (New York: Free Press, 2001), 267. 4. Ronald Reagan, Speaking My Mind: Selected Speeches (New York: Simon and Schuster, 1989), 96. 5.

After a lag, sometimes of decades, an intellectual tide “taken at its flood” will spread at first gradually, then more rapidly, to the public at large and through the public’s pressure on government will affect the course of economic, social, and political policy.10 The concept of lags runs through Friedman’s work. Milton and Rose think that the past two and a quarter centuries have been typified by three different intellectual tides in society and government: “The Rise of Laissez-Faire (the Adam Smith Tide),” “The Rise of the Welfare State (the Fabian Tide),” and “The Resurgence of Free Markets (the Hayek Tide).”11 They consider the Adam Smith tide, which advocates free trade and limited government, to have washed ashore in the realm of ideas from about 1776—with the publication of Smith’s Wealth of Nations and start of the American War of Independence—to 1883 and to have reached its primary public policy influence from about 1820 to 1900 in Britain and slightly later in the United States.


pages: 742 words: 137,937

The Future of the Professions: How Technology Will Transform the Work of Human Experts by Richard Susskind, Daniel Susskind

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

23andMe, 3D printing, additive manufacturing, AI winter, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, Andrew Keen, Atul Gawande, Automated Insights, autonomous vehicles, Big bang: deregulation of the City of London, big data - Walmart - Pop Tarts, Bill Joy: nanobots, business process, business process outsourcing, Cass Sunstein, Checklist Manifesto, Clapham omnibus, Clayton Christensen, clean water, cloud computing, computer age, computer vision, conceptual framework, corporate governance, crowdsourcing, Daniel Kahneman / Amos Tversky, death of newspapers, disintermediation, Douglas Hofstadter, en.wikipedia.org, Erik Brynjolfsson, Filter Bubble, Frank Levy and Richard Murnane: The New Division of Labor, full employment, future of work, Google Glasses, Google X / Alphabet X, Hacker Ethic, industrial robot, informal economy, information retrieval, interchangeable parts, Internet of things, Isaac Newton, James Hargreaves, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Khan Academy, knowledge economy, lump of labour, Marshall McLuhan, Narrative Science, natural language processing, Network effects, optical character recognition, personalized medicine, pre–internet, Ray Kurzweil, Richard Feynman, Richard Feynman, Second Machine Age, self-driving car, semantic web, Skype, social web, speech recognition, spinning jenny, strong AI, supply-chain management, telepresence, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, transaction costs, Turing test, Watson beat the top human players on Jeopardy!, young professional

Antonio Regalado, ‘What It Will Take for Computers to Be Conscious’, MIT Technology Review, 2 Oct. 2014 <http://www.technologyreview.com> (accessed 30 March 2015). 17 Jerome Groopman, How Doctors Think (2008), 17. 18 Simon Baron-Cohen, The Essential Difference: Male and Female Brains and the Truth About Autism (2004). 19 Joseph Weizenbaum, Computer Power and Human Reason: From Judgment to Calculation (1984). 20 The Panel on Fair Access to the Professions, Unleashing Aspiration: The Final Report of the Panel on Fair Access to the Professions (2009). <http://webarchive.nationalarchives.gov.uk/+/http:/www.cabinetoffice.gov.uk/media/227102/fair-access.pdf> (accessed 23 March 2015). 21 Adam Smith, An Inquiry into the Nature and Cause of the Wealth of Nations (1998). 22 Smith, The Wealth of Nations, 12–15. 23 Smith, The Wealth of Nations, 429. 24 Smith, The Wealth of Nations, 430. 25 ‘He is at home when he is not working and when he is working he is not at home’: ‘Economic and Philosophical Manuscripts’, in Karl Marx: Selected Writings, ed. Lawrence Simon (1994), 62. 26 Marx, ‘Economic and Philosophical Manuscripts’, passim. 27 Max Weber, The Protestant Ethic and the Spirit of Capitalism (2011), 99. 28 Isaac Asimov, Robot Visions (1990), 341. 29 ‘Le mieux est l’ennemi du bien’ (‘the best is the enemy of the good’), in Voltaire, ‘La Bégueule’ (1772) <http://fr.wikisource.org/wiki/La_Bégueule> (accessed 23 March 2015). 7 After the Professions When we started working on this book in 2010, our principal focus was on what the future might hold for the professions.

Karl Marx, for example, is known for his writings on the misery that technology could bring. Even Adam Smith, the political economist and philosopher who is held out as the standard-bearer for unfettered markets and innovation, recognized the downside, eighty years before Marx. Today, of course, the conditions in the professions are very different from those in the factories and mills that occupied the thoughts of these classical theorists. Workers in industrial Britain in the eighteenth and nineteenth centuries were systematically exploited and oppressed, and had little legal protection. To draw a direct comparison between their plight and the prospects for our professions would be to overstate the case. Yet we can still learn, albeit indirectly, from the insights of Smith and Marx. In 1776, Adam Smith published The Wealth of Nations.21 He was trying to understand what made some countries rich and others poor.

James Gilmore and Joseph Pine (2000), 134. 15 See e.g. Langdon Winner, who writes: ‘the basic conceit is always the same: new technology will bring universal wealth, enhanced freedom, revitalized politics, satisfying community, and personal fulfillment.’ Langdon Winner, ‘Technology Today: Utopia or Dystopia?’, in Technology and the Rest of Culture, ed. Arien Mack (2001), 59. 16 See e.g. Adam Smith, An Inquiry into the Nature and the Causes of the Wealth of Nations (1998) and Karl Marx, Capital: Critique of Political Economy, vol. 1 (1992). 17 David Autor, ‘The “Task Approach” to Labor Markets: An Overview’, Institute for the Study of Labour Discussion Paper Series, No. 7178, Jan. 2013 <http://ftp.iza.org/dp7178.pdf> (accessed 25 March 2015). 18 Richard Susskind, Transforming the Law (2000), 47. We went on: ‘In the real world, clients’ problems will very rarely belong exclusively to one category alone; as purely high-end or entirely routine, for instance.


pages: 411 words: 80,925

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live by Rachel Botsman, Roo Rogers

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Airbnb, barriers to entry, Bernie Madoff, bike sharing scheme, Buckminster Fuller, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, George Akerlof, global village, Hugh Fearnley-Whittingstall, information retrieval, iterative process, Kevin Kelly, Kickstarter, late fees, Mark Zuckerberg, market design, Menlo Park, Network effects, new economy, new new economy, out of africa, Parkinson's law, peer-to-peer lending, Ponzi scheme, pre–internet, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Simon Kuznets, Skype, slashdot, smart grid, South of Market, San Francisco, Stewart Brand, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thorstein Veblen, Torches of Freedom, transaction costs, traveling salesman, ultimatum game, Victor Gruen, web of trust, women in the workforce, Zipcar

They need more water, food, infrastructure, education, health, and governance. This lack of the most basic resources and the consequent poverty also confronted Adam Smith more than three hundred years ago. Smith, the great Scottish economist, sought a way out of the agrarian squalor of the eighteenth century. He believed a more productive society would lead to a wealthier society. In The Wealth of Nations, Smith argued that humans are motivated by self-interest and “self-love,” and that the exploitation of this trait leads to greater wealth for all and a more effective distribution of labor.1 Looking back, one can understand why Adam Smith wanted to figure how to get the economy to produce more. Britain in the 1700s was not a nice place to live. The average life expectancy was just thirty-five years.

Progress Paradox, cited in David Camp, “Rethinking the American Dream,” Vanity Fair (April 2009), www.vanityfair.com/culture/features/2009/04/american-dream200904. 45. Jonathan Haidt, The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom (Basic Books, 2006), 101. 46. Jon Mooallem, “The Self-Storage Self,” New York Times (September 2, 2009), http://www.nytimes.com/2009/09/06/magazine/06self-storage-t.html?pagewanted=1. 47. Lawson, All Consuming, 11. 1. Adam Smith, The Wealth of Nations (W. Strahan and T. Cadell, London, 1776). 2. “18th Century London—Its Daily Life and Hazards Canadian Content,” http://forums.canadiancontent.net/history/48176-18th-century-london-its-daily.html. 3. David Korten, When Corporations Rule the World (Berrett-Koehler Publishers, 1995), http://deoxy.org/korten_betrayal.htm. 4. Douglas Rushkoff, Life Inc.: How the World Became a Corporation and How to Take It Back (Random House, 2009), 51. 5.

Smith would likely be mystified by how his simple goals of increasing productivity and achieving market efficiency have become an ideological threat to our economy, society, and planet. In When Corporations Rule the World, David C. Korten writes, “Smith did not advocate a market system based on unrestrained greed. He was talking about small farmers and artisans trying to get the best price for their products to provide for themselves and their families. That is self-interest—but it is not greed.”3 Adam Smith and later Milton Friedman both believed that an individual pursuing his own self-interest promotes the good of society as a whole. In Chapter Two, we saw how in just a few generations, this concept was transformed from a relatively healthy narrative of technological ingenuity to a frenetic quest for personal identity through brands, products, and services, before finally becoming an extreme system of insatiable consumerism.


pages: 274 words: 93,758

Phishing for Phools: The Economics of Manipulation and Deception by George A. Akerlof, Robert J. Shiller, Stanley B Resor Professor Of Economics Robert J Shiller

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Andrei Shleifer, asset-backed security, Bernie Madoff, Capital in the Twenty-First Century by Thomas Piketty, collapse of Lehman Brothers, Credit Default Swap, Daniel Kahneman / Amos Tversky, dark matter, David Brooks, en.wikipedia.org, endowment effect, equity premium, financial intermediation, full employment, George Akerlof, greed is good, income per capita, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, late fees, loss aversion, Menlo Park, mental accounting, Milgram experiment, moral hazard, new economy, payday loans, Ponzi scheme, profit motive, Ralph Nader, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, Silicon Valley, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, theory of mind, Thorstein Veblen, too big to fail, transaction costs, Unsafe at Any Speed, Upton Sinclair, Vanguard fund, wage slave

We are not generally aware of that monkey on our shoulder. So, in the absence of some curbs on markets, we reach an economic equilibrium where the monkeys on the shoulder are substantially calling the shots. The Alleged Optimality of a Free-Market Equilibrium There is a perhaps surprising result that, indisputably, lies at the very heart of economics. Back in 1776, the father of the field, Adam Smith, in The Wealth of Nations, wrote that, with free markets, as if “by an invisible hand … [each person] pursuing his own interest” also promotes the general good.16 It took a bit more than a century for Smith’s statement to be precisely understood. According to the modern version, commonly taught even in introductory economics, a competitive free-market equilibrium is “Pareto optimal.”17 That means that once such an economy is in equilibrium, it is impossible to improve the economic welfare of everyone.

Evidence from Capuchin Monkey Trading Behavior,” Journal of Political Economy 114, no. 3 (June 2006): 517–37. 14. Stephen J. Dubner and Steven D. Levitt, “Keith Chen’s Monkey Research,” New York Times, June 5, 2005. 15. Venkat Lakshminarayanan, M. Keith Chen, and Laurie R. Santos, “Endowment Effect in Capuchin Monkeys,” Philosophical Transactions of the Royal Society B: Biological Sciences 363, no. 1511 (December 2008): 3837–44. 16. Adam Smith, The Wealth of Nations (New York: P. F. Collier, 1909; originally published 1776), p. 19. Emphasis added. 17. For a version of Pareto’s original writings, see Vilfredo Pareto, Man­ ual of Political Economy: A Critical and Variorum Edition, ed. Aldo Montesano et al. (Oxford: Oxford University Press, 2014). This edition derives from Manuale di Economia, published in Italy in 1906, and also a later edition in French.

Mineola, NY: Dover Thrift Editions, 2001; originally published 1906. —. Letter to the New York Times. May 6, 1906. Singh, Gurkirpal. “Recent Considerations in Nonsteroidal Anti-Inflammatory Drug Gastropathy.” American Journal of Medicine 105, no. 1, supp. 2 (July 27, 1998): 31S–38S. Skeel, David A., Jr. “Shaming in Corporate Law.” University of Pennsylvania Law Review 149, no. 6 (June 2001): 1811–68. Smith, Adam. The Wealth of Nations. New York: P. F. Collier, 1909. Originally published 1776. Smith, Gary. Standard Deviations: Flawed Assumptions, Tortured Data, and Other Ways to Lie with Statistics. New York: Duckworth Overlook, 2014. BIBLIOGR APHY Akerlof.indb 199 199 6/19/15 10:24 AM Snell, George D. “Clarence D. Little, 1888–1971: A Biographical Memoir by George D. Snell.” Washington, DC: National Academy of Sciences, 1971.


pages: 193 words: 11,060

Ethics in Investment Banking by John N. Reynolds, Edmund Newell

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

accounting loophole / creative accounting, banking crisis, capital controls, collapse of Lehman Brothers, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, discounted cash flows, financial independence, index fund, invisible hand, margin call, moral hazard, Nick Leeson, Northern Rock, quantitative easing, shareholder value, short selling, South Sea Bubble, stem cell, the market place, The Wealth of Nations by Adam Smith, too big to fail

SEC (2010) SEC Charges Goldman Sachs with Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages. 7. New York Times, 20 November 2005 http://www.nytimes.com/2005/11/20/ business/yourmoney/20jail.html?pagewanted=all, accessed 8 March 2011. 8. Geraint Anderson http://www.moneyweb.com/mw/view/mw/en/page308878? oid=309416&sn=2009+Detail&pid=287226, accessed 8 March 2011. Chapter 2 1. 2. 3. 4. 5. Adam Smith (1776) The Wealth of Nations (London: W. Strahan and T. Cadell). Adam Smith (1759) The Theory of Moral Sentiments. http://www.sec.gov/news/press/2010/2010-59.htm, accessed 8 March 2011. Goldman Sachs (2011) Business Standards Report, section v, para A. http://online.wsj.com/article/SB122576100620095567.html, accessed 8 March 2011. 6. Independent Banking Commission (2010) Issues Paper Call for Evidence. 7. DTI (2007) Companies Act Duties of Company Directors.

Within other markets, it could be argued that minimum intervention and maximum openness is desirable to ensure the most efficient allocation of resources (as has been argued in relation to free trade). A market that operates in an inefficient or dysfunctional way, either because of the way it is structured or because of the negative influence by key players, is a concern. This was understood by no less a figure than Adam Smith, who is regarded by many as the founding father of free-market economics through his great work The Wealth of Nations.1 Smith makes clear, however, the dangers of potential market abuse as people pursue selfish ends. It is noteworthy, therefore, that Smith’s other great (and earlier) work, The Theory of Moral Sentiments,2 is about moral philosophy. Different markets raise different issues, including ethical ones. The issues raised by financial markets is a theme explored in this book.

Schwartz, M. (2000) “Why Ethical Codes Constitute an Unconscionable Regression”, Journal of Business Ethics, 23, 173–84. Seldon, A. (2009) Trust: How We Lost it and How to Get it Back (London: Biteback). Singer, P. (ed.) (1991) A Companion to Ethics (Oxford: Blackwell). Bibliography 169 Sinn, H.-W. (2010) Casino Capitalism: How the Financial Crisis Came about and What Needs to be Done Now (Oxford: Oxford University Press). Smith, A. (1759) The Theory of Moral Sentiments. Smith, A. (1776) The Wealth of Nations (London: W. Strahan and T. Cadell). Sorkin, A.R. (2009) Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis – and Themselves (New York: Viking). Stackhouse, M.L. (2001) “Business, Economics and Christian Ethics”, in R. Gill (ed.) The Cambridge Companion to Christian Ethics (Cambridge: Cambridge University Press). Stackhouse, M.L., D.P.


pages: 606 words: 87,358

The Great Convergence: Information Technology and the New Globalization by Richard Baldwin

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, additive manufacturing, Admiral Zheng, agricultural Revolution, air freight, Amazon Mechanical Turk, Berlin Wall, bilateral investment treaty, Branko Milanovic, buy low sell high, call centre, Columbian Exchange, Commodity Super-Cycle, David Ricardo: comparative advantage, deindustrialization, domestication of the camel, Edward Glaeser, Erik Brynjolfsson, financial intermediation, George Gilder, global supply chain, global value chain, Henri Poincaré, imperial preference, industrial robot, invention of agriculture, invention of the telegraph, investor state dispute settlement, Isaac Newton, Islamic Golden Age, James Dyson, knowledge economy, knowledge worker, Lao Tzu, low skilled workers, market fragmentation, New Economic Geography, out of africa, paper trading, Pax Mongolica, profit motive, rent-seeking, reshoring, Richard Florida, rising living standards, Second Machine Age, Simon Kuznets, Skype, Snapchat, Stephen Hawking, telepresence, telerobotics, The Wealth of Nations by Adam Smith, trade liberalization, trade route, Washington Consensus

The Enlightenment (1600s and 1700s) furthered the rise of Europe by adding the thinking of Descartes, Locke, Voltaire, Hobbes, Hume, Kant, Newton, Smith, Rousseau, and others. Europe was also marked by keynote developments in banking, finance, and markets. The economic thought foundations were laid during this period for trade and what would later be called globalization. A key text was Adam Smith’s 1776 tome The Wealth of Nations, which built on thinking by French writers of the physiocratic school. European Age of Discovery: Putting the Global in Globalization The global economic and manufacturing center of gravity was still in Asia at the beginning of the 1400s. The demise of the Silk Road greatly raised the economic rewards in Europe to finding a way to the riches of the East around the Middle Eastern blockage.

It was a century-long sequence of incremental technical, organizational, social, and institutional changes that completely transformed the human condition. Economic historian Nick Crafts would argue that any precise year is misleading given its accretive nature, but 1776 provides as good a landmark as any, since this is when he finds a structural break in British industrial growth. Conveniently, it is also the publication date of Adam Smith’s The Wealth of Nations. The Industrial Revolution was directly linked with improved transportation. Inland water and road transportation networks densified in the last decades of the eighteenth century. Water transportation advanced with new types and layouts of sails, new shipbuilding techniques, and big advances in navigational technology. By the 1700s, Europeans had mapped the world and were navigating the seas with ease.

The Specialization versus Coordination Tradeoff Deciding how to organize production is impossibly complex in the real world—that is, in the world of Mein Herr’s one-mile-to-the-mile-map world. The choices that real firms make fill days and years of middle-manager time, but allowing for all that detail would obscure the main tradeoffs. Abstraction is in order. Fortunately, Adam Smith laid out a useful approach to the matter. The key tradeoff is between specialization and coordination. In his 1776 book The Wealth of Nations, Smith discusses the gains from specialization in the context of an eighteenth-century pin factory. As Smith writes: “One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper.”


pages: 209 words: 80,086

The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, collective bargaining, corporate governance, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, immigration reform, income inequality, industrial robot, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, market bubble, market design, neoliberal agenda, new economy, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, winner-take-all economy, working poor

The hold of this faith over current thinking is difficult to exaggerate despite the fallout from the economic crisis.2 This book explains why it would be more fitting in a fairy tale than in an account of reality. But first we need to see how the neoliberal opportunity bargain of individual freedom and national prosperity was supposed to unfold. From Muscle Power to Brianpower In the eighteenth-century world of Adam Smith, the wealth of nations was based on trade and plunder rather than increasing productivity. The founder of modern economics recognized that wealth could be created by improving the efficiency of the workforce, even if the price was to condemn most workers to jobs that in Smith’s words made them “as stupid and ignorant as it is possible for a human creature to become.” This was because the increase in productive capacity depended on subdividing the activities of workers, each performing the same repetitive task such as in the manufacture of pins where someone draws out the wire, another straightens it, another cuts it, and so on.3 The dangers involved in creating a workforce of human automatons were not lost on Smith.

Gary Becker, “The Age of Human Capital,” in Hugh Lauder et. al. (eds.), Education, Globalization and Social Change (Oxford: Oxford University Press, 2006). Chapter Two 1. Robert Reich, The Work of Nations (New York: Vintage, 1991), 247. 2. W. Norton Grubb and Marvin Lazerson, The Education Gospel: The Economic Power of Schooling (Cambridge, Mass.: Harvard University Press, 2004). 3. See Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations,Edwin Cannan (ed.) (Chicago: University of Chicago Press, 1976 [1776]), 8. By the dawn of the twentieth century, the fate of the workforce was looking more promising, at least according to another famous economist, Alfred Marshall. In a essay on “The Future of the Working-Classes” presented to the Reform Club in Cambridge, England, in 1873, he spoke of new technologies accelerating the demand for a skilled workforce ending the distinction between blue- and white-collar workers.

This was because the increase in productive capacity depended on subdividing the activities of workers, each performing the same repetitive task such as in the manufacture of pins where someone draws out the wire, another straightens it, another cuts it, and so on.3 The dangers involved in creating a workforce of human automatons were not lost on Smith. He believed that although this was a price worth paying to increase national wealth, state-funded education should be developed to compensate for the mind-numbing work that a detailed division of labor imposed on the workforce. Since Adam Smith, labor was treated as a homogeneous category. What counted was the number of workers or the size of the workforce, akin to the area of land for agricultural production or the number of machines in a factory. Well into the twentieth century, people were treated as expensive machines, and the personal costs of rising prosperity continued to be high. Fordist production lines—named after Henry Ford, who pioneered the mass production of Model T automobiles in the early 1900s—were widely used in the manufacture of goods, including televisions, refrigerators, and washing machines that fueled the consumer boom of the 1950s and 1960s.


pages: 540 words: 168,921

The Relentless Revolution: A History of Capitalism by Joyce Appleby

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

1919 Motor Transport Corps convoy, agricultural Revolution, anti-communist, Asian financial crisis, asset-backed security, Bartolomé de las Casas, Bernie Madoff, Bretton Woods, BRICs, British Empire, call centre, collateralized debt obligation, collective bargaining, Columbian Exchange, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, Doha Development Round, double entry bookkeeping, epigenetics, equal pay for equal work, European colonialism, facts on the ground, failed state, Firefox, Ford paid five dollars a day, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gordon Gekko, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, hiring and firing, illegal immigration, informal economy, interchangeable parts, interest rate swap, invention of movable type, invention of the printing press, invention of the steam engine, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, Jeff Bezos, joint-stock company, Joseph Schumpeter, knowledge economy, land reform, Livingstone, I presume, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, moral hazard, Ponzi scheme, profit maximization, profit motive, race to the bottom, Ralph Nader, refrigerator car, Ronald Reagan, Scramble for Africa, Silicon Valley, Silicon Valley startup, South China Sea, South Sea Bubble, special economic zone, spice trade, spinning jenny, strikebreaker, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thorstein Veblen, total factor productivity, trade route, transatlantic slave trade, transatlantic slave trade, transcontinental railway, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration, Yogi Berra, Yom Kippur War

People could be counted on because they counted their interests. By the mid-eighteenth century Samuel Johnson could casually comment that “there are few ways in which a man can be more innocently employed than in getting money.”3 A decisive cultural shift had clicked into place. At the end of the eighteenth century, the intellectual effort to understand the phenomenon of capitalism found its Aristotle in Adam Smith, whose An Inquiry into the Nature and Causes of the Wealth of Nations appeared in 1776. Smith presented a brilliantly detailed explanation of the causes of the unparalleled wealth in Great Britain. (After the Scottish and English crowns were joined in 1706, England was called Great Britain or the United Kingdom.) Building on the new conception of human beings as responsibly pursuing their own interest, he advocated a system of “natural liberty” because he thought that the “invisible hand” of the market would function better if left free of most regulation.

The idea of men and women as consuming animals with boundless appetites capable of driving the economy to new levels of prosperity excited the imagination of dozens of writers, but they were entrepreneurs, not moralists. The proposition that the wealth of nations began with stimulating wants rather than with organizing production robbed intrusive social legislation of a supporting rationale. Once advocacy of freeing trade became attached to a new explanation of economic growth, the earlier commercial wisdom of carefully managing trade to ensure high prices came under challenge, a century before Adam Smith’s explanation of why freedom was better than control in matters economic. Popular responses to fashion revealed that some demand was elastic. If demand was elastic, then growth and prosperity required attention to people’s tastes and desires.

The English Navigation Laws specified that sugar and tobacco had to be shipped directly to Great Britain, just as any items the colonies might import from Europe had to be landed first in British ports. The British cut back on imports of linen from German and Holland and of wine from France. Port became the favorite drink because of the exceptionally good diplomatic relations between Britain and Portugal. Of course other countries retaliated with their own protective legislation. These were the policies that Adam Smith decried in the Wealth of Nations. Calculating the cost of maintaining British colonies, he argued that the country’s best trading partners were its closest neighbors. A lot of economic developments enhanced the possibility for an Industrial Revolution, though none of them can be seen as a cause per se. Conditions make things possible for causes to work, but they cannot cause anything. First and foremost were the dramatic agricultural changes that cut in half—from 80 to 40 percent—the number of men and women working in agriculture.


pages: 585 words: 165,304

Trust: The Social Virtue and the Creation of Prosperity by Francis Fukuyama

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

barriers to entry, Berlin Wall, blue-collar work, business climate, capital controls, collective bargaining, corporate governance, deindustrialization, Deng Xiaoping, deskilling, double entry bookkeeping, equal pay for equal work, European colonialism, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global village, hiring and firing, industrial robot, Jane Jacobs, job satisfaction, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, labour market flexibility, labour mobility, land reform, low skilled workers, manufacturing employment, mittelstand, price mechanism, profit maximization, RAND corporation, rent-seeking, Ronald Coase, Silicon Valley, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, transfer pricing, traveling salesman, union organizing

., Industrialism Reconsidered: Some Perspectives on a Study over Two Decades of the Problems of Labor (Princeton, N.J.: Inter-University Study of Human Resources, 1975); and Clark Kerr, The Future of Industrial Societies: Convergence or Diversity? (Cambridge: Cambridge University Press, 1983). 22Adam Smith’s description of the progressive division of labor in the pin factory into tasks of smaller and simpler scope at the beginning of The Wealth of Nations is actually the locus classicus for this line of criticism of modern industrial society. See An Enquiry in the Nature and Causes of the Wealth of Nations (Indianapolis: Liberty Classics, 1981), pp. 14-15. 23On the Judeo-Christian tradition, see the chapter by Jaroslav Pelikan in Jaroslav J. Pelikan et al, Comparative Work Ethics: Christian, Buddhist, Islamic (Washington, D.C: Library of Congress, 1985).

Taylor, Bismarck: The Man and the Statesman (New York: Vintage Books, 1967), pp. 202-203. 17Braun (1990), p. 54. 18See Klaus Chmielewicz, “Codetermination,” in Handbook of German Business Management, Vol. 2 (199), pp. 412-438. 19Peter Schwerdtner, “Trade Unions in the German Economic and Social Order,” Zeitschrift für die gesamte Staatswissenschaft 135 (1979): 455-473. 20On this general point, see Allen in Lodge and Vogel, eds. (1987), pp. 79-80. 21James Fallows and others have made a great deal of the importance of Friedrich List, asserting that the latter’s National System of Political Economy has been a better guide to both German and Asian economic growth than Adam Smith’s Wealth of Nations. List, however, simply repeats many of the mercantilist dicta about the centrality of national power and the subordination of economic means to strategic ends that was the staple of mercantilists from earlier centuries like Colbert or Turgot. Adam Smith would have found nothing in List’s arguments that he would have considered a decisive critique; indeed, The Wealth of Nations was itself written as a critique of List’s mercantilist predecessors. Fallows, moreover, vastly overstates the importance of List to German economic thought and practice. See Fallows, Looking at the Sun: The Rise of the New East Asian Economic and Political System (New York: Pantheon Books, 1994), pp. 189-190. 22Tomas Riha, “German Political Economy: History of Alternative Economics,” International Journal of Social Economics 12 (1985): 192-209. 23Allen in Lodge and Vogel, eds. (1987), pp. 176-177. 24On the establishment of the Technische Hochschule, see Peter Mathias and M.

Two of the most prolific and renowned contemporary neoclassical economists, Gary Becker of the University of Chicago and James Buchanan of George Mason University (both of whom won Nobel Prizes for their work), have built careers extending economic methodology to what are usually regarded as noneconomic phenomena like politics, bureaucracy, racism, the family, and fertility.7 The political science departments of many major universities are now filled with followers of socalled rational choice theory, which attempts to explain politics using an essentially economic methodology.8 The problem with neoclassical economics is that it has forgotten certain key foundations on which classical economics was based. Adam Smith, the premier classical economist, believed that people are driven by a selfish desire to “better their condition,” but he would never have subscribed to the notion that economic activity could be reduced to rational utility maximization. Indeed, his other major work besides The Wealth of Nations was The Theory of Moral Sentiments, which portrays economic motivation as highly complex and embedded in broader social habits and mores. The very change in the name of the discipline from “political economy” to “economics” between the eighteenth and late nineteenth centuries reflects the narrowing of the model of human behavior at its core.


pages: 328 words: 92,317

Machinery of Freedom: A Guide to Radical Capitalism by David Friedman

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

back-to-the-land, Fractional reserve banking, hiring and firing, jitney, laissez-faire capitalism, Machinery of Freedom by David Friedman, means of production, rent control, road to serfdom, Ronald Coase, Ronald Reagan, Stewart Brand, The Wealth of Nations by Adam Smith, transaction costs, urban renewal, Vernor Vinge, Whole Earth Catalog

This is a classic example of the use of economics and statistics to measure the effect of government regulation. Peltz-man's conclusion was that the particular legislation he was looking at reduced the rate of introduction of new drugs by about half, while having no detectable effect on their average quality. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776; reprint ed., New York: Modern Library, 1937). Usually referred to simply as The Wealth of Nations, this is arguably the most influential libertarian book ever written. Law and Economics Gary S. Becker and George J. Stigler, 'Law Enforcement, Malfeasance, and Compensation of Enforcers', Journal of Legal Studies, 3 (January 1974), 1-18. This article, by two eminent (if somewhat unconventional) economists, introduced the idea of private enforcement of law into the law and economics literature.

Force and restraint may, no doubt, be in some degree requisite in order to oblige children, or very young boys, to attend to those parts of education which it is thought necessary for them to acquire during that early period of life; but after twelve or thirteen years of age, provided the master does his duty, force or restraint can scarce ever be necessary to carry on any part of education. Excerpts from An Inquiry into the Nature and Causes of the Wealth of Nations, Book V, part 3, article 2. Written by Adam Smith and published in 1776. THE IMPOSSIBILITY OF A UNIVERSITY The modern corporate university, public or private, contains an implicit contradiction: it cannot take positions, but it must take positions. The second makes the demand for a 'responsible university' appealing, intellectually as well as emotionally. The first makes not merely the acceptance of that demand but its very consideration something fundamentally subversive of the university's proper ends.

Table of Contents THE MACHINERY OF FREEDOM PREFACE TO THE SECOND EDITION PREFACE TO THE FIRST EDITION ACKNOWLEDGEMENTS INTRODUCTION IN DEFENSE OF PROPERTY IN DEFENSE OF PROPERTY A NECESSARY DIGRESSION LOVE IS NOT ENOUGH INTERLUDE ROBIN HOOD SELLS OUT THE RICH GET RICHER AND THE POOR GET RICHER MONOPOLY I: HOW TO LOSE YOUR SHIRT MONOPOLY II: STATE MONOPOLY FOR FUN AND PROFIT EXPLOITATION AND INTEREST I DON'T NEED NOTHING LIBERTARIAN GRAB BAG OR HOW TO SELL THE STATE IN SMALL PIECES SELL THE SCHOOLS A RADICAL CRITIQUE OF AMERICAN UNIVERSITIES THE IMPOSSIBILITY OF A UNIVERSITY ADAM SMITH U. OPEN THE GATES SELL THE STREETS 99 AND 44/100THS PERCENT BUILT A FIRST STEP COUNTERATTACK MIGHT HAVE BEEN IS WILLIAM F. BUCKLEY A CONTAGIOUS DISEASE? IT'S MY LIFE THE RIGHTS OF YOUTH CREEPING CAPITALISM IF YOU WANT IT, BUY IT SCARCE MEANS FINITE POLLUTION BUCKSHOT FOR A SOCIALIST FRIEND ANARCHY IS NOT CHAOS WHAT IS ANARCHY? WHAT IS GOVERNMENT? POLICE, COURTS, AND LAWS—ON THE MARKET THE STABILITY PROBLEM IS ANARCHO-CAPITALISM LIBERTARIAN?


pages: 324 words: 92,805

The Impulse Society: America in the Age of Instant Gratification by Paul Roberts

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, accounting loophole / creative accounting, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, asset allocation, business process, Cass Sunstein, centre right, choice architecture, collateralized debt obligation, collective bargaining, corporate governance, corporate social responsibility, crony capitalism, David Brooks, delayed gratification, double helix, factory automation, financial deregulation, financial innovation, full employment, game design, greed is good, If something cannot go on forever, it will stop, impulse control, income inequality, inflation targeting, invisible hand, job automation, Joseph Schumpeter, knowledge worker, late fees, Long Term Capital Management, loss aversion, low skilled workers, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, technoutopianism, the built environment, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, Walter Mischel, winner-take-all economy

Conservatives often dismiss such alternative scenarios, whether from abroad or from our own past, as case studies in liberal overreach and unwarranted government intrusion into the marketplace—and these complaints are not entirely undeserved. But the basic argument—that it is possible and thus necessary to take steps to produce more sustainable, equitable, humane economic outcomes—is neither flawed nor particularly “liberal.” From the very beginnings of the Industrial Revolution, it was understood that “commercial society,” as Adam Smith called capitalism, would need constant poking and prodding and nudging to ensure that its massive efficiencies benefited as wide a public as possible. As Smith wrote in The Wealth of Nations,1 “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” Today, conservatives routinely invoke Smith and his invisible hand to argue for unfettered markets. But in fact, Smith recognized that markets needed occasional fettering—he favored, among other things, a progressive tax on the wealthy and, especially, hefty regulation of finance to prevent the consolidation of economic power in the hands of the few.

Saving Capitalism from Short-Termism: How to Build Long-Term Value and Take Back Our Financial Future. New York: McGraw-Hill, 2011. Sennett, Richard. The Culture of the New Capitalism. New Haven, CT: Yale University Press, 2006. Shiller, Robert. Irrational Exuberance. Second Edition. Princeton, NJ: Princeton University Press, 2005. Slade, Giles. Made to Break: Technology and Obsolescence in America. Cambridge, MA: Harvard University Press, 2009. Smith, Adam. The Wealth of Nations. New York: Penguin Classics, 1982. Smith, Merrit Roe, and Leo Marx, eds. Does Technology Drive History? The Dilemma of Technological Determinism. Cambridge, MA: MIT Press, 1994. Sunstein, Cass R. Republic.com 2.0: Revenge of the Blogs. Princeton, NJ: Princeton University Press, 2007. ———. Why Societies Need Dissent (Oliver Wendell Holmes Lectures). Cambridge, MA: Harvard University Press, 2003.

In their capacity as buyers and consumers they are hard-hearted and callous, without consideration for other people.”22 Vendors who failed to accept these truths, and who continued to rely on social obligations and other nonmarket inefficiencies, were not only dooming themselves; they were also holding back the overall efficiency of the marketplace. As Adam Smith, patron saint of efficient markets, proposed two centuries earlier, the best outcome was achieved when individuals pursued self-interest. The shift from customer to consumer, conservative economists now argued, was merely a manifestation of Smith’s great insight. It might be devastating to older, inefficient vendors and a few small towns. But in the long term, it would bring the social benefits of a more efficient economy. Yet in viewing the social side of commerce through such a purely economic, Darwinian lens, we lose a lot of important detail. Adam Smith himself insisted that markets will not yield their famous optimality without a strong moral dimension: absent trust and empathy between buyer and seller, markets quickly lose their efficiencies and fail—as numerous scandals and scams and bubbles and busts have demonstrated.


pages: 420 words: 124,202

The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention by William Rosen

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, All science is either physics or stamp collecting, barriers to entry, collective bargaining, computer age, Copley Medal, David Ricardo: comparative advantage, decarbonisation, delayed gratification, Fellow of the Royal Society, Flynn Effect, fudge factor, full employment, invisible hand, Isaac Newton, Islamic Golden Age, iterative process, Jacquard loom, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, Joseph Schumpeter, Joseph-Marie Jacquard, knowledge economy, moral hazard, Network effects, Peace of Westphalia, Peter Singer: altruism, QWERTY keyboard, Ralph Waldo Emerson, rent-seeking, Ronald Coase, Simon Kuznets, spinning jenny, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, transcontinental railway, éminence grise

Locke’s own protégé, David Hume, was never persuaded that property rights derived from natural law. Eighty years after Locke’s death, conservatives like Edmund Burke, and progressives like Jeremy Bentham and John Stuart Mill, were still uncomfortable with Locke’s idea of natural laws; Bentham called them “nonsense on stilts.”29 The final victory, however, was Locke’s; in 1776, Adam Smith was virtually channeling Locke’s Second Treatise, writing in The Wealth of Nations, “The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable.” Smith’s French counterpart, Anne-Robert-Jacques Turgot, echoed him: “God … made the right of work30 the property of every individual in the world, and this property is the first, the most sacred, and the most imprescriptible of all kinds of property.”

February 17 saw the first volume of Edward Gibbon’s History of the Decline and Fall of the Roman Empire roll off the presses (“In the second century of the Christian Era, the empire of Rome comprehended the fairest part of the earth …”). And on March 9, a former University of Glasgow colleague of Joseph Black published An Inquiry into the Nature and Causes of the Wealth of Nations. Standing in London’s Science Museum, in front of Rocket and surrounded by models of Thomas Newcomen’s beam engine, Joseph Bramah’s challenge lock, and James Watt’s separate condenser, it takes very little imagination to see connections with iron foundries, coal mines, and even cotton fields. The road back to Adam Smith requires more thought, but is just as important, and as enlightening. Smith’s book, like Darwin’s Origin of Species, was revolutionary in its impact, immediately and permanently, though both are far more frequently cited than read.

CHAPTER ELEVEN: WEALTH OF NATIONS 1 nothing about the forging of iron David Warsh, Knowledge and the Wealth of Nations: A Story of Economic Discovery (New York: W. W. Norton, 2006). 2 David Ricardo predicted Clark, Farewell to Alms. 3 The second component, growth in capital Warsh, Knowledge and the Wealth of Nations. 4 Solow first assumed Ibid. 5 “the mass of persons with intermediate skills” Hobsbawm and Wrigley, Industry and Empire: from 1750 to the Present Day. 6 preindustrial Britain exhibited a fair bit F. F. Mendels, “Social mobility and phases of industrialization,” Journal of Interdisciplinary History 7, 1976. 7 “craftsman’s sons became laborers” Clark, Farewell to Alms. 8 A recent World Bank analysis Kirk Hamilton, et al., Where Is the Wealth of Nations? Measuring Capital for the XXI Century (Washington, D.C.: World Bank, 2005). 9 India was home, in 1700 Maddison, ed., The World Economy: Historical Statistics. 10 Solow’s fundamental growth equation Warsh, Knowledge and the Wealth of Nations. 11 Kremer’s model made two assumptions Kremer, “Population Growth and Technological Change.” 12 It’s not as if Kremer was unaware Kremer, “Population Growth and Technological Change.” 13 But China had, and has, huge coal deposits Kenneth Pomeranz, The Great Divergence: Europe, China, and the Making of the Modern World Economy (Princeton: Princeton University Press, 2000). 14 And even though the barbarian invasions Ibid. 15 Needham’s conclusion Joseph Needham, “The Pre-Natal History of the Steam Engine,” Newcomen Society Transactions 35, no. 49, 1962–63. 16 By 400 CE they had developed a system of water “levers” Mokyr, Lever of Riches. 17 “let it [the box bellows] be furnished” Ian Inkster, “Indisputable Features and Nebulous Contexts: The Steam Engine as a Global Inquisition,” History of Technology 25, 2004. 18 “The Chinese had already recognized” Pomeranz, Great Divergence. 19 The Chinese could have a bellows Kent G.


pages: 226 words: 59,080

Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Edward Glaeser, Eugene Fama: efficient market hypothesis, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Washington Consensus, white flight

Watts, Everything Is Obvious: Once You Know the Answer (New York: Random House, 2011), Kindle edition, locations 2086–92. 22. Jorge Luis Borges, “On Exactitude in Science,” in Collected Fictions, trans. Andrew Hurley (New York: Penguin, 1999). 23. Uskali Mäki, “Models and the Locus of Their Truth” Synthese 180 (2011): 47–63. CHAPTER 2: The Science of Economic Modeling 1. John Maynard Keynes, Essays in Persuasion (New York: W. W. Norton, 1963), 358–73. 2. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 5th ed. (1789; repr., London: Methuen, 1904), I.ii.2. 3. The pencil example was based on an essay by Leonard E. Read called “I, Pencil: My Family Tree as Told to Leonard E. Read” (Irvington-on-Hudson, NY: Foundation for Economic Education, 1958), http://www.econlib.org/library/Essays/rdPncl1.html. 4. Kenneth J. Arrow, “An Extension of the Basic Theorems of Classical Welfare Economics,” in Proceedings of the Second Berkeley Symposium on Mathematical Statistics and Probability, ed.

CONTENTS Preface and Acknowledgments INTRODUCTION The Use and Misuse of Economic Ideas CHAPTER 1 What Models Do CHAPTER 2 The Science of Economic Modeling CHAPTER 3 Navigating among Models CHAPTER 4 Models and Theories CHAPTER 5 When Economists Go Wrong CHAPTER 6 Economics and Its Critics EPILOGUE The Twenty Commandments Notes Index PREFACE AND ACKNOWLEDGMENTS This book has its origins in a course I taught with Roberto Mangabeira Unger on political economy for several years at Harvard. In his inimitable fashion, Roberto pushed me to think hard about the strengths and weaknesses of economics and to articulate what I found useful in the economic method. The discipline had become sterile and stale, Roberto argued, because economics had given up on grand social theorizing in the style of Adam Smith and Karl Marx. I pointed out, in turn, that the strength of economics lay precisely in small-scale theorizing, the kind of contextual thinking that clarifies cause and effect and sheds light—even if partial—on social reality. A modest science practiced with humility, I argued, is more likely to be useful than a search for universal theories about how capitalist systems function or what determines wealth and poverty around the world.

It is not at all evident, on its face, that millions of consumers, workers, firms, savers, investors, banks, and speculators, each of them pursuing strictly their own personal advantage, would collectively arrive at anything other than economic chaos. Yet the model says the outcome is actually efficient. The First Fundamental Theorem of Welfare Economics is colloquially known among economists as the Invisible Hand Theorem. It was Adam Smith, perhaps the father of economics, who first stated it in broad terms. Though he did not use the term “invisible hand” in quite this context, Smith argued that decentralized decision making by individual consumers and producers in a market would nonetheless provide collective benefit. “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner,” he famously wrote, “but from their regard to their own interest.”2 Smith’s point that price incentives turn markets into a stupendously effective coordination machine running on autopilot was brought home powerfully by Milton Friedman in his popular TV series Free to Choose in 1980, on the eve of a wave of market reforms under the Reagan and Thatcher governments.


pages: 308 words: 84,713

The Glass Cage: Automation and Us by Nicholas Carr

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Airbnb, Andy Kessler, Atul Gawande, autonomous vehicles, business process, call centre, Captain Sullenberger Hudson, Checklist Manifesto, cloud computing, David Brooks, deliberate practice, deskilling, Elon Musk, Erik Brynjolfsson, Flash crash, Frank Gehry, Frank Levy and Richard Murnane: The New Division of Labor, Frederick Winslow Taylor, future of work, global supply chain, Google Glasses, Google Hangouts, High speed trading, indoor plumbing, industrial robot, Internet of things, Jacquard loom, Jacquard loom, James Watt: steam engine, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kevin Kelly, knowledge worker, Lyft, Mark Zuckerberg, means of production, natural language processing, new economy, Nicholas Carr, Norbert Wiener, Oculus Rift, pattern recognition, Peter Thiel, place-making, Plutocrats, plutocrats, profit motive, Ralph Waldo Emerson, RAND corporation, randomized controlled trial, Ray Kurzweil, recommendation engine, robot derives from the Czech word robota Czech, meaning slave, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley ideology, software is eating the world, Stephen Hawking, Steve Jobs, TaskRabbit, technoutopianism, The Wealth of Nations by Adam Smith, Watson beat the top human players on Jeopardy!

Thanks to the ingenuity of our inventors and entrepreneurs, hardly a decade has passed without the arrival of new, more elaborate, and more capable machinery. Yet our ambivalence toward these fabulous creations, creations of our own hands and minds, has remained a constant. It’s almost as if in looking at a machine we see, if only dimly, something about ourselves that we don’t quite trust. In his 1776 masterwork The Wealth of Nations, the foundational text of free enterprise, Adam Smith praised the great variety of “very pretty machines” that manufacturers were installing to “facilitate and abridge labour.” By enabling “one man to do the work of many,” he predicted, mechanization would provide a great boost to industrial productivity.7 Factory owners would earn more profits, which they would then invest in expanding their operations—building more plants, buying more machines, hiring more employees.

Inside the new factories, ever more efficient and capable machines were installed, boosting productivity but also narrowing the responsibility and autonomy of those who operated the equipment. Skilled craftwork became unskilled factory labor. Adam Smith had recognized how the specialization of factory jobs would lead to the deskilling of workers. “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 wrote in The Wealth of Nations. “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.”27 Smith viewed the degradation of skills as an unfortunate but unavoidable by-product of efficient factory production.

Macmillan, Automation: Friend or Foe? (Cambridge, U.K.: Cambridge University Press, 1956), 1. 2.Ibid., 91. 3.Ibid., 1–6. The emphasis is Macmillan’s. 4.Ibid., 92. 5.George B. Dyson, Darwin among the Machines: The Evolution of Global Intelligence (Reading, Mass.: Addison-Wesley, 1997), x. 6.Bertrand Russell, “Machines and the Emotions,” in Sceptical Essays (London: Routledge, 2004), 64. 7.Adam Smith, The Wealth of Nations (New York: Modern Library, 2000), 7–10. 8.Ibid., 408. 9.Malcolm I. Thomis, The Luddites: Machine-Breaking in Regency England (Newton Abbot, U.K.: David & Charles, 1970), 50. See also E. J. Hobsbawm, “The Machine Breakers,” Past and Present 1, no. 1 (1952): 57–70. 10.Karl Marx, Capital: A Critique of Political Economy, vol. 1 (Chicago: Charles H. Kerr, 1912), 461–462. 11.Karl Marx, “Speech at the Anniversary of the People’s Paper,” April 14, 1856, marxists.org/archive/marx/works/1856/04/14.htm. 12.Nick Dyer-Witheford, Cyber-Marx: Cycles and Circuits of Struggle in High Technology Capitalism (Champaign, Ill.: University of Illinois Press, 1999), 40. 13.Marx, “Speech at the Anniversary of the People’s Paper.” 14.Quoted in Dyer-Witheford, Cyber-Marx, 41.


pages: 500 words: 145,005

Misbehaving: The Making of Behavioral Economics by Richard H. Thaler

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, Amazon Mechanical Turk, Andrei Shleifer, Apple's 1984 Super Bowl advert, Atul Gawande, Berlin Wall, Bernie Madoff, Black-Scholes formula, capital asset pricing model, Cass Sunstein, Checklist Manifesto, choice architecture, clean water, cognitive dissonance, conceptual framework, constrained optimization, Daniel Kahneman / Amos Tversky, delayed gratification, diversification, diversified portfolio, Edward Glaeser, endowment effect, equity premium, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, George Akerlof, hindsight bias, Home mortgage interest deduction, impulse control, index fund, invisible hand, Jean Tirole, John Nash: game theory, John von Neumann, late fees, law of one price, libertarian paternalism, Long Term Capital Management, loss aversion, market clearing, Mason jar, mental accounting, meta analysis, meta-analysis, More Guns, Less Crime, mortgage debt, Nash equilibrium, Nate Silver, New Journalism, nudge unit, payday loans, Ponzi scheme, presumed consent, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, random walk, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, technology bubble, The Chicago School, The Myth of the Rational Market, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, ultimatum game, Walter Mischel

So my next big project was to study a supposedly nonexistent problem. 11 Willpower? No Problem Economists have not always been so dense about self-control problems. For roughly two centuries, the economists who wrote on this topic knew their Humans. In fact, an early pioneer of what we would now call a behavioral treatment of self-control was none other than the high priest of free market economics: Adam Smith. When most people think about Adam Smith, they think of his most famous work, The Wealth of Nations. This remarkable book—the first edition was published in 1776—created the foundation for modern economic thinking. Oddly, the most well-known phrase in the book, the vaunted “invisible hand,” mentioned earlier, appears only once, treated with a mere flick by Smith. He notes that by pursuing personal profits, the typical businessman is “led by an invisible hand to promote an end which was no part of his intention.

But unless you are married to an economist, I don’t advise giving cash on your next anniversary. Come to think of it, even if your spouse is an economist, this is probably not a great idea. You know, and I know, that we do not live in a world of Econs. We live in a world of Humans. And since most economists are also human, they also know that they do not live in a world of Econs. Adam Smith, the father of modern economic thinking, explicitly acknowledged this fact. Before writing his magnum opus, The Wealth of Nations, he wrote another book devoted to the topic of human “passions,” a word that does not appear in any economics textbook. Econs do not have passions; they are cold-blooded optimizers. Think of Mr. Spock in Star Trek. Nevertheless, this model of economic behavior based on a population consisting only of Econs has flourished, raising economics to that pinnacle of influence on which it now rests.

Psychological Bulletin 119, no. 1: 3. Slonim, Robert L., and Alvin E. Roth. 1998. “Learning in High Stakes Ultimatum Games: An Experiment in the Slovak Republic.” Econometrica 66, no. 3: 569–96. Smith, Adam. (1759) 1981. The Theory of Moral Sentiments. Reprint edited by D. D. Raphael and A. L. Macfie. Indianapolis: LibertyClassics. ———. (1776) 1981. An Inquiry into the Nature and Causes of the Wealth of Nations. Reprint edited by R. H. Campbell and A. S. Skinner. Indianapolis: LibertyClassics. Smith, Vernon L. 1976. “Experimental Economics: Induced Value Theory.” American Economic Review 66, no. 2: 274–9. ———, Gerry L. Suchanek, and Arlington W. Williams. 1988. “Bubbles, Crashes, and Endogenous Expectations in Experimental Spot Asset Markets.” Econometrica 56, no. 5: 1119–51. Solow, Robert M. 2009.


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, algorithmic trading, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, conceptual framework, corporate governance, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy

ARISTOCRACY OF IDEAS Just as the railroad created new cities, private jets and private jet time-shares like NetJets have contributed to the globalization of the super-elite—owning homes and doing deals around the world becomes feasible when you can travel the planet as easily as the middle class steps into a car. New technologies have helped, too—instant and mobile communication makes it possible to live on the move and around the world. So have the political revolutions that have opened up so many of the world’s borders over the past twenty years. The most important shift, however, was the one foreseen by Adam Smith in The Wealth of Nations. Writing in 1776 at the very beginning of the industrial revolution, he predicted that as fortunes shifted from acres to shares they would become more mobile: “The proprietor of land is necessarily a citizen of the particular country in which his estate lies. The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country.” Smith could see that manufacturing companies, and the disaggregated owners of their stock, would eventually eclipse land as the engine of the economy.

But the piece had a less cynical motivation, too. Its author, Kevin J. Murphy, was in the vanguard of a small group of business school academics who had spent the previous decade trying to solve one of the big problems of twentieth-century market economies: How do you have capitalism without capitalists? Or, to put it another way, who manages the managers? This is not a new problem. In The Wealth of Nations, Adam Smith compared the executives of a joint-stock company to “the stewards of a rich man” and warned that “being the managers rather of other people’s money than their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. . . . Negligence and profusion, therefore, must always prevail.”

“The largest metals group in the world is Indian” Stephen Jennings, “Opportunities of a Lifetime: Lessons for New Zealand from New, High-Growth Economics,” Sir Ronald Trotter Lecture, April 7, 2009. “They know how to provide mobile phones” Chrystia Freeland, “Globalization 2.0: Emerging-Market Cross-Pollination,” The Globe and Mail, October 1, 2010. “The proprietor of land is necessarily a citizen” Adam Smith, The Wealth of Nations, Book V, Chapter II, Section 91. “We don’t have castles and noble titles” Benjamin Wallace, “Those Fabulous Confabs,” New York, February 26, 2012. and where, in lieu of noble titles, an elaborate hierarchy of conference badges Nick Paumgarten, “Magic Mountain: What Happens at Davos?” The New Yorker, March 5, 2012. “Combined, our contacts reach” “Chris Anderson on TED’s Nonprofit Transition.”


pages: 425 words: 122,223

Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, asset allocation, backtesting, Benoit Mandelbrot, Black-Scholes formula, Bonfire of the Vanities, Brownian motion, buy low sell high, capital asset pricing model, debt deflation, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, fixed income, full employment, implied volatility, index arbitrage, index fund, interest rate swap, invisible hand, John von Neumann, Joseph Schumpeter, law of one price, linear programming, Louis Bachelier, mandelbrot fractal, martingale, means of production, new economy, New Journalism, profit maximization, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, stochastic process, the market place, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, transfer pricing, zero-coupon bond

The nonpredictability of future prices from past and present prices is the sign, not of failure of economic law, but the triumph of economic law after competition has done its best.”14 He recognized the jumble that stock prices presented as an unexplored variation on a theme that runs throughout economic-theory—the difference between price and value. From Adam Smith onward (not the fellow on TV who puts the name in quotation marks, but the eighteenth-century author of The Wealth of Nations), all the great economists have wrestled with this problem in one form or another; it plays a central role in Karl Marx’s model of capitalism. Economists agree that “value” refers to something that lies behind, or beneath, the prices observed in the marketplace; prices gyrate around “true value.” But what is this “true value”? The question is not unlike the exchange between three baseball umpires trying to describe how they distinguish between a ball and a strike: “I call them as I see them,” said the first.

Contents Acknowledgments Introduction: The Revolution in the Wealth of Nations Part I: Setting the Scene Chapter 1: Are Stock Prices Predictable? Part II: The Whole and the Parts Chapter 2: Fourteen Pages to Fame Chapter 3: The Interior Decorator Fallacy Chapter 4: The Most Important Single Influence Part III: The Demon of Chance Chapter 5: Illusions, Molecules, and Trends Chapter 6: Anticipating Prices Properly Chapter 7: The Search for High P.Q. Part IV: What Are Stocks Worth? Chapter 8: The Best at the Price Chapter 9: The Bombshell Assertions Chapter 10: Risky Business Chapter 11: The Universal Financial Device Part V: From Gown to Town Chapter 12: The Constellation Chapter 13: The Accountant for Risk Chapter 14: The Ultimate Invention Part VI: The Future Chapter 15: The View from the Top of the Tower Notes Bibliography and Other Sources Name Index Subject Index Copyright © 2005 by Peter 1.

Her most valuable gift was to be in the foreground rather than the background. She has been a close collaborator in every phase of the project, from the interviews to the planning and writing of each chapter. Every part of the book has been improved by her participation. Even with all this help and support, I am certain that flaws remain. They comprise the only part of the book that is my responsibility alone. Introduction: The Revolution in the Wealth of Nations . . . the machine-gun clatter of fingers on a keyboard. Americans have always welcomed change. Revolution is our birthright. We take it as a sign of our youth that we prefer the new to the old. We are fascinated by innovation and lionize the innovators. We are partial to tinkerers and make folk-heroes out of people like Thomas Edison, Henry Ford, and Benjamin Franklin. But sometimes change seems to run amuck and things appear to be out of control.


pages: 264 words: 115,489

Take the money and run: sovereign wealth funds and the demise of American prosperity by Eric Curt Anderson

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

asset allocation, banking crisis, Bretton Woods, business continuity plan, business intelligence, business process, collective bargaining, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, diversified portfolio, floating exchange rates, housing crisis, index fund, Kenneth Rogoff, open economy, passive investing, profit maximization, profit motive, random walk, reserve currency, risk tolerance, risk-adjusted returns, risk/return, Ronald Reagan, sovereign wealth fund, the market place, The Wealth of Nations by Adam Smith, too big to fail, Vanguard fund

C HAPTER 1 THE SOVEREIGN WEALTH FUNDS OF NATIONS The profusion with which the affairs of a prince are always managed, renders it almost impossible that they should [succeed at business]. The agents of a prince regard the wealth of their masters as inexhaustible; are careless at which price they buy; are careless at what price they sell; are careless at what expense they transport his goods from one place to another.1 —Adam Smith, The Wealth of Nations National governments have historically generated revenue through taxation and conservative investments in state-backed Treasury notes. The traditionally educated central banker heeds Adam Smith’s warning against dabbling in business affairs, particularly speculation in risky ventures that chanced a “squandering” of the public treasury. Admittedly there have been the aberrant few—primarily governments blessed with natural resources that tipped the balance of payments in favor of the existing regime—but as a whole, central bankers were largely restricted to managing the domestic monetary supply and a limited pool of foreign reserves.

Article 56 of the European Union Treaty requires “all restrictions on the movement of capital between Member States and between Member States and third parties shall be prohibited.” Legal authorities contend that the reference to “capital” would cover both foreign direct investment and the portfolio investments favored by sovereign wealth funds (Charles Proctor, 14 March 2008). 50. Charles Proctor, 14 March 2008. 51. Ibid. 52. John James Roberts Manner, England’s Trust, Part III, line 231. Chapter 1—The Sovereign Wealth Funds of Nations 1. Adam Smith, The Wealth of Nations (Random House, 2003), 1034. 2. There are four widely recognized kinds of sovereign investment: foreign exchange reserves, public pension funds, state-owned enterprises, and sovereign wealth funds. According to the IMF, foreign exchange reserves are external assets that are controlled by and readily available to finance ministries and central banks for the purpose of meeting international balance of payment concerns.

Consider, for example, the fact that Germany had only $140 billion in foreign exchange reserves in 2007—enough for two months of imports—yet suffered no international criticism or degradation to Berlin’s credit rating. 6. Gerald Lyons, “State Capitalism: The Rise of Sovereign Wealth Funds,” Thought Leadership, Standard Chartered Bank, London, 15 October 2007. 7. Andrew Rozanov, “Who Holds the Wealth of Nations?” Central Banking Journal, Central Banking Publications, London, May 2005. 8. “Report to Congress on International Economic and Exchange Rate Policies,” Department of the Treasury, Washington DC, December 2007. 9. Stephen Jen, “Currencies: The Definition of a Sovereign Wealth Fund,” Morgan Stanley–Global Economic Forum, New York, 25 October 2007. 10. International finance analysts might argue interest in sovereign wealth funds was not so “sudden.”


pages: 151 words: 38,153

With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don't Pay Enough by Peter Barnes

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Alfred Russel Wallace, banks create money, Buckminster Fuller, collective bargaining, David Ricardo: comparative advantage, declining real wages, deindustrialization, diversified portfolio, en.wikipedia.org, Fractional reserve banking, full employment, hydraulic fracturing, income inequality, Jaron Lanier, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, land reform, Mark Zuckerberg, Network effects, oil shale / tar sands, profit maximization, quantitative easing, rent-seeking, Ronald Coase, Ronald Reagan, Silicon Valley, sovereign wealth fund, the map is not the territory, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, Tyler Cowen: Great Stagnation, Upton Sinclair, winner-take-all economy

“The Richest People in America, 2013,”Forbes, http://www.forbes.com/forbes-400/list/. 3. Janet Lowe, Warren Buffett Speaks: Wit and Wisdom from the World’s Greatest Investor (New York: John Wiley & Sons, 1997), 164. 4. Herbert Simon, “Public Administration in Today’s World of Organizations and Markets,” public lecture (2000), http://research.mbs.ac.uk/hsi/Aboutus/HerbertSimonsLastPublicLecture.aspx. 5. Adam Smith, The Wealth of Nations, chapter 9, “Of the Rent of Land,” conclusion (London, 1776), 212, http://www2.hn.psu.edu/faculty/jmanis/adam-smith/wealth-nations.pdf. 6. See my reconsideration of Henry George’s Progress and Poverty in the New Republic, December 11, 1971, http://cooperativeindi-vidualism.org/barnes-peter_reconsideration-of-progress-and-poverty-by-henry-george-1971.html. 7. Smith, Wealth of Nations, 213. 8. John Kay, “Powerful interests are trying to control the market,” Financial Times, November 10, 2009, http://www.ft.com/intl/cms/s/0/113092ee-ce2f-11de-a1ea-00144feabdc0.html#axzz2qhoM5PwC. 9.

In our larger society, similar warnings could be issued about the gaps between rich and poor and between humans and nature. These gaps must be not only minded but also narrowed. The persistent question is how to do this, and I contend that rent is a useful and indeed necessary tool. But before we get to that, we must first become familiar with rent. The term was first used by classical economists, including Adam Smith, to describe money paid to landowners. It was one of three income streams in the early years of capitalism, the others being wages paid to labor and interest paid to capital. In Smith’s view, landlords benefited from land’s unique ability to enrich its owners “independent of any plan or project of their own.”5 This ability arises from the fact that the supply of good land is limited, while the demand for it steadily rises.

“The interest of any particular branch of trade or manufactures is always to widen the market and to narrow the competition. … To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can only serve to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens.”7 Figure 4.1: ADAM SMITH’S “ABSURD TAX” It’s important to recognize that the tax Smith spoke of isn’t the kind we pay to government; it’s the kind we pay, much less visibly, to businesses. That’s because prices in capitalism are driven by four factors: supply, demand, market power, and political power. The first two determine what might be called fair market value; the last two determine what is now called rent. Actual prices charged are the sum of fair market value and rent.


pages: 282 words: 82,107

An Edible History of Humanity by Tom Standage

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

agricultural Revolution, amateurs talk tactics, professionals talk logistics, Bartolomé de las Casas, British Empire, carbon footprint, Columbian Exchange, Corn Laws, demographic transition, Deng Xiaoping, Eratosthenes, financial innovation, food miles, Haber-Bosch Process, invisible hand, James Watt: steam engine, Louis Pasteur, Mikhail Gorbachev, special economic zone, spice trade, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transatlantic slave trade, women in the workforce

Taking a long-term historical perspective also provides a new way to illuminate modern debates about food, such as the controversy surrounding genetically modified organisms, the relationship between food and poverty, the rise of the “local” food movement, the use of crops to make biofuels, the effectiveness of food as a means of mobilizing political support for various causes, and the best way to reduce the environmental impact of modern agriculture. In his book The Wealth of Nations, first published in 1776, Adam Smith famously likened the unseen influence of market forces, acting on participants who are all looking out for their own best interests, to an invisible hand. Food’s influence on history can similarly be likened to an invisible fork that has, at several crucial points in history, prodded humanity and altered its destiny, even though people were generally unaware of its influence at the time.

One factor that counted in the potato’s favor was the high status of white bread, made from wheat, compared with brown bread, made from rye, oats, and barley. English workers who had become wealthy enough to switch from brown to white bread during the eighteenth century were very reluctant to switch back again. When times were hard, they would sooner eat potatoes. In his book The Wealth of Nations, published in 1776, the Scottish philosopher and economist Adam Smith observed that “the food produced by a field of potatoes is not inferior in quantity to that produced by a field of rice, and much superior to what is produced by a field of wheat.” Even allowing for the fact that potatoes contained a large amount of water, he noted, “an acre of potatoes will still produce six thousand weight of solid nourishment, three times the quantity produced by the acre of wheat.”

“China’s Great Famine: 40 Years Later.” British Medical Journal 319, no. 7225 (1999): 1619–21. ———. Enriching the Earth: Fritz Haber, Carl Bosch, and the Transformation of World Food Production. Cambridge, Massachusetts: MIT Press, 2004. ———. “Nitrogen and Food Production: Proteins for Human Diets.” Ambio 31, no. 2 (March 2002): 126–31. Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. Hartford: Oliver D. Cooke, 1804. Spaull, C. “The Hekanakhte Papers and Other Early Middle Kingdom Documents, by T. G. H. James.” (Review) Journal of Egyptian Archaeology 49 (1963): 184–86. Steinberg, Theodore. “An Ecological Perspective on the Origins of Industrialization.” Environmental Review 10, no. 4 (Winter 1986): 261–76. Stuertz, Mark. “Green Giant.” Dallas Observer, December 5, 2002.


pages: 387 words: 110,820

Cheap: The High Cost of Discount Culture by Ellen Ruppel Shell

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

barriers to entry, Berlin Wall, big-box store, cognitive dissonance, computer age, Daniel Kahneman / Amos Tversky, delayed gratification, deskilling, Donald Trump, Edward Glaeser, fear of failure, Ford paid five dollars a day, Frederick Winslow Taylor, George Akerlof, global supply chain, global village, greed is good, Howard Zinn, income inequality, interchangeable parts, inventory management, invisible hand, James Watt: steam engine, Joseph Schumpeter, Just-in-time delivery, knowledge economy, loss aversion, market design, means of production, mental accounting, Ponzi scheme, price anchoring, price discrimination, race to the bottom, Richard Thaler, Ronald Reagan, side project, Steve Jobs, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, traveling salesman, ultimatum game, Victor Gruen, washing machines reduced drudgery, working poor, yield management

.: Marshall Cavendish, 2004), 318. 214 “kind of environment that Sam Walton built this company for”: Stephanie Rosenbloom, “For Wal-Mart, a Christmas That Was Made to Order,” New York Times, November 5, 2008. 214 Dollar stores, too, were booming: Jason Asaeda, “Tough Times Favor Family Dollar Stores,” BusinessWeek, October 28, 2008. 215 for its 1.3 million employees: Kris Maher, “Wal-Mart Seeks New Flexibility in Worker Shifts,” Wall Street Journal, January 3, 2007. 215 entitled “Obama’s Biggest Challenge”: Bob Herbert, “Obama’s Biggest Challenge,” New York Times, January 9, 2009. 216 “whether carrots were grown without chemical fertilizers”: Andrew Martin, “Budgets Squeezed, Some Families Bypass Organics,” New York Times, November 1, 2008. 216 is trucked in from huge California farms: In Omnivore’s Dilemma, author Michael Pollan writes that Cascadian Farms founder Gene Kahn, now a vice president of General Mills, acknowledges his farm is essentially a “PR farm.” See Michael Pollan, The Omivore’s Dilemma: A Natural History of Four Meals (New York: Penguin, 2006), 145. 218 “need be employed in dissuading them from it”: Adam Smith, The Wealth of Nations, Books IV-V; Andrew S. Skinner, ed. (New York: Penguin Books, 1999), 32. 218 “tolerably well fed, clothed and lodged”: Adam Smith, The Wealth of Nations, Books I-III; Andrew S. Skinner, contributor, (New York: Penguin Books, 1970), 181. 220 B-grade versions of national brands: Charles Fishman offers a great example of this in The Wal-Mart Effect. In 2002, Wal-Mart sold an estimated $3 billion worth of its house brand “Faded Glory” jeans—more jeans than any other retailer.

FOR SOME TIME illusions also guided economists who predicted buying behavior. Chief among these illusions was that we humans always act in our own best interest. This fantasy, although losing currency in recent years, had prevailed in one form or another in American political and economic thought for over a century. It was not always that way. Like psychology, economics was once a branch of “moral science,” concerned with the mind but also the heart. Adam Smith, the crusty Scottish philosopher generally credited as the founder of modern economics, began his Moral Sentiments: “How selfish soever man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. . . . The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.”

Those 41-cent pairs of shoes, “free with rebate” computer printers, and two-for-the-price-of-one pen-and-pencil sets are costing us a lot more than we know. CHAPTER TEN THE PERFECT PRICE The frugal man has the advantage over the man of pleasure in facilities for self-improvement, for doing his duty to his country, and for securing general happiness. | PLATO, SOCRATIC DISCOURSES If you hang around economists long enough, you hear a good deal about their intellectual heroes: John Stuart Mill, Adam Smith, John Maynard Keynes. Among the more controversial of these heroes is Joseph A. Schumpeter, the Harvard economist who in 1943 published the iconic Capitalism, Socialism, and Democracy. The seventh chapter of that work, entitled “The Process of Creative Destruction,” is for many academics a sacred text. “The process of creative destruction,” Schumpeter writes, “is the essential fact about capitalism.


pages: 399 words: 155,913

The Right to Earn a Living: Economic Freedom and the Law by Timothy Sandefur

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

barriers to entry, big-box store, Cass Sunstein, clean water, collective bargaining, corporate governance, corporate social responsibility, Edward Glaeser, housing crisis, joint-stock company, Joseph Schumpeter, labour mobility, minimum wage unemployment, positional goods, price stability, profit motive, race to the bottom, Ralph Nader, RAND corporation, rent control, Silicon Valley, The Wealth of Nations by Adam Smith, trade route, transaction costs, Upton Sinclair, urban renewal

Timothy Sandefur, “The Right to Earn a Living,” Chapman Law Review 6 (2003): 207–78. 3. Jacob I. Corré, “The Argument, Decision, and Reports of Darcy v. Allen,” Emory Law Journal 45 (1996): 1275–76. 4. Darcy v. Allen, 77 Eng. Rep. 1260 (1603). 5. The Case of the Tailors of Ipswich, 77 Eng. Rep. 1218 (K.B. 1615). 6. Ibid. at 1218. 7. Catherine Drinker Bowen, The Lion and the Throne: The Life of Edward Coke (Boston: Little, Brown, 1957), p. 304. 8. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Indianapolis: Liberty Classics, 1976), vol. 2, pp. 647–48. 9. See Barbara Malament, “The ‘Economic Liberalism’ of Sir Edward Coke,” in Law, Liberty, and Parliament: Selected Essays on the Writings of Sir Edward Coke, ed. Allen D. Boyer (Indianapolis: Liberty Fund, 2004), p. 186. 299 Notes for Pages 20–26 10. Chesman et ux v. Nainby, 93 Eng. Rep. 819, 821 (K.B. 1727). 11.

The patrimony of the poor man lies in the strength and dexterity of his own hands; and to hinder him from employing this strength and dexterity in what manner he thinks proper, without injury to his neighbor, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty both of the workman and of those who might be disposed to employ him. As it hinders the one from working at what he thinks proper, so it hinders the others from employing whom they think proper.’” (Quoting Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Indianapolis: Liberty Fund, 1976), vol. 1, p. 138). This is a moral, not an economic, argument. 3. Robert Green McCloskey, American Conservatism in the Age of Enterprise (New York: Harper & Row, 1964), p. 75. 4. Akhil Reed Amar, The Bill of Rights: Creation and Reconstruction (New Haven, CT: Yale University Press, 1998), pp. 148–49. 5. Barron v. Baltimore, 32 U.S. (7 Pet.) 243, 251 (1833). 6. Akhil Reed Amar, America’s Constitution: A Biography (New York: Random House, 2005), pp. 5–53. 7.

Jack Rakove (New York: Library of America, 1999), p. 516. 33. Thomas G. West, Vindicating the Founders: Race, Sex, Class, and Justice in the Origins of America (Lanham, MD: Rowman & Littlefield, 1997), pp. 38–39. 34. Virginia Declaration of Rights (1776), para. 1 (emphasis added). 35. James Madison, Speech in the Virginia Constitutional Convention (1829), in Rakove, Madison: Writings, p. 824. 36. West, Vindicating the Founders, p. 39. 37. Smith, The Wealth of Nations, vol. 1, p. 138. 38. Ibid., vol. 2, p. 660. 39. Ibid., vol. 2, pp. 647–48 40. Ibid., vol. 2, p. 654. 41. Ibid., vol. 1, p. 140. 42. William Blackstone, Commentaries on the Laws of England (London: A. Strahan, 1809), vol. 1, p. 470. 300 Notes for Pages 26–31 43. Encyclopedia Britannica (Edinburgh: Bell & MacFarquar, 1771), vol. 2, p. 281. In fact, some American cities are still referred to as “municipal corporations.”


pages: 632 words: 159,454

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt by Kwasi Kwarteng

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

accounting loophole / creative accounting, anti-communist, Asian financial crisis, asset-backed security, Atahualpa, balance sheet recession, bank run, banking crisis, Big bang: deregulation of the City of London, Bretton Woods, British Empire, California gold rush, capital controls, Carmen Reinhart, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, Deng Xiaoping, discovery of the americas, Etonian, eurozone crisis, fiat currency, financial innovation, floating exchange rates, Francisco Pizarro, full employment, German hyperinflation, hiring and firing, income inequality, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, market bubble, money: store of value / unit of account / medium of exchange, moral hazard, new economy, oil shock, Plutocrats, plutocrats, Ponzi scheme, price mechanism, quantitative easing, rolodex, Ronald Reagan, South Sea Bubble, the market place, The Wealth of Nations by Adam Smith, too big to fail, War on Poverty, Yom Kippur War

Bodin was in no doubt that the Spanish were to blame for this increase in prices, since when ‘the Spaniard made himself lord of the New World, axes and knives were sold there for more than pearls and precious stones’. As a consequence, ‘everything is more expensive in Spain and Italy than in France, and more so in Spain than in Italy’.44 Bodin’s insight into the monetary significance of the Spanish discovery of the New World was shared by other great economists. In Book I of The Wealth of Nations, Adam Smith asserted that the ‘discovery of the mines of America diminished the value of gold and silver in Europe’. Smith made the further point that, after the discovery of Potosí, ‘the silver mines of Europe were, the greater part of them, abandoned’, since the value of silver ‘was so much reduced that their produce [of the European silver mines] could no longer pay the expence of working them . . . with a profit’.

O’Brien, The Development of Monetary Economics, Cheltenham, 2007, p. 34. 42John Black, Nigar Hashimzade and Gareth Miles (eds), Oxford Dictionary of Economics, Oxford, 2009 (1st edn 1997), p. 371. 43Milton Friedman, Wincott Memorial Lecture, given in London on 16 September 1970, quoted in Terry J. Fitzgerald, Money Growth and Inflation: How Long is the Long-Run?, Federal Reserve Bank of Cleveland, Cleveland, OH, 1999, p. 1. 44Jean Bodin, Response to the Paradoxes of Malestroit, trans. and ed. Henry Tudor and R. W. Dyson, Bristol, 1997 (1st edn 1568), pp. 59–60. 45Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, London, 2007 (1st edn 1776), p. 124. 46John Maynard Keynes, ‘Economic Possibilities for our Grandchildren’, in Essays in Persuasion, London, 1972 (1st edn 1931), p. 323. 47John Maynard Keynes, A Treatise on Money, 2 vols, London, 1930, vol. 2, pp. 155, 163. 48Ibid., pp. 153, 161. 49John Maynard Keynes, ‘Social Consequences of Changes in the Value of Money’ (1923), in Essays in Persuasion, pp. 67–8.

Skidelsky, Robert, John Maynard Keynes: Fighting for Britain, 1937–1946, London, 2000. Skidelsky, Robert, John Maynard Keynes: Hopes Betrayed, 1883–1920, London, 1983. Slivinski, Stephen, Buck Wild: How Republicans Broke the Bank and Became the Party of Big Government, Nashville, 2006. Sloan, Alfred, My Life with General Motors, London, 1986 (1st edn 1963). Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, London, 2007 (1st edn 1776). Smith, Vera C., The Rationale of Central Banking, London, 1936. Sobel, Robert, The Last Bull Market: Wall Street in the 1960s, New York, 1980. Sobel, Robert, The Worldly Economists, New York, 1980. Sorkin, Andrew Ross, Too Big to Fail: Inside the Battle to Save Wall Street, London, 2009. Soros, George, The Alchemy of Finance, New York, 1994 (1st edn 1987).


pages: 379 words: 113,656

Six Degrees: The Science of a Connected Age by Duncan J. Watts

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Berlin Wall, Bretton Woods, business process, corporate governance, Drosophila, Erdős number, experimental subject, Frank Gehry, Geoffrey West, Santa Fe Institute, invisible hand, Long Term Capital Management, market bubble, Milgram experiment, Murray Gell-Mann, Network effects, new economy, Norbert Wiener, Paul Erdős, rolodex, Ronald Coase, Silicon Valley, supply-chain management, The Nature of the Firm, The Wealth of Nations by Adam Smith, Toyota Production System, transaction costs, transcontinental railway, Y2K

How is it, in other words, that the performance of firms—meaning their ability to allocate resources, innovate, adapt, and solve problems, both routine and radical—is related to their organizational architecture? MARKETS AND HIERARCHIES INDUSTRIAL ORGANIZATION IS ACTUALLY QUITE AN OLD SUBJECT, growing out of the economic and social upheaval of the Industrial Revolution. Indeed, it is the topic of industrial organization on which Adam Smith opens his monumental treatise, The Wealth of Nations. In particular, Smith discusses the division of labor, the principle that he originally inferred from his observations of workers in manufacturing plants, who consistently performed better when their collective task was broken down into specialized subtasks. The example he uses to illustrate the principle is, of all things, the production of pins. Although it seems trivial, making a pin involves over twenty independent steps, like extruding the wire, grinding the point, hammering the head, cutting the wire, and so on.

Extraordinary Popular Delusions and the Madness of Crowds (Harmony Books, New York, 1980). Some other recent treatises on the same subject are Kindleberger, C. P. Manias, Panics, and Crashes: A History of Financial Crises, 4th ed. (Wiley, New York, 2000). Shiller, R. J. Irrational Exuberance (Princeton University Press, Princeton, NJ, 2000). Fear, Greed, and Rationality Adam Smith’s discussion of rationally optimizing agents, including his reference to the invisible hand, is in Smith, A. The Wealth of Nations, Vol. 1, Book 4 (University of Chicago Press, Chicago, 1976), chapter 2, p. 477. The paradox of the efficient market hypothesis is described in Chancellor, E. Devil Take the Hindmost: A History of Financial Speculation (Farrar, Straus and Giroux, New York, 1999). And some recent work on constructing a more realistic vision of both investor and financial-market behavior, in which dynamics is a crucial ingredient, is Farmer, J.

In such a world, merely surviving is a full-time job, and each generation is compelled to start from essentially the same step as the last. Schools, governments, and professional armies can’t exist, nor can manufacturing, construction, transportation, or service industries. But as central as the division of labor was to Smith’s view of industrial organization, he never actually specified the mechanism by which the specialized subtasks should be aggregated into a complex whole. In The Wealth of Nations, Smith skirts the issue, claiming only that the extent to which specialization is possible depends on the “extent of the market.” By this statement he meant that the larger the pool of potential consumers, the more resources a firm can afford to invest in building production facilities, designing and creating specialized machinery, and employing workers, thereby benefiting from economies of scale.

Profit Over People: Neoliberalism and Global Order by Noam Chomsky

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Bernie Sanders, Bretton Woods, declining real wages, deindustrialization, full employment, invisible hand, joint-stock company, land reform, manufacturing employment, means of production, Monroe Doctrine, Ronald Reagan, strikebreaker, structural adjustment programs, Telecommunications Act of 1996, The Wealth of Nations by Adam Smith, Thomas Malthus, union organizing, Washington Consensus

The international business press has referred to these institutions as the core of a “de facto world government” of a “new imperial age.” Whether accurate or not, this description serves to remind us that the governing institutions are not independent agents but reflect the distribution of power in the larger society. That has been a truism at least since Adam Smith, who pointed out that the “principal architects” of policy in England were “merchants and manufacturers” who used state power to serve their own interests, however “grievous” the effect on others, including the people of England. Smith’s concern was “the wealth of nations,” but he understood that the “national interest” is largely a delusion: within the “nation” there are sharply conflicting interests, and to understand policy and its effects we have to ask where power lies and how it is exercised, what later came to be called class analysis.

My comments on the Madisonian roots of the prevailing concepts of democracy were unfair in an important respect. Like Adam Smith and other founders of classical liberalism, Madison was precapitalist, and anticapitalist in spirit. He expected that the rulers would be “enlightened Statesmen” and “benevolent philosophers,” “whose wisdom may best discern the true interests of their country.” They would “refine” and “enlarge” the “public views,” guarding the true interests of the country against the “mischiefs” of democratic majorities, but with enlightenment and benevolence. Madison soon learned differently, as the “opulent minority” proceeded to use their newfound power as much as Adam Smith had predicted a few years earlier. They were intent on pursuing what Smith called the “vile maxim” of the masters: “All for ourselves, and nothing for other people.”

McChesney Madison, Wisconsin I Neoliberalism and Global Order I would like to discuss each of the topics mentioned in the title: neoliberalism and global order. The issues are of great human significance and not very well understood. To deal with them sensibly, we have to begin by separating doctrine from reality. We often discover a considerable gap. The term “neoliberalism” suggests a system of principles that is both new and based on classical liberal ideas: Adam Smith is revered as the patron saint. The doctrinal system is also known as the “Washington consensus,” which suggests something about global order. A closer look shows that the suggestion about global order is fairly accurate, but not the rest. The doctrines are not new, and the basic assumptions are far from those that have animated the liberal tradition since the Enlightenment. THE WASHINGTON CONSENSUS The neoliberal Washington consensus is an array of market oriented principles designed by the government of the United States and the international financial institutions that it largely dominates, and implemented by them in various ways—for the more vulnerable societies, often as stringent structural adjustment programs.


pages: 692 words: 127,032

Fool Me Twice: Fighting the Assault on Science in America by Shawn Lawrence Otto

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, Albert Einstein, anthropic principle, Berlin Wall, Brownian motion, carbon footprint, Cepheid variable, clean water, Climategate, Climatic Research Unit, cognitive dissonance, Columbine, cosmological constant, crowdsourcing, cuban missile crisis, Dean Kamen, desegregation, double helix, energy security, Exxon Valdez, fudge factor, ghettoisation, Harlow Shapley and Heber Curtis, Harvard Computers: women astronomers, informal economy, invisible hand, Isaac Newton, Louis Pasteur, mutually assured destruction, Richard Feynman, Richard Feynman, Ronald Reagan, Saturday Night Live, shareholder value, sharing economy, smart grid, Solar eclipse in 1919, stem cell, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, University of East Anglia, War on Poverty, white flight, Winter of Discontent, working poor

The core dilemma it identified, which came to be called “the tragedy of the commons” after the paper’s title, lies at the heart of the unresolved environmental challenges of the twentieth century, among them climate change, ocean acidification, overfishing, biodiversity loss, habitat fragmentation, overdevelopment, pollution, exploding population, and unsustainable energy use, to name a few. The dilemma suggests that politicians are paralyzed by a fundamental conflict between the environment and the economy that arises from the deeply held, mistaken belief that freedom and regulation are incompatible. Hardin’s paper was remarkable because it offered such a sound rebuttal to the ideas of the Scottish economist Adam Smith, whose collaborator and mentor was David Hume. In 1776 Smith argued in The Wealth of Nations that in a shared economy, an individual, who “intends only his own gain,” was in effect “led by an invisible hand” to promote the greater public interest, since willing buyers and willing sellers will always arrive at a natural price for things, and the highest value and efficiency will be obtained. “Nor is it always the worse for the society that [the individual’s intention to do social good] was no part of it.

Office of the Minnesota State Auditor, July 2, 2008. www.auditor.state.mn.us/default.aspx?page=20080702.001. 137. Otto, R. Interview by S. Otto, November 22, 2010. CHAPTER 11. FREEDOM AND THE COMMONS 1. US Department of Defense. Quadrennial Defense Review Report, February 2010. www.defense.gov/qdr/images/QDR_as_of_12Feb10_1000.pdf. 2. Smith, A. An Inquiry into the Nature and Causes of the Wealth of Nations. Ed. J. Manis. Electronic Classics Series. Hazleton, PA: Pennsylvania State University, n.d. www2.hn.psu.edu/faculty/jmanis/adam-smith/Wealth-Nations.pdf. 3. Hardin, G. The Tragedy of the Commons. Science 1968;162(3859):1243–1248. www.sciencemag.org/content/162/3859/1243.full. 4. Rand, A. The Virtue of Selfishness. New York: Signet, 1964. 5. Hume, D. An Enquiry Concerning Human Understanding. Harvard Classics Vol. 37. New York: P. F. Collier and Son, 1910. 6.

Conservation Group Petitions the United States Government to List the Polar Bear as a Threatened Species Under the Endangered Species Act. Center for Biological Diversity, February 16, 2005. www.biologicaldiversity.org/news/press_releases/polarbear2-16-05.html. [news release] Smith, A. An Inquiry into the Nature and Causes of the Wealth of Nations. Ed. J. Manis. Electronic Classics Series. Hazleton, PA: Pennsylvania State University, n.d. www2.hn.psu.edu/faculty/jmanis/adam-smith/Wealth-Nations.pdf. Smith, P., et al. Children Who Have Received No Vaccines: Who Are They and Where Do They Live? Pediatrics 2004;114(1):187–195. http://pediatrics.aappublications.org/cgi/content/full/114/1/187. Snow, C. P. The Two Cultures. Cambridge, UK: Cambridge University Press, 1960. Snyder, J., & Chipman, K.


pages: 687 words: 189,243

A Culture of Growth: The Origins of the Modern Economy by Joel Mokyr

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Andrei Shleifer, barriers to entry, Berlin Wall, clockwork universe, cognitive dissonance, Copley Medal, David Ricardo: comparative advantage, delayed gratification, deliberate practice, Deng Xiaoping, Edmond Halley, epigenetics, Fellow of the Royal Society, financial independence, framing effect, germ theory of disease, Haber-Bosch Process, hindsight bias, income inequality, invention of movable type, invention of the printing press, invisible hand, Isaac Newton, Jacquard loom, Jacquard loom, Jacques de Vaucanson, James Watt: steam engine, John Harrison: Longitude, Joseph Schumpeter, knowledge economy, labor-force participation, land tenure, law of one price, Menlo Park, moveable type in China, new economy, phenotype, price stability, principal–agent problem, rent-seeking, Republic of Letters, Ronald Reagan, South Sea Bubble, statistical model, the market place, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, transaction costs, ultimatum game, World Values Survey, Wunderkammern

A different way of seeing this is to allow for the possibility that even if A and B are mutually exclusive, one might take the position that both are possible at nonzero probabilities. The selection criteria for any kind of cultural belief are contingent, and it is easy to envisage a cultural environment in which the question “but is it true?” can be routinely answered satisfactorily by “sometimes,” or “maybe,” or “if God wills it.” 7 Schumpeter maintained, somewhat unfairly, that “the Wealth of Nations contained no really novel ideas and … cannot rank with Newton’s Principia and Darwin’s Origin as an intellectual achievement.” See Schumpeter, 1954 p. 185. 8 In 1492 the Abbott of Sponheim, Johannes Trithemius, wrote In Praise of Scribes in which he made a series of powerful arguments against the use of the printing press and favoring hand-copying. He then promptly proceeded to have the book printed. 9 Al Ghazali’s famous treatise The Incoherence of the Philosophers was increasingly interpreted to imply that foreign learning was incompatible with Muslim religion and that the concept of a natural “law” contradicted the omnipotence of the creator.

By the eighteenth century, conservative writers such as the Jesuits associated Newtonian physics with various heretical philosophies such as deism, Spinozism, or Epicurean materialism (Shank, 2008, p. 381). 32 There is no documentary evidence for Laplace ever to have uttered those widely cited words, but Hahn (1986, p. 256) notes that the statement was a faithful reflection of his position. 33 This line comes right after the famous statement (not reproduced in the Wealth of Nations) that “little else is required to carry a nation to the highest state of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice” (Stewart [1793] 1829, p. 64). Dugald Stewart added that the sentences appear in a small 1755 manuscript by Smith that was in his possession, but not to be published. 34 The description of the one of the “fathers” of Salomon’s House, despite the definition of the end of their foundation as “the knowledge of causes and secret motions of things and the enlarging of the bounds of Human Empire to the effecting of all things possible” includes his entry in streets lined with people in which he “held up his bare hand as he went blessing the people in silence.”

History of European Ideas Vol. 13, No. 3, pp. 183–99. ———. 1994. The Republic of Letters: A Cultural History of the French Enlightenment. Ithaca, NY: Cornell University Press. Goody, Jack. 2009. Renaissances: The One or the Many? Cambridge: Cambridge University Press. ———. 2010. The Eurasian Miracle. Cambridge: Polity Press. Gorodnichenko, Yuriy and Gerard Roland. 2011. “Culture, Institutions, and the Wealth of Nations.” NBER Working Papers 16368, unpublished ms. Gough J. B. 2008. “Réaumur, René-Antoine Ferchault de.” In Charles C. Gillispie, ed., Complete Dictionary of Scientific Biography. Gale Virtual Reference Library. Detroit: Charles Scribner’s Sons. Vol. 11, pp. 327–35. Grafe, Regina. 2012. Distant Tyranny: Markets, Power, and Backwardness in Spain, 1650–1800. Princeton, NJ: Princeton University Press.


pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business process, butterfly effect, call centre, capital controls, Claude Shannon: information theory, collaborative economy, collective bargaining, Corn Laws, corporate social responsibility, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, Downton Abbey, en.wikipedia.org, energy security, eurozone crisis, factory automation, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, full employment, future of work, game design, income inequality, inflation targeting, informal economy, Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kevin Kelly, knowledge economy, knowledge worker, late capitalism, low skilled workers, market clearing, means of production, Metcalfe's law, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, payday loans, post-industrial society, precariat, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, union organizing, universal basic income, urban decay, urban planning, wages for housework, women in the workforce

WORK IS THE SOURCE OF VALUE Amid the empty shops in the run-down high street of Kirkcaldy, Scotland, there is a branch of Gregg’s. Gregg’s sells high-fat food at low prices and is one of the few places busy at lunchtime. A glance at Scotland’s poverty map gives the context: the town is dotted with areas of extreme deprivation and ill health.1 On the wall outside Gregg’s is a plaque marking the house where Adam Smith wrote The Wealth of Nations. Nobody takes much notice. But this is where, in 1776, the economic principles of capitalism were first laid out. I’m not sure Smith would like the look of his home town today, blighted by de-industrialization, low pay and chronic sickness. But he would have understood the cause. The source of all wealth, said Smith, is work. ‘It was not by gold or by silver but by labour that all the wealth of the world was originally purchased,’ Smith wrote; ‘and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command.’2 This is the classic labour theory of value: it says the work needed to make something determines how much it’s worth.

If you witness workers sweating thirteen hours a day in a machine workshop, as Smith did, you will understand that it is the workers, not the machines, that produce the added value.3 Standard textbooks will tell you Smith thought the labour-theory was valid only for primitive societies, and that when it came to capitalism, ‘value’ was the combined product of wages, capital and land. This is incorrect.4 Smith’s labour theory of value was inconsistent, but on a detailed reading of The Wealth of Nations the argument is clear: labour is the source of value but the market can only reflect this roughly, through what Smith calls ‘higgling and bargaining’. So the law operates beneath the surface in a full capitalist economy. Profits and rents are deductions from the value produced by labour.5 David Ricardo, the most influential economist of the early nineteenth century, created a more developed model.

.), New Connectivities in China: Virtual, Actual and Local Interactions (Dordrecht, 2012), p. 94 11. P. Romer, ‘Endogenous Technological Change’, Journal of Political Economy, vol. 98, no. 5, pt 2 (1990), pp. S71–S102 12. Ibid. p. S72 13. Ibid., pp. S71–S102 14. http://www.billboard.com/biz/articles/news/digital-and-mobile/1567869/business-matters-average-itunes-account-generates-just 15. D. Warsh, Knowledge and the Wealth of Nations: A Story of Economic Discovery (New York, 2007) 16. http://en.wikipedia.org/wiki/Apple_A7#cite_note-AnandTech-iPhone5s-A7-2 17. http://commons.wikimedia.org/wiki/File:Bill_Gates_Letter_to_Hobbyists.jpg 18. R. Stallman, The GNU Manifesto, March 1985, http://www.gnu.org/gnu/manifesto.html 19. http://gs.statcounter.com 20. http://www.businessinsider.com/android-market-share-2012-11 21.


pages: 372 words: 107,587

The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, agricultural Revolution, back-to-the-land, banking crisis, banks create money, Bretton Woods, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, dematerialisation, demographic dividend, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy transition, falling living standards, financial deregulation, financial innovation, Fractional reserve banking, full employment, Gini coefficient, global village, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, invisible hand, Isaac Newton, Kenneth Rogoff, late fees, money: store of value / unit of account / medium of exchange, mortgage debt, naked short selling, Naomi Klein, Negawatt, new economy, Nixon shock, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, post-oil, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, Ronald Reagan, short selling, special drawing rights, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, working poor

Richard Heinberg, The Party’s Over (Gabriola Island BC: New Society Publishers, 2003), pp. 14–33; William Catton, Overshoot: The Ecological Basis of Revolutionary Change (University of Illinois, 1980). 47. For an unrealistically optimistic view of what division of labor has achieved, see John Kay, “Why You Can Have an Economy of People Who Don’t Sweat,” Financial Times, Oct. 20, 2010. 48. Adam Smith, The Wealth of Nations (New York: Oxford University Press, World’s Classics Edition, 2008). 49. Economists frame the advantages of increased trade in terms of a concept called “comparative advantage.” Technically, comparative advantage means that each country will specialize in what it is good at, even if another country does everything better, and the result is that all countries benefit from trade. However, this assumes that capital can only be invested domestically.

Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day....48 Later in The Wealth of Nations, Smith criticizes the division of labor, saying it leads to a “mental mutilation” in workers as they become ignorant and insular — so it’s hard to know whether he thought the trend toward specialization was good or just inevitable. It’s important to note, however, that it was under way before the fossil fuel revolution, and was already contributing to economic growth. Standard economic theory tells us that trade is good.

While the first economists were ancient Greek and Indian philosophers, among them Aristotle (382– 322 bce) — who discussed the “art” of wealth acquisition and questioned whether property should best be owned privately or by government acting on behalf of the people — little of real substance was added to the discussion during the next two thousand years. It’s in the 18th century that economic thinking really gets going. “Classical” economic philosophers such as Adam Smith (1723–1790), Thomas Robert Malthus (1766–1834), and David Ricardo (1772–1823) introduced basic concepts such as supply and demand, division of labor, and the balance of international trade. As happens in so many disciplines, early practitioners were presented with plenty of uncharted territory and proceeded to formulate general maps of their subject that future experts would labor to refine in ever more trivial ways.


pages: 261 words: 103,244

Economists and the Powerful by Norbert Haring, Norbert H. Ring, Niall Douglas

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, bank run, barriers to entry, Basel III, Bernie Madoff, British Empire, central bank independence, collective bargaining, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, Jean Tirole, job satisfaction, Joseph Schumpeter, knowledge worker, labour market flexibility, law of one price, Long Term Capital Management, low skilled workers, market bubble, market clearing, market fundamentalism, means of production, minimum wage unemployment, moral hazard, new economy, obamacare, open economy, pension reform, Ponzi scheme, price stability, principal–agent problem, profit maximization, purchasing power parity, Renaissance Technologies, rolodex, Sergey Aleynikov, shareholder value, short selling, Steve Jobs, The Chicago School, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, ultimatum game, union organizing, working-age population, World Values Survey

Ricardo would later use this treaty as his famous example to illustrate the mutual benefits of comparative advantage (Ricardo 1817); however Portugal to this day still lives with an unusually global-trade-dependant economy as a legacy of that treaty (Almodovar and Cardoso 1998). The birth of marginalism While the classical economists touted the virtues of free international trade and took issues of power out of international economics, they still left some room to discuss power in the national context, notably on the labor market. When Adam Smith wrote his famous Inquiry into the Wealth of Nations in 1776, large parts of the British population hardly had enough income to feed their children adequately and provide decent housing. For Smith, it was clear that wages were determined by the relative bargaining powers of industrialists and workers: What are the common wages of labour, depends everywhere upon the contract usually made between those two parties… The workmen desire to get as much, the masters to give as little as possible… 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.

Report of the Office of the Inspector General for the Troubled Asset Relief Program, 17 November. http://www.sigtarp.gov/ reports/audit/2009/Factors_Affecting_Efforts_to_Limit_Payments_to_AIG_ Counterparties.pdf (accessed March 28, 2012). Simon, Zoltan. 2009. “Soros Fund Fined $2.2 Million by Hungarian Regulator.” Bloomberg, March 27. Smeeding, Timothy M. 2005. “Public Policy, Economic Inequality, and Poverty: The United States in Comparative Perspective.” Social Science Quarterly 86: 955–83. Smith, Adam. 1776/2007. An Inquiry into the Nature and Causes of the Wealth of Nations. Ed. Sálvio M. Soares. MetaLibri, 2007, v.1.0p. http://metalibri.wikidot.com/ title:an-inquiry-into-the-nature-and-causes-of-the-wealth-of (accessed March 28, 2012). Sonik, Sara and David Hemenway. 1998. “Is More Always Better? A Survey on Positional Concerns.” Journal of Economic Behavior and Organization 37: 373–83. Soros, George. 2008/2009. “The Crisis and What to Do About It.” In Crash – Why It Happened and What to Do About It, ed.

Whether this is done via generous minimum income guarantees, subsidies of expensive investments in selfimprovement such as qualifications in new skills, or even an “escalator” system where payments are tied to society-benefiting behavior such as in the highly successful Bolsa Família program in Brazil, the lesson is that it doesn’t matter which you choose as long as you choose something which is empirically known to deliver results. He who pays the piper calls the tune The Member of Parliament, who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and 42 ECONOMISTS AND THE POWERFUL influence with an order of men, whose numbers and wealth render them of great importance. —Adam Smith, 1784 What Adam Smith said in the above quote from the second edition of his Wealth of Nations regarding parliamentarians and their incentives to please powerful economic interests holds true for economists as well, and still does to this day. The modern mainstream conception of economics is attractive to all those who do well under the status quo and who would do even better with less grassroots and collective action.


pages: 363 words: 107,817

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed by Andrew Jackson (economist), Ben Dyson (economist)

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

bank run, banking crisis, banks create money, Basel III, Bretton Woods, call centre, capital controls, cashless society, central bank independence, credit crunch, David Graeber, debt deflation, double entry bookkeeping, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, Hyman Minsky, inflation targeting, informal economy, land reform, London Interbank Offered Rate, market bubble, market clearing, Martin Wolf, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Northern Rock, price stability, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, risk-adjusted returns, seigniorage, shareholder value, short selling, South Sea Bubble, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, unorthodox policies

We start by looking at the textbook history of the origins of money, before examining the alternative accounts of historians and anthropologists, which contradict the textbook history. We then discuss the development of banking in the United Kingdom and its evolution up to the present day. 1.1 The origins of money A textbook history The standard theory of the origins of money, commonly found in economics textbooks, was perhaps first put forward by Aristotle (in “Politics”) and restated by Adam Smith in his book “The Wealth of Nations” (1776). According to Smith’s story, money emerged naturally with the division of labour, as individuals found themselves without many of the necessities they required but at the same time an excess of their own produce. Without a means of exchange individuals had to resort to barter in order to trade, which was problematic as both sides of the deal had to have something the other person wanted (the “double coincidence of wants”).

First: “among those who are most likely to bid high interest rates are risk lovers (who are willing to undertake very risky projects, with a small probability of success, but high returns if successful); optimists (who overestimate the probability of projects succeeding and the return if successful); and crooks (who, because they do not plan to pay back the money anyway, are virtually indifferent to the interest rate which they promise). “As a consequence, as the bank raises the rate of interest, there is an adverse selection effect; the mix of loan applicants changes adversely, so much so that the expected return from those receiving loans may actually decrease as the interest rate charged increased.” The problem of adverse selection has long been known – Adam Smith noted in the Wealth of Nations that when interest rates are high the only people wishing to borrow would be “prodigals and projectors”: “Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it.

(Lester, 1938, cited in Zarlenga, 2002) In conclusion, historians agree that Pennsylvania’s system of issuing currency was ‘to the manifest benefit of the province’ (Ferguson, 1953). Indeed, Ferguson notes that “Pennsylvania’s currency was esteemed by all classes and regarded as having contributed to the growth and prosperity of the colony” (p. 159), and that “Favourable testimony can be found in nearly all commentators, modern or contemporary”. (p. 163) Adam Smith, writing in the Wealth of Nations, commented that the success of the system was dependent on three circumstances: “First, upon the demand for some other instrument of commerce, besides gold and silver money, or upon the demand for such a quantity of consumable stock as could not be had without sending abroad the greater part of their gold and silver money, in order to purchase it; secondly, upon the good credit of the government which made use of this expedient; and, thirdly, upon the moderation with which it was used, the whole value of the paper bills of credit never exceeding that of the gold and silver money which would have been necessary for carrying on their circulation, had there been no paper bills of credit.”


pages: 443 words: 112,800

The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy, and the World by Jeremy Rifkin

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, additive manufacturing, Albert Einstein, barriers to entry, borderless world, carbon footprint, centre right, collaborative consumption, collaborative economy, Community Supported Agriculture, corporate governance, decarbonisation, distributed generation, en.wikipedia.org, energy security, energy transition, global supply chain, hydrogen economy, income inequality, informal economy, invisible hand, Isaac Newton, job automation, knowledge economy, manufacturing employment, marginal employment, Martin Wolf, Masdar, megacity, Mikhail Gorbachev, new economy, oil shale / tar sands, oil shock, open borders, peak oil, Ponzi scheme, post-oil, purchasing power parity, Ray Kurzweil, Ronald Reagan, Silicon Valley, Simon Kuznets, Skype, smart grid, smart meter, Spread Networks laid a new fibre optics cable between New York and Chicago, supply-chain management, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transaction costs, trickle-down economics, urban planning, urban renewal, Yom Kippur War, Zipcar

As long as Newton’s long shadow casts itself over economic theory, it is unlikely that economics, as a discipline, will be able to accommodate the growing schisms that threaten all of its most basic assumptions. Economic historian E. Ray Canterbery notes that taking on the likes of Adam Smith becomes increasingly daunting because he rides on the coattails of the great Sir Isaac Newton. He writes, “From time to time, a cluster of economists consider conventional economics ripe for revolution, but any economic revolutionaries will have to go to the barricades against the genius of Isaac Newton as well as against Adam Smith and his long line of followers.”6 Now however, for the first time, the many cracks in the theoretical foundations of the discipline are threatening to tumble the edifice of classical economic theory. THE WEALTH OF NATIONS The fault line that runs through all of classical economic theory is the fundamental misunderstanding of the nature of wealth.

Miller calculates that “three hundred trout are required to support one man for a year. The trout, in turn, must consume 90,000 frogs, which must consume 27 million grasshoppers, which live off of 1,000 tons of grass.”10 Now, let’s look at the thermodynamic consequences of converting nature’s resources into food for human consumption in a complex, industrial civilization and what it portends for how we perceive the wealth of nations. Consider the energy that goes into a beefsteak: 1.It takes nine pounds of feed grain to make one pound of steak.11 This means that only 11 percent of the feed goes to produce the beef itself, with the rest either burned off as energy in the conversion process, used to maintain normal body functions, or extracted or absorbed into parts of the body that are not eaten—like hair or bones.

New York: Columbia University Press, p. 259. 2.Smith Adam. The Essays of Adam Smith. 1776. p. 384. Retrieved from http://books.google.com/books?id=keEURjQkAW8C&printsec=frontcover&dq=Smith+Adam.+T he+Essays+of+Adam+Smith&hl=en&ei=j6WcTZ-1LsLJ0QHp853mAg&sa=X&oi=b ook_result&ct=result&resnum=3&ved=0CDoQ6AEwAg#v=onepage&q=%22the%20 greatest%20discovery%22&f=false. 3.Whitehead, A. N. (1952). Science and the Modern World. New York: New American Library, p. 50. 4.Miller, G. T. (1971). Energetics, Kinetics, and Life: An Ecological Approach. Belmont, CA: Wadsworth, p. 46. 5.Soddy, F. (1911). Matter and Energy New York: H. Holt and Co., pp. 10–11. 6.Canterbery, E. R. (2003). Isaac Newton and the Economics Paradigm: Newton, Natural Law and Adam Smith. In The Making of Economics. River Edge, NJ: World Scientific Pub, p. 75. 7.Laslett, P. (1967).


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, moral hazard, mortgage debt, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

eISBN 978 1 78283 154 9 The directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own … Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. Adam Smith, The Wealth of Nations, 1776 When I speak of high finance as a harmful factor in recent years, I am speaking about a minority which includes the type of individual who speculates with other people’s money – and you in Chicago know the kind I refer to. Franklin D. Roosevelt, US presidential campaign address, Chicago, 14 October 1936 Contents Prologue: The parable of the ox Introduction: Far too much of a good thing PART I: FINANCIALISATION 1 History The road to Pottersville The rise of the trader New markets, new businesses From crisis to crisis The robber barons We are the 1 per cent 2 Risk Cows, coffee and credit default swaps Chasing the dream Adverse selection and moral hazard 3 Intermediation The role of the middleman Liquidity Diversification Leverage 4 Profits Smarter people Competition The Edge Regulatory arbitrage I’ll be gone, you’ll be gone How profitable is the finance sector?

For all their superficial sophistication, the masters of the universe had no real understanding of what was going on before them. 4 Profits Smarter people Though the principles of the banking trade may appear somewhat abstruse, the practice is capable of being reduced to strict rules. To depart upon any occasion from these rules, in consequence of some flattering speculation of extraordinary gain, is almost always extremely dangerous, and frequently fatal to the banking company which attempts it. Adam Smith, The Wealth of Nations, 1776 The year is 1995, and I am sitting at a massive octagonal table on the top floor of the large modern building that dominates the town of Halifax, West Yorkshire. The location is the boardroom of the Halifax Building Society. The Halifax Building Society had travelled far in size, though not in distance. The world’s largest mortgage lender traced its origins to a self-help group which first met 150 years earlier in a much smaller room above a pub just opposite.

Simon, H., 1996, Hidden Champions, Boston, MA, HBS Press. Simon, H., 2009, Hidden Champions of the 21st Century, London and New York, Springer Verlag. Sinclair, U., 1906, The Jungle, London, Werner Laurie. Sinclair, U., 1994, I, Candidate for Governor: And How I Got Licked, orig. pub. 1935, London, University of California Press. Smith, A., 1776, An Inquiry into the Nature and Causes of the Wealth of Nations, 5th edn, 1904, ed. Edwin Cannan, London, Methuen. Smith, G., 2012, ‘Why I Am Leaving Goldman Sachs’, The New York Times, 14 March. Soble, R.L., and Dallos, R.E., 1975, The Impossible Dream: The Equity Funding Story, the Fraud of the Century, New York, G.P. Putnam’s Sons. Sorkin, A.R., 2009, Too Big to Fail: Inside the Battle to Save Wall Street, London, Allen Lane. Stafford, P., 2010, ‘Spread Networks Unveils Managed Services’, Financial Times, 22 November.

Imperial Ambitions: Conversations on the Post-9/11 World by Noam Chomsky, David Barsamian

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

British Empire, collective bargaining, cuban missile crisis, declining real wages, failed state, feminist movement, Howard Zinn, invisible hand, Joseph Schumpeter, Monroe Doctrine, offshore financial centre, Ronald Reagan, The Wealth of Nations by Adam Smith, Thomas L Friedman, Upton Sinclair, uranium enrichment

If you go back to Adam Smith, whom we’re supposed to revere but not read, he assumed that sympathy was the core human value, and society should therefore be constructed so that this natural human dedication to sympathy and mutual support will be satisfied. In fact, his main argument for markets was that they would, under conditions of perfect liberty, lead to perfect equality. In fact, Smith’s famous phrase “the invisible hand,” which everyone totally misuses, appears only once in The Wealth of Nations, in the context of an argument against what we now call neoliberalism.5 He says that if English manufacturers and investors imported from abroad and invested overseas, rather than here, it would be harmful to England. In other words, if they followed what are now called the principles of Adam Smith, it would be harmful to England.

Gardiner Harris, New York Times, 31 October 2004. 39. Fareed Zakaria, Newsweek, 11 October 2004. 7. INTELLECTUAL SELF-DEFENSE 1. BBC World News, 3 December 2004. 2. Thomas E. Ricks, Washington Post, 9 May 2004. 3. PIPA/Knowledge Networks Poll, Press Release, 3 December 2003; and additional PIPA polls. 4. Edmund L. Andrews, New York Times, 3 December 2004. 5. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776) (University of Chicago Press, 1996), book 4, chap. 2. 6. David Ricardo, The Principles of Political Economy and Taxation (Dover, 2004), pp. 83–84. 7. Lord Hutton, “Report of the Inquiry into the Circumstances Surrounding the Death of Dr. David Kelly C.M.G.,” 28 January 2004. 8. Noam Chomsky, Necessary Illusions (South End Press, 1989), p. viii. 9. David Hume, Of the First Principles of Government (Longmanns, Green, and Company, 1882), chap. 1. 10.


pages: 187 words: 55,801

The New Division of Labor: How Computers Are Creating the Next Job Market by Frank Levy, Richard J. Murnane

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Atul Gawande, call centre, computer age, correlation does not imply causation, David Ricardo: comparative advantage, deskilling, Frank Levy and Richard Murnane: The New Division of Labor, hypertext link, index card, job automation, knowledge economy, knowledge worker, low skilled workers, low-wage service sector, pattern recognition, profit motive, Robert Shiller, Robert Shiller, Ronald Reagan, speech recognition, talking drums, telemarketer, The Wealth of Nations by Adam Smith, working poor

The poor service quality was very much a function of organizational design. The narrow job definitions provided workers no opportunity to learn how their task related to those of their co-workers. The importance of organizational design for stimulating or repressing the development of expertise is not a new idea. We remember Adam Smith for explaining how the division of labor—dividing work into narrow tasks—increases short-run efficiency. In his 1776 treatise, The Wealth of Nations, Smith also made clear how that same structure stifles learning. The man whose whole life is spent in performing a few simple operations, of which the effects 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.

Thirty years ago, we would have dismissed these questions as science fiction. Today, we seem more willing to listen. By keeping the four questions in front of us, we will be better able to appreciate the challenge we face as we work to progress as a nation. This page intentionally left blank NOTES CHAPTER 1. New Divisions of Labor 1. Quoted from http://www.pa.msu.edu/people/mulhall/mist/Triple.html. 2. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Modern Library, 1994; orig. 1776). Smith used the term to describe the increased efficiency that came when a particular job—making a straight pin, in his example—was divided into a series of narrow tasks—making the heads of pins, making the stems, sharpening the points—with each task assigned to a specialized worker. 3. On the increase in the number of the working poor, see Barbara Ehrenreich, Nickel and Dimed: On (Not) Getting By in America (New York: Owl Books, 2001). 4.

But the Ad Hoc Committee also made a major miscalculation. Like many computer scientists of that time, the committee expected computers would soon replicate all the modes by which humans process information. The expectation was only partly fulfilled, and so the committee’s warning was only partly right. Computers have not created mass unemployment, but they have created a major upheaval in the nature of human work. More than two centuries ago, Adam Smith used the words “division of labor” to describe an earlier upheaval—the way in which the first factory systems had reorganized work and dramatically boosted productivity.2 In today’s economy, Smith’s words have taken on new meanings. There is a new division of labor between people and computers. And there is a growing division within human labor itself—a divide between those who can and those who cannot do valued work in an economy filled with computers.


pages: 304 words: 82,395

Big Data: A Revolution That Will Transform How We Live, Work, and Think by Viktor Mayer-Schonberger, Kenneth Cukier

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

23andMe, Affordable Care Act / Obamacare, airport security, AltaVista, barriers to entry, Berlin Wall, big data - Walmart - Pop Tarts, Black Swan, book scanning, business intelligence, business process, call centre, cloud computing, computer age, correlation does not imply causation, dark matter, double entry bookkeeping, Eratosthenes, Erik Brynjolfsson, game design, IBM and the Holocaust, index card, informal economy, Internet of things, invention of the printing press, Jeff Bezos, Louis Pasteur, Mark Zuckerberg, Menlo Park, Moneyball by Michael Lewis explains big data, Nate Silver, natural language processing, Netflix Prize, Network effects, obamacare, optical character recognition, PageRank, performance metric, Peter Thiel, Post-materialism, post-materialism, random walk, recommendation engine, self-driving car, sentiment analysis, Silicon Valley, Silicon Valley startup, smart grid, smart meter, social graph, speech recognition, Steve Jobs, Steven Levy, the scientific method, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Turing test, Watson beat the top human players on Jeopardy!

currentPage=all); Jessie Scanlon, “Luis von Ahn: The Pioneer of ‘Human Computation,’” Businessweek, November 3, 2008 (http://www.businessweek.com/stories/2008-11-03/luis-von-ahn-the-pioneer-of-human-computation-businessweek-business-news-stock-market-and-financial-advice). His technical description of reCaptchas is at Luis von Ahn et al., “reCAPTCHA: Human-Based Character Recognition via Web Security Measures,” Science 321 (September 12, 2008), pp. 1465–68 (http://www.sciencemag.org/content/321/5895/1465.abstract). [>] Smith’s pin factory—Adam Smith, The Wealth of Nations (reprint, Bantam Classics, 2003), book I, chapter one. (A free electronic version is at http://www2.hn.psu.edu/faculty/jmanis/adam-smith/Wealth-Nations.pdf). [>] Storage—Viktor Mayer-Schönberger, Delete: The Virtue of Forgetting in the Digital Age (Princeton University Press, 2011), p. 63. [>] On electrical cars’ power usage—IBM, “IBM, Honda, and PG&E Enable Smarter Charging for Electric Vehicles,” press release, April 12, 2012 (http://www-03.ibm.com/press/us/en/pressrelease/37398.wss).

Social Research 68 (2001) pp. 481–513. Silver, Nate. The Signal and the Noise: Why So Many Predictions Fail—But Some Don’t. Penguin, 2012. Singel, Ryan. “Netflix Spilled Your Brokeback Mountain Secret, Lawsuit Claims.” Wired, December 17, 2009 (http://www.wired.com/threatlevel/2009/12/netflix-privacy-lawsuit/). Smith, Adam. The Wealth of Nations (1776). Reprinted Bantam Classics, 2003. A free electronic version is available (http://www2.hn.psu.edu/faculty/jmanis/adam-smith/Wealth-Nations.pdf). Solove, Daniel J. The Digital Person: Technology and Privacy in the Information Age. NYU Press, 2004. Surowiecki, James. “A Billion Prices Now.” New Yorker, May 30, 2011 (http://www.newyorker.com/talk/financial/2011/05/30/110530ta_talk_surowiecki). Taleb, Nassim Nicholas. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets.

Or the real-time stream of GPS coordinates, accelerometer readings, and fuel levels from a delivery vehicle—or a fleet of 60,000 of them. Or think of billions of old search queries, or the price of nearly every seat on every commercial airline flight in the United States going back years. Until recently there were no easy ways to collect, store, and analyze such data, which severely limited the opportunities to extract its potential value. In Adam Smith’s celebrated example of the pin maker, with which he discussed the division of labor in the eighteenth century, it would have required observers watching all the workers not just for one particular study, but at all times everyday, taking detailed measurements, and counting the output on thick paper with feathery quill pens. When classical economists considered the factors of production (land, labor, and capital), the idea of harnessing data was largely absent.


pages: 282 words: 80,907

Who Gets What — and Why: The New Economics of Matchmaking and Market Design by Alvin E. Roth

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Affordable Care Act / Obamacare, Airbnb, algorithmic trading, barriers to entry, Berlin Wall, bitcoin, Build a better mousetrap, centralized clearinghouse, computer age, crowdsourcing, deferred acceptance, desegregation, experimental economics, first-price auction, Flash crash, High speed trading, income inequality, Internet of things, invention of agriculture, invisible hand, Jean Tirole, law of one price, Lyft, market clearing, market design, medical residency, obamacare, proxy bid, road to serfdom, school choice, sealed-bid auction, second-price auction, second-price sealed-bid, Silicon Valley, spectrum auction, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, The Wealth of Nations by Adam Smith, two-sided market

Consequently, there’s a lively ongoing debate about whether and how kidney donors might be treated more generously. Many doctors, hospitals, foundations, and patients argue that the law should be changed to allow living kidneys to be bought, so that the supply of kidneys can keep up with the demand. Economists have long been accustomed to the fact that cash payments can fill such gaps by providing incentives to increase supply. Adam Smith, in his book An Inquiry into the Nature and Causes of the Wealth of Nations (1776), famously observed, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” Economists mostly think that allowing some incentives, monetary or otherwise, to be offered for giving someone a kidney could increase the supply of kidneys. In fact, there isn’t much debate about that.

. [>] allow living kidneys: See, for example, the passionate advocacy of Sally Satel, herself a kidney transplant recipient and a doctor, and the author of When Altruism Isn’t Enough: The Case for Compensating Kidney Donors (Washington, DC: AEI Press, 2008), or the argument presented to economists by the late Nobel laureate Gary Becker and his coauthor Julio Elías in “Introducing Incentives in the Market for Live and Cadaveric Organ Donations,” Journal of Economic Perspectives 21, no. 3 (Summer 2007): 3–24, http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.21.3.3. [>] “It is not”: Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Oxford: Oxford University Press, 2008), bk. 1, chap. 2, para. 2. [>] opposition to legalizing kidney sales: One of the most outspoken opponents of legalizing kidney sales is one of the heroes of kidney exchange, Frank Delmonico. He has been active in formulating the Declaration of Istanbul and is executive director of its custodian group, whose mission is “to promote, implement and uphold the Declaration of Istanbul so as to combat organ trafficking, transplant tourism and transplant commercialism and to encourage adoption of effective and ethical transplantation practices around the world.”

See also markets and marketplaces FreeMarkets, 121–22 futures markets, 16–17, 82–89 Gale, David, 141–43, 158 game theory, 10–11 thought experiments in, 32–33 on trading cycles, 32–41 gaming the system, 10–11 banning markets and, 213–14 in Boston school choice, 126–30 in early transactions, 57–80 in New York City school system, 109–10, 153–55 in the Oklahoma Land Rush, 58–60 gastroenterology fellowships, 75–78 Google, 190–91 Android, 21–22 Great Recession (2008), 66 Green, Jerry, 3–4, 8 Green, Pamela, 3–4 Greiner, Ben, 118 gun ownership, 198 Hamlet (Shakespeare), 200 Hayek, Friedrich, 226–27 health care reimbursement, 206–7, 223–24 for kidney transplants, 51, 206–7, 208–10 health codes, 220–21 Hendren, Hardy, 138, 141 Hil, Garet, 45–46, 49 Hopwood, Shon, 97, 239 horsemeat, 195–97 Hoxby, Caroline, 126 human dignity, 207 IBM, 19 identity theft, 116 immune systems, 133–34 indentured servitude, 199–200 India, 201–2 industry standards, 22 information early transactions and missing, 60 importance of sharing all, 153–61 privacy and, 119–22 on qualifications and interest (See signals and signaling) reliable, 118–19 safety of sharing in Boston Public Schools, 122–28 in clearinghouses, 112 for kidney exchanges, 34, 36, 37, 47–49 market efficiency and, 119–21 for medical residencies, 137–43, 150–51 in New York City school system, 109–10, 112, 153–61 speed of, cotton market and, 89–90 in-kind exchanges, 202–5 Inquiry into the Nature and Causes of the Wealth of Nations, An (Smith), 206–7 insider trading, 48, 85 Institute for Innovation in Public School Choice, 165 interest charges, 200–201, 202, 205 Internet marketplaces, 7, 20–26 Airbnb, 99–103 congestion in, 99–106 dating sites, 72, 169, 175–77 eBay, 104–5, 116–21 payment systems in, 23–26 privacy and, 119–22 real estate, 224–25 reputation in, 115–16, 117–19 safety of, 105 signaling in, 169 targeted ads in, 189–92 thickness of, 105 trust in, 105 Uber, 103–4 Internet of Things, 101 iPhone, 21–22, 24 Iran, Islamic Republic of, 205–6 Iron Law of Marriage, 145 Islam, 200, 201, 205 iStopOver, 102 Japan college applications in, 171 exploding job offers in, 98–99 Jevons, William Stanley, 32 job markets.


pages: 339 words: 109,331

The Clash of the Cultures by John C. Bogle

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

asset allocation, collateralized debt obligation, corporate governance, corporate social responsibility, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, estate planning, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, fixed income, Flash crash, Hyman Minsky, income inequality, index fund, interest rate swap, invention of the wheel, market bubble, market clearing, mortgage debt, new economy, Occupy movement, passive investing, Ponzi scheme, principal–agent problem, profit motive, random walk, rent-seeking, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, shareholder value, short selling, South Sea Bubble, statistical arbitrage, The Wealth of Nations by Adam Smith, transaction costs, Vanguard fund, William of Occam

But while this concept may seem simple and obvious, its actual implementation was too often honored more in the breach than in the observance. Indeed, in 1776, Adam Smith eloquently described—in his The Wealth of Nations—the challenges that existed even in that far simpler era: . . . the managers of other people’s money (rarely) watch over it with the same anxious vigilance with which . . . they watch over their own. . . . Like the stewards of a rich man, they very easily give themselves a dispensation. Negligence and profusion therefore must always prevail.1 Examining the Conflict Some 150 years later in 1932, Columbia University professors Adolph A. Berle and Gardiner C. Means set forth a thesis that echoed the observations of the great Adam Smith. In their classic book The Modern Corporation and Private Property, Berle and Means described the increasingly dominant role of large publicly held corporations in the United States.

See also Index funds assets exchange traded funds versus future of growth in number of as portfolio core profile of trading volumes “Trafficking” in management contracts Transactions: cost of taxes on Trends Turner, Adair Turner, Lynn Turnover: actively managed equity funds exchange traded funds index funds mutual funds Stewardship Quotient and stock market Twardowski, Jan M. 12b-1 fees Value, corporate Vanguard: Admiral shares balanced index fund bond funds, defined-maturity cash flow emerging markets stock fund exchange traded funds “Extended Market” portfolio growth and value index funds history index fund family milestones international funds LifeStrategy Portfolios proxy votes REIT index fund small capitalization stock fund Stewardship Quotient structure and strategy tax-managed index funds Vanguard 500 Index Fund Vanguard Institutional Index Fund Vanguard PRIMECAP Fund Vanguard Total Bond Market Index Fund Vanguard Total Stock Market Index funds Vanguard U.S. Growth Fund Vanguard Wellington Fund. See Wellington Fund Vanguard Windsor Fund Volatility Volcker Rule “Wall Street Casino, The” (Bogle) Wall Street Journal, The Wealth of Nations, The (Smith) Wellington Fund: about advisory fees Annual Report (1967) Annual Report (1978) Annual Report (2000) Annual Report (2010) assets under management Beta dividend income projections dividend policy dividends equity ratio expenses Fall (1967–1978) founding income strategy, implications of investment committee lessons from memo on restructuring memo on speculation naming of other balanced funds versus other pioneer funds compared to performance portfolio approach to higher income Renaissance (1978-2012) restructuring memo returns Rise (1929-1966) shareholder objectives survey speculation memo Wellington Management Company.

I wince when the Federal Reserve states its intention to raise asset prices—including “higher stock prices”—apparently irrespective of the level of underlying intrinsic stock values. Substantive limits on short selling are another nonstarter for me. The overriding principle should be: Let the markets clear, at whatever prices that willing and informed buyers agree to pay to willing and informed (but often better-informed) sellers. Individual investors need to wake up. Adam Smith–like, they need to look after their own best interests. Of course, that would mean that individual investors must demand much better, clearer, and more pointed disclosures. We need a campaign to educate investors about the hard realities of investing. Investors need to understand not only the magic of compounding long-term returns, but the tyranny of compounding costs; costs that ultimately overwhelm that magic.


pages: 326 words: 103,170

The Seventh Sense: Power, Fortune, and Survival in the Age of Networks by Joshua Cooper Ramo

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Airbnb, Albert Einstein, algorithmic trading, barriers to entry, Berlin Wall, bitcoin, British Empire, cloud computing, crowdsourcing, Danny Hillis, defense in depth, Deng Xiaoping, Edward Snowden, Fall of the Berlin Wall, Firefox, Google Chrome, income inequality, Isaac Newton, Jeff Bezos, job automation, market bubble, Menlo Park, natural language processing, Network effects, Norbert Wiener, Oculus Rift, packet switching, Paul Graham, price stability, quantitative easing, RAND corporation, recommendation engine, Republic of Letters, Richard Feynman, Richard Feynman, road to serfdom, Sand Hill Road, secular stagnation, self-driving car, Silicon Valley, Skype, Snapchat, social web, sovereign wealth fund, Steve Jobs, Steve Wozniak, Stewart Brand, Stuxnet, superintelligent machines, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, too big to fail, Vernor Vinge, zero day

became the essential questions, not Which lord controls that field? Releasing power into the busy arms of businessmen, politicians, scientists, and artists meant that ideas, politics, and innovations competed. They got better. They evolved. And the sum of all these interacting pieces produced sustained economic growth for the first time in history. In a “commercial society,” Adam Smith explained in The Wealth of Nations, “every man thus lives by exchanging, or becomes in some measure a merchant.” Smith didn’t mean that everyone was really a merchant; rather, in a world of markets, each of us—our labor, our ideas, our capital—is a commodity. We are liberated, but only to compete. For votes, for jobs, for resources. If the old faiths and institutions couldn’t stand the pressures of these powerful, equalizing forces, then new ones had to be built.

in Kant: Political Writings, ed. H. S. Reiss, trans. H. B. Nisbet, Cambridge Texts in the History of Political Thought (Cambridge: Cambridge University Press, 1991), 54. “Human knowledge”: Francis Bacon, The New Organon, ed. Lisa Jardine and Michael Silverthorne, Cambridge Texts in the History of Philosophy (Cambridge: Cambridge University Press, 2000), 33. In a “commercial society”: Adam Smith, The Wealth of Nations, ed. Kathryn Sutherland, Oxford World’s Classics (Oxford: Oxford University Press, 2008), 31. “the scaffolds humans erect”: Douglass C. North, Understanding the Process of Economic Change (Princeton, NJ: Princeton University Press, 2010), 48. Museums… Scientific congresses: Joel Mokyr, “The Intellectual Origins of Modern Economic Growth,” Journal of Economic History 65, no. 2 (June 2005): 290.

“Being hacked”: Halvar Flake [Thomas Dullien], “Why Johnny Can’t Tell If He Is Compromised” (2014). Unlike traditional conflicts: Derek Gregory, “The Everywhere War,” The Geographical Journal 177, no. 3 (September 2011): 238–50. He labeled it: Donald G. Janelle, “Spatial Reorganization: A Model and Concept,” Annals of the Association of American Geographers 59, no. 2 (1969): 348–64. Adam Smith’s famous remark: Adam Smith, The Theory of Moral Sentiments, ed. Knud Haakonssen (Cambridge: Cambridge University Press, 2002), 198. “Time is a ride”: Stewart Brand, The Clock of the Long Now, 67. The German philosopher: Monika Codourey, “Mobile Identities and the Socio-Spatial Relations of Air Travel,” Surveillance & Society 5, no. 2 (2008): 188–202. “Only large states”: Nicholas John Spykman, “Frontiers, Security, and International Organization,” Geographical Review 32, no. 3 (July 1942): 439.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, accounting loophole / creative accounting, additive manufacturing, Airbnb, algorithmic trading, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, interest rate derivative, interest rate swap, Internet of things, invisible hand, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund

That will, however, require crafting a new narrative about our financial system and its place in our economy and society. As the crisis of 2008 and its continuing aftermath have surely shown, we are at the end of what financialization can do for growth. We need a new model, one that enriches the many rather than the few, in a more sustainable way. We need markets that are structured fairly, with the kind of equal access that Adam Smith described in The Wealth of Nations. We need a political economy that isn’t captured by moneyed interests. And we need a financial sector that understands that it should be a helpmeet to business, not an end in and of itself. Even if we don’t understand the particulars of Wall Street, we all know on some gut level that the current system isn’t working. How could it be when 1 percent of the population takes most of the world’s wealth, and a single industry that creates only 4 percent of jobs takes nearly 25 percent of our country’s corporate profits?

Alyssa Davis and Lawrence Mishel, “CEO Pay Continues to Rise as Typical Workers Are Paid Less,” Economic Policy Institute, June 12, 2014. 51. Dunstan Prial, “Fund Managers Pressured to Be ‘Better Corporate Citizens,’ ” Associated Press, March 9, 2000; Willard T. Carleton, James M. Nelson, and Michael Weisbach, “The Influence of Institutions on Corporate Governance Through Private Negotiations: Evidence from TIAA-CREF,” Journal of Finance 53, no. 4 (1998): 1335–62. 52. Adam Smith, An Inquiry into the Nature and Causes of The Wealth of Nations, vol. 2, edited by Edwin Cannan (London: Methuen & Co., 1904), 159. CHAPTER 9: THE ARTFUL DODGERS 1. Vanessa Houlder and Vicent Boland, “Corporate Tax: The $240bn Black Hole,” Financial Times, November 25, 2015. 2. Carla Mozée, “What an AstraZeneca Deal Could Do for Pfizer’s ‘War Chest,’ Taxes,” MarketWatch, April 28, 2014. 3. “Tracking Tax Runaways,” Bloomberg, Visual Data (Updated April 13, 2015); Andrew Ross Sorkin, “Banks Cash In on Inversion Deals Intended to Elude Taxes,” New York Times, July 28, 2014. 4.

Still, this was a sensitive topic—since asset managers are hired to manage the retirement money of the very firms whose corporate governance they might be trying to direct—and Bogle’s suggestion got a rather mixed reaction. “I remember one of the guys from some big firm said, ‘We all know what you’re trying to do, Jack. Why don’t you just leave it to the markets? Leave it to Adam Smith’s Invisible Hand!’ And I said, ‘Don’t you realize that we are Adam Smith’s Invisible Hand?’ ”48 It’s a profound statement. Finance is in control, yes. But that means that it has the potential to be a force for economic and social good, rather than exploitation. Yet in this case, harnessing that force would require that the asset management industry turn its back on a business model that has been yielding unbelievably easy money for decades.


pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

accounting loophole / creative accounting, Albert Einstein, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, crony capitalism, Dava Sobel, Deng Xiaoping, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, informal economy, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Ronald Coase, Ronald Reagan, sealed-bid auction, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, Xiaogang Anhui farmers, yield management

Boston, Routledge and Kegan Paul. First published in 1900. Simon, Herbert A. 1991. “Organizations and Markets.” Journal of Economic Perspectives 5, 25–44. Skidelsky, Robert. 1996. The Road from Serfdom, London, Penguin. Slemrod, Joel, ed. 2000. Does Atlas Shrug? The Economic Consequences of Taxing the Rich. Cambridge, Harvard University Press. Smith, Adam. 1976. An Inquiry into the Nature and Causes of the Wealth of Nations. Chicago, University of Chicago Press. First published in 1776. Smith, Eugene. 1975. Minamata, New York, Holt, Rinehart, Winston. Smith, Vernon L. 1982. “Microeconomic Systems as an Experimental Science.” American Economic Review 72, 923–955. Sobel, Dava. 1996. Longitude. New York, Penguin. Sobel, Joel, and Takahashi, Ichiro. 1983. “A Multistage Model of Bargaining.” Review of Economic Studies 50, 411–426.

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner,” Adam Smith noted, “but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantage.” Guided by prices, people make their choices. Goods get produced and delivered to the people who want and can pay for them. Self-interest is harnessed to the greater good. Intending only his own gain, a producer or a buyer is “led by an invisible hand,” Smith famously concluded, “to promote an end which was no part of his intention.”10 The metaphor of the invisible hand Smith formulated in 1776 is the classic account of what drives a market economy. It was nearly two centuries before Adam Smith’s insight was taken beyond the metaphor of the invisible hand and given a rigorous theoretical foundation.

Often the current stallholder acquired the space from her mother or sister. Spaces are also rented, bought, and sold. Certain respected merchants, called “queen mothers,” play the part of judges, arbitrating when disputes arise. Gains from trade are generated. The vendors make others—as well as themselves—better off by making food available to the urban poor, and by providing income to farmers with which to buy necessities like clothing. Thus they exemplify Adam Smith’s analysis of the merchant: “By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it.” The Makola marketplace has continued to operate despite periodic, sometimes violent attempts by the Ghanaian government to shut it down. These attempts reached a height of brutality in 1979 after the military government accused marketplace traders of violating its price controls.


pages: 325 words: 99,983

Globish: How the English Language Became the World's Language by Robert McCrum

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Alistair Cooke, anti-communist, Berlin Wall, British Empire, call centre, colonial rule, credit crunch, cuban missile crisis, Deng Xiaoping, Etonian, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, invention of movable type, invention of writing, invisible hand, Isaac Newton, jimmy wales, knowledge economy, Livingstone, I presume, Martin Wolf, Naomi Klein, Ralph Waldo Emerson, Republic of Letters, Ronald Reagan, Scramble for Africa, Silicon Valley, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade route, transatlantic slave trade, transcontinental railway, upwardly mobile

With remarkable foresight, the Scots economist Adam Smith identified this process as early as 1776 in The Wealth of Nations. There were, wrote Smith, two milestones on Britain’s road to global empire: the settlement of North America and the opening of trade routes to India and the East: The discovery of America, and that of a passage to the East Indies by the Cape of Good Hope, are the two greatest and most important events recorded in the history of mankind. By uniting, in some measure, the most distant parts of the world, by enabling them to relieve one another’s wants, to increase one another’s enjoyments, and to encourage one another’s industry, their general tendency would seem to be beneficial. Empire made thoughtful people reflect on the cost to liberty. Adam Smith believed there was an inevitable price.

In simple terms, Smith’s idea, which trickled down into countless expressions of English colonial policy across the globe, was that Britain should stick to the moral high ground, remain faithful to its explicitly commercial traditions, avoid military commitments and be the thrifty, humane and doughty champion of ‘natural liberty’ in all its manifestations. It was this idea that generations of independent-minded Scots and Englishmen would take to the four corners of the world. In this way, the world’s English became the vessel for a progressive culture and political economy. William Pitt the younger, the prime minister during the last years of the century, used to quote from Adam Smith in his Commons speeches (while privately admitting that The Wealth of Nations was beyond him), popularising Smith’s ideas and placing them at the heart of his government’s foreign policy. Yet again, it was war with France that shaped the final decades of Britain’s century-long struggle for global dominance. At first, the French Revolution renewed ancestral Gallic ambitions and, in opposition, stimulated a bruising nationalist temper in Britain.

Schoenbaum, Shakespeare Lives (Oxford, 1993), pp. 104-10. 165 ‘Let me search for the clue’: David McCullough, John Adams (New York, 2001), pp. 48-9. 166 ‘There is nothing preserved of this great genius: ibid., p. 359. 166 Abraham Lincoln used to derive special pleasure from reading Shakespeare: Doris Kearns Goodwin, Team of Rivals (London, 2009), p. 546. 166 The discovery of America: Adam Smith, The Wealth of Nations (1776). 167 The surge in Britain’s fortunes was palpable: Piers Brendon, The Decline and Fall of the British Empire, 1781-1997 (London, 2007), p. 28. 168 Closer to home, in Egypt: Maya Jasonoff, Edge of Empire: Conquest and Collecting in the East, 1750-1850 (London 2005), p. 243. 168 ‘oak planted in a flower pot’: Brendon, Decline and Fall, p. 28. 169 The British media was playing its part too: Tombs and Tombs, That Sweet Enemy, pp. 188-9. 169 ‘The greatest revolution’: quoted ibid., p. 189. 170 So the French Revolution was denied: this account of the duke of Dorset’s abortive game relies on ‘Carry on Cricket: The Duke of Dorset’s 1789 Tour’, History Today, 39 (August 1989).


pages: 196 words: 57,974

Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, barriers to entry, Bonfire of the Vanities, borderless world, business process, Corn Laws, corporate governance, corporate social responsibility, credit crunch, crony capitalism, double entry bookkeeping, Etonian, hiring and firing, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, mittelstand, new economy, North Sea oil, race to the bottom, railway mania, Ronald Coase, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, tulip mania, wage slave, William Shockley: the traitorous eight

Dickson, The Financial Revolution in England, 90. 26. Both quoted in Anthony Sampson, Company Man: The Rise and Fall of Corporate Life (New York: Times Business, 1995), 17. 27. Quoted in Lawrence James, Raj: The Making and Unmaking of British India (London: Abacus, 1998), 49. 28. Beatty, Colossus, 18. 29. Stephen Innes, “From Corporation to Commonwealth,” in ibid., 18. 30. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, vol. 2 (New York: Oxford University Press, 1976), 733. He details the shortcomings of chartered companies on pp. 733–58. 31. K. N. Chaudhuri, The Trading World of Asia and the English East India Company (Cambridge: Cambridge University Press, 1978), 454. 32. Ann Carlos and Stephen Nicholas, “Giants of an Earlier Capitalism: The Chartered Trading Companies as Modern Multinationals,” Business History Review 62 (Autumn 1988): 398–419. 33.

Nowadays, nobody finds it odd that, a century after its foundation, the Minnesota Mining and Manufacturing Company makes Post-it notes, or that the world’s biggest mobile-phone company, Nokia, used to be in the paper business. The Victorians also gave us many of the most profound arguments that swirl around companies. Nowadays it is assumed that the causes of capitalism and companies are inseparable. Yet many of the earliest critics of the joint-stock company and the “subsidy” of limited liability were economic liberals, taking their cue from Adam Smith, who had derided them as antiquated and inefficient. One noted Victorian thinker, A. V. Dicey, fretted that the company would become the harbinger of a new age of collectivism: “one trade after another” would pass from the “management of private persons into the hands of corporate bodies created by the state.”3 (Karl Marx gave a grudging welcome to companies for much the same reason.) For the company’s early critics, it was not just a question of allowing investors to repudiate responsibility for their debts; many Victorian liberals also worried whether professional managers could be trusted to act in the interests of the owner shareholders.

In 1619, the Virginia Company effectively introduced representative democracy into the colonies, authorizing a General Assembly in which members elected the company’s officers.28 John Winthrop (1588–1649) took Massachusetts down the same road in 1630 when the General Court of the Massachusetts Company transformed itself into a commonwealth, redefining “freemen” from stockholders in a commercial venture to citizens of a state.29 Roughly put, the General Courts evolved into increasingly rebellious state legislatures. Economic liberals produced a different array of charges. Adam Smith (1723–1790), who was obsessed with the East India Company’s abuses in Bengal, had two basic complaints. First, he disliked the fact that chartered companies possessed monopolies (albeit ones that were being diluted, even as he scribbled away, by both licensed and clandestine competition). For him, the chartered companies were “either burdensome or useless” and they “either mismanaged or confined” trade.30 Second, he thought that joint-stock companies were inherently less efficient than sole traders.


pages: 166 words: 49,639

Start It Up: Why Running Your Own Business Is Easier Than You Think by Luke Johnson

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Albert Einstein, barriers to entry, Bernie Madoff, collapse of Lehman Brothers, corporate governance, corporate social responsibility, credit crunch, Grace Hopper, happiness index / gross national happiness, high net worth, James Dyson, Jarndyce and Jarndyce, Jarndyce and Jarndyce, mittelstand, Network effects, North Sea oil, Northern Rock, patent troll, Plutocrats, plutocrats, Ponzi scheme, profit motive, Ralph Waldo Emerson, Silicon Valley, software patent, stealth mode startup, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, traveling salesman, tulip mania

Somehow that trait is more endearing than the idea of a money-making machine who cannot even get carried away in affairs of the heart. The delights of the portfolio career I once attended a dinner party where the host went round the table one by one, describing what each of us did for a living. It was a sobering moment. Here were our lives, summed up in a few words. Is this really how we will be remembered? Is this all we have done? Ever since Adam Smith published The Wealth of Nations in 1776, modern societies have focused on the division of labour. It is one of the platforms on which industrial capitalism is constructed. We have become ever more specialist in our work – no one wants to be known as a jack of all trades, master of none. Today it is all niches. After all, the sum of human knowledge has expanded exponentially since Leonardo da Vinci’s day, when the concept of a Renaissance man, who had learning across all fields, was valid.

Building a business is never easy, and the best support always comes from those who have been there before. Just beware Adam Smith’s famous dictum: ‘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.’ These days that’s a criminal offence. Cliques and clubs – the ties that bind It seems every profession has a small circle of characters that basically command things. In most industries, you can fit them round a table. After all, in mature economies most markets are dominated by a handful of operators – if you assemble the owners, founders and heads of those companies, it would often be fewer than twenty people. There is mutual respect and occasional cooperation between these bosses – but is there plotting against the consumer? Adam Smith thought so, but I disagree.

A bank that was formerly happy to let a company trade on overdraft might suddenly insist that it stays in the black every month, which for many is impossible. Instead of waiting for the post, suppliers send a courier to wait in reception to collect a cheque. After all, you cannot meet a payroll on excuses. ‘When the profits of trade happen to be greater than ordinary, overtrading becomes a general error both among great and small dealers’ Adam Smith Meanwhile, corporations go through agonies in getting their year-end audit signed off. Even giant companies can struggle with the key ‘going-concern statements’ in their accounts – basically a promise to shareholders that, all things considered, the company can continue to trade for the next twelve months. An audit partner once told me of a massive, hugely profitable company with more than £10 billion of debt that needed to be authorized by the bank for a further year – and at that stage the bank wasn’t promising anything.


pages: 273 words: 34,920

Free Market Missionaries: The Corporate Manipulation of Community Values by Sharon Beder

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

anti-communist, battle of ideas, business climate, corporate governance, en.wikipedia.org, full employment, income inequality, invisible hand, liquidationism / Banker’s doctrine / the Treasury view, minimum wage unemployment, Mont Pelerin Society, new economy, price mechanism, profit motive, Ralph Nader, rent control, risk/return, road to serfdom, Ronald Reagan, school vouchers, shareholder value, structural adjustment programs, The Chicago School, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, Torches of Freedom, trade liberalization, traveling salesman, trickle-down economics, Upton Sinclair, Washington Consensus, young professional

Witnesses to the hearings told the parliamentary committee that share plans were ‘a means of aligning the interests of business and employees so as to achieve better business results’; a way of rewarding employees for their efforts in a ‘tax-effective’ manner; a method of encouraging savings and ‘a means of “democratising” capital: that is, spreading capital ownership and access to capital more widely within the community’.47 Nelson argued that ‘employee share plans bind people more closely to the activities of their fellow citizens who work within a particular organization’ and ‘create a more inclusive workplace’.48 Shann Turbull, a founding member of the Australian Employee Ownership Association, and author of Democratising the Wealth of Nations, argued that corporations misused employee share ownership schemes as a way of legitimizing excessive payments to top executives by offering shares to all employees: ‘I am suggesting that we want to see beyond that to get not just a mandate within a corporation, but a mandate within the whole voting constituency of Australia, so that all people have an inclusive vested interest in property ownership.’49 The Business Council of Australia (BCA) also support employee share ownership plans because they give large numbers of people a financial stake in the company they work for and therefore an incentive to contribute to its success: ‘Shared ownership can create an environment of common goals and shared interest between employees and management.’50 Eighty per cent of its members listed on the stock exchange had such plans.

Daniel Butler, ‘Radicals without Reins’, Accountancy, vol 116, no 1224, 1995. Desai, ‘Second-Hand Dealers in Ideas’, p31; James, ‘The Idea Brokers’, p497; Thatcher quoted in Cockett, Thinking the Unthinkable, p173. Quoted in Yergin and Stanislaw, The Commanding Heights. Dexter Whitfield, Making It Public: Evidence and Action against Privatisation, London, Pluto Press, 1983, p47; Adam Smith Institute, ‘The Adam Smith Institute’, Adam Smith Institute, www.adamsmith.org.uk/ accessed 7 May 2001. Ashford, ‘Politically Impossible?’, p24; Whitfield, Making It Public, p46. Robin Oakley, ‘Privatized Policy-Making for the Tory Right’, The Times, 17 February 1989; Alan Rusbridger, ‘A Thought for Tomorrow’, The Guardian, 22 December 1987. Rusbridger, ‘A Thought for Tomorrow’. Whitfield, Making It Public, p47. ‘The Good Think-Tank Guide’, The Economist, vol 321, no 7738, 1992.

.,” or So They Said’, George Mason University, Fairfax, VA, http://mason.gmu.edu/~ayarrow/economic%20journalismform.PDF accessed 2 January 250 FREE MARKET MISSIONARIES Yergin, D. and Stanislaw, J. (1998) The Commanding Heights: The Battle between Government and the Marketplace That Is Remaking the World, Simon & Schuster, New York Index 3M 209, 210, 222 Abbott Laboratories 69 Academy of Enterprise 214 Access Economics 138 ACIL Economics/ACIL Tasman 138 Adam Smith Club 128 Adam Smith Institute 113 Adler, Rodney 135 The Advertiser 129 advertising 1970s campaigns 63–75 free enterprise advertising 15, 16, 20, 22, 23, 26, 29–42 post-war campaigns 32–39 pre-war criticism 29 role 30–32 share ownership campaigns 195, 196 techniques 16, 67 use of polling 32 wartime 30 Advertising Council (US) 26, 30, 32–35, 39, 46, 64, 65–69, 74–75 Advertising Federation of America 49 AFL 33–34 AIG 210 Aims for Freedom and Enterprise (AIMS) 79, 87 Aims of Industry 113 Alcoa 37–38, 50, 132 Allen Consulting 138 Allende, Salvador 97, 145 see also Chile Alliance for Worker Retirement Security 172 Allied Chemical 69 American Bankers Association 53 American Bar Association 63 American Chamber of Commerce in Australia 84, 211 American Council on Education 47 American Cyanamid 51, 69 American Economic Association 219 American Economic Foundation (AEF) 47, 54 American Enterprise Association 48 American Enterprise Forum 71 American Enterprise Institute (AEI) 54, 117, 119, 121, 131, 135, 136 American Express 119, 212, 215 American Federation of Advertising 30 American Heritage Foundation 26 American Iron and Steel Institute 26, 53 American Legion 49 American Management Association 55 American Medical Asociation 49 American Petroleum Institute 26, 50, 53, 119 American Shareholders Association 174, 183 American Tobacco 3, 4 American Vocational Association 47 American way of life 15, 16, 21, 33, 57 Americans for the Competitive Enterprise System 54 AMP Insurance 134 Arthur Andersen 133 Assembly of Australian Business Organisations (AABO) 83 Association of British Chambers of Commerce 81, 113 Association of National Advertisers 32 Association of Private Enterprise Education (APEE) 221–222 Atlas Economic Research Foundation 114–115 AT&T 15, 31, 102, 193, 209, 222 AusIndustry 213 Australia children’s enterprise education 209, 210, 211, 212–213 civil service 89, 130, 131, 135, 138, 158–160, 163 consultants, management 138, 158 economic advisers 155–165 economic education 81–89, 224 economic literacy 218 employee share ownership 180–181 key civil servants 159–162 key people and connections 137 market liberalization 152, 155–163, 164–165 National Priorities Project 132 New Right 130–131, 159, 160 privatizations 132, 138, 196 privatizations of pensions 183–184 Senior Executive Service 158–159 share ownership 174, 201–202 social justice 165, 192 think tanks 84, 127–138 Treasury 156–157, 161 see also Stone, John 252 FREE MARKET MISSIONARIES universities 89, 159 Washington consensus 149, 154 Workers’ Party 127–128 Australian Bankers Association 84 Australian Business Week 212–213 Australian Chamber of Commerce 64, 81–83, 86 Australian Chamber of Manufacturers 83, 134 Australian Coal Association 133 Australian Employers’ Federation 132 see also Hay, Andrew Australian Farmers’ Federation 83 Australian Federation of Commercial Broadcasters 88 Australian Free Enterprise Association 85 Australian Gas Light Company 180 Australian Industries Development Association 84 Australian Institute of Public Policy (AIPP) 135 Australian Labor Party (ALP) 84, 85, 134, 152, 156–158, 175 Australian Lecture Foundation 129 Australian Mining Industry Council 83, 84, 129, 132, 133 Australian National University 155, 160 Australian Public Service Association 138 Australian Share Ownershp Association 180 Australian Small Business Association 132 Australian Stock Exchange 130 Australian Wool Growers and Graziers’ Council 83 Balderstone, James 134 Balladur, Edouard 197 Bank of America 215 Baroody, William Jr 117 Barratt, Paul 162 Barton, Bruce 15, 30 Baumol, William 102, 103 Baxter, Ken 160, 162 Bennet, William 171 Bergen Chamber Economic Education Foundation 72 Bergen County Chamber of Commerce 72 Bernays, Edward 1, 3–4 Best Buy 210 Boeing 212 Booker T.


pages: 243 words: 66,908