Archive: Adam Smith

I really don’t want this debate between me and DK to go on and on ad infinitum, so I’ll keep this short. DK has responded to my post yesterday. He says I’m missing the point. But I fear it is infact DK who is missing the point. But I’ll go through his points in the order he wrote them.

…[O]ne might also say that, to bring the greatest economic prosperity, one might desire a certain type of person to move into this country. Are the people that Martin Kelly constantly highlights in his Foreign Criminal Of The Day series (a great many of whom carry previous convictions in their own countries) economically or socially beneficial to this country? I would say that they are not.

DK is right. But British-born criminals aren’t economically or socially beneficial to this country either. Would you send all British-born criminals on to a desert island because of this?

I am being facetious there. Of course it would be prudent not to allow foreign criminals into this country. But that is distinct from letting immigrants in as a whole. I am aware that most libertarians are as keen on stopping crime as anybody else. That’s why I said in my previous post, “There is probably not a single (sane) person on the planet who thinks that there should be no government.” Most recognise the need to uphold laws, so there is no hypocrisy involved when a libertarian says he would like fewer foreign criminals coming in to the country.

But this is the thing. Once you accept that some government intervention can be a force for good, you have voided your ability to use “small government” as a mantra, a panacea for all economic ills.

Oh, good god. No, you haven’t; you have simply asked the government to act in the interests of the people but only within that competence.

Missing the point alert.

I will ask the question again. Why is asking the government to act in the interests of the people so good in situation x, yet so so baaad in situation y? How can that be? You still have not explained this.

If the people of this country have asked their government, their servants, to restrict, in some small ways, immigration then they are hardly asking their government to curtail their freedom (to emigrate if they want).

You may as well say, “If the people of this country have asked their government to implement socialist policies then they are hardly asking their government to curtail their freedom.” This is why some free-market enthusiasts often deride European governments — even though the citizens of those countries usually quite like the socialist policies. By bringing in this get-out clause — “the people asked them to, so it’s okay” — DK has once again made the “small government” argument redundant.

DK then mentions the cultural issues again.

…but you have admitted the cultural problems so I almost need not continue…

Remember my first post on this subject? I cited Adam Smith for a reason. As I said in my first post, Smith is talking about goods and capital, but I don’t see any reason why it can’t apply to labour. DK does say in his post: “A plastic toy frog from China is not going to suddenly jump up and rape and kill your daughter.” I’ve dealt with crime already. So given that (ideally) criminals would not be let in, let’s assume that people coming into the country are not more likely to become criminals than British-born citizens.

There are lots of relevant bits that I can cite, but I said I’ll keep it short so here we go.

First, every individual endeavours to employ his capital as near home as he can, and consequently as much as he can in the support of domestic industry; provided always that he can thereby obtain the ordinary, or not a great deal less than the ordinary profits of stock.

Thus, upon equal or nearly equal profits, every wholesale merchant naturally prefers the home trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade. In the home trade his capital is never so long out of his sight as it frequently is in the foreign trade of consumption. He can know better the character and situation of the persons whom he trusts, and if he should happen to be deceived, he knows better the laws of the country from which he must seek redress…

…To give the monopoly of the home market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must, in almost all cases, be either a useless or a hurtful regulation. If the produce of domestic can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful. It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy.

This is probably a gross simplification, but what I think Smith was saying that is extremely advantageous for people to stay at home to do their business. (In the case of labour, this is so obvious. Family ties, friends, history, culture — these are all things that encourage us to stay at home.) So if somebody wants to do their business away from home, the benefits of doing so must be so high that any government intervention will either be useless or harmful.

DK continues:

I call for small government because big government is not only economically bad, but also socially damaging: hence my little exegesis above. I do not call for small government because I am a libertarian (indeed, I was barely aware of the concept before I started blogging: I am no trained economic or political commenter, a fact which must be painfully obvious to those that are. I merely extrapolate from information delivered): it is because I have come to the conclusion that the smaller you can make the government the better it is for everyone that I call myself a libertarian…

This is just chicken and egg. Whether you believe that small government is good because you’re a libertarian or whether you call yourself libertarian because you believe that small government is good is neither here nor there. The point is that, whichever came first, you call yourself a libertarian and you believe in small government. Apart from in that one policy area.

Here is the next missing the point alert.

To say that I have become a “a utilitarian like the rest of us” is completely fucking stupid; Neil Harding also believes that government can be a force for good: are you saying that he and I are the same because we are both utilitarians? I don’t fucking think so. Neil is a socialist: I am very far from being so.

As far as I can tell, DK seems to think that by calling him a utilitarian I am somehow trying to paint him as a socialist in denial, or make him “the same” as a Labour supporter, or something. Let me get this one clear. What I meant by describing DK as a “utilitarian” was merely that he doesn’t always believe that small government is beneficial.

The possibility that government can be a force for good has come in to play. That is all I meant by saying “utilitarian”. So, yet again, this means that using “small government” as an argument to back up your position is not enough. If you believe that government can be a force for good, how can you then justify something else because it involves making the government smaller?

As I have said, it is not necessarily inconsistent to want more restrictions on immigration but to want fewer restrictions on other parts of the economy. But when you have conceded that government intervention can be a good thing, opposing something simply because it involves government intervention is hypocritical. This doesn’t mean that you can’t have other perfectly valid arguments in favour of your position. This is what I have been trying to get at.

I am aware that DK has often put forward alternative justifications for his opinions. Infact, he has started to do this in his post today:

However, to bring it back to what started this debate, I do share UKIP’s premise that it is wrong that it is the EU which controls our policy: whatever we decide to do about immigration, it should be the people—or, even, the elected government—of this country that make it, not the unelected bureaucrats of the EU. Call it a point of principle, if you will.

At the moment, we have seen a vast increase in means-tested benefits which lead to massive marginal tax rates, often of over 90%. This is clearly a disincentive for people to get off their fat, fucking arses and work (and thus take responsibility for their own lives).

Of course, you could say that by controlling immigration you are stilting competition in the labour market which is clearly a disincentive for people to work harder. But I digress. There is nothing particularly wrong with either of the justifications that DK has made there. These arguments are worth paying attention to. But if he ever justifies his position by saying that it reduces the size of government I will ignore it because I know that he doesn’t genuinely believe in it.

The point is that calling for more government intervention in any area of the economy is not consistent with “libertarian”, “small government” or “free market” principles.

One last missing the point moment.

That’s how the free market supposedly works you see.

Fair enough. Though note the word “supposedly”…

Indeed. But I’m not the one who’s supposed to be defending the free market.

One of the most interesting things about libertarians is how quickly their devotion to free markets and capitalism disappear so quickly as soon as it involves those dirty foreigners getting a piece of the action.

The Devil’s Kitchen likes to describe himself as a libertarian (as he did in a self-congratulatory post today) and makes much of his support for free markets — albeit almost always in terms of how much tax he has to pay.

But yesterday all of that talk about free markets was thrown out of the window when he approvingly posted a video of Swivel Eyed Farage on Sunday AM.

DK says:

And, on current showing, there is simply no major party that supports the libertarian agenda (I believe that UKIP are the closest that we have, hence my support for them).

Ukip libertarian? I hardly think so. Here is Swivel Eyed Farage in action.

I read one person somewhere (sorry, I’ve forgotten who) complaining that the amount of time Ukip was given on Sunday AM wasn’t enough. Having now watched the clip, I can understand why. If it continued for much longer it probably would have counted as a Party Political Broadcast. How Farage could get away with making such glaringly inconsistent statements almost in the same breath without anything less than fawning deference from Huw Edwards is beyond me.

Farage said:

Should somebody who’s interviewed as a school teacher and then changes faith midway through be allowed to teach a class of children when they can’t see her face? I wouldn’t have thought so, no.

Immediately afterwards, when Huw Edwards asked about the British Airways worker who was asked to cover her cross, Farage’s response was the exact opposite! One rule for Muslims and another for Christians.

Well I find that amazing, I mean British Airways are one of those companies that have consistently been anti-British… So I’m not surprised at all by BA’s behaviour.

Later on he says:

The underlying philosophy that runs through every single Ukip policy is that we want less government interference in our lives.

But predictably, just one minute later, he advocates the view that governments should be able to tell people where they can and can’t live. The reason why? As DK says:

His point about differing GDPs is a good one, I think, and forms the basis of my reservations on the unfettered free trade of peoples between countries. It seems to me that, inevitably, should you allow this, many more people will flow from the lower GDP countries into the high GDP countries and, realistically, that there will be far fewer emigrating to those lower GDP countries.

The fact that different countries have different GDPs is not a good argument against “the unfettered free trade of peoples between countries”. GDP is a measure of all of the income earned in an economy. So if you say that a country has a lower (per capita) GDP than another, that just means that the average income of a citizen of that country is lower.

Different people have different incomes. That is a fact of life. These differences in income exist within Europe. They also exist within the UK. They also exist within Kirkcaldy.

If this is so much of a problem that the government has to set some kind of limit to immigration, then it must also be enough of a problem to set a limit to the amount that people move within a country. There would be quotas on the number of people who can move from the Highlands to the Home Counties. They would build a moat around Ferguslie Park.

But they haven’t. That’s because the economy can cope with people of different economic backgrounds moving around the country. It is a fact that Scots prepared to move to England and English people prepared to move to Scotland in search of work will make more money than if they just stayed where they were born.

The economy as a whole benefits from this free movement of people. If Mr S from Scotland is really good at making widget X which is made in England, Mr S will move to England to work in job X because that’s what he’s good at, so he’ll make the most money there. And because he’s really good at his job, he makes widget X more efficiently than the average Mr E from England would have. Because Mr S is better at his job, firm X’s costs are lower and the benefits are spread to the economy as a whole.

Just because the line on the map has moved doesn’t make this fact untrue. And this isn’t just some pie in the sky economic theory. I am sure that everybody can think of several people who have moved long distances to get a job because they could see the clear benefits of doing so. DK himself is an Englishman living in Edinburgh for crying out loud! Just imagine how much of an economic shithouse the world would be if nobody ever moved away from their place of birth.

I really don’t see how it can be consistent to support a free market within a country but then advocate that the free trade — which is supposedly so beneficial to all — should end at the line drawn on a map.

Given that DK is such a “libertarian”, I am sure he will be familiar with the section of libertarian poster boy Adam Smith’s The Wealth of Nations dealing with protectionism (Book IV, Ch II). Smith might be talking about goods, but I cannot see any reason why what he says does not apply to labour aswell. If anyone has any reasons I would love to hear them.

Saying that the fact that countries have differing GDPs is a problem for a free trade area is a bit like saying that having firms of differing sizes is a problem in an economy. It is not. DK is probably right when he says, “there will be far fewer emigrating to those lower GDP countries,” if free trade of peoples is allowed.

This kind of thing is usually celebrated by libertarians. It’s freedom of choice, you see. So when there is competition, firms that don’t match the expectations of their customers have to adapt in order to survive. It is exactly the same for countries. When people can pick and choose where they live, governments are forced to take a long, hard look at the way they are running their economies. Sometimes they might even reform.

If, as libertarians suggest, it is the case that cutting back on welfare benefits, lowering corporate tax and so on improves a country’s economy and living standards, then open borders will force governments to adopt these policies as they try to attract jobs to their economies.

I thought that was what DK wanted? But by opposing the “free trade of peoples”, he could well be supporting the continuation of the welfare state.

Adam Smith on MPs’ wages.

Students don’t seem to be too happy about the new name for the merged Fife and Glenrothes colleges, Adam Smith College (irony alert: you can’t study Economics there).

In what may be a unique move the Students Association will not be named after the college.
Instead the economist’s name has been binned in favour of Jennie Lee, the Lochgelly miner’s daughter who became a socialist MP at the age of 24 and was instrumental in setting up the Open University.

Heh!