The Profound Wisdom and Humanitarianism of Adam Smith

When we think of someone of Smith’s stature and intellect, we might imagine ourselves being easily intimidated into silence in their presence.  Yet he was described by several of his contemporaries as being “comically absent-minded, with peculiar habits of speech and gait, and a smile of inexpressible benignity.”

Imagine yourself on a tour of a tanning factory with Smith engaged in an in-depth conversation about free trade when he suddenly steps into a huge tanning pit from which he needs help to escape (this purportedly happened while in the company of Charles Townshend, British politician and author of the infamous Townshend Acts), or witnessing him “put bread and butter into a teapot, drink the concoction, and declare it to be the worst cup of tea he ever had.”

Without question, Smith was a man of innate wisdom and humanitarianism, and apparently a very down to earth and entertaining one, at that.

I subscribe to Richard Whately’s (1787-1863) theory of value (emphasis mine).

Whately then makes some most important observations — It may be worth observing that in examining, framing, or altering definitions in Political Economy, you will find in most persons a tendency to introduce accidental along with or instead of essential circumstances. I mean that the notion they attach to each term, and the explanation they would give of it, shall embrace some circumstances generally, but not always, connected with the thing they are speaking of, and which might accordingly (by the strict account of an accident) be ‘absent or present, the essential character of the subject remaining the same.” A definition framed from such circumstances, though of course incorrect, and likely at some time or other to mislead us, will not unfrequently obtain reception, from its answering the purpose of a correct one, at a particular time and place. . . . .

“A specimen of that introduction of accidental circumstances which I have been describing, may be found, I think, in the language of a great number of writers respecting Wealth and Value; who have usually made Labour an essential ingredient in their definitions. Now it is true, it so happens, by the appointment of Providence, that valuable articles are, in almost all instances, obtained by Labour ; but still, this is an accidental, not an essential circumstance. 1f the aerolites which occasionally fall were diamonds and pearls, and if these articles could be obtained in no other way, but were casually picked up to the same amount as is now obtained by digging and diving, they would be of precisely the same value as now. In this, as in many other points in Political Economy, men are prone to confound cause and effect. It is not that pearls fetch a high price because men have dived for them ; but on the contrary, men dive for them because they fetch a high price.”

Thus Whately has sent a deadly shaft into the whole Economics of Smith and Ricardo. Smith begins his work by describing Wealth as the produce of “land and labour”; thus making materiality and labour as the essence of Wealth; and he entirely omits Exchangeability. Now, as a matter of fact, not twenty per cent. of Economic or Exchangeable quantities have any labour associated with them at all, and not five per cent. of Economic quantities have materiality and labour associated with them, which shows that materiality and labour are only the accidents of Wealth and Value. It is Exchangeability, which is the sole essence of Wealth, as the ancients unanimously held. The Economists also held that Exchangeability is the real essence of Wealth ; but they clogged it also with materiality, which is entirely inadmissible.

Whately then said that pearls do not fetch a high price because men dive for them, but men dive for them because men give a high price for them ; that is, it is not Labour which is the cause of Value, but Value which is the inducement to Labour; just as Condillac said before him; and this is the entire boulversement of the Economics of Smith and Ricardo.

Whately thus laid the foundation of that system of Economics which I have adopted and developed.

David Henderson writes:

…was shown, in the marginal revolution of 1870, to be wrong

In that vein, an excellent article on AIER titled “Music Has No Economic Value“. A seriously good read.

https://www.aier.org/article/music-has-no-economic-value/