Thursday, March 11, 2010

Adam Smith and role of governments!

Conventional wisdom on the role of governments, as highlighted by laissez faire supporters, has it that Adam Smith favored limiting government role to administering justice, enforcing private property rights, and defending the nation against aggression.

Gavin Kennedy (via Mark Thoma) mines the 1937 edition of Wealth Of Nations from Random House, New York, edited by Edwin Canaan, and comes up with the following list of tasks that Smith envisioned for governments

1. the Navigation Acts, blessed by Smith under the assertion that ‘defence, however, is of much more importance than opulence’ (WN464);
2. Sterling marks on plate and stamps on linen and woollen cloth (WN138–9);
3. enforcement of contracts by a system of justice (WN720);
4. wages to be paid in money, not goods; regulations of paper money in banking (WN437);
5. obligations to build party walls to prevent the spread of fire (WN324);
6. rights of farmers to send farm produce to the best market (except ‘only in the most urgent necessity’) (WN539);
7. 'Premiums and other encouragements to advance the linen and woollen industries' (TMS185);
8. 'Police', or preservation of the 'cleanliness of roads, streets, and to prevent the bad effects of corruption and putrifying substances'; ensuring the 'cheapness or plenty [of provisions]' (LJ6; 331);
9. patrols by town guards and fire fighters to watch for hazardous accidents (LJ331–2);
10. erecting and maintaining certain public works and public institutions intended to facilitate commerce (roads, bridges, canals and harbours) (WN723);
11. coinage and the mint (WN478; 1724);
12. post office (WN724);
13. regulation of institutions, such as company structures (joint- stock companies, co-partneries, regulated companies and so on) (WN731–58);
14. temporary monopolies, including copyright and patents, of fixed duration (WN754);
15. education of youth ('village schools', curriculum design and so on) (WN758–89);
16. education of people of all ages (tythes or land tax) (WN788);
17. encouragement of 'the frequency and gaiety of publick diversions'(WN796);
18. the prevention of 'leprosy or any other loathsome and offensive disease' from spreading among the population (WN787–88);
19. encouragement of martial exercises (WN786);
20. registration of mortgages for land, houses and boats over two tons (WN861, 863);
21. government restrictions on interest for borrowing (usury laws) to overcome investor 'stupidity' (WN356–7);
22. laws against banks issuing low-denomination promissory notes (WN324);
23. natural liberty may be breached if individuals 'endanger the security of the whole society' (WN324);
24. limiting 'free exportation of corn' only 'in cases of the most urgent necessity' ('dearth' turning into 'famine') (WN539); and
25. moderate export taxes on wool exports for government revenue (WN879).

See also this post by Gavin Kennedy.

1 comment:

Amol Agrawal said...

I am not one bit surprised by this. I have been reading a bit about Keynes as well via other economists. He has alsio been misinterpreted greatly. His solutions about increased govt's role was for great depression which was taken to one extreme (govt in everything) to rejecting it outright.
Same is the case with Adam Smith as well. A team of econs - Nava Ashraf, Colin F. Camerer and. George Loewenstein -even said Adam Smith was a behavioral economist -