Chapter 17. The Spread of the Smithian Movement
1. The Wealth of Nations and Jeremy Bentham
Contrary to received opinion, The Wealth of Nations was not an instant success.
Of the leading British journals of the day, the Annual Register gave it a brief, tepid review,
while The Gentleman's Magazine ignored it altogether.
The most influential journal, The Monthly Review, was ambivalent about the book.
Indeed, there were no citations to The Wealth of Nations in articles on economics for ten
years after its publication, and no one mentioned the book in Parliament until 1783.
It was only in the 1780s that the book began to roll.
By 1789, the wealth of nations had already gone into five editions.
Between 1783 and 1800, members of Parliament in Britain appealed to the authority of Adam
Smith 37 times.
The noted English philosopher, Jeremy Bentham, 1748-1832, son of a wealthy lawyer, proclaimed
himself a fervent disciple of Smith.
His first economic work, however, was bold enough to take his master to task for inconsistency
in his own free market views by upholding usury laws.
In The Defense of Usury, 1787, Bentham pointed out that usury laws create a scarcity of credit.
He also stressed that usury is what would now be called a victimless crime and therefore
not really a crime at all.
He had noted elsewhere, in a work on morals and legislation, that usury, which, if it
must be an offence, is an offence committed with consent, that is, with the consent of
the party supposed to be injured, cannot merit a place in the catalogue of offences unless
the consent were either unfairly obtained or unfreely.
In the first case it coincides with defraudment, in the other with extortion.
In short, in the latter cases, no special laws against usury would be needed beyond
the common legal prohibitions of force and fraud.
There are hints in Bentham's defense of usury for the first time in Britain that the fundamental
cause of interest is time preference.
Thus, Bentham refers to lending as exchanging present money for future, and also defines
a saver as someone who has the resolution to sacrifice the present to the future.
He also understands that added to pure interest is a risk premium proportionate to the risks
a creditor expects to incur in a particular loan.
Some Smith biographers have accepted the legend that Bentham's defense of usury converted
Smith to the free market in lending position, but there is no real evidence to that effect.
Moreover, it goes against what we know of Smith's general intractability.
A Scottish friend wrote to Bentham that Smith is supposed to have told a third party that
he admired the defense and that he could not complain about the treatment Bentham had accorded
to Smith.
The friend concluded that Smith had seemed to admit that you were right.
On reading this, the eager Bentham wrote to Smith, asking him whether he had actually
converted him to opposition to usury laws.
Smith, however, received the letter virtually on his deathbed, and he could only send Bentham
a copy of the Wealth of Nations.
All this is far too flimsy an evidence of any recantation by Smith.
2.
The Influence of Dugald Stewart Adam Smith's lectures converted the merchants
of Glasgow to a free trade position, but most of his influence was spread through the wealth
of nations.
A triumphant movement of Smithian disciples really begins only with Dugald Stewart, 1753-1828.
Stewart was the son of Matthew Stewart, a professor of mathematics at Edinburgh University.
Stewart succeeded his teacher, Adam Ferguson, as professor of moral philosophy at Edinburgh
in 1785.
Stuart made himself the leading disciple of Smith, and after the death of his master,
Stuart became his first biographer, reading his account of the life and writings of Adam
Smith in 1793 to the Royal Society of Edinburgh.
But by this time, Britain was in the throes of a hysterical counter-revolution, a veritable
Stewart was a highly prolific writer and an outstanding and notable orator, but he kept his lectures, as well as writings, bland and acceptable to the powers that be.
Thus, in 1794, Stuart recanted his earlier praise of the great French laissez-faire liberal
and close friend and biographer of Turgot, Marie-Jean-Antoine Nicolas de Caritat,
the Marquis de Condorcet, 1743 to 1794.
This Girondist revolutionary was too hot a topic, and Stuart also made sure to praise the British
By the turn of the century, however, the worst of the counter-revolutionary hysteria had blown over, and Stuart felt safe enough to propound his true, classical liberal views in books and in lectures.
Hence in 1799 and 1800, Stewart began to lecture on political economy in addition to his general lectures on moral philosophy.
He kept giving these lectures until his retirement from Edinburgh in 1810.
His 1800 lectures remained unpublished until printed as Stewart's Lectures on Political Economy in 1855.
Since the retirement of the great Thomas Reid, founder of the Common Sense School of Philosophy, from his post as Professor of Moral Philosophy at Glasgow in the 1780s and his death a decade later,
Dugald Stewart had become the only distinguished philosopher in all of Great Britain. Oxford and Cambridge were still in deep decline.
With the European war blocking trips to or from the continent, it became the fashion for bright young
students all over Britain to come to Edinburgh and study under Dugald Stewart. In this way,
and clinging passionately to the Smithian line, Dugald Stewart, in the first decade of the 19th
century profoundly influenced and converted a host of future economists, writers and statesmen.
These included James Mill, John Ramsey McCullough, the Earl of Lauderdale, Canon Sidney Smith,
Henry Broom, Francis Horner, Francis Jeffrey and the Viscount Palmerston.
This was thereby developed as a discipline, Stuart giving rise to text writers, publicists,
editors, reviewers and journalists.
Typical of this illustrious group was the case of Francis Horner, 1778-1817, who was
born in Edinburgh, the son of a merchant, and studied under Stuart at the University.
Returning from England, Horner enrolled in Stewart's new special course in political
economy in 1799, where he studied the wealth of nations and eagerly read Condorcet and
Turgot.
Horner indeed was so impressed by Turgot that he wanted to translate Turgot's writings
into English.
Becoming a lawyer shortly thereafter, Horner went to London and became a member of Parliament
in 1806.
Inspired by Stuart's teachings, his students, Sidney Smith, Henry Broom, Francis Jeffrey
and Francis Horner, founded the Edinburgh Review in 1802 as a new scholarly Whig periodical
devoted to educating the intelligent public in liberty and laissez-faire.
This Whig magazine was the only economic journal in Great Britain and as such enjoyed great
The last decade of teaching by Dugald Stewart proved, however, to be the last great burst of the Scottish intellectual ascendancy in Great Britain.
For the shades of night were rapidly closing in on the Scottish Enlightenment.
In the first place, Tory repression of liberal and Whig ideas during the generation of War with France continued to be far greater in Scotland than in England.
More important in the long run was the great revival of militant evangelical Protestantism that swept Western Europe and then the United States in the early years of the 19th century.
The liberal, moderate and even deistic views that had spread throughout the Western world in the last half of the 18th century were swept aside by resurgent Christianity.
In Scotland, the result was an intellectual counter-revolution against moderate control of the Presbyterian Church and a purging of the Scottish faculties of moral philosophy and theology of moderate, sceptical and secularist teachings.
Smith and Hutchison were now denounced in retrospect as guilty of a refined paganism, and with a resumption of strict theological control of the moral philosophy faculty, Scottish universities lost their preeminence in Britain, and slid rapidly downhill, intellectually, if not theologically.
Neither classical liberal social philosophy nor political economy could survive in that kind of academic climate.
As a result, intellectual leadership shifted from Scotland to England and out of academia altogether for a considerable period.
Since English universities were still not hospitable to the new discipline of political economy,
The locus of economic thought now shifted from Scottish academics to English businessmen,
publicists and government officials.
The shift was symbolized by the fact that while the Edinburgh Review continued to be
published for decades and its nominal home was still Edinburgh, three of its four editors
had moved to England within a few months of the start of the publication.
One of them, who died at a very young age, was Francis Horner.
Moving to London as an attorney, Horner quickly became a Whig member of Parliament, and his
expertise on monetary matters made him chairman of the famous Bullion Committee in 1810, which
was to strike a crucial blow for hard money.
There he worked closely with David Ricardo.
In the first issue of the Edinburgh Review, Horner reviewed the famous monetary work of
Henry Thornton as well as a highly important essay by Lord King in a later issue.
Horner was a member of prominent Whig Clubs in London, the King of Clubs, and Brooks,
in both of whom he had David Ricardo as a fellow member.
Horner also shared scientific interests with Ricardo, and both men were members of the
The Board of the Geological Society of London
Another illustration of the intellectual shift from Scotland to England is what happened
to two bright young Scotsmen who studied under Stuart and were later to become major
leaders in British economics.
James Mill, 1773-1836, was the son of a Scottish shoemaker who studied under Stuart and was
was then licensed to preach in the Presbyterian Ministry.
Failing to find a ministerial post in the increasingly militant Calvinist climate in Scotland,
Mill was obliged to move to London, where he became editor of the Literary Journal.
Eventually Mill found employment in the London office of the East India Company,
which gave him a base to pursue his very active economic and philosophical work in his off hours.
The younger John Ramsey McCullough, 1789-1864, who studied with Stewart in his last years,
wrote economic articles in The Scotsman and the Edinburgh Review and organized an economics
lecture series.
But despite his obvious merits, McCullough was unable to find an academic post in Scotland
and finally moved to London to teach political economy at the newly established University
of London.
But after four years he spent the rest of his life working as a financial controller
in England, again writing and being active in economics in addition to his regular work.
One beneficial result of the Stuart-led sweep of Smithianism in Great Britain is that it
swamped the competing strain to political economy, the political arithmeticians.
These political arithmeticians or statistical collectors, as Stewart contemptuously called
them, had formed a competing school in economics since the writings of Sir William Petty, 1623-1687,
and his followers in the late 17th century.
The arithmeticians generally scorned the classical method of arriving at economic laws deduced
from broad insights into human action and the economy.
Instead, in a Baconian fashion, they tried in vain to arrive at theoretical generalizations
from hodgepodge collections of statistical facts.
With little insight into the laws of the free market, or the counterproductive nature of
government intervention, the political arithmeticians tended to be mercantilists and British chauvinists,
Proclaiming the Economic Superiority of Their Homeland
But this school was demolished by the Smithians, first by Smith himself, who declared in The Wealth of Nations that
I have no great faith in political arithmetic.
And then by Stuart, who engaged in a searching methodological critique of this allegedly scientific school of thought.
Stuart wrote, The facts accumulated by the statistical collector are merely particular
results which other men have seldom an opportunity of verifying or of disproving, and which can
never afford any important information.
In short, in contrast to the replicable quantitative findings of natural science, statistics of
of human action are mere listings of particular non-replicable events, rather than the embodiment
of enduring natural law.
Stewart concluded that, instead of appealing to political arithmetic as a check on the
conclusions of political economy, it would often be more reasonable to have recourse
to political economy as a check on the extravagance of political arithmetic.
Over the 1790s, then, Adam Smith held total sway over economic thought in Britain.
Amidst a flourishing swarm of views, all the major protagonists in England, as we shall
see below, from Bentham to Malthus to Ricardo, considered themselves devoted Smithians, often
One Trying to Systematize and Clarify the Admitted Confusions and Inconsistencies of
Their Master
3.
Malthus and the Assault on Population
One of the first Smythian economists, and indeed a man who was, for two decades, the
only professor of political economy in England, was the Reverend Thomas Robert Malthus, 1766,
to 1834. Malthus was born in Surrey, the son of a respected and wealthy lawyer and country
gentleman. Malthus graduated from Jesus College, Cambridge, in 1788, with honors in mathematics,
and five years later became a fellow of that college. During that same year, Robert Malthus
became an Anglican curate in Surrey, in the parish where he had been born. Malthus seemed
Malthus seemed destined to lead the quiet life of a bachelor curate, when in 1804, at nearly
40, he married and promptly had three children.
The year after his marriage, Malthus became the first professor of history and political
economy in England, at the new East India College at Haleybury, a post he retained until
his death.
All his life Malthus remained a Smithian and was to become a close friend though not disciple
of David Ricardo.
His only marked deviation from Smithian doctrine, as we shall see, was his proto-Keynesian worry
about alleged underconsumption during the economic crisis after the end of the Napoleonic
Wars.
But Malthus was, of course, far more than a Smithian academic, and he gained both widespread
In previous centuries, insofar as writers or economists dealt with the problem at all,
they were almost uniformly pro-populationists.
A large and growing population was considered a sign of prosperity and a spur to progress.
The only exception, as we have seen, was the late 16th century Italian absolutist theorist
Giovanni Bottero, the first to warn that population growth is an ever-present danger, tending,
as it does, to increase without limit, while the means of subsistence grows only slowly.
But Bottero lived at the threshold of great economic growth, of advances in total population
as well as standards of living, and so his gloomy views got very short shrift by contemporaries
or later thinkers.
Indeed, absolutists and mercantilists tended to admire growing population as providing
more hands for production on behalf of the state apparatus, as well as more fodder for
its armies.
Even those 18th century writers who believed that population tended to increase without
Limit, curiously enough, favored that development.
This was true of the American Benjamin Franklin, 1706-1790, in his Observations Concerning
the Increase of Mankind and the Peopling of Countries, 1751.
Similarly, the physiocrat leader Mirabeau, in his famous The Friend of Man, or A Treatise
Notice on Population, 1756, While comparing human reproduction to that of rats, they would
multiply up to the very limit of subsistence like rats in a barn, yet advocated such virtually
unlimited reproduction.
A large population, said Mirabeau, was a boon and a source of wealth, and it was precisely
Because people will multiply, like rats in a barn, up to the limit of subsistence, that agriculture, and hence the production of food, should be encouraged.
Mirabeau had picked up the rats in a barn metaphor from Catillon, but unfortunately did not inherit
Catillon's highly sensible and sophisticated optimum population realization that human beings
will flexibly adjust population to standards of living, and that their non-economic values
will help them decide on whatever trade-offs they may choose between a slightly larger population
or a Smaller Population and Higher Standards of Living.
Mirabeau's co-leader of physiocracy, François Canet, however, converted him to a gloomy view of the influence of the alleged tendency to unlimited population growth on standards of living.
Adam Smith, Malthus's standard-bearer in economics, managed in a typically confused and contradictory fashion,
at one and the same time to provide Malthus with all his ammunition for gloom and doom,
while remaining a cheerful proponent of large and growing numbers of people.
For on the one hand, Smith opined that people would indeed insist on breeding up to the
minimum of subsistence, the essential Malthusian doctrine, but on the other, Smith asserted
said cheerfully that the most decisive mark of the prosperity of any country is the increase
of the number of its inhabitants.
At about the same time that Adam Smith was sinking into confusion and paving the way
for the unfortunate anti-population hysteria of Robert Malthus, the unheralded Abate Antonio
Genovese, the first professor of economics on the continent at the University of Naples,
was pointing the way to a very different solution to the population question.
In his Lesione di economia civile, 1765, this excellent utility value theorist was reminiscent
of Cantillon's insight about an optimum population.
Under any given conditions, he pointed out, population can either be too large or too
Robert Malthus was moved to consider the population question by wrestling in friendly and repeated
argument with his beloved father, Daniel, a fellow country squire in Surrey.
Daniel was a bit of a radical and was influenced by the utopian and even communistic opinions
of the day.
He was a friend and great admirer of the French radical Jean-Jacques Rousseau.
The 1790s was the era of the outburst of the French Revolution, and it was a decade when
ideas of liberty, equality, utopia and revolution were very much in the air.
One of the most popular and influential radical works in England was William Godwin's 1756-1836
Inquiry Concerning Political Justice, 1793, which was, for a time, the talk of England.
Godwin, son and grandson of dissenting ministers, had himself been a dissenting minister when
he lapsed into secularism and became a radical theorist and writer.
In his utopian belief in the perfectibility of man, Godwin has been generally bracketed
with the distinguished French philosopher and mathematician Condorcet, whose great
peon to optimism and progress sketched for an historical picture of the progress of the
human mind, 1794, was remarkably written while in hiding from the Jacobin terror and in the
shadow of his arrest and death.
But the two optimists were very different.
For Condorcet, close friend of Turgot and admirer of Adam Smith, was an individualist
and a libertarian, a firm believer in free markets and in the rights of private property.
William Godwin, on the other hand, was the world's first anarcho-communist, or rather
voluntary anarcho-communist.
For Godwin, while a bitter critic of the coercive state, was an equally hostile critic
of Private Property.
But in contrast to late 19th century anarcho-communists such as Bakunin and Kropotkin, Godwin did
not believe in the imposition of rule by a coercive commune or collective in the name
of anarchistic no-rule.
Godwin believed not that private property should be expropriated by force, but that
But individuals, fully using their reason, should voluntarily and altruistically divest
themselves of all private property to any passer-by.
This system of voluntary abasement, brought about by the perfectibility of human reason,
would result in total equality without private property.
In his voluntarism, Godwin was thus the ancestor of both the coercive communist and the individualist
In his way, however, Godwin was every bit as and even more appreciative of the benefits
of individual freedom and a free society as was Condorcet.
He was sure that population would never grow beyond the limits of the food supply, for
he was convinced that there is a principle in the nature of human society by means of
of which everything seems to tend to its level and to proceed in the most auspicious way
when least interfered with by the mode of regulation.
The Marquis de Condorcet, sensibly enough, was also not worried about excessive population
growth wrecking the future libertarian and free market utopia that he envisaged for the
future of man.
He was not worried because he believed that on the one hand, science, technology and free
markets would greatly expand the subsistence available, while reason would persuade people
to limit population to numbers that could be readily sustained.
William Godwin, however, was not content with this intelligent treatment of the problem.
On the contrary, in the first place Godwin worried, in proto-Malthusian fashion, that
population did always tend to press on resources so as to keep living standards down to subsistence
level.
He believed, however, in some sort of leap in being, a new Godwinian man, and institutions
where reason would instead prevail.
It would prevail, in fact, by reason making man master of his passions, to such an extent
that sexual passion would gradually become extinct, and advancing health would make man
immortal.
We would then have a future human race of immortal and ever-aging adults, a utopia that
seems impossibly dotty.
The men, therefore, will probably cease to propagate.
The whole will be a people of men and not of children.
Generation will not succeed generation, nor truth have, in a certain degree, to recommence
her career every thirty years.
There will be no war, no crimes, no administration of justice, as it is called, and no government.
Every man will seek, with ineffable ardor, the good of all.
William Godwin had learned of the alleged eternal pressure of population down to subsistence
from Dr. Robert Wallace, 1697-1771, a Scottish Presbyterian minister who had set forth his
allegedly utopian government in his Various Prospects of Mankind, 1761.
Mises' ideal utopia was a world government which imposed totalitarian communism, compelling
equality and eradicating private property.
The state would bring up all children and all would be taken care of.
The fly in the ointment, however, the serpent in Eden, would be population growth.
The marvelous conditions provided by world communism would lead to population growing
Inventing so rapidly that mass misery and starvation would prevail.
As Wallace lamented, under a perfect government the inconveniences of having a family would
be so entirely removed, children would be so well taken care of and everything become
so favorable to populistness that mankind would increase so prodigiously that the earth
Earth would at last be overstocked and become unable to support its numerous inhabitants.
There would not even be sufficient room for containing their bodies upon the surface of
the earth.
Hence utopian communism would have to be abandoned.
William Godwin was too ready to accept Wallace's mechanistic worry about population growth,
thought rather bizarrely that the withering away of sex would provide the cure for Wallace's
problem and ensure that egalitarian anarcho-communism would prevail.
Daniel Malthus was just the sort of man to be deeply impressed by the Godwinian utopia,
and he and his son Robert spent many happy hours arguing over Godwin's political justice.
2nd Edition, 1796, and his follow-up collection of essays, The Enquirer, 1797.
Robert decided to write a book clobbering these utopian fantasies once and for all and
dredged up the specter of population growth as the inevitable rock upon which such fantasies
would inevitably founder and collapse.
Hence the publication in 1798 of the first edition of Malthus's immensely popular and
controversial Essay on the Principle of Population as it Affects the Future Improvement of Society.
The essay went through five more editions in Malthus' lifetime, gained him the nickname
of Population Malthus, and gave rise to literally millions of words of heated controversy.
There was virtually nothing in Malthus' essay that had not been in Giovanni Bottero two
centuries earlier, or for that matter in Robert Wallace.
As in Bottero, all improvements in living standards are in vain, giving rise to an immediate
and deadly pressure of population growth upon the means of subsistence.
Once again, such mechanistic burgeoning of population can only be limited by the positive
Check of War, Famine and Pestilence, supplemented by the rather weak preventive check of fewer
births spurred by continuing starvation, preventive or negative check.
There is only one thing that Malthus added to the Botero model, the spurious mathematical
precision of his famous statement that population tends to go on doubling itself every 25 years
or increases in a geometrical ratio, while the means of subsistence increase in an arithmetical
ratio.
It is not easy to see why Botero's anti-population hysteria was properly and understandably ignored
in an age of joint growth in population and living standards, while Malthus, writing in
a similar period of growth, should sweep the Western world.
One reason was undoubtedly the fact that Malthus set himself, with verve and self-assurance,
against the highly popular and influential writings of Godwin, as well as against the
ideals of the French Revolution.
Another was the fact that, by the time his essay appeared, British intellectuals and
public were turning rapidly away from the French Revolution in a burst of reaction,
Impression, and Continuing War Against France. Malthus had the good fortune of being in tune
with the latest twist of the zeitgeist. But a third element explained his instant renown,
the spurious air of the scientific that his alleged ratios gave to a doctrine in an age
that was increasingly looking for models of human behavior and its study in mathematics
Science and the Hard Physical Sciences.
For spurious Malthus's ratios undoubtedly were.
There was no proof whatever for either of these alleged ratios.
The absurdly mechanistic view that people unchecked would breed like fruit flies cannot
be demonstrated by simply spelling out the implications of the alleged doubling itself
every 25 years.
For example, taking the population of the world at any number, a thousand millions for instance,
the human species would increase in the ratio of 1, 2, 4, 8, 16, 32, 64, 128, 256, 512,
and so forth, and subsistence as 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and so forth.
In two centuries and a quarter the population would be to the means of subsistence as 512
to 10.
In a few more centuries at the same rate the ratio of population to subsistence would begin
to Approach Infinity.
This is scarcely demonstrable in any sense, certainly not by referring to the actual history
of human population, which in most of Europe remained more or less constant for centuries
before the Industrial Revolution.
Still less is there proof of Malthus' proclaimed arithmetical ratio, where he simply assumes
Malthus one attempt at proof of his ratios was extraordinarily feeble.
Priding himself on relying on experience, Malthus noted that the population of the North American colonies had increased for a long while in the geometric ratio of doubling every 25 years.
But this example hardly demonstrates the fearful outstripping by population of the arithmetically increasing food supply, for as Edwin Cannon astutely notes, this population must have been fed, and consequently the annual produce of food must also have increased in a geometrical ratio.
His example proved nothing.
Cannon adds that by the sixth chapter of his essay, Malthus seems to have had some inkling of this objection to his argument,
and he tries to reply in a footnote that, in instances of this kind,
the powers of the earth appear to be fully equal to answer all the demands for food that can be made upon it by man.
But we should be led into an error if we were thence to suppose that population and food ever really increase in the same ratio.
But since this is precisely what had happened, Malthus is clearly totally unwitting that the second sentence in this note is in flat contradiction to the first.
Malthus' pessimistic conclusion about man thus contrasted with the optimism of his beloved Adam Smith as well as with Godwin.
For if the inexorable pressure of population growth is always and everywhere destroying any hope of living standards being above subsistence,
Then the result is not only gloomy for any communist or egalitarian utopia, it provides an equally gloomy prognosis for the free market society envisioned by Smith, or far more consistently by Condorcet.
Yet, unfortunately, in his understandable eagerness to demolish the case for egalitarian communism, Malthus threw out the baby with the bathwater, and also cast an unnecessary pall on the far more rational, utopian prognoses of the free society and private property by Smith and especially Condorcet.
It was easy for Malthus to dismiss brusquely Godwin's absurd reliance on the demise of sex to solve the problem of overpopulation.
But his treatment of Condorcet's position was far less cogent.
For the sophisticated French aristocrat had strongly implied that birth control played a major role in his optimism about the libertarian future.
While modern neo-Malthusians are enthusiastic not only about birth control, but also sterilization and abortion as means of family planning, the conservative Malthus drew back in horror from any hint of such measures, which he saw simply as vice.
Malthus denounced Condorcet's solution as either a promiscuous concubinage which would prevent breeding or something else as unnatural.
To remove the difficulty in this way will surely, in the opinion of most men, destroy that virtue and purity of manners which the advocates of equality and of the perfectibility of man profess to be the end and object of their views.
A sally that might apply neatly to Godwin, but scarcely to Condorcet, for whom purity
was scarcely an overriding concern.
In fact, Malthus held out little hope for mankind.
His one practical proposal was the gradual abolition of the Poor Law, and especially
of the idea of the right of the poor to be supported by the State.
that would discourage excessive breeding among the poor.
All in all Schumpeter's scathing assessment of the essay of 1798 was well deserved.
Malthus, he wrote, held that population was actually and inevitably increasing faster
than subsistence, and that this was the reason for the misery observed.
The geometrical and arithmetical ratios of these increases to which Malthus seems to
have attached considerable importance, as well as his other attempts at mathematical
precision, are nothing but faulty expressions of this view which can be passed by here with
the remark that there is of course no point whatever in trying to formulate independent
laws for the behavior of two interdependent quantities.
The performance as a whole is deplorable in technique, and little short of foolish in substance.
Poor Godwin, however, unfortunately did not come to a similar assessment, at least not
immediately.
He was, after all, not a scholar of population theory, and he had no immediately effective
reply.
It took Godwin all of two decades to study the problem thoroughly and come to an effective
Refutation of His Nemesis. In On Population, 1820, Godwin came to the cogent and sensible conclusion
that population growth is not a bogey, because over the decades the food supply would increase
and the birth rate would fall. Science and technology along with rational limitation of birth
would solve the problem. Unfortunately, Godwin's timing could not have been worse.
By 1820, the aging Godwin, along with Utopianism and even the French Revolution, had been forgotten in Great Britain.
His excellent rebuttal went unread and unsung, while Malthus continued to tower over all as the much admired final word on the population question.
His essay being world famous and Godwin and Condorcet, as he believed effectively disposed of,
Malthus now decided to spend some years actually studying the population problem.
Remarkably, Malthus' second edition of the essay in 1803, on which all five future editions were based, was a very different work.
In fact, Malthus' essay is one of the rare works in the history of economic thought, whose second edition, in effect, totally contradicted the first.
The second edition incorporated the fruits of Malthus' study on population through his travels in Europe.
Filled with copious statistics, the new edition was fully three times the size of the first.
But that was the least of the changes.
For whereas in the first edition the preventive check was minor and hopeless,
as well as a generally vicious possibility for solution,
Malthus now acknowledged that another negative or preventive check, one that entailed neither
vice nor misery, was a real possibility for ameliorating or even suspending the eternal
pressure of population upon the food supply.
This was moral restraint, that is, chastity and restraint from early marriage, which was
is moral and not vicious because it involved neither birth control nor other forms of irregular gratification or improper acts.
Indeed, for Malthus, moral restraint now became the most powerful check on population of them all,
more powerful even than vice or the misery and starvation of the previously dominant positive check.
As a result, human beings were no longer viewed as the puppets of inexorable and gloomy forces,
which could now be overcome by moral restraint and moral education.
In the first edition, indeed, Malthus stood opposed to any growth of leisure or luxury in society,
for such increasing ease would eliminate the extreme pressure needed to awaken naturally
The Theory of Money and Credit
Malthus now emphasized another proposed moral reform in keeping with his new position, that
people try to reduce the number of children by marrying at a later date.
Such moral restraint, he was now convinced, entailed neither of the two dread checks of
vice or misery.
Dr. Gray's discussion of this theme is marked by his characteristic insight and wit.
Contrary to the usual view as to what is involved in Malthusianism, he restricts himself to
telling us not to be in too great a hurry to get married, with a special appeal to his
women readers, who, if they could look forward with just confidence to marriage at 27 or
28, should and would prefer to wait until then, however impatiently the privation might
be borne by the men.
This is the voice of a dear and kindly old uncle, rather than the monster for whom Malthus
has so frequently been mistaken.
And it is as ineffective as the advice of an uncle in such matters usually is.
For even with marriage at 28, there is time for a disconcerting and devastating torrent
of Children.
Oddly enough, however, Malthus' new view was not very far removed from his enemy Godwin's
invocation of virtue, prudence or pride in limiting the growth of population.
Shorn of the nonsense of the withering away of sex, Godwin was now vindicated, and Malthus
seemed implicitly to agree by taking the refutation of Godwin and Condorcet, who had now faded
from Public View, out of the title page of the second edition.
Unfortunately, however, Malthus never acknowledged any change whatever.
Godwin rightly complained that Malthus had co-opted his own major criticism without credit
or even acknowledging the abandonment of his own views.
Malthus maintained from 1803 onwards that his thesis had not at all been changed, but
only elaborated and improved.
His changes were stuck into the text in passing, while he continued to place great importance
upon his arbitrary ratios.
His changes were evasive, rather than frank.
For example, in his second edition, Malthus quietly removed the self-contradictory note
in which he denied that food could ever increase geometrically, or as much as population.
In fact, he virtually admits that food has sometimes increased geometrically in new colonies,
that is, in North America.
Instead, he now confined his self-confident assertions to prophecy, a prophecy which the
growth of living standards in England proved to be wrong within his own lifetime.
And yet Malthus continued to write that his ratios were self-evident, even though he conceded
said that it was impossible to find out what the rate of increase of unchecked population
would actually be.
In the end, as Cannon justly declares, the essay on the principle of population falls
to the ground as an argument and remains only a chaos of facts collected to illustrate the
effect of laws which do not exist.
Malthus in fact had executed a cunning and successful tactical maneuver.
He had introduced enough qualifications and concessions to fuzz over his argument.
He and his followers could maintain the full arrogance and error of the first edition,
and then, if challenged, beat a clever retreat by bringing up the qualifications and asserting
that Malthus had anticipated and met all the charges against him.
He was able to maintain the hard-nosed position of his first edition while being able to fall
back on the cloudy concessions of his second.
As Schumpeter writes, the new formulation made it indeed possible for adherents to this
day to take the ground that Malthus had foreseen and accounted for practically everything opponents
might say.
He adds that this does not alter the fact that all the theory gains thereby is orderly retreat with the artillery lost.
Unfortunately, however, neither Malthus' followers nor even many of his astute critics realized this point.
And so, Malthus and his followers had ensconced themselves in the security of a theory that, regardless of the facts, could never be refuted.
or they could fall back on what Schumpeter calls the horrible triviality that if indeed population increased geometrically forever and food barely increased at all, then enormous crowding and misery would result.
Unfortunately Malthus' own self-serving interpretation of the changes of his second edition was adopted by nearly all his contemporaries, friends and critics alike,
like, as well as by historians until recent years.
Most of Malthus' readers, for one thing, had been swept away by the verve and panache of
his first edition, and simply didn't bother reading the much longer and stodgier second.
Instead, they simply and conveniently interpreted the new material as merely empirical documentation
of Malthus' original thesis.
And his more thoughtful readers interpreted moral restraint as just another negative check
on population, a mere refinement of the basic theory.
And so, thus protected and interpreted, Malthus' fallacious and inchoate principle of population
carried the day, and adopted enthusiastically by Ricardo and his followers, was to become
enshrined into British classical economics.
As we shall see further in Volume 2, even though Nassau W. Senior, in effect, devastatingly
refuted Malthus, his own piety toward Malthus and his image allowed Malthusianism to remain
at least officially enshrined in economic thought.
It is an unfortunate story.
Thus, as Schumpeter writes, the teaching of Malthus' essay became firmly entrenched in
in the system of economic orthodoxy of the time, in spite of the fact that it should have been, and in a sense was, recognized as fundamentally untenable or worthless by 1803.
It became the right view on population, which only ignorance or obliquity could possibly fail to accept, part and parcel of the set of eternal truth that had been observed once for all.
Objectors might be lectured if they were worthy of the effort, but they could not be taken seriously.
No wonder that some people, utterly disgusted at this intolerable presumption, which had so little to back it,
began to loathe this science of economics quite independently of class or party considerations,
a feeling that has been an important factor in that science's fate ever after.
Certainly, the triumph of the Malthusian fallacy played an important role in the common view
that the science of economics itself was and is cold, hard-hearted, excessively rational
and opposed to the lives and welfare of people.
The idea of economics being anti-human reached a bold and unforgettable expression in Dickens'
Grudge, the caricature of a Malthusian who cackled that poverty and starvation would
be helpful in reducing the surplus population.
In the last half of the 19th century, as Schumpeter writes, the interest of economists in the population
question declined, but they rarely failed to pay their respects to the shibboleth.
Then, in the early decades of the 20th century, at the very same time as the birth rate in
In the Western world began to decline sharply.
Economists revived their interest in Malthusian doctrine.
Schumpeter's irony was properly bitter.
An ordinary mortal might have thought that the fall in the birth rate
and the rapidly approaching goal of a stationary population
should have set worrying economists at rest.
But that mortal would thereby have proved that he knew nothing about economists.
Instead, at the same time that more economists stressed Malthusianism, others stressed precisely
the reverse.
While some of them were still fondling the Malthusian toy, others zestfully embraced a
new one.
Deprived of the pleasure of worrying themselves and of sending cold shivers down the spines
of other people on account of the prospective or present horrors of overpopulation, they
They started worrying themselves and others on account of a prospectively empty world.
By the 1930s, in fact, economists and politicians were howling about the eminence of race suicide
and an excessively falling birth rate.
The Great Depression, as we shall see, was blamed by some economists on a birth rate
which had started falling decades before.
Countries such as France, mindful also of their need for cannon fodder, gave bounties to large
families.
Then, by the 1960s and 1970s, anti-population hysteria arose again, with ever more strident
calls for voluntary or even compulsory zero-population growth.
And countries such as India and China experimented with compulsory sterilization or compulsory
Abortion. Characteristically, the height of the hysteria in the early 1970s came after
the 1970 census in the United States noted a significant decrease in the birth rate and
the beginnings of an approach toward a stationary state of population. It was also observed
that various third world countries were beginning to see a marked slowing of the birth rate,
a few decades after the fall in death rate due to the infusion of Western advances in
medicine and sanitation.
It looked again as if people's habituation to higher living standards will lead them
to lower the birth rate after a generation of enjoying the fruits of lower death rates.
Population levels will indeed tend to adapt to maintain cherished standards of living.
It looks as if Godwin was right, that given freedom, individuals in society and the marketplace
will tend to make the correct birth decisions.
4.
Resistance and Triumph in Germany
In contrast to Great Britain, the German-speaking countries were predictably highly resistant
to the spread of Smithian views.
They had been ruled ever since the late 16th century by Cameralism.
Cameralists, named after the German royal treasure chamber, the Kammer, propounded an
extreme form of mercantilism, concentrating even more than their confrères in the West
on building up state power and subordinating all parts of the economy and polity to the
state and its bureaucracy.
Whereas mercantilist writers were generally pamphleteers scrambling for some particular
form of state advantage, the cameralists were either bureaucrats in one of the 360 tyrannical
German states or else university professors advising the princes and their bureaucracy
how best to maximize their revenue and power.
As Albion Small put it, to the Cameralists, the object of all social theory was to show
how the welfare of the state might be secured.
They saw in the welfare of the state the source of all other welfare.
Their key to the welfare of the state was revenue to supply the needs of the state.
The whole social theory radiated from the central task of furnishing the state with
ready means.
As professors, the Cameralists wrote lengthy tomes cataloging various parts of the economy
and the plans the government should make for each of these parts.
The Cameralists lauded virtually all forms of government intervention, sometimes to the
point of a collectivist welfare warfare state.
They could scarcely be called economists, since they had no notion of regular economic law
that could reach beyond or nullify the plans of state power.
The first major camera-list was Georg von Obrecht, 1547-1612, son of the mayor of Strasbourg,
who went on to be a famous professor of law at the university in that town.
His lectures were published posthumously, 1617, by his son.
In the next generation the one important camera-list was Christoph Bezold, 1577-1638, born in Tübingen
and later a highly influential law professor at the University of Tübingen.
Bezold wrote over 90 books, all in Latin, of which the Synopsis Politicae Doctrinei
1623 was the most relevant to economics.
Another influential cameralist of the early 17th century was Jakob Bornitz, 1570-1630,
a Saxon who was the first systematizer of fiscal policy and who urged close supervision
of industry by the state.
Another contemporary who, however, wrote later, in the middle of the 17th century, was Caspar
by Oliver Klok, 1584-1655, who studied law at Marburg and Cologne and later became a
bureaucrat in Bremen, Minden and, finally, in Stolberg.
Klok published the most famous cameralist work to that date, the tractus juridico-politico-polemico-historicus
de irario.
The most towering figure of German Cameralism came shortly thereafter.
Veit Ludwig von Seckendorf, 1626-1692, who has been called the father of Cameralism,
was born in Erlangen and educated in the University of Strasbourg.
He went on to become a top bureaucrat for several German states, beginning with Goethe,
Der Teutcher Fürstenstadt, 1656
Joachim Becker, 1635-1682, born in Speyer and alchemist and court physician at Mainz,
soon became economic adviser to Emperor Leopold I of Austria and manager of various state-owned
enterprises.
Becker, who strongly influenced Austrian economic policy, called for state-regulated trading
Banking Companies for Foreign Trade and a State Board of Commerce to supervise all domestic
economic affairs.
A pre-Keynesian, he was deeply impressed by the income flow insight that one man's expenditure
is by definition another man's income.
And he called for inflationary measures to stimulate consumer demand.
His well-known work was Politischer Diskurs, 1668. Schumpeter described Becker as brimming
over with plans and projects, but some of these plans did not pan out, as Becker ended
up fleeing from the wrath of his creditors. Apparently his own consumer demand had been
stimulated to excess. Becker's brother-in-law, Philipp Wilhelm von Hornig, 1638-1712, was
von Hornig's central theme was the importance of making Austria self-sufficient, cut off from all
Trade, Wilhelm Freiherr von Schröder, 1640-1688, Wilhelm Freiherr von Schröder, 1640-1688,
Wilhelm Freiherr von Schröder, 1640-1688, Born in Königsberg and a student of law at
the University of Jena, Schröder also became influential as an advisor to Emperor Leopold
I of Austria. Schröder managed a state factory, was court financial counselor in Hungary and
and set forth his views in his Fürstliche Schatz und Rentkammer, 1686.
Schröder was an extreme advocate of the divine right of princes.
His Cameralism emphasized the importance of speeding the circulation of money
and of having a banking system that could expand the supply of notes and deposits.
The system of Cameralism was set in concrete in Germany by the mid-18th century work of Johann Heinrich Gottlieb von Juste, 1717-1771.
Juste was a Thuringian who studied law at several universities and then taught at Vienna and at the University of Göttingen.
He then went to Prussia to become Director of Mines, Superintendent of Factories, and finally Administrator of Mines in Berlin.
Eusty's work was the culmination of Cameralism, including and incorporating all its past tendencies,
and emphasizing the importance of comprehensive planning for a welfare state.
Characteristically, Eusty emphasized the vital importance of freedom, but freedom turned
out to be merely the opportunity to obey the edicts of the bureaucracy.
Eusty also stressed the alleged alienation of the worker in a system of factories and
an advanced division of labor.
Among his numerous works, the most important were Staatswirtschaft 1755, the System des
and Finanzwesens, 1766, and his two volume, The Groundwork of the Power and Welfare of
States, 1760 and 1761.
Eusty, however, came a crapper on his own welfare in the welfare state, and over his
own unwillingness to obey the laws of the realm.
Because of irregularities in his accounts as administrator of the Prussian mines, Eusty
was thrown into jail, where he died.
The other towering figure of 18th century German Cameralism was a follower of Eusty,
Baron Josef von Zonenfels, 1732-1817.
Born in Moravia, the son of a rabbi, Zonenfels emigrated to Vienna, where he became the first
Professor of Finance and Cameralistics and became a leading advisor to three successive
Austro-Hungarian emperors.
An absolutist, mercantilist and welfare state proponent, Zonenfeld's views were set forth
in his Grundsätze der Polizei, Handlung und Finanzwissenschaft, 1765-1767.
His book, remarkably enough, remained the official textbook of the Austro-Hungarian
monarchy until 1848.
In this atmosphere deeply permeated with Cameralism, it is no wonder that Smith's wealth of nations
made little headway at first in Germany.
However, Britain had an important foothold in Germany, for the electorate of Hanover
Hanover was a continental possession of the British dynasty in the heart of Prussia and
therefore this land was under strong British cultural influence.
Hence the first German review of the wealth of nations appeared in the official journal
of the University of Göttingen in Hanover.
The University of Göttingen had developed the most respected department of philosophy,
History and Social Science in Germany, and by the 1790s it had become a flourishing nucleus
of Smithianism in the otherwise hostile German climate.
Taking the lead in introducing Adam Smith into German thought was Friedrich Georg Sartorius
Freiherr von Woltershausen, 1765-1828.
Sartorius was born in Kassel and studied theology and history at the University of Göttingen.
Soon Sartorius taught history at Göttingen by the 1790s, expanding his repertoire to
courses in political science and economics.
Sartorius published selections of Adam Smith's works and his Handbuch der Staatswirtschaft,
Berlin, 1796, was explicitly an economic textbook summarizing the views of Adam Smith.
An expanded summary of Smith's work appeared a decade later as Concerning the Elements
of National Wealth and State Economy According to Adam Smith, 1806.
In the same year, however, there appeared another volume which set forth Sartorius'
Sartorius differs from Smith's odd value theory and affirms that the main source of value
in its use is consumption.
The value of labor, too, is determined by its usefulness, and therefore it cannot serve
live as an invariable measure of value, and neither can money, since money prices are
also subject to the changing interplay of supply and demand.
Sartorius therefore finds Smith's labor theory of value a strange and deceptive conclusion.
Unfortunately, Sartorius' other main deviation from Smith is a great weakening of Smith's
already shaky devotion to laissez-faire.
Sartorius advised frequent interventions by the state.
Sartorius was one of a great quartet of professors who propagated Smithian doctrine in Germany.
Another was Christian Jacob Krauss, 1753-1807, a distinguished philosopher who was born in
East Prussia and studied under Immanuel Kant at the University of Königsberg, later becoming
a close friend of Kant.
Krauss took his doctorate at the University of Halle, but spent a formative year at Göttingen,
where he imbibed a lasting interest in economics.
After gaining his doctorate in 1780, Krauss became professor of practical philosophy and
cameralia at the University of Königsberg, where he taught not only philosophy, but also
the Greek classics, history, English literature and mathematics.
By the early 1790s, however, Krauss's interests became entirely devoted to economics.
Indeed, Krauss was one of the first persons in Germany to acclaim the wealth of nations,
which he hailed as the only true, great, beautiful, just, and beneficial system.
Krauss greeted Adam Smith with none of the deviations or hesitations that had beset Sartorius.
In fact, he trumpeted the wealth of nations as certainly one of the most important and
beneficial books that have ever been written.
Krauss even dared to liken Smith's book to the New Testament.
Certainly since the times of the New Testament, no writing has had more beneficial results
than this will have.
Curiously enough for a German academic, Krauss published very little during his lifetime.
He was, however, a highly influential teacher. His lectures at Königsberg were always crowded,
and he was considered the most important professor there, with the exception of Kant.
After his death, Krauss's friends published all his manuscript writings, the most important
of which was Die Staatswirtschaft, five volumes, Königsberg, 1808-1811.
The first four volumes of this work were essentially a paraphrase of Smith's Wealth of Nations,
substituting Prussian for British examples.
The fifth volume of Die Staatswirtschaft was by far the most important.
For there, Krauss presented his own contribution to Smithian economics.
Krauss addressed himself to Prussian economic policy in lecture form.
The volume was an incisive call for individualism, free markets, free trade, and a drastic reduction of government intervention.
Krauss began with the fundamental insight that every individual wants to improve his lot.
The desire and effort of each individual to improve his lot is the basis of all state economy, like the force of gravity in the universe.
But if men wish to improve their own lot, then government coercion, requiring certain
actions, or forbidding others, must necessarily cripple and distort such effort at improvement.
For otherwise, why don't individuals do what government wants of their own accord,
and without coercion?
And since they don't wish to do so, they will seek means of evading the government
mandates and prohibitions.
In all these cases, and in stark contrast to the Cameralists, Krauss puts himself in
the point of view of the individuals in society subject to government edicts, and not in the
point of view of the officials issuing the decrees.
A charming memorial to Christian Krauss was set forth to a friend by the great statesman
of Reform, Baron Karl von Stein, 1757-1831.
Stein said of his friend and adviser, The whole province, Prussia, has gained in light
and culture through him.
His views force their way into all parts of life, into the government and legislation.
If he has set up no brilliant new ideas, he has at least been no glory-seeking sophist,
To have presented the plain truth clearly and purely and correctly expressed, and to
have communicated to thousands of auditors successfully, is a greater service than to
arouse attention through chatter and paradoxes.
Krauss had an unassuming but genial personality, which laid strong hold on its environment.
He had flashes of new insight and great applications, and often astonished us by his unexpected
Conclusions. Reading his writings, everything there is clear and simple, and at present,
you need nothing more.
A third member of the Smithian professorial quadrumvirate in Germany was August Ferdinand
Lüder, 1760-1819. Lüder was also a product of the University of Göttingen, studying
Ludwig was a professor there, and becoming professor of philosophy. He was also a history professor and court counselor in Brunswick.
Lüder had done a great deal of work in historical and geographical statistics, publishing the Statistical Compendia, Historical Portfolio, 1787 and 1788,
and Repository for History, Statistics and Policy, 1802-1805.
But in the meantime, Luther read Adam Smith and became an enthusiast, publishing a Smithian work in 1800-1802 on national industry and state economy.
In addition to a compendium of Smith's views, Luther provides an impassioned defense of freedom in all its social and political aspects, as well as in the strictly economic sphere.
As Luther wrote in another work, I hazarded everything for freedom, truth and justice, for freedom of industry as well as of opinions, of hand as of spirit, of person as well as of property.
A fascinating aspect of August Lüder is that he was driven both by Smithian methodology
and by his devotion to freedom to repudiate his beloved life work, the investigation into
national statistics.
For not only would statistics mislead government policymakers, but government planners could
scarcely hope to plan at all without a raft of statistics at their command.
Statistics is not only misleading, therefore, it becomes a necessary condition for the very
government intervention which must be repudiated.
Lüder levelled his criticisms in two volumes on statistics, Criticism of Statistics and
State Policy, 1812, and Critical History of Statistics.
In the preface to his criticism, Lüder wrote movingly, On the strongest pillars and the
The firmest foundation, the structure of statistics and policy seemed to me to rest.
I had devoted the happiest hours of my life and the greatest part of my time to statistics
and policy.
Everything in me could not but revolt at the convictions which pressed upon me.
But the current of the times flowed too swiftly.
Ideas, which had entered my very marrow, had to be reviewed and exchanged for others.
One prejudice after another had to be recognized as prejudice.
More and more indefensible appeared one rotten prop after another, one rent and tear after
the other.
Finally, to my no small terror, the whole structure of statistics collapsed, and with
Policy, which can accomplish nothing without statistics.
As my insight grew and my viewpoint cleared, the fruits of statistics and policy appeared
more and more frightful.
All those hindrances which both threw in the path of industry, whereby not only welfare
but culture and humanity were hindered.
All those hindrances to the natural course of things, all those sacrifices brought to
to an Unknown Idol, called The Welfare of the State or the Common Wheel, and bought
with ridicule of all principles of philosophy, religion and sound common sense, at the cost
of morality and virtue.
With such perceptive insight into the evils of statistics and policy, one shudders to
think of Luther's reaction to the current world, where statistics and policy, both then
The fourth influential German-Smithian academic was Ludwig Heinrich von Jacob, 1759-1827.
Jacob studied at Hala and then taught at the University of Kharkov in the Ukraine.
As a result, Jacob became a consultant to several commissions at St. Petersburg and
helped spread Smithian economics to Russia.
But for most of his life, Jakob taught political economy and philosophy at the University of
Halle, where, like Christian Krauss, he combined Kant and Smith's individualism into an economic
and philosophical whole.
Like Krauss also, Jakob played an important advisory role in the liberal Stein-Hardenberg
reforms in Prussia.
His most important work was his Principles of Economics, 1805.
At any rate, under the influence of the Quadrum Verat of Sartorius, Krauss, Lüder and Jacob,
the Smithians rather rapidly took over one economics department after another from the
older Cameralists, who were pushed back, where they more properly belonged, into the departments
of law and administration.
and views also penetrated the civil service and were responsible for the important failed
liberal reforms in the early 19th century of Stein and Hardenberg in Prussia.
Stein and Hardenberg, it should be added, had both studied at the University of Göttingen.
In a little over a decade, Smithianism had triumphed over Cameralism in Germany.
5. Smithianism in Russia
Smithianism also began to penetrate Russian political culture.
Cultural and intellectual life had only begun to flower in that backward and despotic empire in the mid-18th century.
The University of Moscow, the first university in Russia, started at the late date of 1755.
Enlightenment ideas spread in Russia, and we have seen that Catherine the Great at least
flirted briefly with physiocracy.
French was the language of the Russian court, and so any ideas prevailing in France, the
home of the Enlightenment, had to be taken seriously in Moscow and St. Petersburg.
In addition, the Scottish version of the 18th century Enlightenment was, in a sense, carried
In the 1760s, it was the custom of Empress Elizabeth of Russia, the daughter of Peter
the Great, to select outstanding students to finish their studies abroad.
As a result, the Empress made the fateful choice of sending to Scotland in 1761 two men who
would be particularly instrumental in spreading Smithian ideas to Russia.
The more important of the two was Semyon Efimovich Desnitsky, son of a Ukrainian petty bourgeois
and his lifelong friend and classmate at University, Ivan Andreevich Tretiakov, 1735 to 1776, son of an army officer.
The two studied at Glasgow University for six years, studying eagerly under Adam Smith until the latter left his chair at Glasgow in 1764.
At Glasgow, Desnitsky and Tretyakov heard Smith's Wealth of Nations lectures, and also studied under Smith's colleague and former student, John Millar.
When the two Russian students were in financial difficulty, Adam Smith lent them money to tide them over.
The two Russians returned to Moscow in 1768, imbued with Smithian doctrine, and promptly became the first Russian professors of law at Moscow University.
In Moscow, the young Smithians ran into strong faculty hostility.
The majority of professors at Moscow University had been German, and the Germans strongly opposed the successful drive by the younger Russians to teach in Russian rather than Latin, and even more were the Germans hostile to the two Smithians liberal, reformist and anti-clerical views.
Dessnitsky and Tretiakov each published a Smithian book in their first year back in Russia.
Both books were largely verbatim transcriptions of Smith's lectures, with Dessnitsky ghostwriting Tretiakov's volume.
Of the two from that point on, Tretiakov was the more faithful Smithian.
Dessnitsky more the independent thinker.
Both men were dominant in the political and law faculty at Moscow University, with Desnitsky becoming known as the outstanding Russian social and political theorist of the second half of the 18th century, as well as the father of Russian jurisprudence.
Desnitsky also translated the Great Blackstone into Russian.
Empress Catherine the Great became interested in the latest intellectual craze, the Scottish
Enlightenment, and on Dessnitsky's return from Russia, commissioned him to write a Smithian
reform plan for Russia, a massive volume, the Predstavlini, which he finished and sent
to Catherine in 1768.
Its basic thrust was that of moderate political reform.
He proposed a system of two-house representation along with independent, life-appointed judges
serving as checks and balances on the executive and legislature.
Catherine the Great read the Predstavleni and incorporated politically trivial suggestions
into her famous 1768 reform decree, the Nakaz, which was translated into English, French
and German.
The Predstavlany itself, however, was far too radical to see the light of day, and it
remained unpublished until the revolutionary year of 1905, when it inspired liberal reformers
and was reprinted twice in rapid succession.
The influence of Smithianism in Russia was redoubled by the fact that Princess Ekaterina
Anna Dashkova resided in Scotland in the late 1770s, while her son studied at Edinburgh
University.
Dashkova wrote proudly of her close friendship with such immortals as Adam Smith, the Reverend
William Robertson, Adam Ferguson and Hugh Blair.
But despite their eminence, the hostility of the Russian state and church, seconded
by most of the Moscow faculty to the two jurists' liberal views got them ousted from their
university posts.
Each was forcibly retired from the university, Tretyakov in 1773 and Desnitsky in 1787,
and each died early, a few years after their ouster.
Picking up the Smithian torch for the next Russian generation was a German Smithian,
He was the Baltic German nobleman Heinrich Friedrich Freiherr von Storch, 1766-1835.
Born in Riga and educated at Jena and Heidelberg, Storch spent his life high up in the Russian Civil Service,
becoming a professor at the Imperial Cadet Corps at St. Petersburg,
and Educating the Future Czar Nicholas I and his Younger Brother in Smithian Political Economy
Helping to bring Smithianism to Russia, von Storch wrote in German a nine-volume historical and statistical work on Russia at the end of the 18th century, 1797 to 1803,
and later wrote a treatise on economics in French, Cours d'Economie Politique, 1815.
The book was published in St. Petersburg for the education of the future czar.
A moderate Smithian, von Storch, sensibly rejected the idea that some labor was unproductive
and dabbled in a form of pre-Keynesian income analysis in his last work in 1824.
6. The Smithian Conquest of Economic Thought
By the turn of the 19th century, the views and doctrines of Adam Smith had swept the
board of European opinion, though they had scarcely been embodied in political institutions.
Even in France, as will be seen in the second volume of this series, the pre-Smithian subjective
of Mutility Scarcity Approach to Value as well as the stress on entrepreneurship in the market,
continued to be prominent, but only under the cloak of a proclaimed devotion to Adam Smith
as the founder of economic theory and free market policy.
In the hands of James Mill and Ricardo in England, of J.B. Say in France, and throughout the rest of the continent,
Adam Smith would be treated as the embodiment of the new discipline of political economy.
There were advantages, but probably greater disadvantages, to this Smithian dominance
over economic thought after the 1790s. On the one hand, it meant at least a moderate appreciation of,
and devotion to, freedom of trade at home and abroad. Even more solidly, it meant a keen
in understanding and a steadfast adherence to the virtues of saving and investment, and
a refusal to indulge in proto-Keynesian worry about hoarding or underconsumption.
Moreover, this adherence to what Schumpeter calls the Turgot-Smith view of saving and
investment also meant a determined opposition to wildly inflationary schemes of expansion
of money and credit.
On the other hand, there were dire costs to economic thought in this Smithian takeover.
Even on the monetary front, Smith had gone against his 18th century colleagues in adopting
crucial aspects of John Law's inflationary doctrine, in particular praising expansion
of bank credit and money within a specie standard framework.
In this way, Smith paved the way for later apologetics on behalf of the Bank of England
and its generation of credit expansion.
More fatefully, Smith totally set back price and value theory and led it into a fateful
cul-de-sac from which it took a century to recover.
In some respects, it has never fully recovered.
At the root of Smith's drastic changes in theory was undoubtedly his Calvinist contempt
for luxury consumer spending.
Hence only work on material goods, that is, material capital goods, was productive.
Hence too Smith's interventionist call for usury laws to lower the rate of interest so
so as to ration savings and channel them away from luxurious consumers and speculative projectors
to sober prime borrowers.
Smith's contempt for consumers also led him to discard the time-honored subjective utility
scarcity theory of value, and to seek the cause of value not in frivolous consumers
but in real cost or labor pain embodied into the product.
Hence Smith's crucial shift of emphasis in economic theory away from consumer demand
and actual market prices and towards unrealistic long-run equilibrium.
For only in long-run equilibrium does a labor pain or cost theory of pricing take on even
superficial plausibility.
But the exclusive attention to long-run equilibrium led Smith to toss out the entire entrepreneurship
and uncertainty approach that had been elaborated by Catillon and Turgot, for in a timeless
final equilibrium there is obviously no problem of change or uncertainty.
Smith's labor theory of value led to Marxism and all the horrors to which that creed has
has given rise, and his exclusive emphasis on long-run equilibrium has led to formalistic
neoclassicism which dominates today's economic theory, and to its exclusion from consideration
of entrepreneurship and uncertainty.
Smith's stress on the economy in perpetual equilibrium also led him to discard his old
by my friend David Hume's important insight, even if inferior to Cotillon's, into the international
speciflow price mechanism and to the important business cycle analysis that lies clearly
implicit in that doctrine.
For if the world economy is always in equilibrium, then there is no need to consider or worry
The Theory about increases in money supply, causing price rises and outflows of gold or
silver abroad, or to consider the subsequent contraction of money and prices.
In essence, then, the common picture of economic thought after Smith needs to be reversed.
In the conventional view, Adam Smith, the towering founder, by his theoretical genius
Smith, by the sheer weight of his knowledge of institutional facts, single-handedly created
the discipline of political economy, as well as the public policy of the free market, and
did so out of a jumble of mercantilist fallacies and earlier absurd scholastic notions of a
just price.
The real story is almost the opposite.
Over Smith, centuries of scholastic analysis had developed an excellent value theory and
monetary theory, along with corresponding free market and hard money conclusions.
Originally embedded among the scholastics in a systematic framework of property rights
and contract law based on natural law theory, economic theory and policy had been elaborated
still further into a veritable science by Cantillon and Turgot in the 18th century.
Far from founding the discipline of economics single-handed, Adam Smith turned his back
not only on the scholastic and French traditions, but even on his own mentors in the considerably
more diluted natural law of the Scottish Enlightenment, Gershom Carmichael and his own teacher, Francis
Hutchison.
The most unfortunate aspect of the total Smithian takeover in economics was not so much his
own considerable tissue of error, but even more the blotting out of knowledge of the
rich tradition of economic thought that had developed before Smith.
As a result, the Austrians and their nineteenth-century predecessors, largely deprived of knowledge
of the pre-Smith tradition were in many ways forced to reinvent the wheel, to painfully
claw their way back to the knowledge that many pre-Smithians had enjoyed long before.
Adam Smith and the consequences of Smith is an outstanding example of the Coonian case
in the history of a science.
In all too many cases, the development of knowledge in a discipline is not a steady
Continuous March Upward into the Light, Patiently Discarding Refuted Hypotheses and Adding Continually
to the Stock of Cumulative Knowledge.
But rather, the history of the discipline is a zigzag of great gain and loss, of advances
in knowledge followed by decay and false leads, and then by periods of attempts to recapture
lost knowledge, trying, often dimly and against fierce opposition, to regain paradigms lost.