The Publication of the Wealth of Nationsl C. Carson

His most recent book, The Rebirth 01 Liberty (1973), covers the founding of the American Republic from 1760 to 1800. 212 Another Bicentennial: Publicationof WEALTH OF NATIONS CLARENCE B. CARSON monly understood that the two documents were produced from a similar intellectual outlook, but knowledge of this had but little prepared me for what could be learned about the one by studying the other. The main difficulty in discern ing the meaning of the Declara tion of Independence is, for me at least, in the first few lines of the second paragraph. They are also the most quoted lines from the document. To wit: "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, 1976 ANOTHER BICENTENNIAL 213 Liberty, and the pursuit of Happi ness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed."

Though there may be difficulty with some other passages, the most troublesome are these two: "that all men are created equal," and the right to "the pursuit of Happiness." Differences Abound In the most obvious senses, men are not created equal. They differ from one another in height, in weight, in strength, in native in telligence, in heredity, in ability, in upbringing, in interests, and in almost every other way that comes to mind. Indeed, these very dif ferences go to make up one of our most prized possessions, our indi viduality. Not only are we not the same, as some say, but also in our differences we are not equal. Some have talents for doing all sorts of things. Others can learn to do any thing only with the greatest diffi culty. Some 'are endowed with all the good graces, or so it seems. Others are very nearly graceless. There are those who claim that we are an equal in the sight of God. Whether this is so, or in what way it may be so, I do not know.

Those who say this usually say it as if it were obvious and offer no proof or evidences in support of it. Within the context of the Decla ration, it is sufficiently clear that what is meant is that men are en dowed by their Creator with an equality of rights. It is equally clear, when the matter is pursued logically and historically that for this to be instituted they must be equal before the law. What are these rights to which men are entitled? According to the Declaration, they are the right to "Life, Liberty, and the pursuit of Happiness." Life and liberty pose no great problem for explanation, but the same does not go for the pursuit of hatppiness. The com monly used phrase at the time was "property," but Jefferson substi tuted for it "pursuit of Happi ness," not because he doubted that property was a natural right but because he wished to say consid erably more than this. The mean ing of the phrase poses no great difficulty. If other words are needed, it means the right to seek one's own well-being. But what is the ground of such a right? How can seeking one's own well-being be justified? Would this not be contrary to the general welfare?

Would it not be that very selfish ness which has been so often con demned? On what basis does the equal right to do such a thing rest? The answers to these questions can be found in The We1aUh of 214 THE FREEMAN April Nations. They can be found else where in bits and pieces, but no where so comprehensively as in Adam Smith's major work. There is in the following quotations the key to understanding the basic passages of the Declaration: Every individual is continually ex erting himself to find out the most advantageous employment for what ever capit~l he can command. It is his own advantage, indeed, and not that of society, which he has in view. But the study of his own advantage natur ally, or rather necessarily leads him to prefer that employment which is most advantageous to the society.! The following is more famous but not necessarily clearer: The produce of industry is what it adds to the subject or materials upon which it is employed. In proportion as the value of this produce is great or small, so will likewise be the profits of the employer. But it is only for the sake of profit that any man employ~ a capital in the support of industry; and he will always, therefore, en deavour to employ it in the support of that industry of which the produce is likely to be of the greatest value, or to exchange for the greatest quan tity either of money or of other goods.

But the annual revenue of every society is always precisely equal to the exchangeable value of the whole 1 Adam Smith, The Wealth of Nations Edwin Cannan, ed. (New Rochelle: Ar lington House, n. d.), II, 27. annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeav ours as much as he can both to em ploy his capital in the support of do mestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the an nual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the sup port of domestic to that of foreign in dustry, he intends only his own se curity; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this as in many other cases, led by an in~is ible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to pro mote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuad ing them from it. 2 The same principle which ap plies to trade and manufacture within a country applies to that among countries as well: 2 Ibid., pp. 29-30.

1976 ANOTHER BICENTENNIAL 215 ... The interest of a nation in its commercial relations to foreign na tions is, like that of a merchant with regard to the different people with whom he deals, to buy as cheap and to sell as dear as possible. But it will be most likely to buy cheap, when by the most perfect freedom of trade it encourages all nations to bring to it the goods which it has occasion to purchase; and, for the same reason, it will be most likely to sell dear, when its markets are thus filled with the greatest number of buyers. 3 There are many economic con cepts treated in Smith's magnum opus, some of them more or less original with him, but there is one overriding principle which occurs over and over again. It is this: when individuals are free to pur sue their own interests they will benefit not only themselves but the general public as well. Adam Smith did not discover, of course, that men are self-interested. That has surely been known as long as there has been a concept by which it could be thought. He may not have been the first to discover that there i s a nat u r aI harmony wrought by an invisible hand - the natural order? - from the multi tudinous acts of unconcerned and self-interested individuals, but he did give the principle the. most pointed application and spell out 3 Ibid., pp. 38-39.

the extent of its comprehensive ness. It is the crux of his lengthy and detailed argument for eco nomic liberty and free trade. There, too, lies the key to un derstanding some of the most mo mentous phrases of the Declara tion of Independence. In what way are all men created equal? There may be others, but there is cer tainly this one: Every man is, by nature, self-interested. The Found ers of the United States were apt to refer to it as self-love. Jesus made it the foundation point of his second most important com mandment: "Do unto others as you would they should do unto you." In short, He said, extend tha t care and love to others which you have for yourself. The Crea tor has implanted this self-inter estedness, or self-love, in us to in sure our survival and that of the race. Sell-Interest Is Normal Any man lacking the ability to discern his interest and the will to pursue it is unfitted to the office of a man. He would be unable to look after himself and would have to be taken over by others for his own good and the protection of others from him. This is not to say tha t men may not perform self less acts - acts of heroism, acts motivated by love untinctured by concern for self. It -is rather to say 216 THE FREEMAN April that self-interest is the rule - the norm - ,and selflessness the excep;.

tion. The opposite of self-interest is not,as is sometimes supposed, selflessness; it is self-destructive ness, a condition requiring re straint. All men are equal, then, in that all are self-interested. Self-interest as the ground, or one of the grounds, of equality, gains plausibility by the fact that one of the unalienable rights as serted is the right to "the pursuit of Happiness." This is the right to fulfill one's self, to seek one's own well-being, or to pursue one's own interest. There is no reasonable way to attach a different meaning to the phrase. The Declaration of Independence makes the right to pursue his self-interest a funda mental right of man. Within the framework of The Wealth of Na- ' Hons such a right is justified, for when men behave economically so as to advance their own interests the result is 'also to advance the good of people generally. It is not my position, of course, that Jefferson was influenced by The Wealth of Nations 'when he wrote the Declaration, or that there was some sort of interchange between the two men. There was none to my knowledge. It is rather that a comrnon set of assumptions was leading to similar conclusions, and that the two works illuminate one another.

Old Ideas Challenged The two works are closer re lated, however, than even this would suggest. Much of the body of Smith's two-volume work was devoted to a point-by-point refuta tion of the mercantile system and to the economic arguments for free trade. The American revolt fol lowed changes in British policy, changes in taxation which can be attributed to the infelicities of mercantilism. 4 Once the thrust of Smith's conclusions about mercan tilism were accepted, the Ameri can cause would have a virtually complete justification. The full significance of the views that all men have an equal right to the pursuit of their in terests and that when they exer cise this right it works to the pub lic benefit can only be appreciated in the context of what has usually been believed and done. To say that the ideas of Jefferson and Smith were radical may not ex pose their full scope. In fact, they laid under siege some of the most deeply rooted and persistent no tions that men have held.

No notion is more deeply rooted and persistent than the one that some ,class, order, or body of men is chosen, ordained, or especially equipped to decide what is good 4 See Clarence B. Carson, The Rebirth of Liberty (New Rochelle: Arlington House, 1973), pp. 65-76.

1976 ANOTHER BICENTENNIAL 217 for the rest of us. The generality of men are the sheep and they are the shepherds, as it were. How they have been chosen or selected has varied from time to time and place to place but such an elite has commonly occupied declision-mak ing roles throughout history. The Puritans of New England considered themselves chosen of God to rule over the people there. They not only excluded others from government but also laid down all sorts of economic restric tions. "Inns, mHls, and ferries were subject to control. Charges were limited by law, and the obli gations of such institutions were legislatively defined .... Effort~ were made to determine fair prices, fair wages, and reasonable profits."5 The most presumptuous effort to control the lives of people by an .elite occurred in colonial Georgia, however, immediately after its founding. Georgia was conceived as a char,itable undertaking and was placed under a Board of Trus tees who resided in England. "The Board will always do wha.t is right," the Trustees proclaimed in 1735, "and the people should have confidence in US."6 They proceeded 5 E. A. J. Johnson, American Economic Thought in the Seventeeth Century (New York: Russell and Russell 1961) p 17 6 Daniel J. Boorstin, The Arr:erica~s: T~e Colonial Experience (New York: Vmtage Books, 1958), p. 88.

to fasten upon the inhabitants reg ulations both strange and per verse: Not only did they encourage silk culture by a guaranteed inflated price and by bounties and prizes for the product delivered in England, but they even wrote into land-grants pro visions requiring each grantee, in order to validate his claim, to plant at least 50 white mulberry trees on every 50 acres; every grantee of 500 acres had to plant 2000 trees within twenty years. 7 In addition, they had many rules governing consumption and other kinds of production than that of silk. Many Regulators in England Old England had its own varie ties of elites to determine what was good for people in the cen turies before Adam Smith. It had an hereditary monarchy and ari stocracy' an established church w,ith its hierarchy, and other classes and orders who partici pated in laying down regulations. These, from time to time, laid down rules governing econom,ic re lations : controlling prices, control ling wages, granting monopolies, deciding who could sell what where, and to whom, restrictin~ the Iives and red ucing the Iiveli hood of the people.

7 Ibid., p. 83.

218 THE FREEMAN April One of the main difficulties with the notion that some know best what the rest of us should do ,is that those who govern are self interested, too. They deny to men the right to decide what is in their own best interest, but what they most frequently do is saddle every one with what is in the interest of a few. Smith did not neglect to point out that those who fastened the mercantile regulations on England did so to advance their own special interests. He said: ... The capricious ambitions of kings and ministers has not, during the present and the preceding cen tury, been more fatal to the repose of Europe than the impertinent jeal ousy of merchants and manufactur ers. . . . [T]he mean rapacity, the monopolizing spirit of merchants and manufacturers ... may very easily be prevented from disturbing any body but themselves. That it was the spirit of monopoly which originally both invented and propagated this doctrine [mercantil ism], cannot be doubted; and they who first taught it were by no lueans such fools as they who believed it. In every country it always is and must be the interest of the great body of people to buy whatever they want of those who sell it cheapest. The propo sition is so very manifest, that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question, had not the inter ested sophistry of merchants and manufactures confounded the com mon sense of mankind. 8 It might be nearer to the whole truth to say that mercantilism re sulted from a tacit alliance be tween monarch and merchants, each pursuing their own ends.

At any r,ate, Smith gave short shrift to the notion that there existed any person or group com petent to decide the economic good for the rest of us. On one facet of the m-atter, he wrote: The statesman, who should attempt to direct private people in what man ner they ought to employ their capi tals [sic], would not only load him self with a most unnecessary atten tion, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would no where be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. 9 Of the economy in general, he de clared: It is the highest impertinence and presumption, therefore, in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expence, either by sumptuary laws, or by prohibiting the importation of foreign luxuries.

8 Smith, op. cit., II, pp. 71-72. 9 Ibid., p. 30.

1976 ANOTHER BICENTENNIAL 219 They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expence, and they may safely trust private people with theirs. If their own ex travagance does not ruin the state, that of their subjects never will.l 0 Wha t Smith could say of the ways of kings and ministers can be said with equal justice about those who govern in republics. A Gainer and a Loser in Any Transaction? Another widely held notion is that in any given transaction there is someone who wins and some one who loses. How such a notion arises again and again is fairly easy to understand. In a transac tion a merchant may make a profit, a profit which may be thought of as the difference between what he paid for the item and what he sold it for. The buyer, on the other hand, may be unable to discern any profit which he has gained in the transaction. At least, he is un able to calculate it ;and enter it in his books. One profited from the transaction; the other did not.

There was a gainer and a loser, or so it may appear. An example may show how some people come to feel this way. A man buys an automobile for $2000, 10 Ibid., I, p. 371. say, and drives it for awhile. Be ing in need of money, he sells it to a used car dealer for $800. In a few days, he learns that the dealer has sold the car for $1100. The man may readily conclude from these facts that he paid too much for the car in the first place and sold it for too little in the second. At any rate, the amount of money which he had was diminished by the series of transactions, and that of the dealer increased. It may not be that the feeling that there is a loser in the trans action arises so much from the fact that one has clearly made a profit - though there are those who oppose profit-making in prin ciple and a great many more who oppose profit-making at their ex pense -as that transactions usu ally involve the trade of some com modity or service for money. If all transactions were in kind, both parties would no doubt believe that they were the gainers, and both would no doubt be right. But when money enters the picture, is used as a medi urn for the exchange, he who paid out the money may con clude that he has been a loser, par ticularly if he tries shortly to sell the commodity for the sum he paid for it. Indeed, a man may pay $1 for 5 pounds of apples, cpnsume the apples, become in, and feel cer tain that he is the los·er in the transaction.

220 THE FREEMAN April Balance of Trade This idea of a gainer and a loser has been given international and even universal application. The main route to this notion has been the conception that there is only a given quantity of a thing. Anyone who acquires more must then be depriving others of it. The best known instance of this line of thinking occurred when precious metals were used as money and thought of, by some, as wealth, or the only true wealth. Since there is only a certain quantity of these in nature, the nation which gains these does so at the expense of other nations. The mercantile no tion of "favorable" balance of trade was justified by the notion that a nation should ·attempt to in crease its holdings of precious metals. To do so, ,it ought to sell more to other nations than it bought, getting the difference in gold .and silver. But the belief that there is only a certain quantity of a thing has not been restricted to precious metals; it has been ex tended to other things as well. In our day, there are those who claim that if one man eats overmuch he is depriving others of needed food.

At any rate, over the centuries the notion that in transactions there is a gainer and loser, either potentially or actually, has bred a large portion of government regu lation, restriction, and intervention. It has led to laws promoting exports and discouraging imports, to the payment of bounties, to the imposing of tariffs, to price con trols, to wage controls, to quality controls, to prohibitions against sending gold out of a country, to the confiscation of "excess profits", to ,all sorts of laws for the protec tion of consumers. Each Party Gains Adam Smith did not spend much energy on the gainer-loser in transactions idea. He simply stated that where a trade had been freely effected it was assumed to be to the mutual advantage of the par ties. (The Austrian School has since buttressed this point with extensi ve theoretical demonstra tions.) He did go to some length to justify profits, rent, and inter est. Indeed, he held that men save and invest in order to make a profit, that the capital that results from this is the main way to pros perity, and that when men are free to compete prices and wages are regulated by it. He did ac knowledge that in trans'actions men frequently were unable to get the best possible price for what they were selling or buying. The source of this, however, was gov ernmen t restraints on commerce and on the entry of competitors to the field, not that some individual was taking unfair advantage. And, 1976 ANOTHER BICENTENNIAL 221 he devoted fulsome attention to the fallacies of mercantilism and the bullion. or monetary theory of wealth.

The Wealth 0 f Nations moves toward one conclusion, sometimes ponderously but always master fully - the individual and social beneficence of liberty: All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left per fectly free to pursue his own interest his own way, and to bring both his in dustry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the at tempting to perform which he must always be exposed to innumerable de lusions, and for the proper perform ance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the in dustry of private people; and of di recting it towards the employments most suitable to the interest of so ciety. According to the system of nat ural liberty, the sovereign has only three duties to attend to... : first, the duty of protecting the society from the violence and invasion of other in dependent societies; secondly, the duty of protecting ... every member of the society from the injustice or oppression of every other member of it ... ; and, thirdly, the duty of erecting and maintaining certain public works and certain public institu tions ... ,11 A Century of Gain For more than a century after 1776 the thrust tow,ard liberty gained sway in the world. The United States and England led the way in many respects. Trade re strictions among nations were either greatly reduced or removed.

In the course of the nineteenth century, serfdom and slavery, where they still existed, were gen erally abolished. The ideas that men have an equal right to pursue their interests and that when they do so the general public benefits gained hold and were buttressed by law in many lands. There was a great creative and productive surge within nations, and the na tions of the world were generally drawn together in a great trading network. Populations increased as rarely before, but the ever-larger numbers of people were more prosperous than ever. Wars still occurred, but wi,th one or two notable exceptions they were brief and limited affairs. By the turn into the twentieth century, though, there were al ready ominous signs that the tide was shifting against individual liberty. The defection of the in tellectuals was lalre'ady well under11 Ibid., II, p. 290.

222 THE FREEMAN April way. A spate of ideologies was gaining adherents, particularly socialistJc ideologies. The system that had produced abundance on a seale never before im'agined in the world was being ,attacked for not having made everyone affluent. Governments were beginning to impose new and old restraints on productive efforts. Nations were once again beginning to erect barriers against trade. New names and new ideas were supplanting those of the Founders Qf the United States and the classical economists: such names as Karl Marx, Friedrich Nietzsche, Nico lai Lenin, Benito Mussolini, and Joseph Stalin. In their wake has come the totalitarian state which threatens in varying degrees in dividual liberty in every corner of the world. As fate would have it, on the two hundredth anniversary of the Declar1ation of Independence and The Wealth of Nati,ons, the world is more in need of the ideas of liberty 'contained in them than it was in 1776. There is one appro priate way to 'celebrate the bicentennial of The We,alth of Nations; it is to read or re-read it. True, the sentences are long and com plex, and the periods are rounded, as it is described. The language is, much of it, from a bygone era.

But many of the ideas are as fresh ,and ,applicable today as when they were penned. Nor is the celebration of the publication of The Wealth of Na tions something for Scotland only, or for England, or even for the English-speaking countries. Adam Smith's great work was written by a Scotsman in English in the eighteenth century, but it belongs to the ages and to the whole world. He took economics out of its parochial framework where it was concerned only with the wealth of a single nation and made it a universal study, one which conceived an order in which the efforts of the individual bene fitted not only his own country but peoples everywhere that trade took place. So long as the love of liberty survives anywhere, sus tenance for it ,can be found in The Wealth of Nations. t) JACK MARKOWITZ Two HUNDRED AND FIFTY years ago, in 1726, a half century before the United States was born, Eng land's brightest literary men were playing midwife to a different sort of enduring political classic. Its author was one of the wittiest (which did not preserve him from being one of the angriest) ,ge niuses who ever lived: a priest of the Church of England who would have healed the world by making it laugh at itself. A quarter of a millennium has not dulled the bite of his salubrious masterpiece, Travels into Several Remote Na tions of the World.