1984: The Adam Smith Address was Adam Smith a Monetarist or a Keynesian?

Abstract

Adam smith, let me start by saying, was a remarkable writer, person, and economist. He was in many ways the real founder of economics, starting our science off in resource allocation, income distribution and a host of similar aspects of microeconomics. Despite a number of interesting passages, such as that on debt, however, he was not distinguished as a macro-economist. The hagiography tends either to ignore his weakness in money and banking, as does Samuel Hollander in The Economics of Adam Smith, or to protest that he is much better on the balance of payments [9], or on monetary economics generally [20] than most observers are willing to allow. I yield to none in my admiration for The Wealth of Nations—and in fact recommend to students that they, like Bismarck’s tariff negotiator for Prussia under the Zollverein, Rudolph Von Delbrück, read the hallowed text each night for half an hour before retiring [8, vol. 1]. But it is helpful for Smith’s reputation as a human being to acknowledge that he, like the rest of us, from time to time made a mistake or overlooked a significant aspect of the economy of his day—even on the microeconomic side. I happened to elicit strong protests from two critics at the Glasgow celebration of the bicentenary of The Wealth of Nations when I suggested that Adam Smith was totally unaware of the technological changes taking place in the industrial revolution cooking around him [2, 12]. His other slips not recited in my chapter on that occasion include the remark that Dutch merchants are uneasy at being separated from their capital which is why they unload goods from East Prussia in Amsterdam to look at them before ship** them on to Italy—when the real reason was to repack the grain more carefully to prevent it from exploding from spontaneous combustion under the hot Mediterranean sun [28, Book IV, 422]; or the amateurish and quite unsupported sociology that ascribed French interest in life annuities and tontines to the “fact” that the farmers general (of tax collections and the like) who accumulate wealth are social upstarts, cut off from marrying into the upper classes and too proud to marry their lower-class equals, hence celibate and without heirs [28, Book V, 871–872].