The worst form of government, except for all those other forms that have been tried from time to time

I have been working away at my next book which is on classical economics, which was the highpoint of economic theory, from whence economics has been in precipitous decline since falling into the hands of socialists and academics (did I just repeat myself there?). As it happens, I have just today been working on the chapter on the role of government according to the classics. Here’s the first para of the chapter – a draft so all comments are truly welcome:

It is almost impossible any longer to know what a modern economist believes about the economic judgements found among economists prior to the publication of The General Theory. Possibly the most incorrect judgement is the belief that classical economists were opposed to public spending and insisted on an extremely limited role for government regulation or expenditure.

There is a lot in the chapter but let me start with this quote from The Principles of Political Economy by J. Shields Nicholson published in 1901. Don’t know who he is? You’ll have to buy the book, but very respectable, a man of the establishment of his own time. He is here summarising the almost-two previous pages on how Adam Smith understood the role of government.

“Thus, according to the actual teaching of Adam Smith, if competition leads to injustice or oppression, the State ought to intervene, and if self-interest is inadequate to provide various institutions for the satisfaction of actual needs, the State ought to provide for their erection and maintenance.” (Nicholson 1901: 179-180)

This is the kind of statement that you will never find in an economics text today, which is not something I say in any kind of positive way. But what I really want to deal with is his view of the people who get elected to Parliament.

“The assumption that government is all-wise and all-powerful is so far removed from the truth as to be of little use even for the purposes of abstract reasoning. With the best intentions, governments may ruin their legislation by ignorance and their administration by feebleness. And very frequently the intentions are not the best, if by best we mean that the public interests, with the due regard to the future as well as the present, are always dominant. The government, even of the most democratic states, must be formed of persons who are themselves liable to errors of judgment and errors of passion. And to a considerable extent they are supposed to carry out the mandate of their electors. The electors are open to all kinds of persuasion, as well as to the persuasion of justice and reason…. In the most advanced democracies, laws are still made and unmade in the interests of powerful classes and sometimes against the interests of considerable minorities. Officials are still appointed for all sorts of reasons apart from merit and efficiency, and are removed, or not removed, on a similar diversity of excuses.” (Nicholson 1901: 249)

Then follows my own comment on what Nicholson has written:

One cannot quote the whole of Nicholson, but it is as engaging today as Mill’s Principles is now a formidable challenge to a modern reader. Yet they both speak from the same script, with Nicholson frequently referring to Mill’s Principles even with the first edition having been published more than half a century before his own book was published. And in his views on the role of government, he was doing no more than following Mill who did much to outline just how crucial government was in the management of an economy. And in this, he spoke for the entire classical tradition.

And so far as leaving things to the market, you will not find a single economic writer today who is as resolute in wishing to see the market succeed and who is as fulsome in their support for liberty and prosperity that only free markets and democratic governments can bring as were Mill and Nicholson, and indeed the whole of the classical tradition going right back to Adam Smith.

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12 Responses to The worst form of government, except for all those other forms that have been tried from time to time

  1. C.L.

    If you’re essaying economic theorising prior to Keynes – especially in relation to government, liberty and supposed market failures – you should discuss the Catholic social encyclicals beginning with Rerum Novarum of Leo XIII (1891). I think you’ll find what he says about the mutually symbiotic relationship between capital and labour, the limited role of the state, private property and freedom of association compatible with classical economics. Unfortunately, this tradition has also been infected by socialism – to the extent that the gulf between Leo and his present-day successor is as wide as that between Adam Smith and Clive Hamilton.

  2. None

    Your book sounds both interesting and necessary, Steve. I found your first paragraph a little too wordy- I couldn’t easily discern your point. May I suggest being a little more assertive? Something like:

    It is almost impossible any longer to know what a modern economist believes about the economic judgements found among economists prior to the publication of The General Theory. Possibly tThe most incorrect manifest judgement is the belief is that classical economists were opposed to public spending and insisted on an extremely limited role for government regulation or expenditure.

    Not sure if manifest is the right word but I think you’ll get the point.

    Your subsequent quotes were very illuminating and would make a few lefties choke. In your last paragraph you could possibly omit “now”; maybe also drop the last “And” to add punch: “In this, he spoke…”.

    Please, keep writing.

  3. Karabar

    It seems to me that Smith, Mills and Nicholson wrote in a period in which men had integrity and could generally be taken at their word.
    Today’s world in comparison is a fantasy land in which corruption in business as well as government results in the populace being fed nothing but lies by a compliant news media.
    How can economics possible be effective in a corrupt world in which no one can be believed?

  4. RobK

    I agree with None’s comments.
    I’d suggest “ Today it is almost impossible….”, and leave “manifest” out altogether.
    I ordered your previous book some weeks ago. It is on a slow boat from the UK. I’m looking forward to reading it. Thanks.

  5. Sinclair Davidson

    How does Nicholson differ from any modern economist advocating government intervention to address “inequality” – the modern “injustice”.

    On elected representatives how does he differ from the modern public choice school?

  6. Frank Walker from National Tiles

    Sortition
    Recall elections
    Veto plebiscites
    Confederalism
    Participatory democracy
    Strict constiutionalism
    Republican virtue

    I’m not sure this really has been tried.

  7. max

    Murray N. Rothbard:

    Economic Thought Before Adam Smith
    Classical Economics

    If you look at the theories developed by the classical economists, you can easily find fault. Smith advanced an exploitation theory of labor,

    Ricardo furthered the Marxist cause by implying that profits could only increase at the expense of workers’ wages, which tended toward the subsistence level.

    The honour of being called the ‘father of modern economics’ belongs, then, not to its usual recipient, Adam Smith, but to a gallicized Irish merchant, banker, and adventurer who wrote the first treatise on economics more than four decades before the publication of the Wealth of Nations. Richard Cantillon
    The first self-conscious school of economic thought developed in France shortly after the publication of Cantillon’s Essai. They called themselves ‘the economists’, but later came to be called the ‘physiocrats’

    If we were to award a prize for ‘brilliancy’ in the history of economic thought, it would surely go to Anne Robert Jacques Turgot,

    Adam Smith (1723-90) is a mystery in a puzzle wrapped in an enigma. The mystery is the enormous and unprecedented gap between Smith’s exalted reputation and the reality of his dubious contribution to economic thought.
    Smith’s reputation alnlost blinds the sun. From shortly after his own day until very recently, he was thought to have created the science of economics virtually de novo. He was universally hailed as the Founding Father.

    For Smith not only contributed nothing of value to economic thought; his economics was a grave deterioration from his predecessors: from Cantillon, from Turgot, from his teacher Hutcheson, from the Spanish scholastics, even – oddly enough – from his own previous works, such as the Lectures on Jurisprudence (unpublished, 1762-63, 1766) and the Theory of Moral Sentiments (1759).

    But the problem is worse than that; for it is not just that Smith’s Wealth of Nations has had a terribly overblown reputation from his day to ours. The problem is that the Wealth of Nations was somehow able to blind all men, economists and laymen alike, to the very knowledge that other economists, let alone better ones, had existed and written before 1776.

    If, then, Adam Smith contributed nothing of value to economic thought; if, in fact, he introduced numerous fallacies, including the labour theory of value, and thereby caused a significant deterioration of economic thought from previous French and British economists of the eighteenth century; did he make any positive contribution to economics?
    Indeed, the list of exceptions Smith makes to laissez-faire is surprisingly long. His devotion to the militarism of the nation-state, for example, induced him to take the lead in the pernicious modern view of excusing any government intervention that might plausibly be labelled for ‘the national defence’ . On that basis, Smith supported the navigation acts, that bulwark of British mercantilism and systemic subsidy for British shipping.
    There is also a particularly lengthy list of taxes advocated by Adam Smith, each of which interferes in the free market. For one thing, Smith paved the way for Henry Georgism and the ‘single tax’ by urging higher taxes on uncultivated land, displaying his animus against the landlord. He also favoured moderate taxes on the import of foreign manufactures, and taxes on the export of raw wool – thus gravely weakening his alleged devotion to freedom of international trade.

    Smith also advocated a tax on the retail sale of all liquor in order to discourage the multiplication of small alehouses.
    And finally, Adam Smith advocated the soak-the-rich policy of progressive income taxation.
    Perhaps Smith’s most flagrant violation of laissez-faire was his strong advocacy of rigid usury laws, a sharp contrast to the opposition to such laws by Cantillon and Turgot.

    Perhaps most important of all, how do we square Smith’s alleged role as champion of free trade and laissez-faire with his spending the last 12 years of his life as a commissioner of Scottish customs, cracking down on smugglers violating Britain’s extensive mercantilist laws and evading import taxes?

  8. Frank Walker from National Tiles

    For Smith not only contributed nothing of value to economic thought

    Pull the other one it plays Jingle Bells.

  9. Tel

    His devotion to the militarism of the nation-state, for example, induced him to take the lead in the pernicious modern view of excusing any government intervention that might plausibly be labelled for ‘the national defence’ . On that basis, Smith supported the navigation acts, that bulwark of British mercantilism and systemic subsidy for British shipping.

    And errr how did Great Britain do after 1776, all things considered? Dreadful failure were they?

  10. max

    And errr how did Great Britain do after 1776, all things considered? Dreadful failure were they?

    basically:”It’s all downhill from here” “downhill all the way,”

    If Great Britain had not been defending an empire, and had not gone into all those wars in the 18th, 19th and 20th century, it would be vastly richer and free than today.

    In 1800 one pound was ~ 5 US dollars
    Today one pound is 1.5 US dollars
    Empire is gone, probably soon Scotland as well.

    societies/empires do not collapse overnight

  11. Tel

    Empire is gone, probably soon Scotland as well.

    Yeah, after WWII they went downhill.

    Besides, if you want to compare with the USA as a reference point, then how about I list all the wars the US has been involved with?

    It’s difficult to find any part of US history where they were not militaristic and the time they surpassed Britain was WWII which involved successful US militarism in both the Pacific and Europe and supply of equipment to Russia. If you want me to get really subversive, the USA also supported Germany in the 1920’s and 1930’s so they had their bases covered!

  12. max

    Besides, if you want to compare with the USA as a reference point, then how about I list all the wars the US has been involved with?

    US of A is following same pattern as British empire — the end is going to be same.

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