A Book Review of Adam Smith in Toulouse and Occitania: The Unknown Years, by Alain Alcouffe and Philippe Massot-Bordenave.1 Adam Smith in Toulouse and Occitania: The Unknown Years is not a book for everyone. It is not an introduction to the life or the works of Adam Smith. It is not even a traditional biography of Smith. I would say it is more a way to be a tourist with Adam Smith. The book is dotted with mistakes and hyperbolic conclusions, from, say, the use of son-in-law rather than stepson, to unsupported claims of influences on Smith’s work. And yet is it a fascinating journey in 18th century Southern French culture and in the ways in which one may imagine Smith would travel through it. “The influence that the tour of France had on Smith is through his observation and study of the culture, economy, politics, and society of France.” Adam Smith accompanied the Duke of Buccleuch on a Grand Tour of Europe, as was customary for young aristocrats coming of age at the time. They started in France in February 1764. That the sojourn in France may have influenced Smith is a common trope in the literature. But Smith’s French influences are mostly identified with the Physiocrats. Not here. In Adam Smith in Toulouse and Occitania, the Physiocrats are a sort of afterthought at the very end of volume. The influence that the tour of France had on Smith is through his observation and study of the culture, economy, politics, and society of France. I said earlier this book feels like being a tourist in France with Adam Smith because Alcouffe and Massot-Bordenave do not leave any details unaccounted, as one would imagine Smith would have done. It is not a superficial account of the people and the places Smith visited. Instead, each person introduced is introduced with his or her full family history, and connections with other people. Each town or place mentioned is presented in its complete history, from foundation to current state. In my imagination this is how Smith would have prepared for his travels, studying in detail all aspects of a place and its people before or as he would visit. Alcouffe and Massot-Bordenave immediately tell us that Smith’s Grand Tour was a bit atypical. Rather than travelling through the major capitals of Europe and to the Mediterranean countries, Smith’s Grand Tour did not include Italy. The main base was not Paris, but Toulouse, the eighth largest city in France by population size, and it would have included Germany and Northern Europe, had the tour continued according to plan. (It did not, due to the sudden death of the Duke’s younger brother who had joined Smith and the Duke in France). The authors speculate that the unusual itinerary may have been dictated by the understanding that the center of influence was moving from the Mediterranean Sea to the Atlantic Ocean. The choice of Toulouse is also progressively justified as the book advances. The future Duke was to be educated in the arts of living with the prospect of becoming not only one of the largest landowners in Britain, but also a great “statesman.” He was expected to learn about politics, to meet and interact with people of his rank, and to be accustomed to their presence. Toulouse may not have been Paris, but it was the home of the second largest parliament in the country and, in a sense, the ideal place to study the complexity and diversity of the French political system, away from the chaos of Paris. In France, some provinces were administered by Estates, a form of limited democratically elected body (like Toulouse), and others by Intendants and Governors, a sort of viceroy (like the neighboring Guyenne, where Bordeaux is located). Toulouse was the home of the Abbé Colbert who chaperoned Smith and the young Duke around the South of France. The Abbé had Scottish origins, which underlined the tight relations between those two nations. Before the Union, France and Scotland had strong ties as “an enemy of my enemy is my friend,” as the saying goes. And Toulouse, and especially the near-by Bordeaux, was now the home of several Jacobites. Despite the Parliament of Toulouse closing Jesuit Colleges in 1764, it tried to give space to Protestants under false certification of Catholicity. The authors claim that “the development of Masonic lodges was another indication that religion was losing its monopoly on the organization of social and intellectual life” (111). And yet, religious conflicts that intertwined with conflicts between the judicial and royal power were still center stage in Toulouse when Smith was there. Mr. Calas, a Protestant, was put on the rack and tortured to death because he was accused (without proof) of murdering his son because he wanted to convert to Catholicism. With Voltaire’s help, the Calas family achieved final justice with the proclamation of innocence of Mr. Calas and compensation for damages—directly from Paris. In The Theory of Moral Sentiments, Smith uses this example to claim that the accusation of guilt of an innocent man is one of the most horrendous accusations one can make. The tensions with the center of power are also exemplified by the local Parliament’s refusal to register a royal edict to implement a new tax. When the Governor tried to arrest the parliamentarians, they went ahead and arrested him. At the time of Smith’s arrival in Toulouse, the Parliament was no longer active, and left the city in a crisis. Smith had to wait for formal introductions. He was bored there. But, according to Alcouffe and Massot-Bordenave, the exposure to the tensions between center and periphery and between different powers would be a good lesson for visitors, like Smith, from a country newly unified and still with some struggles on how to handle the unification of power. Bordeaux proved to be a welcome distraction from the social dullness of Toulouse. Not only did it have a very active theater, it was also a great commercial port—a slave trade port, to be precise. And again our authors bring us through the history and all the connections of this city, from Montesquieu, the Baron de Segondat, President of the Parliament who denounced slavery while promoting it his financial participation in the Compagnie des Indes, whose son Smith and the young Duke would meet, to Marchal de Richelieu, a military hero and great statesmen, and Colonel Barré, an advocate of the “sons of freedom”—the denomination of the north American settlers fighting against British oppression, also companions of Smith and the Duke. All this is always presented in a detailed account of all the overlaps of family and economic connections. A thorough history of the thermal resort of Bagneres-de-Bigorre accompanies the account of Smith’s time there. According to the authors this sojourn was a turning point in Smith’s travels. All the important people of Toulouse and Bordeaux, as well as nobles of France and Spain, would come to “take the waters.” Most accommodations in the town were similar to each other. Housing could no longer be a criterion of social discrimination, and thus formalities of introductions and hosting were much reduced. Smith was able to build the network of acquaintances needed for him and the Duke. Then in Montpellier, doors were open, and the Parliament was in session. They traveled there by canal. Our authors speculate that the majestic Languedoc canal, and the 328 engineering structures along it, was one of the reasons for choosing Toulouse as the base for this part of the Grand Tour. Smith became quite close with the Riquet family, related to the builder and owners of the canal. Smith’s understanding of the importance of water communication is well documented in his works, and according to the authors, was enhanced by his experience in the South of France. And when the Duke took possession of his land, he dedicated a lot of resources to the development of a vast system of canals. For more on these topics, see “Who Was Adam Smith?” by Maria Pia Paganelli, Library of Economics and Liberty, April 1, 2019. See also the EconTalk podcast episode Nicolas Phillipson on Adam Smith. Alcouffe and Massot-Bordenave again offer the rich socio-political-economic context in which Smith and the Duke traveled. The richness of their description brings to life the richness of the experience for both Smith and the Duke. In April 1765, the Duke’s stepfather authorized their departure from Toulouse to Paris. They did not leave until October, with the following recommendation from the Abbé Colbert: “if you did not fear God be at least afraid of the Syph.” Footnotes [1] Adam Smith in Toulouse and Occitania: The Unknown Years, by Alain Alcouffe and Philippe Massot-Bordenave. *Maria Pia Paganelli is a Professor of Economics at Trinity University. She works on Adam Smith, David Hume, 18th century theories of money, as well as the links between the Scottish Enlightenment and behavioral economics. For more articles by Maria Pia Paganelli, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

In “Why I Write,” Orwell declares “Every line of serious work that I have written since 1936 has been written, directly or indirectly, against totalitarianism and for democratic socialism, as I understand it.”  A curious claim.  I’ve read 1984 at least ten times and Animal Farm at least five times, plus much of his other work.   Orwell’s attack on totalitarianism is blatant, trenchant, and thorough.  His defense of democratic socialism, in contrast, is practically invisible.  So despite his self-image, Orwell ends up being history’s greatest critic of totalitarianism – and not much else. And he was the best at what he did.  Orwell didn’t merely expose totalitarianism as a system based on brutality, lies, and dehumanization.  He dug deep, and exposed its root: irrationality.  1984 is a grand illustration of Voltaire’s aphorism that “Those who can make you believe absurdities, can make you commit atrocities.”  Yes, totalitarians often claim the mantle of “reason” – and their traditionalist and religious critics are happy it hand to to them.   But the heart of totalitarianism is fanatical belief in a mountain of absurdities.  Their distinctive empirical claims are plainly false, and their distinctive arguments are either riddled with errors or so meaningless they’re “not even false.”  And the low quality of totalitarian thought is hardly surprising, because they use terror to silence their critics instead of patiently hearing them out. Though Orwell is the greatest critic of totalitarianism, he made a few major mistakes.  First and foremost, he casually accepted the socialist critique of capitalism.  If he looked at the world, he would have noticed that the world’s most capitalist countries were near the pinnacle of human civilization.  Instead, he placed his faith in empty socialist promises of a brighter future.  Orwell also casually accepted the Leninist theory of imperialism: The idea that countries fight over colonies because they desperately need to off-load the fruits of domestic “overproduction.”  Yet due to the gravity model, the European powers’ best customers were always other European countries.  That’s why they were able to hastily release their colonies after World War II.  Given his keen insight into political psychology, Orwell should have defaulted to the simple story that war is the triumph of nationalistic emotion over capitalist calculation.  A great missed opportunity! [few more comments on book club] (0 COMMENTS)

Economist and author Michael Munger of Duke University talks about human wants and desires with EconTalk host Russ Roberts. Human beings have desires about our desires. Can we change what we want? And how should economists and normal human beings think about doing the right thing, what we often call morality? Is acting morally self-interested […] The post Michael Munger on Desires, Morality, and Self-Interest appeared first on Econlib.

Transparency and directness – I have always been a pretty passionate guy, especially at Waze. After the acquisition, I was invited to speak on many different Google panels and events and very quickly, I began racking up my HR complaints. I used a four letter word, my analogy was not PC, my language was not PG… I actually stopped speaking at events where the majority appreciated what I was saying but the minority that was offended by something (words and not content) made it a pain. I began watching what I said, what I discussed and began wearing a corporate persona (I was still probably one of the less PC characters at Google but this was my cleaned up act…). I value transparency and feel that people should bring themselves to work but that also means a certain tolerance of people not saying something exactly as you would like them to or believing something you don’t. That tolerance is gone at Google and “words” > “content” is the new Silicon Valley mantra of political correctness. You can say terrible things as long as your pronouns are correct or can say super important things but use one wrong word and it’s off to HR for you… This is from Noam Bardin, “Why did I leave Google or, why did I stay so long?“, PayGo. It time stamps as “a few seconds ago,” but I know that can’t be right because I read it this morning. That’s a picture of Bardin at the top. Bardin was CEO at Waze, one of my favorite apps when I’m driving. (Because I have a radar detector, the warning about cops is less valuable to me when I’m driving than the warning about cars parked on the side of the road.) Waze was bought out by Google some years ago. The whole article is full of insights, some of which Arnold Kling has highlighted. It’s really a beautiful analysis of incentives. The part I quote above is one of the most disturbing. Bardin’s comment about Google on the issue of words versus content reminds me of Professor Henry Higgins’s comment, in his My Fair Lady song, “Why Can’t the English Teach Their Children How to Speak?”, about the French: “The French never care what they do, actually, As long as they pronounce it properly.” Similarly, the people at Google’s HR don’t care how terrible are the things you say as long as you use the right words. I’m sure this is an exaggeration and that Bardin knows it’s an exaggeration, just as I’m sure Henry Higgins was exaggerating, but Bardin’s making an important, and concerning, point. (1 COMMENTS)

The Economist has an article showing a dramatic difference in economic growth between northern and southern China: There has been some migration to southern China, but nowhere near enough to fully explain this divergence.  The southern provinces really have done better, even in per capita terms. The Economist provides a number of explanations for this gap, but barely even alludes to the most important; southern China is considerably more capitalist than northern China.  That oversight would not have occurred in the Economist I read when I was young.  Someone should revive the Far Eastern Economic Review. PS.  Of course there are more than two Chinas.  Taiwan is even more capitalist than the southern mainland, and is even richer.  Hong Kong is even more capitalist than Taiwan, and is even richer.  Funny how that works. PPS.  I said, “barely even alludes to” as this is the only reference to free market policies in the article: In 2013, the peak of China’s building frenzy, investment in assets such as roads and factories reached an eye-watering 66% of gdp in the north versus 51% in the south. Southern officials have been more hands-off. PPPS.  I see a lot of talk about China’s “industrial policy”.  FWIW, there’s more industrial policy in northern China than in the south. (0 COMMENTS)

Part 2: “Swapping” as an Entrepreneurial Response to Poverty (Read Part 1 here.) The central response to poverty observed by Carol Stack in All Our Kin was the formation of kin networks based on de facto acts of motherhood and the willingness of fathers to take responsibility for their children, whether in or out of wedlock. These kin networks formed the basis for the use of reciprocal exchange to extend the effective size of the household in “The Flats.” An interesting exercise for EconLib readers while reading this book is to find the ways that Stack might have better understood those exchanges if she had a background in basic microeconomics. Stack devotes an entire chapter to what she terms “swapping.” Faced with deep deprivation, nothing can go to waste or sit idly, whether a physical object or the time of residents. The solution is what Stack terms an “intricately interwoven” system of exchange through which resources, including time, are given to others in the community with the expectation that they will reciprocate at some point in the future. It is tempting to see this as mutual gifting or barter, but the swapping of The Flats is better understood as a sophisticated form of credit. If you received resources from other members of the community, the expectation was that you would reciprocate. Stack defines the swapping process as the exchange of “any object or service offered with the intent of obligating” (1974, 34). These exchanges could involve anything from household objects like a TV or coffee pot, to things like clothing or cash, but also to services such as childcare and housing. Most strikingly, children were frequently moved from house to house over the course of their childhood as it became easier for one or another relative to care for them. Note how this challenges the standard idea that a family exists within one household. The economic function of swapping is that it became a way to reallocate resources to those who needed them most at any particular time. Stack sometimes implies that this swapping wasn’t “productive,” but from a subjectivist perspective, all of these exchanges were mutually beneficial and utility-enhancing. Economically, this sort of exchange behavior can be seen in three complementary ways. First, it is a form of credit, as Stack’s use of the phrase “with the intent of obligating” suggests. Those who have objects or time or space that is greater than their current needs can “save” by providing those resources to others with the expectation of being able to draw on that saving later in the form of resources from the recipient. Second, swapping can be seen as a way of minimizing the “idleness” of resources. A typical middle-class family might think nothing of having a closet full of clothes that are there in case we want them. In a poor community, unworn clothes would be seen as wastefully idle. They could be put to a more valuable use by being worn by other members of the community. Clothing not currently being used was fair game for swapping. One can extend this analysis to other household objects as well as household space and the time of community members. If some kin find themselves with the time to care for the child of other kin who are struggling, they will do so with the expectation of reciprocation down the road. Finally, swapping’s main economic effect was extending the effective size of a household to the entire network of kin. What swapping does is to enable people to draw on a larger range of other people and resources as inputs into household production. Whether taking the form of financial resources, objects like a couch or clothing, or time devoted to child care, swapping enables residents of “The Flats” to not be limited to what is available within the four walls of their homes for household production. Living space, childcare, and other resources can come from anyone or anywhere within their personal kindred. The combination of large personal kindreds and swapping enabled families to have access to more resources, both human and material, than a superficial approach might suggest. The message of All Our Kin was not that the Black family was “just fine.” Rather it was that in order to understand how social institutions actually operate, we need to be willing to challenge our pre-existing categories, and try to understand how the people themselves see their situation and what sorts of steps they are taking to ameliorate it. The synoptic, statistical data-driven perspective of governments, often combined with an uncritical acceptance of their own experiences of institutions like the family as both descriptively and prescriptively “normal,” can hide the myriad ways that entrepreneurial humans respond to the challenges of poverty. The result in the 1960s was an overstatement of the dysfunctionality of Black families, creating a problematic cultural meme that would persist and negatively affect policy making for decades.   (0 COMMENTS)

Last Friday, February 19, I gave about a 1.6 hour Zoom talk to Ryan Sullivan’s class at the Naval Postgraduate School. It was titled “Don’t Forget What We Know: The Ethical and Economic Case Against Lockdowns.” Here it is. By the way, the most surprising thing I heard from Jeremy Horpedahl in his debate/discussion with Phil Magness is that when there’s an externality, there’s a presumption in favor of government intervention. I disagree and I say why at about the 28:50 point. The Commissar Komisar discussion at 54:27 is based on a short blog post I did here. (0 COMMENTS)

Here are my reactions to last week’s Book Club comments, starting with a fine exchange between John Alcorn and KevinDC. Alcorn: 1) In previous posts, you argue that totalitarian regimes can maintain power indefinitely — or at least much longer than they do — if successors would practice ruthless repression like the founders. For example, loss of nerve among rulers after Stalin, culminating in Gorbachev, explains the collapse of communism. In your post about war, you argue that war is an efficacious means to the end of justifying ruthless domestic repression, and that war also spontaneously occurs among power-hungry dictators. Why, then, did successors often lose their nerve in 20th-century totalitarian regimes? (We’re back to sideward glances at western prosperity, and tensions between totalitarian empire and national sentiments in smaller, satellite States.) KevinDC: I suspect this has a lot to do with the nature of power struggles in dictatorships. Initially, they are won by the most ruthless and cold blooded people – the ones who will do absolutely anything to get power. But almost by definition, in the process of gaining power they also push aside or eliminate everyone who was almost but not quite as ruthless as they were. And during their reign, they keep a firm eye out for and move swiftly against anyone who might be ruthless enough to challenge them. As a result, when the first dictator passes, there’s nobody left who has that same level of brutality and brutal competence, so their successor is inevitably less brutal and more moderate. This may also explain what’s different in the case of North Korea – being an explicitly familial dynasty, you could select for equally brutal successors in a way that wasn’t true in the Soviet Union. Alcorn again: 2) Re: North Korea. Are you sure that dynastic succession (kin lineage) facilitates selection for efficacious brutality? As you point out, trust might allow the founder to inculcate brutality in the son. However, natural endowments, too, matter. Brutality genes might skip a generation! Regression to the mean is probable. Kin lineage greatly reduces the scope of eligible pool of talent in efficacious brutality. Blaise Pascal argued that kin lineage reduces both competence and strife. Both John and Kevin make good points.  My reconciliation, to channel Gordon Tullock: 1. Revolutionary dictatorships are the worst of the worst, because revolutions select for bloodthirsty risk-taking true believers.  After a successful revolution, prospects are bleak until the whole founding generation dies off.  When Mao finally died, China was amazingly lucky to get a crusty pragmatist like Deng Xiaoping instead of a second Maoist fanatic. 2. Subsequent generations of dictators are generally a big improvement.  Sure, the upper echelons struggle eagerly for power.  But stable regimes attract slightly squeamish risk-averse opportunists.  After two generations, these opportunists come to vastly outnumber bloodthirsty risk-taking true believers. 3. Strictly hereditary dictatorship, per Pascal, has the lowest selection pressure for bloodthirsty power-hunger.  While plenty of hereditary dictators are still awful tyrants, hereditary dictators are the most likely to peacefully relinquish power, or at least “go with the flow.”  The main worry is just that weak hereditary leaders will be reduced to figurehead status by whoever wins the tournament to “advise” them. So what happened with Gorbachev?  He mostly fits my profile of a “slightly squeamish risk-averse opportunist.”  You could object that a risk-averse leader would never have embarked on glasnost and perestroika, but I say Gorbachev didn’t realize he was playing with fire until it was too late to retain power without a swift reversion to mass murder.  And too his credit, Gorbachev was too squeamish for that. David Henderson: I was expecting, when I saw that you had a link to the statement “It takes an outsider to see the ideological landscape as it really is,” that you would reference Hayek’s The Road to Serfdom. I’m disappointed that you didn’t. You might argue that, coming from Austria, which was so close to Germany, Hayek was not clearly an outsider. But that makes his accomplishment all the more impressive. Fair point.  Though I’m not a fan of Hayek, I agree that he deserves credit for popularizing the totalitarian model in The Road to Serfdom. Henri Hein: I agree that the Thought Police is efficient in fictional Oceania, but I have often found this to be one of the less plausible constructs in the novel. If government is so inefficient at everything, why should it be able to run an efficient Thought Police? I understand that the Russian equivalent was frightening, and somewhat effective, but given the powers and resources they were given, I don’t see any reason to accept they were efficient. I agree that Orwell’s depiction of the efficiency of the Thought Police is implausibly high.  Once Winston and Julia get arrested, we learn that the Thought Police was on to them for years; they were sitting on piles of redundant evidence the whole time.  And the only clear “false positive” in 1984‘s system of repression is the character of Parsons, who was plainly a loyal Party member falsely denounced by his own children.  Real totalitarian regimes, in contrast, heavily persecute even their loyal followers.  Still, we should not underestimate the ability of totalitarian regimes to excel in tasks they prioritize.  As I’ve said before: Communist regimes did provide poor incentives to produce consumer goods for ordinary citizens.  But they provided solid to excellent incentives in the sectors they really cared about: the military, secret police, border guarding, athletics, space programs, and so on. Performance in these sectors was often (though hardly always) world-class. I’ll post my final thought on Orwell’s book-within-a-book next week, along with replies to any general comments participants care to offer.     (0 COMMENTS)

Why do economists who accept a theory oppose putting it into practice?  For example, I believe global warming is a rather significant problem.  I agree that it is internally consistent that carbon taxes (or some other variation like cap & trade) can reduce carbon emissions to a socially optimal level.  So, why then do I oppose carbon tax regulation? There are many reasons why I (and many other GMU-style economists) oppose regulation even though a logical argument can be made, it could improve a given situation.  We tend to focus on public choice reasons (such as rent-seeking and agency capture).  The knowledge problem, most famously discussed by F.A. Hayek, is also often cited: government agents can too seldom possess all information and knowledge necessary to regulate desirably and much less “optimally.” There is an element of the knowledge problem that warrants further attention, an element highlighted by Don Lavoie in his 1985 book National Economic Planning: What is Left? In this book, Lavoie greatly expands our understanding of the knowledge problem and its relevance for assessing central planning and more mundane government regulation.  He discusses Hayek’s formulation of knowledge as mostly tacit, but Lavoie also emphasizes that knowledge is built upon inarticulable foundations.  Attempts to articulate the inarticulate foundations are doomed to fail as each person carries with him or her different nuanced understandings of the language used in legislation authorizing regulations. Consider, for example, the phrase “2+2=4.”  Understanding the phrase’s meaning requires a tacit, inarticulable understanding of the elements: 2, +, =, and 4.  If one were to try to rigorously define every element in that phrase, he would eventually fall into a problem of recursivity.  As children, when we first encounter mathematics, it may seem weird and arbitrary.  We just learn that 2+2=4 by rote.  It is only through repeated interactions with mathematics do we start to understand it.  To paraphrase the great mathematician John von Neumann, you never really learn mathematics.  You just get used to it. The problem of inarticulable understandings of knowledge comes into play in the field of regulation.  The economist has a foundation of knowledge.  When he tries to convert that knowledge into policy, we run into a game of telephone.  At each step along the way, the knowledge and information get a little distorted. Each person has different foundations from which they understand the message the economist is delivering.  As such, the end policy would deviate considerably from theory, even if we assume away public choice issues.  In other words, the policy will look considerably different from the theory because of a sort-of language barrier. Consider, for example, the word “cost” in economics.  We define “cost” to mean what one gives up to take a particular action (it is sometimes called “opportunity cost” for this reason).  Cost is inseparable from choice.  Yet, “cost” takes on a very different meaning for the general public, as it usually refers to a negative consequence (“the cost of reading is a headache”) or the monetary price of something (“the coffee cost me $2”).  Thus, the economist already faces a problem communicating his theory to policymakers.  But even within the field of economics, “cost” has different understandings.  James Buchanan’s excellent short 1969 book, Cost and Choice, discusses how “cost” has changed understandings among the various schools of thought. I oppose regulation even when I understand the argument because argument and policy are not the same things.  When communicating, experts run into the telephone problem: the theory is misunderstood, misapplied, or miscommunicated.  Competition among experts helps solve these problems, yes, as experts become incentivized to be less wizardly and more like teachers.  But the knowledge problem remains, and regulation can only enhance the communication problems. (0 COMMENTS)

Rarely does one see such unambiguous good news as this: The Berkeley City Council has unanimously voted to become the first Bay Area city to end single-family zoning. . . . Berkeley was the first city in the country to enact single-family zoning more than 100 years ago. Opponents of single-family zoning say it was used to exclude people of color from moving into certain neighborhoods. Who wins? 1.  Conservatives that favor local control of zoning decisions. 2.  Conservatives that favor deregulation and free markets. 3.  Progressives worried about housing affordability for the poor and minorities. 4.  Urbanists worried that suburbia creates isolated, atomistic people, unconnected to their neighbors. 5.  Environmentalists worried about urban sprawl. Congratulations to Berkeley for ending 100 years of solitude. (0 COMMENTS)