Quotation of the Day…
… is from page 120 of George Stigler‘s 1965 paper “The Economist and the State,” as this paper is reprinted as Chapter 11 of the 1982 collection of some of Stigler’s writings titled The Economist as Preacher and Other Essays:
Smith’s first basis for his economic policies was his belief in the efficiency of the system of natural liberty. There can be little doubt that this tough-minded Scotsman, this close friend of that cool and clear thinker, David Hume, had a deep attachment to the natural law of the late enlightenment. But Smith did not propose natural liberty as a lay religion of political life. Instead he argued, as a matter of demonstrable economic analysis, that the individual in seeking his own betterment will put his resources where they yield the most to him, and that as a rule the resources then yield the most to society.
DBx: Yes. Stigler goes on to rightly criticize Smith for failing – in those rare instances when Smith allows some role for government intervention – to analyze the operation of the state with the same rigor that Smith used to analyze the operation of the market. This failure to analyze the state with rigor continues today among economists (and non-economists) – a failure made all the worse by the fact that today’s most of today’s economists are less rigorous than was Smith in analyzing the market.
Note also that Stigler’s accurate description of Smith’s reason for supporting the market order belies any claim that Smith’s support for free markets was based on “faith.” One of the favorite ploys of opponents of the free market is to assert that the case for the free market rests on “blind faith.” Obviously, the people who so assert are either unfamiliar with, or ignore, works such as (to name only six) F.A. Hayek’s “The Use of Knowledge in Society,” Armen Alchian’s and William R. Allen’s Universal Economics, Don Lavoie’s National Economic Planning: What is Left?,” Israel Kirzner’s Competition and Entrepreneurship, Douglas Irwin’s Free Trade Under Fire, and Deirdre McCloskey’s Bourgeois trilogy.
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