A Wealth of Ideas

The Business Roundtable published a review of a new biography of Adam Smith as one of our regular Perspectives yesterday. Adam Smith is a man much revered by the Mont Pelerin Society and his enduring ideas and their striking relevance to the problems facing many economies today have been widely discussed at the Society’s general meeting in Sydney this week. Yet little is known about the man himself, as Jeffrey Collins explains in the Wall St Journal review:

Having dined with Adam Smith on a number of occasions, Samuel Johnson once described him “as dull a dog as he had ever met with.” Smith’s biographers might be inclined to agree. The most celebrated political economist in history led a remarkably quiet life. Born in the sleepy Scottish port of Kirkcaldy in 1723, he was raised by his widowed mother and lived with her for much of his life. He studied at the University of Glasgow (which he loved) and at Oxford (which he loathed). Only once in his life did he travel outside of Britain. He wrote few letters and burned his personal papers shortly before his death in 1790. Even his appearance is a mystery. The only contemporary likenesses of him are two small, carved medallions. We know Adam Smith as we know the ancients, in colorless stone.

It is a measure of Nicholas Phillipson’s gifts as a writer that he has, from this unpromising material, produced a fascinating book. Mr. Phillipson is the world’s leading historian of the Scottish Enlightenment. His “Adam Smith: An Enlightened Life” animates Smith’s prosaic personal history with an account of the eventful times through which he lived and the revolutionary ideas that inspired him. Adam Smith finally has the biography that he deserves, and it could not be more timely.

In shedding light on Adam Smith’s character Collins explains that his philosophical ambitions were much broader than the “Wealth of Nations” might suggest, and ranged over politics, law, ethics and aesthetics.

Inspired by his friend, the skeptic David Hume, Smith swept aside all timeless or divine notions of moral and political order. In his view, society emerged from the historical experience of a needy species driven to create conditions in which property, affection and opinions alike could be stably exchanged. Manners and morals, like goods, thus had an “economy.” The material and moral economies were, indeed, linked, in that a rising material prosperity helped to encourage civility and taste. Mr. Phillipson reconstructs Smith’s intricate system with erudition and imagination, often from student notes of Smith’s long-lost lectures, which he had delivered in both Glasgow and Edinburgh.

As many of today’s debt-laden countries search for new ways to reignite economic growth, it seems a read of Mr Phillipson’s “Wealth of Ideas” would be well worth while. 

Smith’s was a complex legacy, and in reading about it one is struck by its uncanny relevance. When the “Wealth of Nations” appeared, Britain staggered under massive war spending and a colossal national debt. Bad loans blighted banks across the country. Several had collapsed, leaving their investors ruined. Gold bugs abounded. In the face of international competition, well-connected manufacturing interests clamored for protective tariffs. The times called for Adam Smith, and his theories worked to stabilize and liberate the British economy as it entered the industrial age. If we need a reminder of his achievements, and of late it appears that we may, Mr. Phillipson has given us a superlative one.



At the Mont Pelerin Society General Meeting in Sydney this week, enjoying a feast of ideas and insights from some of the world’s leading classical liberal thinkers.  The broad theme of the meeting is to stimulate new ideas to promote a 21st Century liberal enlightenment. The Society’s president, Professor Deepak Lal, who will be speaking at Business Roundtable functions in New Zealand in late October, introduced the meeting:

At a time when many of the ideas of the Enlightenment that inspired classical liberalism are under threat, it is fitting that we should discuss how these ideas and ideals still retain their relevance, and how they are being refurbished by notable advances in the human sciences, particularly in neuroscience and socio-biology. This is one major theme at this meeting.

Ironically,  just as economic liberalism came to be adopted across much of the globe, the dirigiste impulse was transferred to the personal sphere.  The resultant abrogation of Mill’s “principle of liberty’” poses a serious and growing threat to personal freedom.  This ‘new dirigisme’ is being given succour by new-fangled economic theories, as well as the abrogation of Humean scepticism by many scientists committed to political causes. 


We will be following on from the Society’s special meeting in New York in 2009 by taking stock of the aftermath of the Great Recession.  In particular, the rise of the emerging giants China and India which are now becoming the torchbearers of that economic liberalism which many in the West are abandoning.  This along with the remarkable economic performance of our host country – Australia – will also be a major theme of this meeting.

In one of the opening sessions yesterday on Lessons from the Scottish Enlightenment,  presented by Professor James R Otteson from New York’s Yeshiva University, I learned a fine new word: phronesis, used by Aristotle to describe judgement – the skill of knowing what to do. He affirmed Aristotle’s view that:

 …one develops good judgement by, and only by, using it, which requires the freedom to make choices.  Developing judgement in good directions requires receiving  feedback when one makes choices: good feedback when one makes good choices, bad feedback when one makes bad choices. This accountability is the other side of the ‘freedom’ coin, and its development of good judgement is what can enable not only Kantian dignity but also Aristotelian happiness. The most attractive conception of human morality, I believe, is the one that endorses and protects these two aspects of humanity – freedom and its partner accountability, as well as independent judgement.

Otteson went on to describe political and economic institutions consistent with this conception and one which

…would be a system in which third-party oversight, second-guessing, and – as I see it at any rate – self actualising infantilisation is reduced to an absolute minimum. It would be a system in which we do not bail out unsuccessful enterprises, but rather let natural corrections encourage different enterprises. Such a system would have the triple benefits of (1) respecting people’s dignity as free and responsible agents, (2) enabling them to develop their own good judgement, and (3) leading to economic growth.  Moreover, if the Scots were right, such a system of institutions might also enable human happiness. The entrepreneurial opportunities that commercial societies provide might satisfy the need the Scots believed humans have to struggle and contend, and perhaps their “bourgeois virtues” might substitute for the martial virtues of bygone eras.

I’d happily settle for that.