or “How the Dismal Science Became Dismal”

A fascinating review of the evolution of conjectures and conceptualizations in political economy to the late 19th c., and a corrective to the view that Smith’s Wealth of Nations (1776) is some sort of fundamentalist free-market scripture. Despite assertions to the contrary, Smith did not invent the doctrine of comparative advantage or the theory of the division of labor, nor did he establish the priority of the market over the state. Here we see how Smith’s ideas were developed and altered after his death.

Smith’s long, contested ‘political odyssey,’ as Milgate and Stimson describe it, wends and wobbles through the work of his various interpreters, mostly because Smith’s complex presentation precluded any wide agreement on the precise contribution made by his work. The context for understanding Smith’s work shifted also, as the mercantile and commercial nature of economic society gave way to the industrial economy of the 19th c. and, as a consequence, the approach to the theory of political economy changed.

What makes After Adam Smith valuable as a History of Ideas is the way that Milgate and Stimson clarify previously unrecognized connections across time and provide new ways to consider the work of familiar figures (i.e. Paine’s revolutionary break with the view of civil society as identified with the state, or Mill’s distinction between arguments for economic liberty and political liberty). Just as early modern science (through the work of Galileo, Descartes, Leibniz, Newton, et.al.) came to view the whole of nature as linked and organized by discoverable common forces, so did the economy come to be regarded as a machine (ref. the Invisible Hand, in its various interpretations). As the theory of political economy took shape, Malthus, Godwin, Robinson Crusoe and Moll Flanders argued among themselves. Passion, utility, knowledge and property jostled for influence. Utopias rose and fell and rose again. The principle of ‘rationality’ applied by classical political economists became ‘not merely pure but perfect’ (and therefore unreal [K. Arrow]) in the neoclassical fetish for equilibrium, competition, and completeness. By the end of the 19th c., we were far from The Wealth of Nations. Smith’s description of self-interested action as morally regulated, prudent behavior―based on a model of a socially-constructed self―had been replaced by the calculation of exclusively private costs and benefits.

Smith’s great contribution, according to Milgate and Stimson, was in recognizing the complexity and ambiguity inherent in market relations and in anticipating the kinds of tensions that would emerge as national economies developed in an increasingly interconnected world. Smith’s successors were bequeathed a rich fount of political and economic thought, though in reconceiving and reimagining Smith’s ideas his neoclassical descendents arrived at an altogether different intellectual space. By “narrowing the conceptual focus of economics to the question of how the market mechanism resolves problems of allocating given resources between competing ends within its abstract model of perfect competition,” say Milgate and Stimson, neoclassical political economists “effectively distanced the understanding of economic life from political life… [and] did so at the cost of producing a science that tended to adopt a certain studied indifference toward the political and social institutions and structures within which markets function.” Disconnecting the understanding of the market mechanism from its historical/social context made possible an economic science which could claim to offer robust truths without regard for the constraints of time or place, but it also foreclosed on the kinds of considerations that intrigued Adam Smith. ( )