20160413 Variations on a theme of Adam Smith

Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sun Sep 24, 2017 11:27 am

20170924 Pages 1008-1012

Book Five

Of the Revenue of the Sovereign or Commonwealth

Chapter 3

Of Public Debts

In these pages Mr. Smith continues discussion of the difficulty of retiring public debt.

In this set of pages, Mr. Smith introduces the time honored expedient of debasing the currency as a way of retiring public debt. He mentions the Romans, for example, who “raised two ounces of copper to a denomination which had always before expressed the value of twelve ounces”.

On page 1012, Mr. Smith lays the foundation for a transition to an extension of the British system of taxation.


Because this thread is intended to attempt to gain an understanding of how economies function, and what practices or policies lead to greater or lesser success given specific human populations, I will from time to time bring other voices into the mix. Today, I am interested in the wording used by an author give as “Steve Patterson”, in a piece at mises.org dated 06/18/2015:

Begin Quotation:
Businesses, on the other hand, deal with creating wealth by selling goods and services people value.
End Quotation.

I am dubious about this statement. Patterson is writing about the differences he sees between businesses and charities, so he deserves some consideration on that account, but taking the statement as quoted, I have a real problem with it.

I consider “selling” to be a form of labor which does indeed have value in itself, because it matches a customer with a supplier, to the mutual benefit of each. It is normal for the supplier to split a portion of the proceeds of each sale with the sales person. However, I am not persuaded that the labor thus performed is responsible for more than a portion of the wealth created, in the sense that Mr. Smith seems to mean when he says, on page 277:
Begin Quotation:
The real wealth of the country, the annual produce of its land and labour...
End Quotation.

Perhaps my argument with Mr. Patterson comes down to his over simplification of the activities of the business in his user of the word “selling”. A charity performs “sales” activities just as surely as a traditional business does, so in that sense, the labor of selling its services to its customers adds to the sum “annual produce”.

Assuming for a moment that a business has created a product out of components or materials collected from elsewhere, then the products “sold” to customers are part of the “annual produce”.

If the business is merely distributing goods manufactured by others, then to my way of thinking it is no more virtuous than the charity, except that it has demanded a trade of something in exchange for the goods or services sold.

The business has contributed to the “annual produce” in the limited context of distribution, but I fail (at the moment) to see how this activity has contributed to the wealth of the nation (ie, “annual produce”) any more that the charity has done.

A few sentences on, Mr. Patterson argues:
“Wealth is not found in nature;...”

But Mr. Smith asserts, a bit later on page 277:
Begin Quotation:
he land constitutes by far the greatest, the most important, and the most durable part of the wealth of every extensive country.
End Quotation.

I would argue that the United States has “created wealth” in Mr. Smith's land sense, on many occasions when it has distributed land to individuals. The first notable occasion for this practice was distribution to Revolutionary War veterans, who had not been paid for their services.

https://www.archives.gov/files/research ... 5-1855.pdf

According to this web site, land is still available for homesteading in the United States:
http://www.homesteadandprepper.com/mode ... d-is-free/

However, the Homestead Act of 1862 has been ended:
https://en.wikipedia.org/wiki/Homestead_Acts

It is my impression that the awarding of land to individuals, in return for their commitment to develop and to live on the land, is equivalent to a loan which might be offered for purchase of land, without the obligation to improve it.

Thus, I would argue that awarding the land to individuals for free, in return for development of that land, is an act of wealth creation, whereas the mere purchase of land for a fee is a transfer which does not create wealth through its contribution to “annual produce”. However, I can understand the argument that if the seller realizes a gain from the sale, then that individual's wealth has been increased, at the expense of the buyer, whose loan must have included that transfer to the seller.

I am not convinced that the transfer from the buyer to the seller has increased the “annual produce” of the nation.

(th)
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tahanson43206
 
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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sat Sep 30, 2017 1:22 pm

20170930 Pages 1012-1013

Book Five

Of the Revenue of the Sovereign or Commonwealth

Chapter 3

Of Public Debts

In these pages Mr. Smith continues discussion of the retiring public debt, and begins a transition to a grand scheme to retire the public debt of Great Britain by extending the franchise to all the regions then comprising the empire.

During the years that Mr. Smith wrote these pages, the American colonies were moving rapidly toward what became a total break of ties with England.

From page 1013 we have:
Begin Quotation:
By extending the British system of taxation to all the different provinces of the empire inhabited by people of either British or European extraction, a much greater augmentation of revenue might be expected.
End Quotation.

Mr. Smith then observes:
Begin Quotation:
This, however, could scarce, perhaps, be done, consistently with the principles of the British constitution, with admitting into the British parliament...a fair and equal representation of all those different provinces ...
End Quotation.

He concludes by noting that “private interests” and “confirmed prejudices” would preclude the possibility.

Thus, in this section, Mr. Smith is noting the call of the American Colonies for representation in Parliament, and the eventual failure of that call.

However, in the pages to follow, Mr. Smith promises to consider how extension of the British system of taxation might look, if extended as he imagines it might.


Because this thread is devoted to study of economics, I'd like to provide links to two opinion pieces that a appeared in a local newspaper recently, taking opposite views of a discussion underway at the national level, about revisions to the American system of taxation.

Mr. Andrew Doehrel is president and chif executive officer of the Ohio Chamber of Commerce, which is funded by commercial interests in the State:

http://www.dispatch.com/opinion/2017092 ... f-tax-code

Ms. Wendy Patton is Ohio senior project director for Policy Matters Ohio, which is self described as: a nonpartisan policy research institute 

http://www.dispatch.com/opinion/2017100 ... prosperity

After reading both of these opinion pieces, I am left with an understanding of the gulf between the two positions, and an overall feeling that Mr. Doehrel is wildly optimistic about his confidence in “free enterprise, economic comparativeness and job growth”.

Meanwhile, Ms. Patton asserts that “Good public policies boost wealth and productivity”.

My impression is that both of these folks are striving to understand what good public policy might be, but that neither one seems (to me) to have achieved the understand that is needed, in this State, and in the country as a whole.

Meanwhile, Mr. Elon Musk announced his vision for development of equipment and procedures capable of supporting an expedition to Mars, starting in 2022. Mr. Musk has inspired thousands of people to exert their maximum effort to support his visions for electric vehicles, vacuum tube transport, space travel and other similar grand alternative future technologies.

It seems to me that wealth is being created by the individuals and teams Mr. Musk has inspired.

On page 273, Mr. Smith makes one of several definitions of wealth in terms of “land and labour”:
Begin Quotation:
real value of the annual produce of the land and labour of mankind.
End Quotation.

It occurs to me just now that the word “land” can be extended to the realm where Mr. Musk operates, with the word “environment”, so that both matter and energy available to Mr. Musk and his staff are understood as contributing to the wealth produced through their “labour”.

(th)
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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sat Oct 07, 2017 2:37 pm

20171007 Page 1014

Book Five

Of the Revenue of the Sovereign or Commonwealth

Chapter 3

Of Public Debts

In these pages Mr. Smith continues discussion of the retiring public debt, and begins a transition to a grand scheme to retire the public debt of Great Britain by extending the franchise to all the regions then comprising the empire.

Because this is the final chapter, and there are only 14 pages left to consider, I've decided to stretch this phase out by advancing one page at a time.

My sense of this chapter is that it may be compared to a symphony, which is building toward a grand finale. In the case of Mr. Smith's Public Debts chapter, I note that he concludes with what amounts to a forecast of the dissolution of the British Empire which did not occur until World War II.

On the present page, Mr. Smith considers the tithe of the church of the time, and offers preference for a uniform land tax which would accrue to the government.

Because these pages were written when America had not yet completed its separation from Great Britain, Mr. Smith allows himself to entertain the prospect that the lands in America might be assessed “...according to an equitable valuation in consequence of an accurate survey”.

I note that the implication of these remarks is that Mr. Smith is unaware of or simply discounts the surveys already performed in America, by George Washington and many others. At the same time, I recognize that surveys of land in America have continued since Washington's time, and indeed, are not yet complete.

https://nationalmap.gov/small_scale/a_plss.html

Begin Quotation:
Over the past two centuries, almost 1.5 billion acres have been surveyed into townships and sections. The BLM is the Federal Government's official record keeper for over 200 years' worth of cadastral survey records and plats. In addition, BLM is still completing numerous new surveys each year, mostly in Alaska, as well as conducting resurveys to restore obliterated or lost original survey corners.
End Quotation.

Smith concludes Page 1014 with mention of “Stamp-duties”. According to:

https://www.gov.uk/stamp-duty-land-tax

The British Stamp Duty Land Tax remains in service today.

https://www.nytimes.com/2017/10/09/busi ... haler.html

Begin Quotation:
WASHINGTON — Richard H. Thaler, whose work has persuaded many economists to pay more attention to human behavior, and many governments to pay more attention to economics, was awarded the Nobel Memorial Prize in Economic Sciences on Monday.
End Quotation.

I note that Mr. Smith mentions what I deduce to be irrational behavior by individuals and groups (such as governments or corporations of the time), but since his theme was so all encompassing, the word “irrational” does not appear in the index, and I do not recall his making it a major theme.

Mr. Smith's famous articulation of the concept of “the invisible hand” is mentioned in the index (page 485).

From the vantage point of 2017, I am persuaded that Smith's focus upon the phrase:

Begin quotation (page 485):
...he intends only his own gain...
End Quotation.

Is an oversimplification, necessary no doubt for the centuries of persistence of his concept of the “invisible hand”, but from my observation it discounts the good will of what I perceive to be the greater part of the human race, to act deliberately to improve the overall environment.

Indeed, it seems to me that Smith himself was embarked upon an enterprise of improving the global environment in which he lived. While Mr. Smith may indeed have been thinking about his “own gain”, yet it seems to me that his undertaking was motivated by a sense of higher purpose.

(th)
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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sat Oct 14, 2017 1:16 pm

20171014 This is a stub for a weekly update
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