20160413 Variations on a theme of Adam Smith

Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Mon Jan 16, 2017 3:34 am

2017/01/15 Knowledge Forum
Thread: Adam Smith “The Wealth of Nations”
Book 4 Chapter 5 “Bounties”

The full title of this section is:
Begin Quotation:
Digression on the Corn Trade
End Quotation.

Part 2 of this chapter on bounties paid upon export of certain commodities dives deeply into the history and current practice of various government policies regulating trade in corn, both within nations and between nations, with emphasis on Great Britain.

While I did not find this sentiment in this section, I was reminded of Smith's prior assertion that corn sets the value of money, and not the other way around.

There are several assertions by Mr. Smith that are worthy of recording for posterity in the present thread, here are two that I particularly like:

Begin Quotation: (Page 569)
But the law ought always to trust people with the care of their own interest,as in their local situations they must generally be able to judge better of it than the legislator can do.
End Quotation.

Begin Quotation: (Page 581)
The laws concerning corn may every where be compared to the laws concerning religion.
End Quotation.

My overall impression of this chapter is that Smith disapproves of almost all impediments to free trade. He does make an exception for protection of activities which relate to national defense, and the same reservation can be observed in the policies of the United States in 2017.

Where I hope to end up over the course of these weekly ruminations is with a conclusion that the economy of the planet Earth of 2016 can support a class of distant communities with digital communications reflecting the greater variety of capability of the larger population, while at the same time providing a large and ready market for digital communications from the smaller populations, who may yet offer insights or achievements not occurring elsewhere.

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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sun Jan 22, 2017 9:14 pm

2017/01/22 Knowledge Forum
Thread: Adam Smith "The Wealth of Nations"
Book 4 Chapter 6 “Of Treaties of Commerce”

The arrangements described by Mr. Smith in this chapter appear to have been considered useful and appropriate in his time.

It is difficult for me to imagine how favoring one remote community over another would have much value in an all-digital economy.

The prominent example Smith provides is an arrangement to favor Portuguese wines arriving in Britain, and for Portugal to favor British woolen goods, with the asserted benefit to England of an increased flow of Portuguese gold and silver, compared to what I assume was expected to be the case without the special arrangements.

In an all-digital economy, physical items will not be exchanged.

As imagined by Edward Lerner in “InterstellarNet: Origins”, discussed in the Magellan thread in this forum, there may indeed exist competition between agents representing remote communities, but it is difficult (for me at least) to imagine how favoring one community over another in the exchange of digital files would benefit anyone.

However, taking into account the variety of thoughts of human beings, I do not doubt that someone somewhere will conceive of a benefit.

Mr. Smith concludes this chapter with a detailed review of the practices of rendering gold and silver into coin in various countries. While this discussion would certainly appear to have no application in an all-digital economy, for historical perspective, I thought Smith’s closing comments to be worth recording here:

Begin Quotation from Page 597-589:
But as the law for the encouragement of coinage derives its origin from those vulgar prejudices which have been introduced by the mercantile system; I judged it more proper to reserve them for this chapter. Nothing could be more agreeable to the spirit of that system than a sort of bounty upon the production of money, the very thing which, it supposes, constitutes the wealth of every nation. It is one of its many admirable expedients for enriching the country.
End Quotation.

Earlier, Smith has argued on more than one occasion, that corn sets the value of gold and silver, and not the other way around.

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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Fri Jan 27, 2017 7:10 pm

20170127 Editorial by The Charlotte Observer contains remarkable insight

The purpose of this thread is primarily to study Adam Smith. However, since 240 years (or so) have passed since Mr. Smith was writing, occasionally contemporary writers come up with insights that (I think) may help to increase understanding of how economies work, and more importantly, what policy changes might improve performance.

From: http://www.dispatch.com/opinion/2017012 ... tive-peace

Begin Quotation:
Our economic system contributes to the problem. Driven by competition, innovation, disruption and risk, our system creates winners and losers. Problems proliferate when this rich nation leaves many mired in unemployment or dead-end jobs.
End Quotation.

The problem described in the quotation above has remarkable similarity to observations recorded by Smith all those years ago. The only difference I can see is that Smith accepted as quite normal that families would starve and children would die in great numbers due to the failures of the market system as it existed in his day.

In 2017 (in the United States) the social safety net is somewhat better, but not significantly better. Now it is rare for children of impoverished parents to starve, but it is quite common for children to suffer from malnutrition.

I am persuaded that a guaranteed basic income for all citizens of a state would improve the state of being of the entire population, but at present, I do not understand how the finances would be arranged. The traditional way of doing such things is to borrow money. In Mr. Smith's terminology, capital would be borrowed to put underutilized resources into motion, and that motion would (presumably) yield a return that would permit the borrowed capital to be returned with a profit to the lender, and with a profit remaining to the borrower.

Since the United States is already trillions of dollars in debt (mostly to itself but substantially to other nations), borrowing in the traditional way seems (to me) to be less than an optimum solution.

Resources are put into motion when a nation goes to war. Resources are put into motion when a group of Amish volunteers gather to raise a barn

If there is a way of putting unused resources into motion to support a Guaranteed Basic Income, I am unable to imagine it.

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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Tue Jan 31, 2017 4:50 pm

2017/01/28 Because the theme of this thread is the topic of economics, based upon the work of Adam Smith, it is appropriate to cite more current thinking.

The Columbus Dispatch published an editorial on the subject of free trade:
http://www.dispatch.com/opinion/2017012 ... ter-cheese

The editorial lays out the principles and benefits of free trade, and as I read the article I could associate many of the ideas with Smith's work.

The topic was presented for the Ohio audience served by the Dispatch.

However, just as in Smith's time, the editorial concedes the downside of unbridled capitalism and its associated free trade.

Begin Quotation from editorial:
At worst, it could put Ohio cheese makers out of business, depriving dairy workers of their jobs, harming their families and local economies.
End Quotation

Here, in a nutshell, is a statement of the deficiency that has existed throughout human history, certainly in Smith's time, and most assuredly in ours.

The capitalist system, in its brutal competition, certainly has many benefits for the global population in which it operates. However, the losers in the competition have traditionally left to fend for themselves, as companies disintegrate. Over the years, some minor attempts have been made to sustain the losers until they can find work or some legal means of providing for their families, but I do not consider the remedies I know about in the United States (in particular) to be optimum for significant populations.

A model of economic activity that exists in the United States in 2017 that might be worth study is the system of farm teams developed by major league baseball.

Major league baseball is a competitive activity on every level, and thus seems to me to be a decent example of the capitalist system at work. Employees compete within each team for the positions that are available. Meanwhile, many major league teams have formed associations with smaller regional teams where employees can develop their skills under less pressure than exists at the major league level.

I am trying to imagine how the United States might organize "farm teams" of displaced workers to perform tasks for which they are qualified, while simultaneously attempting to improve their skills to better compete for new work opportunities that are evolving along with advancing technology and changing tastes and preferences of consumers.

The present system that I am seeing consists of displaced workers going into a temporary out-of-work support system, and eventually timing out of that, so that they are unemployed or have positions that barely sustain life, and which have very little of the features that create a productive and rewarding life.

The challenge facing anyone who would like to hire poorly qualified workers is how to create products and services in competition with major league competitors on the world stage.

Farm teams work in the baseball field of activity because there are local audiences who are willing to pay lesser amounts to attend games, and employees are willing to accept correspondingly lower remuneration. However, from my observation, the quality of play is quite high, and again from observation, it seems to me that both employees and customers find the time they spend together satisfying.

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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Wed Feb 08, 2017 8:36 pm

2017/02/08 As another digression from Mr. Smith's book (Reference #1) I would like to mention a recent op-ed column by the conservative columnist George Will.

http://www.dispatch.com/opinion/2017013 ... than-china

The heart of Mr. Will's discussion is contained (as I read the article) in the paragraph which begins: "The reason is this"

In sympathy with others whose writings on economic principles have come to my attention, Mr. Will is in favor of the "constant churning of a dynamic domestic economy".

I am interested in finding ways to improve the management of displaced workers as compared to the very imperfect system that I see in place in various parts of the world in 2017.

Granting that Mr. Will's "constant churning" is indeed beneficial to the society as a whole, I am not willing to accept as "beneficial" the poor management of displaced workers.

As I have commented previously, the American baseball system has a provision for personnel who are "discarded" by the major league ball clubs, in the associated farm teams they sponsor.

I would like to see something like that come into being for those who are inevitably "discarded" by Mr. Will's "constant churning". In sports there are winners and losers. Teams who experience losing often receive adjusted coaching, improved or additional training, and motivational sermons. In many cases teams who have experienced losing come back to take a temporary place as winners. The system that I see for putting team members of capitalist "teams" back into productive work is poor to very poor, in the United States and perhaps elsewhere on Earth in 2017.

*** Addendum 2017/02/09: Adam Smith's thick book has been the subject of my close study over the course of this thread. Today it came to me that the entire work might boil down to two sentences:

First, money is created when capital is put into motion.
Second, capital starts (for the individual) with the body and brain of that individual. Capital may be accumulated from the physical environment, through exertions by the body and brain.

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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sun Feb 12, 2017 6:25 pm

2017/02/12 Knowledge Forum
Thread: Adam Smith "The Wealth of Nations"
Book 4, Chapter 7 - Page 599

The full title of this section is:
Begin Quotation:
Of Colonies: Part First: Of the Motives for establishing new colonies
End Quotation.

Pages 599-608 comprise a concise summary of deployment of colonies, from those of Greece and Rome, through the European undertakings in the time of Columbus, through the time Smith was writing.

It seems to me that the motivation for development of communities away from Earth will differ somewhat from those Smith recounts, but at the same time, I can see how there could well be some overlap. A significant motivation in the present time is the need to create one or more backups of the very vulnerable civilization we see about us in 2017, on Earth.

Readers of Dr. Dartnell's book may well share significant doubt that the fragile structure we have created can persist without collapse.

Recent political developments in the United States and in Europe, and in many other regions on Earth, do not give me confidence we are going to make it much further.

Having said that, the original motivations Smith recounts may well play a role, from over population pressures in various regions and a desire to escape unpleasant circumstances, through simple capitalist greed to acquire materials for exploitation and the egotistical desire of some political leaders to extend their reach.

A major difference I expect to see, between the undertaking Smith describes, and the present time, is significant commerce with remote communities. What commerce may occur (it seems to me) will probably involve gathering of valuable materials for transport to Earth, or to the Earth/Moon system for refinement and eventual use in products.

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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sun Feb 19, 2017 3:15 pm

2017/02/19 Knowledge Forum
Thread: Adam Smith "The Wealth of Nations"
Book 4, Chapter 7 - Pages 609-637

The full title of this section is:
Begin Quotation:
Causes of the Prosperity of New Colonies
End Quotation.

This is a lengthy selection, with a lot of content to try to capture.

2017/02/20 Update to Adam Smith thread for pages 609-637:

In this part of Chapter 7, Mr. Smith provides a concise and comprehensive summary of the history of the formation of colonies by Greece, Rome, several European nations, and Great Britain. France receives praise for its humane management of slaves. England receives praise for several behaviors which Smith describes as beneficial to the colonies created and managed by Great Britain.

Chief among the positive behaviors is the rule of law, and methodical development of the assets and the people of the colonies.

Chief among the negative behaviors is the mercantile system, which Smith regularly and consistently condemns throughout the book. In particular, Smith disapproves of the common practice in his day, of restricting flows of goods between the home country and the colonies, so that free trade is prohibited.

This part closes with fulsome praise for the positive influence, not just of Great Britain, but all of Europe, on the character of the people who developed the colonies.

Begin Quotation:
It bred and formed the men who were capable of achieving such great actions, …
End Quotation.

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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sun Feb 26, 2017 6:17 pm

2017/02/26 Knowledge Forum
Thread: Adam Smith "The Wealth of Nations"
Book 4, Chapter 7, Part 3 Pages 638-693

20170226 Update for Reference #1, Part III Pages 638-693.

This part of Chapter 7 is too long to try to cover in a single post.

The subtitle is:
Begin Quotation from Page 638:
Of the Advantages which Europe has derived from the Discovery of America, and from that of a passage to the East Indies by the Cape of Good Hope.
End Quotation.

By coincidence, CSPAN (in the US) broadcast a lecture on Colonial America and the British Empire on February 25th.

https://www.c-span.org/video/?417591-2/ ... ish-empire

Professor John Coombs spoke about events in the 17th century, and described in detail the organization of flows of goods between the North American colonies and Britain, with focus upon tobacco as a major driver of profits and thus of activities of various kinds, including movement of convoys of vessels under protection of the British navy.

This history preceded Smith's writing of “Wealth”, and Smith makes references to that history in this section.

I've been trying to understand how economies work (or don't work), and nowhere in Smith or anywhere else I've run across so far, is there an acknowledgement of the importance of kindness, generosity or nurturing, as a source of positive input to the capitalist system which was evolving at Smith's time, and continues to evolve today, in 2017.

The closest Smith comes (as nearly as I can determine so far) is his acknowledgement of education. The index contains a number of citations of references to education, and I note that on page 877 and 878, Smith is quoted as saying:
Begin Quotation from Index Page 1061:
beneficial to the whole society and therefore not unjustly defrayed by general contribution...
End Quotation

My reading of this line is that Smith is noting the frequent if not general objection to spending of general funds on the education of others. The objection to spending public funds (“my taxpayer dollars”) continues to this day, in a variety of areas, certainly including education but also including health care in the United States.
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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sun Mar 05, 2017 2:38 pm

2017/0/05 Knowledge Forum
Thread: Adam Smith "The Wealth of Nations"
Book 4, Chapter 7, Part 3 Pages 638-693

20170305 Update for Reference #1, Part III Pages 638-693.

This part of Chapter 7 is too long to try to cover in a single post.

The subtitle is:
Begin Quotation from Page 638:
Of the Advantages which Europe has derived from the Discovery of America, and from that of a passage to the East Indies by the Cape of Good Hope.
End Quotation.

For this weekend, I will consider enjoyments and industry.
20170305 Page 638 Paragraphs 1 through 4

Mr. Smith closes this opening sequence with:

Begin Quotation:
The general advantages which Europe, considered as one great country, has derived from the discovery and colonization of America, consist, first in the increase of its enjoyments, and secondly, in the augmentation of its industry.
End Quotation.

Since my purpose in undertaking this study is to try to anticipate how the future may unfold for human beings building communities away from Earth, I would like to stop here to consider the vision of Edward M. Lerner, for a digital communications based economy between solar system and interstellar communities, combined with the vision of Eric Drexler and many others for atom assembly machinery able to sustain an advanced civilization through distributed manufacture of complex structures.

The Star Trek(r) vision of a matter replicator is interesting, and I am not saying here that it cannot happen. Instead, I am simply pointing out that Nature has been assembling objects an atom at a time for millions of years, and the most likely path for humans is to follow Nature's example.

The implication is that atom assemblers will take large amounts of time to build various objects. It takes a few months for Nature to assemble a seed of a plant, for example.

An acorn can be assembled in the course of a season, for example.

Thus, as a rule of thumb, I would expect humans using atom assemblers to take about as much time as Nature requires to assemble objects of comparable size and complexity.

Nature uses a form of parallel processing in building structures such as an acorn. I would expect that humans would try to implement parallel processing to the maximum extent possible.

I would expect manufacture of an object such as a screw of modest size to take a week.

Today I'd like to present for consideration an object which I think would quite reasonably be expected to take a month to complete. I am thinking here of a shaving blade, or the more complex shaving device offered by Norelco,

Here is an example:
https://www.walmart.com/ip/3pcs-Replace ... /818843867

A replacement shaver head package from Walmart (or Target, or similar vendor) consists of three blade assemblies and three cover assemblies.

I can easily imagine a person setting up an atom assembly enterprise to make these components. Output might be one assembly every week or two, and an individual might own or lease multiple machines.

Norelco recommends replacing blades once a year, although in my experience a blade set can last for as long as eight years. Either way, there would be a recurring market for replacement blades in a community on the Moon, Mars or anywhere else away from Earth.

I am not suggesting that other ways of shaving will become practical and popular. The Norelco shave head example is intended for illustration of how an economy might evolve in future.

The designs for the replacement shave head components would exist in digital form, and the designs could be (and most probably would be) exchanged between remote communities.

Picking up on Mr. Smith's remarks above, it seems to me that new or improved digital designs would be exchanged between communities just as physical objects were exchanged in Smith's time, and the exchanges would result in both increased “enjoyments” and increased industry, as various individuals and groups seek to improve their trading capability by designing new and improved digital designs.

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Re: 20160413 Variations on a theme of Adam Smith

Postby tahanson43206 » Sun Mar 12, 2017 10:10 pm

20170312 Page 638-639

In the opening two pages of Part Third, Mr. Smith considers in a variety of ways how increased trade with the Americas has benefited populations of many countries, including those who do not trade directly with the Americas.

Begin Quotation:
A more extensive market must have been created for that surplus produce, so as to raise its value, and thereby encourage its increase.
End Quotation.

I note here that in the American context, “surplus produce” becomes the property of discount chains which endeavor to find buyers at lower and lower prices. In this context, the market is being expanded by discount entrepreneurs, but to my eye it appears the value of the surplus produce is steadily decreasing.

Since my purpose in undertaking this study is to try to anticipate how the future may unfold for human beings building communities away from Earth,

Because of the vision of digital exchange between remote communities and Earth, it seems (to me) reasonable to suppose that surplus produce may occur in those remote communities, but if atom assembly systems are deployed as I imagine they will, there would be less chance of the kinds of excess produce we see so often on Earth, in 2017.

In the capitalist system with advanced Division of Labor and advanced Automation we see in place in 2017, it is common for excess to be generated as manufacturers try to anticipate the potential market, with only (what I am assuming must be) seat-of-the-pants guesswork to help them.

On the other hand, if digital exchange comes to pass as Edward Lerner imagines, then the economic value of files transmitted between locations will determine what is offered in exchange via the same channel.

Following Mr. Smith's lead in this case, I am assuming that “greater abundance” will ultimately occur, as improved designs for products become available, and the remote communities will be motivated to “augment” their industries, to produce more value in digital “products” to be exchanged with other communities.

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