Re: 20160413 Variations on a theme of Adam Smith
Posted: 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)
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)