02-11-2009, 01:06 AM
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The one who believes in Tressel
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Join Date: May 2004
Posts: 3,855
Points: 40,000,011.99
Bank: 0.00
Total Points: 40,000,011.99
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DaytonBuck's Freedom Island
This thread was inspired by DaytonBuck's idea of an area of space dedicated to freedom and free markets. So I'm going to start it off on the right note with this fitting article.
Adam Smith gets the last laugh
By P.J. O?Rourke
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The free market is dead. It was killed by the Bolshevik Revolution, fascist dirigisme, Keynesianism, the Great Depression, the second world war economic controls, the Labour party victory of 1945, Keynesianism again, the Arab oil embargo, Anthony Giddens?s ?third way? and the current financial crisis. The free market has died at least 10 times in the past century. And whenever the market expires people want to know what Adam Smith would say. It is a moment of, ?Hello, God, how?s my atheism going??
Adam Smith would be laughing too hard to say anything. Smith spotted the precise cause of our economic calamity not just before it happened but 232 years before ? probably a record for going short.
?A dwelling-house, as such, contributes nothing to the revenue of its inhabitant,? Smith said in The Wealth of Nations. ?If it is lett [sic] to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue.? Therefore Smith concluded that, although a house can make money for its owner if it is rented, ?the revenue of the whole body of the people can never be in the smallest degree increased by it?. [281]*
Smith was familiar with rampant speculation, or ?overtrading? as he politely called it.
The Mississippi Scheme and the South Sea Bubble had both collapsed in 1720, three years before his birth. In 1772, while Smith was writing The Wealth of Nations, a bank run occurred in Scotland. Only three of Edinburgh?s 30 private banks survived. The reaction to the ensuing credit freeze from the Scottish overtraders sounds familiar, ?The banks, they seem to have thought,? Smith said, ?were in honour bound to supply the deficiency, and to provide them with all the capital which they wanted to trade with.? [308]
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We could pump the banks full of our national treasure. But Smith said: “To attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils.”
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