Adam Smith's Lectures on Domestic Policy

Dan Klein recently published Adam Smith's lectures on domestic policy at Econ Journal Watch

The lectures are from a course that was taught by Smith on jurisprudence between 1763 and 1764. The lectures provide a general defense of liberalization as a good remedy to problems that are routinely addressed by civil government in the non-utopian world in which we [still] reside.

However, the lectures provide a great deal of insight into Smith's thinking on the human condition. In that way, the lectures are far more interesting than simply a boring discussion of policy. 

Below are several interesting passages.

Smith explains why certain objects which have no value to us may be valuable to others.

Nothing without variety pleases us; a long uniform wall is a disagreeable object. Too much variety, such as the crowded objects of a parterre, is also disagreeable. Uniformity tires the mind; too much variety, too far increased, occasions an over-great dissipation of it.

Value is (in part) related to pleasure. Pleasure is derived from hitting the sweet spot between too much variety and uniformity. 

What we are every day accustomed to does not very indifferently affect us. Gems and diamonds are on this account much esteemed by us. 

Value will be lost once tired of a perspective, regardless of how novel it may be at first or how valuable it may be to others. [This may explain the Boston Red Sox's treatment of Terry Francona.]

Smith weighs in on the purpose of civil government.

Law and government, too, seem to propose no other object but this; they secure the individual who has enlarged his property, that he may peaceably enjoy the fruits of it. By law and government all the different arts flourish, and that inequality of fortune to which they give occasion is sufficiently preserved. 

In fact, law and government are necessary for wisdom and virtue.

Wisdom and virtue too derive their lustre [sic] from supplying these necessities. For as the establishment of law and government is the highest effort of human prudence and wisdom, the causes cannot have a different influence from what the effects have.

To Smith, the division of labor is the driver of the economic growth of nations.  

It is the division of labour which increases the opulence of a country. 

However, the division of labor does not produce an equal distribution of growth.  

The division of opulence is not according to work.... The artisan who works at his ease within doors has far more than the poor labourer who trudges up and down without intermission. thus he who as it were bears the burden of society, has the fewest advantages.

And if not for the "poor labourers" the "European princes" would be unable to benefit from the division of labor:

It is easy to conceive how the rich can be so well provided for, as they can direct so many hands to serve their purposes. They are supported by the industry of the peasant. In a savage nation every one enjoys the fruit of his own labour, yet their Indigence is greater than anywhere. 

One downside of an economy based on the division of labor is that not every individual enjoys all the fruits of their own labor, but the benefits of division increase the standards of living even for the poor. 

...it is of this account that a common day labourer in Britain has more luxury in his way of living than an Indian sovereign. 

There are two categories of the causes of the slow progress of economic growth. 

First, natural impediments; and secondly, the oppression of civil government. 

Civil government is needed for wisdom, virtue, and a division of labor to thrive. And yet too much oppression extinguishes the spark of opulence. 

Smith's worry, however, is not so much over-regulation by an overbearing civil government. Smith is concerned that a government that is too powerful becomes a military target.

In the infancy of society, as has been often observed, government must be weak and feeble, and it is long before its authority can protect the industry of individuals from the rapacity of their neighbours. When people find themselves every moment in danger of being robbed of all they posses, they have no motive to be industrious.... When the power of government becomes so great as to defend the produce of industry, another obstacle arises from a different quarter. Among neighboring nations in a barbarous state there are perpetual wars, one continually invading an plundering the other, and though private property be secured from the violence of neighbours, it is in danger from hostile invasions.

Smith also listed a number of institutions that reduce growth primarily by reducing the incentive to be "Industrious". There include slavery, tenant-based farming, the right of primogeniture, regulations of importation and exportation, the lack of transportation infrastructure, licensing laws, and the culture and treatment of those who "truck, barter, and exchange". 

In a rude society nothing is honourable but war. In the Odyssey, Ulysses is sometimes asked, by way of affront, whether he be a pirate or a merchant. At that time a merchant was reckoned odious and despicable; but a pirate or robber, as he was a man of military bravery, was treated with honour. We may observe that those principles of the human mind which are most beneficial to society, are by no means marked by nature as the most honourable.

Lastly, Smith questioned the benefits of monopoly-based credentialing, even when the credential or license is permitted to reduce a negative externality. 

All monopolies and exclusive privileges of corporations, for whatever good ends they were at first instituted, have the same bad effect. In like manner the statute of apprenticeship, which was originally an imposition on government, has a bad tendency. It was imagined that the cause of so much bad cloth was that the weaver had not been properly educated, and therefore they made a statute that he should serve a seven years apprenticeship before he pretended to make any. But this is by no means a sufficient security against bad cloth. 

There's much more in the lectures. Check them out for yourself!