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- [00:07]
A
You're listening to the Hayek Program Podcast. This podcast includes audio from lectures, interviews, and discussions from scholars and visitors of the FA Hayek Program for Advanced Study in Philosophy, Politics and Economics at the Mercatus center at George Mason University. To learn more about the Hayek Program, visit Hayek Mercatus. To learn about graduate student fellowship opportunities with the Mercatus center at George Mason University for students at Mason as well as at universities across the Globe, please visit students.mercatus.org all right, today is May
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B
28, 2026, and I'm here with my colleague Dom Boudreaux, and we're celebrating the 250th anniversary of of the publication of the Inquiry into the Nature and Causes of the wealth of Nations. So, Don, thanks for coming on. And let me start with a very basic question as we celebrate this achievement. Why should young people be reading Adam Smith today?
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C
Young people should be reading those human beings who have proven themselves to be unusually voluminous fonts of wisdom and insight. And Adam Smith is certainly among that group of people. I believe he was one of the wisest and most insightful human beings ever to live. And so it's not just because he wrote on a subject that you and I hold dear, economics and political economy. It's because he was just wise. He had enormous amounts of insight both into, and I'm sure we'll talk about this, both into human nature at the individual level and how human society hangs together, given that human nature. And it's also worth saying that unlike a lot of people who have had a lot of wisdom and have shared that wisdom, Adam Smith was also an astonishingly wonderful writer. And so he's fun to read. He's 250 years later, his prosecution. He wrote originally in English, so there's no translation issue, but his prose still sparkles, and there's a rhythm and cadence to it that even to the ears of us, 250 years later, it still works. It still sings to our aesthetic senses for variety. His books are great. You should read the great books. He was unusually wise. He was a great writer. There are countless reasons to read Adam Smith. So go out and do it.
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B
You know, it is. I don't think there's a single Great Books list that wouldn't have Smith's book on it. It is really an amazing achievement of the English language, both as a scientific track and as a literary track. And that's so rare, I think, especially in the modern era, when there's a huge divide between those two things. Our ability to contribute scientifically and our ability to write clearly so that the uninitiated can actually go from A to Z with us. Right. So I'm going to skip around a little bit here and ask you a question because one of the things that I think is really important and I would love listeners to learn about is how. What a unique educational opportunity people have at George Mason University and why that's such an important aspect of learning how to do economics the right way and pursue it that way. You have had the opportunity to teach Adam Smith in a seminar now. Is it over a decade now?
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C
Well, I think. Yeah, I think I probably taught the first one in 2011, 2010. So it's probably close to a decade and a half.
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B
And you're working with graduate students with this close reading of the book. And I just was wondering if you could talk a little bit about your experience with that, what it meant not only as a teacher, but also to you as someone who, you know, reading the book in such close a way with others who are also reading closely.
- [04:21]
C
I first read the wealth of nations, the old Modern Library edition, in the summer between my graduating from college and starting graduate school. And I'm sure I got a lot out of it, but I was aware then that, you know, there was a lot in it that I. That just went over my head. I didn't get. I'm sure I didn't read it very carefully. I wasn't going to teach it. I was just reading it because I wanted to be able to say something that I knew most economists would never be able to say, namely, I read the wealth of nations rather than just, you know, reading a few passages. And so I didn't read it again cover to cover until I taught that free first seminar in 2010, 2011, 2012, whenever it was, it was a while back. And so I read it, you know, really carefully, pen in hand, making notes, and, you know, I confirmed what the very young me knew. And on my first reading, 90% of it just went. It just escaped me. I caught some of the more obvious things, you know, the invisible hand, the, you know, Smith's hostility toward mercantilism. That's. You can't miss that. But there are so many subtle insights and little detours and avenues that he takes that when you put them all together or the whole truly is greater than the sum of its. Of its parts in this. So it's getting less and less, but it's still the case that every. So I read it every semester. I say I Don't read it every semester as carefully as I did that very first time. But I do read it every spring semester and it's typically the case that some I see something in it that I didn't see in past readings. One of my favorites, this occurred, I just noticed this about five, five years ago and you may have heard me talk about it is early on in the book when he's talking about the woolen coat, the eye pencil story, but he's doing it in terms of code. He's got three exclamation points in one paragraph. And you know, Smith was a very proper 18th century classical writer. And three exclamation points. I mean this is, this is like, as I keep saying, it strikes me as the 18th century equivalent of maybe putting, you know, hand clapping emojis in a scientific document today. I mean he got, he was so blown away by the enormous system of social cooperation that he saw around him in England 250 years ago. I mean, imagine what he would say were he alive today to see a much larger globe spanning system of social cooperation. He would put hand clapping emojis in it. So that seminar that you refer to, I teach it every spring semester. It was one semester right after Covid that because of the enrollment problems, that I didn't do it. But I have graduate students, our PhD students, some of our best students who take it. I also have upper level undergraduate students who take, and sometimes master's students who take it. Dominic Pino took it a few years ago. You know, Dominic's now, you know, working with, he's an editorial writer for the Washington Post. But you know, some of the best students that we've had over the past 15 years, I'm very happy to say they were in the Adam Smith course. Not all of them. In fact, most of them went on to write their dissertations on something other than Adam Smith. But it's really good if you're an economist, to read, to read the great masters. And I tell my students, you know, look, I said I don't know that any survey's been taken. Maybe one has been. But I don't feel like I'm going out on a limb to say that if you take all living PhD economists, even just limited to the English speaking world, and you ask them honestly, how many of you have read the wealth of nations cover to cover. What would you think, Pete? 1, 2% maybe? I mean it's a tiny fraction. There's nothing wrong with that. We live in a world Smith himself would appreciate. We live In a world of specialization, you can't, you know, if you're specialist in an industrial organization, you can't be spending your time, you know, studying all the great history of thought works. But it's really a shame because there's so much insight in Smith. And one mark of a great writer is even when he's wrong, and there are things that we know he was wrong on. When you read him and you ask why was Smith wrong on that? Pondering why he's wrong, is it self instructive because someone like Adam Smith doesn't make a mistake out of carelessness or laziness. His errors themselves can be sources of insight when you ponder those errors. Why did Adam Smith, for example, have a labor theory of value? We know that was wrong, but he didn't stumble into it as an idiot. You get something, some insight into not only his thinking, but some insight into how the best human minds think about economics. When you ask how did Adam Smith, writing In the mid 18th century, what did he mean by the labor theory of value? Why did he think that was the best explanation? And then you actually start to see some plausibility. It's wrong. The labor theory value is wrong, but you see some plausibility in it. You see it as a stage of okay, we don't know what causes value. Here's a theory. It brought the people of his era a few steps closer to understanding how the commercial economy worked. Fortunately, by early 1870s we got the marginal revolution and we can understand it a lot better. But it wasn't just a mistake that we can dismiss. Oh, Adam Smith was wrong. We improve our own minds and our own understanding by pondering why someone so intelligent makes mistakes. And certainly by pondering why he gets right. All the many things that he got right only further increases our intelligence. Let me say just one other thing, just about it, because it occurs to me, you know, in the current Liberty Fund Oxford University bicentennial edition version, which is what this is, I've had these since 1984, so they're more than 40 years old. It's a 947 page work. It's amazing how much of it remains timely today. You think that this guy wrote a quarter of a millennium ago. And so it's going to be about issues that are long dead, long past. Some of them are, but most of them aren't. Most of them are still with us today. The issue of monopoly power, protectionism and trade, the burden of government debt, the ways that government taxes, how should government tax us? He still speaks to the modern economy. If the modern economist would read Smith, the modern economist would learn things that he or she didn't get in graduate school or undergraduate training, for that matter.
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B
Yeah, I think that's right. One of the things that Jim Buchanan used to say in class was that he would ask us, what more do we know about the market today than what Adam Smith taught us in 1776? And if the answer isn't that much, then maybe the emperor has no clothes. Right. Sort of modern economist. The other thing I just want to push a little bit on this issue of. Or stress a little bit this issue on the unique education, because one of the things that I've always thought about was when I was a graduate student, I had to read these two articles. One of them is called Does Economics have a Useful Past? And it's by Stigler. And his argument is, no, whatever's good in the ancients is now embodied in the moderns. And the only thing that isn't embodied in the moderns is all the bad ideas of the ancients. So we don't have to pay attention to them. On the other hand, Deirdre McCloskey wrote a paper called does the Past have a Useful Economics? And her answer, of course, was, yes, we can learn a lot about economics and closure laws, things like that. And I always thought that one of the unique things about GMU is that we answer in the affirmative to both, when in fact, most economists answer, well, now economic history is a little bit more, you know, respect it. But at the time when I was a graduate student, McCloskey's position was a very outlier position to hold. And certainly Stigler's position was the mainstream position to hold. So you should say, you know, I don't have to study the past, I don't have to study ideas in the past. And I think it is you. But I remember a story, maybe you can elaborate on it, of when you were at Auburn and Garrison was in his office. And I think that it might even be like, someone like Jurgen Backhouse or. Or something like that. And they were talking about, like, Garrison had, like, a big, you know, thick book or whatever. I. Maybe it was Human Action, might have been wealth of nations or whatever. And Backhouse was, like, completely, like, shocked. Like, you read a book like that. Like, you know, like, we economists don't read books. Like, is that inaccurate? Do you remember that story or.
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C
I do. It wasn't Jurgen Backhouse. I don't remember who it was, but yeah, you know, so I went to Auburn for graduate school. I finished the graduate school, Auburn, after starting at nyu, you, of course, came to gmu. And one of the unique things about our training we were fortunate was we did get a lot of exposure to the great books. So I didn't read the wealth of nations when I was at Auburn, but you mentioned Roger Garrison, who's a dear friend of mine. He died earlier this year. Roger taught the first quarter. Auburn was on the quarter system of macroeconomics in the PhD program. And we read the general theory, Keynes general theory, cover to cover. I wonder how many economists read the general theory, even Keynesians. Now, I don't think the general theory can hold the candles of the wealth of nations for its clarity or wisdom, but it is a great book in economics. And I think if you're going to call yourself an economist reading these great books, I wouldn't go as far as saying it's a necessity. But my gosh, it's a huge asset. And so being in a program like George Mason's, when we still read great books, Tyler Cowan says it very often we're a books program or a books department, not so much an articles department. We write articles, we publish articles, but we also write books. And we value our colleagues who write books. And that's not true in many programs. So there is a distinction I like to make between scholarship and research. And people use those two terms often as synonyms. I don't think they're synonymous. Good scholars often do good research, but you can be a scholar and not do research. You know, you study Tacitus and Euripides, but the two are different. And what makes a great department is being filled with scholars who do research, people who read widely and deeply. That gives them a better sense of what the important questions are, and better sense, by the way, where to look for answers, as opposed to just going out blindly and starting, you know, gathering data. But a lot of people mistake, you know, churning out lots of articles with lots of econometric calculations as scholarship. It's not a lot of. It's not scholarship. It's just. It might be useful research, but it's different than scholarship. And we at George Mason have scholars who also do research.
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B
I have a funny story along those lines. When I, when I showed up at NYU after being at GMU to get my PhD, it was the first time that I ever heard the term scholar used in a derogatory sense. One of the faculty members said, oh, he's a scholar. We need scientists, not scholars. And I can remember thinking like, I thought they Were this like, you know, in my head, because of where I came from, I didn't see it like as this huge separation. And I was like, I think one is an input into the other. And, you know, I don't get it. And so I think that there's still something very, you know, precious and unique about what we do that I hope that potential students, undergraduates as well as graduate students consider George Mason as a, as a destiny precisely because we offer this kind of education that is not as widely offered in economics. And one of the issues, let's get back to Adam Smith, is that Smith, when you touch him, there's a humanity in the way he's writing, which is absent from so much of the technique driven approach of economics. It's a very human centered social science rather than a model driven idea. The models or the mental frameworks are used to illuminate humanity, not to substitute for studying humanity. So in that regard, I was wondering if you could maybe talk about how you see the relationship between Smith's great book in social psychology, the Theory of Moral Sentiments, and the wealth of Nations. And just let me add a quick line on this, which I always love Hayek, as you know, because you've done so much great work on Hayek. He rarely was snarky, right? He always was very nice or whatever. He has a great passage in Individualism True and False where he says he would line up all the modern tomes of social psychology and he still would prefer Adam Smith to them. It's a great line. So, you know, if you could maybe talk about that relationship between those two great books of Smith and how he saw them and how you see them, that would be great.
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C
So much to say. Let me begin by saying Smith would have thought silly this strict division between positive and normative. Nevertheless, both books were scientific in the sense that they both set out chiefly to explain and describe the world that Smith observed. In the case of the Theory of moral sentiments, the 1759 book, Smith wasn't laying down moral precepts for how we should live, although you can infer from his positive theory a lot of normative conclusions. But his goal was to describe what he observed about humanity and the same thing can be said about the wealth of Nations. He, in the latter book set out to describe what he observed about commercial society and how commercial society hangs together and operates. And as you know, I mean, it's been debunked now, but for a long time, you know, there was what the Germans called, you know, das Adam Smith problem, you know, The Adam Smith problem, and this problem allegedly was a huge inconsistency between the Theory of Moral Sentiments and the wealth of Nations. Because in the Theory of Moral Sentiments, Adam Smith is, he understands that people have moral sentiments and you know, they are, you know, they care about things other than their narrow material well being. But in the, in the wealth of nations, that's somehow different. That's just nonsense. You can't read the wealth of nations and come away believing that. Smith believed that individuals are nothing other than narrow minded pursuers of sensuous pleasures. They're the same, the people who populate the wealth of nations are the same people that Smith was theorizing about 17 years earlier when he wrote the Theory of Moral Sentiments, what Smith sought to do. Now, scholars of Smith, more competent than me, might nitpick what I'm about to say and I wouldn't go to the barricades defending myself. I might get a few of the details or the nuances wrong, but I think the broad outline of what I'm about to say is correct. In the Theory of Moral Sentiments, Smith wants to understand how individuals relate to the people they know and see and come into contact with. And also when they imagine people that they might deal with. He's trying to explain the. It's a theory of the moral sentiments that we as individuals have as we connect with other individuals. In the wealth of nations, he wants to explain not so much why individuals feel what they do, react as they do, you know, emotionally and ethically. He wants to explain how commercial society hangs together. The commercial society that is being run by the same people who he theorized about in 1759. And those are two very different projects. He wants to understand the formation of prices. He wants to understand what we today call the allocation of resources. And none of this can be people try but they fail. None of this can adequately be explained by conscious moral sentiments. You don't have people intending to increase the capital of a country or intending to reallocate resources from where they're less productive to where they are more productive. He's looking at, in the wealth of nations, he's looking at patterns of resource allocation and as the results of human action, but not of human design. And so being not the result of human design means not the result of human intention. When you leave the realm of human intention, then you get away from moral sentiments. You're talking about again, results of human action, but because no one is intending them, we need a different kind of explanatory framework. And so he's Got these invisible hand explanations. And so the two books in no way are contradictory to each other. And Smith, scholars know that of the two books, his favorite was the Theory of Moral Sentiments. But he was still proud of the Theory of the wealth of Nations. He didn't disown it. And if Smith thought that there was any conflict between the two, he would have. He would have tried to fix it or disowned one of the books. And he never did that.
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B
Yeah. The book he was constantly editing was the Theory of Moral Sentiments. Right.
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C
And abridgments and edits were much more extensive in the Theory of Moral Sentiments than they were in the wealth of Nations.
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B
You know, one of the things that I love to hear you talk about is the title of the book. So maybe you could talk a little bit about that.
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C
Well, as you know, Pete, this happened to so many of us. As a very young, very young man. You know, I'm literally still a teenager. It was Peter Bauer I encountered. Peter Bauer saying that poverty has no causes. Wealth has causes. And, you know, I mean, that insight alone is very powerful. Once you. It just changes your orientation, the way you look at the world. Yeah. What has to be explained is wealth, the production of things that make our lives prosperous. Poverty needs no. Poverty just happens if wealth isn't produced. But Bauer obviously knew. He got it from the wealth, from this book, what we call the wealth of Nations. And the full title is An Inquiry into the Nature and Causes of the wealth of Nations. So let's look at the words again. It's written in the mid 18th century. An inquiry, not the final word. This is an inquiry. I'm not telling you. I'm not laying down gospel. I'm not imposing dogma on you. I'm inquiring into this interesting thing that I've observed around me. I, Adam Smith, am living at a time and place where I know for the first time in human history, ordinary people are experiencing a rise in their living standards, well above subsistence. That has never happened before. And it's not happening in most places of the world today in the mid 18th century. This is really interesting. What causes this? For most of human history, it hasn't been caused. I want to inquire to why this nation or the few nations that are experiencing this. Holland a century earlier. England and the lowlands of Scotland in the 18th century. Why is this happening? We take our prosperity for granted today, which is why we can talk about the causes of poverty and seemingly make sense. Because poverty today is the exception in our world. In his day, it Wasn't. So he's inquiring into the causes of the wealth of nations and then, of course, the nature and the nature of wealth. His chief target with this book were the mercantilists of the era. And the mercantilists, central to their notion of wealth is money. The mercantilists believed literally that wealth is money and money is wealthy. Wealth is not access to goods and services. Wealth is gold and silver. Wealth is money. And Smith said, to put it in 21st century terms, that's crazy talk. That's bonkers. If you got a whole bunch of gold and silver, you just got a whole bunch of gold and silver. You can't eat it, you can't drink it, you can't house yourself in it. It's very difficult to do. Wealth is access to goods and services. Money plays a useful role in society. Smith was a very good monetary theorist. But ultimately, gold and silver, money, these are means to acquire the true pieces of wealth which are access, ordinary people's access to goods and services. And so he tells you in the title, if you're paying attention, what this book is going to be about. And he fulfills the promise in the ensuing 947 pages of giving you an insight into the nature of and causes of the wealth of nations. Why some nations are richer than others, why we're richer today than we were in the past.
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B
You know, it's an interesting fact, because I've heard you stress this point, that at the end of the 1800s, so beginning of the 20th century or late 19th century, Alfred Marshall is now flipping the story around and that the question is poverty. But, you know, it kind of struck me when I, when I hear you say that, because I know that they, they, you know, a lot of thinkers were asking the question, how could we have poverty amidst plenty kind of thing. But when I started studying economics, which wasn't that long ago in the big scheme of things, 40% of the world was living in extreme poverty. 40%. I can't imagine back in 1890 when Marshall wrote that actually how many people outside of Great Britain and the United States were living in improved living conditions.
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C
Yeah, yeah, whatever was, the number was surely higher than the 40% that was the case when you and I were still students. But Marshall is writing in Great Britain and he had traveled to the United States. He probably traveled on the continent in Western Europe. And by that time, by the time he's writing, you know, in the second half of the 19th century, those parts of the world had become unprecedentedly prosperous for Ordinary people. And you know, this is, this is, I say this perhaps too often, but one of the big problems with the market, with the free market is that it works so darn smoothly and well that it does make to, to us, it makes wealth production appear mechanical. It just happens. And even Marx, who's writing in the middle part of the 19th century, you know, he gets to think that he gets to wealth just capital just accumulates and it throws off its fruits. And then we get today, you know, Thomas Piketty writing, you know, with his formulas, wealth just happens. And it's just the only question then is how was it distributed? And, and you know, if that is your starting point, I'm sorry, you cannot be a good economist because the point of economics goes back to you got to inquire into the nature and causes of the wealth of nations. It doesn't just happen.
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B
It is amazing because if you listen to Piketty, Zuckman, any of these people, you know, they're like, for example, Zuckman is the author of the wealth tax, right? And they somehow think I can tax the hell out of wealth, but wealth will still be created, right? It's like, because they make the fundamental, I mean, you know, people will push back on this and like you said, you know, they'll complain that you're being too unsubtle or, you know, you're too blunt. But, but the reality is that if you tax something, you're going to get less of it. If you subsidize something, you get more of it. It's a sort of a basic economic. Simple economics is not necessarily simple minded. And you cannot separate out the wealth creating activity from the rewards that the creators get for creating this wealth. And if we somehow think we can penalize it, well, okay, like take a good look at what happens when countries do that. And instead they think somehow, oh, this won't happen.
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C
Here it is. The, what you're referring to is the unfortunate continuing triumph of hopes and dreams over reality. And you know, reality is always going to win out and it's good to have hopes and dreams, but the hopes and dreams should be based upon precepts that can be, you know, that are based in reality. And this notion that wealth will just continue to happen and all we have to do is redistribute it. Just take it from Jeff Bezos and give it to me, give it to other people and we'll still be as wealthy, but it'll be more fairly distributed. It is, you know, well, I mean, how many human beings, I mean, you study Communism Pete, more carefully than I have. How many human beings have been slaughtered by pursuit of this false notion? It's terrifying to contemplate.
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B
You and I have also a shared respect and admiration for Thomas Sowell and his pithy way to sum up things. There are no solutions, there's only trade offs. But one of his favorite, I think, is reality is not optional. Right? And that is an issue. I want to go back to the issue about tms and the wealth of nations, because I meant to bring this up and it's a segue into a question. I want to ask you about Hayek and Buchanan and their relationship to Smith, because when Hayek talks about the Great Order or the Great Society, you have to have these rules of just conduct, all right, that are in their Hume, Smith's friend, argued in the Treatise of Human Nature that you needed to have stability of possession, transference of those possessions by consent and the keeping of promises and that sort of institutional pattern. And so to me, when I think about the relationship between Smith's Theory of Moral Sentiments and the wealth of nations, it turns on what you were just talking about, which is whether or not we're also dealing with familiarity or we're dealing with anonymity, and yet somehow we still like your common woolen coat. And the reason for the exclamation marks is because that's cooperation among strangers, among strangers, not among your close. And so the sympathy or empathy that Smith has is not necessarily associated with proximity, it's with projection, our ability to project how I would interact with the other, even though the other is not someone who's my close identified person. So it makes possible the cosmopolitan liberal society, or the Great Society as Hayek calls it. And we need those rules of just conduct. We can't do economics without those rules of just conduct. We would instead collapse into, say, the Hobbesian Jungle or whatever, for lack of a better word. But in many ways, this is what McCloskey's trying to tell us too, right? In her bourgeois trilogy, she's kind of taking an inquiry into the nature and causes of the wealth of Nations. She's trying to explain the Great Fact, but she finds its roots in the bourgeois virtues that evolve. So it's not the Christian virtues, it's not the warrior virtues, it's the bourgeois virtues that are required for us to be able to get this. And those are those rules of just conduct. And I was wondering maybe do you see that as like one of the continuing legacies of Smith as it was carried forward in the 20th century? By Hayek and Buchanan among. Probably first among the economists of the 20th century that did that work, or do you see them? Yeah, anyway. Yeah, I just wanted you to.
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C
Yeah, yeah, yeah. But it's, but it's, it's very subtle. Right. So it's naive to believe, as some people will do believe. It's naive to believe that the best economists who supported the free market, including Adam Smith, believe that. It's naive to think that they, that these economists believe that all that's needed is a formal legal system and a free market and everything will work out fine.
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B
Right.
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C
The people who populate the markets have to have, nevertheless, a certain amount of honesty and integrity, humanity about them, even when they're dealing with strangers. So, you know, this is maybe where Smith's impartial spectator comes in. You know, well, you know, I could, I could steal this thing. No one's going to see me, but. Except my impartial spectator would and I'm going to feel terrible, so I'm not going to steal this thing. You can't have a viable society, much less, you know, prosperous market economy, if the people in it have zero moral sentiments. On the other hand, this is what Smith is saying in the wealth of Nations. It can't just be the moral sentiments for two reasons. You're familiar with them. It's the incentive and the knowledge problem. You take the same people who have, who have ordinary moral sentiments in our society and you give them political power to impose their will on others and not accept the consequences, the negative consequences of their actions, they will start behaving badly and they will start creating net harm. And so they need more than just the. Their baseline bourgeois default mode sentiments. And of course, for the market to work, you need, you need knowledge. And this is where the price system comes in and other pricing profits and losses. And it can't just be, well, you know, people have, you know, we have all these, you know, these seven virtues and we're going to go out in the market and these seven virtues alone will, will inspire us to treat our fellow human beings properly and will give us enough knowledge to know what to do, to treat our fellow human beings in the ways that they should be treated. So it needs both, the modern prosperity needs the individuals in it to have some minimum commitment to bourgeois decency, including, as Dierdre would be the first to point out, including the recognition that people behaving commercially are behaving in an honorable way. There's nothing demeaning about being a merchant or being an investor, which is very Much unlike the way people thought about these tasks in the past. So you need that, but you also need the harder institutions and market discipline to complete the picture. You can't have just one or the other.
- [37:17]
B
I hope that maybe the listeners will discover your old Liberty Matters dialogue on ideas and institutions. Not only because 2014, I think, yeah. Not only because you lay it out beautifully in there, but also Joel McCure is in that dialogue as well with Deirdre. And it's a quite fascinating thing because, you know, both Deirdre and Mulch, your and us are ideation people. We care about ideas, we're devoted to ideas. But you need to have ideas tied to institutions that actually can, you know, provide these, these hard things. What you were just talking about the right incentives and the right sort of generation of knowledge to be able to coordinate economic activity. But you know, just to follow up on this line, I run this reading group for Liberty Fund called no Due Date and this month was George Will's Conservative Sensibility. The Conservative Sensibility book, which I think is not correctly titled, it's really a book on classical liberalism. But he has a great line in there where he's explaining why it is that there's an achievement gap between what the progressives, you know, promised us and what they were able to achieve. And he says that it comes down to two things. One, we don't want to admit that we actually don't know how to fix some of the problems and they're intractable. And we, we have, we should have a more epistemic humility about that. Right. But the second one is that we have too much politics. And he goes, like our problems that we face, for example, very simple one, which is the problem with the fiscal state of the coming entitlements and everything like that. He goes, we know an answer to this, which is raise taxes and cut the benefits. But we're never going to do it because we have too much politics. And because we turn to too much politics, we basically induce more rent seeking behavior. And so government fails because it's big and it grows because it fails. And it just kind of continually perpetuates. Adam Smith understood this as well. That's one of the things that's most amazing if you look at the way Smith talks about in the fifth book of wealth of Nations. He has this idea where he calls the juggling trick that all governments engage in, which is to run deficits, accumulate public debt, and then debase the currency. And when we think about the world today, we think about problems of Say for example, the dollar and the international currency and it's maybe it's losing of its position or fiscal dominance in our own like affairs here in the States. This goes back to your first point. Smith is still speaking to us because we're still engaged in the damn juggling trick and we haven't figured out how the hell to stop the juggler.
- [40:20]
C
Yeah, and he understood the reasons too. You know, the first thing I read, you mentioned Buchanan earlier. The first thing I ever read in Public Choice, I was an undergraduate. It was a little IEA monograph written by Buchanan and Dick Wagner on later the version of Democracy and Deficit, the 1977 book. And it just spoke, it was so clearly written, it spoke to me. I said, well, okay, Keynesianism, even if you accept its economics as being theoretically impeccable, it's, it's politically naive. Politicians of course, are very happy to run deficits during downturns, which is what Keynesianism says should be run during downturns. But politicians are not going to be happy to run surpluses during good times because that requires raising taxes and reducing spending. And what are the political incentives? Political incentives are always keep taxes as low as possible, spend as much as possible. And particularly for national governments that have access to a printing press, that's fairly easy to do. So you can get the short run political benefits by running deficits without ever worrying about the long term consequences because you're going to be out of office probably the time those consequences start to pay up. And so it is kind of a depressing picture. Okay, the political incentives are all against it. But look at the world we're in, Pete, you and I, we're no spring chickens. We're in our mid to late 60s and for the vast majority of our lifetimes, every fiscal year has been one of deficits. I don't know the exact number, but the great majority had been deficits. And on those few occasions when they haven't been deficits, it's because there's been this surprising spurt of economic growth like, you know, the Internet boom at the end of the very end of the 20th century. And why is this? It's not because we've been in depressions all these years. It's because of the political incentives that Buchanan and Wagner and Adam Smith pointed out, spend and don't tax.
- [42:27]
B
Yeah. So I consider you and Doug Irwin to be the clearest voices in our current generation to defend free trade. Okay. And free trade is sort of under assault. And the father of free trade is Adam Smith. So as we come to a close of here. I was wondering if you could maybe talk about if Adam Smith, you know, came alive today and was addressing the international community with respect to what's going on with trade restrictions, all these kind of things like that, he wouldn't be surprised because he understood the dynamics of it, and he didn't even think he could get a free trade regime in his lifetime. Right. I mean, you know, or within, you know, any. I think. But then you have the Corn Laws and Brighton Cobden. But, like, could you talk a little bit about, like, your. Your experience with trying to communicate to people about the benefits of trade and the resistance that you run into, not only from just the politics of it, but the intellectual resistance that you find frustrating.
- [43:43]
C
Yeah, I'm not sure I have anything unique to add. You know, Pareto and William Graham Sumner, they both turned to sociology because they couldn't. Why is the case for free trade, which is so intellectually unassailable and clear, why is it so difficult to get across? Why do people keep ignoring it? When I hear arguments for protectionism, there are some that are a little bit more respectable than others, but basically the typical argument for protectionism is no more respectable than someone saying 10 minus 2 equals 15. And when an ordinary person hears 10 minus 2 equals 15. So what the heck are you talking about? No, 10 minus 2 equals 8. Right. You want to get from 10 to 15, you need to add 5, not subtract 2. And intellectually, that's how I feel. I think Adam Smith probably felt the same way. I mean, the core of the wealth of nations is book four, which is his, where he spends most of it attacking mercantilism. And you can tell when you get to that book that he kind of lets himself loose. I mean, it's Adam Smith, guns a blazing. He doesn't hold back. He's very critical of the mercantilist. And you can tell he's baffled by why would anyone think these arguments make sense? And so you said if he were resurrected today, he wouldn't be surprised. I'm of two minds of that. But what you mean by he wouldn't be surprised is he would recognize he listened to Donald Trump, listened to Bernie Sanders, who's no better than Donald Trump on trade, he would understand it all. I heard this all 250 years ago. Nothing surprising here. In a way, though, he might be surprised. What the heck have you people been doing 250 years of time to improve your arguments and to improve your understanding, and you're still in the same place that I left you when I died in 1790. What has been going on? Why, you know, we've had all these great writers. You know, you're too kind about me, but, you know, Doug Irwin, going back in the past, Bastiat, no one was better than Bastiat.
- [46:00]
B
I just wanted to, you know, really thank you for all the work that you're doing, you know, in not only, you know, promoting Adam Smith, but sound economics and the importance of economic education as well as economic, well, basic economic literacy and its approach all the way. I mean, people should remember that when you were the department chairman at George Mason University, you played a major role in having Russ Roberts come here. And the belief that we should have economic communication should be a skill that our students have to acquire and learn to be citizens in this modern world. And so. Yeah, but.
- [46:45]
C
But in fairness, as you know, I mean, I was just carrying on the tradition that had been here. You know, Walter Williams was my successor, right, as. As chairman. And. And no one was a better and more determined communicator of sound economics than Walter. And so just carrying on that tradition. But. But yeah, I was happy to carry it on. And, you know, you and all of other colleagues, you know, we have a very supportive environment here where we understand that ultimately economics is valuable not just because it allows professional economists to, you know, you know, do puzzles and. And earn an income. It's. It is needed and valuable in society because it gives us insight that no other discipline gives us into how the commercial society hangs together. And if you do not understand that, then you are prone to adopt or support policies that will destroy the very commercial society that you want to save.
- [47:41]
B
That's a great point. One last thing going back to GMU that I wanted to stress is that when you read Adam Smith, he tells us in the lectures on astronomy that science advances through stages of wonder, surprise, and then appreciation. And he also tells us in the wealth of nations that science is the great antidote to, you know, the superstitions and mythologies that are out there. And to me, I think that one of the things when you read Adam Smith, even though he's, you know, it's such a vital exercise that he's engaged in, there's a sense of joy, right? There's a sense of joy of figuring things out in economics. And I think that's something that we also share in our. In our program is a sort of a just a pure sense of love of the discipline and what it has to offer us. And we get that from Adam Smith. And then the people who, as Buchanan puts it, sit in the seat of Adam Smith, you know, all those years later. Right. That's how he starts the. What should economists do? It's, you know, the men who sit in the seat of Adam Smith.
- [48:52]
C
As you know, my bread and butter course that I teach is intro econ 101, econ 103 at George Mason, and I've been doing it for more than 40 years, and I never tire of doing it. I love economics. And as we do at George Mason, as you do. Right. This is not a job. I mean, I'm happy to get paid for it, but I love economic because it's fun, it's interesting, and it's important. And frankly, it's not that difficult. It's applied, consistent, common sense. And when you can take these few insights and then string them together in a coherent way, that suddenly gives you the vision of how the world works, that you understand. Most people, they don't see it. It's empowering. It's fun. And like you, Pete, and like a lot of our colleagues here, it's not just you and me. We have this almost evangelical urge not to proselytize for free markets. It is to explain the way economics works and the way economies work. And when you understand that, you naturally become a supporter of free markets. But for me, what makes me angry isn't so much that people don't support free markets, that people get the economics wrong. I think if you only got the economics right, then you'd change your policy prescriptions and your policy preferences.
- [50:29]
B
Yeah, well, that was in Adam Smith. It all begins with an inquiry. An inquiry into the nature and causes
- [50:37]
C
of the wealth of nations. That's right.
- [50:39]
B
All right, well, Don, thank you very much, and I appreciate you taking the time to talk with us today.
- [50:45]
C
Always my pleasure.
- [50:52]
A
Thank you for listening to the Hayek Program podcast. To learn more about the research, scholars and work of the Hayek program, visit hayek.mercatus.org for more information about graduate student facilities, fellowship opportunities for students at Mason as well as at universities across the Globe, please visit students.mercatus.org we hope you recommend students to our programs or consider applying yourself.