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Progress by consent: Adam Smith as development economist

The Review of Austrian Economics volume 34, pages 179–201 (2021)Cite this article

Abstract

Adam Smith is not sufficiently recognized as a founder of development economics. Smith challenged the longstanding assumption that inferior development outcomes reflected inferior groups, and that superior groups should coerce inferior groups to make development happen. Smith made clear that the positive-sum benefits of markets required respecting the right to consent of all individuals, from whatever group. These ideas led Smith to be a fierce critic of European conquest, enslavement, and colonialism of non-Europeans. The loss of Smith’s insights led to a split in later intellectual history of pro-market and anti-colonial ideas. The importance of the right to consent is still insufficiently appreciated in economic development debates today.

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Fig. 1

Notes

  1. Glaeser (2011) argues that the individual right to choose is “the moral heart of Economics,” tracing it back to Adam Smith

  2. From the essay “On National Characters” in the original 1753 version of Hume (1777). The later 1777 version drops the phrase “and in general all the other species of men (for there are four or five different kinds),” which was perhaps Hume’s response to criticisms of this passage.

  3. Sebastiani (2013, Kindle Locations 1058-1064) argues that Hume “intended to demonstrate that justice was an artificial, conventional, and social virtue relating to public utility and not to any transcendental principle, because it had come into being and evolved in the ambit of relations of exchange between individuals.” More evidence for this is that Hume expresses his own revulsion against slavery: “domestic slavery, in the AMERICAN colonies, and among some EUROPEAN nations, would never surely create a desire of rendering it more universal. The little humanity…to exercise so great authority over their fellow-creatures, and to trample upon human nature, were sufficient alone to disgust us with that unbounded dominion.” (from his 1742 Essay “On the Populousness of Ancient Nations” in Hume (1777))

  4. Quotations from Hume (1751) from Levy and Peart (2004), whose exposition I follow here. This paper has also benefited greatly from an unpublished manuscript Levy and Peart 2016.

  5. Pp. 102–103, Dunbar (1782)

  6. Easterly (2001), p. 30

  7. Smith (1776), Kindle Locations 217–220

  8. Smith (1776) (Kindle Locations 233–239)

  9. Smith (1776) (Kindle Locations 252–258)

  10. Quoted in Sebastiani (2013), Kindle Locations 2962–2964

  11. Smith (1776) (Kindle Locations 1536–1537)

  12. Smith (1776) (Kindle Locations 2221–2222)

  13. Smith (1776) (Kindle Locations 7128–7133)

  14. Smith (1776) (Kindle Locations 6223–6227)

  15. Smith (1776) (Kindle Locations 10,904–10,911)

  16. Ferguson (1782) (Kindle Locations 2071–2079)

  17. Ferguson (1782) (Kindle Locations 1636–1643)

  18. Ferguson (1782) (Kindle Locations 3029–3034)

  19. Smith (1776) (Kindle Locations 7128–7136)

  20. Smith (1776) (Kindle Locations 217–220)

  21. Smith (1776) (Kindle Locations 1839–1841)

  22. To be more exact, the existence of a poverty trap also depends on the relative slopes of the two relationships of opposite causality between development and extent of the market. If the slopes are such that there is no poverty trap, it is still true that starting from a low level of each, the division of labor and extent of the market will feed on each other and increase till they reach a stable equilibrium. A factor that exogenously makes the market small, such as the high transport costs to be discussed next, will have a low stable equilibrium at a low level of development. A longstanding argument for foreign aid is that it will allow an escape from a poverty trap, but Easterly (2006a, b) and Kraay and McKenzie (2014) fail to find evidence of the simple types of poverty traps in which aid would have this effect.

  23. Smith (1776) (Kindle Locations 2615–2618) Roads are of course endogenous, unlike waterways. Smith recognized this and posited yet another case of dual causation – richer countries could afford better roads, and then these roads would make them even richer. The opposite could happen for poor countries, another possible poverty trap.

  24. Smith (1776) (Kindle Locations 339–345)

  25. Smith (1776) (Kindle Locations 10,851–10,859)

  26. Smith (1759), Page 240

  27. Smith (1776) (Kindle Locations 6619–6625)

  28. Smith (1776) (Kindle Locations 12,827–12,834)

  29. Smith (1759)(p. 132).

  30. Smith (1759), pp. 229–239

  31. Smith (1759)(p. 132).

  32. Smith (1759)(pp. 137–138).

  33. Smith (1759)(pp. 138–139).

  34. Quoted in Rothschild (2009), p. 437

  35. Smith (1759)(pp. 138–139).

  36. Smith (1776) (Kindle Locations 10,951–10,958)

  37. Robbins (1953), p. 57.

  38. Notable exceptions are Muthu 2008 and Rothschild 2012.

  39. Smith (1776) (Kindle Locations 7016–7023)

  40. Smith (1776) (Kindle Locations 8865–8866)

  41. Smith (1776) (Kindle Locations 9311–9316)

  42. Smith (1776) (Kindle Locations 9933–9940)

  43. Smith (1776) (Kindle Locations 10,179–10,185)

  44. Smith (1776) (Kindle Locations 8289–8290)

  45. Smith (1776) (Kindle Locations 10,196–10,199)

  46. Smith (1776) (Kindle Locations 12,021–12,029)

  47. Smith (1776) (Kindle Locations 12,043–12,046)

  48. Smith (1776) (Kindle Locations 13,100–13,102)

  49. Smith (1776) (Kindle Locations 12,049–12,058)

  50. Smith (1776) (Kindle Locations 10,196–10,201)

  51. Smith (1759) (pp. 211–212).

  52. Quoted in Rothschild (2009), p. 424

  53. Smith (1776) (Kindle Locations 1905–1910)

  54. Smith (1776) (Kindle Locations 9780–9785)

  55. Smith (1776) (Kindle Locations 15,322–15,325)

  56. Rasmussen (2017). Rasmussen describes Hume as openly skeptical of religion (which denied to him professor positions), while Smith was much more discreet about his similar skepticism.

  57. Smith (1776) (Kindle Locations 9940–9946)

  58. Quoted in 1815 in Sebastiani (2013), Kindle Locations 4395–4398.

  59. Pitts (2005), p. 243

  60. Quotes: Von Mises (1927): “the colonial policy of the European powers since the age of the great discoveries stand in the sharpest contrast to all the principles of liberalism.” Hayek (1944) “The experience in the colonial sphere, of Great Britain as much as of any other, has amply shown that even the mild forms of planning which Englishmen know as colonial development involve, whether they wish it or not, the imposition of certain values and ideals on those whom they try to assist.” And Hayek again: “Can there be much doubt that {global economic planning} would mean a more or less conscious endeavor to secure the dominance of the white man, and would rightly be so regarded by all other races?” Friedman (1958) “What is required in the underdeveloped countries is the release of the energies of millions of able, active, and vigorous people…what is required is an atmosphere of freedom.” Friedman and Rose (1980): “If some people are denied access to particular positions in life for which they are qualified simply because of their ethnic background, color, or religion, that is an interference with their right to “Life, Liberty, and the pursuit of Happiness .” It denies equality of opportunity and, by the same token, sacrifices the freedom of some for the advantage of others.”

  61. Easterly (2014) gives examples.

  62. As Coyne and Hall (2014) discuss, some of the same debates about “American Empire” are happening today as happened analogously in the time of Smith.

  63. Shleifer (2009) labels the period since 1980 “The Age of Milton Friedman.”

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Acknowledgements

I am grateful for comments received at the Mont Pelerin Society General Meeting 2018 in Gran Canaria, Spain, for comments of two anonymous referees, and for comments by Michael Clemens, Ernesto Dal Bo, Elizabeth Dalton, Angus Deaton, Ross Levine, Paul Mueller, and Dennis Rasmussen.

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  1. NYU, New York, NY, USA

    William Easterly

  2. NBER, Cambridge, MA, USA

    William Easterly

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Correspondence to William Easterly.

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Easterly, W. Progress by consent: Adam Smith as development economist. Rev Austrian Econ 34, 179–201 (2021). https://doi.org/10.1007/s11138-019-00478-5

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Keywords

  • Economic development