Most men and events tend to fade away over time. As such, it is gratifying to discover that even after 300 years, my name still looks relevant to the point that there is an institution named after me and it has organized an essay contest on what I would write now. I am therefore delighted to submit this essay in support of it.
I have to say I feel very honoured by this well-thought event. This topic really strikes at the heart of my lifetime endeavour which maybe characterized as a passionate attempt made by a “man of letters” to tell his fellow citizens of the world and the posterity an alternative “intellectual structure” to theorize the world as he saw it which was very different from the old mercantilist semi-feudal order which saw the world as largely a zero-sum game . But I think such world-view was misguided and my perspective would represent a much smarter way of looking at the world.
Much in the world has changed and I feel gratified that my ideas seemed to have contributed to that. But now is not the time for complacency. Yes, the wealth that has been created by free markets has been phenomenal, but the proportion that has been used to lift the poor “out of poverty” was much smaller than I would have thought. I am not the apologist for the kind of capitalist system most have in mind which looks quite a misguided conception. I see myself as a moral philosopher first and foremost and I see the Wealth of Nations as really a sequel to The Theory of Moral Sentiments and they should be read together as they really represent two dialectic sides of man which is at once a self-interest oriented specie but at the same time, also a social creature capable of virtue. Society, therefore, is about making the most out of these two forces, but it appears that so far the world has focused mainly on just part of the first side and the subtlety and sophistication underpinning the free market capitalist society seemed to have been neglected.
There are many things I would like to write about now to facilitate the posterity grasping the essence of my thoughts and more importantly, to enrich them to drive the attainment of what I see as entirely possible: that the “invisible hand” and “impartial spectator” in combination of “self-love” and “sympathy” converting “the private interests and passions of men” into a better world for all.
And such world could have “all ranks in society” reaching the “highest degree of opulence” but still exhibiting “virtues”, with elements of “prudence” to moderate the individuals’ excesses; elements of “justice” to prevent us harming others; and elements of “beneficence” to promote the happiness of others. And such society may well not be obsessed with merely the chasing of material wealth or symbols of material wealth. Rather, they may pursue all the three components of “Happiness” as conceived by me in the Theory of Moral Sentiments: “material provision, social engagement, and the tranquillity that comes from acting virtuously”.
Such society may not be really that much inferior to what Plato has conceived but is more attainable and would not require any great leader or designer — what it requires could be “little else” but “peace, easy taxes and a tolerable administration of justice… “ This is why I have called it the “system of natural liberty” and I think the awakening to such possibility constitutes my greatest discovery.
This sounds too good to be true to many, I know. But I have done my best to verify such perspective from all the facts I could gather and discussions with all the people I have met at Kirkcaldy, Glasgow, Paris, London, Edinburgh etc. and all these have reinforced my conviction, which was further substantiated by the three following cases: the United States; the John Whitgift Foundation in the UK (quietly and beneficently helping the Croydon Community for 427 years); and Hong Kong.
In retrospect, my fellow Scotsman John Cowperthwaite (Financial Secretary of HK during 1961-1971) has tried a great political economy experiment which seemed to have based considerably on my “intellectual structure”. Most importantly, if Cowperthwaite’s experiment has worked in Hong Kong, maybe this could work in many other parts of the world too.
These are among the reasons for hope and I wish they can be understood by more men of actions who can help to turn more I have theorized into reality in the years to come. This constitutes the most important thing I want to write now.
Other than this, I would like to write briefly on the following inter-related subjects which are derived from the above but taking together, they could possibly bring out the fuller implications of my “intellectual structure”.
On Economics
I think Economics should not be a discipline about glorifying the market as perfect and omnipotent; my idea was just that it is an amazing force that deserves to be recognized and utilised. My view on political economy remains unchanged and that it can be considered “ a branch of the science of a statesman” and that “it proposes to enrich both the people and the sovereign.” I think it is worthwhile for Economics to consider going back to its roots.
On Money and Government
Another economic vocabulary which has become much more important now is money, especially fiat money. I think herein lies one of Keynes’ greatest contribution to economics and I think the conception of him as the champion of Government intervention may have over-simplified.
I think Leijonhufvud’s ’ Keynesian Economics and the Economics of Keynes” is insightful and I tend to think that Keynes saw the inter-war period as a special situation which required special ways to handle but this doesn’t mean that he has abandoned the free market. Indeed, the Bretton Wood system would suggest that Keynes did believe in the importance of free trade; and his point could be just that for the more complex modern economies, we may need the visible hands to play more active roles from time to time.
On University
I think when Plato founded the Academy, his idea was about nurturing just society. I therefore find it regrettable that modern universities are becoming like vocational institutes and that nowadays philosophy has become quite a marginalized faculty.
Keynes has once remarked that “the world is ruled by little else” other than “ideas.” I think the US was founded on the great ideas and great courage of its Founding Fathers, whose conceptions about the US society, with individuals being endowed with “unalienable rights” and being free to the “pursuit of Happiness” in their own ways seemed to fit well into what my intellectual structure would prescribe. I therefore feel sad to see that its 35th President was in office for only 1036 days. For the following words from Kennedy really strikes to my heart: ..” Let us think of education as the means of developing our greatest abilities, because in each of us there is a private hope or dream which, fulfilled, can be translated into benefit for everyone..”
On the free market
I am delighted to see the enrichment of the concept since my time and I have read with delight Hayek’s Use of Knowledge in Society and I see insights in Alchian’s remark that “what price determines is more important than what determines price”. I am also delighted that Economists have finally recognized that many of the alleged “market failures” are really caused by market forces not being allowed to play out. Coase’s remarks that “clear delimitation of right is an essential prelude to market transactions” and what are transacted in the market are really” bundles of rights” rather than goods are illuminating; so is Cheung’s idea of a “New Institutional Economics”.
On the Firm and Modern Enterprises
And this brings us to the nature of the firm as an economic institution characterized by visible hands and as such, modern enterprises and governments could well be seen as different types of firms, as Coase would suggest. And I think one main insight of Coase is that the free market can self-create the firms to complement it. As such, the more important question to ask is whether the market and the firm can form into a virtuous cycle so that we can have the firms to complement the market and the market to discipline the development of all kinds of firms. This is among the areas which deserves more creative thoughts and I wish the university could contribute more.
On the Science of Men
This also brings us to the important ideas to pursue. I think one of the most important subject to study is the Science of Men. That there can be such a subject; that it can be a holistic discipline like the This-Worldly dimension of Moral Philosophy; that meticulous and all-encompassing empirical observations and audacious theorization about the real world could possibly help to bring us to a better world. That, perhaps, also lies one of the most important contribution to humanities from the Scottish Enlightenment, of which I am a part.
References
Alchian A.A. Uncertainty, Evolution, and Economic Theory (1950)
Alchian A.A. Some Economics of Property Rights (1965)
Alchian A.A. and H. Demsetz , The Property Right Paradigm (1973)
Butler E. , Condensed Wealth of Nations (2011)
Cheung SNS, A Theory of Price Control (1974)
Cheung SNS, The Myth of Social Cost (1978)
Cheung SNS, The Contractual Nature of the Firm (1983)
Cheung SNS, On the New Institutional Economics (1990)
Cheung SNS, The transaction costs paradigm (1998)
Coase R.H. , The Nature of the Firm (1937)
Coase R.H, The Federal Communication Commission (1959)
Coase R.H., The Problem of Social Cost (1960)
Hayek F.A,, The Road to Serfdom (1944)
Hayek F.A, Use of Knowledge in Society (1945)
Hayek F.A, Law, Legislation and Liberty (1960)
Hayek F.A., The Fatal Conceit (1988)
Hetzel R. , The Contribution of Adam Smith to the Enlightenment and Their Relevance for Today (2023)
Keynes J.M., A Treatise on Money (1930)
Keynes J.M., The General Theory of Employment, Interest and Money (1936)
Leijonhufvud A., Keynesian Economics and the Economics of Keynes: A Study in Monetary Theory (1968)
Mitchell W.C., Adam Smith’s Revolution
Rosten L. A modest man named Smith (1970)
Smith Adam, The Theory of Moral Sentiments (1759)
Smith Adam, An inquiry into the Nature and Causes of the Wealth of Nations (1776)
Smith Adam, Lectures on Jurisprudence (1763)
Smith Adam, The History of Astronomy (1795)
