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Adam Smith's theory of absolute advantage and the use of doxography in the history of economics
Adam Smith's theory of absolute advantage and the use of doxography in the history of economics
Reinhard Schumacher2012, Erasmus
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Hla Myint interpreted Adam Smith's "two distinct benefits" from foreign trade as a vent-for-surplus gain and a productivity gain. This classification has been adopted widely, but the vent-for-surplus gain has caused some debates. In this article, I show that Myint's categorization is based on a misinterpretation. Smith's two distinct benefits consist of exports and imports. Additionally, Smith does not expound a vent-for-surplus theory. Besides Smith's true benefits from trade, I discuss reasons for their modern misinterpretation and David Ricardo's and John Stuart Mill's criticism of Smith's theory, which is often misunderstood as well.
Smith held a low opinion of casuistry as a moral system because of its false precision and potential to corrupt our sense of duty. Yet Smith endorsed the basic premise of casuistical reasoning in relation to state administration – that the application of principles would need to take into account the circumstances of a given case, especially when principles conflicted. This paper recovers the casuistical character of Smith's exceptions to a policy of free trade, which he justified with reference to the statesman's higher duties of providing security and justice. The exercise has two key effects. The first is to direct attention to the manner in which Smith first isolated wealth as an analytical category distinct from strength, a precondition for his reintegration of strength and wealth as superior and inferior goals of statesmanship. This was a major disruption to existing argumentative conventions, one that reveals the dangers of accepting Smith's construction of a 'mercantile system' on his terms. The second effect is to highlight the implications of the disappearance of the statesman as an integrating site of reasoning with respect to multiple discourses of state administration. In short, the phrase 'free trade' is likely to mislead in relation to Smith.
Adam Smith is commonly referred to as one of the first who thought of foreign trade in terms of an international division of labour, whereby each country specialises in the production of certain goods. It is argued that he made a strong case for foreign trade on this basis. In this article, I will, in contrast, show that Smith does not understand foreign trade as an international division of labour. Economic progress rather than international trade determines domestic production structures. Apart from domestic development, international trade patterns are affected by transport costs and geographical factors, as well as producer and consumer preferences. In Smith’s theory, countries will not specialise, but rather produce similar goods. The division of labour plays a role in Smith’s theory of foreign trade, but in a mechanical, not territorial, sense.
The European Journal of the History of Economic Thought
Adam Smith and the “Rich Country–Poor Country” Debate: Eighteenth-Century Views on Economic Progress and International Trade2016 •
Despite his emphasis on economic development, Adam Smith did not participate in the contemporary “rich country–poor country” debate. Some see the absenteeism as a deficiency, while others assume that Smith propounds a theory of uneven development and agrees with the divergence argument. In this article, Smith's own theory is expounded and related to the contentious points of the “rich country–poor country” debate. It is concluded that Smith's theory does not fit easily into the categories of this debate. He rather takes up a third position, being neither a proponent of pure convergence nor of pure divergence.
Economics Bulletin
On the Smithian Origins of "New" Trade and Growth Theories2002 •
Adam Smith is generally ignored as a trade theorist in textbooks and surveys because of the common belief that he only confirmed the rule of absolute advantages to explain structure of foreign trade. On the other hand, many textbooks and surveys on growth theories simply overlook Smith's significant contributions to growth theory. However, his vent-for-surplus approach may be interpreted as a pioneering study which stresses the importance of economies-of-scale in explaining the structure of trade. Furthermore, in Smith (1776), both learning by doing and economies-of-scale are crucial to explain long-run growth. This short paper addresses to the undeniable influence of Smith's concepts such as "extent of the market", "division of labor", "improved dexterity in every particular workman" and "simple inventions coming from workman" on both recent trade and growth models. The note mainly is based on a schematic outline of Smith's ideas on the nature and causes of the wealth of nations.
Research in the History of Economic Thought and Methodology
Steuart, Smith, and the 'System of Commerce'2020 •
Though contemporaries, Adam Smith and Sir James Steuart are commonly portrayed as if they belonged to different eras. Whereas Smith went down in history as both founder of the science of political economy and patron saint of economic liberalism, Steuart became known as the last, outdated advocate for mercantilist policies in Britain. Smith himself was responsible for popularizing the notion of the “system of commerce” as an approach to political economy that dominated the early modern period. As a historiographical concept, the mercantile system became a misguided international trade theory grounded upon the Midas fallacy and the favorable balance of trade doctrine. Smith’s treatment of international trade in the Wealth of Nations, however, was criticized for its inconsistencies and lack of analytical clarity even by some among his own followers. Given Smith’s doubtful credentials as an international trade theorist, the chapter investigates the reasons that led him and Steuart to be placed on opposite sides of the mercantilist divide. The authors analyze the works of both authors in depth, showing that their disagreements had chiefly to do with different views on money and monetary policy. Additionally, the authors explore how early nineteenth-century writers such as Jean-Baptiste Say and J. R. McCulloch helped forge the intellectual profiles of both Steuart and Smith.
This essay explores how the defense of global commerce pioneered in the Enlightenment was tied to the improvement of the natural order. Two rival ecologies, one made by natural historians and the other developed by Adam Smith and his liberal successors, vied for intellectual precedence as well as for practical application in the metropole and the colonies. Together they constitute the beginnings of an ongoing quarrel over the environmental foundation of capitalism.
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