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Is Adam Smith the Father of Economics and Free-Market Capitalism? [Reason Podcast]

Gene Epstein of Barron's and FreedomFest's Mark Skousen debated Smith's legacy at a raucous Soho Forum debate.

On June 13 at New York's Subculture Theater, The Soho Forum staged a debate over the resolution: "Adam Smith should be honored as the founder of modern economics and free-enterprise capitalism."

FreedomFest impresario and economist Mark Skousen argued for the affirmative while Barron's books editor and Soho Forum co-founder Gene Epstein argued the negative. Naomi Brockwell moderated. The monthly Soho Forum runs Oxford-style debates, which means attendees are polled before and after the event and the winner is the debater who moves the most people in his or her direction. After an hour of racous back and forth, Epstein emerged as the winner. Reason is proud to co-sponsor the Soho Forum and to offer its debates as a podcast. To watch debates, go to Soho Forum's YouTube channel.

The next Soho Forum debate takes place on July 11 and features Choice Media's Bob Bowdon and Columbia University's Samuel Abrams debating school choice. Go here to buy tickets and get information about upcoming events.

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This is a rush transcript—check all quotes against the audio for accuracy.

Naomi Brockwell: Welcome to the Soho Forum, a monthly debate series that features topics of special interest to libertarians and aims to enhance social and professional ties within New York City's libertarian community. We are in partnership with Reason for this and if you would like to catch more of their podcasts, please go to Reason's podcast page on iTunes or you can also catch it on the Soho Forum's podcast page on iTunes. Tonight's resolution is that Adam Smith should be honored as the founder of modern economics and free enterprise capitalism.

Defending the resolution, we have economist Mark Skousen, author of the Making of Modern Economics: The Lives and Ideas of the Great Thinkers. Mark will be doing signing and sales of his book after the debate and arguing for the negative we have Gene Epstein, Baron's economics and books editor and director of the Soho Forum.

Now Mark, you will have 12 minutes to defend the proposition that Adam Smith should be honored as the founder of modern economics and free enterprise capitalism.

Mark Skousen: Thank you. I'm sorry I cannot see the whites of your eyes. It would be helpful to see my audience. Let me start by telling you a story. In February 1793, the British Empire was in crisis. Over the past 10 years, the United Kingdom, the greatest military power in the world had lost its most valued colonies to a makeshift army of American ruffians and was near bankruptcy. Lord North, the Prime Minister, was forced to resign. Now, closer to her own home, King George III witnessed the shock of his life, the beheading of the Sovereign French king, Louis XVI and his queen only a week earlier in January 1793, and then the new French National Assembly declared war on England.

Was the decline and fall of the British Empire not far behind and was King George's life in mortal danger? What actions should the monarch and the parliament take to avoid the terrible calamity that had turned France into a bloody revolution and uprooted the very foundation of French society. Luckily Lord North had been replaced by a very young but dependable Prime Minister, the Lord of the Treasury William Pitt, the younger. Like many of the King's ministers, Pitt was familiar with the sensible policies and majors that would be needed to preserve a stable and prosperous commonwealth in the face of potential rebellion by the common citizens as it happened in France. For he was a student the new political economy, the new doctrine of economic liberalism. The laissez faire of the French physiocrats, the system of natural liberty advocated by a Scottish professor of moral philosophy who had gained immortality with the publication of a big, fat book with the lengthy title An Inquiry Into the Nature and Causes of the Wealth of Nations, published in 1776, the very same year as the American Declaration of Independence, in two volumes by the prestigious publisher Strahan and Cadell.

Was it not William Pitt the younger who declared in parliament in 1792 that the Wealth of Nations furnish the "best solution to every question connected with the history of commerce or with the system of political economy." EG West, Adam Smith's premier scholar wrote "Pitt's commercial policy from 1784 to 1794 was explicitly based on Smithean principles. The commercial treaty with Paris, with France the reduction of debt, customs reform, and resolute retrenchment in public expenditure, all of which occurred within a few years of 1776 were all clearly connected with this great book that was published in that same year.

Three years before his death, Adam Smith made his last visit to London where he was invited to dinner hosted by Pitt and others. Smith was the last guest to arrive and upon entering the room, the whole company rose from their seats to receive him. When Smith requested "Be seated gentlemen", Pitt replied "No sir. We will stand till you are first seated for we are your students." I'd like to have students like that. Wisely during the 19th century, Britain advanced much of the Smithean system of natural liberty and England became the workshop of the industrial world with its policies of sound money, low tariffs, and the rule of law. Using the policies advocated by Smith, Pitt reduced the national debt, not by runaway inflation, which the French did fatally. But by raising taxes. Yes, raising taxes. Consequently, the King of England kept his head and lived until 1820 at the ripe age of 81. Pitt kept his position as Prime Minister into the 19th Century and England became the wealthiest country in the world.

20 years after Smith's death in 1790, Alexander Von Demirret, a German student wrote to a friend, "Next to Napoleon, Adam Smith is the mightiest monarch in Europe." Now what was this grand thesis to encompass 18th and 19th century Europe? Professor Jerry Mueller of the Catholic University of America and another distinguished scholar of Adam Smith said, "The Wealth of Nations is the most important book ever written summarizing capitalism and its moral ramifications." The most important argument of Wealth of Nations is that a market economy is best able to improve the standard of living of the vast majority of the populous. It can lead to what Smith called universal opulence. Smith valued commercial society, not only because it made men wealthier but for the character it fostered. He valued the market because it promoted the development of cooperative modes of behavior, made men more gentle and more responsible to the needs of others. The Wealth of Nations, like Smith's theory of moral sentiments was intended to make men better not just better off or to quote EG West, "To be humane and not just human."

So there is a reason why chapter one of my book, The Making of Modern Economics is called It All Started with Adam. Adam's magnum opus is a declaration of economic independence, the intellectual shot heard around the world. It almost has universal claim among economists, historians, and political thinkers that this philosopher of the Scottish Enlightenment was a genius who wrote the first masterly treatise on a subject that dominates every waking hour of practically ever human being, making a living bettering one condition as an individual and as a nation.

Adam Smith was a revolutionary. His doctrine revolutionized European society as surely as Marx in a later epic. He was on the economic side as a philosopher of the capitalist revolution. As John Locke was his philosopher on the political side and Newton was the natural philosopher on the physical sciences. Leaders of the Austrian School agree. Ludwig Von Mises said it's publication in 1776, "marks the dawn of freedom both political and economic. It paves the way for unprecedented achievements of laissez faire. There can hardly be found another book that can initiate a man better into the study of the history of modern ideas and prosperity created by industrialization." Mises' younger colleague, Friedrich Hayek said, "Smith is the greatest of them all. He helped to create a great society." Members of the Chicago School concur. I have quotes from George Stigler, from Milton Freedman, and HL Mencken who is a favorite among libertarians said, "There is no more engrossing book in the English language. Historian Arnold Toynbee said, "The Wealth of Nations and the steam engine destroyed the old world and built a new one."

So the public has recognized its unique contribution. The Wealth of Nations sold out within six months as a best seller. It is quoted that "It is reasonable to say that the Wealth of Nations is the most translated economic book in history." I have a whole book on translations. It is also one of only two books I'm aware of in economics that has a complete concordance, the other unfortunately being the general theory, both by a free market economist, Fred Glahe. The word a is used 6,691 times. Invisible hand only once, located by the way in the exact center of the book suggesting not a marginal principle but a central concept, the invisible hand. And it's also the only book I know of that is made into a Bantam paperback for beach reading. I have it right over there next to the bust of Ben Franklin, next to the bust of Adam Smith.

The first edition of the Wealth of Nations sells today for over $200,000 in good condition. That's good news to me. I have a first edition. I paid $25,000 for it in the last 1980s. I would have brought it tonight but it is on loan at the Panmure House, Smith's home in Edinburgh.

For those who think there were predecessors who deserved greater recognition as I'm sure my able opponent is suggesting, JB Say said at the time, "When we read this work, The Wealth of Nations, we feel that previous to Smith there was no such thing as political economy." That's why I have in the Index of my chapter one entitled The Pre Adamites.

So why was Adam Smith's book so influential? I have five major reasons. One, he boosted the free trade movement like no other and won the first round of socialist calculation debate against the mercantilist based on what James Buchanan has noted. Number two, he offered a blueprint for a stable, moral, and prosperous society. Number three, he made the case for laissez faire limited government. Number four he developed a system to reduce poverty and inequality. Number five, he made political economy, now called economics, a legitimate social science.

Let me just mention for those Randians who are among the audience, I will tell you one final story because we're running out of time. One of the major political debates during the 17th and 18th Century was "without an all powerful state, who or what would maintain the social order." Thomas Hobbes in his influential leviathan claimed that life was so nasty, brutish, and short that citizens should sacrifice their freedoms to an absolutely all powerful state. Montesquieu told the story of the troglodytes, an imaginary race of primitive individualists who looked after their own interests exclusively and descended into civil war. In his historic context, Smith's Wealth of Nations created a new doctrine. He argued that under his system of natural liberty, the commercial society was not destructive or unstable but was constructive in creating a stable, moral and peaceful social order.

Benjamin was the chief archetype of this person who used commercial interests for his interests. Individuals would place restraint on themselves with the cultural impartial spectator. They would be led by an invisible hand so that by pursuing their own interests they would frequently promote that of society. Thank you.

Brockwell: And now we have Gene Epstein who will be presenting his case for the negative. Gene, you'll have 12 minutes.

Gene Epstein: Thank you. Mark Skousen is a guy I love and admire and for that very reason, I won't hesitate to subject Mark's extreme views to the harsh criticism they richly deserve. Mark would have us engage in two kinds of covers ups. First, he proposes a cover up of history. By asking us to honor Adam Smith as the only intellectual founder of free market capitalism, he would have us cover up the fact that Smith was preceded by free market thinkers in France who even had some key insights that went well beyond the insights of Smith. By honoring Smith as the only founder, Mark would dishonor the role played by these pioneering thinkers.

Second, Mark would try to have us cover up key parts of Smith's own writings. Smith's book The Wealth of Nations includes a whole range of sustained arguments that were anti free market and even pro socialist, ignoring these arguments by Smith is not only dishonest, it's dangerous. The more we elevate Smith to the status of the founder of free enterprise the greater the danger that enemies of the free market will strike back by citing Smith against us. This anticapitalist gotcha gang that has cited Smith against us, already includes the left wing critic Noam Chomsky, theologian and progressive writer Harvey Cox, Nobel laureate economist Marcus Send, and even an Occupy Wall Streeter who ran from a copy of The Wealth of Nations while arguing with free marketeer Peter Schiff.

So this backlash has already been happening. Mark wants to hope that progressives don't do a lot of reading but unfortunately some of them do and by supporting Mark's resolution, will only help make the backlash more likely and potentially more damaging. But honesty also requires us to engage in a bit of nuance this evening about Adam Smith. Here is my alternative resolution.

Despite the fact that some of Adam Smith's key writings were an embarrassing indictment of free enterprise capitalism, Smith should still be honored as one of a number of intellectual founders of free enterprise capitalism. I'm not here to run a horse race between who gets the greater recognition or who gets the lesser recognition. I'm only arguing for nuance. Smith is one of a number of intellectual founders not the only one. I would defend that proposition because I do think the great stuff in Smith's work is great enough to offset the scandal of Smith's surprising indictments of the free market. Mark covered some of those great things and I do agree that in most of those cases, no one said it better than the guy from Glasgow. If you ask how it's possible for Smith to be both pro and anti free market in the same book, all I can say is that anyone who has read Smith carefully will find that ambivalence and consistency seem to be his middle names. But if you agree with my new nuance resolution, you have to vote against Mark's. Smith is not the founder but one of a number of founders.

One of those founders includes a Parisian originally from Ireland named Richard Cantillon whose book length essay on the nature of commerce in general was published in 1755, 21 years before the publication of The Wealth of Nations. Mark might tell you that I'm being unfair by saying he is covering up Cantillon's role because in Mark's book, The Making of Modern Economics: The Lives and Ideas of the Great Thinkers, Mark does devote a couple of paragraphs to Cantillon. Mark even writes that Cantillon is "regarded by Murray Rothbard and other economic historians as the true father of modern economics." Mark's disclosure is true as far as it goes but it falls far short of full disclosure. Mark has quoted a number of people who think Smith was a major figure and for the moment, I won't quibble with all the nuances in those judgements but Mark neglected to quote two great economist that he himself celebrates in his own book who made similar claims for Richard Cantillon.

Among those greats, Mark names the 19th Century economist Walt William Stanley Jevons but he doesn't tell you that Jevons called Cantillon's book the first treatise in economics. Another great thinker Mark names and even quotes this evening about Adam Smith is Nobel laureate Austrian economist Friedrich Hayek. But Mark doesn't tell you that in a forward to a German edition of Cantillon's book, Hayek called Cantillon the first person who succeeded in penetrating and presenting to us almost the entire field, which we call economics. In other words, two of Mark's own great economists are calling him from the grave and telling him that Cantillon should also be included as one of the intellectual founders of free enterprise capitalism.

We also know that Adam Smith read Cantillon since Cantillon is specifically cited in The Wealth of Nations, yet in certain key respects Smith did not pay adequate attention to what Cantillon had to teach him. Mark writes in his book "Adam Smith advocated maximum economic freedom in the micro economic behavior of individuals in the firm." But this is simply not true in at least one vital respect. Anyone who advocates maximum economic freedom can never advocate government imposed price controls. Smith wanted government control of the most important price of all, the price of credit. Smith specifically proposed a government imposed 5% cap on all loans. In other words, he advocated usury laws but in his own book, Cantillon specifically attacked and even mocked the usury laws.

First take Smith. His support of usury laws isn't just some brief reference in The Wealth of Nations. He considers the issue quite carefully. He writes, "If the legal rate of interest in Great Britain was fixed so high at 8% or 10%, the greater part of the money which was to be lent, would be lent to prodigals and projectors who alone would be willing to give this high interest. Sober people would not venture into the competition." By projectors, Smith means speculators. To protect these sober people, Smith endorses the present legal rate in Britain of 5%.

Imagine we're arguing with Senator Elizabeth Warren, who would make high interest lending illegal. All she would need to cite is The Wealth of Nations to prove that her own high priest also believed that such practices should be outlawed. Mark presumably wants to hope that no one notices this section in Smith but in this case, that turns out to be a vain hope. For exactly this sort of thing that Mark's extreme views invite, try an article in the New York Review of Books by the left wing left leaning Nobel laureate economist Amartya Sen. Sen sets things up by venerating Smith, then he goes in for the kill by informing us of one of the great man's misgivings about unfettered capitalism. Sen provingly right discussing laws against usury, Adam Smith wanted state regulation to protect citizens from the prodigals and projectors who promoted unsound loans.

For a breath of fresh air, try reading Cantillon on usury laws. Cantillon wrote, "Nothing is more entertaining than the multitude of laws and rules made in every century on the subject of interest of money. Always unnecessarily by sages who barely understand the facts of commerce." Cantillon addresses this amazingly clueless idea that if you allow an interest rate of 8 to 10%, sober people would not be able to borrow, as he explains. "Interest is always highest in proportion to the greater risk." I'm quoting him. It diminishes from class to class up to that of rich merchants who are known to be credit worthy. The interest stipulated for this class is called a current rate of interest and it differs little from the interest rate charged on land mortgages, since mortgages of course demand low interest rates because they have property as collateral.

Cantillon linked borrowing at high rates of interest to the profitable activities of entrepreneurs and he went on to approvingly cite an interest rate as high as 30% that some entrepreneurs can profitably borrow at. Wouldn't it be great to able to tell Elizabeth Warren and Amartya Sen that accordingly to another intellectual founder of free market capitalism, Adam Smith was one of those "sages" who barely understood the "facts of commerce" when it comes to usury laws. But if you vote for the resolution Mark is defending that option is not open to you.

When it comes to an understanding of the vital role of entrepreneurship, a cornerstone of free enterprise theory, Mark admits that compared to Cantillon's book, this he writes in his own book, entrepreneurship is downplayed in The Wealth of Nations but that's an understatement. Cantillon used the word entrepreneur more than 100 times. Smith never uses the word entrepreneur but briefly refers to undertakers and was relatively tone deaf to risk taking.

Smith anti-capitalism gets even worse. Smith attacked landlords. In New York City, everyone hates landlords and all they do is cite Adam Smith to justify that hatred. Smith even spoke about capitalists and landowners deducting from the produce of labor. Deducting from the produce of labor and hence exploiting labor in this zero sum game. You'll find nothing of this Cantillon who explains how entrepreneurs add value to the incomes and labors but coordinating and improving the allocation of the labor. That still doesn't exhaust Smith's indictment of the free market but I'm running out of time.

Mark's absurd position on Smith can be likened to someone defending this resolution, John Adams should be honored as the founding father of the American Republic instead of one of the founding fathers. I cite Adams because a major blight on Adam's record as president is suppressing free speech and as I mentioned, Smith had many such blights, almost to the point of having Benedict Arnold tendencies with respect to the free market. But I do insist on my resolution. Adam Smith should be honored as one of a number of intellectual founders of free enterprise capitalism. Among those others, I would include Richard Cantillon and Jacque Cordot who came before Smith and a man who came after him, the 19th Century French thinkers JB Say and Frederick Bastiat and the 20th Century Austrians, Ludwig von Mises and Friedrich Hayek. If you agree with my resolution, you have to vote against Mark's. Thanks very much.

Brockwell: Mark, you now have five minutes of affirmative rebuttal.

Skousen: First of all, Gene, these aren't my extreme views. I simply quoted from numerous, very well known experts and I've noticed that one of the things they emphasize, these experts, is to avoid the casual reading and the often misinterpretations that Adam Smith has. There is no doubt that Adam Smith's Wealth of Nations that is over 1000 pages, has heavily criticized over the years by socialist, Marxists, and a few free market economists who are usually more considered on the fringe in a lot of ways. So it looks like you've moved over in that direction. I don't know. But I will say one thing, I really dislike, I bristle every time Gene and others use the term left wing or even right wing. This is a smear tactic. It's inappropriate in dialogue. We believe in civil discourse and not labeling. We need to avoid labels as much as possible. Freedom fast. I encourage everyone to not use these terms. If we truly believe in individualism, then we should treat people as individuals. Once you label someone, thinking stops and the accusations begin. So it's not something that you will find me doing.

Gene makes some valid points. I am not here to support usury laws that Smith advocated. No question about that. But it is interesting that while Smith advocated usury laws on moral grounds, basically minimizing the effect of sub prime loans, he was making a moral argument, his views did not carry the day. If we're talking about influence, if we're talking about a founder of a science, then you have to talk about influence. Cantillon is not a book that can you have a Bantam paperback. In fact, the only place you can find it, you will not find it in any of the bookstores. You have to find it at the Mises Institute that has published it. Of course you can read it and they padded it to make it look like a thick book of 250 pages but in fact, it's only about 150 pages because they have so many blank spaces between each chapter to make it seem thicker than it is. It is not a fat book. It takes fat books to influence the world, with the one exception of the New Testament.

If Gene Esptein's criticisms of Smith are so overwhelming and believe me, he is using a parenthetical approach to reading about Adam Smith and others I presume, why would Ronald Coates, the great Nobel Prize economist who is familiar with all the arguments against Smith, stated unequivocally at the Mount Pelerin Society meetings in 1976, "Adam Smith was a great economist perhaps the greatest that has ever been. Going back to the usury laws. While he advocated usury laws, nobody cared. In fact, usury laws were abolished in the UK in 1854 but the free trade movement was dramatic and if you look at the charts and I wanted a PowerPoint here to show you these things but I've got a chart here that shows you the dramatic decline in tariffs not only in the UK but in the United States. And who is the father of the free trade movement. It is none other than Adam Smith and he is the father of the free trade movement.

So there are some other things. Yes, he did not use the word entrepreneur. You can't find that in the concordance. I'm glad you mentioned undertaker because that was unfortunately the word he used to translate it. But I suppose I disagree the most with Rothbard. By the way, all of these arguments that is just spouting Rothbard and Rothbard is an important person to give the counter position. Adam Smith originated nothing that was true and whatever he originated was wrong. This is just plain wrong headed as I've sought to demonstrate. It is introduction to the 1967 Modern Library edition of The Wealth of Nation. Max Lerner said there is nothing in it that might not have been found elsewhere but what counts is the work as a whole. It is more of a book. It is the summery of a new European consciousness.

Epstein: My good friend Mark wants intellectual history to become solely a popularity contest. Who sold the most, who wrote the thickest book, you can indeed read Cantillon on Kindle, lots of us own Kindles and indeed I would actually grant that popularity is a factor if you're talking about influence indeed. But surely, popularity in terms of intellectual history is not the only factor. Cantillon was not obscure. Tougot was not obscure. They were both read by David Hume. They were both read by Adam Smith. Excellent contributions, pioneering work, recognizing those champions of the free market. That's what we are also all about, whoever we are. Progressives, libertarians, or what have you. So the popularity contest that Adam Smith might win, would also mean I guess that if Mark writes an update of his book then the manure spreaders, Paul Krugman and Joseph Stigler will get the most prominent display. We go for excellence and also contributions, not just popularity.

Mark said, nobody cared about Adam Smith's championing of the usury laws. Well this is a copy of an article in the intellectual weekly, The New York Review of Books by Amartya Sen, Nobel laureate economist, he cared. He wrote approvingly about this as I stated in my introduction. In addition, Mark belittles the length of Cantillon's book. Well he might do so but in addition if he wants to belittle of Cantillon's book then he might also bear in mind ... oh thank you. Thank you. That was another note. You might also bear in mind, the full statement that Friedrich Hayek wrote about Cantillon's book. This gifted, independent observer enjoying an unsurpassed vantage point in the midst of the action, coordinated what he saw in the eyes of a born theoretician and was the first person who succeeded in penetrating and presenting to us almost the entire field, which we now call economics. That was indeed done in the space of about 185 pages.

Whether we call these people left wingers or progressives, my point to Mark is that they read them. Harvey Cox wrote a recent book called The Market Is God. He's got two chapters on Adam Smith. They are gotcha chapters. He quotes Adam Smith as "disapproving of the free market." Chomsky did it. Others may do it. So of course if you have any dignity and honesty, you'll recognize the flaws in Adam Smith and recognize as well, that he was in a very, very clear sense anti free market. He even wrote certain things about exploitation of land owners and capitalists that gave aid and comfort at the time to David Ricardo who quoted him and who in turn inspired Karl Marx. All of these things are a blot on Adam Smith's record but again, I insist on the nuance.

I insist on recognizing that Adam Smith should be honored as one of a number of intellectual founders of free enterprise capitalism. If Mark and other well meaning people who keep putting Adam Smith in the pantheon as the alpha and omega, if they keep doing that, they are leaving with their chins. There will be more Amartya Sen's. More Noam Chomsky's. More progressives as I think Mark prefers me to call them. Calling us out and embarrassing us on the fact that Adam Smith oddly enough was ambivalent, contradictory, inconsistent on free market capitalism and wrote many, many things that give aid and comfort to enemies of the free market.

So again, nuance is the theme of the evening. Yes, he was great. There are many great things in him. I don't agree with Murray Rothbard as Mark seems to imagine. Murray Rothbard was a great guy but Murray Rothbard's criticisms of Adam Smith went way overboard. He did not recognize the excellence and the greatness of Adam Smith as I do but unlike Mark I recognize that we will be engaging in cover ups of history and cover ups of Adam Smith's own writings unless we put him in this place as one of a number of founders, not the founder. Thank you.

Brockwell: So now we have some time for you each to ask each other a question. You get two questions each so a total of four questions. Mark would you like to begin? Do you have a question for Gene?

Skousen: So Gene, have you ever read The Wealth of Nations and the Theory of the Moral Sentiments cover to cover every page?

Epstein: Mark, as I believe I wrote you in an email a couple weeks ago many years ago I was a seminar with Robert Heilbroner author of the Worldly Philosophers and those are the two books we had to read cover to cover. I've re read much of those books frequently. So the answer is yes I have. Many years ago and since I've read Adam Smith and admire many things he wrote and in fact, if you check my columns, especially when I write about free trade, I often cite some of the wonderful things Adam Smith wrote about free trade. Mark, let's say you open up a copy of The New York Review of Books about progressive bi weekly, I won't call it left wing, and it's an article by Amartya Sen.

Skousen: Progressives is acceptable as well. I'm a progressive. I'm a liberal.

Epstein: Okay, how would you portray the New York Review of books? Quick question?

Skousen: I wouldn't. I'd treat everyone who writes those articles as individuals. I don't try to color my views before I read them. I want to judge them on their own by what they said.

Epstein: Well if you've read Amartya Sen, you would know that he is a progressive but let that pass.

Skousen: What does that mean? Progressive?

Epstein: Excuse me, Mark. I'm sorry. That was just a preamble to get to the question. The question is only this, Amartya Sen writes that Adam Smith was monumental. He knocked it out of the park but then he writes, Mark Smith called the promoters of excessive risk in search of profits prodigals and projectors, discussing laws against usury Smith wanted state regulation to protect citizens from the prodigals and projectors and unsound loans. He then goes on to say, a great part of the capital of the country would thus be kept out of the hands of those who are most likely to be kept out of the hand out of those out of the hands of those who would destroy it. Sorry for stuttering. Go ahead Mark. My question is what letter to editor might you write in defense of Adam Smith if you read by article by Amartya Sen, in which he approvingly argues for usury laws citing our Adam Smith.

Skousen: Well I've already discussed that. I don't support Adam Smith's argument for usury laws even though it was a moral argument basically trying to keep the people who are struggling to pay a high interest from entering that market, the so called sub prime loan market and so that's the only argument that is used, a moral argument on usury laws and it's not one I accept so why would you even bring that up.

Epstein: Wouldn't you feel more comfortable citing Cantillon on the foolishness of people who propose usury laws? Wouldn't you feel more comfortable citing him?

Skousen: Of course. Milton Freeman. A whole bunch of people.

Epstein: Cantillon who preceded Milton Smith by 21 years. Would you feel more comfortable citing him?

Skousen: So what?

Epstein: Next question Mark.

Skousen: What's the point? I'm not going to justify Adam Smith's parenthetical reference to usury laws. I'm looking at the big picture of Adam Smith and you're not.

Epstein: Read the book. The statement was not in parentheses Mark. It went on for pages.

Skousen: It is. It's parenthetical. It's parenthetical. It's just like if you looked at a beautiful picture, in fact I have one here if I can find it. If you have a picture, here is a picture of Marilyn Monroe all right. Now, if you're Gene Epstein, she's not a beautiful woman. She's not pockmarks and moles. She's got scars.

Epstein: She's one of many beauties like Elizabeth Taylor.

Skousen: This is typical of what he's doing to Adam Smith. If you buy into his argument, it's the same argument. You are not looking at the big picture. You're not looking at a distance. You're getting so close to Adam Smith that all you see is ugliness and that's all you've quoted. You are a big fan of Adam Smith but have you never quoted any of the negatives or any of the positives of Adam Smith, so maybe that's my second question if I may ask. So give me a quote, give me a good, strong libertarian quote that you really like from Adam Smith's Wealth of Nation that you say you have read regularly all the way through, cover to cover, you must have some really good sentences. In fact, here let's make this easy. Here is a copy of the book or here is the Bantam paperback and please draw from there a quote that you really like, very strong liberty, and you would say yes, Adam Smith is a great economist.

Epstein: The problem is when you belong to the Adam Smith Church and you try to explain to somebody like Mark, as I did when I wrote my 880 word column, Mark came down and said all you did was say, you wrote a great book. You should have quoted some of the great stuff in it. Well I only had 800 words to establish my case. I only have 12 minutes to establish my case about the problems with Adam Smith. Mark who belongs to the Adam Smith Church, cannot believe that I admire Smith anyway. I could refer him to my columns. I quote over and over again Mark's Adam Smith's statement about what is prudent in the household, should be prudent for a country, with respect to free trade. Of course the statement about the invisible hand is wonderful. I sent you Mark one of my favorite quotes from The Theory of Moral Sentiment in which Adam Smith specifically spoke about empathy in human beings and you said ah, what a wonderful quote you have from Adam Smith. It's about compassion. We've talked about this Mark. But you are a such a church goer, you can't trust me to admire Adam Smith.

Skousen: You can make up stories all you want Gene. Give me the email. Send me the email.

Epstein: I'll send you the email. Right now I'm going to quote you. What is prudent in the household can be a bad idea for a country.

Skousen: And what was he referring to in that quote?

Epstein: Free trade Mark.

Skousen: No, he wasn't.

Brockwell: There will be a quiz afterwards.

Skousen: He was talking about the national debt.

Epstein: Mark, he talked about the household being able to buy things dear, buy things cheaply and produce what it wants.

Skousen: But not in that context. The context was the national debt.

Brockwell: I should shut this down but I'm quite enjoying this.

Epstein: The invisible hand. It's a wonderful statement. That statement about low taxes and easy laws and all you need is growth, wonderful statements from Adam Smith. He's one of the great guys. He's beautiful like Marilyn Monroe, like Elizabeth Taylor, like Bette Davis, like Michelle Phieffer. One of those guys. But Mark says no. He is the only beautiful guy in the world. Mark, quit the madness.

Skousen: Tell you what. If you really think he's a great economist, I dare you to put on this Adam Smith tie.

Epstein: Before he does this I am going to allow him to ask a second question too.

Skousen: As I have an Adam Smith tie, are you willing to put on that ... don't throw it on the floor. That's disgraceful please. You're not willing to put it on?

Epstein: Mark.

Skousen: Let me put it on for you. I suggested it.

Brockwell: Do you want to go onto your second question?

Epstein: I have a question for Mark. I'm going to read what Adam Smith actually wrote about the usury laws so you can be disabused of the idea that he was only making a moral point. He wrote and this is what Cantillon corrected him on, "If the legal rate of interest in Great Britain, for example, was fixed so high as 8 or 10%, the greater part of the money, which was to be lent would be lent to prodigals and projectors who alone would be willing to give this high rate of interest. Sober people would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands, which were most likely to make a profitable and advantageous use of it and thrown into those which were most likely to waste and destroy it." He's talking about practical consequences and not morality is he not in that statement? Do you want me to read it to you again?

Skousen: It's fine. I agree.

Epstein: You said he was talking only about morality of lending. I'm talking about he's saying practical consequences. If we allowed an 8 to 10% interest rate, then the silver people would not be able to borrow. That's a practical consequence is it not? Do you agree?

Skousen: Sure.

Epstein: Then you said sure so you therefore have to abandon your view that Adam Smith was supporting the usury laws because he thought it was a moral issue. He also thought it was a practical issue. Cantillon showed no you're clueless because obviously the credit worthy people would also be able to borrow. So again, it was a practical issue, hardly a parentheses in Smith. Now you're nodding Mark so it looks like you're coming along to my point of view.

Skousen: It's just a waste of time to even talk about this. It's just immaterial. It's impractical. The usury are not an issue anymore, so why do you keep bringing it ...

Epstein: They are for the New York Review of Books and Amartya Sen.

Skousen: Apparently.

Epstein: Apparently, but you don't care Mark. You don't care.

Skousen: That's right because the rest of the world doesn't care either.

Epstein: The rest of the world doesn't care about the New York Times Review of Books?

Skousen: Why don't you change the whole debate and let's have a debate on usury laws and see how many people show up?

Brockwell: Next season we're going to do a debate on usury laws.

Skousen: I mean seriously.

Epstein: How about the entrepreneur? Do you want to debate that?

Skousen: Gene, I'll give you a quote that everybody in this audience ought to applaud. May I do that?

Brockwell: Sure. Why not?

Skousen: I'm going to stand up for this.

Brockwell: Did you want to borrow the tie?

Skousen: To prohibit a great people from making all that they can of every part of their own produce or of employing their stock in industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of man. Now who said that?

Epstein: Adam Smith and it's one of his great statements Mark, that's why he's one of the greats. One of the ...

Skousen: Is it in Murray Rothbard's book? Is it in one of your quotes in your many columns on the trouble with Adam Smith, a title which I would never write.

Epstein: I'll have to leave that crazy question and answer.

Brockwell: We are going to go to audience questions.

Epstein: I said to Mark, I'll run out the clock if all I do is talk about his greatness. He believed in the exploitation theory did he not? He wrote the capitalist profit was a deduction. That was his word, deduction. Is that true too Mark? Or is that just a parentheses?

Brockwell: If you have a question for these two gentlemen, please line up. We have a microphone set up on the side there. While we are waiting for people to line up, I just wanted to once again thank the Smith Family Foundation. They have of course have been wonderful supporters of this series from the very beginning. Without them it would not be possible so I just want to give them a round of applause. As people are lining up there, we also have a live stream going so if you're watching it in the live stream, feel free to tweet us any questions that you have at the Soho Forum and I'll be going through that and asking our speakers any good questions that you come up with. So if we want to go to the audience, first question.

Audience: Thank you very much. Mark and Gene, it seems like you are two entrepreneurs arguing about profits. Mark you are arguing about gross profits and I think Gene you're arguing about net profits with regards to the damage that Adam Smith does with regards to who takes his arguments and then uses them in a way that does not support the free market. I'm kind of curious Gene, to what extent do you see Cantillon whose works as of a few years ago, not all of his works have been translated into English at that point, that he lays the groundwork for anarchical capitalism?

Epstein: I doubt very much that Cantillon was an anarchical capitalist. An interesting question but I do also want to stress that I'm appealing to the cunning part of you when I talk about the harm that could be done. I'm also appealing to your integrity in the audience. I'm also saying that we have to honor pioneering thinkers like Cantillon. Those who came before Smith who actually had better insights in key ways about entrepreneurship and about commerce. So that's simply a matter of your own integrity.

Second, in terms of approaching Smith with mixed feelings, it doesn't even matter that the left wing progressives, to offend Mark doubly at the moment, the left wing progressives have cited Smith against us. That's a practical consequence that I do think is dangerous but in a way it doesn't matter because if you read Smith in total you can see this is a very inconsistent, very ambivalent thinker who in certain ways laid the groundwork for Marxism. Who again wrote that capitalist profit is a deduction, who was so tone deaf to entrepreneurship as compared to the French that he could only think of capitalist profit as a deduction. So that just in terms of caring of coverups of history and coverups of writing, quite apart from the net profit issue and the harm done by promoting Adam Smith.

Skousen: I'd like to comment on that. I just read Jerry Mueller's book on Adam Smith. He said the distinction between Marx and Smith couldn't be clearer. In Marx's view, capitalism caused the ordinary individual to be poor, dehumanized, and alienated. For Smith, capitalism provided there was freedom, helped him become affluent, humanized, and unalienated. They are just two extremes. Again, like the Bible, you can find anything you want in Smith to support these views but the fact is that the really real scholars in this area, do not have any problem distinguishing between Marx and Smith.

Epstein: Of course there is a difference between Marx and Smith but Smith was a precursor. I remind Mark that Smith also wrote later on about the division of labor in a capitalist society that it makes a worker as stupid as it is possible to become and want in education. So even he talked about alienation. May I finish Mark? I also remind Mark again that Marx quoted Smith and was impressed by Smith's beginnings of an exploitation theory because Smith thought landowners were predators and deducted against labor. Smith propounded a labor theory of value. All of those things are dangerous and again Mark read Ludwig von Mises, you will find no such garbage in Von Misses. You will find it in Smith. To compare Smith to The Bible and say oh you can find all kinds of left wing stuff in Smith, he is responsible for what he wrote. And unlike so many others that I could name like Cantillon and like Mises, they made no such insane statements against capitalism as Smith did.

Skousen: Of course if Mises did indeed say that, he wouldn't have written such a wonderful pro introduction to The Wealth of Nations that he did in 1966 and I quoted just part of that where Mises considered him really one of the greatest economics ever.

Epstein: Just like I do. Just like I do.

Brockwell: So we're going to go into our next question.

Audience: Hi. I have a question about the ideological purity in this room. As a classical liberal myself, I agree with a lot of your implied views on certain economic questions but I was just wondering if you wouldn't consider the left wing noble laureate economists to be part of the field of economics and whether or not Adam Smith founded our particular common branch of economics that we all agree with is relevant to his role in founding economics as an entire field of study.

Epstein: Well, you want to answer that Mark?

Skousen: I didn't understand her question. When she used left wing I stopped thinking.

Epstein: What? I don't know what Mark calls Paul Krugman but ...

Skousen: Paul Krugman came to Freedom Fest and was treated very civilly by our audience and never did we refer to him as a left winger. WE listened to what he had to say and that's what this dialogue is all about. Let me tell you something ladies and gentlemen. You might not remember anything about this debate but listen to this, as long as we continued to use this kind of divisive language that demonizing people, we're never going to make any progress.

Brockwell: I do want to keep on track with the questions though.

Epstein: Sorry, I want to answer the question. Mark told me not to use the phrase left wing but I can use the phrase progressive for people like Stieglitz. Well okay. I can only say that if you actually read Stieglitz and Krugman and so on, you realize that they are very, very pro interventionist. Is that all right with you Mark? Mark just said like the usury laws. The general question on the part of the young lady previously, did Adam Smith contribute to modern economics? Obviously he did make contributions to modern economics. I mentioned a number of other founders of modern economics whom I would also list including to go JB Say, Bastiat, Mises and Hayek all of whom made contributions as well. Amartya Sen does have some interesting things to say. But he is clearly an interventionists and he uses Smith against us to favor the usury laws. That's an easy example. There are many others I could cite from Noam Chomsky and others and from that kid from Wall Street.

Skousen: Again, Amartya Sen has made some great contributions to economics and one of the positive contributions is he demonstrated historically over and over again, that famines were human caused. This is a powerful contribution to economic development theory and for us to simply label this person and simply dismiss him because he is in one particular category, this is a major blunder on our part. We're never going to make any progress unless we have an open mind as we read each columnists, each book, instead of constantly saying oh I need to know where you stand on this and I'm going to label you and therefore once I've labeled you, now I know where you stand. I really don't need to read his stuff.

Brockwell: Gene, going forward. Maybe we'll agree to call them interventionists.

Epstein: So we've agreed. Absolutely.

Skousen: He's not always an interventionist. I use the example of famine where he does not believe in use of government, which he says is causing famines so let's treat everyone, we all say we're individualists but we're really not. We want to label people. We want to put people in groups.

Brockwell: Let's move on from this topic. Get to the next audience question.

Epstein: Hands across the table about being open minded. I read the New York Times Review of Books, New York Times, New York Magazine and the New Yorker all the time. I consider their arguments. I even consider Krugman's arguments Mark.

Brockwell: Next question.

Audience: Especially with misrepresenting your arguments on sort of why we should look at a plurality of people, especially people that are not Adam Smith as people we might look more towards as the founders of modern economics, it does remind me of the common thing people say about American constitutionalism and democracy, the idea that our founding father, Jefferson and Washington and such were so influential and the constitution and the idea of how our way of government should work in practice. Yet, for all their talk of equality between men, many of them owned slaves. I was wondering, would it be fair then to say that they should still be held up in this instance of American constitutionalism as the founding fathers or rather a founding father or should we look to other influences for say American constitutionalism that are more ideologically pure than the ones such as Washington and Jefferson?

Epstein: I'm totally against purity. All of the founders of free market economics that I've listed had flaws. Just like the founding fathers had flaws as well. Indeed, unfortunately, there is no perfect bible. We learn from all these great people and we also have to consider critically everything that we say. We also have to agree with Mark that even Mark and even Stieglitz occasionally have something to teach us however dishonest these people are. All of that is true. All of that is true. I'm only analogizing it. I'm only talking about Mark's absurdly extreme position that Smith is the only one. Absolutely ridiculous. There are many others who came before Smith and who came after him who were better or worse in different ways and I never said that I'm going to rate Smith in relation to Cantillon or in relation to John B Say. He had great things. It's not a horse race. There is greatness to be had from all of them.

Skousen: I do think there is this tendency to engage in revisionist history, which is what we're doing with Adam Smith and to focus on their peccadillo of our traditional heroes. High schools have stopped naming their schools after George Washington and Thomas Jefferson because they owned slaves. They are looking again at that focus and ignoring all the great things. In the case of Murray Rothbard, Washington was a lousy general and only by luck did he win the War of Independence and as revisionist history conceived in liberty, he promoted the notorious Charles Lee as the best general in the army. This is very typical of Rothbard and by the way, Rothbard I shouldn't have been surprised when I commissioned Murray to write this book, that he would come up with this very strong contrarian view. He is very much a contrarian and he did this and conceived in liberty where he kind of flip flops on what we regard as heroes and Washington's a classic example of that and I do think we are seeing more and more of this and this whole debate is an example of it.

Epstein: I've been told I look like Bernie Sanders. No one told me I looked like Murray Rothbard but apparently Mark thinks I do. I'm not here to defend Murray Rothbard's view. Mark is setting up a straw man.

Skousen: I just don't think we would have had this debate without Murray Rothbard's book.

Brockwell: Should we go to the next question?

Audience: Well one of the big issues currently in The New York Times is the "Laffer Curve" concept that if you cut very high taxes, you may increase revenues for a while. Of course when you cut low taxes, you're going to decrease revenues and I'm told this goes back to Adam Smith or Laffer's idea was around long before Art Laffer. I'm told it's in Adam Smith in the chapter on taxation. I just read it this morning trying to find it at least up through the appendices. He clearly understands that if you raise taxes, the base goes down but he doesn't spell out the idea that beyond some point when you continue raising taxes, total revenues are going to start declining. I couldn't find it in that chapter. Is it somewhere in The Wealth of Nations? Is that the wrong chapter?

Skousen: Well George Stielger always said, "It's all in Adam Smith." So there is a huge section on taxation. You have to remember that The Wealth of Nations was not written to business people. It was written to policy makers. That was his primary motives in his arguments on free trade and taxation and so forth and the whole system of natural liberty was a concept. So taxation is very much an issue and some say flat tax is what he proposed. There is quite a bit written about proportionality. Talked about proportionality. There is one section on real estate where he talks about progressive taxation and I notice that the progressives in the true definition of the word, favor progressive taxation and they will quote Smith on this one section on real estate taxes to suggest that. It's probably in there. I'm not familiar with an actual quote about the Laffer Curve example. Of course Kansas is the new topic because Kansas apparently was a failed example of supply side tax cuts and they've had a lot of problems in Kansas as a result.

Brockwell: Gene, do you have anything to comment on that?

Epstein: No. I second Mark's statement fully.

Brockwell: All right. Next question.

Audience: Hi. One thing this whole debate has been about is Adam Smith, the founder or is he one of the founders and I think that it lends credence to your argument but I have a slightly harder question for your side, which is if you could choose one ambassador for economics, let's say you have someone who is willing to read as long of a book as you want but there are only willing to read one book, would you use Adam Smith as an ambassador or would you use someone else? Thank you.

Skousen: Well that's what this debate is about. His is Cantillon and mine is Adam Smith.

Epstein: The answer is neither.

Skousen: Turgot is pretty good.

Epstein: Well thank you for answering for me Mark. I thought you just answered for yourself. I think the spirit of that question is if you had one book to recommend to somebody who wants to read about economics, then which one would you recommend? Unfortunately ...

Skousen: You want to hold this also?

Epstein: I think Mark's book is worth reading but ...

Skousen: But have you read it cover to cover?

Epstein: Read about half of it Mark. I do think that modern day economist, for me really it's what Walter Black said, what is the way in? Oddly enough the way in for me was to read, you know Adam Smith was not the way in for me. Look, I studied Adam Smith with Robert Heilberger who was a interventionist just to conform to Mark's statement. He loved Adam Smith. He loved the way Adam Smith wrote and he loved Adam Smith's ambivalence and contradictions with respect to the free market. Of course, Amartya Sen and others, they are beginning to sort of co op them because he is so easy to co op because as Mark said, it's almost like choose what you want. There are so many "parenthetical" statements in Smith that really betray the free market. Mark thinks that's okay. It's like the bible, which of course speaks volumes about Mark's worship of Adam Smith but indeed obviously Adam Smith was very, very inconsistent and has to own up to all of those inconsistencies and all of those ways in which he inspired David Ricardo and indeed to some degree Karl Marx. The way in for me was Murray Rothbard.

One of these six that I recommended, then unambiguously I would recommend Bastiat. Bastiat was a fiery writer. I would recommend some of the essays of Bastiat. Because part of it is who is the most accessible. I would recommend passages in Smith but if there is just one writer to choose, Bastiat would be my choice.

Skousen: By the way, do you know what side of the French Assembly Bastiat sat on?

Brockwell: Was he a leftist? We don't use that word Mark.

Skousen: No, we don't. That's exactly my point. That's exactly my point. That just shows you why we need to stop using these terms.

Epstein: I vote we stop using the word leftist. I also vote against Mark's resolution.

Brockwell: All right. Let's go onto the next question.

Audience: Mr. Skousen. Can you explain why Adam Smith should not be viewed as a step backwards in comparison say to the writings of the Spanish scholastics at the University of Salamanica. Smith's writing has seemed to go backwards in comparison to what they wrote on subjective value, monetary issues, even victimless crimes.

Skousen: So I think what we're doing is typical history, looking at it through our eyes today, which is very common. It's very easy to do and we're easy to pick out all the mistakes that were made. If we look back at Newton, as a classic example, and Newton was a big believer in alchemy. Do we hold that against him? No, because we recognize the broad positive contributions that Newton made in calculus and the principles of natural philosophy.

I tried, was tempted to show you that at the time Smith was viewed as this great breakthrough, really revolutionary. Quoting Say, here is a Frenchman who is familiar with Turgot and Cantillon and so forth and yet he says it's like we before Adam Smith, there was no political economy. You're almost scratching your head saying well aren't they familiar with these people and the fact is that at the time, when Smith's book came out, and he spent 10 years in France writing the book. He was very good friends with Turgot and knew a lot of these people and he obviously didn't get everything exactly right but the main thesis, this is the thing that has been missing in Gene's basic philosophy, which I've been trying to get you to understand is there is overwhelming archetype view that he was arguing for and he was very effective in this statement, rather than these parenthetical ones and that is this invisible hand doctrine that people could act on their own and engage in self interest, enlighten self interest and the results were beneficial to the general public and resulted in peace and social stability and prosperity and not only prosperity for the rich and the aristocrats but for the common man.

For the English working man, for the French peasant, for the German worker. These are the people he was saying would benefit from a system of natural liberties. System of natural liberty was the term he used. He did not use the term laissez faire, the French word. It's also not in The Wealth of Nations. That's a very important point.

Epstein: I just want to make a brief point correcting Mark that I scrupulously quoted Cantillon on entrepreneurship and on the usury laws in order to show that I am not in any way to try to anachronistically condemn Smith for this errors. I have also quoted Smith on exploitation. That's something he introduced. Never in Cantillon. Cantillon recognized the entrepreneur adds value so indeed Mark would be right if we were anachronistically correcting Smith in light of today's wisdom. I'm talking about how he was indeed in several key respects, a step backward from his own time from his precursors among the French.

Brockwell: I want to go into the final question just because we're running out of time.

Audience: This question is for both of you. Maybe Mark in particular. If you were tasked with writing an encyclopedia entry for Cantillon, what would you write?

Skousen: Well Cantillon I would write is a really great French writer who got it right on pretty much everything. Now I don't know how much of a physiocrat he was, because the physiocrats did argue for agriculture, I know Turbot in particular was favorable towards agriculture and effected Smith in that respect. So I don't know that about Cantillon but overall I would say he was very good in his economics. There is no question about it.

Epstein: Well it's great that Mark is moving in this direction because of course what I would write is Cantillon deserves to be regarded as one of the founders of free market economics.

Skousen: I would agree with that.

Epstein: May I finish? Agreed. That's great. I think I heard Mark agreeing with me. One of a number of founders of free market economics and also he encapsulated according to Hayek, according to others, almost the whole of economics so he deserves to be up there in the pantheon with Adam Smith. No higher, no lower.

Skousen: But he did not change the world, that's the point.

Brockwell: It's like herding cats. We now have our five minutes closing statements from each of you so you can go and elaborate more on that during your closing statement if you wish. Thanks to everyone who submitted questions online, on social media. Thank you and sorry that we didn't get to your question. I think a gentleman previously mentioned something about the School of Salamancas. Mark, did you want to go ahead and start your closing statement.

Skousen: Yes, I'd be glad to. So I want to end by telling you a story. Before I wrote my book, The Making of Modern Economics, which is a history of the great economic thinkers, I was in Rothbard's camp or in Gene Epstein's camp. Rothbard Lite if you will. I commissioned Murray Rothbard to write his history of thought. I did this in 1980. I paid him $20,000 advance to write the contra Heilbruner book. The worldly philosophers of which his favorite economists in my reading of his book were Marx, Veblan, and Keynes. So I said, I would like you to write 12 chapters, one volume work, a free market alternative to Heilbruner's Worldly Philosophers and he agreed to do that. So one year and he's supposed to do it in one year. Well one year went by, two years went by, finally I kept asking where Marx and he finally got to Marx and then did the other chapters and unfortunately he died in 1995 and had two volumes. It was a Schumpeterian work by the time he was finished and I was deeply moved and read his book cover to cover.

I was very much, Rothbard was very much a mentor to me. I thought he was the ideal person to write this book and he passed away so he didn't finish his history of thought. So I thought after all my years of experience that I would finally write a history of thought, which is now called The Making of Modern Economics. Well of course I started with chapter one. I had the title. It all started with Adam and the entire chapter was Rothbarding through and through. Critical of Adam Smith. Saying he went down the wrong road. All the arguments that Gene Epstein has spoken about to you today. I was in that camp and I wrote that chapter.

So one time I headed out to Utah and I had that chapter in my hand and I went to my wise old uncle Leon Skousen, who I considered with great wisdom and influence in my life. I handed him the chapter. I said, would you mind reading this and tell me what you think? Before he can even read it, he put his hand on my shoulder and he said, Mark I'm going to tell you something. The invisible hand doctrine of Adam Smith is inspired of god. But when he said that he really shocked me. I said well wait a minute. Maybe I have the whole wrong attitude here on Adam Smith. Maybe he is this great hero that a lot of economists have said but maybe it's Rothbard is right.

Who is right? My wise old uncle Leon who is not a trained economists versus the trained economists, the mentor, Murray Rothbard. I said, there is only one way to solve this problem and I said I will pick up the book cover to cover and make up my own mind, which I did for two months. If you can look through this book, this book is special to me. It's marked up through and through all the way and when I was finished I put the book down and I said to myself, clear as ever, Murray Rothbard is wrong. My wise Uncle Leon is right. This is a great book. I tore up my first chapter, re wrote it, made Adam Smith a heroic figure and it totally transformed this book.

Mike Sharp, the publisher of this book, is close friends with Robert Heilbruner and told me that my book would eventually take the place of Heilbruner because of the heroes in my book are Adam Smith and those who promoted the running plot of the system of natural liberty, who defended it, who improved upon the house that Adam Smith built because it was not structurally complete or full. It needed the marginal revolution, the contribution of the British school, the Austrian school, the Chicago school, and I had a good ending with my final chapter.

So the book is as a whole and a very powerful, I did something in economics that has never been done before. The history of economics was a hodge podge. This guy said this. This guy said that. There was no hero and I discovered I could make a hero out of this book, out of this history with a running plot and those who were judged for and against Adam Smith and proving or tearing it down and triumph at the end with the dramatic rise of free market capitalism with the collapse of the Soviet central model system. Thank you.

Epstein: I think Mark already being an honest and open guy, pretty much provided his own self refutation in his summary remarks. He clearly is struggling with the ghost of Murray Rothbard. I personally am not. I don't agree with Murray Rothbard about Adam Smith. Murray Rothbard would not have included Adam Smith among the founders of free market economics. I would do so. So Mark has been oscillating in his struggles, in his semi religious crusade to either kill the ghost of Murray Rothbard or embrace his Uncle Leon and Adam Smith. I'm only trying to suggest to Mark that there is a middle ground. That it is indeed possible for a columnist like me to quote Adam Smith on indeed the role of government. I loved some of Adam Smith's statements about, what was it Mark about the government official arrogant enough to think he could run enterprise is truly to be condemned. Wonderful statements. Wonderful nuggets and insights in Adam Smith which I often cite in my column.

So I'm not struggling with those demons. I can bring sanity to the story. I can tell you that there is greatness in Adam Smith. I can also tell you that Adam Smith was a retrogression from some of the free French economists who were wonderful and marvelous in their celebration of the entrepreneur and in their ways against intervention and against the usury laws. I can also tell you that Adam Smith was tone deaf to certain things about intervention and I can still talk about the greatness of Adam Smith.

I want to mention one thing that I didn't have time for. Do you know that Adam Smith actually brought alive value and use and value and exchange, the whorry Marxist mantra that he wrote about in The Wealth of Nations. That the word value has two different meanings. That the idea that water has great value and that diamonds don't and yet why is it that water is almost free and diamonds are expensive? Did you know the odd mystery of Adam Smith is that in his own lecture notes, I couldn't believe this but I just looked it up, in the lecture notes Adam Smith resolved this paragraph when he lectured. He wrote that cheapness is in fact the same thing as plenty. It is only on account of the plenty of water that it is so cheap, it has to be got for the lifting on account of the scarcity of diamonds, that they are so dear.

So Adam Smith put into the language this Marxist mantra about value and use and value and exchange and yet he was contradicting his own lecture notes and then we even find that what he wrote in his lecture notes about this supposed paradox between water and diamonds had already been resolved by Turgot, by Hutchinson, by others who came before him. So this was the most perverse mystery about Adam Smith all together. Marxist. Believe me the Marxist is still around and they still believe in value and use and value in exchange. So again, we have so much to worry about from Adam Smith. It's compelling that we take a few stripes off him and relegate him to one of the greats. That is all I am arguing for. I'm not religious. I'm not struggling with Murray Rothbard. Among those intellectuals founders, I would include Cantillon, Turbot, Say, and Bastiat. All of those people that came before him and came after him. If we continued with Mark to promote Adam Smith as the guy, the king, we are leading with our chins because there is much in Adam Smith to embarrass us.

I wrote Mark awhile ago that it was unfortunate that Adam Smith did not use the word entrepreneur and Mark wrote me back that it was impossible for him to do so because the word entrepreneur did not come into use until decades later in the writing of JB Say. I had to correct Mark. I told him no. The word entrepreneur is used over 100 times by Cantillon and he analyzes it. He's sensitive to borrowing at high rate of interest because he writes about the entrepreneur. Mark being naturally gracious and open minded wrote me that he stood corrected and he would make the correction in the third edition of his book, which he did. Now he didn't acknowledge me but I'm not looking for that. I'm only looking to further the truth.

For the fourth edition, I now urge you to amend the first chapter called "It All Started with Adam". It did not all start with Adam. It all started with a bunch of people. Intellectual history is not a popularity contest. We accord it according to originality, pioneering work, and merit. We have integrity, therefore you must vote against Mark's extreme resolution and vote for the other modest resolution. Adam Smith deserves to be honored as one of a number of founders of free market economics. Thank you.

Brockwell: We initially started out a yes vote. People who agreed with the resolution was 44%. And the no vote was 15%. And then we had some undecideds. Post, we ended up with the yes vote of 29%. So that actually lost 14%. The no vote ended up with 61%, which gained 45% so the winner actually goes to the negative Gene Epstein. But I'm sure that we have all learned a whole lot tonight. It's been a wonderful debate. A very lively one. You get the tootsie roll this time, the metaphorical tootsie roll that you always offer. Thank you so much for everyone for coming. It's really wonderful to have you here.

Epstein: All of us, me, Naomi, and Mark and probably Andrew Headen will be at Freedom Fest and we hope you'll all join us there.

Brockwell: Yes, please come. 10th Anniversary. William Shatner is going to be there. Some really awesome people. See you there.

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  • Jerryskids||

    "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest" ranks right up there with "Cogito ergo sum", "E=mc^2", and "An object in motion tends to remain in motion along a straight line unless acted upon by an outside force" as pithy expressions of complex ideas. Economics necessarily involves exchange, the heart of capitalism is that trade is not a zero-sum game but neither is it a costless one. You gotta pay for what you want, and even if it's more than you'd like to pay it's less than you're willing.

  • JFree||

    What a horrible debate.

    It is entirely full of strawmen and the worse sort of historical revisionism and the central question to be voted on is pure hagiography.

    And where the fuck is Anders Chydenius? His National Gain - http://bit.ly/2tLY4l5 - is far shorter and more cogent than either Smith or Cantillon and was published in 1765 so is at least contemporaneous.

    So what if Adam Smith has what are today viewed as 'contradictory' nuanced views? Far more important than 'usury laws' was his view of corporations themselves - as intrinsically a problem for true free markets. Maybe it is the modern ideologues who are the morons. And maybe the whole value of ANY work of philosophy/analysis is that it tends to make people think about their own beliefs. Instead this whole debate is predicated on the idea that Smith's only role in life was to serve as a bullet for future generations to shoot at each other.

  • OM Nullum gratuitum prandium||

    Adam Smith is NOT the father or modern economics or free market thinking. He is a well known contributor but he also made many mistakes, some false assumptions and copied ideas from his contemporary and, at that time, also well known peers.

    Nevertheless his commentary on trade is very valuable and rings as true today as it did more than two centuries ago.

  • Sanjuro Tsubaki||

    No. Jacob was the first capitalist. Cain was the first socialist.

  • CatoTheChipper||

    I was surprised that Gene Epstein waited until his closing remarks to introduce the fact that Adam Smith's theory of value is completely addled. It is almost indistinguishable from Marx's labor theory of value. Economics is just sociology without a theory of value; with a flawed theory of value, an economic theory can be worse than nothing.

  • JFree||

    You mean like Rothbard's theory that labor added to land adds enough value to override both the Lockean proviso and the previous legal notion that land itself can only be held in usufruct not full 'ownership'?

  • Barbara Yarhead||

    Epstein is likely referring to Anne Robert Jacques Turgot instead of Jacques Cordot. The audio is a bit muffled, but Turgot is a famous physiocrat.

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