Sunday, October 15, 2017


Dennis C. Rasmussen, The Infidel and the Professor: David Hume, Adam Smith, and the Friendship that shaped Modern Thought”. Princeton University Press, 2017.
Dennis Rasmussen has written an excellent account of a neglected aspect of the intellectual stimuli associated with enduring changes in philosophy, political economy and, eventually, in the practice of science, from a period known as the Scottish Enlightenment.
Of course, the European Enlighenment was occasioned by a much wider geographical spread of many individuals than just the two above, albeit central figures, of David Hume and Adam Smith. But their intellectual relationship was a central factor that helped to determine the nature and consequences of what others in England, France, Germany, Holland, Scandinavia and Europe’s universities were doing separately and together.
Rasmussen captures to details of Hume’s and Smith’s contributions to Enlightenment thinking in a uniquely two-levels account. The main text is clear cut, stating the historical facts in clear manner as to what each believed. Hume, of course, was mostly controversial in his critique of the prevailing religious dogma and he attracted the ignorant hostile reactions of Church members. Smith, his junior by 12 years, and publically beyond suspicion as an apparently orthodox Christian believer in public, though in fact, privately he was a sceptic too. It took sometime for the pair to disclose privately to each other the philosophical basis for their mutual scepticism, and their quite different behaviours in the face of the hostile politico-religious environment of the times the lived in. 
The other levels of their relationship are revealed in Rasmussen’s use of an informative 50 pages of end notes for scholars interested in the supporting evidence for his assertions. Reading the main text together with the end-notes reveals the depth of Rasmussen’s scholarship. It also explains why he as written such an intensely interesting book about an intellectual relationship between two men at the centre of the Scottsh Enlightenment.
For all the things that Hume and Smith had in common intellectually they also had much that was so different. Hume took on the burden of establishing the empty philosophical basis of the dominant Christian religion of his times. His candour enraged extremist Christian believers. Pathetic attempts to drive Hume out of the Church of Scotland failed, not least because those who knew him well realised he was not an emissary of Satan, but a man of gentle scholarship and impeccable social manners and modest behaviour.
Here I would add some comments on Adam Smith whose conduct in the crisis of Hume’s decline and death in 1776 remains somewhat inexplicable in Rasmussen’s authoritative and otherwise excellent account.
Clearly, Smith wanted to playdown Hume’s insistence that he would not change his views on religion as he approached death, which religious persons’ anticipated would be dealt with by God severely in respect of Hume’s disavowal that there was a God.  Hume, of course, did not recant. 
My point here is that Rasmussen does not explain Smith’s role in Hume’s near-death discussions. I have suggested elsewhere that Smith’s views on religion and the existence of God are explainable and were discretely close to David Hume’s ideas .
See my two published papers: 1):  Gavin Kennedy, Journal of The History of Economic Thought (JHET, 2011. “The Hidden Adam Smith in his Alleged Theology”, September, pp 385-402; and 2): and in The Oxford Handbook of Adam Smith, 2013, “Adam Smith on Religion”, pp 464-8, OUP.  
Basically, Smith hid his views on religion from his mother, a devout Christian who had brought her only son up in a like manner. Adam would never do anything to upset his mother even at some personal cost in his relations with others. His partial amendments to his last edition of Moral Sentiments (1790) show clearly his private non-religious ideas, as amended in public statements after his mother had died.

Rasmussen’s ‘The Infidel and the Professor’ in my view is the best authoritative scholarly book on David Hume and Adam Smith published in the last 5 years. It is destined to be the classic book of those times.

Thursday, October 12, 2017


Rene E. Ofreneo posts (11 October) on Business Monitor HERE 
The trouble is that the welfare state system has been eroding.  Economic globalization and the shift in economic thinking favoring free-wheeling neo-liberal economics are the culprits. The welfare state system is even on the brink of collapse in some European countries due to the global financial crisis, with the Austerians managing to control the levers of policy-making. This, in brief, is the reason the debates on the future of the capitalist system have been intensifying, not easing.
One of those engaged in the global debates is Prof. Robert Reich, US labor secretary under President Bill Clinton. In Saving Capitalism (2016), Reich argued for the need to reform America’s corporate system in order to save capitalism “for the many, not the few”. He demolished the old argument of “free traders” seeking less government role in business and in shaping the economic directions of society, stating that no “free market” is possible without government.  Further, he pointed out that the “invisible hand” in the market is not really that invisible; it “is connected to a wealthy and muscular arm” of the corporations.  Those who argue for free market are the ones trying to influence the market for themselves. Reich went on to outline how the American big corporations and their CEOs are able to manipulate the market and the politicians, monopolize products ranging from agriculture seeds to ICT data, hollow out manufacturing by outsourcing everything, organize business to maximize returns to shareholders, and minimize taxes for the rich.  An ex-Cabinet man, Reich concluded that the so-called free market system is really an alliance between Wall Street and Washington.
So what is Reich’s proposed alternative?  A return to Keynesian model of development where the government leads in designing, organizing and enforcing the market to meet the needs of the many, not the few.  He also argues for a fairer sharing of present and future wealth, not through a simple higher taxation for the rich but through an assurance that every citizen shall have a basic decent income.
Is this vision of economic governance possible in America?  In Europe? In the Philippines?  The answer lies in the collective hands of the millennials and the next generation.”
Professor Paul Reich is a product of his the economics that his generation absorbed from Paul Samuelson’s economics, which in turn were misappropriated from a misreading of Adam Smith’s singular use of the two metaphoric words, ‘invisible hand’, in his Wealth of NationsRene E. Ofreneo, the author of the above piece adds to the speculative confusion, with his politics that says nothing about the solutions to the identified problem. 
I think it is time to anticipate a theme in my Authentic Account about what Adam Smith actually meant in his use of the ‘invisible hand” metaphor. So later today I shall publish a brief extract from my explanation on Lost Legacy.

It won’t solve the problems of the world’s economies, but it will remove one area of muddled modern thinking about its causes.

Wednesday, October 11, 2017


David Bernstein posts (10 October) on The New York Times a conversation with Muhammad Yunus, the Bangladeshi founder of the Grameen Bank and recipient of the 2006 Nobel Peace Prize, HERE 
M.Y.: The capitalist system is based on a fundamental flaw, on misinterpretation of human beings. In capitalist theory, it is assumed that man is entirely driven by self-interest. That’s definitely not the description of a real human being. Human beings are selfish, and at the same time they are equally selfless, if not more. They want to help others. Adam Smith wrote this in “The Theory of Moral Sentiments.” He was a professor of philosophy. He was interested in morality. Then he wrote a completely different book that talked about self-interest and the “invisible hand.” The first book was forgotten. He never integrated the two books.
D.B.: If we integrated these ideas, what would be the implications?
M.Y.: Capitalism is all about options. But in the economic system, there is only one kind of business: business to make money — and it’s made more extreme by saying it produces best results when one maximizes profit. When we introduce the selflessness of people in the business world we get another option. Alongside conventional business, we add another type of business that will allow us to express our selflessness through business. The exclusive goal of this business, which I call social business, is to solve people’s problems. My book is full of examples of this.”
Another conversation where the participants discuss the real world as if their definitions of the real world describe reality - almost as if the economy they call capitalism listened to definitions and acted accordingly.
This error is profound. It sits alongside the absurd notion that Adam Smith “invented’ or somehow ‘created’ what we now call capitalism (a word first used in the 1830s - Smith died in 1790.
Even the sequence referred to by the conversationalists above is suspect. Muhammad Yunus wants to give capitalism a ‘social conscience” and thereby change human behaviours. He is building a false perspective based on a leaking boat. Adam Smith certainly wrote two books in two different episodes in his life, but not divided in the manner that Mohammad Yunus imagines. 
Moral Sentiments (1759) was appropriate at the time because Adam Smith was a Professor of Moral Philosophy. The subject that became economics did not yet exist. Smith’s other academic subject was Jurisprudence. He developed a strong teaching interest in Jurisprudence - the laws that governed human personal and necessarily, also, their social behaviours.
It was from this background that Adam Smith resigned his Chair at Glasgow University and spent ten years or more researching and writing Wealth of Nations based on what had been happening for centuries and had continued to happen in what we now call the economy, on a far wider scale in the late 18th crentury in North-West Europe. 
The Wealth of Nations (1776) and subsequent editions to 1789, addressed that transformation from the predominantly landed property economy to a market economy. It did not ‘invent’, nor create, capitalism. Nor did it ‘talk about’, ’self-interest’ and the “invisible hand” in any special manner.
 Indeed, Smith’s singular, once only, reference to “an invisible hand” in Wealth of Nations’ was ignored by Smith’s contemporaries and for much of the 18th century too by the many authors who wrote extensively about Adam Smith’s ideas contained in Wealth of Nations. Remarkably, major 18th-century and 19th-century economists when quoting from Wealth of Nations and addressing the ideas contained in or adjacent to the very paragraph that mentioned the ‘invisible hand’ did not mention nor comment on it their remarks.
The fact is that the so-called ‘invisible hand’ was ignored by his contemporaries and by his  successors! The significance of the ‘invisible hand’ is a wholly 20th-century phenomenon invented by Paul Samuelson n 1948.

Unfortunately, Muhammad Yunus, has been misled by those modern economists educated post-1948 into the modern myth of Adam Smith’s ‘invisible hand’, as has David Bernstein.

Tuesday, October 03, 2017


Senator Linthicum posts (2 October) in the Upper Rogue Independent HERE
“Senator Linthicum newsletter”
“One of Adam Smith’s teachers was Adam Ferguson at the University of Edinburgh. In 1792, Ferguson wrote about the relationship between freedom and anarchy, “Liberty or freedom is not as the origin of the name may seem to imply, and exemption from all restraint, but rather a most effectual application of every just restraint to all members of a free state, whether they be magistrates or subjects.”
He continued, “It is under just restraints only that every person is safe, and cannot be invaded, either in the freedom of his person, his property, or innocent action…”
Adam Ferguson was not one of Adam Smith’s “teachers” and certainly not in 1792. Adam Smith died in 1790!
Moreover, Adam Smith never attended Edinburgh University. He was educated at Glasgow University, where, later,  he became  Professor of Moral Philosophy, before Smith retired in order to write what became the Wealth of Nations (1776)

They knew each other, of course. Ferguson set aside his “persoanl differences” with Adam Smith and attended him in the last days of Smith’s life, shortly before Smith died in Panmure House, Ediinburgh.

Tuesday, September 26, 2017


I have today completed the manuscript of my latest book AN AUTHENTIC ACCOUNT OF ADAM SMITH. 
It now awaits editorial editing and feedback, and then my re-writing to accommodate the editor's comments and advice.
This may take some time...

Wednesday, September 13, 2017


My absence from posting these weeks is down to my intense preparation of my manuscript  of ‘AN AUTHENTIC ACCOUNT OF ADAM SMITH’ for press.

Apologies for this situation, but the book must come first, just like a new born baby...though my wife tells me I don't know the half of it.


Monday, August 21, 2017


Oliver Reynolds posts (21 August) on FOCUS ECONOMICS HERE
Bounty or burden? The impact of refugees on European economies is far from clear
Avindar Mohamad was 18 years old when he was forced to flee with his family from his hometown of Aleppo after the Syrian civil war broke out in 2011. Until then, he had led a relatively comfortable life: His father worked as a baker, and his mother had a job at a large pharmaceutical company. When the conflict started, his father flew ahead to Denmark, while Avindar sought refuge in neighboring Lebanon along with his mother and two sisters. It was only several months later that the family finally found itself together again, this time on Danish soil, under Denmark’s family reunification program.
In recent years, the number of people like Avindar seeking asylum in the European Union has skyrocketed, from around 200,000 in 2006 to around 1.3 million in both 2015 and 2016 according to Eurostat figures. The continent has witnessed one of the largest forced migrations since World War II, as civil war in Syria and Iraq and instability in Afghanistan have led to a wave of refugees moving westwards in search of safety. Unlike Avindar and his family, many have been forced to make the journey on foot. The potential effect of this surge in refugees on the economies of European countries is still very much up in the air, with a multitude of factors at work.
The economic impact is likely to be slightly positive in the short-term. All the refugees arriving in the European Union need to be housed and fed. Their medical needs must be addressed, and both children and adults have to be educated in preparation for entry into local labor markets. Before they are ready to work, financial support is also necessary. The ensuing boost to government spending and fiscal transfers will give domestic demand a shot in the arm. According to estimates from the IMF, by the end of 2017 GDP in Austria, Germany and Sweden—the main destination countries for refugees—will have been boosted by 0.5%, 0.3% and 0.4%, respectively. In Germany, by far the largest recipient in absolute terms, refugee-related expenditure amounted to more than EUR 20 billion last year. 
In the longer term, the picture becomes far murkier. This isn’t just because little is known about the current cohort of refugees, such as their average level of education or how long they will remain in their host countries. It is also because the long-term economic impact of refugees rests largely on how successful countries are at weaving them into the economic fabric of their societies. The more refugees who find jobs, and the better paid these jobs are, the greater the positive impact on labor supply, the public coffers and economic growth. 
Upon arrival, however, asylum seekers face myriad problems which hinder their integration into the labor market. Many find that the qualifications they held in their home countries are no longer recognized, and even those who hold valid qualifications are faced with a language barrier; the vast majority of the refugees who have reached the European Union in the last few years lack basic competence in their host country’s language. The process of applying for and being granted asylum is also a protracted one, often lasting around six months. In some European nations, it is even longer, as the sudden influx of refugees has led to a huge backlog of unprocessed claims. In many countries, asylum seekers are not normally allowed to work while their claims are being processed, increasing the risks of demotivation and deskilling. Even in Germany, which is known for the efficiency of its bureaucracy and labor market, only around 500,000 of the 1.2 million refugees had completed the first stages of the integration process and signed up as job seekers by March 2017. Of these refugees, a mere 12% had found employment.
arduous task. Studies from many developed countries have repeatedly shown that refugees tend to earn less, have worse employment prospects and hold lower occupational status than native workers or economic migrants. Even in Sweden, a country with a relatively strong track record of integrating refugees, a study of those arriving between 1997 and 2010 found that fewer than 20% had found employment after one year. Ten years down the line, only between 50% and 60% were working, significantly below the corresponding figure for Swedish natives. 
However, there is much that nations can do to help refugees integrate more seamlessly into society. For instance, Germany’s integration law, which was approved by its parliament in 2016, provides culture and languages classes for newcomers. This policy is similar to Sweden’s longer-standing introduction program, which includes an interview with the Public Employment Service (PES) in order to create a tailored action plan for each refugee, and provides personalized training, employment assistance, and financial and housing support. Special measures in the labor market could also be considered, in order to overcome any initial jitters employers may have about hiring refugees. Wage subsidies for firms who hire refugees have proven effective in several Nordic countries. The experience of refugees in the Netherlands has shown that work at temporary agencies can be another useful stepping stone, helping new arrivals adjust to labor market conditions. Enabling asylum seekers to hit the ground running and apply for jobs upon arrival, provided certain conditions are met, would also help; this is currently the case in Sweden, for example.
Policies which boost the labor market participation rate more generally will likely have an outsized effect on refugees. Improving the geographical mobility of migrants, making labor markets suppler and thus more adaptable to tumultuous technological change, and avoiding welfare traps due to an overlap between the benefit system and the tax system would all help refugees get their foot on the employment ladder. 
While the successful integration of refugees poses a challenge to policymakers, it could pay dividends in the long term. Europe is ageing fast, with the old-age dependency ratio in the EU-28 forecast to soar from 28.8% in 2015 to 50.3% by the middle of the century. Many pension and healthcare systems across the continent are already creaking under the strain of having to provide for so many retirees. The most recent wave of refugees arriving in Europe could help alleviate this burden to an extent. Most refugees are young: Around 50% of those who have sought asylum in the EU over the last few years are between 18 and 34, while nearly one-third are younger than 18. They are also likely to have higher fertility rates than native-born citizens. Both of these factors should help slow the rate of ageing and lessen the impact of the transition of our greying societies. The IMF estimates that the current influx of refugees could reduce pension spending by 0.25 percentage points of GDP by 2030 for the EU as a whole, and by more for large recipient countries. 
Whatever the net impact of refugees on the macroeconomy, this question is far from being at the forefront of people’s minds. Instead, most people are much more preoccupied with how refugees could affect their daily lives, and whether they will have to compete with them directly for jobs. This fear helps partially explain the recent rise in popularity of far-right parties, such as the Swedish Democrats in Sweden, or the AfD party in Germany. On this issue, concerns are only partly justified. Research has shown that displacement effects can exist, and domestic workers with similar skillsets to newcomers are more likely to lose out, while other types of workers gain. However, the time horizon, state of the economy and the flexibility of labor markets are all key factors, and these effects are rarely felt in the long run in growing economies where workers can move smoothly between jobs. 
Over four years after he arrived, Avindar has integrated well into Danish society. He is training to become an IT technician, and in the meantime works part-time at a local supermarket to help pay the bills. He has learned the local language, has a close group of Danish friends, and pays taxes. Avindar is, in short, one of the lucky ones. He is young, and his family was wealthy enough to travel directly to Denmark, rather than embark on a perilous journey across the continent. The Danish economy is also fortunate to have him. By learning a trade, working and paying taxes, Avindar is making a positive contribution to his host country. The economic impact of many others may be less clear-cut. But the experience of people like Avindar shows that, with a well-functioning labor market and the right public policies in place, it is possible for refugees to become integrated into both society and the economy.  
recommend readers follow the link and read the whole of Oilver Reynolds article (and subscribe to Focus Economics). I shall try to place this subject in its proper context of human history,
The debate on the migration of refugees from war-torn countries is warming up and balanced researched reporting is required rather than hasty political stances giving credibility to ignorant racial prejudice.
This context includes the long view of human history:
In the 16th and 17th centuries, European explorations found vast near empty territories in the Americas, South Asia, Australasia and the Pacific, which were followed by what became vast European migrations to occupy these territories as well as to militarily overawe populations in Africa, Asia and the Americas.
Current migration flows into Europe are redistributing world populations from wars, invasions, political disorders and persecutions, and their attractiveness from visual observations on world television and WWW.

These movements of populations are an integral and ancient consequence of human life that have a long and deep history going back a million of more years since various members of what became the human species left Africa and spread themselves, albeit thinly, across reachable continents and contested, often violently, with other species that were already in place from their own earlier evolutionaty development.
The modern wave of spreading population movements is now underway and can be expected to continue. Remember. We humans are all immigrants no matter where we reside.