1. “Power and riches appear to be, what they are, enormous and operose machines contrived to produce a few trifling conveniences to the body”
2. “The beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.”
3. “How many people ruin themselves by laying out money on trinkets of frivolous utility? All their pockets are stuffed with little conveniences. They walk about loaded with a multitude of baubles, some of which might at all times be very well spared, and of which the whole utility is certainly not worth the fatigue of bearing the burden.”
4. “Though the whole of his life he pursues the idea of a certain artificial and elegant repose which he may never arrive at, for which he sacrifices a real tranquility that is at all times in his power, and which, if in the extremity of old age he should at last attain to it, he will find to be in no respect preferable to that humble security and contentment which he had abandoned for it.””

Who made these remarks?

• him
• her
• him
• her
• him

I remind readers that the job of an economist is to, as Hayek put it, demonstrate to men how little they know about what they imagine they can design. Or in short, that there are indirect consequences of every action – some more perverse than others. Many people are shocked when I read the above quotes to them, because their unquestioned belief is that it is inconsistent to support commercial society while at the same time being anti-materialistic.

But they come from the Father of Capitalism himself, Adam Smith. And they come from a book he wrote 17 years before he wrote the Wealth of Nations. It is called the Theory of Moral Sentiments.

But those who appreciate what Mssrs. Smith and Hayek and many others wrote, and what I hope to instill into my students, is that our commercial society, were it to be absent special privilige (what I roughly define as corporatism), is of course capable of providing material goods that were beyond our parents’ wildest imagination. And it is able to provide them to the masses. But that alone is not the most significant aspect of commercial society. Its achievement is that it is capable of responding rapidly to the non-material wants and wishes of large portions of the population. No other system comes close.

This is really what Smith meant by his “Invisible Hand” (OK, I never asked him, it is what I believe its essence to be). Modern commercial society, as opposed to the planned economies of certain failed states, or pre-industrial feudal societies, or even most of the corporatist states pervasive today, can produce efficiently whatever it is that members of our society wish to pay for.

If every American, tomorrow, decided to take up shelter in the woods, and stop consuming 90% of the “useless” gadgets that we do today, then so be it – there is nothing in the teaching or implications of economics that suggests this is remotely a problem. In fact, this is its virtue. If this movement to the woods coincided with an enormous increase in our desire for learning ancient languages, then the modern commercial society would quickly see to it that our minds were filled with this incomprensible stuff.

Would society look very different? Of course, but that is the point. Our modern commercial system, as flawed as it is, nearly perfectly expresses the preferences of the people that comprise the society. Compare that to monarchical rule – where lords served at the whims and pleasures of kings and queens, and who forced landed serfs to obey them. Compare that to socialist rile – where small groups of favored elites make decisions for hundreds of millions of people, who presumably do not know what is good for them … or who just need a little social conditioning.

There is nothing in the economics that I teach, or about a large, impersonal, human society that requires people to senselessly acquire material goods. That the system allows people to do so is a testament to it, not a black mark. If there are some in society that decry the decay of humanity, it is not the system of specialization, production and exchange that we have adopted that is at fault – the “fault” lies in the fact that people share all sorts of different values. Fortunately, modern capitalist societies that respect property and the rule of law enable everyone to live under the big tent, without forcing anyone to do what they do not wish to do. Tell me please, under what other social arrangement is such a marvel possible in a world of billions of heterogenous (i.e. different) people that do not know one another?