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0:40

John Eul

0:42

is an actor who lives in Crookedi Scotland.

0:45

If you watch a lot of British TV dramas,

0:48

you may have seen him playing a doctor,

0:50

or a hotel manager, a police

0:53

sergeant, but lately, he's been moving

0:55

away from acting. I've written two

0:57

plays and I'm writing another one One

0:59

of those two plays is about Andrew Carnegie

1:02

who made his fortune in America but

1:04

grew up nearby in 527. The

1:07

other play called the Invisible Hand

1:09

is about Adam Smith, who is often called

1:11

the founder of modern

1:13

economics. He grew up just

1:15

down the street from where John Yule lives.

1:18

It's from here, and I always

1:20

thought there was a story in it.

1:23

And Cricati doesn't do 527. To

1:26

perpetuate the greatness of

1:28

Adam Smith. That is

1:30

changing. Croccarti is preparing

1:33

to celebrate the three hundredth anniversary

1:35

of Adam Smith's birth. The church

1:37

where he was baptized is being restored. There

1:40

are plans for a museum and cultural

1:42

center John Yule doesn't

1:44

blame his neighbors for not caring enough

1:47

about Adam Smith. He didn't really care

1:49

either until he started working

1:51

on his play. Always aware

1:53

of Adam Smith, but not entirely

1:56

of his legend of his contribution

1:59

to economics really and to

2:01

527. I knew about it,

2:03

but as most people you would

2:05

527, actually, don't know They

2:07

know about the wealth of nations, and they know that

2:10

Margaret Thatcher The

2:12

enemy always had a

2:14

copy of wealth of nations,

2:16

the legend goes, in her handbag.

2:19

So I thought, wow,

2:22

that's what's looking into. You

2:24

say the legend goes that Thatcher

2:26

carried Adam Smith around in her handbag. What

2:28

do you think? But I think is that, yes,

2:30

she did read some of Adam Smith.

2:33

She didn't read the first book, the theory

2:35

of moral sentiments clearly. But

2:37

she read the second one and

2:39

she did use that as

2:41

an authority to promote

2:44

her economic theories and

2:46

activities and policies.

2:48

And she caused so much misery

2:51

in this country not to

2:53

everybody, but to a lot of people.

2:57

As for John Yule calling Margaret

2:59

527, the enemy We're gonna

3:01

let that slide for now. It isn't 527 legacy.

3:04

We're debating here. It's Adam Smiths. Over

3:07

the first two episodes of the series,

3:09

We've spoken with economists, philosophers,

3:12

political scientists, and others about

3:14

Smith's ideas and how they've been interpreted and

3:17

misinterpreted and misinterpreted recruited over the years.

3:19

So today on 527 Radio, in

3:21

the third and final episode of our series

3:23

on the Real Adam

3:24

Smith, we wanna know what

3:26

would a truly Smithbian economy

3:28

look like today.

3:29

The kind of capitalism that we have

3:32

now is not something Smith could have imagined.

3:34

Yes. I think we've moved on since the eighteenth

3:36

century, unfortunately. But have we

3:38

moved on so much from

3:39

the eighteenth century? Most of the economic

3:42

restrictions that it objects to or as

3:44

he often puts it extorted from the legislature

3:47

by rich companies. Also,

3:50

what kind of life lessons can Adam

3:52

Smith still teach today? He's

3:54

so infuriatingly balanced. Our

3:57

journey to find the real Adam

3:59

Smith had to end sometime. Sadly,

4:03

that's today, but we'll hold our tears

4:05

till the end. The final episode

4:07

begins now.

4:20

This is 527 radio,

4:22

the podcast that explores the hidden

4:24

side of everything with your

4:26

527, Steven Dubner. In

4:36

Adam Smith's Day, the residents of

4:38

Kirkland cricody, mined coal

4:40

and harvested salt. Later, they

4:42

made canvas and linoleum. Cricody

4:45

was a thriving market town.

4:47

Today, they're mostly service

4:49

jobs, most of which don't pay very

4:51

well. John Yule has had

4:54

seventy years to observe the shifts

4:56

in the local

4:56

economy. My

4:58

father had a business here. William

5:01

Yulin's son, which was a well established grocery

5:03

business. So he was,

5:05

you know, steeped in Carcará. He was from

5:07

here. The road bridge changed

5:09

everything. The road bridge,

5:11

which crosses the river 527, was

5:13

built in nineteen sixty four. The

5:16

bridge made it much easier to get from Edinburgh

5:18

up into Fife, the county where

5:20

Cercuddy is located. Maddad

5:22

was really pushed out of business by

5:25

the supermarkets coming in

5:27

to the town because they got over the

5:29

bridge then they still have to go around. It was in

5:31

their interest to open stores, Tesco

5:34

to open stores here. So

5:36

a small substantial grocer

5:39

who took stuff all over the county

5:41

and local hotel everything, he was just

5:43

pushed out of the way.

5:44

What do you

5:44

think Adam Smith would say to that story?

5:47

I think he would think it was progress

5:49

because really things do always evolve and

5:51

change and you can't hold back

5:53

progress. I don't like supermarkets.

5:55

I think they've ruined so

5:57

much of our communities. But

6:00

nonetheless, that's seen

6:02

as progress. When

6:06

Adam Smith was writing the wealth of

6:08

nations in the mid eighteenth Century,

6:10

it wasn't supermarkets he was worried

6:12

about. It was trading firms

6:15

like the English East India company,

6:17

which grew so massive that it began

6:19

acting like a sovereign

6:21

as Smith put in. Here is a passage

6:23

from the wealth of nations read by

6:25

John Yule. While they were

6:27

traders only, they managed their

6:29

trade successfully and were

6:31

able to pay from their profits a moderate

6:33

dividend to the proprietors of

6:35

their stock. Since they

6:37

became sovereigns, with a revenue

6:40

which it is said was originally more

6:42

than three million standing they

6:45

have been obliged to beg extraordinary

6:48

assistance of government in order

6:50

to avoid immediate

6:51

bankruptcy. Smith was concerned

6:54

that companies like this were essentially too

6:56

big to fail. Does that

6:58

maybe ring a few

6:59

bells? It does to this

7:01

collar. I'm Maha Raffia Tal,

7:04

and I'm a lecturer or assistant

7:06

professor in global economy at the University of

7:08

Glasgow. Okay. And global economy

7:10

means what here? I am a political

7:12

scientist, but I study the economy.

7:15

Atal is writing a book with the working title

7:17

when companies rule corporate

7:20

power, from the East India company

7:22

to Silicon Valley. There's

7:24

quite a bit of Adam Smith in it.

7:26

So Smith appears in my book in

7:28

two principal places. There's a

7:30

first chapter where I talk about the Ascendia company

7:32

as a case. And then there's a chapter

7:34

that's about Amazon as an employer

7:36

and a way that it governs labor and exerts

7:38

a lot of influence in the towns where it sets up

7:40

its big labor operations. Let's

7:42

start with the East India company. This

7:45

takes us back to the early seventeenth

7:47

century. So there's a first curve

7:49

of globalization that is associated with

7:52

the corporate period of imperialism where

7:54

European countries are giving

7:56

a charter, a permit, a license,

7:59

to some investors who would like to create

8:01

a company. This new

8:03

level of commerce was happening throughout

8:05

Europe. So in England, we're

8:07

talking about the English East India company, which

8:09

was chartered by Queen Elizabeth in sixteen

8:11

o one. In the Netherlands, we're

8:13

talking about the Dutch East India company. And

8:15

then there are smaller ones that are chartered

8:17

by the French and by the Portuguese. The

8:19

English East India Company had a charter

8:21

that allowed it to trade on the Indian

8:23

subcontinent and in Southeast Asia.

8:25

And what the charter says is

8:28

this company is the only English company

8:30

that is gonna be allowed to trade in these regions. So

8:32

it's a monopoly that protects it from

8:34

other English merchants going

8:36

out and trading there.

8:37

So a protected monopoly. And what

8:39

share of the revenues or

8:41

profits would flow directly back to the

8:43

crown under this agreement? It's a

8:45

small amount. It's taxed like ordinary taxation. The

8:48

intention was to go and open

8:50

a spice trading business to compete

8:52

with the Dutch upward running a very

8:54

lucrative spice trade. England is just really

8:56

beginning to think about building an

8:58

empire of its own. It's beginning to feel like it

9:00

has a strong navy and it could

9:02

be starting a life as a colonial

9:04

power but is not in a position to be running its

9:06

own colonies as a government yet, and so

9:08

she charters this company. As it

9:10

turned out, the English East India

9:12

company did not confine itself

9:14

to the Spice Trade nor

9:16

to East India. At its peak,

9:18

which was around the mid eighteenth

9:20

century, when Adam Smith was writing the

9:22

wealth of nations, the East India

9:24

company controlled wait, you

9:26

want to take a guess, what share

9:29

of global trade would you say this

9:31

one company controlled at

9:33

its peak? 527 controlled fifty

9:35

percent of global trade at its peak is what I

9:37

can say. Okay. Let me ask you

9:39

this. Let's imagine that there was a

9:41

civil war of sorts. England against

9:43

the East India

9:44

company. Who wins? The East India

9:46

company. Because it governed a hundred

9:48

million people and

9:50

at its peak. And at that

9:52

time, the whole population of

9:54

England was, like, five

9:56

million people, maybe eight million people, certainly less than

9:58

ten million people. Okay.

10:01

How did a spice trading

10:03

company with a charter out of London come

10:05

to govern a hundred million people on

10:07

the Indian subcontinent? Well,

10:09

in seventeen sixty five after

10:12

years of expansion and

10:14

war, the East India company

10:16

signed a treaty with India's

10:18

mobile emperor that allowed the

10:20

company to collect taxes from some of

10:22

the richest parts of India. With

10:24

a cut going to the emperor,

10:26

of course, This taxing

10:28

power made the East India company

10:30

the de facto sovereign over

10:32

much of India and provided

10:34

funding to continue growing. Back

10:37

in England meanwhile, there had been a long

10:39

period of civil war and then

10:41

a merger with Scotland, all

10:43

of which generated political chaos.

10:46

And while that's been happening, this other

10:48

organization has grown up with its own

10:50

currency, with its own ambassadors, with its own

10:52

army, governing a population that is ten

10:54

times the size. Of the country that it's

10:56

supposed to be representing. Not

10:58

everyone was in favor of the East India

11:00

company's reach. The politician and

11:02

philosopher Edmund Burke, for instance,

11:04

called it a date in the

11:06

guise of a merchant. And

11:08

Adam Smith becomes interested in the East India

11:11

company because during this

11:13

period, there is a moral sensation

11:15

in Britain of

11:17

controversial pamphlets about the company that

11:19

people would hand out at pubs and coffee houses

11:21

and read aloud 527 friends. Some

11:23

of them are written by company officials.

11:25

When are they? They propaganda, essentially. Some

11:27

of them are propaganda. They are kind

11:29

of that old thing. What's good for

11:31

General Motors is good for America. Some

11:34

of them are then critical accounts

11:36

that seem to be suggesting the East India company

11:38

is too powerful. But when you look Those are

11:40

written by merchants who would

11:42

love to be in the spice trade in India, but they

11:44

can't get in because it's a locked

11:46

monopoly. And in

11:48

each of those cases, in the pro East

11:50

India company pamphlets and

11:52

the anti East India company pamphlets,

11:55

Are the connections of the authors

11:57

well known? Or are

11:59

they a little bit of 527 propaganda?

12:01

Yes. 527 propaganda. Do they

12:03

use their real names? Would never use

12:05

fake names, but sometimes they would just be

12:07

signed like by a merchant.

12:09

And Smith becomes an enthusiastic

12:11

reader of these pamphlets Some of

12:15

these pamphlets as Atal

12:17

writes were written by men

12:19

who were at once company

12:21

employees, theorists

12:23

of economic policy, and

12:25

occasional advisers to government

12:27

committees crafting trade

12:29

regulations. If all this

12:31

feels, let's say, crony

12:33

ish or perhaps you prefer sleazy,

12:36

it is worth considering just how

12:39

blurry the lines were between

12:41

commerce, government, and the

12:43

intelligency. The enlightenment

12:45

philosopher John Locke 527 instance,

12:47

who was revered today for his arguments

12:49

about property rights, he was also

12:51

a shareholder of the

12:53

royal Africa company which dominated England's

12:56

trade inslades. What about

12:58

Adam Smith? He

13:00

was repulsed by what he saw as

13:02

the East India company's self

13:04

dealing. He found it in

13:06

Atal's words politically oppressive

13:08

and economically unproductive. One

13:11

incident in particular caught Adam Smith's

13:13

attention, a serious drought in

13:15

Bengal, where the East India

13:17

company took grain from hungry

13:19

peasants. In order to feed the

13:21

company's own army. And

13:23

between seven and ten million people die in a

13:25

year. Mhmm. Which is somewhere between a

13:27

quarter and a third of a population of the province at

13:29

the time. I mean, it's huge mouse death

13:31

event. And it's such a big event that it's

13:33

covered in the papers. In

13:34

Britain, and the company does have to report

13:37

about it in its company reports. Smith

13:39

becomes very interested in how did this happen? How

13:41

is this company mismanaging its

13:43

rule? Rating in the wealth

13:45

of nations Smith blamed

13:47

the severity of the famine on the

13:49

East India company's improper

13:51

regulations and in

13:53

judicious restraints. After

13:56

the

13:56

famine, the British government got more involved

13:58

in the oversight of the company, but

14:00

there was another colonial

14:02

scandal brewing It's called the

14:04

East India company, but it gets

14:06

itself involved in the American revolution.

14:09

Yeah. With tea. With tea. The

14:11

East India company due to a combination

14:14

of overreach, war,

14:16

corruption, and the sheer cost of

14:18

maintaining a huge army. Had

14:20

fallen into significant debt. So the

14:22

British government tried to bail them out

14:24

with the T Act of seventeen

14:26

seventy three. This gave the

14:28

company a monopoly on the sale of

14:30

tea in the North American

14:32

colonies. That tea would be

14:34

subject to import taxes. Which

14:36

antagonized the colonists to the

14:38

point that, as you likely know,

14:40

some of them boarded ships in

14:42

Boston Harbor and dumped the East India

14:44

Company's tea. And Smith in his

14:46

critique of the Bengal famine and what's happening

14:48

in India says, look, part of the problem here

14:50

is it can't be regulated because

14:52

it's so big and it has

14:54

all these independent relationships with Indian

14:56

government officials that really should be part of British

14:58

state diplomacy, and it has this

15:00

internal conflict of interest between its commercial

15:02

and political imperatives. This is gonna

15:04

lead to some form of state capture where the

15:06

British government ends up doing things that are bad for

15:08

Britain to help the company. So he's

15:10

concerned about the way in which the governance in the

15:12

colonies will corrupt British government of

15:14

society. Were there other British firms

15:16

who were selling other things to the

15:18

colonies? Yes. That was a relatively

15:20

free trade. And they announced that there was gonna

15:22

be a limited set of wholesale licenses.

15:25

Only certain people are gonna be approved to get them

15:27

in

15:27

the, you know, North American ports and Boston,

15:29

Charleston, so on. And only the

15:31

East Indian company is gonna have this transatlantic

15:34

shipping route. So in other words, there

15:36

were vendors who had trading agreements

15:38

are trading networks in place and they

15:40

were then suddenly

15:41

excluded. They were then suddenly

15:43

excluded. And then the wholesale

15:45

licenses We're only gonna give out a limited number

15:47

of those. We're gonna cherry pick our favorite people to

15:49

give them to. This creates this huge

15:52

political outcry and it's in the protest over

15:54

those

15:54

licenses. That the tea is famously thrown

15:56

overboard in Boston Harbor. So

15:58

I have a big question. You have to

16:00

pardon my ignorance here. But

16:02

for someone who may think about Adam

16:04

Smith, today as a

16:06

patron saint of free market capitalism.

16:09

Mhmm. It sounds like the East

16:11

India company was

16:13

the embodiment of free market capitalism

16:16

and it turned out to be

16:18

a den of corruption

16:20

and bloat and

16:21

failure. So how can those two things

16:23

be true? Well, Smith would say

16:25

that it's not a particularly free

16:27

market entity because it's able

16:29

to achieve all of this commercial prowess

16:31

because it has these special permits

16:33

from the government that other firms don't

16:35

have. But don't modern firms

16:37

today get version of a

16:39

special permit from governments to operate as a do,

16:41

maybe not as monopolistically, but

16:43

maybe not as un monopolistically either.

16:45

Yes. We shouldn't say that the government creates a

16:47

monopoly, but, like, Who's Facebook's

16:49

rival, for instance? Who is Amazon's

16:51

rival? I ask you sincerely for an

16:53

answer. Yeah. And well, I think

16:55

that from Smith in particular, there's

16:57

a really strong critique of state capture, and

16:59

we should be concerned. So when I

17:01

come back to Smith and thinking about Amazon, you

17:03

know, listeners may remember, what

17:06

Amazon was looking to open a second

17:08

headquarters. It had many cities in the United States

17:10

bidding to be the second headquarters. The

17:12

cities even before one was

17:14

selected, had to sign nondisclosure agreements to not talk to the

17:16

public about the fact that they were in contention or what

17:18

the terms of those would be. That's

17:20

something that it extracts from a lot of cities where it

17:22

has warehouses already. It's something that

17:24

Facebook has extracted from some of the cities where

17:26

it has data hubs and processing

17:29

facilities. So I think that we should be

17:31

worried about these large companies who are

17:33

large employers in the places where they set up

17:34

operations, they're often able to

17:37

extract terms from local government that are

17:39

not subject to public

17:41

discussion and public consent in

17:43

places that are ostensibly democracies.

17:46

By the

17:49

nineteenth century, the East India company's trading monopolies

17:51

had been curtailed. After

17:53

the Indian rebellion of eighteen

17:56

fifty seven, The company was

17:58

nationalized and its activities

18:00

wound down. It still

18:02

exists in a sense in two thousand

18:04

five, the Indian businessman, Sanjit

18:06

Mehta, bought the rights to the name and

18:08

he turned it into a consumer brand focused

18:10

on luxury foods. So

18:12

the East India company survives

18:15

as a name, but a

18:17

name that represents something

18:19

very different from what it meant in its

18:20

lifetime, which is a

18:23

lot like someone else we know. He would

18:24

have been appalled by our brand of

18:27

casino capitalism. Coming

18:29

up after the break,

18:31

can we talk about where Adam Smith

18:33

would land onto days political spectrum.

18:36

Oh, god, please now. I'm Stephen Dubner.

18:38

This is Freakonomics Radio. We'll

18:40

be right back. Freakonomics

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20:30

John Yule's play the invisible

20:32

hand tells the story of Adam Smith's intellectual

20:35

journey, his rise to fame, and

20:37

his relationship with his mother,

20:39

It imagines Smith in

20:42

conversation with voltaire in

20:44

527, with his friend David Hume

20:46

in Edinburgh, and there's

20:48

another character in it. A modern day

20:50

history professor who acts as something like

20:52

the conscience of the playwright. Here

20:55

is what the professor has to say

20:57

about how Adam Smith might see

20:59

today's global economy.

21:01

He would have been appalled by our brand

21:03

of casino capitalism. Had he been alive today,

21:06

I think he would have urged economists

21:08

to consider that the quality, not

21:10

just the quantity of economic

21:13

growth, is what really matters. He saw

21:15

that wealth brought power.

21:17

He valued the free market

21:19

527 believed it was the responsibility of

21:22

a civilized society to

21:24

ensure that wealth should

21:26

not be achieved at the expense of the

21:28

rest of humanity. First

21:31

and foremost, Adam Smith

21:33

was a philosopher and a

21:35

humanist before he was an

21:37

economist. How can

21:39

it be? That the man known as the

21:41

founder of free market capitalism

21:43

is also a humanist whose sympathies

21:45

line up squarely against many

21:47

of the natural results of capitalism?

21:49

The political scientist, Glory

21:52

Lou, author of Adam Smith's

21:54

America, to spend a lot of time thinking about

21:56

this contradiction. This is one of my favorite

21:58

lines about him by the intellectual historian

22:00

Donald Lynch. He's so infuriatingly balanced.

22:03

I'd love that. As

22:06

well as mesmerizingly mundane his

22:08

life, at least as you're right. Oh,

22:10

yes. That's another phrase 527 really love.

22:12

And to be honest, there are parts of the

22:14

wealth of nations that are mesmerizingly mundane.

22:17

Most of us don't

22:19

read these texts as a scholar

22:22

and try to

22:24

divorce our personal politics.

22:26

Most of us, when we read almost anything,

22:28

it seems like we practice what

22:30

psychologists call confirmation bias. Right?

22:33

Oh, there's evidence from

22:35

Smith or whoever that proves that I was

22:37

right. Yeah. Do you feel that someone who

22:39

tends to be quite liberal or quite

22:41

conservative? If they were actually to read all

22:43

of Smith, which one would

22:45

feel ultimately more

22:47

supported, more at home, the leftist

22:49

or the rightest, Oh,

22:50

man. I'm gonna cheat.

22:52

They're both gonna feel

22:54

just as supported. Can you just

22:56

put this in an example Imagine

22:58

a young liberal college student reading the

23:00

book and coming upon something that

23:02

jives with everything they believe and then

23:05

something that really goes

23:07

against

23:07

it. So for the

23:10

recent Berkeley grad,

23:13

down with the Washington consensus,

23:16

young woman who

23:18

happens upon the works of Adam

23:21

Smith, she's going

23:23

to find a Smith

23:25

who had a radical

23:27

orientation towards the poor. She's

23:29

also going to find

23:32

that Smith had a view of

23:35

liberty that wasn't just about

23:37

the primacy of economic

23:40

freedom. That said, for every reading

23:42

of Smith, there's another reading of

23:44

Smith. For every sentence where it seems like Smith

23:46

says this is bad, there's another sentence

23:48

you could go, well, maybe not. Could

23:50

you give me

23:50

a few from each

23:53

category? Okay. Slavery,

23:57

bad. Futilism,

24:01

bad?

24:01

I don't want to be on the record for

24:03

saying this, but like growth.

24:05

Overall, economic growth is good.

24:07

Why would you not wanna be on the record saying

24:10

that? Doesn't that seem like a fairly

24:12

humane logical argument like

24:14

more people having access let's

24:16

say, food and electricity. I

24:18

mean, it used to be pretty

24:21

uncontroversial to say that. I think because

24:23

I'm worried about being taken out of

24:25

context. He thinks growth is good.

24:27

He thinks getting people

24:29

out of poverty is

24:30

good. He thinks high

24:33

wages and low profits

24:35

are good. I have to tell

24:37

you 527 Adam Smith were here

24:39

today, I don't think he's gonna

24:41

be in the Republican Party in the United

24:42

States. Is he? Oh god, please know.

24:45

No. I don't think so. But

24:48

if we were to poll

24:50

a thousand Republican voters and a thousand

24:52

Democratic voters right now in

24:54

the

24:54

US, where would we get a higher share

24:56

you think of people who say that they're in favor of

24:58

Adam Smith? If

24:59

I just

24:59

had to guess, I'd probably guess

25:02

the Republican party. It's difficult

25:06

to know because he was a whig.

25:09

That is Eamon Butler from the Adam

25:11

Smith Institute in London, which

25:13

promotes conservative positions under Smith's

25:15

banner. In Smith's Day,

25:18

Butler says, the tourists were

25:20

the more conservative people. And

25:22

if we were more like

25:24

reformers. So he'd be a sort

25:26

of liberal with a small l rather than a member

25:28

of the liberal party. I don't know that he'd be a

25:30

member of any party really. One

25:32

point of contention or at least confusion over

25:34

how to think about

25:35

Adam Smith today is his

25:38

frequent use of the phrase self

25:40

interest.

25:40

If you want to regard self interest 527 the B0NA

25:43

Noel Fort Smith says of his analysis, that's

25:45

a mistake. That is

25:48

Craig Smith. No relation, but he is an Adam

25:50

Smith scholar at Glasgow University.

25:52

But it's also a mistake to say, oh, he wasn't

25:54

interested in so far just because he

25:56

was. He knew that in certain circumstances,

25:58

human beings pursued their own interests, and

26:00

that had consequences that you

26:02

could study as a social scientist.

26:05

Other times, they behaved benign. And that benevolence

26:07

could be studied in the same way as a

26:09

social scientist. So I think the association

26:11

of Smith was Has

26:15

privileged that particular element in this analysis,

26:17

which is more apparent in the

26:19

wealth of nations. It's endothelial

26:21

moral sentiments but it's understood

26:23

a richer context in the Soviet moral

26:24

sentiments. One thing we've learned here that

26:27

surprised me was when

26:30

we visited Smith's hometown Kirkcuddy and saw

26:32

that it's not a it was never a big city, but it

26:34

was a market town and a

26:37

harbor town. Yep. And that there was a lot to be

26:39

learned there about the way commerce

26:41

actually worked. From the twenty first century,

26:43

when we look back, we

26:45

assume that these old economies were very primitive,

26:47

but they weren't in all primitive, they were complicated

26:49

and complex. The scale was different,

26:51

perhaps, but complicated and

26:53

complex. So that has changed

26:55

my understanding of how thoroughly

26:57

Smith understood how economics

26:59

actually worked on the

27:01

ground. Knowing

27:02

what you know, I'm curious to ask,

27:05

how you think he would assess the

27:07

modern economy? Well, that's

27:08

a good question. One of the things that

27:11

interesting about Smith is just how much he

27:13

anticipates, things that you could see around

27:15

about him beginning to happen and

27:17

that worried him about the way the

27:19

economy was developing. obviously,

27:21

he's doing that in an eighteenth century setting.

27:23

It's the beginnings of

27:25

what would become the modern globalized

27:28

world. But he was aware of the

27:30

different factors that were impacting on this. He

27:32

was aware that different

27:35

economic actors had

27:37

different and potentially contradictory interests,

27:40

and that that was a threat that came from

27:42

this kind of development. So

27:44

Smith is often held up as being

27:46

this person who sailed a breach,

27:48

the development of a modern economy. And yes, he

27:50

is. To a certain extent, He sees

27:52

it as a welfare, a more humane

27:54

world than the world had

27:56

come 527. But he was also aware of

27:58

the negative side of it. And so you

28:00

find in Smith a set of warnings about

28:03

things like cronyism, corporate

28:05

corruption of politics, imperialism,

28:09

exploitation of

28:09

workers. That

28:10

all sounds very familiar from the

28:12

twenty first century. Yes? Yeah. Yeah. It

28:14

does. And he's I mean, obviously, he

28:16

didn't have a crystal ball or anything like that, but he

28:19

could see that those were the kind of issues that

28:21

would come out of

28:23

our commercial society. Smith understood

28:25

that there was a central rule for the government to play.

28:27

He understood that there were limitations to be pushed

28:30

on particular forms of economic activity

28:32

that were necessary for CISO, the

28:34

proper operation of a commercial society.

28:37

And that more nuanced,

28:39

more pragmatic analysis

28:42

is I think what is the takeaway from

28:44

anybody who reads Smith. Yes,

28:49

Nuance. It is something we strive for

28:51

on this program every week. I'm not saying

28:53

we always get there, but it's

28:55

a goal. In this regard, Adam Smith is a

28:57

good model for

28:57

us. But there is also an

29:00

argument to be made that Nuance

29:02

is for the perpetually undecided

29:05

or the week of heart.

29:07

John Yule is not

29:09

such a person. He had been trying to figure out what would be

29:11

the topic of his third play.

29:14

As it turns out, his second play, the

29:16

one about Adam Smith, has set

29:18

him on a clear path. He has

29:20

come to think that Smith was

29:22

either misunderstood or outright

29:25

exploited by politicians and policy advisers

29:27

in the UK. I

29:29

felt the policies

29:33

espoused by such and

29:35

her cabinet, her fellow politicians in

29:37

the conservative party were

29:40

cruel, callous, and unnecessary.

29:43

And they were creating a society

29:45

which was selfish. And

29:47

I think the apex of that is

29:49

the behavior of the banks. Which

29:51

she helped to deregulate the

29:53

behavior of the banks, which is a subject

29:55

of the third play I've decided

29:58

only yesterday. Was

30:00

the apex of utter selfishness,

30:03

appalling behavior, which

30:05

allowed large sections of the

30:07

population to suffer badly. And

30:09

I think that's if not unforgivable,

30:12

at least deserves examination.

30:14

Now what would you say to let's

30:17

say we spoke with a fellow in London who

30:19

runs the

30:19

Adam Smith Institute, which has a

30:21

very different perspective on these things.

30:24

Yes. And in fact, the Adam Smith Institute was

30:27

one of these think tanks that Thatcher

30:29

actually consulted with or used

30:31

their

30:31

wisdom. Now he would argue that

30:34

this deregulation that you just spoke of and

30:36

the privatization of many

30:38

industries may

30:40

have been painful in the short

30:42

run, but that as appalling as

30:44

it was to use your word, what would be

30:46

more appalling is to let state grow and grow and

30:48

grow and grow and grow and then crumble under its

30:50

weight. Yes. And if you read history, we

30:53

have seen states have done that. Yes. So

30:55

what would you say to that critique

30:57

I think part of the problem is our political

31:00

system here in Great

31:02

Britain is too centralized.

31:04

Everything is centralized to London. So

31:06

you have what we've just been

31:08

through with three prime ministers

31:10

in months. And the second

31:12

one followed trickle down

31:14

economics as she called it -- Mhmm. --

31:16

and bankrupted the country almost.

31:18

There's something in that which speaks

31:20

about the approach of Adam Swiss. And

31:22

so I think there's middle

31:25

course to be had. And I think if power

31:28

spread around the country, we will

31:30

perhaps not become an

31:32

independent nation in Scotland, but a much

31:34

happier one. Coming up

31:37

after the break, there is a brand

31:39

new Adam Smith Institute taking

31:41

527 in the last house where Adam Smith

31:43

lived. We're trying to pick up where he

31:45

left off. This is Freakonomics

31:48

Radio. I'm Stephen Dubner. And I

31:50

wanna thank you for listening all year

31:52

long to this show. Our numbers

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this year have been bunkers,

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more than a hundred million downloads

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with another thirty or forty million for the other shows

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32:02

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32:05

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32:08

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32:10

if you feel like giving us a

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spread the word about this show to

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that is the best way to support the podcasts

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32:26

also got a great lineup of

32:28

episodes to start the New Year, including

32:30

a special series on

32:32

airline travel, and another one

32:34

on the controversy over returning

32:36

looted art and artifacts to their

32:38

countries of origin. And

32:40

we'll be back in a minute to conclude this series in search

32:43

of the real Adam Smith.

32:45

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33:47

Rosetta Stone, how language

33:49

is learned. Having

33:54

spent time

33:56

in Crookedi, Adam Smith's

33:59

hometown, and Glasgow, where

34:02

he studied and taught for

34:04

years. We headed to Edinburgh,

34:06

the Scottish capital, where Smith lived the

34:08

last years of his life. So,

34:10

Panmure House is Smith's final remaining

34:12

home. That is Caroline

34:13

Howard, the program director

34:15

of Panmure House. It was

34:17

in this seventeenth century building that Smith

34:20

completed the final editions of

34:22

the two masterworks, the theory of moral

34:24

sentiments, and, of course, the wealth

34:26

of nations. He also transformed Panmure House

34:28

into a vibrant meeting place

34:30

for all of the finest minds of the

34:32

Scottish enlightenment,

34:34

they would come together to debate all the biggest issues their day. And

34:37

how would Adam Smith have spent

34:39

his days while living here? I'm

34:42

sure he'd have risen with the sun and done some

34:44

work on his revisions to the

34:46

theory of moral sentiments in the

34:49

wealth of nations. Before he put on his dress code

34:52

and wandered up Edinburgh's

34:54

beautiful royal 527, which

34:56

I guess would have smelled a

34:58

little different back then from how it does

35:00

now. Panmure House lies

35:02

just off the royal mile, which is

35:04

the main drag of Edinburgh's

35:06

Old Town. Edinburgh Castle lies

35:08

at one

35:08

end, Hollywood Palace at the other. In

35:10

the middle, by the way, stands a bronze

35:13

statue of Adam Smith. The Real Smith,

35:15

meanwhile, the late eighteenth century, Adam Smith,

35:17

would have made his way

35:19

from Panmure

35:20

527. All

35:22

the way up the mile to house where

35:24

he would have spent anything

35:26

between eight to ten hours administrating

35:30

heavily and very successfully by all

35:32

accounts. Before returning home in

35:34

the evening to enjoy a meal prepared

35:36

by his cousin and mother,

35:39

I'm no doubt, and then a

35:41

bit more reading before

35:44

bedtime. So in between his morning

35:46

writing and his

35:48

evening reading, Adam Smith, one of the most celebrated thinkers of his

35:49

time, would spend eight to

35:51

ten hours working at

35:54

customs house, This

35:56

is true. For the last several

35:58

years of his life, Smith worked as

36:00

a senior official at the Scottish Customs

36:03

Board. He was essentially an

36:05

overseer of tax collection. I had been surprised to learn

36:07

this on two counts. First,

36:09

why would Smith want a

36:11

job at all if

36:13

he didn't need the income, which apparently he didn't.

36:16

And second, why would he want this

36:18

job? Adam Smith, known

36:20

today as a small government

36:22

free market fundamentalist, helping to run Scotland's tax

36:26

department. In Glasgow, I had asked the Smith

36:28

scholar, Craig

36:30

Smith, 527 this job wasn't a curious choice.

36:32

Yes and no. It's a family

36:34

tradition.

36:34

It's part of as a customs officer.

36:38

He obviously had a background and an interest in customs given the

36:41

work that he did on the Imperico

36:43

elements of the Wealth of Nations. So in

36:45

many ways, it made perfect sense. 527

36:47

was also interested in the way in which

36:50

customs, excise, and taxation

36:52

were deployed in the economy. It's about

36:54

how do

36:56

you tax effectively to get the revenue you need to run the

36:58

government, but at the same time,

37:00

not tax in a way that

37:02

discourages economic

37:04

activity. I had talked to Eamon Butler about this

37:06

too at the Adam Smith Institute in London. Just so you know,

37:08

here's Butler's position on tax

37:11

in general. Look, I'm in favor of cutting any tax of any

37:14

size at any time in

37:16

any amount for any purpose. I think

37:18

tax, it

37:20

may be unnecessarily

37:22

evil, but it's still an evil. So

37:24

isn't it strange that Butler's intellectual hero

37:26

spent his final years as

37:29

a tax collector? Tend to agree. It was basically a

37:31

job which most people you just stayed at home.

37:34

You didn't do anything. You just took

37:36

the money. But Smith actually

37:38

turned up and and Smith

37:40

actually did the job and he's, you know, he said he did all the

37:42

boring admin stuff. But at the

37:44

same time, he came up with

37:46

proposals to say, well, look, this text is

37:48

so complicated that you're actually

37:50

encouraging smuggling or you're

37:52

encouraging evasion. So why don't we just

37:54

simplify it? And he came up

37:56

with a lot of proposals on tax, which the incoming prime minister William Pitt actually

37:58

took up and put into legislation.

38:02

This image of Adam Smith as a sharp perhaps the

38:05

greatest economic mind of his

38:07

era, you run across it

38:09

again and

38:10

again. Here, for instance, is

38:12

the Smith Scholar Dennis 527 from

38:14

Syracuse University? Towards the end of his

38:17

lifetime, there's a famous story that features in

38:19

virtually everyaccount of Smith's life where he's entering a

38:21

room with William Pitt, the prime minister,

38:23

and his top ministers,

38:26

and they all rise to greet him and he says sedan gentlemen and

38:28

they say no, we'll stand until you're

38:30

first seated for all your 527, meaning

38:33

we're all your students. Whether or

38:35

not that's true. I don't know how faithfully they followed on Smith's economic advice,

38:37

but there is, you know, some evidence that he

38:39

had quite a bit of impact even during his

38:42

own lifetime. 527 you

38:45

get the sense that

38:47

Adam Smith's later years in Edinburgh

38:49

were good ones. There

38:51

is a lot to be celebrated in

38:54

Smith's life and memorialized,

38:56

but Panmure House is aiming

38:58

a bit higher than that. Today,

39:00

it's affiliated with Harriet Watt University and Edinburgh

39:03

business school who partnered to rescue the

39:05

house in two thousand eight

39:07

and restore it. The team at Panmure

39:09

House aims to reintegrate the economic and

39:12

ethical sides of Adam Smith's

39:14

legacy, and they use the building

39:16

to host Smith

39:18

inspired lectures and debates.

39:20

Also, the occasional play. John

39:22

Eulze, the invisible hand was put on

39:24

here in

39:26

twenty eighteen. But the pan viewer mission is growing. They are

39:28

hiring a team of academic researchers

39:30

to create a facility devoted to

39:32

what Caroline How

39:34

It calls sustainable

39:34

capitalism. We're at the dawn of the

39:36

fourth industrial revolution with far

39:39

more wealth literacy

39:42

and opportunity than ever before,

39:44

but this is also a time of

39:46

real geopolitical instability, rising

39:50

inequality. Completely unprecedented

39:52

environmental crisis and global

39:55

economic turmoil as

39:56

well. And how relevant can Adam

39:59

Smith be there? Dennis Rasmussen again. I wrote an

40:01

article a few years ago about Smith's

40:04

worries about

40:06

economic inequality. And

40:08

that's not something that, again, I think many people would take to be

40:10

a central part of Smith's concerns.

40:12

He wants everybody to be richer,

40:14

but does he really care about inequality?

40:16

I think he does. He worries about the inequality inhibits

40:19

sympathy, the ways that it's hard for

40:21

the rich to sympathize with

40:24

the poor, and the ways that

40:26

these things can undermine morality and even

40:27

happiness. The only things that are gonna

40:29

solve these problems the

40:32

open minded inquiry, recent

40:35

debate, and multidisciplinary collaboration

40:38

that characterized

40:40

Smith. And the Scottish enlightenment. This is definitely gonna

40:42

be the future of Adam Smith's thinking

40:44

as it were were trying to pick

40:46

up where he left off.

40:49

It is an enticing thought for sure,

40:51

to not only keep Adam Smith current for

40:53

the twenty first century, but also

40:55

to reclaim him. To show that he was

40:57

so much more than the cardboard cutout image. So many of us

41:00

have the free market, Zelle, who

41:02

apparently thought

41:03

some invisible hand would solve

41:06

everything. One evening during our visit

41:08

to Edinburgh, the playwright

41:10

John Yule and I

41:12

took a stroll through Panmure House along with a program

41:14

executive named Blair Barrows.

41:16

Every event we do is

41:18

kind of introducing people

41:20

to Smith as a human because they're only they

41:22

see a statue of him, and they see a plaque

41:24

on the wall, and they see a picture, but

41:26

they don't see that human element. But not statues and plaques.

41:28

It's that what he is

41:31

thought to represent

41:34

as a patron saint of a certain kind of free market

41:36

ideology is in

41:38

fact a component

41:38

of who he was, but just

41:40

one. That's There we say

41:42

that is an

41:44

American ideology, not typical

41:46

to America or of America,

41:49

but by and large, came

41:51

from there. It's come to this desert John.

41:54

It's come to the Sudah Chicago

41:56

School of Economics among

41:58

others. But The other side of

42:00

that is that because

42:02

Britain followed America and almost

42:04

everything it did, particularly with

42:06

money, and we've become so

42:08

Americanized here, that

42:10

madam satcher, as we said

42:12

earlier, actually propagated the

42:14

same stuff, you know, that

42:16

right

42:17

wing ESOS of that's what Adam Smith was about.

42:19

So to what degree would you

42:21

say this project is meant to

42:23

be a corrective

42:25

to that Not just the wealth of nation

42:27

Smith, but the nineteen sixties University

42:29

of Chicago, nineteen seventies

42:31

and eighties Britain nationalizing

42:34

privatizing Adam Smith. I

42:36

wouldn't use the word corrective. The

42:38

project here is we're trying to open

42:41

up debate more. We're trying

42:43

to introduce people to Smith

42:45

for them to develop

42:47

their own ideas. So I wouldn't say

42:49

it's a corrective. I would just say it's building on a foundation of

42:51

different ideas. Nice done. Same

42:53

thing. Well, because I

42:55

am neither academic or

42:58

any of these things, I can say, what I

43:00

wanna say. And I would say that

43:03

Great Britain bought locks

43:05

dock and almost barrel the American

43:08

way. They really did. They

43:10

went for it and became

43:12

individualistic throughout

43:14

the nation. And that has been to the detriment of many,

43:16

many things. And I'm not sure that there's

43:18

not now a movement led by

43:20

Panmure

43:21

Heis and others like them to I think I would

43:24

use the word corrective. He's correcting

43:25

your lack of

43:28

using corrective. The

43:31

Smiths moved into

43:33

Panmure House in seventeen seventy

43:36

eight. Margaret

43:38

Smith His beloved mother lived with him here at Panmir

43:40

House until she died in

43:42

seventeen eighty four, which was just six years

43:44

before Smith himself passed away.

43:48

His mother was very, very religious. And

43:50

some people have suggested that part

43:52

of the reason that Smith is so

43:54

careful about what he says about

43:57

religion was more indifference to hearth than it was to the

44:00

church. You know, I always wonder what he

44:01

would have written it. She died earlier. He died later.

44:03

You think he would have broken loose

44:05

a bit more? Some people have suggested that, and they've said that if you

44:07

look at some of the changes made to the very final edition of

44:10

TMS, the serial model

44:12

sentiments 527

44:14

she had passed away that some of the passages might

44:16

be interpreted as reducing the

44:19

religious

44:19

context. While he was

44:21

able to make meaningful revisions

44:24

to theory of moral

44:26

sentiments and wealth of nations during

44:29

his time at Panmir.

44:32

He was also unfortunately really busy with his day job.

44:34

Okay? So this prevented him

44:36

from writing the third major

44:38

work that he

44:40

had planned. It's unclear what this third major work might have

44:42

been. Smith was known to have made

44:44

notes for a book on the history of the

44:46

arts and

44:48

sciences and another book on the history of law and government.

44:50

In fact, in seventeen ninety

44:52

on his deathbed, he had

44:56

the two executives of his will, Joseph Black and

44:59

James Hutton, come to Panure

45:01

House to burn all of the

45:03

unfinished notes and papers that

45:05

might have helped us piece together

45:08

what would have been in that third

45:10

major work. It is a real

45:12

loss actually that we don't have that

45:14

text and

45:15

I have checked the seller in the

45:17

attic several times and I'm afraid they

45:19

really are gone. Adam

45:23

Smith died at Panmure House

45:25

in seventeen ninety, age sixty

45:28

seven. John Yule's play,

45:30

citing Smith scholarship, him

45:32

as somewhat frustrated toward the end of his life

45:34

that he hadn't accomplished

45:36

more. He was buried very

45:38

close by at Cannon

45:40

Gate Kirkyard. John Eul

45:42

and I 527 followed Smith's

45:44

footsteps all day and into the

45:46

night, we went to pay our respects.

45:50

So John, we're

45:50

entering what you call the Kirkyard. Yes. Okay. What

45:53

we would call the

45:53

cemetery or it's just

45:56

Churchyard, but it happens to

45:58

graveyard graveyard. And it

46:00

happens to be Halloween.

46:02

Are you a believer? No. But

46:04

I still feel slightly nervous.

46:07

Because it is Halloween. And because you're with

46:10

Americans and you distressed us

46:11

perhaps? No. the no.

46:14

Those are

46:15

the people of Edinburgh who are likely to leap up from behind the scenes,

46:17

527 ask for a money, trick

46:20

or treat.

46:22

It is

46:23

quite spooky, isn't it? But it's

46:25

easily quiet. Up

46:30

here, Adam Smith.

46:32

And this is where the great man lies.

46:34

Oh, so he's got a very

46:36

special place in the cemetery. He does.

46:39

He really does. I like the grave. I

46:41

think it's suitable to the man. I think

46:43

it fits his personality, and I think

46:45

it fits his world

46:48

and his place in it. There's

46:50

a slight austerity about it,

46:52

which I feel is appropriate

46:54

and that the influence of his mother must have rubbed off

46:56

in some way on him. I just feel

46:58

that from that grave. It's not fancy

47:02

and it's speaks to me of serious

47:04

person, a serious person,

47:07

not somebody who wants to be

47:09

known for 527 and

47:10

beads, but for serious thoughts and words.

47:13

And can we

47:14

read what's there? Written

47:16

on the footstone is

47:18

the property which every

47:20

man has in his own labor

47:23

is the original foundation of all other

47:26

property, so it is the

47:28

most sacred and inviolable.

47:31

That's really good. I

47:33

wish I'd put that in the play. When you talk about

47:36

how much the world was changing during

47:38

Smith's time and it was,

47:40

it certainly changed quite a bit since

47:42

his time. And as we stand

47:44

here at his gravesite

47:46

on Halloween in Edinburgh,

47:49

on the eve of the three

47:51

hundredth anniversary of his birth, what

47:53

do you think Adam Smith would say to you

47:56

tonight, you John Newell, who's been writing

47:58

and thinking about

48:00

Adam

48:00

Smith, and about how Adam Smith saw the world. What do you think he would say to

48:02

you? You say, finish

48:03

that third play or keep on 527 it. You say,

48:06

get it finished because

48:08

that concludes the

48:10

journey that you've been on, which started

48:12

and still lives with the

48:14

theory of moral sentiments. And I know the

48:16

wealth of nations is the most famous book

48:19

But for me, as was

48:21

said

48:21

earlier, it's the theory of moral sentiments,

48:24

which is the guide. So if that's

48:26

your mission as directed by Adam Smith, what

48:28

do you weigh time talking to me here

48:30

in the cemetery, you gotta get home and get to work.

48:32

Don't

48:32

you? You invited me, and we've had

48:34

a very nice day, and you

48:36

gave me lunch at the end of the day, I'm

48:39

just a traveling player. And the

48:41

thought of lunch is always

48:43

a

48:43

bidding. And so now I'll go back and do

48:45

the play and be hungry Laurel.

48:50

And thus

48:52

concludes our three part search

48:54

for the real Adam Smith. All

48:57

my thanks to John Eul

48:59

along with his merry band of

49:01

Smith historians from

49:04

thanks to all the Smith's scholars and Debotez

49:06

who gave us their time and expertise,

49:08

and thanks especially to

49:11

you for listening. Again, if you are willing to spread

49:13

the word about Freakonomics Radio, that would be

49:16

great. My biggest thanks here go

49:18

to Zach Lipinski who produced

49:20

this series with

49:22

great care and insight and humor, and you also proved

49:24

to be an excellent traveling companion. And

49:26

one more note of Bank to

49:29

John Yule for lending his fine voice to

49:31

the readings of Adam Smith as well

49:34

as for his companionship

49:36

and for leading us to a very

49:38

good haggis. Coming up next

49:40

time on

49:41

the show. I think it's

49:43

very unusual to have

49:46

your mix of apprehension

49:48

in some domains, say, like public

49:50

speaking, and what must

49:52

be extreme self confidence to

49:55

feel like you can write the entire history of mankind.

49:57

I'm not sure it's self confidence. At least when

49:59

I wrote Sapiens, I didn't

50:01

take myself or 527 too

50:04

seriously. And, yeah, I

50:06

might make some terrible mistakes, but

50:08

that's fine. I mean, who's going

50:10

to read it anyway? People did

50:13

read Sapiens, millions of people. It's an unusual

50:15

and extraordinary history of the

50:18

human race by Yuval Noah

50:20

Harari. He sat down to talk about

50:22

it with Steve Levitt, my freakonomics

50:24

friend and co author 527 his

50:26

podcast. People I mostly admire.

50:28

That's one of our sibling podcasts

50:30

in the freakonomics radio

50:32

network. And for a special holiday

50:34

treat, you will hear that Harare interview next time on this show.

50:36

Until then, take care of

50:38

yourself. 527 if

50:42

you can, someone

50:44

else too. Freakonomics radio

50:47

produced by Stitcher and Renbud Radio, you can find

50:50

our entire archive on any

50:52

podcast app or at 527

50:54

dot com we also published

50:56

transcripts and show notes.

50:58

This episode as noted earlier was

51:00

produced by Zac Lipinski

51:02

with help from Katherine Moncure and it was mixed by Greg

51:04

Ripon with help from Jeremy Johnston.

51:06

We also had help in Scotland

51:08

from Josh 527, and

51:10

upload studios, and help in

51:12

London from Rob Double, Alex

51:14

527 LaSalle and London Broadcast Studios.

51:16

Our staff also includes Morgan Levy, Ryan Kelly,

51:18

Alina Coleman, Rebecca Lee Douglas, Julie 527, Eleanor

51:21

Osborn, Jasmine Klinger,

51:24

Dairy Klener, Ematorel,

51:26

Lyric Boudic, and Elsa Hernandez.

51:28

The Freakonomics Radio Network's

51:30

executive team is Neil Carruth,

51:32

Gabriel Roth,

51:34

and Meats. Steven Dubner. Our theme song is mister Fortune

51:36

by the hitchhikers. All the other music

51:38

was composed by Louis

51:39

Guerra. Once

51:42

thanks for listening. Look

51:44

there's a light. Look

51:46

somebody coming up with

51:49

a light.

51:49

Alright. Let's pretend that those people are not going to

51:51

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51:57

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