My Teeny Tiny Conference About Adam Smith

The Fitzwilliam seminar on economic thought

Two weeks ago, I ran a teeny tiny conference about the history of economic thought.

We called it The Fitzwilliam Seminar on the History of Economic Thought, and the focus was on Adam Smith, classical liberalism, and the Scottish Enlightenment.

The event was in Panmure House, which is where Adam Smith lived from 1778 to 1790 while he worked as a customs comptroller. Our main discussions took place in the drawing room, where it’s believed that he held dinners for the Oyster Club, a learned society that he ran with his friends David Hume and Joseph Black. 

When I say ‘teeny tiny’, I literally mean eight people. The close-knit and extremely focused nature of the group was my favourite part of the event. 

The event was somewhat of a milestone, as the first official Fitzwilliam event hosted outside Ireland. We’ve previously run a film screening, a retreat, a writers’ meetup, and a pub meetup.  

Why the history of economic thought?

For one thing, last year I enjoyed reading Tyler Cowen’s book Who Is the Greatest Economist of All Time?, and I thought it would be fun to turn it into an event. Second, I had never read any Adam Smith directly before, and this was a less painful way to force myself to do it.  

Also, the opportunity to run an event in Adam Smith’s house was simply too good to pass up. We were given a tour, and we got to read and turn the pages in a first edition of The Wealth of Nations from 1776. I would have thought that you should use gloves when handling a book that old, but apparently, the oils in your fingers prevent the pages from clumping together.    

The format of the event was as follows: there were five sessions, each lasting a bit under an hour, chaired by an academic who guided a discussion about their chosen topic. You can see the schedule here. The rest of this post will be a summary of what we talked about in each of the sessions. The summaries have been written by me, so the attendees wouldn’t necessarily endorse every word.  

Overall, I felt the event went swimmingly, and I’m grateful to the attendees and to everyone who helped organise. It was honestly one of the most memorable and intellectually fulfilling experiences I’ve had.  

After the event, I brought everyone to dinner at one of my favourite Chinese restaurants, where we were served by a robot. Just as Smith would have wanted. 

Stephen Kinsella: StephenGPT

Stephen Kinsella is chair of the economics department at the University of Limerick; you can follow him on Twitter here. 

When Stephen Kinsella was 23, he took a course called ‘Historical Foundations of Political Economy’ – his favourite from his PhD. For that course, he took extensive notes while reading Marx, Keynes, Smith, and other influential economic thinkers. For this session, Stephen uploaded those notes to train a GPT model to simulate himself at age 23. He then created a second model, using those notes and also his columns for The Currency and other public writings, to simulate himself at his current age (46). There are a few interesting directions you can take this in, for example:

• Use StephenGPT-23 to predict Stephen at 46, and see how accurate he is. In the general case: How predictably do people’s views shift over time? Should you be concerned if a large language model trained on your past self can predict your current view too accurately? 

• Compare the responses of StephenGPT-23 and StephenGPT-46, to see how his views are generally changing over time. The questions he prompted it with included “Has Smith or Keynes been more influential on Stephen Kinsella’s views?” 

• Write down predictions in advance for what you believed when you were young, then see how accurately you remember your previous understanding. 

Stephen is also using LLMs to great effect in a course he teaches called ‘International Economics’ at the University of Limerick. The winning formula seems to be creating a different GPT for each week of the course, which is trained on material only up to one week ahead of where the students are. If you train the model on all the course material, it’s too difficult to prevent it from bringing up later information which confuses them. He has been running A/B tests on whether these LLM teaching assistants are effective. The tricky part is that they are so popular that students are requesting to transfer into the tutorial groups which use them, messing up the causal inference.

A general theme of our conversation was that deep reading of texts and tracking how you struggle through them is an area that is particularly ripe for improvement with LLMs. It’s great to see Stephen running some experiments to this end.

Rebecca Lowe: Adam Smith as a radical egalitarian 

Rebecca Lowe is a political philosopher writing a book about the philosophy of freedom; you can follow her on Twitter here. You can see the abstract for the paper she’s writing about this topic here.  

Adam Smith was remarkably egalitarian. You might call him a hardcore ‘epistemic capacity egalitarian’, believing that we all possess equal potential to know how to lead fulfilling and ethical lives. This is the basis of his moral theory, especially as he outlines it in The Theory of Moral Sentiments (his earlier book that focuses more on what we would now call psychology and moral philosophy). 

Amartya Sen, who wrote the introduction to my edition of The Theory of Moral Sentiments, is an influential interpreter of Smith. He interprets Smith’s libertarian attitudes as being in large part about how, if the state is too powerful, it curtails people’s ability to fulfil their moral potential. Smith’s vision is one of individuals with extreme levels of self-respect.

‘Equal potential’ does not mean equal potential to the same level. Clearly, people have different talents and proclivities – and socialisation is not the source of all of those inequalities. But the differences are probably smaller than they seem. Smith says that rich people seem smarter than poor people, but this is because poor people spend their lives in drudgery and don’t have time for academic pursuits. 

In her contribution to a set of collected essays about Adam Smith, Elizabeth Anderson proposed a distinction between ‘moderate’ and ‘radical’ egalitarians. Moderate egalitarians are people who just want to temper around the edges of a certain hierarchy, while radicals want to abolish that hierarchy completely. Jean-Jacques Rousseau is the prototypical radical in this analysis, and Anderon presents him as the foil to Smith. Anderson paints Smith as a moderate, but Rebecca disagrees. 

Adam Smith was certainly a radical relative to the time that he lived in. For example, he supported universal public education. He views public education as necessary in part to compensate for the drudgery created by the division of labour. And it seems at least debatable that he might also have been a radical in Anderson’s sense. 

Shruti Rajagopalan: The East India Company

Shruti Rajagopalan is a senior research fellow at George Mason University and director of the Emergent Ventures India programme; you can follow her on Twitter here. You can see the paper this discussion was based on here. 

In the late 18th century, the British East India Company was rapidly expanding its control. By 1803, most of the Indian subcontinent had been colonised. 

Adam Smith was an early critic of the East India Company. His criticisms first appeared in the 4th edition of The Wealth of Nations, and were expanded upon in subsequent editions. 

There are two classic criticisms of the East India Company. The first is that colonisation in itself is wrong. The second is that the Company’s status as a monopoly led to abuses. Many critics of the East India Company subscribed only to the second critique: the MPs involved in the impeachment of Warren Hastings, for example, would not have disputed the rectitude of the Empire in general. This was a recurring topic: Every time the monopoly charter was renewed by parliament, there was a major associated debate. 

Adam Smith’s criticism was more nuanced than either the pure anti-colonial or anti-monopoly lines of thinking. I understood his criticism to have four parts: 

First, the East India Company was one of the first joint stock companies in the world, and Smith was sceptical of joint stock corporations in most cases.¹

Second, Smith says that the company’s abuses stem from their mercantilist attitudes. Mercantilists advocated for maximising exports and minimising imports, especially of precious metals, which were seen to be the primary determinant of national wealth. He says these attitudes partly caused the 1770 Bengal famine, which led to the deaths of an estimated 10 million people. The Company held a monopoly on the distribution of many goods to Bengal, as well as a large quantity of the food supply – and, on both fronts, made a huge profit from the famine. The famine years brought in record revenues for the Company. (For more on the general history of the East India Company I recommend William Dalrymple’s The Anarchy.)

Notice that this criticism is different to being opposed to colonialism in general. If Britain had control over India, but didn’t grant a mercantilist monopoly to the Company, then it could have been in the self-interest of colonists to improve services and health, and collect a fraction of the resultant economic uplift.

Indeed, he says that the Company was not as rife with abuse when it still had to compete with the Portuguese, French and Dutch East India Companies. But after the Carnatic Wars, British dominance over the French in India became relatively clear outside small pockets.

Third, Smith argues that sustaining the monopoly causes a huge amount of corruption in Britain. The historian Dan Bogart has written about the extensive network of bribes in parliament which were required to sustain the East India Company’s monopoly charter. The Company was corrupting not just the colonised but the coloniser.   

Fourth, he writes about what we would now call principal-agent problems in the context of the Company. It was extremely difficult to align the incentives between officials in London and employees in Bengal. One of the major problems faced by the Company was employees trading under their own names, i.e. exploiting their position of influence in the Company to strike private deals, hoard food, and manipulate market prices.   

Smith’s writing about the East India Company is a historically significant and nuanced criticism. He gives an account of why you might oppose the Company and their policies, even if you weren’t opposed to the British in India per se. He shows that the militaristic nature, the corruption of officers, and the poor delivery of social functions were inherent to the incentives created. Shruti says that she’s not aware of any criticisms of the East India Company at remotely this level of sophistication and complexity until many decades if not over a century later. 

Anton Howes: A digression on coinage 

Anton Howes is a historian who writes the Age of Invention Substack; you can follow him on Twitter here. I hope you will be hearing more about this topic soon on his blog. 

There’s a section in The Wealth of Nations that approximately no one has read, in which Smith goes on what feels like an interminable tangent about silver prices and the history of coinage. For Anton Howes, that’s the best part. 

Monetary history is extremely underrated, and Anton has helped me to appreciate that. His session gave a broad overview of the context relevant to understanding intellectuals in Smith’s time writing about currency.  

The way that coinage used to work is that you would take your gold and silver to a mint counter, and they would be exchanged for coins with a corresponding value. Those coins would be made from a mix of metals, usually silver and copper (gold coins were rare and impractical). The ratio between the quantity of precious metals that you give to the mint and the amount of that metal they give you back in the form of coinage is set by the mint price.   

(By the way, some of these mints were privately operated. The state did not have a monopoly on money at this time. Even the East India Company could issue its own coinage, thanks to Charles II.)

By Smith’s time, the value of coins in Britain had become ‘by tale’, which is to say, their value came from the face value being legally enforced, rather than from their metal content. ‘Debasement’ refers to a situation where you alter the metal content in a coin to be less valuable while keeping the face value the same. A typical debasement would involve replacing silver with copper in coins. The usual motivation for debasement was that the government wanted to keep the extra precious metals as a way of raising revenue. This was a form of seignorage, which is the profit that a government makes from producing money. This was a huge deal: seignorage was historically one of the largest sources of government revenue. Rebasement is the opposite process, of adding more precious metals into coins.

Debasement is not a problem in itself. As you make coins out of less and less valuable material, in the limiting case currency would only be valuable because everyone agrees on the face value. That would just be fiat currency, i.e. the system we have today. The trouble comes from international trade. If you debase your currency but are still buying the same goods with it, the country you’re trading with will have less silver flowing into it – especially important if you are a mercantilist. The extent to which trading partners were debasing their coins was extremely politically sensitive. 

The funny thing about debasement is that you can’t easily tell when it’s happened. The mix of metals will be chosen such that the density and look are the same. You would need to assay the coinage to find out what metals are in it, which at the time was a relatively sophisticated chemical test. There were several examples of different countries debasing their coinage in secret. 

‘Aggressive’ debasement is when you debase your currency not in response to any other country, and ‘defensive’ debasement is when you change the metal content of your coins in response to someone else’s debasement. News or rumours of debasement could set off chain reactions of more debasements.

There was something of a black market in debasing your own money. Think about it: If coins are made out of silver, but the thing that gives them their legal value is the stamp on the top, then I will remove as much of the silver as possible without sacrificing the legal integrity of the coin. In fact, in various European countries, this was part of the design: There would be an outer part of the coin’s design corresponding to how it was issued, and an inner part which was the minimum amount you could have of the coin and still have it be accepted.  

A crucial piece of context is that Britain is historically extremely unusual for almost never debasing its coinage. The major exception to this was Henry VIII’s Great Debasement, which is how he got the nickname ‘Old Coppernose’. Coins had the King’s face on them, but after debasement, they became so low quality that, with use, the front part of the coin would wear away and you would start to see the copper peaking through Henry’s nose. Subsequently, one of Elizabeth I’s great domestic political accomplishments was to successfully rebase the coinage. 

Britain was tame on the coinage front, and Germany was the opposite. The Kipper und Wipper (the ‘see-saw time’) was a financial crisis in the Holy Roman Empire where different German mints started aggressively debasing, forcing other regions to defensively debase. 

Funnily enough, one of the most important scholars in this area was the astronomer Nicolaus Copernicus. He formulated what is now known as Gresham’s Law. Gresham’s Law says that ‘bad money drives out the good’: If you have different kinds of money in circulation with the same face value, the coins made from the more valuable commodity will begin to disappear from circulation. Gresham’s Law is one reason why defensive debasement was seen as necessary. 

An interesting question, which we didn’t have time to get on to during the event, is at what point monetary policy stops being governments just trying to maximise revenue, and starts to have an actual goal of price stabilisation. Sean Brocklebank (more on him in a moment) told us that, in pre-modern times, annual inflation or deflation could be enormous depending on the size of the harvest. Even if a medieval government were engaged in measures to target a stable rate of inflation, the year-to-year price changes due to how the staple crop was doing would have been so large that the general public probably wouldn’t even notice. 

In conclusion, I still haven’t read the part of The Wealth of Nations about coinage. Perhaps I never will, but at least now I have the context I need. 

Sean Brocklebank: Smith and behavioural economics

Sean Brocklebank is a senior lecturer in economics at the University of Edinburgh; you can follow him on Twitter here. 

Samuel Johnson once said that a dog who walks on his hind legs is remarkable not because he does it well, but because he does it at all. Sean asks: Are we just impressed that Adam Smith is engaged in contemporary and serious academic debates at all, rather than that he’s doing it well?² 

There is a cottage industry of people singing the praises of Adam Smith, and discussing all the developments and research findings that he allegedly anticipated (a key figure in this group is Russ Roberts of EconTalk). There’s a fun paper from the Journal of Economic Perspectives about all the different results from behavioural economics that Smith anticipated in his work. In some cases, more than two centuries elapse between a behavioural bias being written about by Smith and being seriously studied again. In The Theory of Moral Sentiments, he argues that behaviour is determined by a struggle between the “passions” and the “impartial spectator”, in a way that is strikingly similar to dual process models in psychology. He also recognisably discusses loss aversion long before Kahneman and Tversky would make it part of their academic programme. The paper has a nice list of ideas from Smith that the authors think haven’t been explored properly in psychology yet.  

Sean’s question is one part of the more general question of what the value is of reading old texts. Wouldn’t it be depressing if economists had made so little progress in 250 years that Smith could still make a contribution today? As my friend Pradyumna was recently savaged for asking on Twitter, physicists don’t read Newton’s Principia anymore – why read the classics in any other field?

It’s worth keeping in mind that economics is at the complete opposite end of the spectrum to history-obsessed philosophy, where you could probably get through an entire economics degree without reading a word from a single historically influential economist.

Personally, I have mixed thoughts about the value of reading old texts, but there are certain older books that I would read even if it were only for historical interest. It’s cool to see the development of ideas over time, and it can be fruitful to put yourself in the shoes of someone whose world was truly alien from your own. It raises questions like: If you didn’t take it for granted that colonialism and racism were wrong, what specific criticisms would you have had of Britain’s East India Company? Or: What might you have thought about the division of labour and the nature of work if you lived before the Industrial Revolution? 

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Finally, since this is The Fitzwilliam, it would be remiss if I did not mention that we also had a brief discussion on Adam Smith’s thoughts about Ireland, regarding which he bizarrely praises the virtues of the potato-only diet: 

The chairmen, porters, and coalheavers in London, and those unfortunate women who live by prostitution, the strongest men and the most beautiful women perhaps in the British dominions, are said to be, the greater part of them, from the lowest rank of people in Ireland, who are generally fed with this root [the potato]. No food can afford a more decisive proof of its nourishing quality, or of its being peculiarly suitable to the health of the human constitution.³ 

Sam Enright is executive editor of The Fitzwilliam. You can follow him on Twitter here. 

1.  See The Wealth of Nations, Book V, Chapter 1, Part III, Article 1.

2. This comment was funnier in person because we were next to a comically huge copy of Johnson’s Dictionary. 

3.  The Wealth of Nations, Book I, Chapter XI, Part I.