Wednesday, April 15, 2015

It ain't Sociology 101

I found a chart recently, a table comparing the ideas of different economists. Can't find it now, dammit. One column in the chart was for Adam Smith. One item under Adam Smith said his thinking was class-based.

Well, I didn't like that much, and I went on to other things. So, now, when I want to link to that table, I can't find it.

So it goes.

Maybe Adam Smith's thought is considered "class-based" because he focused on the differences among three groups: the owners of natural resources, the workers, and the owners of man-made resources. Land, labor, and capital.

Maybe Smith's thought is considered class-based for other reasons. I don't know anything about that. So I want to evaluate just the one notion, that Smith's focus on "land, labor, and capital" is class-based.

I begin with Schumpeter's thought, that if we do not make distinctions, we shall never be able to say any more than that everything depends upon everything.

Adam Smith looked at the world around him and he saw the aristocracy, and he saw the commoners. And he saw a rising new "class" or category, those people who make money by doing business. It didn't start out as business, you know? It started out as "busyness". But it grew in importance. And Adam Smith caught it on the up-swing.

Does that make his work class-based? Maybe -- if you don't look into what he says.

Smith made distinctions, because if you don't make distinctions you can't say anything interesting. But the distinctions he made were realistic. They were based on the world of his day. And he didn't focus on classes of people. He focused on types of income.

I don't like looking at things in terms of us and them -- the 99% and the 1% and like that. I prefer to think in terms of categories of income, not classes of people. So Adam Smith makes sense to me.

As Smith put it, writing of wages, profit, and rent:

When those three different sorts of revenue belong to different persons, they are readily distinguished; but when they belong to the same they are sometimes confounded with one another, at least in common language.

Classes separate people. But Smith pointed out that any one person can receive income of various types. So for him, income was not distinguished by class of person. It was distinguished by type of income. He also identified different regulating factors for each type of income. These regulating factors were what made one type of income different from another. Smith's thinking was not class-based. It was income-based.

That's why we remember him as an economist, not a sociologist.

1 comment:

The Arthurian said...

From the balance, Does Supply-Side Economics Work? by Kimberly Amadeo:

"Supply-side economics is the theory that says increased production drives economic growth. The factors of production are capital, labor, entrepreneurship and land."

People define the factors of production differently. Smith identified three factors, which today we call land, labor, and capital. I add finance as a fourth factor. I've seen some people add government as a fourth factor. And many people add entrepreneurship as a fourth factor.

Smith counted entrepreneurship in with labor.

If you separate the entrepreneur from the laborer, you are engaging in class-based economics. Not Smith. You.

The factors are cost categories. Why does nobody understand that?