prior probability

We now turn to Part 1 of Chapter 2 of Book V of The Wealth of Nations. Here, Adam Smith surveys the two major “Sources of Revenue which may peculiarly belong to the Sovereign or Commonwealth” (WN, V.ii.a.1): capital and land. Moreover, in the course of his superlative survey Smith, yet again, makes a number of timeless observations:

1. ADAM SMITH’S EVERGREEN CRITIQUE OF DEMOCRACY

First off, the Scottish scholar compares and contrasts in passing “the orderly, vigilant, and parsimonious administration of such aristocracies as those of Venice and Amsterdam” with “the thoughtless extravagance” of parliamentary democracies like England:

“The orderly, vigilant, and parsimonious administration of such aristocracies as those of Venice and Amsterdam is extremely proper, it appears from experience, for the management of a mercantile project of this kind. But whether such a government as that of England—which, whatever may be its virtues, has never been famous for good œconomy; which, in time of peace, has generally conducted itself with the slothful and negligent profusion that is perhaps natural to monarchies; and in time of war has constantly acted with all the thoughtless extravagance that democracies are apt to fall into—could be safely trusted with the management of such a project, must at least be good deal more doubtful.” (WN, V.ii.a.4)

2. SMITH’S LIMITED DEFENSE OF “MERCANTILE PROJECTS” LIKE THE POST OFFICE

Although Smith is very critical of the mercantile system in general (see especially Chapters 1 to 8 of Book IV of The Wealth of Nations), he is, above all and as we have seen time and time again, a pragmatist, so he is willing to tolerate — and even praise — certain mercantile projects when the benefits of those projects are great enough and benefit the public at large:

“The post office is properly a mercantile project. The government advances the expence of establishing the different offices, and of buying or hiring the necessary horses or carriages, and is repaid with a large profit by the duties upon what is carried. It is perhaps the only mercantile project which has been successfully managed by, I believe, every sort of government. The capital to be advanced is not very considerable. There is no mystery in the business. The returns are not only certain, but immediate.” (WN, V.ii.a.5)

3. “NO TWO CHARACTERS SEEM MORE INCONSISTENT THAN THOSE OF TRADER AND SOVEREIGN” (WN, V.ii.a.7)

Why? Because the government is a monopoly, so it doesn’t have to worry about competition:

“No two characters seem more inconsistent than those of trader and sovereign. If the trading spirit of the English East India Company renders them very bad sovereigns, the spirit of sovereignty seems to have rendered them equally bad traders. While they were traders only they managed their trade successfully, and were able to pay from their profits a moderate dividend to the proprietors of their stock. Since they became sovereigns, with a revenue which, it is said, was originally more than three millions sterling, they have been obliged to beg extraordinary assistance of government in order to avoid immediate bankruptcy. In their former situation, their servants in India considered themselves as the clerks of merchants: in their present situation, those servants consider themselves as the ministers of sovereigns.” (WN, V.ii.a.7)

4. THE OPPORTUNITY COSTS OF PUBLIC OWNERSHIP OF LAND

Last but not least, Adam Smith has this to say regarding government ownership of land:

“The revenue which, in any civilized monarchy, the crown derives from the crown lands, though it appears to cost nothing to individuals, in reality costs more to the society than perhaps any other equal revenue which the crown enjoys. It would, in all cases, be for the interest of the society to replace this revenue to the crown by some other equal revenue, and to divide the lands among the people, which could not well be done better, perhaps, than by exposing them to public sale.” (WN, V.ii.a.19; my emphasis)

But at the same time, the Scottish scholar makes a pragmatic exception for “parks, gardens, public walks, &tc.”:

“Lands for the purposes of pleasure and magnificence—parks, gardens, public walks, &c. possessions which are every where considered as causes of expence, not as sources of revenue—seem to be the only lands which, in a great and civilized monarchy, ought to belong to the crown.” (WN, V.ii.a.20)

On this note, recall Adam Smith’s discussion of “publick diversions” in Paragraph 15 of Article 3 of Part 3 of Chapter 1 of Book V of The Wealth of Nations (WN, V.i.g.15), one of my favorite passages in Smith’s entire magnum opus. For me, Smith’s call for “publick diversions” and his public-spirited defense of communal spaces go hand-in-hand: a great society is one in which the people are able to choose from many different forms of entertainment [1] in many different communal and private spaces.

Nota bene: I will proceed to Part 2 of Chapter 2 of Book V of The Wealth of Nations in my next post.

[1] Alas, as I mentioned in a previous post, a potential blind spot bedevils Smith’s call for “publick diversions”, for Smith says that the market for entertainment should be free so long as the forms of entertainment being offered are “without scandal and indecency.” (WN, V.i.g.15) The blind spot, then, is this: Smith’s anti-scandal caveat appears to necessitate some form of censorship. After all, who decides what is scandalous or indecent?

Happy spring! We now turn to the next-to-last chapter of Adam Smith’s Wealth of Nations: Book V, Chapter 2, which is available here. This chapter has two parts. Part One, consisting of 21 paragraphs, surveys “the Funds or Sources of Revenue which may peculiarly belong to the Sovereign or Commonwealth” (WN, V.ii.a). Part Two, by contrast, is much more lengthy and detailed than Part One. It contains a combined 204 paragraphs, spans 139 pages of the Glasgow edition of Smith’s magnum opus, and is further divided into six subsections as follows:

1. A general introduction (“Of Taxes”, WN, V.ii.b.1-7);
2. Article I: “Taxes upon Rent; Taxed upon the Rent of Land” (WN, V.ii.c.1-27), “Taxes which are proportioned, not to the Rent, but to the produce of Land” (WN, V.ii.d.1-9), and “Taxes upon the Rent of Houses” (WN, V.ii.e.1-20);
3. Article II: “Taxes upon the Profit, or upon the Revenue arising from Stock” (WN, V.ii.f.1-14) and “Taxes upon the Profit of particular Employments” (WN, V.ii.g.1-13);
4. Appendix to Articles I and II: “Taxes upon the Capital Value of Land, Houses, and Stock” (WN, V.ii.h.1-18)
5. Article III: “Taxes upon the Wages of Labour” (WN, V.ii.i.1-7);
6. Article IV: “Capitation Taxes” (WN, V.ii.j.1-9) and “Taxes upon consumable Commodities” (WN, V.ii.k.1-80).

Nota bene: We will jump into Part One of Chapter 2 of Book V starting on Monday, 23 March.

Chapter 1 of Book V of The Wealth of Nations (available here) contains a two-page conclusion consisting of six paragraphs (WN, V.i.i.1-6), but this short recap is pure gold. Here, Adam Smith lays down two general rules for public finance, three exceptions to his rules, and to top it all off, an exception to the exceptions(!):

A. TWO GENERAL RULES

RULE #1: LOCAL PUBLIC GOODS SHOULD BE PAID FOR BY LOCALS

Public goods that benefit a local community (e.g. police and fire departments) should be paid for by the taxpayers in that local community and not by anyone else:

“Those local or provincial expences of which the benefit is local or provincial (what is laid out, for example, upon the police of a particular town or district) ought to be defrayed by a local or provincial revenue, and ought to be no burden upon the general revenue of the society. It is unjust that the whole society should contribute towards an expence of which the benefit is confined to a part of the society.” (WN, V.i.i.3; my emphasis)

RULE #2: EVERYONE SHOULD PAY THEIR FAIR SHARE OF TAXES IN ORDER TO FINANCE PUBLIC GOODS THAT BENEFIT THE SOCIETY AS A WHOLE

Public goods that benefit everyone, by contrast, should be paid by everyone. Examples of public goods that benefit everyone are national defense and the cost of “supporting the dignity of the chief magistrate” (e.g. the president, the king, the governor, etc.):

“The expence of defending the society, and that of supporting the dignity of the chief magistrate, are both laid out for the general benefit of the whole society. It is reasonable, therefore, that they should be defrayed by the general contribution of the whole society, all the different members contributing, as nearly as possible, in proportion to their respective abilities.” (WN, V.i.i.1)

B. THREE EXCEPTIONS

Next, after establishing his general rules of public finance, the Scottish scholar then makes three specific exceptions: one for the administration of justice; another for roads and communication systems; and a third for education. These three types of public goods should be financed by user fees — not by the taxpayers — to the greatest extent possible:

EXCEPTION #1: ADMINISTRATION OF JUSTICE

Although everyone benefits from the rule of law, the costs of the administration of justice (e.g. the construction and maintenance of courthouses and the salaries of bailiffs, judges, clerks, etc.) should to the greatest extent possible be paid by the people who benefit the most from the court system, i.e. the litigants:

“The expence of the administration of justice, too, may, no doubt, be considered as laid out for the benefit of the whole society. There is no impropriety, therefore, in its being defrayed by the general contribution of the whole society. The persons, however, who gave occasion to this expence are those who, by their injustice in one way or another, make it necessary to seek redress or protection from the courts of justice. The persons again most immediately benefited by this expence are those whom the courts of justice either restore to their rights or maintain in their rights. The expence of the administration of justice, therefore, may very properly be defrayed by the particular contribution of one or other, or both, of those two different sets of persons, according as different occasions may require, that is, by the fees of court. It cannot be necessary to have recourse to the general contribution of the whole society, except for the conviction of those criminals who have not themselves any estate or fund sufficient for paying those fees.” (WN, V.i.i.2; my emphasis)

EXCEPTION #2: ROADS AND COMMUNICATIONS

Smith’s second exception are public goods like roads and the post office. Everyone benefits from good roads and from a reliable and fast communications system, but the costs of these public goods should be paid by user fees, e.g. tolls and stamps:

“The expence of maintaining good roads and communications is, no doubt, beneficial to the whole society, and may, therefore, without any injustice. be defrayed by the general contribution of the whole society. This expence, however, is most immediately and directly beneficial to those who travel or carry goods from one place to another, and to those who consume such goods. The turnpike tolls in England, and the duties called peages in other countries, lay it altogether upon those two different sets of people, and thereby discharge the general revenue of the society from a very considerable burden.” (WN, V.i.i.4; my emphasis)

EXCEPTION #3: PUBLIC EDUCATION

Again, although everyone benefits from a good education system, schools and sermons should be financed by the people who attend them (or by their parents in the case of children) or by private charity (e.g. alumni donations):

“The expence of the institutions for education and religious instruction is likewise, no doubt, beneficial to the whole society, and may, therefore, without injustice, be defrayed by the general contribution of the whole society. This expence, however, might perhaps with equal propriety, and even with some advantage, be defrayed altogether by those who receive the immediate benefit of such education and instruction, or by the voluntary contribution of those who think they have occasion for either the one or the other.” (WN, V.i.i.5; my emphasis)

C. THE EXCEPTION TO THE EXCEPTIONS

When user fees are insufficient to pay for the full costs of justice, roads, schools, etc., then then taxpayers as a whole must make up the difference:

“When the institutions or public works which are beneficial to the whole society either cannot be maintained altogether, or are not maintained altogether by the contribution of such particular members of the society as are most immediately benefited by them, the deficiency must in most cases be made up by the general contribution of the whole society. The general revenue of the society, over and above defraying the expence of defending the society, and of supporting the dignity of the chief magistrate, must make up for the deficiency of many particular branches of revenue….” (WN, V.i.i.6; my emphasis)

Nota bene: We will proceed to Chapter 2 of Book V of The Wealth of Nations in my next post.

Adam Smith concludes his general survey of public duties in Chapter 1 of Book V of The Wealth of Nations (available here; scroll down to “Part IV”) by pointing out one last major outlay or “expence” that every government must incur:

“Over and above the expence necessary for enabling the sovereign to perform his several duties [i.e. the duties of national defense, justice, and public works], a certain expence is requisite for the support of his dignity.” (WN, V.i.h.1; my emphasis)

Moreover, even here, Smith has something important and insightful to say. To the point, he observes that the size or magnitude of this particular expense — what he calls “the Expence of supporting the Dignity of the Sovereign” — is a function of two variables. One is the general level of wealth of society:

“In an opulent and improved society, where all the different orders of people are growing every day more expensive in their houses, in their furniture, in their tables, in their dress, and in their equipage, it cannot well be expected that the sovereign should alone hold out against the fashion. He naturally, therefore, or rather necessarily, becomes more expensive in all those different articles too. His dignity even seems to require that he should become so.” (WN, V.i.h.2)

In other words, the more wealthy a society is, the more it will cost to maintain “the dignity of the sovereign.” The other key variable is what type of government a country has. The majesty of a Versailles (pictured below), of a royal court of an absolute monarch of a great nation, will be more expensive to maintain than that of, say, a governor’s mansion of a small or upstart state:

“As in point of dignity a monarch is more raised above his subjects than the chief magistrate of any republic is ever supposed to be above his fellow-citizens, so a greater expence is necessary for supporting that higher dignity. We naturally expect more splendour in the court of a king than in the mansion-house of a doge or burgo-master.” (WN, V.i.h.3)

Although this is one of the shortest subsections of Smith’s entire magnum opus — it contains a mere six sentences spread across three short paragraphs — here, the Scottish scholar is making a deeper point: appearances are as important as reality, form is just as important as substance, for in addition to the fundamental duties of national defense (see Part 1 of Ch. 1 of Book V), the administration of justice (see Part 2), and the provision of public goods (see Part 3), the government also has an implicit duty to conduct itself with a certain decorum and majesty (Part 4).

Nota bene: I will conclude my general survey of Chapter 1 of Book V of The Wealth of Nations in my next post.

Nota bene: For my readers who are overseas, the “SAT” or “Scholastic Aptitude Test”, a rite of passage for most high school seniors in the U.S., is a high-stakes college entrance exam administered by a private company called the College Board. The SAT has two main sections: Math and Reading & Writing.

Thus far this week, we have been exploring Smith’s survey of religion in Book V, Ch. 1, Part 3, Art. 3 of The Wealth of Nations. To recap, Smith’s stance toward religion reveals a tension. On the one hand, he defends religious liberty: people should be free to choose their own religion. But at the same time, Smith also concedes that a lot people will make bad religious choices: they will join religious sects that are too strict!

Smith’s solution to this strictness problem reveals his overall commitment to freedom, for his proposed remedy is not to restrict people’s liberty or regulate their behavior. Instead, his proposed solution is to widen people’s horizons through “the study of science and philosophy” (WN, V.i.g.14) and to give people more choices in the form of “publick diversions” (WN, V.i.g.15). Let’s explore these Smithian remedies in greater detail below:

Remedy #1: Science and Philosophy

First off, why does Smith champion “the study of science and philosophy”? Because, in the immortal words of the Scottish Enlightenment philosopher, “Science is the great antidote to the poison of enthusiasm and superstition; and where all the superior ranks of people were secured from it, the inferior ranks could not be much exposed to it.” (WN, V.i.g.14; my emphasis) But how exactly would Smith promote “the study of science and philosophy”? Would he use taxpayer funds to subsidize instructors of science and philosophy? No, he would not. Instead, Smith would require aspiring professionals and future office holders to pass a sort of entrance exam before they could join a profession or hold public office:

“… the state might render [the study of science and philosophy] almost universal among all people of middling or more than middling rank and fortune; not by giving salaries to teachers in order to make them negligent and idle, but by instituting some sort of probation, even in the higher and more difficult sciences, to be undergone by every person before he was permitted to exercise any liberal profession, or before he could be received as a candidate for any honourable office of trust or profit. If the state imposed upon this order of men the necessity of learning, it would have no occasion to give itself any trouble about providing them with proper teachers. They would soon find better teachers for themselves than any whom the state could provide for them.” (WN, V.i.g.14; my emphasis)

Say what? Alas, the devil is in the details, and Smith does not provide us any additional details about this proposed universal entrance exam. What subjects or topics would this entrance exam cover? Who would administer it? (By way of comparison, the College Board, the private company that offers the SAT college entrance exam, is a de facto monopoly; see here, for example.) What would the format of this exam be — e.g. short answer, essay, multiple choice, or some combination thereof — and how high a grade or score would one need to pass? In any case, however these logistical questions are answered, notice the limited scope of Smith’s proposed entrance exam: only “people of middling or more than middling rank” would be required to take the exam.

Remedy #2: Publick Diversions

In addition to Smith’s proposed entrance exam, Smith also proposes an even more creative, surprising, and far-reaching solution to counteract the strictness of small religious sects:

“The second of those remedies is the frequency and gaiety of public diversions. The state, by encouraging, that is by giving entire liberty to all those who for their own interest would attempt without scandal or indecency, to amuse and divert the people by painting, poetry, music, dancing; by all sorts of dramatic representations and exhibitions, would easily dissipate, in the greater part of them, that melancholy and gloomy humour which is almost always the nurse of popular superstition and enthusiasm. Public diversions have always been the objects of dread and hatred to all the fanatical promoters of those popular frenzies. The gaiety and good humour which those diversions inspire were altogether inconsistent with that temper of mind which was fittest for their purpose, or which they could best work upon. Dramatic representations, besides, frequently exposing their artifices to public ridicule, and sometimes even to public execration, were upon that account, more than all other diversions, the objects of their peculiar abhorrence.” (WN, V.i.g.15; my emphasis)

Before proceeding, I want to confess that this is one of my favorite passages in the entire Wealth of Nations. Why? Because Smith presents a cheerful and joyous picture of commercial society, one full of entertaining spectacles and “gaiety and good humour.” Notice how Smith specifically singles out “painting, poetry, music, dancing” as well as “dramatic representations and exhibitions,” and to this laundry list of public diversions, we could also include today’s movie industry (Hollywood) and other spectacles or forms of play, such as professional and college sports. In a word: entertainment.

My main takeaway from this passage — and from Smith’s treatment of religion more generally — is that Smith is not only a true champion of religious liberty; he is also a champion of culture and freedom more generally. Both markets — the market for religion and the market for entertainment — should be free. But that said, as the crucial phrase “without scandal or indecency” in the passage above hints at (V.i.g.15), there is a potential blind spot in Smith’s call for “publick diversions”: who decides what is scandalous or indecent? Smith’s anti-scandal caveat would appear to necessitate some form of censorship!

On this note, I wonder what Adam Smith, were he alive today, would have to say about today’s forms of popular digital entertainment, such as single- and multi-player video games like Grand Theft Auto, Fortnite, and Roblox; or so-called “reality TV” shows like Cops, Real Housewives of Atlanta, and Love Island; or popular social media platforms like TikTok, Substack, and Instagram? Which of these forms of entertainment, if any, do more harm and good? Wouldn’t we all be better off without them? Or is a plethora of 24-hour news outlets and social media addiction the price we must pay to live in a free society? However my questions to Smith are answered, I will conclude my survey of Chapter 1 of Book V of The Wealth of Nations in my next post.

🍀 Happy Saint Patrick’s Day! 🍀 I concluded my previous post with the following observation: “Although Adam Smith is a champion of religious liberty …, he identifies one major downside of allowing people the freedom to choose their own religion.” So, what is this downside? According to Smith, the downside is this: people might become too religious, i.e. too strict in their adherence to religious rules, or more simply put, too moral! In today’s post, I will explain how Smith reaches this surprising and counter-intuitive conclusion. (I will then survey Smith’s proposed remedy in my next post.)

To begin, for Smith all systems of morality fall into one of two categories: (A) strict or austere, and (B) liberal or loose:

“In every civilised society, in every society where the distinction of ranks has once been completely established, there have been always two different schemes or systems of morality current at the same time; of which the one may be called the strict or austere; the other the liberal, or, if you will, the loose system. The former is generally admired and revered by the common people: the latter is commonly more esteemed and adopted by what are called people of fashion.” (WN, V.i.g.10)

Next, Smith explains why most new religious sects end up preaching “strict” or “austere” systems of morality: to attract new members! Or in the immortal words of Adam Smith:

“Almost all religious sects have begun among the common people, from whom they have generally drawn their earliest as well as their most numerous proselytes. The austere system of morality has, accordingly, been adopted by those sects almost constantly, or with very few exceptions; for there have been some. It was the system by which they could best recommend themselves to that order of people to whom they first proposed their plan of reformation upon what had been before established.” (WN, V.i.g.11)

So, what’s the problem? Simply put, the Scottish philosopher appears to be saying that there is an optimal level of morality, i.e. an Aristotelian golden mean between the two extremes. For Smith, the problem is that most religious sects end up becoming too austere and strict:

“Many [religious sects], perhaps the greater part of them, have even endeavoured to gain credit by refining upon this austere system, and by carrying it to some degree of folly and extravagance; and this excessive rigour has frequently recommended them more than anything else to the respect and veneration of the common people.

And:

“In little religious sects, accordingly, the morals of the common people have been almost always remarkably regular and orderly; generally much more so than in the established church. The morals of those little sects, indeed, have frequently been rather disagreeably rigorous and unsocial.” (WN, V.i.g.12)

So, what is to be done? What is Smith’s remedy? Today, for example, whenever we are worried about other people’s behavior (such as social media addiction), our knee-jerk reaction is to call for government regulation or even prohibition. But that is not Adam Smith’s approach, for Smith is a true champion of liberty: the government should not pick sides; people should be free to choose their own religion. Instead, Smith proposes two alternative solutions, two antidotes to strict religions and strict moral systems more generally: one is “the study of science and philosophy” (WN, V.i.g.14); the other is “the frequency and gaiety of publick diversions” (WN, V.i.g.15). I will further explore both of these Smithian antidotes in my next post.

“The institutions for the instruction of people of all ages are chiefly those for religious instruction. This is a species of instruction of which the object is not so much to render the people good citizens in this world, as to prepare them for another and a better world in a life to come.” (WN, V.i.g.1; my emphasis)

Adam Smith turns to the most contentious and controversial topic of his day in the third and last major subsection (“Article 3”; available here) of Part 3 of Chapter 1 of Book V of his magnum opus. Although Article 3 is titled “Of the Expense of the Institutions for the Instruction of People of all Ages” (WN, V.i.g), these institutions (plural in Smith’s subtitle) boil down to just one: religion.

So, what does Smith have to say about religion? It turns out the Scottish scholar has a lot of things to say — this chapter contains 42 paragraphs in all and spans 45 pages of the Glasgow edition of The Wealth of Nations — but for me the most original and important thing Smith says is this: the market for religion should be just as free as the market for goods and services — in other words, not just free markets, but also free minds! — or in the immortal words of Adam Smith:

“But if politics had never called in the aid of religion, had the conquering party never adopted the tenets of one sect more than those of another when it had gained the victory, it would probably have dealt equally and impartially with all the different sects, and have allowed every man to choose his own priest and his own religion as he thought proper. There would in this case, no doubt’ have been a great multitude of religious sects. Almost every different congregation might probably have made a little sect by itself, or have entertained some peculiar tenets of its own.” (WN, V.i.g.8)

In other words, let a thousand religious sects bloom:

“But though this equality of treatment should not be productive of this good temper and moderation in all, or even in the greater part of the religious sects of a particular country; yet provided those sects were sufficiently numerous, and each of them consequently too small to disturb the public tranquillity, the excessive zeal of each for its particular tenets could not well be productive of any very harmful effects, but, on the contrary, of several good ones: and if the government was perfectly decided both to let them all alone, and to oblige them all to let alone one another, there is little danger that they would not of their own accord subdivide themselves fast enough so as soon to become sufficiently numerous.” (WN, V.i.g.9)

For Smith, the more religious sects the better because the more sects there are, the less likely any one religion will be able to dominate the others! Historically speaking, however, “Times of violent religious controversy have generally been times of equally violent political faction.” (WN, V.i.g.7; my emphasis) Why? Because politics and religion have always been closely connected: “… each political party has either found it, or imagined it, for its interest to league itself with some one or other of the contending religious sects. But this could be done only by adopting, or at least by favouring, the tenets of that particular sect.” (ibid.)

In short, instead of allowing people the freedom to choose their own religion, governments have tended to join the religious fray, pick sides, and declare the victors the “established” or official church of the state — like the Anglican Church in England — thus putting an end to future religious strife be awarding the spoils in the form of permanent government subsidies to the victor! On this note, Smith includes an extended quotation from pp. 30-31 of Volume 3 of David Hume’s History of England (see WN, V.i.g.3-6) in which Hume sings the praises of “established” religions like the Anglican Church in England, but Hume’s song is a sardonic one:

“‘And in the end, the civil magistrate will find that he has dearly paid for his pretended frugality, in saving a fixed establishment for the priests; and that in reality the most decent and advantageous composition which he can make with the spiritual guides, is to bribe their indolence by assigning stated salaries to their profession, and rendering it superfluous for them to be farther active than merely to prevent their flock from straying in quest of new pastures. And in this manner ecclesiastical establishments, though commonly they arose at first from religious views, prove in the end advantageous to the political interests of society.'” (WN, V.i.g.6, quoting David Hume) [1]

Alas, the existence of an “established” or official church might be “advantageous to the political interests of society” by putting an end to sectarian violence and open religious warfare, but at the same time, Smith warns us against the perils of monopoly in the market for religion:

“… in general every religious sect, when it has once enjoyed for a century or two the security of a legal establishment, has found itself incapable of making any vigorous defence against any new sect which chose to attack its doctrine or discipline. Upon such occasions the advantage in point of learning and good writing may sometimes be on the side of the established church. But the arts of popularity, all the arts of gaining proselytes, are constantly on the side of its adversaries.” (WN, V.i.g.1)

In other words, when an established church enjoys a government monopoly in the market for religion, it will lose its zeal or spiritual energy over time and thus lose its original appeal to the masses. On this note, Smith specifically compares and contrasts the polished refinement of the clergy of such established religions with the entrepreneurial zeal of Catholic priests:

“The clergy of an established and well-endowed religion frequently become men of learning and elegance, who possess all the virtues of gentlemen, or which can recommend them to the esteem of gentlemen: but they are apt gradually to lose the qualities, both good and bad, which gave them authority and influence with the inferior ranks of people, and which had perhaps been the original causes of the success and establishment of their religion.” (WN, V.i.g.1)

By contrast:

“In the Church of Rome, the industry and zeal of the inferior clergy are kept more alive by the powerful motive of self-interest than perhaps in any established Protestant church. The parochial clergy derive, many of them, a very considerable part of their subsistence from the voluntary oblations of the people; a source of revenue which confession gives them many opportunities of improving. The mendicant orders derive their whole subsistence from such oblations. It is with them as with the hussars and light infantry of some armies; no plunder, no pay. The parochial clergy are like those teachers whose reward depends partly upon their salary, and partly upon the fees or honoraries which they get from their pupils, and these must always depend more or less upon their industry and reputation.” (WN, V.i.g.2; my emphasis)

In other words, incentives matter! The clergy of “established and well-endowed” religions are subsidized the government — they are the established or official religion of the state, after all! — so they get paid regardless of how compelling or boring their sermons are. A priest, by contrast, receives most of his remuneration from his parishioners, not from the government; so he has a powerful incentive to attend to the needs of his flock.

Although Adam Smith is a champion of religious liberty (including, presumably, the Humean freedom to choose no religion at all), he identifies one major downside of allowing people the freedom to choose their own religion. I will explore this religious-freedom trade off — as well as Smith’s proposed remedy — in my next two posts.

[1] As an aside, here Smith also refers to David Hume as “by far the most illustrious philosopher and historian of the present age” (WN, V.i.g.3) Given that Hume was considered by many people in Smith’s day to be a notorious atheist and “infidel”, Smith’s description of Hume as the “most illustrious” scholar of his time is itself quite revealing!

“For a very small expense the public can facilitate, can encourage and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education.” (WN, V.i.f.54, my emphasis)

Happy Pi Day 3.14! Did you attend a public school or a public university? If so, then you have Adam Smith to thank for that opportunity! To see why, let’s pick up where we last left off: Paragraph 50 of Article 2 of Part 3 of Chapter 1 of Book V of The Wealth of Nations. As we saw at the end of my previous Adam Smith post, Smith explores the dark side of the division of labor in that crucial paragraph. More specifically, he warns that specializing in simple, repetitive tasks can render workers as “stupid and ignorant as it is possible for a human creature to become.” (WN, V.i.f.50) So, what is to be done? For Smith, the answer is compulsory public education, a bold and radical proposal at the time.

To see just how bold and radical Smith’s proposal is, we must go back in time — to 1776, the year The Wealth of Nations was published — when child labor was a far more common practice than it is today. In Smith’s day, children as young as five years old performed daily household chores, such as planting, feeding livestock, or mending fences, while many others were apprenticed or worked as servants. In short, the children of the common people were expected to work; their labor was necessary for family survival. [1]

Smith, however, wants to separate little children — boys and girls! — away from the watchful of eye of their parents during most of the day. Worse yet, not only does Smith want to “impose” education on all children (WN, V.i.f.54) and thus deprive parents of the labor of their children; Smith also wants force these already hardscrabble and impoverished parents to pick up some of the tab for their children’s compulsory education:

“The public can facilitate [compulsory education] by establishing in every parish or district a little school, where children may be taught for a reward so moderate that even a common labourer may afford it; the master being partly, but not wholly, paid by the public, because, if he was wholly, or even principally, paid by it, he would soon learn to neglect his business.” (WN, V.i.f.55; my emphasis)

Talk about the road to serfdom, to borrow F. A. Hayek’s wolf-cry! Whatever happened to natural liberty, laissez-faire, and “free” markets? Why is Smith so willing to disrupt people’s lives by exempting education from market forces?

To appreciate the logic of Smith’s bold and radical proposal we must first, as Smith himself does, compare and contrast the educational opportunities of two groups of children in 1776: those of “people of some rank and fortune” and those of “the common people.” (WN, V.i.f.52-53) Smith’s verdict: the children of parents of “some rank and fortune” have many opportunities to further their education, while the children of “the common people” have none:

“[The children of the common people] have little time to spare for education. Their parents can scarce afford to maintain them even in infancy. As soon as they are able to work they must apply to some trade by which they can earn their subsistence. That trade, too, is generally so simple and uniform as to give little exercise to the understanding, while, at the same time, their labour is both so constant and so severe, that it leaves them little leisure and less inclination to apply to, or even to think of, anything else.” (WN, V.i.f.53)

To remedy this educational asymmetry and counteract the dark side of the division of labor, Smith makes his bold and radical proposal. In Smith’s ideal world, not only would there be a “little school” in “every parish” (WN, V.i.f.55); parents would also be forced(!) to send their children to these schools during daylight hours, and furthermore, his proposed system of nation-wide education would be subsidized “partly” (ibid.) by the government.

But how does the Scottish philosopher justify this unprecedented (in Smith’s day) expansion in the role of government? What is so special about education? Simply put, as we have seen many times already, Smith is a pragmatist, not an ideologue. It looks like he has carefully weighed both the social benefits against the private costs of compulsory public education, and for Smith the benefits to society outweigh the costs to individual parents:

“A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it.” (WN, V.i.f.55; my emphasis)

In other words, if we subsidize a “little school” in every parish for the common people and make education compulsory, we are not taking the road to serfdom; instead, compulsory public education is the road to freedom, for an educated people will be less likely to place their trust in dangerous demagogues like a Donald Trump or a Bernie Sanders. For Smith, education is one of the most important public works of all. Why? Because education is essential for liberty.

Nota bene: I will proceed to Article 3 of Part 3 of Chapter 1 of Book V on Monday, 16 March.

[1] See, e.g., Michael Schuman, “History of child labor in the United States—part 1: little children working”, Monthly Labor Review, U.S. Bureau of Labor Statistics (January 2017), https://doi.org/10.21916/mlr.2017.1