prior probability

Nota bene: Below is a short excerpt from Chapter 4 of my forthcoming book with Salim Rashid, Das Adam Smith Problematic? Ethics, Economics and Society:

Adam Smith, an up-and-coming professor of jurisprudence and moral philosopher when he published the first edition of The Theory of Moral Sentiments in 1759, borrows many legal locutions to describe the moral machinations of his impartial spectator. Among other things, Smith uses the words “appeal” (TMS, III.ii.32), “judgements” (III.ii.33), “jurisdiction” (III.iii.5), “sentence” (III.ii.32), and “tribunal” (III.ii.33) whenever he is discussing the figure of the impartial spectator. But the term he uses most often to describe his imaginary being is the word “judge.” Sometimes the word judge is capitalized. Most of the time, however, it is not. In Chapter 3 of Book III of TMS, for example, Smith describes his impartial magistrate as an “examiner and judge” (III.i.6), a “great judge and arbiter” (III.iii.4), an “awful and respectable judge” (III.iii.25), and “the immediate judge of mankind” (III.ii.32), that is, with a lower-case j. But at the same time, in several other passages in TMS (see TMS, II.iii.2, III.ii.33, & III.iii.43), Smith capitalizes the word “Judge” (upper-case J). What’s going on?

Also, what kind of judge (or Judge!) is the impartial spectator? Does this imaginary magistrate refer to a mental or internal process, a fiction of our moral imaginations (our inner voice or conscience), or is he an actual external entity, a deity, or godlike “beholder,” to borrow Daniel Klein, Nicholas Swanson, and Jeffrey Young (2025)’s formulation? At first glance, Smith appears to propound the first of these two possibilities in Book III of TMS. By way of example, Smith refers to the “higher tribunal” of our own consciences in the following passage:

But though man has, in this manner, been rendered the immediate judge of mankind, he has been rendered so only in the first instance; and an appeal lies from his sentence to a much higher tribunal, to the tribunal of their own consciences, to that of the supposed impartial and well-informed spectator, to that of the man within the breast, the great judge and arbiter of their conduct. (TMS, III.ii.32)

But in the very next paragraph (!), Smith describes this higher tribunal as an all-seeing Judge (capital J) or deity/godlike entity:

In such cases [i.e. when people think we are guilty of an offense we, in fact, did not commit] the only effectual consolation of [a] humbled and afflicted man lies in an appeal to a still higher tribunal, to that of the all-seeing Judge of the world, whose eye can never be deceived, and whose judgments can never be perverted. (TMS, III.ii.33)

Notice how Smith drops the word “supposed” when he capitalizes the word “Judge,” but notice too how he deploys the same set of legal metaphors (that of magistrate and tribunal) to refer to two different entities—either to the man within the breast or to a godlike entity—depending on whether the word “judge” is capitalized or not. For Smith, then, there are fallible and imperfect “judges” and infallible and perfect “Judges.” The judge of the lower-case j is the man within the breast, while the capital J Judge is God or a “beholder.”[1] But this observation, in turn, poses a puzzle. Specifically, why are there not one but two (!) types of impartial spectator in Smith’s moral framework? Was the Scottish moral philosopher and jurisprude being esoteric or unclear on purpose? If so, why?

In a recent paper, Daniel Klein, Nicholas Swanson, and Jeffrey Young (2025, pp. 321-322) all but concede that Adam Smith paints a confusing and conflicting picture of the impartial spectator in TMS,[2] for they identify a wide variety of competing motives that Smith may have had for being intentionally evasive or esoteric on this score: pedagogical, strategic, and even theological. (To be continued …)

[1] See Klein, D., Swanson, N., and Young, J. (2025). The impartial spectator rises. Econ Journal Watch, 22(2): 296–326..

[2] Cf. Medema, S. (2023). Review of R. P. Malloy, Law and the Invisible Hand (Cambridge University Press, 2022). Journal of the History of Economic Thought, 45(4): 686–689, at p. 688: “… the spectator encounters what seem to be insuperable difficulties as an operational concept owing to its essential ambiguity and indeterminacy. To be blunt, who is he/she/them? Everyone has their own idea of the impartial spectator…. Or, to put matters another way, there is no impartial spectator, only conflicting visions of such.”

I will resume my series on my forthcoming book with Salim Rashid, Das Adam Smith Problematic? Ethics, Economics and Society, in my next post. Today, however, I want to honor the brave and idealistic men who tried to liberate their beloved Cuba on this day 65 years ago (17 April 1961), when a paramilitary force consisting of 1,400 Cuban exiles (the legendary Brigade 2506) launched their heroic but doomed attempt overthrow Fidel Castro’s dictatorship, doomed in large part because JFK cancelled crucial air strikes as the invasion was taking place. Although the 1961 Bay of Pigs invasion and the 1746 Battle of Culloden (see yesterday’s post) are separated by over two centuries (or 215 years, to be exact), the eerie parallels between both “lost causes” are not lost on me. (On this note, following the example of Scotland’s union with England, perhaps Cuba, and not Canada, should become the 51st U.S. State?) Either way, may my Cuban brothers and sisters be free and prosperous one day soon!

I will resume my series on “Das Adam Smith Problematic?” in the next day or two, but in the meantime, I want to commemorate the 280th anniversary of the Battle of Culloden, which took place on this day (16 April) in 1746, when a rag-tag Scottish army under the command of “the Young Pretender”, Bonnie Prince Charlie (Charles Edward Stuart), was decisively defeated by a British government force led by the Duke of Cumberland, thereby ending the ill-fated Jacobite rebellion of 1745. Hat tip to Alanna MacTavish (University of Aberdeen) for reminding me of this historic event during her talk on “Jacobitism and Reformed Scholasticism” at last weekend’s annual meeting of the American Society for Eighteenth-Century Studies (ASECS) in Philadelphia!

Nota bene: Below is another short excerpt from Chapter 3 of my forthcoming book with Salim Rashid, Das Adam Smith Problematic? Ethics, Economics and Society. (The works cited are included below the fold.)

“[Das Quesnay-Problem] refers to an internal contradiction in Physiocracy—an influential school of political economy led by the French polymath François Quesnay—the tension between laissez-faire and despotism in pre-revolutionary France…. On the one hand, the Physiocrats were champions of free markets and economic freedom, or in the eloquent words of Walter Bagehot, this new school of laissez-faire economists ‘delighted in proving that the whole structure of the French laws upon industry was wrong; that prohibitions ought not to be imposed on the import of foreign manufactures; that [subsidies] ought not to be given to native ones; that the exportation of corn ought to be free; that the whole country ought to be a fiscal unit; that there should be no duty between any province; and so on in other cases.’ (Bagehot 1876, p. 32) But at the same time, the Économistes, starting with Quesnay himself, had ‘an eager zeal for … despotism,’ for they wanted to accomplish their radical free market reforms ‘by the fiat of the sovereign.’ (ibid., p. 35) How does Adam Smith resolve this tension between ‘natural liberty’ and free markets on the one hand and the reality of centralized power and hereditary monarchy on the other? In short, what is the relationship between democracy and capitalism? (see generally Friedman 2002) Is democracy a necessary or sufficient condition for Smith’s system of natural liberty? Or to borrow an actual historical example …, if Smith had to choose just one of the following three places to live in the 20th century—Juan Perón’s Argentina, Fidel Castro’s Cuba, or Augusto Pinochet’s Chile—which of these despotic Latin American regimes would he have chosen? A hard choice indeed!”

Nota bene: I have blogged about this puzzle before: see here. Below, however, is a revised and corrected excerpt from Chapter 3 of my forthcoming book with Salim Rashid, Das Adam Smith Problematic? Ethics, Economics and Society. (“Cole 1958 refers” to Arthur H. Cole’s classic 1958 paper “Puzzles of the “Wealth of Nations”, Canadian Journal of Economics and Political Science, Vol. 24, No. 1, pp. 1–8.)

Arthur H. Cole was an economic historian at Harvard and the head librarian of the Harvard Business School. [For more information about Cole’s life and work, see here (Wikipedia) and here (Irwin Collier’s archive).] In 1958, he wrote a paper titled “Puzzles of the ‘Wealth of Nations.’” Although Professor Cole’s paper refers to puzzles (plural), the author ends up identifying only one puzzle, but it is a big one. Was Adam Smith a misanthrope?

To this end, Cole (1958, p. 3) shows how “Smith gives much evidence of a pretty low opinion of mankind in general.” Among others, Smith calls out “the usual idleness” of apprentices (WN, I.x.a.8) and the “sneaking arts” of underling tradesmen (IV.iii.b.8). The Scottish scholar also castigates “weak and wondering travellers” (V.i.d.17) and “stupid and lying missionaries” (ibid.). Smith rebukes “the absurd prescriptions” of doctors (II.iii.31) as well as “[l]uxury in the fair sex” (I.viii.37); and he is unable to “reckon our soldiers the most industrious set of people among us” (I.viii.44).

But Smith reserves his greatest invective for politicians, i.e. “that insidious and crafty animal” (IV.ii.39), and for merchants and manufacturers, whose “avidity” (IV.viii.4), “clamour and sophistry” (I.x.b.25), and “mean rapacity” (IV.iii.c.9) impede the progress of commerce. Cole’s conclusion is that Smith had bad things to say about almost everyone. Well, almost everyone. By comparison, Smith has good things to say about the “judicious operations” of English bankers and the “delightful art” of gardening. He commends “the wholesome and invigorating liquors of beer and ale,” and he also praises the “chairmen, porters, and coalheavers in London” as well as “those unfortunate women who live by prostitution” as “the strongest men and the most beautiful women perhaps in the British dominions ….” [WN, I.xi.b.41, quoted in part in Cole 1958, pp. 7-8.]

Cole’s puzzle is therefore this: what are we to make of this Smithian pattern of general condemnation sprinkled with such limited praise? Or in the words of Arthur Cole:

One lesson seems sufficient: when some specially vigorous judgment is quoted from the great Scotsman—that a politician is an “insidious and crafty animal,” or tradesmen are capable of “sneaking arts”—it will be appropriate to reflect that this thorn came from a bouquet full of rather thorny roses. Whether Adam Smith deliberately put such prickly blossoms there—for literary effect—or in his premature cantankerousness didn’t realize that such barbs were being placed all through the book—this question each admirer of the Scotsman may answer for himself. (Cole 1958, p. 8)

Happy Monday! Now that we have concluded my detailed chapter-by-chapter survey of The Wealth of Nations (see my post from 11 April), I want to conclude this extended series of elaborate blog posts — by my count, 78 substantive posts in all, not including my 20 additional posts on Book IV, Chapter 2 from around this time last year! — on a more general and personal note by sharing what Adam Smith and his magnum opus mean to me. Smith scholar Maria Pia Paganelli once wrote, “We pose questions to Adam Smith. And he still answers, even if both the questions and answers change over time.” [1] I, however, think it’s the other way around: Adam Smith poses questions and problems to us, and he leaves it up to us to provide our own answers. And on this note, my colleague and friend Salim Rashid and I have both been collaborating on a new project, which is now tentatively-titled Das Adam Smith Problematic? Ethics, Economics, and Society (Palgrave Macmillan, forthcoming), in which we explore some of the many questions, open problems, and unresolved mysteries that Smith poses to us today, not just in The Wealth of Nations, but also in his other great book, The Theory of Moral Sentiments, as well as in the two books he was purportedly working on his entire life but never published — one on jurisprudence, the other on the arts. Starting tomorrow, then, I will begin a new series of blog posts in which I explore the most important questions that Adam Smith poses to us today. In the meantime, help us pick out a book cover.

[1] Paganelli, M. (2015). Recent engagements with Adam Smith and the Scottish Enlightenment. History of Political Economy, 47(3): 363–394, p. 363

In other news, my streak of consecutive days blogging hit 1776 days while I was in Philadelphia this weekend! See here.

P.S.: I also overheard this beautiful ballad for the first time — fittingly enough — somewhere in the City of Brotherly Love, where I have been attending a joint meeting of the Eighteenth-Century Scottish Studies Society (ECSSS) and the American Society for Eighteenth-Century Studies (ASECS).

In my previous two posts (see here and here), we have seen why government overborrowing poses such a grave danger to the wealth of a nation. Today, we will take a look at Smith’s surprising and radical solution to this problem, for he proposes nothing less than “a new Utopia” (V.iii.68), a political union between Great Britain and her colonies:

“By extending the British system of taxation to all the different provinces of the empire inhabited by people of either British or European extraction, a much greater augmentation of revenue might be expected. This, however, could scarce, perhaps, be done, consistently with the principles of the British constitution, without admitting into the British Parliament, or if you will into the states general of the British empire, a fair and equal representation of all those different provinces, that of each province bearing the same proportion to the produce of its taxes as the representation of Great Britain might bear to the produce of the taxes levied upon Great Britain. The private interest of many powerful individuals, the confirmed prejudices of great bodies of people seem, indeed, at present, to oppose to so great a change such obstacles as it may be very difficult, perhaps altogether impossible, to surmount. Without, however, pretending to determine whether such a union be practicable or impracticable, it may not, perhaps, be improper, in a speculative work of this kind, to consider how far the British system of taxation might be applicable to all the different provinces of the empire, what revenue might be expected from it if so applied, and in what manner a general union of this kind might be likely to affect the happiness and prosperity of the different provinces comprehended within it. Such a speculation can at worst be regarded but as a new Utopia, less amusing certainly, but not more useless and chimerical than the old one.” (WN, V.iii.68; my emphasis)

But is Smith serious? Does he really believe that a grand political union between Britain and her far-flung colonies would be desirable, let alone feasible? Although the Scottish scholar describes this proposed political union as “a new Utopia” (which leads me to believe that Smith’s bold proposal might just be a ruse or a mere strawman), he nevertheless devotes all of the last 23 pages of the Glasgow edition of The Wealth of Nations, corresponding to paragraphs 69 to 92 of this chapter, to working out the logistical details of taxing the constituent members of this proposed union and to estimating the amount of new tax revenue that such a grand union would generate.

For my part, I am going to skip Adam Smith’s detailed analysis of the logistical details (see, for example, paragraphs 69 to 87 of Book V, Ch. 3), and for the sake of brevity, I will fast-forward to the very last paragraph of The Wealth of Nations (Paragraph #92), where the Scottish scholar reveals his true colours, so to speak. In this concluding passage, Smith contemplates the following “what if?” scenario: what if the people and politicians of Great Britain were to reject his bold proposal? In that case, Smith’s prescription is crystal clear: the central government in London would have to reduce the amount of public spending. Or in the immortal words of Adam Smith:

“If it should be found impracticable for Great Britain to draw any considerable augmentation of revenue from any of the resources above mentioned [i.e. from the expansion of tax collection in the provinces of the new union], the only resource which can remain to her is a diminution of her expence.” (WN, V.iii.92; my emphasis)

It is here, in the very last paragraph of The Wealth of Nations, that Smith concludes his 900-plus-page magnum opus with a scathing critique of “the rulers of Great Britain” for deluding themselves that their debt-ridden government commands a great empire. In reality, says Smith, these rulers are lords of a budgetary black hole (i.e. the colonies), a bottomless money pit and financial house of cards:

“The rulers of Great Britain have, for more than a century past, amused the people with the imagination that they possessed a great empire on the west side of the Atlantic. This empire, however, has hitherto existed in imagination only. It has hitherto been, not an empire, but the project of an empire; not a gold mine, but the project of a gold mine; a project which has cost, which continues to cost, and which, if pursued in the same way as it has been hitherto, is likely to cost, immense expence, without being likely to bring any profit; for the effects of the monopoly of the colony trade, it has been shown, are, to the great body of the people, mere loss instead of profit. It is surely now time that our rulers should either realize this golden dream, in which they have been indulging themselves, perhaps, as well as the people, or that they should awake from it themselves, and endeavour to awaken the people. If the project cannot be completed, it ought to be given up. If any of the provinces of the British empire cannot be made to contribute towards the support of the whole empire, it is surely time that Great Britain should free herself from the expence of defending those provinces in time of war, and of supporting any part of their civil or military establishments in time of peace, and endeavour to accommodate her future views and designs to the real mediocrity of her circumstances.” (WN, V.iii.92; my emphasis)

In other words, Smith is a fiscal conservative, for what he is saying here is that Great Britain’s public debts are unsustainable: she simply cannot afford to subsidize such a large empire and should therefore cut her losses by relinquishing her colonies — or as my colleague and friend Dan Klein would say: Britain should “let ’em go!” [1] For my part, the only thing that I would add is this: Smith’s smack-down of “the rulers of Great Britain” applies with equal force to our (USA’s) elected officials today, of both political parties. According to the Department of Treasury (see here), as of March 2026 the total national debt of the United States exceeds $38 trillion! (By comparison, our nation’s current GDP is just around $29 trillion.) Nota bene: I will offer some concluding thoughts on The Wealth of Nations as a whole starting on Monday, 13 April.

In the middle part of Book V, Chapter 3 of The Wealth of Nations, Adam Smith restates and rebuts two contemporary arguments in defense of government borrowing. The first argument is a proto-Keynesian one:

“The public funds of the different indebted nations of Europe, particularly those of England, have by one author been represented as the accumulation of a great capital superadded to the other capital of the country, by means of which its trade is extended, its manufactures multiplied, and its lands cultivated and improved much beyond what they could have been by means of that other capital only.” (WN, V.iii.47; my emphasis)

The gist of this proto-Keynesian argument is that public debts translate into public spending, and public spending, in turn, contributes to a nation’s GDP. Smith, however, explains why this argument is a based on a logical fallacy:

“He [i.e. the ‘one author’ mentioned in the passage above] does not consider that the capital which the first creditors of the public advanced to government was, from the moment in which they advanced it, a certain portion of the annual produce turned away from serving in the function of a capital to serve in that of a revenue; from maintaining productive labourers to maintain unproductive ones, and to be spent and wasted, generally in the course of the year, without even the hope of any future reproduction…. Had they [the creditors] not advanced this capital to government, there would have been in the country two capitals, two portions of the annual produce, instead of one, employed in maintaining productive labour.” (WN, V.iii.47; my emphasis)

In short, public debts “crowd out” private investment in more productive pursuits. Now, what about the other argument in defense of government borrowing? Smith restates this second argument as follows: “In the payment of the interest of the public debt, it has been said, it is the right hand which pays the left. The money does not go out of the country. It is only a part of the revenue of one set of the inhabitants which is transferred to another, and the nation is not a farthing the poorer.” (WN, V.iii.52) Smith, however, immediately exposes this argument as a cheap accounting trick:

“This apology is founded altogether in the sophistry of the mercantile system, and after the long examination which I have already bestowed upon that system, it may perhaps be unnecessary to say anything further about it. It supposes, besides, that the whole public debt is owing to the inhabitants of the country, which happens not to be true; the Dutch, as well as several other foreign nations, having a very considerable share in our public funds.” (WN, V.iii.52; my emphasis)

Smith then adds for good measure: “But though the whole debt were owing to the inhabitants of the country, it would not upon that account be less pernicious.” (WN, V.iii.52) That is, even if all of a nation’s public debts were from domestic lenders, government overborrowing and the accumulation of public debts would still be bad — not in a moral but in an economic sense. Why? Because, in the immortal words of Adam Smith:

“Land and capital stock are the two original sources of all revenue both private and public. Capital stock pays the wages of productive labour, whether employed in agriculture, manufactures, or commerce. The management of those two original sources of revenue belong to two different sets of people; the proprietors of land, and the owners or employers of capital stock.” (WN, V.iii.53; my emphasis)

Simply put, a nation’s wealth [“revenue, both private and public”] is a function of the amount of land and capital that is put to productive use, but when the government borrows money, that money is no longer available for investment in the private sector. But that is not all, for Smith makes the following ominous observation:

“When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about by bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretended payment.” (WN, V.iii.57; my emphasis)

In other words, when the public debt becomes too large, the government will either have to default on its debts (“bankruptcy”) or perform the “juggling trick” of a currency devaluation (“pretended payment”):

“The raising of the denomination of the coin has been the most usual expedient by which a real public bankruptcy has been disguised under the appearance of a pretended payment…. The honour of a state is surely very poorly provided for when, in order to cover the disgrace of a real bankruptcy, it has recourse to a juggling trick of this kind, so easily seen through, and at the same time so extremely pernicious.” (WN, V.iii.58)

Alas, both options (default and devaluation) are bad because, in both cases, a nation’s wealth is transferred from private creditors, who would have invested that wealth in productive (i.e. revenue-generating) pursuits, to the government, which will then have no incentive to cut back its spending on wars and other wasteful projects. So, what is to be done? How can we avoid either of these dreadful outcomes, i.e. default or devaluation? We will explore Adam Smith’s bold but surprising solution to the problem of government overborrowing in my next post.

“The ordinary expence of the greater part of modern governments in time of peace being equal or nearly equal to their ordinary revenue, when war comes [governments] are both unwilling and unable to increase their revenue in proportion to the increase of their expence.” (WN, V.iii.37; my emphasis)

I concluded my previous post with the following words: “… Smith identifies yet another method of government borrowing — one that occupies a ‘middle place” between temporary ‘anticipations’ and ‘perpetual funding’.” (WN, V.iii.29) What is this intermediate method? According to Adam Smith, “These are, that of borrowing upon annuities for terms of years, and that of borrowing upon annuities for lives.” (V.iii.29) In a word: bonds or what Smith calls “annuities”.

As an aside, Smith concludes that “[i]n France a much greater proportion of the public debts consists in annuities for lives than in England.” (V.iii.34) Why are lifetime annuities more popular than long-term annuities in France than in England? For Smith, this difference in public finance “arises altogether from the different views and interests of the lenders” in both countries. More specifically, according to Smith, investors in England are shrewd merchants who value liquidity, and long-term annuities are easier to resell than lifetime annuities:

“In England, the seat of government being in the greatest mercantile city in the world, the merchants are generally the people who advance money to government. By advancing it they do not mean to diminish, but, on the contrary, to increase their mercantile capitals, and unless they expected to sell with some profit their share in the subscription for a new loan, they never would subscribe. But if by advancing their money they were to purchase, instead of perpetual annuities, annuities for lives only, whether their own or those of other people, they would not always be so likely to sell them with a profit. Annuities upon their own lives they would always sell with loss, because no man will give for an annuity upon the life of another, whose age and state of health are nearly the same with his own, the same price which he would give for one upon his own. An annuity upon the life of a third person, indeed, is, no doubt, of equal value to the buyer and the seller; but its real value begins to diminish from the moment it is granted, and continues to do so more and more as long as it subsists. It can never, therefore, make so convenient a transferable stock as a perpetual annuity, of which the real value may be supposed always the same, or very nearly the same.” (V.iii.35)

In France, however, the market for public debt is different, for many investors consist of wealthy bachelors who have less need for liquidity and who instead prefer the soundness and dependability of receiving a dependable stream of payments during their lifetimes:

“In France, the seat of government not being in a great mercantile city, merchants do not make so great a proportion of the people who advance money to government. The people concerned in the finances, the farmers general, the receivers of the taxes which are not in farm, the court bankers, &c. make the greater part of those who advance their money in all public exigencies. Such people are commonly men of mean birth, but of great wealth, and frequently of great pride. They are too proud to marry their equals, and women of quality disdain to marry them. They frequently resolve, therefore, to live bachelors, and having neither any families of their own, nor much regard for those of their relations, whom they are not always very fond of acknowledging, they desire only to live in splendour during their own time, and are not unwilling that their fortune should end with themselves. The number of rich people, besides, who are either averse to marry, or whose condition of life renders it either improper or inconvenient for them to do so, is much greater in France than in England. To such people, who have little or no care for posterity, nothing can be more convenient than to exchange their capital for a revenue which is to last just as long, and no longer, than they wish it to do.” (V.iii.36)

Although one might be tempted to dismiss Smith’s analysis here as anachronistic or out-of-date, the Scottish scholar quickly redeems himself. After comparing and contrasting the markets for public debt in England and France, Smith poses a deeper and more timeless question: why do government overborrow in the first place? Why does public spending always end up exceeding the amount of public revenue collected via taxes? In a word, Smith’s answer is war: “when war comes,” politicians are “unwilling” to increase taxes “for fear of offending the people”:

“The ordinary expence of the greater part of modern governments in time of peace being equal or nearly equal to their ordinary revenue, when war comes they are both unwilling and unable to increase their revenue in proportion to the increase of their expence. They are unwilling for fear of offending the people, who, by so great and so sudden an increase of taxes, would soon be disgusted with the war; and they are unable from not well knowing what taxes would be sufficient to produce the revenue wanted. The facility of borrowing delivers them from the embarrassment which this fear and inability would otherwise occasion. By means of borrowing they are enabled, with a very moderate increase of taxes, to raise, from year to year, money sufficient for carrying on the war, and by the practice of perpetually funding they are enabled, with the smallest possible increase of taxes, to raise annually the largest possible sum of money. In great empires the people who live in the capital, and in the provinces remote from the scene of action, feel, many of them, scarce any inconveniency from the war; but enjoy, at their ease, the amusement of reading in the newspapers the exploits of their own fleets and armies. To them this amusement compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace. They are commonly dissatisfied with the return of peace, which puts an end to their amusement, and to a thousand visionary hopes of conquest and national glory from a longer continuance of the war.” (V.iii.37; my emphasis)

But what happens after these wars end? How will the government be able to repay all the money it has borrowed to subsidize its wars and other overseas entanglements? I will address this key question in my next post.