prior probability

Earlier this month (6-8 July), I had surveyed Part #11 of Adam Smith’s 1784 pamphlet, Additions and Corrections to the First and Second Editions of Dr. Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations (Smith 1784, pp. 13-22), where Smith analyzes and critiques British herring subsidies. For reference, links to my herring-subsidy posts are below:

1. The herring subsidy scam (6 July 2026)
2. Adam Smith’s *negative invisible hand* (7 July 2026)
3. Some closing thoughts on Adam Smith’s critique of the herring bounty scam (8 July 2026)

As a short postscript to my three-part survey, I would now like to bring to your attention a follow-up paper by John Leazer, a scholar who specializes in British history. Professor Leazer’s fascinating paper, which I had not discovered until after writing up my three posts above, is titled “A Case for Subsidies? Adam Smith and the Eighteenth Century Scottish Herring Fishery” and is available here (via JSTOR).

In brief, Leazer surveys the history of British herring subsidies, which he traces back to the historic 1707 “Act of Union” treaty that united England and Scotland into a single kingdom (see Leazer 2013, pp. 51-53), and concludes that Smith’s critique of these subsidies was premature. Although the amount of herring caught declined from 1775 to 1782 (ibid. at Figure 8, p. 62) despite the subsidies, upon closer examination Leazer attributes this decline to exogenous factors, including “dramatic price increases in materials” and an “onslaught of privateers” (ibid. at p. 64).

Moreover, inspecting the fishery data from 1787 to 1799, Leazer concludes that the herring subsidies actually worked in the long run, for the subsidies created “a thriving industry where none existed before” (p. 47). Also, according to Leazer the true costs of the subsidies were not as high as Smith had imagined, for after 1786 “an increasing amount of [herring] were caught for the same amount of subsidy invested in the industry” (pp. 58-59). Or in the words of Leazer: “How could Smith be so wrong?” (p. 64)

Alas, Professor Leazer fails to consider another intriguing possibility: what if it was Adam Smith’s critique of herring subsidies that (perhaps unwittingly) set into motion the train of events that was ultimately responsible for this increase in herring production? After all, Parliament decided to tweak the subsidy scheme when it enacted the Fishery Act of 1786, two years after Smith had first published his stinging critique of herring subsidies in 1784.

Or perhaps it was the steady decline in herring production (especially between the years 1775 to 1782; see above), along with the spotlight Smith shined on this topic in his 1784 pamphlet, that motivated Parliament to enact the 1786 Fishery Act? Either way, what specific change did Parliament end up making to the herring subsidy in 1786? As it happens, Parliament totally ignored — or rejected! — Smith’s advice; instead, it doubled-down on the herring bounty, or to quote Leazer:

“After the Act of 1786 adjusted the bounty system, bounty payments increased dramatically, and herring catches increased as well. Figure 4 shows the yearly tonnage bounty payments between 1783 and 1799. These bounties rose from just over £10,000 in 1783 to almost £20,000 in 1787 and remained consistently around £20,000 between 1788 and 1799.” (Leazer 2013, p. 56, footnote omitted)

Simply put, the subsequent increase in herring production from 1787 to 1799 that Leazer touts so much in his paper was thus most likely due to the dramatic increase in subsidies made in 1786. But what is even more damning for Leazer — and more exculpatory for Adam Smith — is the following fact: Parliament eventually eliminated the herring bounty altogether in the 1830s. Yet, by Leazer’s own admission, “In 1850, total herring catches grew to a half million barrels and, by the end of the 19th century, production reached close to two million barrels …” (pp. 65-66; my emphasis). In other words, to paraphrase one of the characters in The Treasure of the Sierra Madre, we don’t need no stinkin’ subsidies! Smith’s critique of herring subsidies was vindicated by history.

Nota bene: I will proceed to the last part of Smith’s 1784 pamphlet (Part #13) in my next post.

Works cited

John Leazer, A Case for Subsidies? Adam Smith and the Eighteenth Century Scottish Herring Fishery, The Historian, vol. 75 no. 1 (Spring, 2013), pp. 47-68.

Adam Smith, Additions and Corrections to the First and Second Editions of Dr. Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations (1784).

Shout out to my favorite L.A. bookstore, Lost Books (the entrance of which is pictured below), where I found a veritable treasure trove of erudite tomes — listed below in alphabetical order (by author):

1. Ananyo Bhattacharya, The Man from the Future: The Visionary Life of John Von Neuman (Norton, 2022). Full disclosure: I have been wanting to read a book-length biography of the great Hungarian-American polymath John von Neuman for many years now. Thanks to Dr Bhattacharya, I now have my chance!
2. T. C. Boyle, The Relive Box and Other Stories (Ecco 2017). Along with Junot Diaz, T. C. Boyle is my favorite North American novelist and short story writer.
3. Ian Klaus, Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance (Yale, 2016). This book not only surveys many long-forgotten financial frauds; it also poses a provocative question: what would Adam Smith have to say about stock markets, “futures” contracts, and other 19th-century developments in financial capitalism?
4. Michael Lewis, The Money Culture (Norton, 2011). It’s by Michael Lewis. What more do I need to say!
5. Hilary Powell & Dan Edelstyn, Bank Job (Chelsea Green, 2020). Two idealistic artists print their own money and pull off a “reverse heist” to protest the 2008 bank bailouts and consumer debt culture more generally.
6. Guy Standing, Basic Income: A Guide for the Open-Minded (Yale, 2017). Is “universal basic income” (UBI) feasible? Among other things, this book describes many different types of UBI proposals and explains why some of them might be doable.

Nota bene: I will be resuming my previous multi-part series on Adam Smith’s 1784 pamphlet, Additions and Corrections to the First and Second Editions of Dr. Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations (see here, for example), as well as writing up mini-reviews of the above works in the days ahead.

Below are links to some free mathematics textbooks/lecture notes: (hat tips: @pickover, @LunesDes, and @ParamSiddh)

• Donna Kirk, Contemporary Mathematics (2026)
• W. W. Sawyer, A Path to Modern Mathematics (1966)
• C. H. Taubes, Probability, Statistics, and Linear Algebra (2010)

Bonus link: See also my 2015 paper “Finding Santiago“, where I trace the biographical origins of the legendary protagonist of Ernest Hemingway’s timeless novella The Old Man and the Sea.

Are prediction markets (PMs) immoral or dangerous? What about retrodiction markets? What would Adam Smith or F. A. Hayek say? In alphabetical order (by author), below are some anti-PM links:

1. Saahil Desai, Polymarket is going to get someone killed, The Atlantic (7 March 2026)
2. Aisha Down, ‘Abhorrent’: the inside story of the Polymarket gamblers betting millions on war, The Guardian (11 April 2026)
3. Eleanor Harmsworth and Matthew Field, You can now gamble on war, death and destruction. Some people never lose, The Telegraph (7 March 2026)
4. Augustin Lebron, Predicting our own demise, Reducible Errors (17 August 2025)
5. Nitish Pahwa, The legalized gambling industry is collapsing in on itself, Slate (25 August 2025)
6. Bonus link: @TomJrSr, Replies to anti-prediction market claims

For further reference, here is an overview of how prediction markets work.

More generally, is “good faith” more like a rule (e.g. a speed limit or “no smoking” sign), or is it more like a standard (e.g. “fair use” or “be careful”)? Or does the meaning of good faith depend on purely subjective or idiosyncratic factors (e.g. “I know it when I see it”)? My favorite paper thus far at this year’s ALSB (Academy of Legal Studies in Business) conference in Minneapolis has been “Statutory Good Faith and its Continuum of Definitions, Rules, and Standards” by my colleague and friend David Orozco (Florida State), who presents several competing definitions of “good faith” along a sliding-scale or continuum.

Evolvable AI or “eAI” refers to artificial intelligence systems that can autonomously create copies of themselves, pass on heritable traits, and undergo some form of natural selection, e.g. random mutation, recombination, and survival of the fittest. Some AI researchers claim that eAI poses a serious threat to humanity. See Victor Müller, et al., Evolvable AI: Threats of a new major transition in evolution, PNAS (20 April 2026)? Others dispute that claim. See, for example, Maarten Boudry, Domesticated, not feral: Why evolvable AI is not yet a Darwinian threat, PNAS (2 July 2026)? So, who’s right? And if it’s too soon to say who’s right, then what?

Is it possible to tame the A.I. beast in higher ed? I am a college professor who sees the handwriting on the wall: it’s only a matter of time before university administrators begin using “A.I. tools” to replace costly faculty. Although resistance is probably futile at this stage, some law school faculties in the U.S. are now starting to fight back by restricting the use of new technologies like “generative A.I.” in the classroom. (See here, for example.) Is this a lost cause or the start of a counter-revolution in higher ed?

I have returned from my travels in Costa Rica (family vacation) and North Texas (among other highlights, my daughter Adys and I saw the semi-final match between France and Spain at Dallas Stadium) to attend the annual conference of the Academy of Legal Studies in Business (ALSB). This year, the ALSB will take place at “The Depot”, a historic hotel and former train station (pictured below) in the Mill District of downtown Minneapolis, where I will be staying until the end of this week (July 20-23).

I will therefore resume — and conclude! — my multi-part review of Adam Smith’s 1784 pamphlet, Additions and Corrections to the First and Second Editions of Dr. Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations, next week (July 27-31). In the meantime, I will be meeting with friends and colleagues as well as presenting two of my forthcoming papers at the ALSB: “Buchanan v. Samuels: The Cedar Rust Case Redux” (on Tuesday, July 21) and “Stoic Capitalism? Adam Smith versus Marcus Aurelius” (on Wednesday, July 22).