Adam Smith, auditor

Nota bene: This is part 5 of my multi-part series on Adam Smith’s day-to-day duties as a member of the Board of Customs of Scotland. (Here are parts 1 (intro), 2 (Letter #109), 3 (Letter #112), and 4 (Letter #118).) Works cited are below the fold.

Next up is Letter #119. This letter is dated 1 November 1784 and is signed by the same three customs commissioners who signed Letter #118 (also dated 1 Nov. 1784): Adam Smith (top signature), Basil Cochrane (middle), and David Reid (bottom). Letter #119 involves a routine office expense and reads as follows:

“We have receiv’d your Letter of the 26th Ultimo, inclosing an Account of the Expence of a New Bath Stove provided for the use of the Customhouse, in pursuance of our Order of the 29th of September last, Amounting to Two Pounds. — And we agree to your Paying the said Account, to be plac’d to Incidents annexing this Order, and a proper Receipt as Vouchers.”

This letter thus illustrates a routine office expense in which a customs officer at a local port had sent a letter on 26 October (“26th Ultimo“) to the Board of Customs in Edinburgh, attaching an invoice for £2 (about £386 today; see here) for a newly acquired “Bath Stove” (such as the one pictured below) to heat up a local customshouse. In reply, Smith and his fellow commissioners (Basil Cochrane and David Reid) formally approve paying the £2 invoice and instruct the local customs officer to charge this expenditure to the “Incidents“ account, i.e. the account for petty/contingent operational expenses. (See Hoon 1978, pp. 76-84.)

As an historical aside, Bath stoves were very popular in Britain at the time because they were a major technological improvement over traditional open fireplaces or wood-burning stoves. (See, e.g., Rumford 1796, pp. 312-314, explaining why most of the heat generated by an open fireplace is “lost”.) Such stoves, also known as “Bath grates” (Shuffrey 1912, p. 214) or “hob grates” (Kelly 1968, p. 71), were designed to fit directly into the opening of existing brick or stone fireplaces. By blocking off the chimney opening, a Bath stove/hob grate reduced smoke drafts and allowed heat to radiate into the room via the stove’s thick cast-iron front plates.

To my mind, however, what is most remarkable about this particular piece of correspondence (i.e. Letter #119) is the mind-boggling levels of internal bureaucracy required just to complete a routine transaction. First, the local customs official has to request permission from the Board of Customs in Edinburgh to purchase the needed equipment. Once the board grants this permission on 29 September, the local officer is able to order the Bath stove from a vendor, but to actually pay for it, he must next obtain an invoice from the vendor and then forward it to the board, which he does on 26 October. Only after the board approves the invoice is the local official able to acquire the equipment!

In other words, even a relatively modest expenditure made by a local office required formal board review in Edinburgh and the approval of at least three commissioners, followed by a rigorous auditing protocol and strict record-keeping. Yet the total amount of labor, time, ink, parchment, and postal delivery required to process this transaction across multiple levels of government most likely exceeded the £2 purchase price of the Bath stove itself! Was the economic irony of this situation lost on Adam Smith himself? Not if the optimal level of public corruption is zero.