ADAM SMITH: Wealth of Nations (Book I: Chapters 4-8)

    

The best things in life may be free but everything else costs money.  The main question is how much?  How much does that diamond ring in the window cost?  How much is a bottle of water?  The cost of something is what Adam Smith calls its “value.”  He says the word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods...  The utility (usefulness) of water is that we can drink it when we’re thirsty.  But what good is money?  We can’t eat it or drink it so what use is it?  The answer of course is that money can be used to buy things we do need when we need them.  If I have enough money I can buy a bottle of water.  And if I have more money I can buy a diamond ring.  This seems natural to us now but only because we’re used to it.  It’s not natural.  It’s really an odd state of affairs when you stop to think about it.  Adam Smith points out that nothing is more useful than water; but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.  Strange; I can sell a useless diamond ring for thousands of dollars but I can only sell a bottle of water for a dollar.  Why are diamonds so expensive and water so cheap?  One answer is that it takes a lot more work to gather diamonds than it does to get water.  In fact Adam Smith believes that work is the real measure of the exchangeable value of all commodities. The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. According to this formula I can calculate what everything is worth by how much work I have to do in order to pay for it.  For example, if I earn ten dollars an hour then for me buying a one dollar bottle of water is worth six minutes of work; a diamond ring that costs a thousand dollars is worth one hundred hours of work.  But if I can earn twenty dollars an hour then a bottle of water will only cost me three minutes of work.  And I can buy a thousand dollar diamond ring for only fifty hours of work.  The catch is that I have to find a job that will pay me twenty dollars an hour.  Or I can find some other way to make money that equals out to twenty dollars per hour.  Another way to make money is to start my own business.  Adam Smith shows how this works: As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or by what their labour adds to the value of the materials. Under this scenario I save enough money to buy some supplies to make widgets.  (Adam Smith calls this my “stock”)  Then I pay someone else ten dollars an hour to make widgets for me.  I supply the materials.  The people I hire make the widgets.  But how does this help me earn money?  Simple.  In exchanging the complete manufacture either for money, for labour, or for other goods, over and above what may be sufficient to pay the price of the materials, and the wages of the workmen, something must be given for the profits of the undertaker of the work who hazards his stock in this adventure. In other words, I turn around and sell widgets for twenty dollars apiece.  If supplies cost me nine dollars and wages cost me ten dollars then I have one dollar left over.  So every widget I sell earns me one dollar in profit.  This one dollar profit can then be used to replenish my stock and hire more workers.  Money from profits is the “capital” I can use to expand my business and make more widgets.  Adam Smith explains capitalism in simple terms: small profits made from selling widgets across whole countries soon add up.  The total amount of these combined profits is what Smith calls The Wealth of Nations.  One dollar profit will only buy one bottle of water.  But a bunch of dollars put together can buy battleships and interstate highways and water treatment plants and school buildings.  Some things in life are free but nations also need things that cost a lot of money.
     

ADAM SMITH: Wealth of Nations (Book I: Introduction and Chapters 1-3)

There’s an old story about Milton Friedman, the American economist, on a tour of a third world country.  He saw a dozen men digging a long ditch with shovels.  Friedman asked his guide why they didn’t use a backhoe to get the ditch dug faster and more efficiently.  The guide replied that shovels required more men and helped reduce unemployment.  So Friedman said then maybe you should give them spoons; that would take even more men and reduce unemployment even more.  Adam Smith would have appreciated that story.  For Smith the goal of a nation’s economy is not necessarily to employ people; its primary goal is to produce wealth.  He states his theory in the very first sentence of his book: The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life which it annually consumes… The “fund” that each nation builds up measures its ability to feed and care for the citizens and provide them with national security.  When the fund increases life generally improves.  When the fund decreases life generally deteriorates.  So how can a nation make sure that the national fund increases so life will become better for the average citizen?  Smith says there are two main factors involved: first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed.  So the unemployment rate is important as a measure of national economic well-being but it is a secondary consideration.  The first consideration is the skill, dexterity, and judgment with which its labour is generally applied… or, in modern terms, our use of technology.  For example, one man using a backhoe can dig a ditch much faster and much better than a dozen men with shovels.  That doesn’t mean that there will then be eleven men unemployed and one employed.  For the sake of national wealth it means that one man is employed as a backhoe operator, eleven men are freed up to do or make something else, and the nation has a ditch dug in one day instead of a week.  One ditch may not be a big deal but spread across a nation of 300 million people it soon becomes a big deal.  Adam Smith uses an example of a pin-maker to explain the advantages of technology and the division of labor.  To take an example, therefore, from a very trifling manufacture, but one in which the division of labour has been very often taken notice of, the trade of a pin-maker: a workman not educated to this business…could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches… ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day…  Using Smith’s math we find that the use of technology can increase output from 20 units to 4800 units per worker per day.  This is truly amazing.  At this rate any country would soon become wealthy.  Good.  Then let’s roll up our sleeves and get to it.  Not so fast.  Ask yourself: do I really want to be a pin-maker?  In fact, I’m not even making a whole pin.  I’m just a worker performing one process in making a product.  Does the world really need more pins?  What do people work for?  Dostoevsky wrote Notes from the Underground about a civil servant who could probably find a job somewhere in the modern world.  But Billy Budd was a foretopman.  What’s that?  Hint: in today’s world Billy would be out of a job because ships don’t have sails.  Moses was a prince and then a shepherd.  How would he get along in today’s world?  Adam Smith knows that times change; and as the world changes so does the nature of our work. 

MELVILLE: Billy Budd (Chapter 22: The Problem of Justice)

One of the most fundamental problems in Great Books is the simple question: “What is justice?” This question starts off Plato’s Republic and the whole discussion about what would be the ideal form of government.  It’s a problem that lies at the heart of the American system of government and is famously expressed in Federalist Paper #51 this way: what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be necessary… Justice is the end of government. It is the end of civil society. It ever has been and ever will be pursued until it be obtained, or until liberty be lost in the pursuit.  Justice is what the United States government is all about.  Americans will pursue justice until we either get it right or else lose our freedom trying.  Obviously freedom and justice are at the very core of America’s most cherished values.  Herman Melville was an American writer and had both freedom and justice bred deep in his bones.  So it’s odd that he uses an English warship to set up his epic conflict about the struggle between freedom and justice; or maybe not so odd.  Americans (possibly in youthful exuberance) want both freedom AND justice and we don’t see any conflict between pursuing both simultaneously.  But Melville draws from much older and sterner traditions: the law of the sea and the Old Testament.  Life aboard ship is different from life ashore.  There are strict rules and rigid punishments.  The captain of the ship is, for all intents and purposes, the voice of government for sailors.  It’s not a democracy.  Martial law defines what justice is and sets limits to the freedom of sailors.  The captain enforces the law.  He also interprets it.  So Captain Vere has to decide what to do with Billy Budd.  Billy killed a man; a superior officer in fact.  Martial law is clear.  The penalty for merely striking a superior officer is hanging.  And Billy not only struck the Master-at-arms, he killed him.  The law is clear.  Billy must die.  But it doesn’t seem fair; not to the reader, not to the officers aboard the ship, not even to Captain Vere.  And yet the law is clear.  Captain Vere feels intensely the conflict between his freedom to decide what’s fair and his duty to carry out the law.  What he said was to this effect: “Hitherto I have been but the witness, little more; and I should hardly think now to take another tone, that of your coadjutor, for the time, did I not perceive in you, (at the crisis too) a troubled hesitancy, proceeding, I doubt not, from the clash of military duty with moral scruple…”  This troubled hesitancy from the other officers is the direct clash of military duty with moral scruple.  The other officers don’t think it’s fair that Billy must die.  For them justice is being denied by handing down Billy’s harsh punishment.  Their argument goes something like this: Billy didn’t intend to kill the Master-at-arms.  And besides, if anybody had it coming it was Claggart (the Master-at-arms).  In a way this is sort of poetic justice.  So the officers think justice would be served to at least defer sentencing Billy and pass the decision up the chain of command to the admiral.  In this particular case, which is an exceptional one, let the admiral decide what justice is.  But that’s exactly why these men are lower-level officers and Captain Vere is commander of the ship.  It’s the captain’s job to make these tough decisions.  His advice to them is stern and clear as an Old Testament prophet: strive against scruples that may tend to enervate decision. Not, gentlemen, that I hide from myself that the case is an exceptional one. Speculatively regarded, it well might be referred to a jury of casuists. But for us here acting not as casuists or moralists, it is a case practical, and under martial law practically to be dealt with.  Captain Vere reminds them: we’re not philosophers; we’re officers in Her Majesty’s Royal Navy.  It’s not our duty to question the rules and regulations.  It is our duty to carry them out.  As sailors we’re not given the freedom to decide for ourselves what justice is.  That decision has already been made.  Whatever we may privately believe about justice it’s our public duty to maintain law and order.  What is justice?  For Melville it’s the focal point for a great story about a tragic incident.

MELVILLE: Billy Budd (Chapter 11: The Problem of Evil)

Exodus tells the story of the Hebrews being delivered from bondage to freedom.  It also accounts for the Ten Commandments given by God to Moses.  Hobbes gave us another list based on reason and natural laws, which turned the State into a “mortal god.”  Those were big issues painted on a big canvas.  They give explanations about how whole nations come into being and why.  Melville takes us on a much more intimate journey inside the individual human heart.  The story of Billy Budd explores the mystery of evil but never fully explains it.  That’s why it’s called a mystery; evil remains a dark and destructive force in human affairs despite our best efforts to understand, control or contain it.  In Othello we read how a bad man (Iago) sets out to destroy a good man (Othello).  Why?  Iago probably doesn’t even know himself.  All he says at the end of the play is: Demand me nothing: what you know, you know: from this time forth I never will speak word.  And in Exodus we read that the Lord said unto Moses, Pharaoh’s heart is hardened, he refuseth to let the people go.  Why?  We don’t know.  Pharaoh may not know himself why his heart is hardened.  Melville seems to have meditated on this problem of evil and came up empty.  He says that Coke and Blackstone (English jurists and writers on law) hardly shed so much light into obscure spiritual places as the Hebrew prophets. And who were they? Mostly recluses.  The best lawyers in England didn’t know the human heart as well as a few obscure and eccentric recluses.  And who were these recluses?  The dictionary says they’re “people who live in seclusion or apart from society, often for religious meditation.”  For Melville evil is located in one of those obscure spiritual places that can only be explored by someone willing to live apart from society and think long and deep about the meaning of life.  Aristotle also recommended the contemplative life as one of life’s highest goals, but only for a few people.  Wisdom may not be so much a state of being but rather a lifelong quest for understanding; or a certain way of life.  And the question remains whether wisdom is best found living within society by being part of the crowd or is found instead in the solitary pursuit of silence and contemplation.  Socrates sought wisdom in the marketplace; the ancient Hebrew prophets sought wisdom in the deserts or the back roads of lonely mountains.  Billy Budd did not go to sea to find wisdom; he went because he was a sailor and that’s what sailors do.  What Billy found was evil in the form of a man named Claggart.  Claggart hated Billy Budd because… why?  Because Billy was good?  Or because he was popular with his shipmates?  Maybe just because Billy was happy and Claggart wasn’t?  Who knows?  Like Iago, Claggart may not even know himself why he hates Billy.  All Claggart knows is this: he hates Billy.  He hates him with the passionate hatred that lies beyond human understanding.  It’s like the old limerick: I do not like thee Dr. Fell; the reason why I cannot tell.  But this I know and know right well; I do not like thee Dr. Fell.  Even the narrator of the story can’t give us a good account of Claggart’s hatred.  At the time my inexperience was such that I did not quite see the drift of all this. It may be that I see it now. Melville must believe that many times only in hindsight, after much reflection, can we grasp the deeper truths of ordinary life.  And even after much reflection we’re often swayed by our own educational backgrounds and personality quirks.  For example, Melville wonders how much Americans have been influenced by the Bible: And, indeed, if that lexicon which is based on Holy Writ were any longer popular, one might with less difficulty define and denominate certain phenomenal men. As it is, one must turn to some authority not liable to the charge of being tinctured with the Biblical element.  Melville seems to be saying that in the old days men read the Bible deeply and so they understood clearly what good and evil was; they grew up with stories about Cain and Abel or the crucifixion of Jesus.  No more.  These stories used to be part of the Great Books tradition.  Without these stories we easily lose our way in the modern world.