To David Friedman: Antitrust

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Vincent Cook

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May 7, 1998, 3:00:00 AM5/7/98
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[By the way David, I enjoyed your TV appearance with Ed Meese]

David Friedman, replying to Jimbo Wales, wrote:

>>In the _opening page_ of chaper 1 of _Capitalism_ (the cited work), Rand
>>wrote: "It is philosophy that defines and establishes the epistemological
>>criteria to guide human knowledge in general and specific sciences in
>>particular. Political economy came into prominence in the nineteenth
>>century, in the era of philosophy's post-Kantian disintegration, and no one
>>rose to check its premises or to challenge its base. Implicitly,
>>uncritically, and by default, political economy accept as its axioms the
>>fundmental tenets of collectivism."
>
>Hence Rand had her dates right, whether or not her description of the
>intellectual history is right. Thank you--that answers my question.

If one applies the term "political economy" narrowly to refer
specifically to the British classical school and not to economics in
general, then it is fair to say that Rand got her dates correct. It
seems much more plausible, though, to argue that it was Hume (and
to a lesser extent Smith's predecessors in the Scottish
Enlightenment) and not Kant who created the intellectual atmosphere
that permitted a Bentham and a J.S. Mill to sneak egregiously
collectivistic ideas into classical political economy.

Economics was quite prominent in France and even in Scotland long
before Kant or Smith. While the usual mythology is that Smith
and Ricardo founded modern economics, that honor really belongs to
Richard Cantillon. His treatise written sometime around 1730,
_Essai sur la nature du commerce en general_, is the first work to
demarcate the field of economics and give a systematic treatment of
the theory.

Cantillon wasn't alone either. The Physiocratic school and the great
theorist Anne Robert Jacques Turgot were active in France well before
Smith, and Smith's predecessors in the Scottish Enlightenment
(Gershom Carmichael and then Francis Hutchenson) bequeathed their own
body of economic theories (albeit less sophisticated, less
comprehensive, and less laissez-faire in their conclusions than the
French) to Smith.

What Smith really did was import a few French theories (but
unfortunately not some of the more advanced conceptions of value)
into the Scottish context, and thus introduce the English-speaking
world to some laissez-faire ideas in a watered-down form. Of
particular importance was Smith's advocacy of free trade in
international commerce, which has become a sort of holy grail of
British political economy (even in its more collectivist variants)
ever since.

However, unlike some of the French, Smith's pro-capitalist stands
were not integrated in a coherent fashion to offer a rigorous
defense of laissez-faire, so he wound up advocating a long list of
interventionist measures instead - specifically banking regulation,
a government monopoly of money, public works, a government postal
monopoly, agricultural export restrictions, mandates for certain
aspects of real estate (fire walls, mortgage registration), and
prohibition of wages-in-kind. Smith also was in favor of many kinds
of taxes.

I have stressed that the corruption is associated with
*British* political economy because economics in the
Catholic countries on the continent remained strongly individualist
and non-Smithian (J.B. Say being an important transmitter of this
tradition). Of particular importance later in the 19th Century were
the developments in Austria, which became the homeland of
the individualist variant of marginal utility theory and the bastion
of the anti-Marxist/anti-positivist methodology in economics.

Indeed, the magnificent performances of the Austrian economists Eugen von
Bohm-Bawerk in refuting Marxist economics and Carl Menger in challenging
German historicism casts strong doubt on the contention that no one
rose against collectivism in the 19th Century. The problem was that
the Austrian challenge didn't really have much impact in England and
America, where linguistic barriers and a lack of translations kept
English-speaking economists in a state of intellectual isolation
from the real debate.

Most economists today are still largely unaware of the ideas of the
early Austrians and of the pre-Smithian body of economic theory. The
Smith-as-founder myth became entrenched because the post-Revolution
French economists, starting with J.B. Say, found it politically
expedient to distance themselves from their 18th Century predecessors
(who were pro-royalist reformers, with Turgot even being Minister of
Finance briefly) and portray themselves as Smithians instead.
--
Vincent Cook <xyzep...@xyzcreative.net> Remove the xyz's
Epicurus & Epicurean Philosophy Page - http://www.creative.net/~epicurus/
PGP Key - http://pgp5.ai.mit.edu/pks-commands.html
Key fingerprint = 6C AC 39 33 4C F1 72 13 38 89 45 B2 34 D0 69 27
.


David Friedman

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May 7, 1998, 3:00:00 AM5/7/98
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In article <1998050707...@cybere.creative.net>, "Vincent Cook"
<Use-Author-Address-Header@[127.1]> wrote:

>What Smith really did was import a few French theories (but
>unfortunately not some of the more advanced conceptions of value)
>into the Scottish context, and thus introduce the English-speaking
>world to some laissez-faire ideas in a watered-down form. Of
>particular importance was Smith's advocacy of free trade in
>international commerce, which has become a sort of holy grail of
>British political economy (even in its more collectivist variants)
>ever since.
>
>However, unlike some of the French,
>Smith's pro-capitalist stands
>were not integrated in a coherent fashion to offer a rigorous
>defense of laissez-faire,

You are arguing that Turgot's physiocratic theory was "integrated in a
coherent fashion?"

Putting aside the question of influences, what do you find in Cantillon or
Turgot that is correct, and that Smith got wrong?

>so he wound up advocating a long list of
>interventionist measures instead - specifically banking regulation,
>a government monopoly of money,

What government monopoly of money? Smith supported the Scottish system of
private banks issuing their own currency. Do you mean his support for a
government monopoly over small notes?

> public works, a government postal
>monopoly,

Where does Smith say that the post should be a monopoly? Indeed, where
does he discuss a post office in our (rather than the 18th century) sense
of the term?

>agricultural export restrictions,

Where does he support agricultural export restrictions?

>mandates for certain
>aspects of real estate (fire walls, mortgage registration), and
>prohibition of wages-in-kind.

Actually, Smith favored a slightly higher tax on wages in kind--a mistake,
but not the mistake you attribute to him, unless you are thinking of a
passage I don't know.

>Smith also was in favor of many kinds
>of taxes.

And Turgot and Cantillon (and Menger and ...) were in favor of having no
taxes? News to me.

>Most economists today are still largely unaware of the ideas of the
>early Austrians and of the pre-Smithian body of economic theory. The
>Smith-as-founder myth became entrenched because the post-Revolution
>French economists, starting with J.B. Say, found it politically
>expedient to distance themselves from their 18th Century predecessors
>(who were pro-royalist reformers, with Turgot even being Minister of
>Finance briefly) and portray themselves as Smithians instead.

Or, alternatively, because they found Smith (and Ricardo) to have a more
nearly correct and consistent theory.
--
David Friedman
DD...@Best.com
http://www.best.com/~ddfr/
"No man is secure in his life, liberty or property
while the legislature is in session"


Vincent Cook

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May 8, 1998, 3:00:00 AM5/8/98
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David Friedman wrote:

>>What Smith really did was import a few French theories (but
>>unfortunately not some of the more advanced conceptions of value)
>>into the Scottish context, and thus introduce the English-speaking
>>world to some laissez-faire ideas in a watered-down form. Of
>>particular importance was Smith's advocacy of free trade in
>>international commerce, which has become a sort of holy grail of
>>British political economy (even in its more collectivist variants)
>>ever since.
>>
>>However, unlike some of the French,
>>Smith's pro-capitalist stands
>>were not integrated in a coherent fashion to offer a rigorous
>>defense of laissez-faire,
>
>You are arguing that Turgot's physiocratic theory was "integrated in a
>coherent fashion?"

Turgot did not make the sorts of mistakes that Quesnay and other
Physiocrats did, and Smith in fact was more prone to embracing
Physiocratic errors. Turgot's relationship to the Physiocrats was
more of a personal and political one than an intellectual one.

>Putting aside the question of influences, what do you find in Cantillon or
>Turgot that is correct, and that Smith got wrong?

The most fundamental problem with Smith is that in the _Wealth of
Nations_ he sunders price formation from consumer utility. Whereas
the French economists had understood (albeit without the benefit of
marginalism) that scarcity was a factor in price formation and had
worked out a rough understanding of how subjective utility affects
price formation and opportunity costs, Smith's articulation of the
diamond/water paradox presaged his slide into an incoherent
real-costs theory of exchange-value.

Some other key ideas one can find in Cantillon and Turgot but not
Smith (or stated much better than in Smith) are:

(1) a clear statement of an Austrian-like methodology (Cantillon),

(2) market prices derived from subjective utlities (Cantillon with
some qualifications and Turgot more consistently and in great
detail),

(3) uncertainty and a division of knowledge as the basis for
entrepreneurship (Cantillon and Turgot),

(4) a sophisticated theory of spatial economics (Cantillon),

(5) a sophisticated commodity theory of money (Cantillon),

(6) specie-flow mechanism for monetary equilibrium (Cantillon and
Turgot),

(7) the law of optimum returns (Turgot), and

(8) the time-preference theory of capital (Turgot).

All in all, a pretty impressive list. The good points
about Smith (his understanding of the benefits of a division of
labor and the freedom of international trade) can be found also in
Cantillon and Turgot.

>>so he wound up advocating a long list of
>>interventionist measures instead - specifically banking regulation,
>>a government monopoly of money,
>
>What government monopoly of money? Smith supported the Scottish system of
>private banks issuing their own currency. Do you mean his support for a
>government monopoly over small notes?

I'm talking about the minting of coins, not the issuance of
paper currency. The world used gold and silver
coins as the standard money back in those days.

>> public works, a government postal
>>monopoly,
>
>Where does Smith say that the post should be a monopoly? Indeed, where
>does he discuss a post office in our (rather than the 18th century) sense
>of the term?
>
>>agricultural export restrictions,
>
>Where does he support agricultural export restrictions?
>
>>mandates for certain
>>aspects of real estate (fire walls, mortgage registration), and
>>prohibition of wages-in-kind.
>
>Actually, Smith favored a slightly higher tax on wages in kind--a mistake,
>but not the mistake you attribute to him, unless you are thinking of a
>passage I don't know.

I don't have references to the original sources handy, since I'm
relying on a secondary source for my bill of particulars (Murray
Rothbard's _Economic Thought before Adam Smith_). I neglected to
mention that public education and usury laws should be on this list
also. Even his commitment to free trade was not consistent, since he
argued that Navigation Acts were o.k. if justified by considerations
of national defense.

I do have a quote from the _Wealth of Nations_ regarding his
support of public education:

"An instructed and intelligent people besides are always more decent
and orderly than an ignorant and stupid one. They feel themselves,
each individuallly, 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 . . . less apt to be
misled into any wanton or unnecessary opposition to the measures of
government."

That's hardly the sort of rhetoric one would expect from a champion
of individualism. I guess we can be thankful that public education
has failed so badly that wanton opposition to the measures of
government is still alive and well.

>>Smith also was in favor of many kinds
>>of taxes.
>
>And Turgot and Cantillon (and Menger and ...) were in favor of having no
>taxes? News to me.

The point I'm getting at here is that Smith is a sort of Laffer-like figure
who is more interested in generating revenues in the most efficient manner
for the state than in minimizing the state's take. The French
economists, on the other hand, thought of tax reforms in terms of
getting rid of most of the extant taxes (in fact, all but one tax in
the case of the Physiocrats and Turgot).

Turgot's hard-core libertarian attitudes can be discerned from this
passage from _Plan for a Paper on Taxation in General_:

"It seems that Public Finance, like a greedy monster, has been lying
in wait for the entire wealth of the people."

Contrast that to Smith's insipid canons of justice in taxation,
especially his advocacy of the unlovable income tax we have to suffer
with today:

"The subjects of every state ought to contribute towards the support
of the government, as nearly as possible, in proportion to their
respective abilities; that is, in proportion to the revenue which
they respectively enjoy under the protection of the state. The
expense of government to the individuals of a great nation, is like
the expense of a great estate, who are all obliged in proportion to
respective interests to the estate."

I think that a "greedy monster" is a more accurate description of
the state than a "great estate," don't you?

It may also be germane to the tax question that Adam Smith's
so-called laissez-faire principles didn't stop him from spending
the last twelve years of his life as a commissioner of Scottish
customs. How could it be that the foremost champion of free trade
turned into an enforcer of the mercantilist order?

In December of 1785, Smith wrote this in a letter to another customs
official, George Chalmers:

"it may, perhaps, give the Gentleman pleasure to be informed that the
net revenue arising from the Customs in Scotland is at least four
times greater than it was seven or eight years ago. It has been
increasing rapidly these four or five years past; and the revenue of
this year has overleaped by at least one half the revenue of the
greatest former year. I flatter myself it is likely to increase
still further."

Smith's early works may have had a lot going for them, but from the
_Wealth of Nations_ on it was all downhill, and judging from the
sentiments expressed here he had sunk very low indeed.

>>Most economists today are still largely unaware of the ideas of the
>>early Austrians and of the pre-Smithian body of economic theory. The
>>Smith-as-founder myth became entrenched because the post-Revolution
>>French economists, starting with J.B. Say, found it politically
>>expedient to distance themselves from their 18th Century predecessors
>>(who were pro-royalist reformers, with Turgot even being Minister of
>>Finance briefly) and portray themselves as Smithians instead.
>
>Or, alternatively, because they found Smith (and Ricardo) to have a more
>nearly correct and consistent theory.

That wouldn't account for the persistence of the non-Smithian elements in
continental economics.

gsol...@virginia.edu

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May 8, 1998, 3:00:00 AM5/8/98
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The May 2 issue of The Economist has an article on antitrust (p.62-4) with a
cartoon contrasting the "Chicago School" with the "Real World School" and
quotes several economists who are skeptical of "Chicago Orthodoxy" on
antitrust. In particular, according to the article, the idea of "predatory
pricing" has a new lease on life due to "connected markets" (Microsoft is
mentioned), and some markets (air travel) are no longer thought to be
"contestable" due to large sunk costs.

Would you describe this as an instance of your "2% rule" (as in "you can find
2% of economists who don't favor free trade"), or could something more
serious be going on?

Even more interesting is the article's mention of two recent antitrust cases
in which detailed sales information (from point-of-sale scanners) was used to
prevent mergers even though the industries seemed highly competitive. For
example, in the case of Staples and Office Depot, Staples was found to have
lower prices in cities where Office Depot had a store than in other cities.

If "rifle-shot" analyses are now possible, the argument that antitrust laws
have been economically harmful overall might be getting the flavor of the
"sunk-cost" fallacy.

Gordon Sollars
gsol...@virginia.edu

-----== Posted via Deja News, The Leader in Internet Discussion ==-----
http://www.dejanews.com/ Now offering spam-free web-based newsreading


gsol...@virginia.edu

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May 8, 1998, 3:00:00 AM5/8/98
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In article <1998050806...@cybere.creative.net>,

"Vincent Cook" <Use-Author-Address-Header@[127.1]> wrote:
>
> I'm talking about the minting of coins, not the issuance of
> paper currency. The world used gold and silver
> coins as the standard money back in those days.
>
The "world" is a big place; what we care about here is Scotland, where the
banks in fact had a well developed system of bank-notes. Smith held that it
was proper to restrict the notes to "large" amounts, (I think) because those
making large transactions would be better able to judge the reliability of
the bank behind the notes. The "poor" would use coin. Perhaps for this bit
of paternalism Smith stands condemned.

Is there any evidence that the French economists you cite objected to the
government minting of coins?

> I do have a quote from the _Wealth of Nations_ regarding his
> support of public education:
>
> "An instructed and intelligent people besides are always more decent
> and orderly than an ignorant and stupid one. They feel themselves,
> each individuallly, 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 . . . less apt to be
> misled into any wanton or unnecessary opposition to the measures of
> government."
>

And I, too, have a quote from Smith:

"Domestic education is the institution of nature;
public education, the contrivance of man. It is
surely unnecessary to say, which is likely to be the wisest."

Your Smith quote says nothing about *public* education. I'm curious; did
your quote come from the Rothbard book you mentioned?

> Turgot's hard-core libertarian attitudes can be discerned from this
> passage from _Plan for a Paper on Taxation in General_:
>
> "It seems that Public Finance, like a greedy monster, has been lying
> in wait for the entire wealth of the people."
>

Was Turgot speaking of government in general, or of his experience with
French government in particular? That is, if Turgot had been in Scotland and
Smith in France, what differences might we have seen in their writings?

David Friedman

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May 8, 1998, 3:00:00 AM5/8/98
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In article <6iv0ti$l1$1...@nnrp1.dejanews.com>, gsol...@virginia.edu wrote:

>The May 2 issue of The Economist has an article on antitrust (p.62-4) with a
>cartoon contrasting the "Chicago School" with the "Real World School" and
>quotes several economists who are skeptical of "Chicago Orthodoxy" on
>antitrust. In particular, according to the article, the idea of "predatory
>pricing" has a new lease on life due to "connected markets" (Microsoft is
>mentioned), and some markets (air travel) are no longer thought to be
>"contestable" due to large sunk costs.
>
>Would you describe this as an instance of your "2% rule" (as in "you can find
>2% of economists who don't favor free trade"), or could something more
>serious be going on?

I don't know. There has been a game theory literature for some time
challenging the standard debunking of predatory pricing. I don't find the
bits I have seen very convincing, but it is not a field I work in.

David Friedman

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May 9, 1998, 3:00:00 AM5/9/98
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In article <1998050707...@cybere.creative.net>, "Vincent Cook"
<Use-Author-Address-Header@[127.1]> wrote:

All of which I gather, if I understand Vincent correctly, is based not on
his own reading of Smith, Cantillon, etc., but on his reading of a book by
Rothbard, whose conclusions he is here summarizing.

I found and downloaded Cantillon's essai and a work by Turgot; I have now
skimmed the former but not yet gotten to the latter. So far as Cantillon
is concerned, while he certainly anticipates Smith in various ways, to
describe him as more libertarian, more pro-laissez-faire, etc. is, to put
it mildly, inaccurate. Insofar as there is a maximand in his essay it is
not, as in Smith's case, the welfare of the population but the power of
the state.

Since Vincent illustrated Smith's supposed evils with selective quotes and
references, I will do the same for Cantillon, along with the relevant bits
from Vincent (this post and another). Since I am selecting for passages
that contradict Vincent's picture, my quotes will make Cantillon look
somewhat worse than he actually is--and hopefully provide Vincent an
incentive to go read him for himself, assuming I am right in believing
that he has not so far done so.

>The most fundamental problem with Smith is that in the _Wealth of
>Nations_ he sunders price formation from consumer utility. Whereas
>the French economists had understood (albeit without the benefit of
>marginalism) that scarcity was a factor in price formation and had
>worked out a rough understanding of how subjective utility affects
>price formation and opportunity costs,

Cantillon writes:

"Suppose the butchers on one side and the buyers on the other. The price
of meat will be settled after some altercations, and a pound of beef will
be in value to a piece of silver pretty nearly as the whole beef offered
for sale in the market is to all the silver brought there to buy beef"

Or in other words, the total amount purchasers spend on beef is roughly
independent of its price. If you think you can square that with even a
rough understanding of how subjective utility affects price formation, I
would be interested.


>Some other key ideas one can find in Cantillon and Turgot but not
>Smith (or stated much better than in Smith) are:

>(2) market prices derived from subjective utlities (Cantillon with
>some qualifications and Turgot more consistently and in great
>detail)

Cantillon expects scarcity to affect price in the short run but price to
be determined by production cost (land and labor) in the long run--which
is to say, his theory is essentially the same as Smith's.

>The good points
>about Smith (his understanding of the benefits of a division of
>labor and the freedom of international trade) can be found also in
>Cantillon and Turgot.

I cannot speak to Turgot, but so far as Cantillon is concerned the latter
part is false; he is not a free trader but a mercantilist. A few examples:

"If the proprietors of land and the nobility in Poland would consume only
the manufactures of their own state, bad as they might be at the outset,
they would soon become better, and would keep a great number of their own
people to work there, instead of giving this advantage to foreigners: and
if all states had the like care not to be the dupes of other states in
matters of commerce, each state would be considerable only in proportion
to its produce and the industry of its people."

"This is an example of a branch of trade which strengthens the foreigner,
lessen the number of inhabitants of the state, and without causing any
circulating money to leave it weakens the same state. I have chosen it to
show more strikingly how one state may be the dupe of another in trade,
and the method of judging the advantages and disadvantages of foreign
trade."

"It is by examining the results of each branch of commerce singly that
foreign trade can be usefully regulated. It cannot be distinctly
apprehended by abstract reasons. It will always be found by examining
particular cases that the exportation of all manufactured articles is
advantageous to the state, because in this case the foreigner always pays
and supports workmen useful to the state: that the best returns or
payments imported are specie, and in default of specie the produce of
foreign land into which there enters the least labour. "

"... But I have no intention of entering into detail as to the branches
of trade which should be encouraged for the good of the state. Enough to
say that it should always be endeavoured to import as much silver as
possible."

"(I assume always that the comparative wealth of states consists
principally in the respective quantities of money which they possess)"

Vincent attributes to Cantillon "(6) specie-flow mechanism for monetary
equilibrium." This is in part true, but note that Cantillon writes:

"I consider in general that an increase of actual money causes in a state
a corresponding increase of consumption which gradually brings about
increased prices."

And makes it clear that the increase in consumption is real, and is a
benefit due to an inflow of gold. So he has the right result from the
wrong cause--unlike Ricardo, who gets the whole thing right.

Vincent writes (about Smith):

>I neglected to
>mention that public education and usury laws should be on this list
>also.

Cantillon writes:

"It is true that it would be a great advantage to a state to teach its
subjects to produce the manufactures which are customarily drawn from
abroad, and all the other articles bought there"

and

"If the Prince or administrators of the state wish to regulate the current
rate of interest by law, the regulation must be fixed on the basis of the
current market rate in the highest class, or thereabout. ... But the
bankruptcy laws being favourable enough to debtors to allow them to start
again it seems that usury laws should always be adjusted to market rates,
as in Holland."

Which is precisely Smith's (mistaken) position.

Victor writes (about Smith):

>so he wound up advocating a long list of
>interventionist measures instead - specifically banking regulation,
>a government monopoly of money,

Cantillon writes:

"I think public banks of very great utility in small States and those
where silver is rather scarce, but of little service for the solid
advantage of a great State."

"It is then undoubted that a Bank with the complicity of a Minister is
able to raise and support the price of public stock and to lower the rate
of interest in the State at the pleasure of this Minister when the steps
are taken discreetly, and thus pay off the State debt."

Smith is in favor of private banking and private money issuance, with some
qualifications; Cantillon is unambiguously in favor of a government bank
in small states, and believes that in large states a bank, with
cooperation of the government, can lower the interest rate in order to let
the state pay off its debt.

So far as the state monopoly on money is concerned, all I can find in
Cantillon is:

"But as silver can be combined with iron, lead, tin, copper, etc. which
are not such scarce metals and are minded at less expense, the exchange of
silver was subject to much fraud, and this caused several kingdoms to
establish mints in order to certify by a public coinage the true quantity
of silver that each coin contains... ."

From which it certainly sounds as though he approves of government coinage.

>The point I'm getting at here is that Smith is a sort of Laffer-like figure
>who is more interested in generating revenues in the most efficient manner
>for the state than in minimizing the state's take. The French
>economists, on the other hand, thought of tax reforms in terms of
>getting rid of most of the extant taxes (in fact, all but one tax in
>the case of the Physiocrats and Turgot).

You are assuming that they want to reduce the number of taxes in order to
reduce the total collected. I can see no sign of that in Cantillon, and my
memory of the Physiocratic doctrine was that they simply argued that a
single tax was a more direct and less damaging way of collecting money.

So far as relative support for the state, you have the positions of Smith
and Cantillon exactly reversed. Smith repeatedly makes it clear that what
he is concerned with is the welfare of the population, and that he is in
favor of keeping down the size and expenditure of the state--although not,
of course, to zero. Cantillon, on the other hand, writes:

"But a nobleman with his retinue and his horses is useful to the state in
time of war; he can always be useful in the magistracy and the keeping of
order in the state in peace time; and in every case he is a great ornament
to the country, while the monks are, as people say, neither useful nor
ornamental in peace or war on this side of heaven."

"And all things considered they [Princes and Heads of Republics] do not
perhaps so badly in working to perpetuate the glory of their reigns and
administrations, and to leave monuments of their power and wealth; for
since, according to the natural course of humanity, the state must
collapse of itself they do but accelerate its fall a little. Nevertheless
it seems that they ought to endeavour to make their power last all the
time of their own administration."

"It is true that it is of little difference in a state whether people are
accustomed to wear coarse or fine clothes if both are equally lasting, and
whether people eat nicely or coarsely if they have enough and are in good
health, since drink, food, clothing, etc. are equally consumed whether
fine or coarse, and that nothing is left in the state of this sort of
wealth.

But it is always true to say that the states where fine cloths, fine
linen, etc. are worn, and where the feeding is dainty and delicate, are
richer and more esteemed than those where these things are ruder, and even
that the states where one sees more people living in the manner of the
first named are more highly esteemed than those where one sees fewer in
proportion."

Or in other words, the only reason why it is better for people to consume
goods they prefer is that it improves the reputation of the state.

And along similar lines:

"If enough employment cannot be found to occupy the 25 persons in a
hundred upon work useful and profitable to the state, I see no objection
to encouraging employment which serves only for ornament or amusement"

So when everything that can be done to serve the state is done, Cantillon
thinks it harmless if any remaining labor goes to produce things that give
people pleasure.

"The convents of Mendicant Friars are much more pernicious to a state than
those of the closed orders. These last usually do no more harm than to
occupy estates which might serve to supply the state with officers and
magistrates, ..."

And you were complaining that Smith was trying to figure out how best to
serve the state? And for Cantillon's general view of ruler and ruled:

"The example of the prince, followed by his court, is generally capable of
determining the inspiration and tastes of the other proprietors of land,
and the example of these last naturally influences all the lower ranks. A
prince, then, without doubt is able by his own example and without any
constraint to give such a turn as he likes to the labour of his subjects."

While it is irrelevant to your points, the following suggests that
Cantillon's acquaintance with the demographic facts was a bit tenuous:

"We see daily that Englishmen, in general, consume more of the produce of
the land than their fathers did, and this is the real reason why there are
fewer inhabitants than in the past."

In conclusion:

1. Am I correct in believing that you have read neither Smith nor
Cantillon, and are simply relying on Rothbard's hatchet job?

2. In light of the quotes I have just offered, are you prepared to either
revise your position or go read Cantillon for yourself (and Smith) and
then revise it accordingly?

Jim Klein

unread,
May 9, 1998, 3:00:00 AM5/9/98
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In <DDFr-08059...@ddfr.vip.best.com> David Friedman
<DD...@best.com> writes:

>"If enough employment cannot be found to occupy the 25 persons in a
>hundred upon work useful and profitable to the state, I see no
>objection to encouraging employment which serves only for ornament or
>amusement"

Where'd you find this, over the doorway to the U.S. Congress?


>So when everything that can be done to serve the state is done,
>Cantillon thinks it harmless if any remaining labor goes to produce
>things that give people pleasure.

It's hard to tell absent context, but I think it may be worse. Isn't
he saying that if "productive work" on behalf of the State can't be
found for those in its employ, then even "make-work" work is justified
in being supported by the State?

If not, then somebody should tell the U.S. Congress...because that's
obviously the interpretation they take!

PMFJI


jk


David Friedman

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May 10, 1998, 3:00:00 AM5/10/98
to

In article <6j20nb$6...@sjx-ixn8.ix.netcom.com>, Jim Klein
<rum...@ix.netcom.com> wrote:

>In <DDFr-08059...@ddfr.vip.best.com> David Friedman
><DD...@best.com> writes:
>

>>"If enough employment cannot be found to occupy the 25 persons in a
>>hundred upon work useful and profitable to the state, I see no
>>objection to encouraging employment which serves only for ornament or
>>amusement"
>

>Where'd you find this, over the doorway to the U.S. Congress?
>
>

>>So when everything that can be done to serve the state is done,
>>Cantillon thinks it harmless if any remaining labor goes to produce
>>things that give people pleasure.
>

>It's hard to tell absent context, but I think it may be worse. Isn't
>he saying that if "productive work" on behalf of the State can't be
>found for those in its employ, then even "make-work" work is justified
>in being supported by the State?

I don't think so. If you want to look at the context, just do a search for
Cantillon; I downloaded the essai but don't remember the URL.

I think the implication of "encouraging" is not "paying for" but "in
figuring out the right government policy, counting as on the whole a
mildly good thing."

Vincent Cook

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May 12, 1998, 3:00:00 AM5/12/98
to

Gordon Sollars wrote:

>> I'm talking about the minting of coins, not the issuance of
>> paper currency. The world used gold and silver
>> coins as the standard money back in those days.
>>
>The "world" is a big place; what we care about here is Scotland, where the
>banks in fact had a well developed system of bank-notes. Smith held that it
>was proper to restrict the notes to "large" amounts, (I think) because those
>making large transactions would be better able to judge the reliability of
>the bank behind the notes. The "poor" would use coin. Perhaps for this bit
>of paternalism Smith stands condemned.

Scotland still had to trade with the rest of the world, and in any event
banknotes of this era were legally redeemable in coin (albeit with
considerable reluctance on the part of Scottish banks to honor their
obligations and with occasional suspensions of redemption during economic
crises). A monopoly of the mint was also a monopoly over the production of
the commodity used as bank reserves and as the means for settling
international transactions.

>Is there any evidence that the French economists you cite objected to the
>government minting of coins?

Not that I know of, but there is no evidence that they would have objected
to a privatization of the mint either. The point is that, unlike Smith,
the Physiocrats weren't demarcating whole areas of the economy as
being off-limits to private activity, so it is quite plausible to
infer from their theories that they would have reduced the state to
near-Randian levels, financially supported by a single tax on land.

>> I do have a quote from the _Wealth of Nations_ regarding his
>> support of public education:
>>
>> "An instructed and intelligent people besides are always more decent
>> and orderly than an ignorant and stupid one. They feel themselves,
>> each individuallly, 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 . . . less apt to be
>> misled into any wanton or unnecessary opposition to the measures of
>> government."
>>
>
>And I, too, have a quote from Smith:
>
>"Domestic education is the institution of nature;
>public education, the contrivance of man. It is
>surely unnecessary to say, which is likely to be the wisest."
>
>Your Smith quote says nothing about *public* education. I'm curious; did
>your quote come from the Rothbard book you mentioned?

Yes. Rothbard implies that the context of this quote involved the
idea that the state has to inculcate obedience in order to get
sufficient cannon fodder.

>> Turgot's hard-core libertarian attitudes can be discerned from this
>> passage from _Plan for a Paper on Taxation in General_:
>>
>> "It seems that Public Finance, like a greedy monster, has been lying
>> in wait for the entire wealth of the people."
>>
>
>Was Turgot speaking of government in general, or of his experience with
>French government in particular? That is, if Turgot had been in Scotland and
>Smith in France, what differences might we have seen in their writings?

As to the first question, I think it is fair to say that Turgot's theories
concerning taxation were generally applicable, but that he and his
predecessors had arrived at these views largely in reaction to the sharp
contrast they observed between the oppressive and inequitable conditions in
France and the prosperity of the relatively free-market Dutch.

As for the "what if" scenario in your second question, it is
impossible to speculate intelligently about the outcome. For all we
know, both men might have pursued some completely different interest
than writing about economics.

Aside from the question of how laissez-faire Smith was or might have been,
it is important to reiterate again that economics had risen to prominence
long before Adam Smith and Immanuel Kant (the point which gave rise to this
sub-thread). Rand really can't be blamed for falling victim to the
Smith-as-founder myth, but I would hope that the economists who hang out on
h.p.o. might reexamine it a bit more critically.

gsol...@virginia.edu

unread,
May 12, 1998, 3:00:00 AM5/12/98
to

In article <1998051202...@cybere.creative.net>,

"Vincent Cook" <Use-Author-Address-Header@[127.1]> wrote:
>
> Gordon Sollars wrote:
>
> >Is there any evidence that the French economists you cite objected to the
> >government minting of coins?
>
> Not that I know of, but there is no evidence that they would have objected
> to a privatization of the mint either.

So what we know is that Smith said something about government minting of
coins and the French did not. This is not a lot to go on.

> The point is that, unlike Smith,
> the Physiocrats weren't demarcating whole areas of the economy as
> being off-limits to private activity, so it is quite plausible to
> infer from their theories that they would have reduced the state to
> near-Randian levels, financially supported by a single tax on land.
>

And it is quite possible that as Smith saw the beneficial effects of certain
free market policies he would have advocated even more radical policies. (As
Hayek did, ultimately endorsing competition in currency.) Making inferrences
from the theory of the Physiocrats on matters which they didn't actually
address may be a wonderful game, but perhaps one that is unfair to Smith. If
we are going to test historical figures for free market purity, I think it
would be best to confine ourselves to areas where we have both theory and
data for the figures involved.

> >Your Smith quote says nothing about *public* education. I'm curious; did
> >your quote come from the Rothbard book you mentioned?
>
> Yes. Rothbard implies that the context of this quote involved the
> idea that the state has to inculcate obedience in order to get
> sufficient cannon fodder.
>

I enjoy reading Rothbard in high dudgeon as much as the next libertarian, but
I would suggest that it is a mistake to confuse this aspect of his writing
with good scholarship.

> >Was Turgot speaking of government in general, or of his experience with
> >French government in particular? That is, if Turgot had been in Scotland
> >and Smith in France, what differences might we have seen in their writings?
>
> As to the first question, I think it is fair to say that Turgot's theories
> concerning taxation were generally applicable, but that he and his
> predecessors had arrived at these views largely in reaction to the sharp
> contrast they observed between the oppressive and inequitable conditions in
> France and the prosperity of the relatively free-market Dutch.
>

And perhaps the the Scots or the English, if they had been more familiar with
them?

> As for the "what if" scenario in your second question, it is
> impossible to speculate intelligently about the outcome. For all we
> know, both men might have pursued some completely different interest
> than writing about economics.
>

But you find no difficulty in speculating about what detailed policies the
Physiocrats would have supported, based upon some knowledge of their theory?
I think that fairly standard practice in interpreting a counterfactual is to
make as few changes as possible. In this case, that would mean assuming that
Smith and Torgot were still interested in economics, and asking what effect
writing against a different background would have had on details of their
views. I will go out on a limb and suggest that Rothbard never bothered to
think through what that would have meant for specific policy recommendations
by Smith or Turgot.

> Aside from the question of how laissez-faire Smith was or might have been,
> it is important to reiterate again that economics had risen to prominence
> long before Adam Smith and Immanuel Kant (the point which gave rise to this
> sub-thread). Rand really can't be blamed for falling victim to the
> Smith-as-founder myth, but I would hope that the economists who hang out on
> h.p.o. might reexamine it a bit more critically.
> --

Is there more than one economist who hangs out here? :-) Perhaps you mean
"students of Economics". ;-)

Gordon Sollars

David Friedman

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May 12, 1998, 3:00:00 AM5/12/98
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I now have a copy of the Rothbard book on which Vincent based his recent
assertions about Smith and his predecessors. I am afraid I have neither
the time nor the stomach for a full critique, but so far it is consistent
with my expectations. In particular, his discussion of Smith's economic
theory misrepresents it in striking fashion, attributing to Smith an
embedded labor theory of exchange value which Smith does not have (save in
the primitive society where labor is the only input).

Rothbard falsely refers to Smith's "call for government-run education." I
have already posted Smith's real views.

Rothbard asserts that Smith supported public works--including highways,
bridges and harbours, on the rationale that private enterprise would not
'have the incentive' to maintain them properly.(!?)"

The final parenthesis is Rothbard's, but could be mine, since this is an
example of careless reading by Rothbard. The actual passage is not a
discussion of private building of highways etc. at all but of the
possibility of turning over publicly constructed works to private owners,
on the theory that they will have a better incentive to maintain them than
a government agency would. Smith thinks this is a good idea for canals but
rejects it in the case of highways, on the grounds that the private owner
could collect tolls even if he didn't maintain the road, since roads
depreciate much more slowly than canals.

Rothbard says that Smith advocated government coinage; he offers no
evidence for the claim. So far as I can tell, Smith, like Turgot and
Cantillon, mostly took government coinage for granted.

Rothbard said that Smith advocated government intervention in the form of
"The Post Office, on the simple grounds-which will draw a bitter laugh
from modern readers-that it is profitable!"

As I already pointed out, Smith did not advocate it--he merely commented
that it was the one commercial activity which all kinds of governments
seemed to be able to run at a profit. I don't think he can be blamed for
failing to anticipate the incompetence of governments a century or two
after his death.

Rothbard's list of Smith's sins is essentially the same that Vincent
already gave. Rothbard provides no documentation for any of it, aside from
the quote on education that Vincent already posted. So I have no idea what
his basis is for thinking that Smith thought wages in kind should be
illegal, or registration of mortgages should be compulsory, or ... . Given
how unreliable Rothbard is when he is talking about parts of Smith's
position that I recognize, I see no strong reason to suppose that he has
any solid basis for those beliefs, although it is certainly possible.

Typically, Rothbard mentions that Smith spoke favorably of a tax on wool
exports (as a revenue measure, although Rothbard doesn't say so) without
mentioning that it is in the context of an attack on the existing
prohibition of exporting wool.

Rothbard refers to Turgot as pro-laissez-faire, but for some reason does
not provide a catalog of his failings analogous to the catalog provided
for Smith--although, as I point out with a lengthy quote in another post,
Turgot's views on education were (by Rothbard's standards, and mine)
immeasurably worse than Smith's.

In fairness to Turgot, I should say that, despite his views on education,
his general political views, like Smith's, are moderate libertarian. He is
a thorough free trader and expresses libertarian sentiments on a variety
of other issues.

David Friedman

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May 12, 1998, 3:00:00 AM5/12/98
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In article <1998051202...@cybere.creative.net>, "Vincent Cook"
<Use-Author-Address-Header@[127.1]> wrote:

>Gordon Sollars wrote:

>A monopoly of the mint was also a monopoly over the production of
>the commodity used as bank reserves and as the means for settling
>international transactions.

Unless I am mistaken, you have still nowhere cited Smith calling for a
monopoly of the mint--as opposed to simply taking it for granted that
government was doing it, as in fact it was.

>>Is there any evidence that the French economists you cite objected to the
>>government minting of coins?
>
>Not that I know of, but there is no evidence that they would have objected
>to a privatization of the mint either.

Cantillon explicitly discusses the reasons for having a government mint,
in a quote I have already posted. He does not explicitly say that private
mints should be illegal--but neither, so far as I know, does Smith. As far
as I can tell, neither of them considered the question.

>The point is that, unlike Smith,
>the Physiocrats weren't demarcating whole areas of the economy as
>being off-limits to private activity, so it is quite plausible to
>infer from their theories that they would have reduced the state to
>near-Randian levels, financially supported by a single tax on land.

As I have already pointed out, Cantillon, at least, comes across as a
thorough statist. He is also quite explicitly in favor of government
regulation of trade, aimed at bringing silver into the country. Your
"quite plausible" is pure fantasy, at least so far as he is concerned.

And what are the "whole areas of the economy" that Smith market as
off-limits to private activity? Not education. Not the issuance of bank
notes. Not highways or canals. Can you give me a list?

>>Your Smith quote says nothing about *public* education. I'm curious; did
>>your quote come from the Rothbard book you mentioned?

>Yes. Rothbard implies that the context of this quote involved the
>idea that the state has to inculcate obedience in order to get
>sufficient cannon fodder.

You are now telling us something about Rothbard, not something about
Smith. There is a large gap between "cannon fodder" and people who are


"are . . . less apt to be misled into any wanton or unnecessary

opposition to the measures of government." If anything, the implication
of the passage is they Smith is in favor of opposition to the measures of
government--when necessary. Hence the qualifications.

>>> Turgot's hard-core libertarian attitudes can be discerned from this
>>> passage from _Plan for a Paper on Taxation in General_:

You don't think it a slight stretch to accuse Smith of selling out because
he was a customs official, and then regard Turgot as a hard core
libertarian?

In another post, Vincent writes:

>I am always happy to do more research on questions such as this, but you
>really ought to aspire to greater things than just provoking me to read
>more. First of all, if it is the case that (1) my analysis and quotes were
>derived from Rothbard, and (2) these analyses and quotes are
>misrepresentative of Cantillon, Smith, et al.; then it stands to reason
>that Rothbard would be responsible for any such misrepresentations. Why
>then are you accusing me of being selective, etc.?

I didn't accuse you of being selective; I accused you of illustrating your
points with selective quotes. Obviously Rothbard was the one who selected
them.

>I am simply putting
>forward the data I have.

While not bothering to get any additional data. _The Wealth of Nations_ is
not a hard book to find, and it is quite enjoyable to read.

>Unfortunately, it appears that your obvious
>irritation with Rothbard is coloring your responses to me.

You are stating, with great confidence, conclusions that are not your
own--and you did not put your statements in the form "Rothbard claims
that." I suggest that before you make statements about Smith, you ought to
read him--and if you do so, you will discover that the statements you are
making wholly misrepresent the tone of the book.

>Second of all, does one misrepresentation (assuming that is what it is)
>justify another? If by your own admission you are making Cantillon sound
>worse than he really is, then it appears that you are engaging in an
>extended rhetorical diversion which doesn't address the main question of
>whether or not the French invented economics, brought it to prominence, and
>used it to support laissez-faire policy prescriptions before Smith.

1. It wasn't a misrepresentation precisely because I warned the reader
that I was selecting my quotes. Part of my point was to demonstrate what
could be done by that technique.

2. Cantillon does not use economics to support consistently laissez-faire
policy prescriptions before Smith.

3. Of course Smith had predecessors--that isn't news. Smith himself
discusses the physiocrats at some length, and politely. Near the beginning
of the lecture notes I provided my students for the course in History of
Thought I have been teaching this quarter, I wrote (about Smith):

1. The man who first assembled economics, although there were precursors.

Judging by Cantillon (I haven't yet gotten to Turgot), that statement is
accurate; the Essai is not comparable to _The Wealth of Nations_, although
it contains a noticeable number of the ideas in the latter book, as well
as at least one important idea that I don't think Smith has, and some
errors that Smith either does not make or energetically attacks.

>>1. Am I correct in believing that you have read neither Smith nor
>>Cantillon, and are simply relying on Rothbard's hatchet job?

>This is a loaded question. I am indeed relying on Rothbard's work, but so
>far you have given me little reason to doubt anything he wrote except
>possibly for the bit about the specie-flow. On the other hand, if by your
>own admission you are making Cantillon look worse than he really is, and
>concede that Cantillon anticipates Smith in various important ways,
>then you seem to be hinting that Rothbard might actually be onto
>something.

>Let me put this question to you then: given your reading of Cantillon
>as he really is, do you think he was just another mercantilist hack,
>or do you think he made serious contributions to founding economics
>as a distinct intellectual discipline?

I don't think the mercantilists were hacks. I think Cantillon either made
a serious contribution to economics, or is reflecting the ideas of others
who did. That doesn't surprise me, and is certainly not original with
Rothbard. Long before our exchange, Cantillon was one of the people I had
a mental note to read when I got around to it.

>Seriously David, you have no business strongly denouncing Rothbard's work
>as a "hatchet job" until you can conclusively show that Rothbard
>intentionally got it wrong.

>I take it that so far you have not read Rothbard's book yourself and
>that you have skimmed exactly one of the original sources relating to
>the early French economists he cites. If this is the case, then I
>rather doubt that you are in a position to strongly challenge
>Rothbard's thesis yet, let alone demonstrate that his errors were
>dishonest.

1. I have only skimmed Cantillon, but I know Smith quite well. Assuming
you have accurately represented Rothbard, his remarks on Smith are a
hatchet job. That is consistent with what I know of Rothbard from other
work, and I cannot see any good reason why you would have misrepresented
him in such a way.

2. You were the one who claimed, I presume on the basis of Rothbard, that
Cantillon was a free trader--which is inconsistent with the clear words of
the Essai, as I have pointed out.

>>2. In light of the quotes I have just offered, are you prepared to either
>>revise your position or go read Cantillon for yourself (and Smith) and
>>then revise it accordingly?
>

>I am willing to read Cantillon and reach my own conclusions,

But not to read Smith?

> but I am not
>sure if I really want to continue this sort of discussion with you. What
>you are suggesting by posing such questions is the insinuation that I
>am impervious to whatever evidence you present and that my reliance
>on Rothbard as a secondary source somehow calls my motives into
>question. Frankly, I find that pretty insulting.

Your motives aren't at issue. What I am implying is that you ought not to
make confident assertions based solely on a secondary source--especially a
secondary source by someone who quite obviously has an axe to grind.

I had an exchange with Jimbo over Rand earlier in this thread. I posted
something along the lines of "X says Rand says Y. Y is wrong. Will someone
confirm that Rand really said Y. If she did, isn't that a reason to
question her judgement?" Jimbo called me to task for irresponsibly
suggesting Rand believed something without checking her own words.

I think Jimbo was wrong, and said so. But he would have been right if I
had stated, as a fact, "Rand held view Y." He would have been even more
right if I had stated it, and omitted to mention that X, who was my sole
source for the assertion, made it in the process of attacking Rand. That
is what you did--with Smith substituted for Rand, and Rothbard as X.

I'm not attacking your motives--I am attacking the truth of what you were
asserting (second hand from Rothbard) and your judgement in asserting it
as fact without making any effort to check it first.

A query for you--don't bother to answer it if you don't want to. If, after
reading Smith and Cantillon (and, hopefully, Turgot), you conclude that
the Rothbard book was a hatchet job, will you

A. Revise your opinions of this exchange and ...
B. Revise your opinion of Rothbard?

Vincent Cook

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May 13, 1998, 3:00:00 AM5/13/98
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Gordon Sollars wrote:

>I enjoy reading Rothbard in high dudgeon as much as the next libertarian, but
>I would suggest that it is a mistake to confuse this aspect of his writing
>with good scholarship.

This is more polite than Friedman characterizing Rothbard's work as a
hatchet job, but it suffers from the same problem - unsupported attacks
against Rothbard do not add up to a refutation of his analysis.

>> As for the "what if" scenario in your second question, it is
>> impossible to speculate intelligently about the outcome. For all we
>> know, both men might have pursued some completely different interest
>> than writing about economics.
>>
>But you find no difficulty in speculating about what detailed policies the
>Physiocrats would have supported, based upon some knowledge of their theory?

I think it is easier to work out the logical implications of a theory
and to investigate how committed a theorist was in acting
on their ideas than it is to invent facts that are contrary to
history and use that as the basis for judging people.

>Is there more than one economist who hangs out here? :-) Perhaps you mean
>"students of Economics". ;-)

Well, I'm not that fussy about academic titles and positions, so I
sometimes treat people as experts in a field even when they don't
have a state-approved degree declaring them as such. I can think of
at least a couple of other h.p.o. regulars who have a strong
background in economics (though not necessarily the Austrian theories
I am interested in) and are in jobs that require the use of their
economics training. And who knows - maybe somebody like Greenspan
happens to have gone under very deep cover and secretly lurks
hereabouts.

gsol...@virginia.edu

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May 13, 1998, 3:00:00 AM5/13/98
to

In article <1998051307...@cybere.creative.net>,

"Vincent Cook" <Use-Author-Address-Header@[127.1]> wrote:
>
> Gordon Sollars wrote:
>
> >I enjoy reading Rothbard in high dudgeon as much as the next libertarian,
> >but I would suggest that it is a mistake to confuse this aspect of his
> >writing with good scholarship.
>
> This is more polite than Friedman characterizing Rothbard's work as a
> hatchet job, but it suffers from the same problem - unsupported attacks
> against Rothbard do not add up to a refutation of his analysis.
>
I was taking the fact that you used the passage from Smith quoted by Rothbard
as showing that it was Rothbard's (or your) best evidence that Smith
advocated public education over private. But the passage said nothing about
public education. Thus my attack on Rothbard with regard to this particular
was not "unsupported", although Rothbard (or you) may have some other, better
argument than the one you gave.

In the meantime, David Friedman has provided evidence that Rothbard's
analysis is flawed in other particulars as well. Does this add up to
Rothbard's treatment of Smith being a "hatchet job"? Perhaps there is room
for reasonable disagreement, but I think the answer is "yes".

> I think it is easier to work out the logical implications of a theory
> and to investigate how committed a theorist was in acting
> on their ideas than it is to invent facts that are contrary to
> history and use that as the basis for judging people.
>

And I was sugggesting that imagining the theorist against a different
background of politics and culture might be a good way to carry out such an
investigation.

> >Is there more than one economist who hangs out here? :-) Perhaps you mean
> >"students of Economics". ;-)
>
> Well, I'm not that fussy about academic titles and positions, so I
> sometimes treat people as experts in a field even when they don't
> have a state-approved degree declaring them as such.

I wasn't thinking of "state-approved" degrees; I was making a (weak, I
gather) joke with reference to Rand's statement that her followers should
refer to themselves as "students of Objectivism" rather than as
"Objectivists".

Gordon Sollars
gsol...@virginia.edu

David Friedman

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May 13, 1998, 3:00:00 AM5/13/98
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In article <1998051307...@cybere.creative.net>, "Vincent Cook"
<Use-Author-Address-Header@[127.1]> wrote:

>Gordon Sollars wrote:
>
>>I enjoy reading Rothbard in high dudgeon as much as the next libertarian, but
>>I would suggest that it is a mistake to confuse this aspect of his writing
>>with good scholarship.
>
>This is more polite than Friedman characterizing Rothbard's work as a
>hatchet job, but it suffers from the same problem - unsupported attacks
>against Rothbard do not add up to a refutation of his analysis.

How about supported attacks? You gave us a series of conclusions you drew
from Rothbard's book. I have now provided you with quotes from Smith,
Cantillon and Turgot which demonstrate pretty clearly:

1. Cantillon was a statist and was not a supporter of laissez-faire

2. Smith was not unambiguously in favor of any government involvement in
education at all--he thought there were arguments for and against it.
Turgot, on the other hand, was enthusiastically in favor of centralized
government control over the whole French educational system.

I have also pointed out that Rothbard makes a series of assertions about
Smith's views, without providing support for them, that some of them are
false and others misleading. Would you regard an attack on a modern writer
who favored the legalization of marijuana as a hatchet job, if the author
stated that the writer advocated taxing marijuana--and said nothing at all
about the fact that marijuana was currently illegal and the writer was
arguing for shifting it to the status of tobacco? How about if there was
no way the reader could be expected know that marijuana was illegal? That
is precisely what Rothbard did on the question of wool exports--if you
don't believe me, go read Smith.

A book praising Turgot and damning Smith, which asserts that Smith was in
favor of public education when he wasn't and fails to mention Turgot's
views on the matter, is either incompetent or a hatchet job.

What sort of support are you asking for? Do you expect me to waste my time
writing a book to answer Rothbard's? How am I supposed to prove that Smith
did not advocate a government monopoly of the mint if he never discussed
the matter? It isn't as if Rothbard provided any evidence for the positive
claim. Somehow, you seem a whole lot less sceptical when reading Rothbard
on Smith than when reading Friedman on Rothbard.

>Well, I'm not that fussy about academic titles and positions, so I
>sometimes treat people as experts in a field even when they don't
>have a state-approved degree declaring them as such.

So far as I know, nobody here has a state approved degree declaring him an
expert in economics. My claim to being considered an economist is that
journals print my articles and universities pay me to teach their
students.

Vincent Cook

unread,
May 14, 1998, 3:00:00 AM5/14/98
to

David Friedman wrote:

>>Second of all, does one misrepresentation (assuming that is what it is)
>>justify another? If by your own admission you are making Cantillon sound
>>worse than he really is, then it appears that you are engaging in an
>>extended rhetorical diversion which doesn't address the main question of
>>whether or not the French invented economics, brought it to prominence, and
>>used it to support laissez-faire policy prescriptions before Smith.
>
>1. It wasn't a misrepresentation precisely because I warned the reader
>that I was selecting my quotes. Part of my point was to demonstrate what
>could be done by that technique.

Of course, you didn't establish that Rothbard was being selective,
so I think the lesson was lost on those of us who don't buy into your
"hatchet job" thesis as a matter of faith.

>2. Cantillon does not use economics to support consistently laissez-faire
>policy prescriptions before Smith.

Did I say that Cantillon did? Again, I remind you that the specific point
I made about Cantillon was that he founded economics as a separate
discipline, not that he was the original champion of laissez-faire. In my
reply of May 7th, I specifically said that *some* of the French, and not
all of the French, had integrated their views into a defense of
laissez-faire.

Obviously, I was qualifying my statement, not portraying the whole
group as being pro-laissez-faire. It appears that you are taking my
generalizations about pre-Smithians and taking those statements to
apply indiscriminately to Cantillon, the Physiocrats, and Turgot.
This is a misunderstanding of what I am saying.

In any event, the relevant issue is not whether all of these pre-Smithians
are free-traders in their policy orientation, but whether laissez-faire was
advocated and defended on economic grounds prior to Smith; which relies on
the propositions that (1) economics was founded prior to Smith, (2)
economics rose to prominence in the public policy arena before Smith, and
(3) laissez-faire was advocated by pre-Smithian economists.

Strictly speaking, these propositions don't require that all
pre-Smithian economists contributed equally to founding economics,
popularizing economics, and using economics to support laissez-faire.
Each of them had a more delimited, dare I say specialized role.

>3. Of course Smith had predecessors--that isn't news. Smith himself
>discusses the physiocrats at some length, and politely. Near the beginning
>of the lecture notes I provided my students for the course in History of
>Thought I have been teaching this quarter, I wrote (about Smith):
>
>1. The man who first assembled economics, although there were precursors.

Well, it is news to people who were simply watching your discussion
with Jimbo and don't know anything about the history of economic
thought. I haven't denied that Smith "assembled" economics in one
work before anyone else, but the sheer length of the _Wealth of
Nations_ doesn't have a great deal of bearing on the issues I have
been trying to raise with respect to Cantillon. One can write a
shorter work that identifies a new field of study, defines its
methodology, and states some of the basic theories; and rightly be
called the founder of the field.

>>Let me put this question to you then: given your reading of Cantillon
>>as he really is, do you think he was just another mercantilist hack,
>>or do you think he made serious contributions to founding economics
>>as a distinct intellectual discipline?
>
>I don't think the mercantilists were hacks. I think Cantillon either made
>a serious contribution to economics, or is reflecting the ideas of others
>who did. That doesn't surprise me, and is certainly not original with
>Rothbard. Long before our exchange, Cantillon was one of the people I had
>a mental note to read when I got around to it.

I didn't claim that such historical interpretations were original
with Rothbard, nor does Rothbard make such a claim.

>>Seriously David, you have no business strongly denouncing Rothbard's work
>>as a "hatchet job" until you can conclusively show that Rothbard
>>intentionally got it wrong.
>
>>I take it that so far you have not read Rothbard's book yourself and
>>that you have skimmed exactly one of the original sources relating to
>>the early French economists he cites. If this is the case, then I
>>rather doubt that you are in a position to strongly challenge
>>Rothbard's thesis yet, let alone demonstrate that his errors were
>>dishonest.
>
>1. I have only skimmed Cantillon, but I know Smith quite well. Assuming
>you have accurately represented Rothbard, his remarks on Smith are a
>hatchet job. That is consistent with what I know of Rothbard from other
>work, and I cannot see any good reason why you would have misrepresented
>him in such a way.

I think there is a double standard at work here. You have been castigating
me for making confident statements based upon a secondary source, yet you
strongly attacked Rothbard based not on your own reading of him, but
rather on my presentation of his views. Has it occurred to you that
even if my summary of Rothbard's thesis is accurate, it is too brief
to contain all the evidence, arguments, and qualifications to the
arguments he brings forward? How could you be so confident that you
weren't going to be persuaded by something Rothbard wrote without
having read it?

Even worse, you are so eager to seize upon what you found in Cantillon to
attack Rothbard that you haven't been paying attention to all of the
qualifications that I did include. You'll note my previous mention
of how I excluded Cantillon from the list of single-taxers, and my
argument above about how I qualified the attribution of laissez-faire
views to this group.

>2. You were the one who claimed, I presume on the basis of Rothbard, that
>Cantillon was a free trader--which is inconsistent with the clear words of
>the Essai, as I have pointed out.

No I didn't. In my post of May 7th, this is what I said about Cantillon:

"Economics was quite prominent in France and even in Scotland long
before Kant or Smith. While the usual mythology is that Smith
and Ricardo founded modern economics, that honor really belongs to
Richard Cantillon. His treatise written sometime around 1730,
_Essai sur la nature du commerce en general_, is the first work to
demarcate the field of economics and give a systematic treatment of
the theory."

In my post of May 8th, I listed six of Cantillon's theoretical
accomplishments (one qualified), and you came up with a quote suggesting
that another one should be qualified. After that, you came up with the
charge that I was mistakenly portraying Cantillon as a free-trader.
However, a quick look at these earlier posts on DejaNews will confirm that
I wasn't saying that at all.

>> but I am not
>>sure if I really want to continue this sort of discussion with you. What
>>you are suggesting by posing such questions is the insinuation that I
>>am impervious to whatever evidence you present and that my reliance
>>on Rothbard as a secondary source somehow calls my motives into
>>question. Frankly, I find that pretty insulting.
>
>Your motives aren't at issue. What I am implying is that you ought not to
>make confident assertions based solely on a secondary source--especially a
>secondary source by someone who quite obviously has an axe to grind.

You have been repeatedly questioning my willingness to consider new
evidence and to critically examine what Rothbard says, and making
such queries the rhetorical highlight of your replies. You act as if
I'm a closed-minded authoritarian simply because I take Rothbard
seriously, which is a pretty insulting way to express your
disagreements as far as I'm concerned.

It should be noted also that my purpose in introducing Rothbard's
analysis wasn't to champion Murray's entire world-view. In fact, of
all of Rothbard's works, the particular volume I cited has the most
shortcomings from my own vantage point. However, seeing that you and
Jimbo were perpetuating the Smith-as-founder myth in your discussion
of Kant's alleged influence, I thought it was necessary to point out
the existence of a prominent laissez-faire movement that preceded
Kant and Smith.

>I had an exchange with Jimbo over Rand earlier in this thread. I posted
>something along the lines of "X says Rand says Y. Y is wrong. Will someone
>confirm that Rand really said Y. If she did, isn't that a reason to
>question her judgement?" Jimbo called me to task for irresponsibly
>suggesting Rand believed something without checking her own words.
>
>I think Jimbo was wrong, and said so. But he would have been right if I
>had stated, as a fact, "Rand held view Y." He would have been even more
>right if I had stated it, and omitted to mention that X, who was my sole
>source for the assertion, made it in the process of attacking Rand. That
>is what you did--with Smith substituted for Rand, and Rothbard as X.

If I state an opinion about something on Usenet and you think I am
mistaken, you have every opportunity to question what my sources are, which
is indeed what happened. My responsibility then is to identify what my
sources are, which is what I did in response. I don't see a problem with
that.

The notion that arguments must have full citations is more
appropriate to a one-way channel of communication (such as
peer-reviewed academic papers) because of the lack of any interactive
give-and-take between the author and most of his audience. In the
typical one-way academic modes of communication, the author has to
anticipate all likely requests for factual sources in advance and
satisfy those anticipated requests in the original article, book,
etc., in order to give the audience an opportunity to verify the
facts for themselves.

In an informal group discussion, this procedure isn't necessary.
In a Usenet format, requests for clarification, elaboration,
or support of one's argument can be done on demand, so it is
far more efficient to leave out references to such things until they
are requested. Moreover, there is no presumption that leaving out
such references means that one is basing their analysis exclusively
on primary sources. When one is talking about a body of literature
as vast as the writings of the pre-Smithians and of Smith himself, it
is entirely reasonable to assume that one might be employing
secondary sources in his analysis.

There are far more grounds for expecting a regular on h.p.o. to have
read Rand (which I believe was the substance of Jimbo's complaint)
than there is to have read the whole corpus of 18th Century
economics, a task which even few professional economists have
bothered to undertake.

Also, while secondary sources do create the potential for
misrepresentation, they can also recreate an intellectual context for
the reader that otherwise might not be fully appreciated just from
reading a primary source in isolation. If you think that the h.p.o.
audience needs to be coddled by warning them of every instance where
one is relying on a secondary source, one could argue with equal
justice that one ought to warn h.p.o. of every instance where one is
using a primary source without understanding the full intellectual
context and historical circumstances of the author when he or she
wrote it.

Indeed, one could hedge one's writing with all sorts of skeptical
reservations and disclaimers of this kind. But what end is served by
doing so? If my counterparts in a discussion are so weak-minded that
they aren't alert to the possibility of misrepresentations,
contextual changes in meaning, etc. or aren't able or willing to
track down possible instances of these problems, their criticisms are
not going to be worth much to me anyhow.

>I'm not attacking your motives--I am attacking the truth of what you were
>asserting (second hand from Rothbard) and your judgement in asserting it
>as fact without making any effort to check it first.

No, you have largely ignored the main thrust of what I have been
saying and instead have been attacking a straw man (the Cantillon
free-trader) while poisoning the well against Rothbard. I think it
has become perfectly clear who really has an axe to grind here.

>A query for you--don't bother to answer it if you don't want to. If, after
>reading Smith and Cantillon (and, hopefully, Turgot), you conclude that
>the Rothbard book was a hatchet job, will you
>
>A. Revise your opinions of this exchange and ...
>B. Revise your opinion of Rothbard?

There are two things I can tell you about the revision of my
opinions. First, they will indeed be revised in light of whatever
evidence I come across. Second, the evidence of the thread itself
has already prompted me to revise my opinions about you, and now I am
quite certain that I do not want to continue this sort of discussion
with you. Life is too short and too wonderful to be wasted on
malicious people who are just looking for a chance to
gratuitously abuse the honor of others.

David Friedman

unread,
May 15, 1998, 3:00:00 AM5/15/98
to

Vincent has, I gather, withdrawn from the argument on the grounds that my
attack on Rothbard's attack on Smith is obviously due to malice and bias
on my part; how he can know that is true without first finding out whether
what I am saying is true I have not yet figured out.

I thought that before ending my side of the argument, it would be worth
summing up my reasons for believing that the relevant part of Rothbard's
book (the discussion of Smith, with associated references to Cantillon and
Turgot) is biased, containing a mixture of error and deliberate
misrepresentation--my reasons, in other words, for regarding it as a
hatchet job.

For any who missed the earlier posts, I believe the sequence (some steps
contained more than one post) was:

Victor Cook posts some assertions about Smith, Cantillon and Turgot.

I responded, arguing that Victor's comments on Cantillon and Smith were
mistaken (I had not yet looked at Turgot)

Victor, in his response, mentioned Rothbard's book in a fashion that led
me to suspect (correctly, as it turned out) that Victor's opinions were
based entirely on Rothbard, not on Smith, Cantillon and Turgot, whom
Victor does not seem to have read.

In my response I referred to Rothbard's discussion of Smith as a "hatchet
job," on the basis of Victor's summary of it (and my previous knowledge of
Rothbard); at that point I had not yet located a copy of Rothbard's book.
I also took Victor to task for making confident statements about authors
he had not read, based solely on a biased account by someone else.

Victor, in his response, accused me of being unreasonable in condemning
Rothbard's book without reading it; I responded that Victor had condemned
Smith without reading him, and on the basis of a hostile, not a friendly,
summary. I also provided a lengthy quote from Turgot, demonstrating that
Turgot's views on public schooling, which neither Victor nor Rothbard
mentioned, were very much worse than Smith's views, which Victor (and his
source, Rothbard) condemned. I also provided more examples of misleading
statements in Rothbard about Smith. By that point I had located copies of
Rothbard's book and two books containing translations of Turgot.

Victor decided that arguing with me was a mistake, and announced his
decision not to do any more of it. Whether he has taken any steps to
determine whether his previous assertions about Smith et. al. were true I
do not know.

Herewith a final summary of my conclusions:

1. Cantillon

At one point in the chapter, Rothbard says that Cantillon "was not a
consistent free trader internally just as he was not in the foreign trade
area." Later, however, he writes that "While he inconsistently suggested,
in accordance with the state-building notions of the age, that the king
should amass treasure from a favorable balance of trade, the entire thrust
of Cantillon's work was in a free trade, laissez-faire direction." He does
not mention Cantillon's discussion of how some trade injures one of the
trading partners for the benefit of the other, or his endorsement of trade
regulations designed to maximize the inflow of money to the country. Nor
does Rothbard mention anywhere I could find Cantillon's belief
that an inflow of treasure would benefit the economy as well as the King.

In general, I think Rothbard's discussion of Cantillon is mildly
misleading but not to the point of dishonesty or clear error--I was misled
in that by Vincent's summary of Rothbard, which is what I was originally
responding to.

2. Smith, Turgot, and public education

Rothbard refers to Smith's "call for government-run education." He claims
that it was Smith's desire to see government foster a martial spirit, and
inculcate obedience to government among the populace, that motivated that call.

This is in part false and in part misleading. To begin with, Smith did not
call for government-run education. He offered arguments both for and
against government education, and his conclusion, which Rothbard does not
mention, was that subsidizing the education of the masses would be a
legitimate government activity, but that it would be equally legitimate,
and might be better, to leave education entirely private.

Furthermore, Rothbard's reference to "martial spirit" is highly
misleading. Smith writes:

"But the security of every society must always depend, more or less, upon
the marital spirit of the great body of the people. In the present times,
indeed, that martial spirit alone, and unsupported by a well disciplined
standing army, would not, perhaps, be sufficient for the defence and
security of any society. But where every citizen had the spirit of a
soldier, a smaller standing army would surely be requisite. That spirit,
besides, would necessarily diminish very much the dangers to liberty,
whether real or imaginary, which are commonly apprehended from a standing
army. As it would very much facilitate the operations of that army against
a foreign invader, so it would obstruct them as much if unfortunately they
should ever be directed against the constitution of the state."

Or in other words, Smith's argument on the virtues of a martial spirit is
the same as the argument often offered for the right to bear arms. It
makes a standing army less necessary, and it means that if a standing army
ever tries to take over, the people will be able to stop it. That is very
nearly the opposite of what Rothbard implies.

Smith goes on, concerning the virtues of a martial spirit, to write:

"But a coward, a man incapable either of defending or of revenging
himself, evidently wants one of the most essential parts of the character
of a man. ... Even though the martial spirit of the people were of no
use towards the defence of the society, yet to prevent that sort of mental
mutilation, .... would still deserve the most serious attention of
government ... ." (Bk V Ch1 part III art III)

This may or may not be correct, but it is at the opposite pole from the
position Rothbard is attributing to Smith--in favor of individuals
standing up for themselves, not being obedient.

So far, Rothbard's account is consistent with either of two
explanations--that he was deliberately dishonest or that he had never
really read the book he was criticizing, merely skimmed it for quotes
suited to his purposes.

What makes Rothbard's bias particularly striking is the contrast of Smith
with Turgot. I have already posted Turgot's argument, directed to the King
of France (when Turgot was finance minister of France), in favor of
establishing centralized government control over the whole educational
system. Rothbard discusses Turgot at length, and favorably--but somehow
fails to mention that particular argument.

3. Smith's value theory:

This is a complicated subject. Rothbard misrepresents, probably through
lack of understanding, Smith's position, but establishing that would
require more than I intend to write for this post. Anyone interested
may want to look at my lecture notes on _The Wealth of Nations_,
webbed at

http://www.best.com/~ddfr/Academic/Course_Pages
/History_of_Thought_98/History_of_Tht_Notes_1.html

and

http://www.best.com/~ddfr/Academic/Course_Pages
/History_of_Thought_98/Smith_Final_Lecture.html

and contrast them (and the original) to Rothbard's description.

4. Smith, free trade, and wool:

Rothbard objects that Smith was not really a free trader, and offers as
one example his support for export taxes on wool. There are two things
wrong with this:

A. Smith--like Cantillon and Turgot--was not an anarchist; all of them
believed in a government providing (at least) national defense and paying
for it with taxes. That leaves them with the problem of picking the least
bad form of taxation. Smith offers a rather sophisticated argument
(involving the theory of joint production) for why an export tax on wool
would have relatively little effect on quantity or quality of wool
produced, and hence why it is a relatively innocuous tax.

What makes Smith a free trader is that he regards the effect on the
economy of import and export taxes--including that one--as bad, a cost of
raising needed money, not a policy objective. The difference between him
and Turgot was not that one believed more in the virtues of free trade
than the other, but that Turgot (along with other physiocrats) thought the
ideal system of taxation would collect all of its revenue from one tax, on
the net produce of land, while Smith discusses the advantages and
disadvantages of a wide range of alternative taxes--including revenue
tariffs.

B. Rothbard does not mention that at the time Smith was writing the export
of wool was a criminal offense, which the government tried to prevent by
extensive regulations over the wool trade. What Smith is actually
advocating is thus a sharp reduction in government interference with
trade, although not a total elimination of it. Rothbard has to have known
that, and I do not see any way of interpreting his failure to mention it
as due to anything but deliberate dishonesty--the attempt to mislead his
reader by omission.

5. Other claims about Smith:

Rothbard makes a variety of other assertions about Smith's views for which
he provides no support, and which I suspect are false, since I cannot find
anything in _The Wealth of Nations_ to support them. I have invited
Vincent to provide support for them, but he does not seem interested in
the project.

6. The general tone of Rothbard's comments on Smith.

I think anyone reading the chapter has to conclude that Rothbard's purpose
is to attack both Smith's importance as an economist--in part by correctly
pointing out that many of his ideas appear in earlier works, in part by
correctly, in part by incorrectly, criticizing his ideas--and his claim to
be a libertarian. Having such a purpose is not necessarily a bad
thing--although I think the tone is strong enough to make a prudent reader
suspect that the author may be letting the conclusions he wants to reach
bias his arguments. But the combination of that purpose with extensive
misrepresentation of Smith, at least some of it clearly deliberate, seems
to me to justify my description of that part of Rothbard's book as a
hatchet job.

I should add that I have no opinion of the bulk of the book, since I have
not read it and it deals with people I know much less about than Smith.
The sections I have read say some things that are interesting and true and
some things that are interesting and might be true. But from looking at
Rothbard's discussion of Smith, which is the one part I am most competent
to judge, I conclude that Rothbard's discussion is in general not to be
trusted, and that I would therefore have to go through the primary sources
in some detail to determine which parts of his account are true and which
are not. I may end up doing so for Cantillon and Turgot, who are
interesting, but probably not for the earlier writers.

Stephen Grossman

unread,
May 19, 1998, 3:00:00 AM5/19/98
to

Friedman claims that economics is not based on philosophy and that
"predatory" is a valid scientific/economic concept. I challenge him to
justify this outside a rejection of capitalism (as rights-based) as
justified by selflessness.
€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€
I fought the Logos and the Logos won. ODYSSEUS
...the silly dead... HOMER
Reason is man's basic means of survival. AYN RAND
-----------------------------------------------------------------------------
Tracking Marxist dialectical revolution: ZigZag
Radically systematic radical metaphysics: Existence 2
http://home.att.net/~sdgross
----------------------------------------------------------------------------
Stephen Grossman
Fairhaven, MA, USA
sdg...@att.net
€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€


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