#AdamSmith, #WealthOfNations, and #CornLaws!
What more could you possibly want on a Saturday morning? (IV.v.b) #WealthOfTweets #SmithTweets
Yes, it’s the Digression Concerning the Corn Trade and Corn Laws! We can barely contain ourselves long enough to remind you that “corn” doesn’t mean 🌽 It means the principal cereal crop of a nation. (We keep saying so because we keep forgetting.) #WealthOfTweets #SmithTweets
#TLDR on #AdamSmith’s thoughts on the Corn Laws:

They’re bad. (IV.v.b.1) #WealthOfTweets #SmithTweets
Corn merchants can be broken down into four groups. Smith loves to break things down into groups.
1) Inland traders
2) Importers
3) Exporters
4) Transporters (IV.v.b.2) #WealthOfTweets #SmithTweets
If inland traders raise their prices higher than supply and demand will allow, they’ll discourage consumption beyond “thrift and good management.” People will go hungry and crops will rot.

That's bad. (IV.v.b.3) #WealthOfTweets #SmithTweets
If inland traders don’t raise prices high enough, people will overbuy, traders will lose profits, and the food will run out before the end of the season and people will go hungry.

That's bad. (IV.v.b.3) #WealthOfTweets #SmithTweets
Careful attention to supply and demand and sensible pricing means that inland traders get the best profit and the people don’t starve.

It's the #InvisibleHand at work. That's good! (IV.v.b.3) #WealthOfTweets #SmithTweets
If it were possible to have a monopoly on corn, a merchant might destroy crops to raise prices. But it’s too hard to do this with corn—too many merchants, too much corn. (IV.v.b.4) #WealthOfTweets #SmithTweets
You don’t get dearth and famine from inland merchants colluding over prices.

You get dearth from war and bad weather.

You get famine from government interference. (IV.v.b.5–6) #WealthOfTweets #SmithTweets
When the government sets prices for corn, they either keep corn off the market ➡ early famine, OR encourage people to buy too much too soon ➡ end-of-season famine.

People don't like it, but free trade is the only solution. (IV.v.b.7) #WealthOfTweets #SmithTweets
When the govt interferes and famine results, everyone blames the corn merchants, not the government.

They seem, to Smith, to be the most hated of all merchants in history. (IV.v.b.8–10) #WealthOfTweets #SmithTweets
"Our ancestors seem to have imagined" they could save money by cutting out the middleman.

We, the SmithTweeters, regret to fill you in about the prejudices of your descendants, Dr. Smith. (IV.v.b.11) #WealthOfTweets #SmithTweets
Middlemen have always seemed to consumers like they make money by doing nothing but increasing the cost of goods they buy before reselling them. (Just ask @mungowitz!) But what middlemen do is bring resources to where they are more valued. (IV.v.b.11) #WealthOfTweets #SmithTweets
Where resources are most valued might be another time or another place. Middlemen know they can make a profit by carrying corn to where it's needed or holding corn until it's needed, and then charging more because it's needed more. (IV.v.b.11–21) #WealthOfTweets #SmithTweets
The prejudice against middlemen resulted in regulating agriculture very differently than manufacturing:
Manufactures were forbidden to sell their wares directly. Farmers were required to. (IV.v.b.12–14) #WealthOfTweets #SmithTweets
These regulations prevented not only the division of labor but the development of land.

That makes corn more expensive, which was the opposite of what the laws intended! Oooooops. (IV.v.b.17) #WealthOfTweets #SmithTweets
Treating corn merchants like any other wholesale dealers would help ensure we use our land, our corn, our money, and our time better. We'd all be better off! (IV.v.b.18–21) #WealthOfTweets #SmithTweets
Adam Smith thinks George III gets some things wrong in the corn laws.

American SmithTweeters agree! (IV.v.b.23–26) #WealthOfTweets #SmithTweets
The corn laws are like laws against witchcraft. They’re irrational and they blame people for bad things that they are not causing. The rational thing is free trade. (IV.v.b.26) #WealthOfTweets #SmithTweets
#AdamSmith discusses the mathematics of politics for three paragraphs.
Then he says, “I have no great faith in political arithmetic.”
Moving on. (IV.v.b.27–30) #WealthOfTweets #SmithTweets
Importers of foreign corn increase supply and lower prices.

That’s good!

Corn farmers and merchants disagree for reasons Smith has been explaining for some time now, but high import duties lead to want and scarcity. (IV.v.b.32–35) #WealthOfTweets #SmithTweets
Counterintuitively, exporters help keep supplies up at home.

Unless farmers are allowed to export, they’ll be too cautious about planting more than they can sell. Failed crops, etc. will lead to an undersupply. (IV.v.b.36) #WealthOfTweets #SmithTweets
We’ve always been nicer to exporters than importers or inland merchants. Maybe because it’s fun to charge high prices to foreigners?
(You should see our international SmithTweeting rates!) (IV.v.b.38) #WealthOfTweets #SmithTweets
In case you're not sure, Smith still thinks free trade is the answer. Forbidding farmers from selling goods to the best market (home or overseas) is unjust as well as unproductive. (IV.v.b.39) #WealthOfTweets #SmithTweets
Why keep regulating? As with religion, we think our own interest is so great the government should push people around to protect it. We build bad laws and worse systems and do dumb things like persecuting "witches". (IV.v.b.40) #WealthOfTweets #SmithTweets
[That’s some epic #SmithSnark. We bet #DavidHume drew little hearts in the margin by that paragraph.] (IV.v.b.40) #WealthOfTweets #SmithTweets
Merchants who import grain in order to export it somewhere else are basically banned in England.

That's bad.

A country that serves as a storehouse will never starve! (IV.v.b.41–42) #WealthOfTweets #SmithTweets
Another #TLDR: Stop praising the corn laws and start treating agriculture more like manufacturing. (IV.v.b.43–53) #WealthOfTweets #SmithTweets
One more time. Corn Laws Bad. Free Trade Good!

Good Digression. Good job, everyone. See you tomorrow! #WealthOfTweets #SmithTweets

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More from @adamsmithworks

15 Feb
OK. Chapter 7 of Book 4 of #WealthOfNations is tough going. It's long. It's serious. It's all about colonies.

We can take comfort, though, in knowing that the chapter #AdamSmith says is about colonies is, in fact, about colonies. (IV.vii) #WealthOfTweets #SmithTweets
Colonies were a vexed subject when #AdamSmith was writing, and they’re even more complicated now. So, before we even get to the tweeting, here’s a link to that thread on Smith and “savage nations.” (IV.vii) #WealthOfTweets #SmithTweets

The reason for the ancient Greeks and Romans to settle colonies was straightforward: they didn’t have enough space for their growing populations. Their colonies were treated as “emancipated children”—connected but independent. (IV.vii.a.2) #WealthOfTweets #SmithTweets
Read 21 tweets
14 Feb
Dear Smithketeers. Over many chapters of #WealthOfNations, we've grown close. We were even going to ask all of you to be our Valentines.
And we have to tell you:

The title of Book IV Chapter 6, "Of Treaties of Commerce", is a lie. (IV .vi) #WealthOfTweets #SmithTweets
More like, "Of the reasons the Author is opposed to Treaties generally and the Treaty with Portugal in particular." (IV .vi) #WealthOfTweets
But FINE. Here we go:

Countries that bind themselves via a treaty to offer special treatment to the merchants and manufacturers of another country are granting them a sort of monopoly over their market. (IV. vi.1) #WealthOfTweets #SmithTweets
Read 22 tweets
12 Feb
We're back with more thoughts of #AdamSmith about the tools of mercantilism. Today: Bounties! (IV.v.) #WealthOfTweets #SmithTweets
Today we'd call bounties subsidies, which makes it much harder to use a Boba Fett gif.

So we're sticking with bounties. (IV.v.a.1) #WealthOfTweets #SmithTweets
Everyone admits, says Smith, that bounties shouldn't be given to industries or endeavors that could happen without them. But that means you're only going to give them to endeavors that can't pay for themselves. (IV.v.a.2) #WealthOfTweets #SmithTweets
Read 20 tweets
11 Feb
#AdamSmith has spent a few days talking about why the mercantile system is not a great idea in general, but today he starts to get into specifics by talking about the policies through which it's implemented. We begin today with...drawbacks! (IV.iv.) #WealthOfTweets #SmithTweets
Merchants and manufacturers are not, of course, content only to have a monopoly over the home market. They also want an advantage in foreign markets.

Also: we're calling them M&Ms now. (IV.iv.1) #WealthOfTweets #SmithTweets
M&Ms don't hold sway over foreign governments, so they've gotta settle for getting their home government to pay them to send goods abroad.
Read 13 tweets
10 Feb
#AdamSmith corrects a lot of economic errors in #WealthOfNations "Nothing, however, can be more absurd than this whole doctrine of the balance of trade," upon which nearly all protectionism is based. But we still worry about it today. (IV.iii.c.2) #WeathOfTweets #SmithTweets
Both the supposition that an even balance of trade = fair trade and that an uneven balance of trade implies one side wins and the other loses are false.

That's how he puts it. "Both suppositions are false."

We love a decisive Smith. (IV.iii.c.2) #WealthOfTweets #SmithTweets
The trap is thinking that the country that brings in the most silver and gold wins. Since bullion is the currency of international trade, exporting more than you import (having a positive trade balance) means you bring in more bullion. (IV.iii.c.3) #WealthOfTweets #SmithTweets
Read 31 tweets
9 Feb
Today #AdamSmith is talking about stuff that sounds pretty contemporary. But remember: it's 240 years old. Today it's all about attempts by the political system to manipulate the balance of trade. (IV.iii.) #WealthOfTweets #SmithTweets
The "Commercial System" that Smith is talking about here is also called the mercantile system, or mercantilism. (IV.iii.) #WealthOfTweets #SmithTweets
The gist of mercantilism is:
- If your imports and exports are equal, that's fair. But,
- If you export more than you import, you bring in silver. That's good! And,
- If you import more than you export, you pay out silver. That's bad.
(IV.iii.) #WealthOfTweets #SmithTweets
Read 20 tweets

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