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
Smith thinks treaties granting special access are disadvantageous for one country, but he still doesn't think they cause the country granting special treatment to become a "loser" in trade. (IV. vi.2) #WealthOfTweets #SmithTweets
Transactions favoured by the treaty must at least break even or the trade would stop. Both countries still gain from trade, but the country granting special access gains by less than they would under free trade. (IV. vi.2) #WealthOfTweets #SmithTweets
Sounds like there's no argument for treaties, right? Just use free trade!

Sure, if you're Smith. But the argument for treaties comes guessed it: advocates of the mercantile system. (IV. vi.3) #WealthOfTweets #SmithTweets
The idea behind treaties is that they can help a country secure a positive trade balance and rake in the gold. That's silly, says Smith! (Really, he says it's silly!) (IV. vi.3 & 14) #WealthOfTweets #SmithTweets
Thus ends Smith's substantive argument against treaties generally.

But oh, hey! Did you know that Britain has a treaty with Portugal? #AdamSmith sure as heck knew it. And he DID NOT LIKE IT. (IV. vi.3–19) #WealthOfTweets #SmithTweets
The whole idea behind needing a treaty with Portugal is that Portugal has got gold! GOLD! (IV. vi.8–19) #WealthOfTweets #SmithTweets
(Spain has gold mines, too, but Spain sides with France and against Britain and Portugal in wars, so that's no good. If anything Spain would want Britain to get less gold.) (IV. vi.8) #WealthOfTweets #SmithTweets
The treaty is popular because Britain imports such a huge proportion of all the gold it imports from Portugal. But Smith says that's just because Britain gets so much gold from Portugal that it doesn't need much more. (IV. vi.13) #WealthOfTweets #SmithTweets
And besides, gold is just like any other commodit—ARE WE REALLY DOING THIS AGAIN?!

(IV. vi.12) #WealthOfTweets #SmithTweets
Ahem. Gold is just like any other commodity. Britain will be able to get as much as it's willing to pay for without special treaties. (IV. vi.12) #WealthOfTweets #SmithTweets
Britain sends most of its Portuguese gold back out of the country again. Gold plate still comes from old gold plate (not Portuguese gold) and the money is still about the same age (not new-coined Portuguese gold). (IV. vi.17–18) #WealthOfTweets #SmithTweets
And now: Smith's argument for seignorage.

The link between this and treaties is feeling pretty tenuous, folks. (IV. vi.19–31) #WealthOfTweets #SmithTweets
Smith is against the government paying for turning bullion into coins. The people changing the bullion to coin should pay the mint to do it. The profit the government would make by coining the metals is seignorage. (IV. vi.19–31) #WealthOfTweets #SmithTweets
The Bank of England is unlikely to support the reintroduction of seignorage, says Smith, because they have "mistaken their own interest not a little." But in reality, it would protect them from potentially great losses. (IV. vi.22–31) #WealthOfTweets #SmithTweets
There are many sample calculations. If you like that sort of thing, this chapter is for you.

Just...not if you want to read about treaties. (IV. vi.22–31) #WealthOfTweets #SmithTweets
#TLDR seignorage, so long as it's not so high that it encourages counterfeiting, protects the money supply from being melted down as coins get worn and lose their gold or silver content. And adds to the public coffers, too. (IV. vi.22–31) #WealthOfTweets #SmithTweets
So why does the government pay for coinage?

It's because of mercantilism. #ItsAlwaysBecauseOfMercantilism (IV. vi.32) #WealthOfTweets #SmithTweets
This content "might perhaps have been more properly placed in...the first book".

We noticed, Dr. Smith!! (IV. vi.32) #WealthOfTweets #SmithTweets
Come back tomorrow, when we talk about colonies! See you then! #WealthOfTweets #SmithTweets

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More from @adamsmithworks

16 Feb
In yesterday’s discussion of colonies, #AdamSmith was really good on a lot of issues—particularly on condemning murdering Indigenous people, despoiling colonies in search of gold that ain't there, and then pretending you're doing it all for God. #WealthOfTweets #SmithTweets
Today, Smithketeers, will not be such a feel-good day. You will not be heartened. You might want to pour a cup of tea. Or something much stronger. #WealthOfTweets #SmithTweets
Smith starts by noting that the colonies of developed nations where the “natives easily give place to the new settlers” get rich and cultured faster than anywhere else.

That phrase “give place to” cloaks a lot of horrors. (IV.vii.b.1) #WealthOfTweets #SmithTweets
Read 33 tweets
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
13 Feb
#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
Read 29 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

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