Understanding Adam Smith

I have always wondered where the Scottish Enlightenment with e.g. David Hume (1711-1776), Adam Smith (1723-1790) and Thomas Reid (1710-1796) came from. It appeared suddenly, like dropping from the sky. It appeared where you would not expect it, on the rough borders of the European civilized world, and then became its beacon of light.

This weblog concerns political economy and thus is rooted in a deep appreciation for Adam Smith. But where did Adam Smith come from ? We would better understand him when we also understood his roots.

I now just read Arthur Herman (2001), How the Scots invented the modern world. The true story of how Western Europe’s poorest nation created our world & everything in it. Herman finally answers that tantalizing question. A good review of Herman’s book is at the Guardian.

It was John Knox (c. 1514-1572) who brought Protestantism to Scotland in an iconoclast revolution. A first element is that the bishops (episcopalism) were evicted and that the church parishes were ruled by the elders (presbyterians), which introduced a form of democracy. A second element is the creation of free grammar schools in all parishes so that the children would learn to read the Bible. The children were also taught to write, and once they were able to write: there you have it.

Knox seems to have made a logical error. In order to read the Bible there is no need to be able to write, since it already has been written. Nowadays we don’t make that error. We teach our children to use computer programs and we teach only the happy few how to program computers. The scope for revolution in our age thus is limited. See my book on math education: Elegance with Substance (2009).

John Knox did not appear from a vacuum. It helps to be aware that Knox was trained by John Major (1467–1550) and that the Scots already had an early famous scolar in Duns Scotus (c. 1266-1308). The Scottish dislike of England caused a stronger link with Paris and the universities there. Knox was in Paris and met Calvin (1509-1564).

The Knox process is similar to the impact of Geert Groote (1340-1384) in Holland. He also started teaching people to read and write, though still by hand without the printing press of Johannes Gutenberg (c. 1395 – 1468). Groote managed to create an entire book industry, and thus helped to create the demand for the Gutenberg technique. That story is told by a recent CPB-study by Bas ter Weel, Semih Akcomak and Dinand Webbink (2013) Why Did the Netherlands Develop so Early? The Legacy of the Brethren of the Common Life.

Ter Weel e.a. claim that Groote had an impact on the modern school system, while Arthur Herman has this claim for the Scots. One supposes that there will be more influences. When the Edinburgh School of Medicine was created, their professors were chosen from Scots who had studied in Leiden under Herman Boerhaave (1668-1738) who again had been influenced by the empirical approach of Isaac Newton (1642–1727).

Arthur Herman concentrates on the influence of the Scots and tends to neglect the impact of other peoples on the creation of the modern world. This is okay for whom is interested in the onset of the Scottish Enlightenment and the influence of the Scots on later events. The book contains some hundred Scots who all have interesting biographies so that the book makes a wonderful read. One of them is Andrew Carnegie, whom we already met in the Peace Palace Centenary.

We also discussed the Glorious Revolution of 1688 with William & Mary. What basically happened is that the center of gravity of the Dutch Empire moved from Amsterdam to London and took the cloak of the British Empire. The geographical unit of Holland lacked the manpower and natural resources. Its sea-faring power was not equipped for an extension over land towards Germany (and Hanover). The Dutch conquest of England provided their next phase onto a World Empire. Arthur Herman tells the story that the Scots started running most of that British Empire, but he doesn’t mention that the Dutch already reduced the influence of the Anglo-Saxons and were open to other protestants who could do a better job.The situation would have been entirely different if the Anglo-Saxon noblity could have had a chance to hold on to their own power and biases against the Scottish startups.  

Arthur Herman is a visiting fellow at the American Enterprise Institute and speaks out in favour of supply side economics instead of vulgar “Keynesian” demand economics, see his short 2012 article. While I enjoy his book on the Scots I must observe that he is less at home in economics. This is no severe criticism since it appears that most economists don’t yet get it either. See my explanation that the Ronald Reagan “supply economics” actually amounted to a lot of “demand economics”. I agree with Arthur Herman that we should target at zero inflation with a bias to deflation so that productivity gains directly translate into an increase in welfare. But it takes an Economic Supreme Court to manage this while maintaining full employment.

The Arthur Herman book is a fun read since it also contains much of human folly. It is amazing how human sentiments change as the winds change, even in Scotland. From the Middle Ages to the Scottish Enligtenment to the development of the USA and the British Empire: there is much to think over about human wickedness and contrariness. This brings us also to the Scottish National Party (SNP) and their current plea for Scottish Independence.

The onslaught of stagflation since 1970 also caused the Thatcher years and the devastation of the economy in Scotland and North England. The UK Labour Party, aptly labelled by Keynes as “the party of catastrophy”, didn’t have an answer to stagflation and Margaret Thatcher. That answer can be found in my book DRGTPE. Thatcher was right on some points of Adam Smith but still lacked the full analysis. Lacking a good answer by Labour too, the SNP rose in membership and votes, with the simple answer that independence would solve matters. In a way they were right that Thatcher would have less chance in Scotland that leans to the left. (On the UK electoral system with voting districts, see this paper.)

The situation causes a conundrum. With DRGTPE the need for Scottish independence would fall away, since the whole UK would have full employment. The Scots would also appreciate many of the English investments in co-operation, such as the Caledonian Canal completed in 1822. Thus there are arguments to maintain the Union. On the other hand, there is the Heineken Eurotopia map, that grants independence to various smaller regions in Europe that have a unique base in history. See also this earlier weblog entry on some pro’s and con’s on Scottish independence. Overall I tend to advise smaller democratic units within the overall European Union, which EU concentrates on economic co-operation rather than “integration”.

It is nice to see how so many things hang together.


Arthur Herman reports that many Scots joined the Whig party, and when in London would meet at Holland House. That house’s name derives from an English region in Lincolnshire that is called Holland too. The name of the Dutch country derives from “Hout-land” (German “Holz-land”, English “Wood-land”). On the Lincolnshire region, Wikipedia explains: “Holland in England means “land of the hill spurs”, although hill spurs are hardly obvious.” The etymology is unclear too. There still might be some common source. I recall that someone told me that the fishermen living along the coast of the North Sea had a common language and also intermarried, from Holland to Denmark to Norway, England and Scotland. But I cannot find a source for that now. Wikipedia has a bit on Ingvaeonic languages but the map does not show the UK. The Wikipedia list of languages along the North Sea doesn’t mention a separate sea shore dialect. A book by Bill Griffiths ‘Fishing and Folk: Life and Dialect on the North Sea Coast‘ only considers the UK coast.


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