I have been working away at my next book which is on classical economics, which was the highpoint of economic theory, from whence economics has been in precipitous decline since falling into the hands of socialists and academics (did I just repeat myself there?). As it happens, I have just today been working on the chapter on the role of government according to the classics. Here’s the first para of the chapter:
It is almost impossible any longer to know what a modern economist believes about the economic judgements found among economists prior to the publication of The General Theory. Possibly the most incorrect judgement is the belief that classical economists were opposed to public spending and insisted on an extremely limited role for government regulation or expenditure.
There is a lot in the chapter but let me start with this quote from The Principles of Political Economy by J. Shields Nicholson published in 1901. Don’t know who he is? You’ll have to buy the book, but very respectable, a man of the establishment of his own time. He is here summarising the almost-two previous pages on how Adam Smith understood the role of government.
“Thus, according to the actual teaching of Adam Smith, if competition leads to injustice or oppression, the State ought to intervene, and if self-interest is inadequate to provide various institutions for the satisfaction of actual needs, the State ought to provide for their erection and maintenance.” (Nicholson 1901: 179-180)
This is the kind of statement that you will never find in an economics text today, which is not something I say in any kind of positive way. But what I really want to deal with is his view of the people who get elected to Parliament.
“The assumption that government is all-wise and all-powerful is so far removed from the truth as to be of little use even for the purposes of abstract reasoning. With the best intentions, governments may ruin their legislation by ignorance and their administration by feebleness. And very frequently the intentions are not the best, if by best we mean that the public interests, with the due regard to the future as well as the present, are always dominant. The government, even of the most democratic states, must be formed of persons who are themselves liable to errors of judgment and errors of passion. And to a considerable extent they are supposed to carry out the mandate of their electors. The electors are open to all kinds of persuasion, as well as to the persuasion of justice and reason…. In the most advanced democracies, laws are still made and unmade in the interests of powerful classes and sometimes against the interests of considerable minorities. Officials are still appointed for all sorts of reasons apart from merit and efficiency, and are removed, or not removed, on a similar diversity of excuses.” (Nicholson 1901: 249)
Then follows my own comment on what Nicholson has written:
One cannot quote the whole of Nicholson, but it is as engaging today as Mill’s Principles is now a formidable challenge to a modern reader. Yet they both speak from the same script, with Nicholson frequently referring to Mill’s Principles even with the first edition having been published more than half a century before his own book was published. And in his views on the role of government, he was doing no more than following Mill who did much to outline just how crucial government was in the management of an economy. And in this, he spoke for the entire classical tradition.
And so far as leaving things to the market, you will not find a single economic writer today who is as resolute in wishing to see the market succeed and who is as fulsome in their support for liberty and prosperity that only free markets and democratic governments can bring as were Mill and Nicholson, and indeed the whole of the classical tradition going right back to Adam Smith.