Thursday, July 21, 2005

The Wisdom of the Wealth

I have just finished reading the Adam Smith classic An Inquiry into the Nature and Causes of the Wealth of Nations all 1207 pages of it in my edition. Well, OK, I skipped a rather long aside on the history of the price of silver, as it did not seem very relevant. Now my wife is completely convinced of my nerd qualities, after admonishing me for lying in bed reading a 200 year old economics treatise with the help of my book light. Guilty as charged I guess. Reviewing such a classic, like it was the new Harry Potter novel or something seems rather pointless, but I thought I would post a few quotes which seemed rather prescient or interesting.

The folly of buying lottery tickets.

In the state lotteries the tickets are really not worth the price which is paid by the original subscribers, and yet commonly sell in the market for twenty, thirty, and sometimes forty per cent. advance. The vain hope of gaining some of the great prizes is the sole cause of this demand. The soberest people scarce look upon it as a folly to pay a small sum for the chance of gaining ten or twenty thousand pounds; though they know that even that small sum is perhaps twenty or thirty per cent. more than the chance is worth.

Why lawyers are paid so much. An attorney friend of mine really liked this one.

The counsellor at law who, perhaps, at near forty years of age, beginsto make something by his profession, ought to receive the retribution,not only of his own so tedious and expensive education, but of that ofmore than twenty others who are never likely to make any thing by it.How extravagant soever the fees of counsellors at law may sometimesappear, their real retribution is never equal to this.*18 Compute inany particular place, what is likely to be annually gained, and whatis likely to be annually spent, by all the different workmen in anycommon trade, such as that of shoemakers or weavers, and you will findthat the former sum will generally exceed the latter. But make thesame computation with regard to all the counsellors and students oflaw, in all the different inns of court, and you will find that theirannual gains bear but a very small proportion to their annual expence,even though you rate the former as high, and the latter as low, as canwell be done. The lottery of the law, therefore, is very far frombeing a perfectly fair lottery; and that, as well as many otherliberal and honourable professions, is,*19 in point of pecuniary gain,evidently under-recompenced.

The benefits of free trade This one is often quoted, I am hardly being original

What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage.

Accountability on the maintenence of roads. The "no new gas tax" people should sympathize with this one.

At many turnpikes, it has been said, the money levied is more than double of what is necessary for executing, in the completest manner, the work which is often executed in very slovenly manner, and sometimes not executed at all. The system of repairing the high roads by tolls of this kind, it must be observed, is not of very long standing. We should not wonder, therefore, if it has not yet been brought to that degree of perfection of which it seems capable.

Rules for proper taxation. Congress should read this part.

I. 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.

II. The tax which each individual is bound to pay ought to be certain, and not arbitrary.

III. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

IV. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

The most ironic section is the last chapter on public debt, in which Smith suggests that a land tax should be levied on the American colonies to help retire the debt of the British Empire. The Americans are portrayed pretty much as freeloaders (yeah, we won, get over it). The debt was over 120 million pounds, while the entire tax system was bringing in less than 10 million a year (and people complain about our debt) so this probably was a major issue. Given that this book was published in the fateful year of 1776 though, I don't think his idea got too far.