Comments on: TWoN Book 3 Chapter 8

By: Brett Dunbar

Brett Dunbar — Tue, 16 Feb 2010 03:26:50 +0000

Smith is discussing the difference between the mercantile system and the free market system which he is advocating. Both deal in items that are traded through the market and are not consumed immediately. The difference is that in the mercantile system the market is highly regulated in the interests of the producers while Smith is arguing for deregulation ands the free market with the consumer interest being dominant. In both cases he is describing systems that he was able to observe in action, some sectors being heavily regulated and others little regulated and makes a strong case that the latter is more beneficial and therefore the regulations should be largely abolished.

By: skzb

skzb — Sun, 14 Feb 2010 00:51:04 +0000

Yes, I understood that is what Smith meant. That commodities are not produced unless they satisfy a human want is inarguable; but it is exactly at the next stage that a market economy distinguishes itself from other economic forms, and I was commenting on Smith’s failure to note this.

By: Brett Dunbar

Brett Dunbar — Sun, 14 Feb 2010 00:01:52 +0000

I don’t think you have understood what Smith is saying here. The commodities are ultimately being produced for use. Exchange is a means to an end not an end in itself. That the producer and the consumer are not in a direct relationship doesn’t alter that the consumption is required for the production to have value. This is what Smith means when he states that all production is for use.

By: skzb

skzb — Sat, 13 Feb 2010 22:33:35 +0000

“The producer has no special reason to care who the ultimate consumer is or what they are doing with the product only that the product is consumed.”

Precisely my point. The difference between this and earlier forms of production, which were based on use (generally by the producer; eg, you made a shirt, then you wore it), has far reaching effects on both production and consumption. It is exactly this distinction that Smith blurs.

By: Brett Dunbar

Brett Dunbar — Sat, 13 Feb 2010 21:36:21 +0000

Whether production is for immediate consumption or there are a number of intermediaries between the producer and the consumer the goods are ultimately produced in order to be consumed. If the goods are not consumed by somebody there will be no demand for them so no reason to produce them and they will have no value in exchange. The producer has no special reason to care who the ultimate consumer is or what they are doing with the product only that the product is consumed. If you make cement and sell it to a wholesaler it doesn’t matter to you whether it is then bought from the wholesaler by a builder to construct a house or a dam or a manufacturer to make concrete pipes or a DIYer to build a patio. However if nobody were consuming the cement it would have no value to the wholesaler and therefore it would have no value in exchange. Smith’s point is that ultimately all the value comes from the consumption.

By: MallorySER

MallorySER — Tue, 02 Feb 2010 20:53:28 +0000

Pet Rocks

By: skzb

skzb — Tue, 02 Feb 2010 20:30:21 +0000

Commodities, however, are NOT produced for use in a market economy. Ask any capitalist if he gives a damn if someone uses what he produces, so long as it is paid for. This makes a HUGE difference in the relationship of people to commodities. Which was exactly my point. I am not identifying it is as good, or as bad; I am merely identifying it. One of Smith’s flaws (inevitable, given when was writing) is his attempt to generalize all of economy without seeing the fundamental differences between economic forms. But a society in which most goods are produced in home-craft way for immediate use differs in very basic, fundamental ways from one in which most goods are produced because they can be exchanged for others.

By: knob_e

knob_e — Tue, 02 Feb 2010 08:26:31 +0000

Clearly, the two societies are not indistinguishable. However, being “a society based on production for exchange” negates neither the Smith statement you’ve quoted nor the basic reality that commodities are still being produced “for use.” What was YOUR point?

Umm, was that too confrontational?

By: skzb

skzb — Mon, 01 Feb 2010 22:59:41 +0000

“And yet, there is no “value” in exchange, except for the purpose of consumption”

I’m not sure what your point is, unless you are contending that a society based on production for use and a society based on production for exchange are indistinguishable, and I really doubt you are saying that.

By: knob_e

knob_e — Mon, 01 Feb 2010 21:07:23 +0000

Re Smith’s p. 436. Delightfully-slung canned Latin. Except, by Smith’s reckoning, there is no contradiction, because his “sovereign” stands apart from “all the different orders of his subjects.” He’s not a citizen, He’s the king. See next paragraph: “Every different order of citizen is bound to contribute to the support of the sovereign or commonwealth.”

Re Smith’s p. 444, and your “particular hallmark of capitalism.” And yet, there is no “value” in exchange, except for the purpose of consumption. Also, Smith’s particular grievance here is the emphasis on *foreign* exchange over “the interest of the consumer” at home. Capitalism and mercantilism are not synonymous.