Deirdre McCloskey Reviews Jesse Norman's Book On Adam Smith

See Adam Smith: Father of Economics’ Review: Obvious, Simple and Wise-A Tory MP’s account of his idol is wise about how markets work but wrong about when government should get involved with them. Excerpts:

The big question is "whether Mr. Norman is right to recruit Smith for an interventionist conservatism, as he does."

"He makes the case for a version of a Smithian politics and economics, a “compassionate conservatism,” to use the title of a book he co-authored while serving as part of the brain trust for David Cameron’s prime ministership."

"Like many statists of left and right nowadays, the author believes that markets possess numerous “imperfections.”"

He attacks "the efficient-markets hypothesis in common stocks, which says that you can’t do better than the market. Mr. Norman raises theoretical objections to it. But he doesn’t inquire into whether it is roughly correct—“roughly correct,” after all, is enough to explain why even the brilliant Isaac Newton lost a fortune in the South Sea Bubble."

"on informational asymmetries in the health-care market—the doctor knowing (but not saying) that a generic would be just as good and the patient knowing (but not saying) that he’s not going to take the pill anyway. Arrow assumed that a government organization like the Food and Drug Administration is just the ticket to offset such imperfections. But Arrow had no factual evidence that the government can do better than a private prescriber."

He ignores "the scores of hostile remarks in Smith’s two books about the arrogance of the “man of system” advising governments to shift economic chess pieces."

"“Far from being intrinsically opposed, states and markets rely and benefit from each other.” Tell that to the farmer in Iowa facing retaliation from China and other countries for American tariffs. Tell it to the west-sider in Chicago excluded from employment in a new factory or a new grocery store by governmental restrictions that would have made Smith’s blood boil.

From Malthus in 1798 through Marx in 1867 and Keynes in 1936 to Thomas Piketty in 2013, we have been told over and over again how very imperfect, and anyway doomed, our market economies are. But something is radically wrong with the argument, because since 1800 the wretchedly imperfect market economy has enriched the poor of, say, Japan or Finland by fully 3,000%, a Great Enrichment born out of Smithian liberalism."

"most markets do in fact “just happen,” because people find them mutually beneficial. Markets “just happen,” to take the extreme case, inside jails and prisoner-of-war camps. Markets just happened among Australian aborigines buying boomerangs from better-skilled bands hundreds of miles distant."