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Smith, Marx, Keynes:
Cement Your
Knowledge
J. Bradford DeLong
University of California at Berkeley
, WCEG,
and NBER
brad.delong@gmail.com
http://delong.typepad.com/
+1 925 708 0467
First Full Draft: November 29, 2019
Last Major Revision: December 5, 2019
Last Edited:
December 28, 2019: 11980 words
Pages: <
https://www.icloud.com/pages/
0yyHboa030OEohMkflwYE1u5w
>
1.
Reading Big, Diffi cult Books
Knowledge system and cognitive science guru Andy Matuschak writes a
rant called
Why
B
ooks
D
on’t
W
ork
<
https://andymatuschak.org/books/
>,
about big, diffi cult books that take him six to nine hours each to read:
Have you ever had a book
…
come up
… [and]
discover
[ed]
that you’d
absorbed what amounts to a few sentences?
… I
t happens to me regularly
….
S
omeone asks a basic probing question
… [and]
I simply can’t recall the
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2019-12-28 11980 words
relevant details
… [or]
I’ll realize I had never really understood the idea
…
though I’d certainly thought I understood
….
I’ll realize that I had barely
noticed how little I’d absorbed until that very moment
…
However, he goes on to say:
Some people do absorb knowledge from books
…
the people who really do
think about what they’re reading.
…
These readers’ inner monologues have
sounds like: “This idea reminds me of…,” “This point conflicts with…,” “I
don’t really understand how…,” etc. If they take some notes, they’re not
simply transcribing the author’s words: they’re summarizing, synthesizing,
analyzing
…
But:
Unfortunately, these tactics don’t come easily. Readers must learn specifi c
reflective strategies
…
run their own feedback loops
…
understand their own
cognition
… [what] l
earning science calls “metacognition”
…. I
t’s
challenging to learn these types of skills, and that many adults lack them
…
These points have strong relevance for students in U.C. Berkeley’s Econ
105:
History of Economic Thought
:
Do we live in a Smithian, Marxian or
Keynesian World?
The core of the course is an assisted reading of three big books that are d
—-ably diffi cult: Adam Smith’s
An Inquiry into the Nature and Causes of
the Wealth of Nations
, Karl Marx’s
Capital,
and John Maynard Keynes’s
The General Theory of Employment, Interest and Money.
These are all big, diffi cult, flawed, incredibly insightful, genius books.
And it is a principal task of a successful modern university to teach people
how to read such things. Indeed, it might be said that one of the few key
competencies we here at the university have to teach—our counterpart or
the medieval triad of rhetoric, logic, grammar and then quadriad of
arithmetic, geometry, music and astrology—is how to read and absorb a
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2019-12-28 11980 words
theoretical argument made by a hard, worthwhile, flawed book. People
need to understand what an argument is, and the only way to do that is
actually go through an argument—to read the argument and try to make
sense of it. People need to be able to tell the difference between an
argument and an assertion. People need to be able to do more than just say
whether they liked the conclusion or not: they need to be able to specify
whether the argument hangs together given the premises, and where it is
the premises, and where it is the premises themselves that need to be
challenged. People need to learn that while you can disagree, you need to
be able to specify why and how you disagree.
The fi rst order task is to teach people how to read diffi cult books. Teaching
people fi ve facts about some thinker's theoretical perspective is
subordinate: those fi ve facts will not stick with them over the years.
Teaching them how to read diffi cult books will stick with them over the
years. Knowing what to do with a book that makes an important, an
interesting, but also a flawed argument—that is a key skill.
Therefore, at the start, people need to read the _Wealth of Nations_. They
need to read Books III, IV, and V, to see how Smith uses and qualifi es the
theoretical system he has built. But most of all people need to read Books
I and II, both as an example of a powerful analytical argument, and
because unless you understand Books I and ii you do not understand the
most powerful ideology in the world today—the argument, it's dazzling.
With Adam Smith, you can see how he starts from some premises and then
builds it up to his conclusions. Starting with his premises about human
nature, he derives his theory of the market as a system that has its own
logic: it makes people do things they would not otherwise do, and so
makes them act, collectively, to achieve outcomes that nobody intended.
Since 1800 almost all other major positions in social theory have either
drawn us or been trying to undermine Smith.
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2019-12-28 11980 words
And then, after Smith, we go on to Marx, and Keynes. And we urge you to
focus on the "meta" to the extent that you can: it is not so much the ability
to answer the question "what does Marx think about X?" that we want you
to grasp, but rather "how do I fi gure out what Marx thinks about X?" that
is the big goal here.
We
have our
recommend
ed
ten
-stage process
for reading such big books
:
1.
Figure out beforehand what the author is trying to accomplish in the
book.
2.
Orient yourself by becoming the kind of reader the book is directed at—
the kind of person with whom the arguments would resonate.
3.
Read through the book
actively
, taking notes.
4.
“Steelman” the argument, reworking it so that you fi nd it as convincing
and clear as you can possibly make it.
5.
Find someone else—usually a roommate—and bore them to death by
making them listen to you set out your “steelmanned” version of the
argument.
6.
Go back over the book again, giving it a sympathetic but not credulous
reading
7.
Then you will be in a good position to fi gure out what the weak points
of this strongest-possible argument
version
might be.
8.
Test the major assertions and interpretations against reality: do they
actually make sense of and in the context of the world as it truly is?
9.
Decide what you think of the whole.
10.
Then comes the task of cementing your interpretation, your reading,
into your mind so that it becomes part of your intellectual panoply for
the future.
Follow this process, and your reading becomes active. Then you have the
greatest possible chance of learning the books—of thereafter being able to
summon up sub-Turing instantiations of the thinkers Adam Smith, Karl
Marx, and John Maynard Keynes and then running them on your wetware.
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2019-12-28 11980 words
If you can do that, you can be closer to being as smart as they were. And at
the same time you will be aware enough of their weak points and
blindnesses that you can be wiser than they were.
To assist you in this process, we have compiled 150 questions-and-
answers—50 about Smith, 50 about Marx, and 50 about Keynes—that we
think you should review and learn as part of your active-learning
incorporation of the thought of these three authors into your own minds.
“But”, you may well say, “simply learning these questions-and-answers
merely gets me the ability to parrot verbal formulas. We want more: we
want a least knowledge of facts, terms, and concepts; and we ideally want
deep understanding”.
It is certainly true that there are many who can
parrot verbal formulas
yet
lack
knowledge of facts, terms, and concepts
.
It is certainly true that there
are many who
have
knowledge of facts, terms, and concepts
and
yet lack
deep understanding
. But I am not aware of anyone who has deep
understanding of a discipline and yet lacks
knowledge of facts, terms, and
concepts
. And those who know the
facts, terms, and concepts
cold are the
absolute best at
parrot
ing
verbal formulas
.
As our Economics Department Vice Chair Jon Steinnson says: “You sit
there listening and it makes no sense”—you are at best parroting verbal
formulas—“until one day you fi nd that it does”: that the network of
interlocking verbal formulas has become at least the beginning of
knowledge, and hopefully some day deep understanding. These questions-
and-answers are a way of getting you to ask your own questions of the
text, and to hear it answer—to do your own active reading. If you do it
well, than big, diffi cult books will come to be to you what they came to be
to Renaissance diplomat and political scientist Machiavelli, who wrote
<
http://www.j-bradford-delong.net/Politics/Vettori.html
> that his books
were:
5
2019-12-28 11980 words
ancient men
… [who]
receive
… [me]
with affection
….
I
…
speak with them
and
…
ask them the reason for their actions; and they in their kindness
answer me; and for four hours of time I do not feel boredom, I forget every
trouble, I do not dread poverty, I am not frightened by death
…
And so before he began reading them in the evening, he dressed up:
“[took]
off the day's clothing, covered with mud and dust, and put on
garments regal and courtly
…”
(
The “not frightened by death” part?
When
Machiavelli wrote this letter the Republic of Florence he had been worked
for had been overthrown by the Medici dynasty, and he was righty fearful
that they might decide to arrest, torture, and execute him.)
For those of you reading this who are in the intended audience of Econ
105 students in the fall of 2019, here is an incentive:
1.
The format of the fi nal exam will be like these questions-and-answers.
2.
The questions on the fi nal exam will be constructed by the same process
we used to construct these questions-and-answers.
3.
Some of these questions will be on the exam.
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2019-12-28 11980 words
2. Cement Your Knowledge: Adam Smith
1.
What does Adam Smith think human motivations are?
Adam Smith
believes that human motivations are chiefly but not exclusively greed-
driven. We do have the moral sentiment: fellow-feeling, sympathy,
altruism, whatever you want to call it. But it is relatively weak, needs to
be trained up and nurtured if we are to have a peaceful society, and
these moral sentiments should not be pressed too hard.
2.
What does a person dislike more: to have their little fi nger cut off, or for
100,000 people to die prematurely thousands of miles away?
A person
dislikes having their little fi nger cut off far more.
3.
What kind of person would not trade their little fi nger to save a hundred
thousand lives far away?
A moral monster.
4.
How does the naturally weak faculty of sympathy—the moral sentiment
—acquire the strength that it has in society?
Through education,
training, and social pressure.
5.
How is it that largely greedy individuals can nevertheless support a
very large and usually peaceful societal division of labor?
By means of
our moral sentiment of sympathy, and by means of the societal bonds—
both affectionate and practical-utilitarian—built on top of our natural
propensity to truck, barter, and exchange: to form and maintain gift-
exchange relationships.
6.
Do other creatures form and maintain gift-exchange relationships—
have a natural propensity to truck, barter, and exchange:
No: nobody
ever sees a dog trade one bone for another.
7.
Upon what does human productivity depend?
Upon the fi neness of the
division of labor.
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2019-12-28 11980 words
8.
Upon what does the fi neness of the division of labor depend?
Upon the
extent of the market, and also upon the accumulation of capital.
9.
Upon what do the extent of the market and the accumulation of capital
depend?
Upon the maintenance of peace, good order, and easy taxes.
10.
What other ways than market exchange are there to get what you need
and want?
By making it yourself, or by begging.
11.
What is wrong with getting what you need and want by making it
yourself?
We need and want a lot of different things, and a jack of all
trades is a master of none.
12.
What is wrong with getting what you need and want by begging?
We
need things from many different people, and even a full lifetime of
exertion is unlikely to get you more than four or fi ve people you can
regularly beg goods and services from. You can beg—but you must beg
for money, that you then use to buy things.
13.
Why does it matter that most things we need and want are “rival”?
When a commodity is “rival”, then one person’s use of it right now
excludes others from using it right now, and so reduces their
opportunities. A well organized society would make the people doing
the using take that into account. Hence it makes sense to charge people
a price for making use of “rival” commodities—and that it makes sense
to charge people a price is what makes a market economy a possible
thing, and quite likely a good thing.
14.
Why does it matter that most things we need and want are
“excludible”?
“Excludible” commodities can have “owners” and can be
traded—hence decision-making can be pushed out from an ignorant
controlling center to the periphery of society, where the information is
8
2019-12-28 11980 words
and where people know much much more about what the best way to
make use of commodities is.
15.
What kinds of things do people need to know in a market economy in
order to, say, get a large statue of Athene Fighting-in-Front built and
installed next to the Parthenon on the Acropolis of Athens?
People need
to know things like “the price of tin in Athens, Greece is higher than it
is here in Syracuse, Sicily”?
16.
What kinds of things do people need to know in a command-and-
control economy in order to, say, get a large statue of Athene Fighting-
in-Front built and installed next to the Parthenon on the Acropolis of
Athens?
The right person—the one in the center, in control—needs to
know the values of tin in Athens and in all of the tin production sites,
and how to arrange transportation of tin from the production sites to
Athens.
17.
What other features of human nature are important in Smith’s mind, in
addition to the propensity to engage in gift-exchange?
Language, so we
can persuade each other, plan, and sympathize with each other; money,
so we can greatly extend the division of labor beyond our narrow
networks of immediate trust; and (weak) dominance, so that we can
maintain a largely peaceful order of respect for persons and property
rather than having, in Hobbes’s phrase, a “warre of all against all”.
18.
What does Smith mean by the “System of Natural Liberty”?
A system
in which people respect one another’s property and fulfi ll contracts, and
work diligently to provide for themselves via production and free-
market exchange.
19.
Why is the SNL a system of “liberty”?
B
ecause it
leaves
people free to
do what they wanted with their labor and their possessions,
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2019-12-28 11980 words
20.
Why is the SNL
“natural
”?
B
ecause it
asks no more of people that they
conform to and behave in accordance with
human nature
.
21.
Why is the SNL
a
“system
”?
B
ecause it
can
be and
is
extended to the
status of a general principle
governing much of society
. Let people
decide what they want to do with their things and their labor, and they
arrange themselves in a large highly-productive societal division of
labor.
22.
Why is the SNL
productive
?
Because s
elf-interest focus
es
people on
creating value
, and the division of labor allows people, in cooperation,
to produce a great deal of value
.
23.
What determines the average price—the natural price—the value—of
commodities?
In the early and rude state of society, before land has
become scarce and before the capital stock has been built up, values are
proportional to labor required. Later on it becomes more complicated,
but it is still the case that the required amount of labor time is the most
important determinant of value.
24.
Why is
n’t
the SNL
exploitative
?
Because c
ompetition curb
s
any
destructive
focus of self-interest on accomplishing exploitation.
25.
What usually happens when government interfered with the SNL?
It
usually then creates monopoly, which damages the system’s ability to
fulfi ll its proper role.
26.
What humans designed the SNL?
No human designed the SNL.
27.
Who or what designed the SNL?
It is not clear that anyone or anything
did. In Smith’s cosmology, people fi nd themselves “
led by an invisible
hand to promote an end which was no part of his intention
”. But what
invisible being this invisible hand belongs to is not clear. Chance?
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