"When Hume and Adam Smith prophesied that a little increase of national debt beyond the then amount of it, would probably occasion bankruptcy; the main cause of their error was the very natural one, of not being able to see the vast increase of productive power to which the nation would subsequently attain. An expenditure, which would have absolutely crushed the country in 1770, might be little more than what was necessary to call forth its prodigious powers of production in 1816. But just in proportion to this power of production, and to the facility with which a vast consumption could be supplied, consistently with a rapid accumulation of capital, would be the distress felt by capitalists and labourers upon any great and sudden diminution of expenditure."
- Principles of Political Economy
Sunday, July 7, 2013
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Hume and Smith failed to expect the unexpected Industrial Revolution and instead based their financial assessment on the economic realities as they had presented themselves for centuries. That sounds prudent to me.
ReplyDeleteIm a bit hesitant to accept that the supply of consumption is worth mentioning. Of course people wanted the same products at drastically lower prices.
Yes, it's all fine if you're in Britain in the industrial revolution. But, you could be in Japan in 1990 thinking that there's no need in worrying about the national debt because Japan in 2013 will be so much richer.
DeleteDo you plan on making your students buy copies of Principles of Political Economy for your History of Economic Thought class this fall, Daniel? If so, what edition will you make them buy? The two-volume variorum edition published by Cambridge University Press and edited by John Pullen?
ReplyDeletehttp://www.amazon.com/T-Malthus-Principles-Political-Paperback/dp/0521735734/