#WealthofTweets: Book 2.3

#wealthoftweets #smithtweets

30 Jan • 28 tweets • adamsmithworks/status/1355546695535362053

Why...what's that? A soapbox? Right here? I mean, if you insist, we'll just climb right up on top of it and DISCUSS #AdamSmith and productive and unproductive labor. #WealthOfTweets #SmithTweets

Here’s the thing. We love Smith, and we think he can be a remarkably good writer. But we wish he’d chosen almost any terms but productive and unproductive for the ideas he’s talking about here. (II.iii) #WealthOfTweets #SmithTweets

This passage is almost always completely misunderstood, and it’s entirely because of the value judgements people load onto the words productive and unproductive and the assumptions people make about Smith and economics. (II.iii) #WealthOfTweets #SmithTweets

What Smith says is that productive labor is labor that adds value to something so that it can be sold for a profit. Unproductive labor is labor that doesn’t. (II.iii) #WealthOfTweets #SmithTweets

But that doesn’t mean unproductive labor isn’t valuable, respectable, worth doing, and GOOD WORK. Kings, soldiers, judges, actors, musicians, ministers are all unproductive. They are still doing important work. (II.iii) #WealthOfTweets #SmithTweets

It’s a category, not a value judgement. (II.iii) #WealthOfTweets #SmithTweets But people read this section and think it must be a value judgement, because they assume that economics thinks that only market productivity matters and therefore that “unproductive labor” doesn’t matter. (II.iii) #WealthOfTweets #SmithTweets

It’s a bad reading of Smith based on a false assumption about economics. And we, the SmithTweeters, shall stand for it no longer. (II.iii)
https://www.youtube.com/embed/mJZZNHekEQw #WealthOfTweets #SmithTweets

So what DOES Smith say in this chapter, if he's not throwing shade on anyone who isn't making durable goods for sale? (II.iii) #WealthOfTweets #SmithTweets

We use capital to maintain productive laborers, because we will make money from what they do. Unproductive hands are maintained by revenue. (II.iii.3–7) #WealthOfTweets #SmithTweets

(Please assume that we are rolling our eyes or making exaggerated scare quotes with our hands whenever we say "unproductive". Because we are.) (II.iii.3–7) #WealthOfTweets #SmithTweets

Paying taxes, like going to a puppet-show, supports unproductive laborers. We aren’t sure that makes us feel better about tax day, but it’s fun to think about. (II.iii.7) #WealthOfTweets #SmithTweets

In wealthy countries a greater proportion of the annual produce goes to supporting productive laborers. That’s why those countries continue to get wealthier. (II.iii.11) #WealthOfTweets #SmithTweets

We are more industrious than in the past because we have better incentives to be industrious. When wages are low, why not be idle? (II.iii.12) #WealthOfTweets #SmithTweets

Ah, Dr. Smith, you never miss a chance to pick on the French, do you? (II.iii.12) #WealthOfTweets #SmithTweets

You have to have parsimony (frugality/thrift) in addition to industry, though. Otherwise you’ll spend everything you produce and never get wealthier. (II.iii.15–17) #WealthOfTweets #SmithTweets

The distinction Smith is making is between spending profits (revenue) and reinvesting them. Spending them gives money to idle guests and friends. Reinvesting gives money to productive laborers. (II.iii.18–19) #WealthOfTweets #SmithTweets

Prodigals (big spenders) are the worst because they don’t just spend revenue. They spend their capital. And they spend it on unproductive labor. So they lose twice! (II.iii.20–21) #WealthOfTweets #SmithTweets

Happily, great nations can’t be ruined by prodigal individuals as they are always balanced out by prudent ones. But they CAN be ruined by prodigal governments. (II.iii.27–31) #WealthOfTweets #SmithTweets

Our desire to be prodigal is very strong, but temporary. Our desire to save is calmer, but longer lasting. (We’re pretty sure Smith never had an Amazon Prime account, though…) (II.iii.28) #WealthOfTweets #SmithTweets

Smith has enormous faith in the power of our individual desires to better our condition. It’s so strong, he says, that it’s counterweight to personal prodigality and to government extravagance. (II.iii.31) #WealthOfTweets #SmithTweets

To increase the produce of a nation you must either increase the number of productive workers or the productive powers of the workers you already have. (More SmithTweeters, or more caffeine for the already existing SmithTweeters!) (II.iii.32) #WealthOfTweets #SmithTweets

Think of how much England has improved, and how much more it could have improved if it hadn’t faced the Great Fire, the Plague, wars (so many!) and a revolution. (II.iii.33–36) #WealthOfTweets #SmithTweets

Let’s be clear, though. This isn’t because of good governments managing finances well. Smith thinks the government is terrible at money, and always “The greatest spendthrifts in the nation.” We do well 𝙙𝙚𝙨𝙥𝙞𝙩𝙚, not because of them. (II.iii.36)#WealthOfTweets #SmithTweets

He means it. “Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.” (II.iii.36) #WealthOfTweets #SmithTweets

Adam Smith likes garage sales! (II.iii.39) #WealthOfTweets #SmithTweets

It’s better for national wealth to spend on durable goods, but maybe better for our friendships and characters to throw parties? It’s a tricky balance. We play it safe and do BOTH! (II.iii.42) #WealthOfTweets #SmithTweets

And if that's not a perfect way to kick off a weekend, we don't know what is. See you tomorrow! #WealthOfTweets #SmithTweets