Whereas Austrian economist Karl Menger was an admirer of Adam Smith and defended Smith’s favourite financial insurance policies in an article on the a centesimal anniversary of Smith’s dying, I used to be shocked to learn Menger how crucial Menger was to Smith. Moreover, I felt that his two essential criticisms have been baseless.
on his web page 73 Rules of EconomicsMenger, explicitly criticizing Smith, writes:
In actual fact, the division of labor can not even be stated to be crucial purpose for the financial progress of mankind. Rightly, it ought to be considered solely one of many nice influences that transfer mankind from barbarism and distress to civilization and wealth.
It have to be a lie. Menger argues after this quote that the rise in human information is and can be an necessary contributor to financial progress. fact. However a prerequisite for this impact of human information is the widespread division of labor. Thomas Edison was an awesome contributor to financial progress. If he needed to do the whole lot himself, together with making the sunshine bulb, how far would he should go? In such a case, we’ll return to Smith’s instance that an individual completes all of the steps of constructing a pin and, subsequently, produces lower than 20 pins in a day. Whereas 10 folks, every specializing in two levels, can produce 48,000 pins a day.
on web page 172 Inquiry into the Methodology of Social SciencesMenger writes:
Adam Smith and even his followers, who’ve most efficiently developed political economic system, can not actually be accused of failure to acknowledge the obvious significance of the examine of historical past for the statesman. Neither is the failure to acknowledge the clear precept that totally different financial establishments and authorities measures correspond to the totally different temporal and spatial circumstances of the economic system. It’s their defective understanding of the unintentionally created social establishments and their significance to the economic system. His writings seem mainly of the opinion that the establishments of economic system are all the time the product of the final will of society, such because the expressed settlement of the members of society or the results of a constructive regulation. (Italics added by me.)
This appears opposite to the reality to me.