the scottish philosopher david hume -- 12/17/24
Today's selection -- from The Cambridge Companion to the Scottish Enlightenment by Alexander Broadie. David Hume (1711-1776) was a Scottish philosopher and essayist best known for his system of empiricism and philosophical skepticism. His works profoundly influenced many of America’s Founding Fathers:
“The four men who contributed so much to the development of Scottish political economy in the period were interconnected. Hutcheson, Smith's teacher, is now known to have exerted a great influence on his lectures on economics. Hume corresponded with Hutcheson, and it is well known that he was a close friend of both Sir James Steuart and of Adam Smith. While both Steuart and Smith were profoundly influenced by Hume's Political Discourses (1752), they were to produce works on economics which were so different in perspective as to make dialogue between the men (and the texts) extremely complex.
“Hume's Discourses contain nine essays on economic topics. They cover such subjects as money, the balance of trade, the rate of interest, public finance, taxation and population. As Rotwein has shown, the essays are marked by a unity of purpose and of method. They also enable us to identify a number of particular interdependent themes.
“The first theme is broadly methodological and arises from Hume's conviction 'that all the sciences have a relation, greater or less, to human nature, and that however wide any of them may seem to run from it, they still return back by one passage or another'. The study of human nature was thus to be based upon empirical evidence: as Hume himself made clear, the Treatise of Human Nature constituted an attempt to introduce the 'experimental method of reasoning into moral subjects'. The approach also allowed Hume to state a proposition which was profoundly influential in the eighteenth century, namely: 'It is universally acknowledged that there is a great uniformity among the actions of men, in all nations and ages, and that human nature remains still the same in its principles and operations.'
“Among these 'constant principles' Hume included a desire for action, for liveliness and, of particular interest to the economist, avarice or the desire for gain; a constant principle of motion which allows the commentator to offer scientific generalisations at least in the sphere of political economy.
“A second major theme in the Discourses relates to Hume's employment of historical materials. From one point of view this perspective is straightforward, in the sense that the study of history is an 'invention' which 'extends our experience to all past ages, and to the most distant nations'. But from the point of view of our understanding of economic phenomena, broadly defined, the picture which was to emerge from the 'economic writings' was in fact a complex one.
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| Portrait by Allan Ramsay, 1754 |
“If Hume argued that the principles of human nature were constant, he also appreciated that the way in which they found expression would be profoundly affected by the socio-economic environment which might happen to exist, and also by habit, customs and manners. While this theme runs throughout the essays, perhaps two examples will suffice for the present purpose.
In the long essay 'Of the Populousness of Ancient Nations', a work which has scarcely received the attention it deserves, Hume addressed a proposition which had been advanced by both Montesquieu and Robert Wallace, to the effect that population levels had been higher in ancient as compared with modern times. In deciding in favour of modern society, Hume drew attention to the use of slavery in the classical period as 'in general disadvantageous both to the happiness and populousness of mankind' pointing also to the incidence of military conflict and of political instability. But perhaps the most striking aspect of the argument is the attention given to the point that '[t]rade, manufactures, industry, were no where, in former ages, so flourishing as they are at present in Europe'. Population is ultimately limited not just by political factors, but also by the food supply, and this in turn by the type of economic organisation prevailing. The same basic theme emerges in the essay 'Of Money', where Hurne rejected the conventional wisdom that money can be regarded as wealth and stated the famous relationship between changes in the money supply and the general price level; a relationship which remained substantially unchallenged until the 1920s.
“Less familiar is the point that Hume consistently contrasted the situation of a primitive economy with a more sophisticated version. It is, he argued, 'the proportion between the circulating money, and the commodities in the market, which determines the prices'. In the primitive economy, 'we must consider that, in the first and more uncultivated ages of any state, ... men have little occasion for exchange, at least for money, which, by agreement, is the common measure of exchange'. But in the state of commerce, in contrast, 'coin enters into many more contracts, and by that means is much more employed'.
“On the other hand, the changed form of economic organisation had given a greater scope to individual effort and must therefore massively increase the supply of commodities which are subject to exchange. Hume therefore concluded that although prices in Europe had risen since the discoveries in the West Indies and elsewhere, these prices were in fact much lower than the extent of the increase in the money supply might of itself suggest: 'And no other satisfactory reason can be given, why all prices have not risen to a much more exorbitant height, except that which is derived from a change of customs and manners'.
“The technique which we have just considered enables us to contrast and compare the operation of certain economic relationships in different institutional environments. But there was another dimension to Hume's historicism which, if loosely articulated, is none the less more explicitly dynamic in character. The theme of historical dynamics is addressed primarily in the essays 'Of Commerce' and 'Of Refinement in the Arts', where it is noted:
“The bulk of every state may be divided into husbandmen and manufacturers. The former are employed in the culture of the land; the latter work up the materials furnished by the former, into all the commodities which are necessary or ornamental to human life. As soon as men quit their savage state, where they live chiefly by hunting and fishing, they must fall into these two classes; though the arts of agriculture employ at first the most numerous part of the society.
“It was Hume's contention that there had been a gradual progression to a situation where the two main sectors of activity are fully interdependent, supported by merchants: 'one of the most useful races of men, who serve as agents between those parts of the state, that are wholly unacquainted, and are ignorant of each other's necessities'.
“The argument is rooted in Hume's deployment of a favourite thesis of the eighteenth century, namely that men have natural wants which gradually extend in a self-sustaining spiral. The tone is best expressed in the essay 'Of Refinement in the Arts', where Hume also contrasts the form of government found in 'rude and unpolished nations' with that likely to be associated with the modern state. In passages which are likely to have caught the attention of both Smith and Steuart, Hurne observed that 'where luxury nourishes commerce and industry, the peasants, by a proper cultivation of the land, become rich and independent; while the tradesmen and merchants acquire a share of the property, and draw authority and consideration to that middling rank of men, who are the best and firmest basis of public liberty'—a development which may be expected further to encourage the rate of economic growth.
“The final major theme in Hume's thought relates to the problem of international trade; a theme which, here as elsewhere, unfolds on a number of levels. To begin with, Hume drew attention to the general benefits of foreign trade. In the essay 'Of Commerce', for example, he made the point that if 'we consult history, we shall find, that, in most nations, foreign trade has preceded any refinement in home manufactures, and given birth to domestic luxury'. In the same context he drew attention to induced changes in taste and to the point that imitation leads domestic manufactures 'to emulate the foreign in their improvements'. Hume continued by noting that the encouragement of domestic industry would further enhance the opportunities for trade and economic growth.
“The second aspect of Hume's argument supports his repeated claim for freedom of trade on grounds that are essentially technical. Building upon the analysis in the essay 'Of Money', Hume examined the case of two or more economies with no unemployed resources with a view to demonstrating the futility of the mercantile preoccupation with a positive balance of trade. Against this, Hume contended, a net inflow of gold would inevitably raise prices in the domestic economy, while a loss of specie would reduce the general price level elsewhere — thus improving the competitive position in the latter case and reducing it in the former. In the essay 'Of the Balance of Trade', Hume concluded that 'money, in spite of the absurd jealousy of princes and states, has brought itself nearly to a level', just as 'all water, wherever it communicates, remains always at a level'.
“The third dimension of Hume's treatment of foreign trade is much more complex. It is based upon the premise that countries have different characteristics and different rates of growth, and thus opens up a different and distinctive policy position compared with those so far considered. The argument effectively introduced what Hont has described as the 'rich country – poor country debate'. Hont has identified no fewer than twelve aspects of the argument. But for the present purpose, we may approach the matter in a slightly different way.
“While critical of Montesquieu's thesis regarding the role of physical factors, Hume was nonetheless conscious of the fact that different countries could have different factor endowments, and aware that climate could have some influence upon economic activity. But there is also a sense in which the rich country – poor country thesis reflects strands of thought which we have already identified in dealing with the comparative static and dynamic branches of Hume's argument. In this context it is worth recalling that the comparative static technique involves the comparison of different economic types, while the dynamic element draws attention to the importance of individual effort and to an accelerating rate of change as institutions and manners themselves change. On the one hand the reader is reminded of the phenomenon of a 'diversity of geniuses, climates and soil', while on the other attention is drawn to the point that the extent to which men apply 'art, care and industry' may vary in one society over time, and between different societies at a given point in time. Other factors which will affect the rate of growth and cause variations in rates of growth in different communities include the form of government and the degree to which public policies such as trade regulations, taxes and debt are deployed with intelligence. Hume illustrated this new phase of the problem by referring to the issue of regional imbalance (a concern which he shared with Josiah Tucker), citing the case of London and Yorkshire. The regional dimension is just as relevant to the rich country-poor country debate as is the international, although it was upon the latter that Hume chose to place most emphasis.
“Hume's treatment of the performance of the modern economy, especially in the context of the essays 'Of Money' and 'Of Interest', implies an increase in productivity which may give the developed economy an advantage in terms of the price of manufactures. He also recognised that an inflow of gold in the context of a growing economy need not generate adverse price effects. But Hume clearly felt that rich countries could lose their competitive edge, in noting that England feels 'some disadvantages in foreign trade by the high price of labour, which is in part the effect of the riches of their artisans, as well as of the plenty of money. It was thus recognised that advantages may be eroded, causing the loss in turn of particular industries, unless care is taken to preserve them.
“Hume also seems to have felt that the tendency for the prices of labour and provisions to rise over time could lead to a general loss of markets and that this could involve a policy of protection to support employment levels, a situation which he contemplated with calm objectivity, noting that 'as foreign trade is not the most material circumstance, it is not to be put in competition with the happiness of so many millions’.
“Hume concluded, in the essay 'Of Money', 'There seems to be a happy concurrence of causes in human affairs, which checks the growth of trade and riches, and hinders them from being confined entirely to one people'. The point was to be elaborated in correspondence with Lord Karnes, and reflects an old preoccupation with the classical thesis of 'growth and decay'.”
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