The Evolution of Great World Cities by Christopher Kennedy

Author:Christopher Kennedy [Menno Boldt]
Language: eng
Format: epub
Publisher: University of Toronto Press
Published: 2011-03-19T16:00:00+00:00

Scottish Enlightenment

On 4 July 1776, the eminent philosopher and historian David Hume held a farewell dinner at his home in Edinburgh. Hume was an enlightened liberal thinker who was sympathetic to the American cause of independence. Indeed, it has even been suggested that his terminology was drafted into the Declaration of Independence during Benjamin Franklin’s editing of Thomas Jefferson.31 His dinner on 4 July, however, had no relation to American affairs, for it would have taken weeks for news of that day to reach London, let alone Edinburgh. Hume was dying, from what has since been suspected of being chronic ulcerative colitis, and he was throwing a goodbye party for his friends.32

Among Hume’s guests that night was his close friend Adam Smith, a younger man by twelve years. It is hard to imagine what the conversation would have been about that evening. Smith, however, had just four months earlier seen the publication of his book An Inquiry into the Nature and the Causes of the Wealth of Nations. This celebrated book is still regarded as the most influential text on economics, at least in the English language. Given that it had taken twelve years to write and publish,33 it might well have received some comment at the dinner table.

Economics was also a topic that Hume himself had written on. His philosophical studies of the nature of the human psyche convinced Hume that luxury spending was the most important factor driving the economy. He believed that labour was the basis of wealth, and that people needed luxury spending as an incentive to work. Smith, however, saw things differently. His doctrine put less emphasis on consumption, for he regarded investment in capital as key to economic growth. He saw less need for luxury spending to maintain demand, since it merely employed unproductive labour. Saving, and thus investment in capital goods, made use of productive labour, which ‘adds to the value of the subject on which it is bestowed.’34

In the Wealth of Nations, Smith clearly explains the notion of capital, recognizing it as a component of stock and categorizing its various forms. In its original sense, a stock is a collection or accumulation of goods that a worker is able to produce from his labour, whether it be farming, manufacturing, or other employment.35 Such stock can, when necessary, be exchanged for other goods. When a man possesses such a large amount of stock that he can maintain himself for years, he naturally seeks to derive revenue from his excess.36 The stock can thus be considered to have two components: that which supplies the man’s immediate consumption; and the capital from which revenues can be generated.

Two ways in which capital can be broadly employed are described in the Wealth of Nations.37 When goods are raised, manufactured, or purchased, and subsequently sold for profit, such goods take on the form of circulating capital. Such capital leaves the holder in one form and returns in another, periodically being exchanged as cash. Goods exchanged by merchants and animals exchanged by farmers are of the circulating form of capital.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.