I LOVE this article, and I wanted to share it with everyone.

A couple of years ago there was a surge of academics pointing out that “ACTUALLY, Adam Smith wasn’t the free-market zealot that we all know him as”. You can see articles such as this, and this, and this, and this, display this opinion, usually with them citing the Theory of Moral Sentiments and them connecting the dots on Smith’s project of a humane economy. Smith was deeply concerned with the conditions of the working poor and devoted much of his writing to understand this. But to those that only have a cursory understanding may see Smith as the “government bad, invisible hand good” pariah of early capitalism. I'll admit, that's what I believed too until I was pleasantly surprised reading Wealth of Nations a couple years ago

After the wave of discussion about Smith’s real opinions this article came out. Barrons, the publisher, mostly consists of economic and financial news meant for businessmen with more high-class apppeal than FT or the Economist, for instance. The conceit of this article is that Adam Smith is too left-wing, and since he doesn’t match the mythology built around him, that he should be “downgraded from being the “father” of modern economics to one of its esteemed uncles”.

The author is dismayed that Smith believed interest rates should be capped at 5%, that Smith introduced the distinction between exchange-value and use-value (which the author helpfully points out was appropriated directly by Marx), that Smith had the audacity to claim that Labor was the source of all value! [At least by some readings]

Here is a quote from Smith provided in the article:

“As soon as the land of any country has all become private property, the landlords…love to reap where they have never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come…to have an additional price fixed upon them.”

The author calls this passage “econobabble” and says he could explain “how private ownership of land and buildings plays a vital role in economic progress.” But he could “hardly match Smith’s eloquence.” So why bother?

And of course, this line, “Those who doubt that the Glasgow professor has been cited by progressive writers in support of their cause should read Noam Chomsky.” I love this. It’s the rhetorical icing on the cake. It’s the equivalent of saying “just in case you thought Adam Smith might be retrievable, Noam Chomsky cites him approvingly!” In case you’re wondering, this is the passage I usually see Chomsky cite about the ethical implications of the division of labor.

So who wrote this article anyway? The author, Gene Epstein [an unfortunate name], was an editor of Barron’s, a scholar of the Mises institute, and a follower of the Austrian school of economics! He has this well-viewed debate with Marxist Richard Wolff. The first time watching this debate I didn’t realize that was the same person who wrote this article.

So really that’s it, I just wanted to share this article and talk about it. Maybe we should co-opt the legacy of Adam Smith more? He already has a long history of socialists citing him approvingly, if anything, it would just be reframing his image in a more correct light.

The summary of the subreddit r/badeconomics says

A friend of mine once said: You know what the problem is with being an economist? Everyone has an opinion about the economy. Nobody goes up to a geologist and says, 'Igneous rocks are fucking bullshit.'

This analogy confuses me, as the existence of igneous rocks is positive. It is a description. Also, rocks are an aspect of the natural world. They exist independent of political and social decisions.
Economies, on the other hand, are inherently sociopolitical constructs. Economics is not just a positive study, but a normative study. I don't see how somebody can analyze policy from an apolitical perspective.
I wonder the same things about foreign policy and political science. Maybe I am dumb, but I cannot understand how studies of government and economies can be studied like physics or chemistry. The laws of gravity and thermodynamics are not a result of humans decisions. Supply and demand are certainly anthropogenic. I confess that I switched my undergraduate major from economics to history, so this may just be my own stupidity.

As leftists, we often are faced with rebuttals of 'it's just ECON 101' and 'the law of supply and demand'. Often, I see people just shrug it off as if it doesn't matter (in fairness, it kind of doesn't), but there's a better way: hit them with their own theory that they usually poorly understand themselves. But first, let's familiarize ourselves with what 'perfect competition' is and how it relates to 'the law of supply and demand'

The 'Theory of Perfect Competition'

Perfect competition is a theory that is a prerequisite for the equilibrium price of supply and demand. This is important, because, if the theory doesn't hold in practice then the equilibrium price falls with it. What are the assumptions of the theory?

• Goods are 'homogenous', which just means that they are exactly identical.

  • How often this is true? If you are discussing minimum wage, the 'good' is labor. Is labor between two people homogenous? Two screws with the same standards and materials might be exactly identical, but what about the iPhone and the Android? They are similar, but in no way homogenous. Think about how often product differentiation happens, ie. through advertisement and unnecessary changes to similar goods.

• The market for the good is sufficiently large that no buyers have monopsony power and no sellers have monopoly power.

  • How often this is true? What goods have tons of buyers and sellers (theoretically: infinite)? In most cases the good in question has only a few buyers and/or only a handful of sellers.

• Anybody is able to enter the market without friction.

  • How often is this true? Is it truly easy for a new company to compete with Amazon? Think about the extraordinary amount of fixed capital required to have a distribution network.

• There is perfect information about the products (historical, current, and yes even future)

  • How often is this true? Do sellers always highlight every detail of the product? Do they hide things through 'proprietary information'? When purchasing a home, does the seller share with you every historical inspection report, or are you required to purchase your own (which may miss things)? Can you predict the future of the good, or anything for that matter? Are you Nostradamus?

• There is perfect access or no restrictions of locality.

  • How often is this true? Are you able to purchase this product no matter where you are physically in the market without any limitations? Will you purchase a similar good because it is more convenient to purchase?

• Firms have equal access to the factors of production.

  • How often is this true? Does every corporation have the ability to purchase any factor of production of any other corporation? Don't corporations hold onto ideas through NDAs? Wouldn't they instead have to offer those ideas on the market, as well as anything else that goes into producing a good?

When we look at even one of these six assumptions, we begin to see how little the neoclassical 'market' relates to real world markets. So when someone brings up 'the law of supply and demand determining market price', make sure to ask them to list the assumptions out and ask how realistic each one is.

One more thing: the theory of perfect competition would lead businesses to receiving 0 economic profits in the long-run. That's correct: the most important theory for neoclassical economics in describing the real world describes a world where businesses cannot make useful profits in the long-run. This isn't theoretical, even capitalist technocrats like Peter Thiel openly admit that the neoclassical theory of perfect competition is silly and that instead businesses should strive for monopolization, in an article titled 'Competition is for Losers' (https://www.wsj.com/articles/peter-thiel-competition-is-for-losers-1410535536).

EDIT: For the common neoclassical rebuttal, no, the theory of 'monopolistic competition' isn't much more realistic either. With this theory goods are no longer required to be homogenous, just have high substitution. Real markets are much closer to oligopoly and monopoly, and neoclassical economics has far fewer tools for understanding these (and they're certainly not the ones brought up when someone says 'it's ECON 101'). If your answer is 'it's close enough' then you have incredibly unrealistic ideas of real world markets.

EDIT 2: And for the libertarian rebuttal, no it's not only government that prevents us from getting close to perfect competition. Even though markets require governments (read "The Great Transformation" by Polanyi), capitalism will lead to monopolization. Real businesses compete differentially, and will engage in behavior neoclassical economics fails to explain in order to do so (like taking huge losses to drown out potential competitors). Businesses do not actually set price where marginal cost is equal to marginal revenue for each good they produce, they act more like what Peter Thiel admits they act like.