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History of Political Economy 32.3 (2000) 631-648

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Luxury, Economic Development, and Work Motivation:
David Hume, Adam Smith, and J. R. McCulloch

M. G. Marshall

In a recent article Anthony Brewer (1998) discussed David Hume’s analysis of luxury consumption. He pointed out, in particular, that Hume approved of luxury (since it promoted economic and political development) and that Adam Smith, despite his antipathy to luxury, was influenced by Hume’s analysis. Smith’s desire to retain a number of Hume’s arguments, Brewer argues, may explain certain inconsistencies in The Wealth of Nations. This article extends the analysis of luxury consumption to the relationship between luxury and work motivation, an important and neglected area, and one in which Hume’s overlooked influence on Smith and J. R. McCulloch is particularly interesting and highlights further Hume’s influence on the Scottish tradition in political economy.

The French Enlightenment found its closest parallel in the “amazing efflorescence of Scots thought in the eighteenth century” (Pollard 1971, 60). Among the many important Scottish writers of the eighteenth century, Francis Hutcheson, William Robertson, Adam Ferguson, Lord Kames (Henry Home), and John Millar are perhaps the best known. The latter three, with Hume and Smith, formed a school (the Scottish historical school) that developed a distinct and far-reaching theory of [End Page 631] history and formed the nucleus of the Scottish Enlightenment.1 This was the intellectual context of the political economy of Hume and Smith, whose approach to economics and history was largely determined by this framework. This framework, and the similarity of methodology and outlook that it engendered, provided a common focus and approach for the economic analysis of the two writers. It is hardly surprising then that there are a number of similarities between the work of Hume and Smith (and Francis Hutcheson). Hume was a key influence on Smith’s work,2 and this influence is particularly clear in the area of wage and motivational theories.

Before the middle of the eighteenth century, since most commentators believed that working-class aspirations were severely limited, negative incentives to work were widely advocated. Indeed, the utility-of-poverty doctrine, which suggested that an increase in real wages had a negative effect on the work effort of the laboring classes, did not come under serious and widespread attack until the second half of the century.3 Hume, however, was a firm believer in positive incentives to labor, and he was clearly an important figure in the attack on the utility-of-poverty doctrine (Marshall 1998, 313).

While in the seventeenth and early eighteenth centuries there was considerable concern about the responsiveness of laborers to positive work incentives, in the main the classical economists tended to ignore work-motivation problems. Indeed, they did not perceive any direct difficulties in this area at all, except those arising from institutional or environmental factors. In general, only the pauperized sections of the workforce were deemed to be unresponsive to the work incentives available. Only members of this “degraded stratum,” it was believed, were placed in a situation in which their “natural” inclination to work hard and be ambitious was overwhelmed by their social and economic environment.4 [End Page 632]

McCulloch, the most enthusiastic supporter of the Hume-Smith position on positive incentives among the post-Smithian classical economists, is the main exception. McCulloch, in fact, despite his early support of Thomas Malthus’s principle of population and the Ricardian tone of much of his analysis, is clearly part of a well-defined Scottish (Hume-Smith) tradition on issues of wages, motivation, and luxury consumption. McCulloch’s analysis of work incentives was much fuller than that of his classical colleagues, and he was the strongest supporter among their number of Adam Smith’s position on high wages.5

The discussion that follows illustrates the influence of Hume on McCulloch and shows, inter alia, that McCulloch’s thoroughgoing Humean approach to luxury enabled him to avoid the dilemma that (Brewer argues) faced Smith regarding luxury and productive and unproductive labor...


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