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184 THE ECONOMIC THOUGHT OF DAVID HUME David Hume's views on economics are expressed in his Essays, Moral, Political and Literary, Part II (1752). He was a contemporary of Adam Smith and read Smith's The Wealth of Nations shortly before his death. Some commentators have suggested that Hume exercised some influence over Smith's views on economics; others are not so sure. Hume's commentators over the last 200 years have emphasized his theory of knowledge, doctrine of causality and belief, theory of morals and historical writing. His views on economics have been relatively neglected. The purpose of this essay is to summarize and clarify Hume's views on economics . Commerce and Trade Hume's essay "Of Commerce" is an extension of his view of property rights. Just as government should not impair property rights, it should not impair commerce, which is the freedom to contract between consenting parties. But Hume was not a 'pure' advocate of laissez-faire. He supported the infant industry argument: A tax on German linen encourages home manufacturers, and thereby multiplies our people and industry. A tax on brandy encreases the sale of rum, and supports our southern colonies. The bulk of workers are employed either in argiculture or manufacturing. In the more primitive societies, almost everyone is employed in agriculture (husbandry), and as agricultural techniques are improved, the land becomes able to support more nonagricultural workers, including artisans and providers of luxuries as well as manufacturers. Some of these 185 surplus (i.e., nonagricultural or manufacturing) workers are sometimes appropriated by the sovereign for use in the army or navy (OC 256), which prevents them from producing luxury goods and services, and leads to a different kind of state than would exist if their labor were not so appropriated. Increases in industry, the arts and trade generally increase both the power of the sovereign and the happiness of the people (OC 260). Trade is something that is mutually beneficial -- both parties gain. Hume spends a great deal of time refuting the idea that one nation's gain is another's trade loss. Thus, trade is a win-win rather than a win-lose situation, as some modern-day mercantilists (such as Thurow fThe Zero Sum Gamel and Batra G The Great Crash of 1989l)would have us believe. Hume views everything in the world as purchased by labor, and sees labor as being caused by people's passions (OC 261). In modern language, one could say that wealth is produced either from physical or mental labor, and that it is individual incentive that causes the human action to begin in the first place. Of course, this view overlooks the fact that labor does not exist in a vacuum, but is mixed with land and perhaps capital (which can be seen as the result of accumulated labor). Exchange occurs when producers of a commodity produce more than they can consume. At that point, they trade their surplus for other goods and services (OC 261). In peacetime, the farmers' surplus goes toward the acquisition of manufactures or the cultivation of the liberal arts. In war, the surplus can go toward the support of an army or navy. The state becomes more powerful as it can produce increasingly beyond subsistence, what Hume refers to as employment beyond mere necessities (OC 186 262). But rather than encouraging the increase in state power by force, such increase is best accomplished by allowing individuals to produce as much as they want, which they will do automatically in the absence of coercion, and then appropriate part of the surplus: It is a violent method, and in most cases impracticable, to oblige the labourer to toil, in order to raise from the land more than what subsists himself and family. Furnish him with manufactures and commodities, and he will do it himself. Afterwards you will find it easy to seize some part of his superfluous labour, and employ it in the public service, without giving him his wonted return. Being accustomed to industry, he will think this less grievous, than if, at once, you obliged him to an argumentation of labour without any reward. (OC 262) Countries that engage in...


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