How Adam Smith predicted the success of Facebook, Instagram, and the ‘likes’

I may not be the first one to connect Adam Smith to social media so this is just a short point on how one of the key ideas of the Theory of Moral Sentiments has been a driving force behind the success of social media. Chapter II of Part 3 of the Theory of Moral Sentiments (titled: “Of the love of Praise, and of that of Praise-worthiness; and of the dread of Blame, and of that of Blame-worthiness”) starts with the often-cited line: “Man naturally desires, not only to be loved, but to be lovely; or to be that thing which is the natural and proper object of love.Read more of this post

Classical liberalism in 19th century Hungary

I recently found a book on Hungarian Liberalism (a collection of articles) and read through some of the short essays of Széchenyi (affectionately remembered as the ‘Greatest Hungarian’ in the country) and was pleased to be confirmed by how purely Hume and Adam Smith can be found in his thinking (later in the 20th century the political mainstream often tried to depict him as a proponent of nationalism). Read more of this post

Thomas More on Collusion

Thomas More’s Utopia has many references to all sorts of industrial economics concepts. The law of supply and demand is explained by the example of sheep farming. Buyer power and predatory behaviour are discussed through the example of keeping other types of cattle. Most fascinatingly though there is a discussion of an oligopolistic (sheep) market, which is conducive to collusion and subsequently to higher prices:

But suppose the sheep should increase ever so much, their price is not like to fall; since though they cannot be called a monopoly, because they are not engrossed by one person, yet they are in so few hands, and these are so rich, that as they are not pressed to sell them sooner than they have a mind to it, so they never do it till they have raised the price as high as possible.

Very interesting, worth reading, most of the economics seems to be in book one.

Update:

Since I posted this I found out that the quote above was from Henry Morley’s translation in 1901. Paul Turner’s translation (1965) is somewhat different and actually uses the word oligopoly:

Not that prices would fall, however many sheep there were, for the sheep market has become, if not strictly a monopoly – for that implies only one seller – then at least an oligopoly. I mean it’s almost entirely under the control of a few rich men, who don’t need to sell unless they feel like it, and never do feel like it until they can get the price they want.

So I resorted to the original text to find that it also uses the word oligopoly – I do wonder why it didn’t make it to the 1901 translation:

quod si maxime increscat ouium numerus, pretio nihil decrescit tamen. quod earum, si monopolium appellari non potest quod non unus uendit, certe oligopolium est. reciderunt enim fere in manus paucorum, eorundemque diuitum, quos nulla necessitas urget ante uendendi quam libet, nec ante libet quam liceat quanti libet.

Is talking about antitrust becoming relatively less trendy?

I recently came across Google’s really cool application, Ngram Viewer, which displays the occurrence of given words in the body of books stored on Google Books. Not only that but it plots these relative frequencies on a timeline, therefore we know that x per cent of the books published in year t contain a reference to a given word. These  relative frequencies do not account for the underlying trend in the increase in the number of books published. However one could think of these lines as the fluctuation around the general trend of the number of books published. When a plotted line is increasing, it means that new references to a given word increase at a larger pace than the increase in the number of new books published. Similarly, a decreasing line means that new references to a word increase slower than general book publishing trends. The search below only looked at books published in the English language.

The figure below plots monopoly, antitrust, and cartel on the same timeline (antitrust and cartel occurrences are multiplied by 3 to make it easier to compare relative frequencies – unfortunately Ngram does not do dual vertical axes). The plot is interesting for a couple of reasons. Read more of this post

Frequency of references to ‘market’ and ‘competition’ in literature

A quick search on Google’s  Ngram Viewer for the words market and competition gave the following timeline. I decided to flag up a few milestone books in economics on the plot. This choice is arbitrary and of course hundreds of other explanations to the trends on the below plot could be found:

Read more of this post

Blackboard economics

I’ve been recently reading J-B. Say’s Treatise on Political Economy and stumbled up this passage:

It would, however, be idle to imagine that greater precision, or a more steady direction could be given to this study, by the application of mathematics to the solution of its problems. The values with which political economy is concerned, admitting of the application to them of the terms plus and minus, are indeed within the range of mathematical inquiry; but being at the same time subject to the influence of the faculties, the wants and the desires of mankind, they are not susceptible of any rigorous appreciation, and cannot, therefore, furnish any data for absolute calculations. In political as well as in physical science, all that is essential is a knowledge of the connexion between causes and their consequences. Neither the phenomena of the moral or material world are subject to strict arithmetical computation.”  Read more of this post