In October 2015, I posted HAWB 1791 - Alexander Hamilton rejected Adam Smith. What I am posting today could be titled HAWB 1791 - Alexander Hamilton rejected Adam Smith Part 2.
My October 2015 post mostly discussed Hamilton's refutation of Smith's
advocacy of free trade. Near the end, I presented Hamilton's argument in
favor of direct government intervention in the domestic economy, by
excerpting from European Origins of the Economic Ideas of Alexander Hamilton (Arno Press, New York, 1977), by Robert James Parks:
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One of the doctrines of the physiocrats which Smith had accepted was that of non-regulation of business, with a neutral policy toward its growth. Let alone, neither encouraged nor discouraged, industry would seek its most useful and profitable employment. Against this hypothesis, Hamilton offered several objections. These were that the supposed tendency of industry to seek its most profitable employment was inhibited by the force of habit, the spirit of imitation, fear of new ventures, the intrinsic hazards of new enterprises, and the unfair competition created by the bounties and subsidies given in competitive nations. Experience teaches that men change habits only slowly and reluctantly. It is the job of government to encourage and speed up change. He argued that capital is cautious, and can only be made venturesome if the government removes some of the risks."Experience teaches," Hamilton wrote in Section VII of his December 1791 Report to Congress on the Subject of Manufactures,
that men are often so much governed by what they are accustomed to see and practice, that the simplest and most obvious improvements, in the most ordinary occupations, are adopted with hesitation, reluctance, and by slow gradations….
The apprehension of failing in new attempts is, perhaps, a more serious impediment. There are dispositions apt to be attracted by the mere novelty of an undertaking; but these are not always the best calculated to give it success. To this it is of importance that the confidence of cautious, sagacious capitalists, both citizens and foreigners, should be excited. And to inspire this description of persons with confidence, it is essential that they should be made to see in any project which is new—and for that reason alone, if for no other, precarious—the prospect of such a degree of countenance and support from government, as may be capable of overcoming the obstacles inseparable from first experiments.