David Hume also made it clear that there can be no political freedom without economic freedom, for he truly believed and noted that, “There is no such thing as freedom of choice unless there is freedom to refuse.”
By Anthony Kila
Our Unforgettable today is David Hume, a perfect example of a thinker. His very original thoughts brought light into many great lives and works. Before he died in 1776, David Hume gave instructions that when the time came, his remains should be laid in a simple Roman Tomb and that the stone over him should have written nothing else but his name, the year he came to the world and the year he left the world. He had lived his life and he wanted to leave it to “posterity to add the rest”. Here we are, well over two centuries later, from Lagos, still adding the rest.
That did not start today however, the rest of what the life of David Hume is about was already appreciated and described by even the finest of his contemporaries. Adam Smith, with whom David Hume shared a close friendship, noted of David Hume: “Upon the whole, I have always considered him both in his life time, and since his death as approaching as nearly to the idea of a perfectly wise and virtuous man as perhaps the nature of human frailty will permit.”
In his “Prolegomena to Any Future Metaphysics”, Immanuel Kant declared that “it was the objection of David Hume that first, many years ago, interrupted my dogmatic slumber.” Charles Darwin considered the thoughts of David Hume as a central influence on his theory of evolution. Jeremy Bentham took time to note for all to know that reading David Hume “caused the scales to fall” from his eyes.
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Yes, thanks to the depth and originality of his thoughts, his mode of reasoning and indeed style of writing, there is more than just a bit of David Hume in most of the ideas that have shaped our intellectual and practical worlds. He argued that our reasonings and prescriptions must be based on practical observations, experience and persuasion not intuition or inspirations and he noted that “For as this ought, or ought not, expresses some new relation or affirmation, it is necessary that it should be observed and explained; and at the same time that a reason should be given, for what seems altogether inconceivable, how this new relation can be a deduction from others, which are entirely different from it.” These might seem obvious to many of us now, but it was not so then.
Understandably, most consider David Hume as a philosopher, historian, and essayist, the general tendency is to list him amongst thinkers like Francis Bacon, George Berkley, Thomas Hobbes and John Locke. General education is however wrong, incomplete and unkind to David Hume when we introduce economics in our classes with little, or in some cases, no reference at all, to David Hume. We might be on our way to redemption though, as Centuries later, Paul Krugman has remarked that “David Hume created what I consider the first true economic model.”
A good way to rediscover and appreciate the contributions of David Hume to our understanding of political economy should start with his notion and articulation of the private property system. Undoubtedly, he was for the institution of private property. Unlike other enlightenment theorists (like John Locke) that defended the same institution as commanded or designed by God, David Hume did not take the position that the system of private property was born out of and justified by a natural law.
Rather he argued that the system of private property was borne out of need, due to limited resources and must be based on conventionally agreed law (justice) required to ease transactions in an organized society. In discontinuity and against the tradition of naturalists, David Hume points out that “A man’s property is some object related to him. This relation is not natural, but moral, and founded on justice” and that it is very preposterous, therefore, to imagine, that we can have any idea of property, without fully comprehending the nature of justice, and showing its origin in the artifice and contrivance of man. The origin of justice explains that of property. The same artifice gives rise to both”.
With the positions he articulated in his “On the Balance of Trade, against the leading idea of hoarding commodities, championed by mercantilist who argued that bullions equal wealth, David Hume heralded the “Price-Specie Flow Mechanism” with which we are now familiar and with it he established perhaps the first of our economic models. David Hume argued that it was wrong to limit export (and import) as allowing trade creates more production and more wealth. He noted that “It is very usual, in nations ignorant of the nature of commerce, to prohibit the exportation of commodities, and to preserve among themselves whatever they think valuable and useful. They do not consider, that, in this prohibition, they act directly contrary to their intention; and that the more is exported of any commodity, the more will be raised at home, of which they themselves will always have the first offer”.
Whilst at it, David Hume also laid the foundation of the monetarist quantity theory of money by showing that in a system, there is a correlation between level of money supply and the prices of goods and services. His example, using England as a case study, was that as exports increase and more money (gold) poured into the system to pay the sold items, prices of goods will also increase balancing out the perceived profit. An increased flow of gold into England would therefore not necessarily translate into an increase in the wealth of England.
One of the central points of our lives that David Hume illuminated in an original way is interest rates. The general assumption by all then, and many now, is that the quantity of money in circulation determines interest rates. The idea being that an increase in money supply will reduce interest rates. David Hume instead showed us that High interest arises from three circumstances: A great demand for borrowing; little riches to supply such demand; and thirdly, great profits arising from commerce: And these circumstances are a clear proof of the small advance of commerce and industry, not of the scarcity of gold and silver. Low interest, on the other hand, proceeds from the three opposite circumstances: A small demand for borrowing; great riches to supply such demand; and small profits arising from commerce.
It would be odd not to mention that David Hume also made it clear that there can be no political freedom without economic freedom, for he truly believed and noted that “There is no such thing as freedom of choice unless there is freedom to refuse.”
Join me if you can @anthonykila to continue these conversations.
- Prof Anthony Kila is Centre Director at CIAPS Lagos.