“Little else is required to carry a nation to the highest level of opulence than peace, easy taxes and a tolerable administration of justice.” — Dr. Adam Smith (1755)
“The way to wealth is as plain as the way to market. It depends chiefly on two words, industry and frugality.” — Dr. Benjamin Franklin (1757)
Last week, I had the opportunity to give two lectures on what I call the two doctors of free-market capitalism and wealth creation. Following their advice, you are bound to be financially independent.
The first was at the Panmure House in Edinburgh, Scotland, the final residence of Adam Smith, the father of free-market economics.
My second lecture was at the Benjamin Franklin House on Craven Street in London, England, when Franklin acted as the American colonial agent.
Adam Smith and Benjamin Franklin have much in common. They are both founders: Adam Smith (1723-1790) is considered the father of free-market economics, and Benjamin Franklin (1706-1790) is honored as the father of American capitalism and entrepreneurship.
Both Declared Their Independence in 1776!
They lived at the same time during the 18th century, and were friends, although Franklin was older. Smith published his magnum opus, “The Wealth of Nations,” in March 1776. Four months later, Benjamin Franklin signed the Declaration of Independence. They knew each other in Great Britain, and supported American independence. They each received doctorates, Smith a law degree at the University of Glasgow, and Franklin an honorary degree at St. Andrews for his scientific contributions. They died in the same year, 1790.
Although Smith was a recluse and Franklin a bon vivant, they had a similar philosophy in economics (free markets), politics (democratic republic) and religion (Christian deists). They saw a bright future of universal prosperity if the people adopted the principles of industry, thrift, limited government, the rule of law, sound money and free trade.
Smith called it “the system of natural liberty.” He declared, “To prohibit a great people from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind.”
Franklin used the French term, “laissez-faire.” Leave us alone! Government can play a small but important roll. “A virtuous and industrious people may be cheaply governed,” he wrote.
Both denounced most governmental regulations of industry and interference with the economic activities of people.
To achieve economic progress, they offered a simple solution: unleash the powers of self-interest!
Franklin once wrote, “It seems contrary to the nature of commerce, for government to interfere in the prices of commodities. Trade is a voluntary thing, between buyer and seller, in every article of which each exercises his own judgment, and is to please himself.”
As Columbia professor Wesley Mitchell said, “the wealth of nations will increase most rapidly if every person is allowed the fullest opportunity to decide for his own individual self what is the best way to use his labor and whatever capital he possesses. In other words, the best policy for governments… is to interfere as little as possible with the occupations and investments of its citizens.”
‘The Obvious and Simple System of Natural Liberty’
Their formula of success can be reduced to a simple equation:
A + B = C,
A = Adam…. as in Adam Smith
B = Ben…. as in Benjamin Franklin
C = Capitalism.
‘The Two Great Texts to Build and Retail Wealth’
Recently, I came across a book edited by Anbine Maudet, which combined Franklin’s pamphlet, “The Way to Wealth,” and an abridged version of Smith’s “Wealth of Nations” (590 pages).
She states, “This book is a compilation of two great texts of the 18th century that enabled many people to build and retain wealth. Benjamin Franklin and Adam Smith are now respectively depicted on the U.S. $100 bill and the Bank of England £20 note.”
In review of Franklin’s and Smith’s economic and political views, they agreed on almost everything. They firmly believed in free trade, limited government, easy taxes, the benefits of population growth and immigration, the positive role of saving and investing and a paper money standard (fractional reserve banking backed by gold and silver). They opposed slavery and excessive government regulation. They were culturally conservative and favored peace and the commercial society.
Both saw a bright future for America after the new nation adopted Constitutional limited government, the rule of law, sound money and free trade. Adam Smith predicted that America will eventually become the world’s super power.
Ben Franklin saw a rising sun for the new country: “America will, with God’s blessing, become a great and happy country.”
They were both right!
Franklin’s Influence on ‘The Wealth of Nations’
It appears that Franklin had a significant influence on Smith’s positive writings on the future of America and American independence in “The Wealth of Nations.” Both were residents of London in 1773-1775. According to one report, prior to publishing his magnum opus in 1776, Adam Smith met frequently with Benjamin Franklin, Richard Price and other literary friends, and brought various chapters to their meetings, receiving comments and making changes to the manuscript.
The A & B Classics Updated!
For the 21st century, here are two books devoted to the A & B model of capitalism:
In “The Making of Modern Economics,” Adam Smith and his system of natural liberty are the heroes of economics. Every economist is rated either in favor of the House that Adam Smith Built or against it. I list Ben Franklin as a “pre-Adamite” who advised Smith on American developments and was a big fan of “The Wealth of Nations.” See chapter one, “It All Started with Adam.”
For more information on my unique approach, go to The Making of Modern Economics — MSKOUSEN.COM. It’s now in its 4th edition and published by Routledge.
Douglas Irwin, the foremost authority on free trade and a professor at Dartmouth College, says, “The Making of Modern Economics is the most interesting and lively book on the history of economic thought ever written.”
To purchase the book at a 35% discount, go to www.skousenbooks.com. The price is only $35, and I pay postage if mailed inside the United States.
The second book is “The Maxims of Wall Street: A Compendium of Financial Adages, Ancient Proverbs and Worldly Wisdom.” Franklin is cited 17 times, more than anyone else except Jesse Livermore, Gerald Loeb and Warren Buffett. Two of my favorites are “Nothing but honey is sweeter than money” and “No revenue is sufficient without economy.”
To purchase the book for only $20, go to www.skousenbooks.com. All copies are numbered, autographed and postpaid if mailed inside the United States.
Larry Elder to Address FreedomFest: Full Schedule Now Online
FreedomFest is only a month away! Our full agenda — speakers, panels, debates and breakout sessions — is now posted online. Go to www.freedomfest.com/agenda to check it out. You will be amazed! You can also click on each speaker and see when and about what they are speaking: 2023 Speaker Lineup — FreedomFest.
We’re still adding new speakers and hot topics. Good news! Talk show host Larry Elder, who is running for president, will address us. He’s been rated one of the top three speakers at past FreedomFests. See you there.
Good investing, AEIOU,
You Nailed it!
Fox News Host Sean Hannity Interviews California’s Governor Newsom!
One of the sad trends in today’s media is that opponents don’t interview each other any more. There used to be a time when Bill O’Reilly would take on a politician, but most of the time, they just interview people they agree with, whether on CNN, MSNBC or Fox News.
So, I was amazed that California Governor Gavin Newsom was willing to sit down and be interviewed by Fox News’ Sean Hannity. You can watch the full interview here.
This is the kind of dialogue that we desperately need. I am glad to see it. It’s what we try to do all the time at FreedomFest.
Gov. Newsom came across like “Slick” Willy, President Bill Clinton. When I jogged with President Clinton back in 1992, he sounded like a Republican. Gov. Newsom apparently has the same skill. Beware!