Hume Studies

Hume Studies Volume XXVI, Number 1, April 2000, pp. 143-157 Hume on Economic Policy and Human Nature EDWARD SOULE Subsequent to publishing A Treatise of Human Nature,1 Hume wrote nine essays concerning political economy.2 His analysis, reflections, and policy proposals respond to a transitional3 period in British social and commercial life.4 On the eve of the industrial revolution Hume would have observed an ascendant merchant class, primitive manufacturing activity, increased agricultural productivity , burgeoning foreign trade, and growing urban population centers. These developments were evident throughout Hume's formative years, a time of relative peace and prosperity, notwithstanding bouts of crippling inflation.5 Hume penned his economic essays before the emergence of a comprehensive account of classical economic theory.6 The Wealth of Nations would clarify the relationship between national power7 and the affluence of individual citizens . Although we still argue various aspects of this relationship, Smith at least defined many of the terms of the debate. But Hume confronted a period of greater economic and intellectual uncertainty concerning this fundamental issue of political economy. Some pre-classicists advocated protectionist tariffs and low wages as a way to bolster national treasuries and power.8 These proposals justified state intervention on the basis of nation-building. And the intellectual climate of this period retained vestiges of the seventeenth-century denunciation of ostentatious wealth as immoral. The so-called religious "enthusiasts" worried about spiritual or religious corruption in a period of rising affluence.9 Still others, of a more liberal bent, addressed these issues Edward Soule is at the Robert Emmett McDonough School of Business, Georgetown University, Old North G-04, Washington, D.C. 20057, USA. e-mail: ed.soule@msb.edu 144 Edward Soûle through the lens of individual liberty and resisted both state and church involvement in commercial affairs. These unsettled intellectual currents gave rise to several questions of political economy. How should private commercial affairs be balanced with the needs of a state? Should the state exercise any authority over the level of wages or tax goods typically consumed by one group but not another? And what (if any) are the moral and economic issues attendant to non-essential or luxury goods? Should the state encourage or discourage their production? "Of Commerce" is Hume's attempt to reconcile these questions in one fell swoop. He is sympathetic to nation-building but he is suspicious of state interference in commercial affairs. His project can be understood as an attempt to place nation-building on a foundation that is both economically realistic and morally justified. In Section I, I explicate two of the many arguments Hume makes in "Of Commerce." In Section II, I critically analyze one of them in order to examine and validate Hume's methodology. Finally, in Section III, I will suggest the relevance of Hume's methodology for crafting contemporary economic policy. I. "Of Commerce": Two Arguments "Of Commerce" advances two arguments with widespread economic policy implications.10 In the first, Hume details a complex connection between "luxury goods"11 and a vibrant economy.12 Based on this connection, he argues for the production and consumption of luxury goods as a means to national power. His second argument is an appeal for fairness in compensating members of the laboring class. These two arguments overlap such that fair compensation also serves the interest of the state. From a policy standpoint, these arguments would endorse free markets in terms of production and consumption decisions. And they would counsel states to intervene in labor relations only for the purpose of ensuring that workers be paid fairly and that they not be denied the fruits of their labor. The first argument—that luxury goods spur commercial activity—is best understood in its eighteenth-century context. Hume would have observed a proliferation of luxury or "ornamental" goods and the migration of agricultural workers to urban centers of production. He (rightfully) attributed this phenomenon to the productivity of British agriculture. Moreover, he realized that such productivity would make many agricultural workers "superfluous" to the production of food. Hume was optimistic that these developments would contribute to human welfare by affording] to many the opportunity of receiving enjoyments, with which...