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Independence Day: Adam Smith and Energy

Just months before The Declaration of Independence was signed on July 4, 1776, Adam Smith published The Wealth of Nations. “If the American Founding Fathers articulated in The Declaration of Independence the political case for individual freedom,” scholar Richard Ebeling noted, “Adam Smith presented the complementary argument for economic freedom and free enterprise.”

Smith’s insights from nearly 250 years ago resonate in today’s public policy debates, including with energy.

The main theme of Smith’s masterwork? The natural order of liberty made heavy-handed government unnecessary and counter-productive. Wealth did not originate from bullion as the Mercantilists believed; it came from an international division of labor enabled by free trade. Progress did not emerge from edicts and planning bureaucrats; it came from enterprising individuals pursuing their self-interest.

Globalization, Harmonics

Free and open global trade was central to Adam Smith. Economic autarky was vastly inefficient and counterproductive to international harmony. The economic maxim of buying and not making, later formalized as the law of comparative advantage, was explained by Smith:

It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers.

What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better to buy if of them with some part of the produce of our own industry, employed in a way in which we have some advantage. (WoN, IV, 2)

Enter the global pacemaker in international trade with oil, natural gas, and coal. The U.S.:

The threat to global energy trade? Carbon tariffs (“border adjustments’) to complement domestic carbon taxes to prevent “leakage,” whereupon a country without CO2 rationing would gain at the expense of the taxers. Folly, Adam Smith would say.

Smith recognized the wisdom imbedded in self-interested action, which in our day can be applied to adaptation as the best weather/climate policy, not futile government mitigation policies that only make energy less affordable and less reliable.

Some famous passages from The Wealth of Nations:

As every individual, therefore, endeavors as much as he can both to employ capital in support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. (WoN, IV. 2)

What is the specie of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his own situation, judge much better than any statesman or lawgiver can do for him. (WoN, IV, 2)

The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which can safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. (WoN, IV, 2)

Forced energy transformation substitutes political elites for the commoner. It replaces the individual’s self-interest with collective command-and-control.

And regarding those who pretend to have the common weal in mind? Citizen beware:

By pursuing his own interest [the individual] frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good . . .

Beware of the perils of greenwashing, companies large and small.

Conclusion

July 4th Independence Day is a celebration of one nation’s breakaway from tyranny. Today, another yoke of oppression is at the door: climate alarmism and forced energy transformation.

Paul Driessen and Ann Bridges have offered a Declaration of Mineral Independence in this regard:

We solemnly declare that these United States ought to be free and independent again; that we are absolved from the dictates and bullying of Environmentalist NGOs, their representatives and their funders; and that political obligations to them should be dissolved.

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