The life of a blog

In March of 2005 I did a post about the need for corporate financial disclosures. I quoted John Kenneth Galbraith, whose economics works I think are mostly forgettable, but who had a great turn of phrase - he argued that when he was a young man there were a lot of 5th Amendment Communists (meaning they took the 5th Amendment rather than reveal their political beliefs) and that today there are a lot of 5th Amendment Capitalists (meaning that many corporate leaders refuse to make accurate or meaningful financial disclosures). I also quoted an interview I had read with the retired CEO of Beatrice Foods, Wallace Rasmussen who had said “In God we trust, everything else we audit.” The theme was the notion of a requirement that publicly traded corporations have a responsibility for reasonable levels of financial disclosures. A reader found that post and asked about the books I quoted in the post.

At the end of the post I argued that Adam Smith, who many of the most vocal supporters of the free market, is often misquoted. Indeed, in An Inquiry Into The Wealth of Nations, Smith argues for self interest. But the depth of his writing, especially in his lesser known book (which he actually re-wrote late in life) calledA Theory of Moral Sentiments , he argues that there are appropriate boundaries for economic activity. My suspicion is that Smith would be a great fan of the efforts to improve financial disclosures.

One of the odd things about Adam Smith is how often he is quoted and how rarely he is read. Last summer I re-read the Wealth of Nations. There are some odd parts to the book - for example, there is a lot of description of 18th Century practices which do not seem relevant to today. But by going through the book you get some basic principles of capitalism. Not the caricature that the most greedy (who have probably never read Smith) offer but to use a phrase coined later by DeTocqueville an understanding of "self interest rightly understood."