Friendship with David Hume, friendship No.2

The Scottish Enlightenment was characterised by a thoroughgoing empiricism and practicality where the chief values were improvement, virtue, and practical benefit for the individual and society as a whole.

David Hume (1711 -1776) best friend to Adam Smith, played a major role in developing a positive belief that capitalism could spawn real friendships amongst those embracing new opportunities. New clubs were formed to meet and share ideas. Historian Jonathan Israel argues that by 1750 Scotland’s major cities had created an intellectual infrastructure of mutually supporting institutions, such as universities, reading societies, libraries, periodicals, museums and masonic lodges. The Scottish network was “predominantly liberal Calvinist, Newtonian, and ‘design’ oriented in character which played a major role in the further development of the transatlantic Enlightenment”. Bruce Lenman says their “central achievement was a new capacity to recognize and interpret social patterns.”

David Hume was a profound Scottish philosopher, he also wrote on economics, arguing, for example, against mercantilism and introducing specie-flow arguments. He was born on 26 April 1711 (Old Style) in a tenement on the north side of the Lawnmarket in Edinburgh. Hume’s father died when he was a child, just after the author’s second birthday, and he was raised by his mother, who never remarried. He changed the spelling of his name in 1734, because of the fact that his surname Home, pronounced Hume, was not known in England. Throughout his life Hume, who never married, spent time occasionally at his family home at Ninewells in Berwickshire, which had belonged to his family since the sixteenth century. His finances as a young man were very “slender”. His family was not rich and, as a younger son, he had little patrimony to live on. He was therefore forced to make a living somehow.

Katherine Falconer  Home realized that young David was “uncommonly wake-minded” — precocious, in her lowland dialect — so when his brother went up to Edinburgh University, David, not yet twelve, joined him. He read widely in history and literature, as well as ancient and modern philosophy, and also studied some mathematics and contemporary science.
…………. As an adult, he spent much time abroad, first in France:
He moved to France, where he could live frugally, and finally settled in La Flèche, a sleepy village in Anjou best known for its Jesuit college. Here, where Descartes and Mersenne studied a century before, Hume read French and other continental authors, especially Malebranche, Dubos, and Bayle; he occasionally baited the Jesuits with iconoclastic arguments; and, between 1734 and 1737, he drafted A Treatise of Human Nature.

1750 he met and became best of friends with Adam Smith. They both shared the sad fact they had been brought up by a single parent. Hume was highly influential in his criticisms of theology and subjects such as monarchy – he defended the conservative view that British governments are best run through a strong monarchy.

Whilst studying at Oxford, Adam Smith had been given a copy of Hume’s first book, ‘A Treatise of Human Nature’ given to him by one of his eminent Balliol lecturers, Francis Hutcheson. At Oxford the book was considered ‘evil’ and encouraging atheism. Smith went back to Scotland, and, Spurred on by his admiration of Hutcheson, who always gave his lectures in English (very popular to do so at the time) Smith was a popular public lecturer and made a financial profit, such that he was able to produce, in 1759, the much acclaimed book, ‘Theory of Moral Sentiments’. This book gained him admirers in France and Germany and so, when in France tutoring 18 year old Henry Scott, he was moving in circles where he met such intellectuals as Voltaire, economic theorists such as Quesnay and important French economic administrators like Turgot and Necker. Whilst in Toulouse, France, in the summer of 1764, Smith had enough spare time to commence work on his ultimate masterpiece, ‘An Inquiry into the Nature and Causes of the Wealth Nations.’

On returning to London, Smith met up with his old friend David Hume. He sought his advice, and those of other friends in London as he continued to try to finish his book. He also met Edmund Burke, Samuel Johnson and Edward Gibbon. He was so admired amongst these intellectuals that he was elected a member of the Royal Society in 1773.  The young Buccleuch was so satisfied with his tutoring that an annuity was given to Adam Smith so he could return to Edinburgh to live with his ageing mother and complete his major work with few distractions. The book was published in 1776, the year his dear friend, David Hume, died.

The brilliance of Hume’s work lives on in relevance.
Hume argued against ‘mercantilism’
Mercantilism was an economic theory and practice, dominant in modernized parts of Europe during the 16th to the 18th century, that promoted governmental regulation of a nation’s economy for the purpose of augmenting state power at the expense of rival national powers.

With the alternative being Price specie-flow

Price-specie flow mechanism

Adjustment mechanism under the classic gold standard allowing disturbances in the price level in one country to be wholly or partly offset by a countervailing flow of specie (gold coins) that would act to equalize prices across countries and automatically bring international payments into balance.

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

An argument David Hume made against those who argued that a favorable balance of trade is always good public policy. The price-specie flow mechanism states that under a gold standard, countries with positive trade balances are effectively importing gold (money) in exchange for their exports while those with negative trade balances are exporting gold in exchange for imports. The increase in gold in countries with positive trade balances causes inflation, which makes prices rise and in turn makes imports more competitive. Conversely, the decrease in gold in countries with negative trade balances causes deflation, which makes price fall and exports more competitive internationally. This cause the balance of trade to shift in both countries. Thus, Hume argued that a trade balance is relatively unimportant because it tends to balance itself out in the long term.

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Hume  was a well travelled and a highly thought of intellect of the Scottish Enlightenment before and since he died in Edinburgh, 1776. Many nations refer to his work and to Adam Smith’s as they try to build a strong economy for their people, wrestling with modern day political economics which are possibly still more elegantly described by these two great thinkers.