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Lessons From Adam Smith’s Edinburgh and Paris

Blog Post | Urbanization

Lessons From Adam Smith’s Edinburgh and Paris

Examining the places where major advances happened is one way to learn about the conditions that foster societal flourishing, human achievement, and prosperity.

Summary: Amidst the turmoil of modern times, evidence reveals significant progress across various metrics, from rising life expectancy to declining global poverty. Cities have emerged as epicenters of innovation and progress throughout history, fostering collaboration, competition, and freedom of thought. By exploring the unique environments of cities like Edinburgh and Paris, where intellectual liberty thrived, Chelsea Follett uncovers the vital role of peace, freedom, and population density in driving human achievement and societal advancement.


This article appeared in Adam Smith Works on 2/8/2024.

Has humanity made progress? With so many serious problems, it is easy to get the impression that our species is hopeless. Many people view history as one long tale of decay and degeneration since some lost, idealized golden age.

But there has been much remarkable, measurable improvement—from rising life expectancy and literacy rates to declining global poverty. (Explore the evidence for yourself). Today, material abundance is more widespread than our ancestors could have dreamed. And there has been moral progress too. Slavery and torture, once widely accepted, are today almost universally reviled.

Where did all this progress come from? Certain places, at certain times in history, have contributed disproportionately to progress and innovation. Change is a constant, but progress is not. Studying the past may hold the secret to fostering innovation in the present. To that end, I wrote a book titled Centers of Progress: 40 Cities that Changed the World, exploring the places that shaped modern life.

The origin points of the ideas, discoveries, and inventions that built the modern world were far from evenly or randomly dispersed throughout the globe. Instead, they tended to emerge from cities, even in time periods when most of the human population lived in rural areas. In fact, even before anything that could be called a city by modern standards existed, progress originated from the closest equivalents that did exist at the time. Why is that?

“Cities, the dense agglomerations that dot the globe, have been engines of innovation since Plato and Socrates bickered in an Athenian marketplace,” urban economist Edward Glaeser opined in his book The Triumph of the City. Of course, he was hardly the first to observe that positive change often emanates from cities. As Adam Smith noted in 1776, “the commerce and manufactures of cities, instead of being the effect, have been the cause and occasion of the improvement and cultivation of the country.”

One of the reasons that progress tends to emerge from cities is, simply, people. Wherever more people gather together to “truck, barter, and exchange,” in Smith’s words, that increases their potential to engage in productive exchange, discussion, debate, collaboration, and competition with each other. Cities’ higher populations allow for a finer division of labor, more specialization, and greater efficiencies in production. Not to mention, more minds working together to solve problems. As the writer Matt Ridley notes in the foreword he kindly wrote for Centers of Progress, “Progress is a team sport, not an individual pursuit. It is a collaborative, collective thing, done between brains more than inside them.”

A higher population is sufficient to explain why progress often emerges from cities, but, of course, not all cities become major innovation centers. Progress may be a team sport, but why do certain cities seem to provide ideal playing conditions, and not others?

That brings us to the next thing that most centers of progress share, besides being relatively populous: peace. That makes sense, because if a place is plagued by violence and discord then it is hard for the people there to focus on anything other than survival, and there is little incentive to be productive since any wealth is likely to be looted or destroyed. Smith recognized this truth, and noted that cities, historically, sometimes offered more security from violence than the countryside:

Order and good government, and along with them the liberty and security of individuals, were in this manner established in cities, at a time when the occupiers of land in the country, were exposed to every sort of violence. But men in this defenceless state naturally content themselves with their necessary subsistence; because, to acquire more, might only tempt the injustice of their oppressors. On the contrary, when they are secure of enjoying the fruits of their industry, they naturally exert it to better their condition, and to acquire not only the necessaries, but the conveniencies and elegancies of life. That industry, therefore, which aims at something more than necessary subsistence, was established in cities long before it was commonly practised by the occupiers of land in the country. […] Whatever stock, therefore, accumulated in the hands of the industrious part of the inhabitants of the country, naturally took refuge in cities, as the only sanctuaries in which it could be secure to the person that acquired it.

Of course, not all cities were or are peaceful. Consider Smith’s own city: Edinburgh. At times, the city was far from stable. But the relatively unkempt and inhospitable locale emerged from a century of instability to take the world by storm. Scotland in the 18th century had just undergone decades of political and economic turmoil. Disruption was caused by the House of Orange’s ousting of the House of Stuart, the Jacobite Rebellions, the failed and costly colonial Darien Scheme, famine, and the 1707 Union of Scotland and England. It was only after things settled down and the city came to enjoy a period of relative peace and stability that Edinburgh rose to reach its potential. Edinburgh was an improbable center of progress. But Edinburgh proves what people can accomplish, given the right conditions.

During the Scottish Enlightenment centered in Edinburgh, Adam Smith was far from the only innovative thinker in the city. Edinburgh’s ability to cultivate innovators in every arena of human achievement, from the arts to the sciences, seemed almost magical.

Edinburgh gave the world so many groundbreaking artists that the French writer Voltaire opined in 1762 that “today it is from Scotland that we get rules of taste in all the arts, from epic poetry to gardening.” Edinburgh gave humanity artistic pioneers from the novelist Sir Walter Scott, often called the father of the historical novel, to the architect Robert Adam who, together with his brother James, developed the “Adam style,” which evolved into the so‐​called “Federal style” in the United States after Independence.

And then there were the scientists. Thomas Jefferson, in 1789, wrote, “So far as science is concerned, no place in the world can pretend to competition with Edinburgh.” The Edinburger geologist James Hutton developed many of the fundamental principles of his discipline. The chemist and physicist Joseph Black, who studied at the University of Edinburgh, discovered carbon dioxide, magnesium, and the important thermodynamic concepts of latent heat and specific heat. The anatomist Alexander Monro Secondus became the first person to detail the human lymphatic system. Sir James Young Simpson, admitted to the University of Edinburgh at the young age of fourteen, went on to develop chloroform anesthesia.

Two of the greatest gifts that Edinburgh gave humanity were empiricism and economics. The influential philosopher David Hume was among the early advocates of empiricism and is sometimes called the father of philosophical skepticism. And by creating the field of economics, Smith helped humanity to think about policies that enhance prosperity. Those policies, including free trade and economic freedom that Smith advocated, have since helped to raise living standards to heights that would be unimaginable to Smith and his contemporaries.

That brings us to the last but by no means least secret ingredient of progress. Freedom. Centers of progress during their creative peak tend to be relatively free and open for their era. That makes sense because simply having a large population is not going to lead to progress if that population lacks the freedom to experiment, to debate new propositions, and to work together for their mutual benefit. Perhaps the biggest reason why cities produce so much progress is that city dwellers have often enjoyed more freedom than their rural counterparts. Medieval serfs fleeing feudal lands to gain freedom in cities inspired the German saying “stadtluft macht frei” (city air makes you free).

That adage referred to laws granting serfs liberty after a year and a day of urban residency. But the phrase arguably has a wider application. Cities have often served as havens of freedom for innovators and anyone stifled by the stricter norms and more limited choices common in smaller communities. Edinburgh was notable for its atmosphere of intellectual freedom, allowing thinkers to debate a wide diversity of controversial ideas in its many reading societies and pubs.

Of course, cities are not always free. Authoritarian states sometimes see laxer enforcement of their draconian laws in remote areas, and Smith himself viewed rural life as in some ways less encumbered by constraining rules and regulations than city life. But as philosophy professor Kyle Swan previously noted for Adam Smith Works:

Without denying the charms and attractions Smith highlights in country living, let’s not forget what’s on offer in our cities: a significantly broader range of choices! Diverse restaurants and untold many other services and recreations, groups of people who like the same peculiar things that you like, and those with similar backgrounds and interests and activities to pursue with them — cities are (positive) freedom enhancing.

The same secret ingredients of progress—people, peace, and freedom—that helped Edinburgh to flourish during Smith’s day can be observed again and again throughout history in the places that became key centers of innovation. Consider Paris.

As the capital of France, Paris attracted a large population and became an important economic and cultural hub. But it was an unusual spirit of freedom that allowed the city to make its greatest contributions to human progress. Much like the reading societies and pubs of Smith’s Edinburgh, the salons and coffeehouses of 18th‐​century Paris provided a place for intellectual discourse where the philosophes birthed the so‐​called Age of Enlightenment.

The Enlightenment was a movement that promoted the values of reason, evidence‐​based knowledge, free inquiry, individual liberty, humanism, limited government, and the separation of church and state. In Parisian salons, nobles and other wealthy financiers intermingled with artists, writers, and philosophers seeking financial patronage and opportunities to discuss and disseminate their work. The gatherings gave controversial philosophers, who would have been denied the intellectual freedom to explore their ideas elsewhere, the liberty to develop their thoughts.

Influential Parisian and Paris‐ based thinkers of the period included the Baron de Montesquieu, who advocated the then‐​groundbreaking idea of the separation of government powers and the writer Denis Diderot, the creator of the first general‐​purpose encyclopedia, as well the Genevan expat Jean‐​Jacques Rousseau. While sometimes considered a counter‐​Enlightenment figure because of his skepticism of modern commercial society and romanticized view of primitive existence, Rousseau also helped to spread skepticism toward monarchy and the idea that kings had a “divine right” to rule over others.

The salons were famous for sophisticated conversations and intense debates; however, it was letter‐​writing that gave the philosophes’ ideas a wide reach. A community of intellectuals that spanned much of the Western world—known as the Republic of Letters—increasingly engaged in the exchanges of ideas that began in Parisian salons. Thus, the Enlightenment movement based in Paris helped spur similar radical experiments in thought elsewhere, including the Scottish Enlightenment in Edinburgh. Smith’s many exchanges of ideas with the people of Paris, including during his 1766 visit to the city when he dined with Diderot and other luminaries, proved pivotal to his own intellectual development.

And then there was Voltaire, sometimes called the single most influential figure of the Enlightenment. Although Parisian by birth, Voltaire spent relatively little time in Paris because of frequent exiles occasioned by the ire of French authorities. Voltaire’s time hiding out in London, for example, enabled him to translate the works of the political philosopher and “father of liberalism” John Locke, as well as the English mathematician and physicist Isaac Newton. While Voltaire’s critiques of existing institutions and norms pushed the boundaries of acceptable discourse beyond even what would be tolerated in Paris, his Parisian upbringing and education likely helped to cultivate the devotion to freethinking that would come to define his life.

By allowing for an unusual degree of intellectual liberty and providing a home base for the Enlightenment and the far‐​ranging Republic of Letters, Paris helped spread new ideas that would ultimately give rise to new forms of government—including modern liberal democracy.

Surveying the cities, such as Edinburgh and Paris, that built the modern world reveals that when people live in peace and freedom, their potential to bring about positive change increases. Examining the places where major advances happened is one way to learn about the conditions that foster societal flourishing, human achievement, and prosperity. I hope that you will consider joining me on a journey through the book’s pages to some of history’s greatest centers of progress, and that doing so sparks many intelligent discussions, debates, and inquiries in the Smithian tradition about the causes of progress and wealth.

Blog Post | Economic Growth

Measuring Freedom and Flourishing | Podcast Highlights

Chelsea Follett interviews Leandro Prados de la Escosura about the long term trends in wellbeing, inequality, and freedom.

Listen to the podcast or read the full transcript here.

Let’s discuss your latest book, Human Development and the Path to Freedom.

I have spent many years working on economic performance in the long run, and while I don’t have anything against GDP, I was always uneasy with the idea of using GDP per head as a shortcut for wellbeing. GDP is a good indicator of output but a very deficient indicator of wellbeing.

Most economists say, “This is true, but it’s highly correlated with non-economic dimensions of wellbeing.” There is also a tendency to produce a dashboard of indicators, basically GDP and some additional measures that create a more nuanced picture.

I was unhappy with that. Then I realized that, since the beginning of modern national accounts in the 1950s, there have been attempts to produce alternative measures. More than 30 years ago, the United Nations Development Programme produced the Human Development Index. I was very interested, but at the same time, I was frustrated when I saw that countries with no freedom at all ranked very highly in the index.

For example, in the first report in 1990, they had a retrospect going back to 1975, and I found that Spain, under Franco’s dictatorship, ranked very highly in human development. How come? It wasn’t satisfactory to rank a nasty dictatorship so highly. And then I read the literature accompanying the report and found this very candid assertion: “The purpose of human development is to increase people’s range of choices. If they are not free to make those choices, the entire process becomes a mockery.”

This is an important philosophical point: Human development is not just about living longer or having a higher material standard of living. You can get that in a high-security prison in Norway. Choosing between alternative ways of life is what makes the difference.

To make a long story short, they have tried time and again to introduce freedom, but they never managed to do so because of strong political opposition from country members of the program. So, as an independent scholar, I thought, “Look, nobody is going to read it, but I have the freedom to introduce the freedom dimension.”

Tell me about what you found.

Perhaps what makes sense is to compare what I found to what you would get on the basis of per capita income. If you look at the average increase from 1870 to 2020, the growth in income and wellbeing is very similar.

But if you look closer, you realize there are large differences across different periods. During first globalization before 1913 and between 1970 and 2000, they are relatively close. During the last two decades, the difference is huge in favor of material living standards measured by per capita income. The first part of the 20th century is just the opposite.

What next? Well, try to provide an explanation.

I went in two steps. One was asking, “Why has this growth in human wellbeing happened? What is the intuition?” The intuition is that if you get richer, you’re going to become better fed, healthier, better educated, and freer. But you can also have different levels of wellbeing at the same income level, and the most important finding from a historical perspective is that at any point of income, you have higher wellbeing today than in the past.

If you compare 1870 to 1913, you see that for most of the income levels, you get the same association between health and income, but at high levels of income, you get higher levels of health. Improvements in health techniques and medical knowledge were restricted to the most advanced countries. But if you look at the 1950s, at any income level, you get higher levels of health than in 1913 or 1870. You also find this for education and freedom. If you move to 2000, there is another upward shift.

Of course, there are reversals. There have been four moments in time in which the progression, the positive progression of human development stopped or declined. One was the Great Depression. The second one was during Mao’s Great Leap Forward. Then there were the oil shocks in the early ’70s, but the most damaging one has been COVID. COVID is the first period in which wellbeing measured in terms of augmented human development has declined

However, over the long run, for any income level, whether you are rich or poor, nowadays you have higher wellbeing than in the past.

Those findings are fascinating. What would you say is the biggest implication of your work?

The first thing is that wellbeing, broadly defined, has expanded worldwide more steadily than per capita income.

Secondly, the phases in which we conventionally associate improvements in wellbeing are not necessarily the same as those in which actual wellbeing improved. For instance, there was an important improvement in the so-called interwar period, even though economic growth stagnated. In 20th-century India, before independence, there was a stagnation in real average income but a remarkable improvement in health. This was because of the discovery of the germ theory of disease, which brought simple hygienic practices like washing your hands before eating and not sleeping near animals.

We also tend to forget that the association between wellbeing and income is not fixed. There are movements along the function: if you are richer, other things being equal, you’re going to be healthier, more educated, and freer. But this is not the whole story. There are also upward and downward shifts.

For instance, you could say that in terms of freedom in 2020, we are worse off than we were 20 years ago. This doesn’t mean that people were richer 20 years ago—we’re richer now—but at the same income level, 20 years ago, people were freer than we are today.

So, it’s a nuanced picture. Overall, things are improving, but there are also worrying declines in freedom.

Exactly.

Can you talk about inequality?

In 1870, in the case of wellbeing, inequality was high, and it increased up to the end of the century, then went down. Then, because of World War I, it increased again. But from the late 1920s to the present, with the exception of a reversal because of World War II, there has been a steady decline in inequality of wellbeing.

In the case of per capita income, inequality increased until the end of the 20th century, around 1980, and only began declining after 1990.

Here, I’m referring to relative inequality. If we increase wealth by 10 percent everywhere, inequality in relative terms doesn’t change. Some people are a bit pickier and think, “If my income increases 10 percent and my income is 100, I get 110. If your income is 1000, you now get 1100.” This is absolute inequality.

Relative inequality in per capita income increased until 1980 and has declined since 1990. But absolute inequality in per capita income, the distance between rich and poor, continues growing.

Absolute inequality in wellbeing has declined since 1960. Today, it is similar to what you would find in 1938, 1913, or 1900, but higher than in 1870.

It’s also important to look at what happens to different parts of the distribution. Who are the winners and losers? Broadly speaking, the middle class of the world gained the most, and the lower classes and those at the top won relatively less. If you look at absolute gains, those who were at a higher level of wellbeing got more. But that changes for different dimensions. Those at the bottom, for example, were the main winners in terms of education, while those in the middle were the main winners in terms of health.

I know that your current focus is on freedom. Could you tell me a little bit about that?

I became interested in human development after reading Amartya Sen, who emphasizes what Isaiah Berlin would call positive freedom. Freedom to. But he also emphasizes negative freedom, the absence of coercion and interference. And I think this is interesting because many people think there is a trade-off between negative and positive freedom.

At the end of the day, everybody wants to have negative freedom, but there are those who think negative freedom has nothing to do with income, that would be Hayek, and those who think negative freedom can only be reached as a second stage once you provide for those who don’t have access. For some, positive freedom is a socialist lie to reduce negative freedom. For others, they are two faces of the same coin.

As an economic historian, I find this is an interesting topic for research. If you look at the world, and you can see this in the Human Freedom Index that Cato publishes, you see the countries at the top in terms of negative freedom are also at the top in terms of positive freedom. For instance, Denmark is at the top of the list in terms of economic freedom, but also in terms of education and health.

My question was, well, maybe this trade-off is only a short-run phenomenon. Maybe if you look at the long run, the trade-off doesn’t hold or only holds for a certain period. So why not construct two alternative sets of estimates, one for positive freedom and the other for negative freedom? And this is what I’m trying to do now.

My main discrepancy with the Fraser Institute economic freedom index is that I don’t take into account the size of government. I know this is a contentious issue. People say, “the larger the government, the less room for private initiative.” At a point in time, this is true. And if you look at similarly developed countries, this is true.

But if you take a cross-section at a point in time, you can see that there are countries in which the size of government is much, much smaller, that are not necessarily freer, in terms of absence of coercion and interference, than countries with larger governments. Look at, for instance, Latin American and Sub-Saharan African countries. Think of Somalia. Or think of my own country under Franco. It was a right-wing, but, in many aspects, very socialist dictatorship in which the government was everywhere. But the size of government was very small.

In 1980, do you know what percentage the income tax contributed to the revenues of the central government in Spain? Give me a figure. You would say 40 percent?

Sure, 40 percent.

2 percent.

Wow.

Nobody paid income tax. So, there was no redistribution.

My point is that the size of government matters less than the nature of government. Perhaps Denmark would have more economic freedom with a smaller government, but if you compare Denmark to other countries, you can see that even though the Danish government is larger, Denmark’s degree of economic freedom is higher. Why? Because the nature of government action is different. It doesn’t interfere as much as another government that is less intrusive in quantitative terms but more intrusive in qualitative terms.

So, if you are looking at a point in time, it makes sense to say, “mutatis mutandis, if a rich country nowadays has a smaller government, this country is going to be freer.” That is true. But the action of government varies from one case to another.

Get Leandro Prados de la Escosura’s book, Human Development and the Path to Freedom: 1870 to the Present, here.

The Human Progress Podcast | Ep. 48

Leandro Prados de la Escosura: Measuring Freedom and Flourishing

Leandro Prados de la Escosura, an emeritus professor of economic history at Carlos III University in Spain, joins Chelsea Follett to discuss long term trends in wellbeing, inequality, and freedom. To see the slides that accompany the interview, watch the video on YouTube.

Board of Governors of the Federal Reserve System | Economic Growth

Income Growth Over Five Generations of Americans

“We find that each of the past four generations of Americans was better off than the previous one, using a post-tax, post-transfer income measure constructed annually from 1963-2022 based on the Current Population Survey Annual Social and Economic Supplement.”

From Board of Governors of the Federal Reserve System.