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P.J.'s Cliffs Notes on Adam Smith

Front cover of "On the Wealth of Nations" by P.J. O'Rourke

KAI RYSSDAL: Protests in Seoul are threatening what could be the biggest U.S. free trade deal since NAFTA. South Korea and the United States do $72 billion worth of business a year.

The two sides are trying to lift tariffs and other limits on all those goods and services. But it's a pretty safe bet nobody at the negotiating table's read the book that made the idea of free trade famous: "The Wealth of Nations," for short, by Adam Smith. P.J. O'Rourke has read it. His latest book is called "The Wealth of Nations." P.J. O'Rourke, good to have you here.

P.J. O'ROURKE: Well thank you! Thanks for having me on.

RYSSDAL: Not to put the kibosh on the whole conversation before we really get started, but does Adam Smith really matter today?

O'ROURKE: Yeah, I'm glad to say he does, cause I just finished a book about him. Yeah, he does matter, because he has some stuff that really matters to say about things like free trade, the China panic . . . And, oh my gosh, we're getting everything from China and all we're giving them is money and pretty soon we'll be broke, and you know.

RYSSDAL: But it's not like anybody picks up a 900-page book when they're trying to figure out economic policy today.

O'ROURKE: More's the pity. There are very few people in Congress, and at the Treasury Department and elsewhere — and even on Wall street — who couldn't stand a good, strong dose of this 900-page book. Course the key problem here is the 900 pages. I mean, it took me a year to read the thing.

RYSSDAL: Maybe what we ought to do at this point is pause for a brief primer on what exactly it was Adam Smith said in "The Wealth of Nations."

O'ROURKE: OK, it is actually fairly simple. All of economic progress, from caveman to the world of tomorrow, depends upon three individual prerogatives. It is the pursuit of self-interest, the division of labor, and the freedom of trade. It's a three-legged stool. You take any one of those legs out from under the stool and the economy comes crashing down. And really, it doesn't go much very far beyond that.

RYSSDAL: What would he have to say after those 900 pages, if he just showed up in downtown New York City today?

O'ROURKE: Well, I think he'd be happy at the extent to which prosperity has spread to ordinary people. It's important to remember he lived in a time when ordinary people were extraordinarily poor. I mean, way below modern poverty level. I mean, to the extent that they did not have meat to eat. They were lucky to get an occasional mystery part of the cow. And it was Smith's objective to see that people got better off, and I think he'd be happy to see that most of us got better off. He would not be surprised to see that not everybody got better off, because he was a good student of human nature and he knew that not everyone would succeed.

He would be upset that people were still arguing over something like balance of trade, which he thought was absolutely ridiculous. The important part of trade is the freedom to do so. I mean, you have to reduce it to a very basic level: Do you have the right to trade your work, something you created, to somebody, anybody in the world, in return for the good or the service that they want to give to you? And all of us at a gut level would say, "Yeah, man! You know, Chinese want one of my paperbacks and they're willing to give me a cool Buddha statue made of jade? Bonus!"

RYSSDAL: Yeah, but that's not what happens in the economy today, right? What happens in the economy today is that China is sitting on, you know, $700 billion worth of U.S. Treasury bonds.

O'ROURKE: To which Adam Smith would say, "Who cares?" Absolutely who cares, we didn't give that money for nothing. And what are they gonna do with it except buy stuff from us?

RYSSDAL: Are there hazards, do you think, in trying to plum this 900-page doorstop for economic policy as opposed to economic theory?

O'ROURKE: Oh yeah, absolutely, and this shows up in the book. The book is in fact five books. And in the fifth book, Adam Smith takes his economic principles and he tries to turn them into prescriptions for policy. It's Adam Smith policy wonk, and he fails big time. I mean he is . . . I mean he has some good suggestions, he has some bad suggestions, he argues with himself, he's self-contradictory, he has some ridiculous suggestions. And it's a great lesson, that you take the most amazing genius in the world with the most thorough understanding of the subject . . . he turns into an idiot. Politics makes idiots of us all.

RYSSDAL: No coincidence, I guess, that you wrote about Adam Smith. You and he share a certain political and intellectual sympathy.

O'ROURKE: I only wish we shared an IQ. I'd be too smart to be sittin' here. I'd be on my yacht.

RYSSDAL: The latest book from P.J. O'Rourke is called "On the Wealth of Nations." A guy named Adam Smith wrote a book with a similar title. Mr. O'Rourke, thanks a lot for your time.

O'ROURKE: And Kai, thank you.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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