Barry Weingast

Adam Smith proposed two contradictory theories of the British Empire in the Wealth of Nations and suggested a third. The first view holds that the empire was created for merchants eager to establish and maintain monopolies of the colonial trade. Smith concludes that “Great Britain derives nothing but loss” from the colonies. In the second view, Smith celebrates the European discovery of the new world, opening non-incremental increases in division of labour, specialization and exchange. The empire thus fostered the economic growth of both sides of the British Atlantic, net of the costs of monopoly. Smith’s third argument holds that many mercantile restrictions improved Britain’s security given its long-term military competition with France. How do we reconcile the incompatibility of Smith’s three views of the British Empire? Smith provides no guidance. I argue that, to understand the British Empire, we must view it from the perspective of a long-term military rivalry with France. Many navigation regulations were designed to advantage Britain vis-a-vis France. Smith argues, for example, that the harm to France from prohibiting trade in military stores more than compensates the loss in wealth due to the restrictions. I demonstrate the logic of these claims using tools from modern political economics and political science.

Smith’s “luxury hypothesis” seems to assert that the endless violence of the feudal era ended with the appearance of luxury goods. This view holds that feudal lords had nothing to do with their wealth but to wage war—no other markets were available to them. As luxury goods became available, the lords dropped their weapons and disbanded their armies so that they could buy more luxury goods. The traditional account has causality going from the appearance of luxury goods to the lords disbanding their armies. On my approach, ubiquitous violence under feudalism implies that the causal logic in this account goes from the logic of violence to the gradual and sequential appearance of luxury goods to ending violence near the towns and cities, but not in the agrarian hinterland.

The birth of political thought has long been associated with the development of either the polis as a new form of political organization in Greece, or of democracy as a new form of government in Athens. This article suggests that this view ought to be expanded. Between the late 6th and 4th centuries bc, the Greek polis of Athens established large, participatory democratic institutions. But the transformation that the polis underwent did not merely affect political structures: in this period, Athens transitioned from an undeveloped, limited access, ‘natural state’ toward a developed open access society – a society characterized by impersonal, perpetual, and inclusive political, economic, legal and, social institutions. Those who witnessed this transformation first-hand attempted to grapple, often critically, with its implications. We show that Thucydides, Plato, and other Greek political thinkers devoted a considerable part of their work to analyzing the polis’ tendency toward not only political, but also economic, social, and legal inclusion. Without understanding this larger picture, we cannot adequately explain the development of Greek political thought.