Economic Develoment From Zero

Economic Development From Zero

by Juan

The main advantage of SORAnomics over Economics is that it is based on the dynamics of the human mind as explained by David Hume which was later applied by Adam Smith. Because the mind is a non-physical thing, it can remain the same throughout space and time. A human mind living 2,000 years ago has the same dynamics as a human mind living today, and the same with a human mind 2,000 years from now living in a spaceship in a different galaxy. The human mind's dynamics will only change after humans evolve into a different species (such as one with psychic abilities), and this would cause all of our maxims to be re-examined and re-tested.


Thus, the same maxims given by Smith on economic development will apply to humans throughout space and time. Currently, the only maxim of Smith on development accepted by economists is comparative advantage. His other maxims (mostly in Book 3) have been conveniently disregarded because it goes against current mercantile or commercial ideas:


“It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy." The tailor does not make his own shoes, but buys them of the shoemaker. The shoemaker does not make his own clothes, but employs a tailor. The farmer does not make shoes nor clothes, but employs tailors and shoemakers. For their interest, all of them employ their industry with some advantage over their neighbours. They buy whatever else they need with the price of their own produce... By making those cheap foreign commodities at home, the nation’s industry is thus turned into a less advantageous employment. The exchangeable value of its annual produce is reduced by such regulations, opposite of the intention of the lawgiver. By such regulations, a particular manufacture may sometimes be developed sooner. After a certain time, it may be made at home cheaper than in the foreign country. (Chapter 2, Book 4 Wealth of Nations)

Generally, the situation of a country, and its improvement in agriculture and trade are favourable to the introduction of a republican government.There is little probability that republican governments will ever be introduced into Tartary or Arabia, because their country cannot be improved. Most part of its lands are hills and deserts.These cannot be cultivated and is only fit for pasture.They are generally dry and do not have any big rivers.The opposite of this are those countries where republican governments have been established, particularly in Greece. (Simple Lectures, Part 1, Chap 3)

A merchant is not the citizen of any particular country. He is indifferent on from where he carries on his trade. He will remove his capital and all the industry it supports, from one country to another with very little disgust. No part of it can belong to any particular country, till it has been spread in that country, in buildings or in the improvement of lands. No vestige remains of the great wealth of the Hans towns except in the obscure histories of the 13th and 14th centuries. It is even uncertain where some of them were situated or to what European towns their Latin names belong. (Simple Wealth of Nations, Book 3)

How would smith develop a society from the rude state?

As mentioned in a previous post, Smith's economic system works in all states of society, from nothing or 'state zero' up to the advanced, prosperous state. State zero can occur after a natural disaster when society breaks down. A slightly more advanced state or state level 1 is when people live very far apart in undeveloped rural areas where they live off the land (when people have some lodging and clothing). (Described in Book 3 of the Wealth of Nations)

A people in a rural village will likely not have any technical skills nor even speak the national language. But they will likely have some agricultural skills or skills in extracting natural resources. In this 'rude state', this will be their most important capital, source of revenue, and the center of their economy:

"Cultivation of land was the original destination of man. All through one’s life, we retain a predilection for this primitive employment. Without the assistance of some artificers, land cultivation cannot be done without great inconvenience and continual interruption. The farmer frequently needs the service of smiths, carpenters, wheel-wrights, and plough-wrights, masons, and bricklayers, tanners, shoemakers, and tailors. Such artificers stand in need of one another. Their residence is not tied down to a precise spot. They settle near each other and form a small town. The butcher, the brewer, and the baker soon join them. Many other useful artificers and retailers join them for supplying their wants. They contribute still further to increase the town." (Simple WN, Book 3, Chap. 1)

Thus, the economic plan for the rude society will be to sell natural resources to other societies (explained in Book 1). The next question is what to sell, and this depends on what the society can supply and what other societies demand. Usually, profitable sales require high quality produce which the rude state is incapable of. However, there may be societies within the country that are more advanced (level 2 or 3), that can accept lower quality produce to be processed into higher quality sales or exports. The rude society can sell to such societies while steadily improving the quality of its production, pooling its revenue to attract more, higher quality capital.


For example, if the rude state can only produce low quality grains, it can look for societies of animal breeders who needs such grains, until they gain experience to grow better grains. In return, the breeders can pay in meat or animals, to ensure the subsistence of the rude state and its continued labour.


In the African case, the rural areas of the Ivory Coast, which can only produce cocoa beans (level 1), can look for more advanced societies of bean grinders and roasters in towns (level 2) to process the beans. Those roasters can look for still more advanced societies in cities (level 3) to liquify the beans into chocolate butter for making chocolates. Those cocoa processors can then turn to commercial cities and ports (level 4 or 5) to export those chocolates overseas. In this solution, the revenue of chocolate-making mostly goes to the Ivory Coast, instead of to overseas interests, allowing the Ivory coast to build its capital and wealth.

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The development of the rude state will then depend on the nature of the people, with some cultures being able to develop faster. Regardless of culture, Smith guarantees that by allowing profit-sharing or giving the people the proceeds of their own work, industry and development can be sped up. While profit sharing is the main expedient to speed up development, grain based valuation or supply chain barter is the main expedient to prevent the society from sliding backwards during economic crises.