LETTER TO THE EDITOR: A COMMENT ON MARIA PIA PAGANELLI’S MISTAKEN TREATMENT OF ADAM SMITH’S “FOUR STAGES” THEORY OF ECONOMIC DEVELOPMENT

Abstract

Three principal problems with Maria Pia Paganelli’s (2022) treatment of Adam Smith’s “Four Stages” theory of (socio-)economic development are, first, her doubting whether Smith argues the “four stages” theory or a “stadial model” of economic development; second, her preference for only the equivalent of time-series data to evaluate Smith’s four stages theory; and third, her misrepresenting several of Smith’s arguments in theWealth of Nations (hereinafterWN). From these flaws in her analysis and ignoring the development economics literature that appreciates the relevance of Smith’s explanations, Paganelli invites us to inquire again into the causes of the wealth of nations since Smith has failed in that effort: “when none of the empirical data fits our stadial model of economic development, maybe it is time to inquire again into what causes nations to develop and grow richer” (2022, p. 98; italics original). She also appears not to have paid much attention to Smith’s explanation in the “Introduction and Plan of the Work” of his goals in the five books of the Wealth of Nations, namely: (a) to explain the “causes of [the] improvement, in the productive powers of labour, and the order, according to which its produce is naturally distributed among the different ranks and conditions of [people] in society” (WN, pp. 10 11); (b) to “explain in what has constituted the revenue of the great body of the people, or what has been the nature of these funds which, in different ages and nations, have supplied their annual consumption” (p. 11); and (c) to explain the proper role of government in the economic development process. Paganelli’s arguments are thus incorrect and misleading. My comment elaborates.