Adam Smith’s home cannot escape invisible hand
Posted by GTG on March 13, 2008
The house where famous 18th century philosopher and economist Adam Smith lived in until his death in 1790 has been put up for sale for £700,000.
My bet is that is what the “father of capitalism” - whose firm belief that market forces allocate resources more efficiently than any amount of human planning is capable of shaped modern economic thinking - would have wanted.
Ironically, his followers are not so happy with the sale.
…(T)he prospect has horrified experts months before Smith’s long-awaited statue is due to be unveiled on the Royal Mile.
The veteran campaigner Professor Sir Alan Peacock said: “It’s a disgrace that the council has agreed to dispose of a building as significant as this. It should be saved for the nation.”Dr Eamonn Butler, the director of the Adam Smith Institute, said: “We’ve thought about approaching the council about Panmure House in the past to see what we could do. I doubt we’d be able to bid for it.”
Perhaps even more ironically is how this case serves as an example of why the free market works so well - it reveals and quantifies the otherwise invisible desires of people in dollars and cents. If his followers are so ardent to keep Adam Smith’s house from being sold to outsiders, why not shell out the £700,000 to keep it?
Their refusal to do so tells us one thing: no matter how valuable they say the house is and what a disgrace that it is being sold and how they tried but failed to buy it and how sad they are, to them the house is not worth the magic number of £700,000. Price tags expose cheap talk.
In this case, I’d say the house is better off in the hands of someone else who values it higher. Whether it is converted to an Adam Smith museum or an office, the owner will definitely be working hard to put his £700,000 investment to good use - as if guided by an invisible hand, of course.
March 13, 2008 at 7:53 pm
Hi
Nice post, but not an accurate account of the issues.
Panmure House is an ‘A listed’ property in Edinburgh and is in the highest protected category. Sir Alan Peacock has no quarrels with the house being sold on the market; his objection was the way it was described by the seller as a ‘development opportunity’, which in ordinary parlance means anything from knocking it down for an apartment block, or worse, to letting it go the ruin as an investment before replacing it with ‘tat’.
The price tag is not just £700,000 - it’s an ‘offers over bid’, a sealed bid auction. After which there would be restoration costs, perhaps of a similar amount.
Some of us would like to see it bought for around £700,000 and restored by non-public funding (private subscription) to be rested for educational purposes connected with the works of Adam Smith and his friend David Hume, academic research projects, and international meetings.
I visited it today with Sir Alan and others from Heriot-Watt University, preliminary to a decision on whether to bid. I visit it regularly when showing academic and journalsts visitors to Adam Smith’s Edinburgh.
We never ‘tried but failed to buy it’ nor are we ’sad’, and the house in today’s market is probably ‘ [may be] ‘worth the magic number of £700,000.’ Ours is not ‘cheap talk’. You are talking about something you apparently know nothing about.
I trust you are not a typical economist who talks big about ‘free markets’ but nevertheless has, or seeks, the job protection of academic tenure, while denying such privileges to others seeking to protect Edinburgh’s architectural heritage.
March 14, 2008 at 12:29 am
To Gavin:
Thanks for the comment. I admit I know much less about the matter than you do, since I am not intimately connected with the matter. But perhaps the lack of emotional connection also helps in viewing things in perspective.
With regards to Sir Alan and the decision to bid for the property, what you have said is rather inconsistent from what the parties have told the press (or given how the media works these days, what the press has reported them saying). Which brings me back to my point that talk is cheap - not yours, but talk in general.
I fully understand that the “loss” of the property will be a big blow to you and your fellow academics if it is sold. But I’m saying that by looking from the broader perspective - which economists like you and me are so trained in doing - the public as a whole benefits from the sale of the property when it is sold to the highest bidder i.e. the one who wants it most.
Lastly, I think the link between my desire for job security and the desire of others in protecting Edinburgh’s architectural heritage is tenuous at best, but I would say that I welcome all competition
P.S. I fully support your drive to preserve the property.
May 19, 2008 at 9:28 am
Hi GTG
An update. The sealed bid auction produced two bids. One from a private developer of £950,000 and one from Edinburgh Business School, Heriot-Watt University of £800,000.
In sealed bid auctions in Scotland the seller is not obliged to accept the ‘highest or any bid’, and being a public authority, funded by taxes, it is obliged to consider whether the bid is ‘clean’ (no conditions) or conditional. The private developer imposed the restrictive condition that her bid was ’subject to a structural survey’ of the building built in the 1690s. The EBS bid was ‘unconditonal’ and the money is due on the exchange of contracts (or ‘missives’ in Scotland) in about two weeks time, after the Scottish Government approves of the sale.
The private developer’s bid may be withdrawn if the structural survey, carried out by her surveyors over the next moth or two, shows substantial costs of restoration, leaving the Council to start the bidding over.
The bid documents required bidders to state their intended use of Panmure house. EBS intends to renovate the building (at its own risk and expense), and use it as an education centre for post-graduate research, a library and seminar rooms (open to other universities to hire). It will have a business plan and will undertake income earning activities only.
EBS is not supported by public funds; all of its income comes from commercial educational work in post-graduate education (currently 6,800 students across the world, and 10,000 graduates).
Many Blogs have jumped in to shout about ‘free markets’ but they appear to know nothing of the private enterprise of EBS, a separate unit within a publicly funded university, from which it receives no subsidies - it pays for any university services it uses (over a £1million a year), and uses it annual ‘profit’ for EBS’s charitable objects.
Perhaps you may wish to change your stance? I am sure Adam Smith would approve - in his day universities received no government funding.
Gavin