Thursday, April 20, 2006

An Erudite Speech Marred by a Problematical Assertion

Ambassador J. Thomas Schieffer Addresses The Research Institute of Japan, Tokyo, 19 April 2006:

Finally, I think Adam Smith was right. There is an invisible hand that moves markets, and that hand generally moves, as Smith said, out of self-interest. As Smith wrote so many years ago, "It is not from the benevolence of the butcher, the brewer, or the baker, that we [can] expect our dinner, but from their regard to their own interest."

[GK: delete 'can' in square brackets.]

Ambassador Scheiffer’s speech and the Q and A session that followed it presents a coherent account of economics, economic policy, USA-Japanese relations, some interesting comments on comparisons between Texas and Australia's economic prospects, and, in the round, gives a credible exhibition of an intelligent spokesman for his country.

However, his comments on Adam Smith were disappointing and problematical. Regular readers will already know which aspects of the paragraph quoted are contrary to Smith’s ideas in “Wealth of Nations”, though they conform to the commonly expressed views of much of academe.

For new readers, the transposition of the isolated metaphor of the invisible hand, which was about human motivation and its unintended consequences and not about how markets work (there being nothing invisible 'moving' Smithian markets) and the singular one-way interpretation of the motives of the ‘butcher, brewer and baker’ that draws them into a market exchange with their customers in which both parties to transaction mediate their self interest by serving the other party’s self interest.

Ambassador Scheifer is clearly an accomplished diplomat, educated and erudite as the best diplomats of any nation aspire to be. He should read a little wider, perhaps by reading ‘Wealth of Nations’ for himself, and think carefully about what Smith was getting at in his famous quotation. In exchange, we serve our own self interests best by serving the self interests of others.

[Read Ambassador Scheifer's speech and the Q&A session answers at:]


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