Wednesday, November 30, 2011

A Bogus Visualisation of the Invisible Hand

Wmellin posts HERE

The invisible hands behind The Invisible Hand”

Towards the end of his chapter “The Great Exhibition of Things,” Thomas Richards relates the transformation of the commodity as bland in 1776 to the commodity as spectacle in 1851. He grounds this discussion with Adam Smith’s Wealth of Nations: “’the market price of every particular commodity is…continually gravitating towards the natural price’ (162)…Clearly Smith believes himself to be describing the workings of the commodity in essentially neutral terms” (67). Richards writes of Smith’s “Invisible Hand” – the mysterious arrival of a market at the intersection point of the downward sloping demand and upward sloping supply curves to create an equilibrium price and quantity for a given good or service.

In this chapter Richards highlights the juxtaposition between the work that goes into supplying the objects displayed at the Great Exhibition and the leisure spent enjoying said presentation. Twenty-five pages earlier he describes this dichotomy, “Though the manufactured objects displayed were often bright and new, Mayhew cannot ignore ‘the sunken eyes and other characteristics of semi-starvation’ that he sees on every face [of streetsellers]” (42). Now, street vendors were not necessarily the ones crafting the objects housed in “The Chrystal Palace,” but the conditions and treatment of factory workers in Industrial Great Britain is no secret. The workers who made the commodities that guided The Invisible Hand to the free market’s equilibrium were themselves invisible hands, intermediate labor inputs who created final, finished and polished objects yet were unseen in the goods’ ultimate display.

The Invisible Hand is a fascinating metonymical phrase because it captures the labor involved in a free market yet simultaneously negates its presence in the final stage, or the acting out of what constitutes the market: buying and selling
.”


Comment

Wmellin articulates a myth about Adam Smith that is totally wrong. Smith never discussed the IH metaphor in relation to his discussions of markets in Books I and II of WN.

His singular use of the IH metaphor is made in Book IV of WN (p. 456) and does not refer to market prices at all. In Smith’s account, he does not refer to anything guiding ‘the invisible hand’ to ‘equilibrium’. That it does is an wholly invented idea, originating in the imaginations of modern economists in the 20th century.

‘Wmellin’ sees the invisible hand metaphor as “a fascinating metonymical phrase”, by which he means ‘the substitution of a word referring to an attribute for the thing that is meant the use of the crown to refer to a monarch’ (Dictionary) but in Smith’s use none of ‘market equilibrium’, nor supply and demand’ or such like, is in that sense metonymically substitutable in Adam Smith’s use of the metaphor of an invisible hand. If Smith was thinking metonymically, he was not thinking of these words when he used the IH metaphor in Wealth Of Nations. If me is thinking thus, fine, but it has nothing to do with Adam Smith.

Adam Smith was an accomplished grammarian. He lectured on Rhetoric at the University of Glasgow from 1751-64, and had delivered lectures on rhetoric at his public course in Edinburgh from 1748-51 to wide acclaim – his public lecturing reputation made him a credible candidate for the vacant chair at Glasgow. His rhetoric lectures of 1762-63 were found in a house clearance as student notes in 1958 in Aberdeen, Scotland, and were published as ‘Lectures in Rhetoric and Belles Lettres’ by Oxford University Press, 1963.

In these lectures he traces the use of metaphors from the classics (Homer, Virgil, etc.,) and in English literature up to the 18th century. He is careful to define metaphors as ‘describing in a more striking and interesting manner’ their ‘object’ (p.29), giving clear examples of objects for his students for the use of metaphors. One of his students, Hugh Blair, went on to become a distinguished Professor of Rhetoric at Edinburgh University.

In Wealth Of Nations Smith demonstrates to what he refers when he used the IH metaphor in Book IV, chapter 2, p 456, where he used it. He describes how some, but not all, merchants are so concerned at the risks of exporting their capital or goods to foreign countries or the colonies in the Americas, that they prefers to invest only in ‘domestick industry’. It is their concerns for the security of their capital that leads them to invest locally. He states this clearly in WN, pages 452-56, where Smith analyses how from this insecurity they are, 'led by' the metaphor of ‘an invisible hand’, to enhance domestick investment.

And that is the extent and limit of Smith’s metaphoric intentions. All other attributions and accretions are bogus, including those attributions of ‘wmellin’ in ‘Victorian Visual[!] Culture’.

Tuesday, November 29, 2011

On the Errors of Robert Franks. Again

Erica Augenstein posts (29 November) in The Cornell Daily Sun a report of Robert Frank’s idea that Charles Darwin was the founder of economics, not Adam Smith
HERE

Cornell Professor's Theory Relates Economics to Theory of Evolution

Prof. Robert Frank, management and economics, detailed his new theory of how capitalism can be explained by Darwinian concepts at a lecture in the Plant Sciences building on Monday.

As detailed in his recently published book, The Darwin Economy, Frank explains that natural evolutionary behavior leads people to consume more in order to compete with the relative wealth of others.

For instance, “The middle class admires the rich and attempts to mimic them, which leads to more consumption,” Frank said. These behaviors allow individuals to fight for resources in the global market, much like animals in a Darwinian system.
Frank said that the parallels extend to the potential drawbacks of Darwinian evolution. Just as some evolution creates inefficiencies for animals, some habits of individuals in the marketplace, such as conspicuous consumption, can hurt people.
“The large antlers on the bull elk are good for winning battles for females, but make the bull elk more cumbersome,” Frank said. “This behavior is brought on by competition like a military arms race.”

This Darwinian theory provides an alternative to Smith’s “invisible hand” theory, which suggests that deregulation allows self-interest to advance societal interest. However, Frank’s theory is not meant to absolutely contend with Smith’s, Frank said.
“Smith explains how often there are effects of self interest. I have no quarrel with his insight,” Frank said.

Frank said he disagrees more with contemporary disciples of Smith who, he said, wrongly interpret the principle of the invisible hand to be the sole determinant of the forces of capitalism.

“It is not the whole story,” Frank said of this interpretation. “It is a naïve version of Smith.


Comment
Frank’s views on Charles Darwin are naïve versions of natural selection. For example: “The large antlers on the bull elk are good for winning battles for females, but make the bull elk more cumbersome,” Frank said. “This behavior is brought on by competition like a military arms race.”

Elks compete for sexual access to females. It is in their nature (and found in all living creatures that breed by sexual activity). Elks engage in sexual competition whether they had large or small antlers and some elks with small or smaller antlers continue to have progeny. Because of genetic changes some elks gain an advantage over other males from their bulk and strength. They have more progeny as a result, passing on their genes to more descendants. But they do not have any control or consciousness of their genetic inheritance and they could never consciously choose the size of their antlers. They cannot ‘mimic’ rivals with larger antlers ever! They have no control over their genes. By the time they are born it is too late. The size of their antlers is already determined.

Franks does not seem to understand natural selection. In comparing the participants in an economy, who consciously choose their actions within social constraints, with the blind forces of natural selection, Frank is in error. His is “a naïve version of Smith.” Therefore, he mistakes the so-called antler behaviours as an ‘arms race’.

It’s the wrong metaphor, much like his misunderstanding throughout his book of Smith’s use of the IH metaphor.

Frank’s version of Darwinian theory: does not provide an “alternative to Smith’s “invisible hand” "theory” on two counts.
First count is that Adam Smith never had a ‘theory’ of ‘an invisible hand’. Frank got that misattribution from modern economists, most not having read Wealth Of Nations, including, on this reading, suspect neither has Frank (see my review of his book on Lost Legacy in 2 parts, 23 September 2011). The other count is that Darwin never had a theory of natural election as represented by Frank’s misattribution.

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David Brin Confronts Atlas Shrugged

David Brin points out the parallels between Atlas Shrugged and Occupy Wall Street on Red, Green, and Blue Blog HERE

Brin's essay goes over several issues – follow by clicking on the ‘next page’

(Brin also writes on his own Blog, Contrary Brin, HERE . This Link carries a much more readable summary of his views on Atlas Shrugged and I commend it if you are in a hurry.)

But no one can deny my ongoing campaign to get folks to read Adam Smith, the founding sage of both libertarianism and liberalism. Like Smith, I believe in fair and open and vigorously creative competition - the greatest innovative force in the universe and the process that made us. Encouraging vibrant, positive-sum rivalry – in markets, democracy, science, etc – is one reason to promote universal transparency (see The Transparent Society), so that all participants may base their individual decisions on full knowledge.

That positive aim - also preached by Friedrich Hayek - should be the goal of any sane libertarian movement… instead of fetishistically hating all government, all the time, which is like a poor workman blaming the tools. Anyway, a movement based on hopeful joy beats one anchored in rancorous scapegoating, any day.

(Adam Smith favored feeding and educating all children, for the pragmatic reason that this maximizes the number of skilled, adult competitors, a root motive of liberalism and a role for government that is wholly justifiable in libertarian terms.)
For my full, cantankerously different take on the plusses and minuses of contemporary libertarianism — and other oversimplifying dogmas — have a look at this essay
.”

Comment
Brin is worth readig for his critique of Ayn Rand’s dismal brand of libertarianism in Atlas Shrugged, book and film, which I have never found attractive, nor motivating. Libertarians of her ilk are more depressingly aggressive than enlightening. Their libertarian anarchism – they hate the idea of government – does not improve on the far left’s anarchism – a pox on both of them say I!

Liberty is more important than democracy; the former cannot be faked, the latter often is. Ayn Rand’s version is more than a few steps towards tyranny.

I much prefer the humanitarian libertarianism espoused passionately by the Adam Smith Institute in the UK, of which I am a Fellow.

I also noted that David Friedman on the Ideas Blog gives David Brin’s piece a bashing over a single sentence that he wrote about Adam Smith HERE: “David Brin and Adam Smith

Long-term readers of Lost Legacy may remember that I had a debate a couple of years back near the end of the summer academic break on Lost Legacy with David Friedman, lasting several weeks (or so it seemed) on Smith’s use of the IH metaphor. He eventually retired from the debate, neither of us giving an inch, but I enjoyed the tussle for the time it lasted.

Whatever the merits of David Friedman’s criticism of David Brin’s single sentence, I remember how mistaken he was on Adam Smith’s use of the IH metaphor. This probably goes to show that the centre-right can be as factious as the far left.

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Monday, November 28, 2011

Mark Blaug Demolishes the Neoclassical Myth of the Invisible Hand

Frederic Sautet posts an appreciation of Mark Blaug (1935-2011) on the Coordination Problem Blog HERE:
“Mark Blaug (1927-2011), fellow traveller of Austrian economics”

It includes a most interesting quotation from Mark’s excellent Economic Theory in Retrospect (follow the link to read the whole of Frederick Sautet’s appreciation).

Here is Mark Blaug’s quotation:

I contend that perfect competition is a grossly misleading concept whose only value is to generate an endless series of examination questions. Economics would be a better subject if we discarded it once and for all. Having expunged perfect competition, we ought to follow it by also discarding Walrasian existence proofs and the Invisible Hand Theorem of welfare economics. First of all, everyone admits that these beautiful theorems are mental exercises without the slightest possibility of ever being practically relevant: first-best optima are never actually observed and in a second-best world, it is not in general desirable to fulfill any of the first-best optimum conditions; in other words, piecemeal welfare policies may be based on good or bad qualitative judgments but they are not based on rigorous analytical theorems. But once first-best, end-state competition is discarded as irrelevant, as precisely and rigorously wrong, and replaced by process-competition as imprecisely and loosely right, what are we left with? We are left with the content of every chapter in every textbook on imperfect or monopolistic competition, on oligopoly, duopoly and monopoly, in short, on industrial organization as a sub-discipline in economics. In those chapters, firms jostle for advantage by price and nonprice competition, undercutting and out-bidding rivals in the market place by advertising outlays and promotional expenses, launching new differentiated products, new technical processes, new methods of marketing and new organizational forms, and even new reward structures for their employees, all for the sake of head-start profits that they know will soon be eroded. In these chapters, there is never any doubt that competition is an active process, of discovery, of knowledge formation, of ‘creative destruction’. I call this ‘the Austrian view of competition’ because it is most firmly enshrined in the writings of such Austrian economists as Hayek, Schumpeter and, more recently, Kirzner.” (Blaug, M. 1996 edition. Economic Theory in Retrospect. pp. 594-595).

Comment
Needless to say, I agree with Mark Blaug’s take on Smith’s use of the invisible hand and his definitive criticism of the gross miss-interpretations by most modern economists and philosophers (and most of the media under their influence) of Smith’s meaning of his use of the invisible hand metaphor, including some leading scholars at George Mason University, Fairfax, Virginia.

Lies travels around the world faster than a satellite, while truth is still putting on its boots.

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Sunday, November 27, 2011

Meaningless Hyperbole and Twaddle

“Misha” writes 17 November on Misha Blogs HERE

“Adam Smith vs. the Visible Hand”

"Adam Smith, the father of Capitalism, wrote about “The Invisible Hand”. The Invisible Hand is the functioning of a capitalist system, which would always bring good. Adam Smith imagined a well honed system of free markets plus enveloping democracy that turned people’s innate greed into productivity. I like the idea that some people are hungry and hire me to make their dinner and both parties benefit. But what if there is only a finite amount of food to be turned into dinner? In a reality of limited resources, the blind Invisible Hand hits a wall.
….
Take for example, the trucks Bloomberg just unleashed on the Occupy Wall Street protesters. The amazing sound weapons were used to bring the protesters to their knees do the bidding of the Invisible Hand, which by this point carries signs of gangrenous infections of government corruption. The fetid smell of a wormed-through congress, pampered by lobbyists and drunk on insider information, has swirled around the fingers of Adam Smith’s Invisible Hand. As we sit by and feel the Invisible Hand fisting our future, we may ask: is so-called “progress” evil?


The Invisible Hand, though it is festering with infected abscesses from bailout injections and bedraggled with engorged ticks of greed is flailing forward and shaping and re-shaping the world in it’s image. But the Visible Hand knows what the other hand is doing. The Visible Hand is inevitable. The Visible Hand will HAVE to do the clean up.”


Comment
Misha writes total imaginative nonsense:

is the functioning of a capitalist system, which would always bring good”; “the blind Invisible Hand hits a wall; the bidding of the Invisible Hand, which by this point carries signs of gangrenous infections of government corruption”, and “The Invisible Hand, though it is festering with infected abscesses”.

To this, the invented myths about Adam Smith’s use of a metaphor, have reduced the wholly innocent Adam Smith, writing quietly in his mother’s Kirkcaldy house and garden, to meaningless hyperbole and twaddle.

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A Myopic View of Trade

Peter Epp writes (25 November) in The Farmer HERE

"Smith’s ‘invisible hand’ gets slapped"

“It wasn't supposed to be like this. Adam Smith's economic philosophy suggests that society benefits when economies and capital investment are directed by an 'invisible hand'; that is, when self-interest is allowed to dominate economic decisions.
And so when a clothing manufacturer in South Carolina is shut down so that its products can be made more cheaply in China, the Smith philosophy would find this agreeable, because the products are now more affordable for South Carolinians.
Ditto the tool and die worker in Wallaceburg or Windsor. If that work is moved to China or Korea, the Smith philosophy would find this to be a sensible move. The products are made more cheaply, and are thus made more affordable for the customers of those products.

But if workers in South Carolina or in Wallaceburg or Windsor are left without an income, or with an income made lower because of the work of the 'invisible hand', is it surprising that those same workers perhaps can't afford to purchase those goods, now made cheaper but not manufactured with their labour?”


Comment
No, no, no. Adam Smith expressed the general notion that society benefitted from economic growth, which, contrary to most modern economists, had nothing to do with ‘direction by an invisible hand’. This was a metaphor in Wealth Of Nations, used once, in reference to a specific object and not enunciated as a general principle to markets, supply and demand, and so on.

In Smith’s example the metaphor ‘described in a more striking and interesting manner’, how some, but definitely not all, merchants, who were fearful of the risks of sending their capital abroad preferred instead to invest their capital in the ‘domestick market’ (note Smith’s 18th-century spelling, written three times in the same paragraph) describing the object the metaphor of ‘an invisible hand’ (see Wealth Of Nations, Book IV. Paragraph 9. P 456).

He was not making nor suggesting a general statement about the economy. That is a 20th-century invention.

By adding their proportionally small investment to the domestic economy they added to ‘domestick’ revenue and employment (today’s GDP), which was a public benefit, especially for those labourers employed domestically in producing the ‘annual output of the necessaries, conveniences, and amusements of life’, which Adam Smith considered to be the public benefit of investment.
The merchants concerned with the risks of foreign trade and invested domestically also added by their net investment from their profits and added to economic growth.

Of course, the labourers who got paid work, and the merchants led by their risk aversions to invest domestically, were unaware, and did not need to be aware, of the public benefits of their decisions to invest locally.

It was not an ‘invisible hand’ that caused the misery of unemployment or low wages. Metaphors do not exist separate from their objects. Consult an English language textbook on the meaning and role of metaphors in the English language. However, Smith noted that trade made people in the participating countries better off in terms of the ‘necessaries, conveniences, and amusements of life’, just as, on a more local scale, trade between towns and country makes the people in a country better off, for without trade among localities, people would all be worse off – local self-sufficiency would reduce domestic living standards in South Carolina and Wallaceburg dramatically.

If this were not true, Peter Epp is welcome to demonstrate his ‘no trade’ proposition for all states in the USA. Who would he suggest would sell them, or buy from them ‘clothing, tools and die products’? Are there enough purchasers of these products in his local area of South Carolina or Wallaceburg making it worthwhile to manufacture it only locally? The same is true locally, town-wide and state-wide.

Adam Smith wrote about the situation in 18th-century Britain. Trade with China and Korea was not significant, and anyway was dominated by mercantile tariffs protections and prohibitions, and trade exclusion policies with countries with which Britain had trade quarrels (such as wine from France), and in the British colonies of North America they were compelled to buy British goods, and all foreign goods, that had to be shipped in British ships and via Britain, under the Navigation Acts at high monopoly prices, and were only allowed to export from a select and restricted list of goods, for which the monopolising British merchants paid very low prices, a classic double-whammy. We know where that led to in 1776.

The 21st-century problems of US trade relations with China and Korea (both major centres of US foreign investment) have nothing to do with Smith’s use of the invisible hand metaphor.

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Looney Tunes no 9

1
Editorial team (25 November) at Yakima Herald.com
Here

But this commercial creep has developed over the better part of the past century, pushed by the invisible hand of economic inevitability.

2
Who was Simply Greater at Combating: Bruce of Mohammed Ali?

Atlantadjpartyentertainment HERE

Of course, Mohammad did supply an invisible hand techinque in a fight. Bruces rate, having said that, is definitely a constant cloud.

3
“Adam Smith vs. the Visible Hand

HERE

The Invisible Hand, though it is festering with infected abscesses from bailout injections and bedraggled with engorged ticks of greed is flailing forward and shaping and re-shaping the world in it’s image.
« Misha's Blog

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Saturday, November 26, 2011

Announcement XXV

I am tied up writing an examination paper in Strategic Negotiation, somewhat overdue, for my old day-job (I retired in 2005) but I am still involved in various tasks for the Edinburgh Business School, including in a week or so, the grading of the December Diet of MBA exams.

This makes it difficult to post as regularly as normal, though I have one post in the system today, which I shall try to get to this evening. But before the Christmas break, I shall also be occupied with my residual responsibilities ... then family responsibilities take over.

Please accept my apologies in advance.

I shall read Lost Legacy for comments everyday.

Gavin

Thursday, November 24, 2011

Weird Article of the Year

Shelby_H_Moore III (has published articles on FinancialSense.com, Gold-Eagle.com, SilverStockReport.com, LewRockwell.com. Is the sole or contributing programmer of numerous (some million+ user) commercial software applications, such as Corel Painter, Cool Page, WordUp, Art-O-Matic, etc.. Has an education in engineering and math) posts in The Market Oracle
HERE http://www.marketoracle.co.uk/Article31717.html

“Understand Everything Fundamentally, The entropic force is fundamental”

“Did Adam Smith know entropy?
Free market (i.e. anarchist) capitalism didn�t fail, rather the world has been doing collectivism, which leads to socialism as we now see occurring. Adam Smith was advocating collectivism when he wrote in the Wealth of Nations, that tax should be apportioned relative to income.
Perhaps Adam Smith was blind to the mechanism of his �invisible hand�. This fundamental concept is the entropic force, that 99.9% of the people in the world don�t grasp.”


Comment
You have to read the weird (and I mean weird) article to judge the remarks about Adam Smith and everything else. He seems to be punting gold investments.

Taxation according to income is not socialism, nor was Adam Smith “blind to the mechanism of his �invisible hand�”. There was no “mechanism” to be 'blind to', which is a modern invention, not found in Smith's texts. It was a metaphor, as misunderstood by Shelby Moore and by most modern economists, and still wrong for all that.

It only shows what happens when engineers and maths graduates let loose on something not amenable to their skills. Sad.

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Wednesday, November 23, 2011

Andrew Skinner; doyen among Smithian Scholars, 1935-2011

Eric Schliesser, a fine scholar who is much appreciated for his knowledge of 18th-century leading figures of the Scottish Enlightenment, has written a tribute to Andrew Skinner, whose death was reported today:

This has been a terrible week for the history of economics: two of its giants, Andrew Skinner and Mark Blaug, died a few days apart. Skinner was the Daniel Jack Professor of Political Economy from 1985 to 1994 and Adam Smith Professor of Political Economy from 1994 until 2000 at University of Glasgow. Skinner is best known for his superb editing of the 2-volumes of the The Wealth of Nations in The Glasgow Edition of the Works and Correspondence of Adam Smith (1976).

He was also the author of a very fine collection of essays on Adam Smith, A System of Social Science: Papers Relating to Adam Smith. (He also edited several volumes of scholarly papers on Adam Smith.) He should have been better known for his very helpful (1966) edition of Sir James Steuart (1767) An Inquiry into the Principles of Political Economy. (The edition does contain some cuts, so let the buyer be aware.) Steuart was a subtle reader of Hume's political economy, and was deliberately ignored by Adam Smith; it mattered a lot to Skinner to ensure that Steuart was not forgotten.

I did not have much interaction with Skinner. But one is worth recounting. At the start of 2000, I sent him a draft of my main methodological/interpretive chapter on Smith's Wealth of Nations of my dissertation-then-in-progress. (We had never met.) Skinner was a natural choice because he was the leading scholar of the connections between Adam Smith's economics and Smith's Kuhnian theory of science. A few months went by, and just before his official retirement from the university he sent me his (kind) reflections on my chapter. Then I did not realize how rare such generosity is. He concluded his letter with a remark that I quote: "I met [Thomas] Kuhn in 1975 in Princeton when he told me, as I recall, that he was unaware of [Adam Smith's "The History of] ASTRONOMY" - if true, intriguing in that both Kuhn and Smith cite Copernicus' introduction as a classic example of the crisis state?
"

Comment
Eric characterises an important aspect of Andrew Skinner, whom I first met in 1972, as he passed through the University of Strathclyde meeting some of my then colleagues, and we had a conversation, typically on Adam Smith. I was researching that year on the history of defence economics and he recommended that I read Wealth Of Nations in which (Book V) Smith had much to say about the importance of defence in history. Typically of Skinner, as I came to know him during the years, he sent to me within days a two-page summary of Smith on the ‘first duty’ of government and the defence of the nation against barbarous invasions and violence. I noticed Andrew's paper recently somewhere in a pile of old papers and meant to file it where I could find it again. Alas, it seems to have rejoined another pile …

When I retired and was working on my 'Adam Smith’s Lost Legacy' (2005), I contacted Andrew and he expressed his usual enthusiasm, mentioning some of his books on Adam Smith, including those ‘fine essays’, cited by Eric, ‘A System of Social Science: Papers Relating to Adam Smith'. Anybody writing about Adam Smith who has not read that volume is surely deficient in her range. But every scholar has surely read – and regularly consulted – Andrew’s co-edited Wealth Of Nations in the Glasgow Edition from Oxford University Press, as I do almost everyday, both the edited text and its footnote references, which are gold mines of relevant facts, lifting that edition above all others.

When I was working on my second book: ‘Adam Smith: a moral philosopher and his political economy’ (2008, Palgrave; 2nd edition, 2010), I sent chapters to Andrew to which he replied with comments. Later, I gave him copy of the published 1st edition at a meeting of the History of Economics 40th annual conference in Edinburgh. To my surprise and delight, he responded many months later in 2009, with a very long phone call saying how much he had enjoyed it (from him, that was praise indeed!) and he asked several interesting questions about some of the contents, and was kindly supportive of some of my main themes.

That was typical of Andrew Skinner, a fine teacher and supportive scholar of those whom he met and conducted discourse. The last time we met at an event in Glasgow, he confided in a distinct whisper, that he did not think Smith was quite the kindly old soul that he was credited to be among some scholars, citing his poor treatment of Sir James Steuart by completely ignoring him. He also noted positively my speculative remarks (‘Did Smith Block Hume?’) that Smith may have been less than proper in his possible duplicitous role in David Hume’s potential soundings in 1751 about a post at Glasgow, when Smith was seeking promotion to the same vacant chair of moral philosophy as the Professor of Logic.

He found my other speculation that Smith’s applying for the post in 1778, as a Scottish Commissioner of Customs and the Salt tax, was principally to avoid completing his much advertised work (from 1759) on Jurisprudence (i.e, how states ‘ought’ to be governed), once the ‘disturbances in America’ flared into a successful outright rebellion against the obdurate King George and the radical proposals for government in the Declaration of Independence. There was no obvious way that Smith could avoid offending the British government and the King in such a work and his private sympathies could not do let him otherwise (best then to say nothing). The facts are that Smith did not finish his near completed manuscript and he ensured from his deathbed that Professor Black or Hutton burned the mss ‘unread’.

Andrew Skinner took a great interest in the rebellion by the British residents (published recently). He said he thought my speculation was at least worthy of note and did not dismiss it out of hand, as some other scholars have done. I read Andrew's later publication of his essay, 'The Mercantile System', with great interest, in Jeffrey T. Young, editor, 2009. 'Elgar Companion to Adam Smith', pp. 261-76. Cheltenham, Edward Elgar, with great interest. Its precision is another fine example of fine scholar's work. Readers would do well by reading it. Andrew sets a high bar for all those who want to emulate him.

Andrew was and is regarded rightly as the doyen of Adam Smith scholars in the recent past. I hope that something may be arranged to honour Andrew and his work posthumously.

Lost Legacy Quoted

Bullfax, in “an innovative service that combines, news feeds, opinions and a dedicated blog to give a quick and comprehensive look at the state of markets and the economy, HERE quotes the ‘curious cat’ Blog, ’Investing and Economics’ Here which reports recent little extracts from Lost Legacy on Adam Smith.

I welcome interest in what I write and any Blog may reproduce anything written here on Adam Smith, his moral philosophy and political economy (I hope their readers learn something not available elsewhere), but it would be nicer for Lost Legacy to be acknowledged.

A Misreading of Adam Smith

Shelton A. Gunaratne, Professor of mass communications, emeritus, Minnesota State University Moorhead posts in Lankaweb. HERE http://www.lankaweb.com/news/items/2011/11/22/an-outsider’s-view—9marxist-notion-of-socialism-unlikely-to-replace-capitalism-culture-determines-‘third-way’/

Capitalism is an economic system wherein the means of production are privately owned, operated for profit (endless capital accumulation) from investment, and in competitive markets (laissez faire) free of state interference. Because perfect competition is a myth hatched in Adam Smith’s imagination, pure capitalism is only a theoretical construct that has never existed or will exist anywhere.”

Comment
Adam Smith invented nothing about 'capitalism'. The word was first used in English in Thackeray’s ‘The Newcomes’ in 1854 in reference to manipulating financiers that featured in the second half of the novel, and was picked up by Karl Marx a little later and back-edited into the English editions of Capital. Smith knew nothing of late 19th- century capitalism, nor 20th-21st century modern corporations.

Smith wrote about ‘commerce’ and the Fourth Age of Man.

What Shelton Gunaratne designates in a critical manner, as ‘endless capital accumulation’, was accompanied, necessarily, in the endless ‘great wheel of circulation, also by the ‘endless’ funding of wages for labourers. The alternative was, and remains, endless dire poverty – under $1 a day instead of $3 a day, 12-14 hours a day, versus 8 hours in a five-day week, rising only from ’endless accumulation' to the current $50+ a day in the countries that have benefitted for three centuries from that accumulation continuing. It is politically easier (but not easy) to seek to redistribute the benefits of successful capitalism than it is to merely try to redistribute poverty-level incomes, usually experienced in tyrannical regimes (e.g., Libyan oil wealth, and in war-torn and poor countries, e.g., Somalia).

‘Perfect competition’ was not a product of Smith’s ‘imagination’. Mythical as the invented “theoretical construct” is, but it was developed from a century or more after Adam Smith died (1790), and of which myths he knew nothing. On the contrary, the realities of ‘commerce’, wrapped deep as they were by the policies of mercantile political economy, were criticized sharply by Adam Smith. This was a central feature of his ‘violent attack’ on the commercial system of Great Britain in Wealth Of Nations that had existed and developed since the 16th century economic regime that was constructed by legislation from and since Elizabethan times (Apprentices Act, Settlement Acts, monopolizing powers of the Guilds, wages determined by local Magistrates, Combination Acts, and the Navigation Acts, not to mention his criticism of tariff protection and prohibitions, ‘jealousy of trade’, and regular wars on borrowed money).

Smith never said anything about a ‘perfectly’ balanced perfectly competitive economy in 18th century Britain. Nor did he advocate ‘laissez-faire’. His preference for competition over monopoly and legislated Acts of parliament were not dogmatic; they were specific and coherent.

Shelton Gunaratne’s thesis is based on a poor understanding of Adam Smith Works.

Monday, November 21, 2011

Looney Tunes no 8

1
Greed in the name of profit: A Magic Trick that would make Houdini blink

Examiner.com HERE

Thanks to the efforts of "truth busters-worldwide" ( the 99% grass root organization ) The Invisible Hand and their agents are becoming more and more visible.”

2
Bordering on the bizarre

Times of India

Soon it began to rain, confirming my suspicion that the invisible hand was indeed mounting pressure on me; my resolve only grew stronger.

3
Why haven't the 2011 protests hit Russia?

Aljazeera.com HERE

“The magic of the invisible hand, they argue, keeps getting slapped down by the interventionist bureaucratic state.

4
Canada Income Inequality: How A Growing Earnings Gap Is Raising Home Prices ...

Huffington Post Canada HERE

It was amidst this anxiety-ridden atmosphere that a little-known Vancouver real estate blogger tapped out a controversial post titled "Invisible Hand of Income (Inequality)."

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Mark Blaug and the Invisible Hand

Roger Backhouse has announced the death of Mark Blaug, an historian of economic thought, who influenced me, and many other young economists in the 1960s. His authoritative book, is still quoted regularly, particularly his great Chapter 2 in Adam Smith: “Economic Theory in Retrospect” [1962] 3rd edition, 1978, 2002, Cambridge University Press.

He also had many other publications in the scholarly. Roger Backhouse writes: “Ruth Towse has just given me the news that Mark died, peacefully at home, on November 18th. He had been very ill for the past year.”

I reprint below a post of mine on Mark Blaug from 28 April, 2010, on Lost Legacy, as my short tribute to Mark’s memory:

“Mark Blaug's Criticism of the 'Historical Travesty' of the Myth of the Invisible Hand”

Paul Walker, a regular reader of Lost Legacy, commented on yesterday’s post with a quotation from Mark Blaug’s, "Economic Theory in Retrospect", 5th ed. Cambridge: Cambridge University Press, which I think needs a wider circulation than would occur if left in the comments to a post. It is particularly apposite in regard to my new paper for the University of Richmond Summer Institute in June (working title): ‘Paul Samuelson and the Genesis of the Modern Economics of the Invisible hand Doctrine’.

"[ ... ] Smith's faith in the benefits of 'the invisible hand' has absolutely nothing whatever to do with allocative efficiency in circumstances where competition is perfect a la Walras and Pareto; the effort in modern textbooks to enlist Adam Smith in support of what is now known as the 'fundamental theorems of welfare economics' is a historical travesty of major proportions. For one thing, Smith's conception of competition was, as we have seen, a process conception, not an end-state conception. For another society, a decentralised competitive price system was held to be desirable because of its dynamic effects in widening the scope of the market and extending the advantages of the division of labour - in short, because it was a powerful engine for promoting the accumulation of capital and the growth of income."

Blaug, Mark 1996. Economic Theory in Retrospect. 5th edn. 60-1. Cambridge: Cambridge University Press.

Comment
I was unaware of this statement by Mark Blaug – and I applaud it warmly – though I purchased a copy of Blaug’s masterly survey of history of economic thought in the 1960s when I was a student, though the subject was not part of the curriculum for an Honours degree in economics – no surprise there then – (there were a few courses from Economic History, a different degree, that could be taken, which I did).

‘Tis a pity that I was unaware of Mark’s thought, which coincide with mine and derive from my quite independent reading since just before I retired in 2005.”

Postscript:
See also Mark Blaug on Adam Smith and the Invisible Hand in Palgrave Dictionary of Economics: Second Edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume HERE: http://www.dictionaryofeconomics.com/article?id=pde2008_I000220

Adam Smith employed the term ‘invisible hand’ twice in his published writings, and a considerable secondary literature has explored the multiple meanings he intended to convey by the use of this metaphor. I argue that, whatever he did mean, he certainly did not mean that competition or the market mechanism promoted efficiency: instead it promoted the growth of income, even for the poor.

Readers will recognise why I was impressed with Mark Blaug's scholarly publications and why they influenced me so much.

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Sunday, November 20, 2011

Adam Smith No Ideologue

Steven Shaviro writes in the Pinocchio Theory Blog HERE

Several important conclusions emerge from Graeber’s meticulous work of comparison and reconstruction. One (not surprisingly for me) is to expose the ridiculous parochialism of the notions of Homo oeconomicus, of self-interested “rational choice,” etc., which have dominated Western social thought since Adam Smith. ...

... (Graeber makes quite explicit what other anthropologists have known for a long time — that Smith’s claim for a basic human propensity to “truck, barter, and exchange” is ridiculous and incredibly parochial
).”

Comment
David Graeber’s appreciation of Adam Smith’s Work is not high. His understanding of it is also weakened by the influence of some modern economists on his misunderstanding of the authentic Adam Smith. David Graeber is an anthropologist who immodestly asserts the primacy of his own thinking over everybody else’s, including Adam Smith’s much different analysis compared to the ideas he attributes to him, mainly from the unreliable inventions of modern economists.

Home economicus’ was not put forward by Adam Smith and certainly was not advanced by him. It originated in the 1870s (Smith died in 1790) from the new school of marginal utility theories to become the philosophical foundation of what we know today as neo-classical economics.

Smith did not suggest a single-dimensional economic man beholden to “self-interested rational choice”. His assertions about economic behaviour were based on a far more complex, because nuanced, theory of the self-interest of humans in society who were not rational-bound humans reacting to pure economic stimuli. (See: Smith’s remarks contrasting those who treat humans as if they were wooden chess pieces, Moral Sentiments, Book VI, p 234).

The litmus test of misunderstanding what Smith was about is captured in the widespread misreading of Smith’s paragraph about the ‘butcher, brewer, and baker’, which is often used to transmute ‘self-interest’ into ‘selfishness’, the very opposite of Smith’s point that to obtain what we want from others in voluntary exchange, each party mediates their self-interests by "addressing" the "self-love" of the other party by persuasion and accommodating to the self-interests of others, and that this propensity emerged from the ‘faculties of reason and speech’ long ago in pre-history. Early exchange behaviours took its later forms in ‘truck, barter, and exchange’. It was from exchange behaviour early language emerged among consenting parties (Adam Smith, 1761, ‘Considerations Concerning the First Formation of Languages and the Different Genius of Original and Compounder Languages’). Similarly, Smith analysed the exchange behaviours that prompted the emergence of moral sentiments, long before Revealed Religion had emerged from the associated and widespread superstitions about invisible gods (Smith: The Principles which lead and direct Philosophical Enquiries illustrated by the History of Astronomy [1744-c.50] 1795, posthumous), and, of course, his “Moral Sentiments”, 1759.

David Graeber, like modern economists, confines ‘truck, barter, and trade’ to market economies (some like Karl Polanyi, restrict this behaviour historically to the capitalist decades, ignoring the vast reciprocation and quasi-bargaining experience of humans throughout prehistory). To describe this phenomena as “ridiculous and incredibly parochial” is typical of the arrogant refusal to consider differing viewpoints that endear David Graeber to his disciples, but which when allied to self-proclaimed political certainties is the ante-chamber of tyranny.

Now, nothing above asserts that David Graeber has nothing useful to say; he has lots of interesting – sometimes insightful – things to say in his book, “Debt: The First Five Thousand Years”, which is going to be around for sometime to come and you should become familiar with his thesis. I merely think that David has a warped image of Adam Smith in some important respects, mainly because he is overly influenced by Smith’s image from modern economists, and, worse, because Smith is totally misunderstood by the exponents of modern corporate capitalism (the real source of 'greed is good' and rationality among what the Occupiers refer to as the ‘1%”.

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Saturday, November 19, 2011

Socialism and Capitalism Are Quite Different

Andy Logar posts (19 November) in American Thinker HERE

Socialism's Fundamental Flaws”

“In the Soviet model the state owned the means of production thus all workers were employed by the state -- essentially each working for everyone else, the collective, but not directly for themselves. This was effectively a compulsory altruism which, because not being a primary human drive, introduced a fatal systemic flaw to an economy so bereft of incentives as to engender the famous Russian quip: ‘We pretend to work and they pretend to pay us.’

“As if one were not enough, the second fatal flaw was the elimination of the free market and its replacement by the planned economy -- where supply and demand were in the hands of technocrats and not the invisible hand of free-market capitalism
.”

Comment
Be clear, I have no sympathy for the ‘socialism’ practiced in the Soviet Union or elsewhere, of which criticism by Andy Logar I broadly agree, but I have no confidence in his characterization of the pre-Soviet economy as ‘the free market”, nor as replacing “free market capitalism”. It was largely a pre-capitalist continent, dominated by a repressive oligarchy and a semi-feudal countryside.

Stark contrasts between two extreme poles of description, as is usual in such ideological posts, do not help clarity in the argument that Logar’s post purports to make. He even makes an unfortunate and questionable statement in describing the Soviet model of state ownership as: “essentially each working for everyone else, the collective, but not directly for themselves”. It was the French, 18th-century Physiocrat, Mirabeau, who correctly commented that in markets, each individual thinks they work for themselves, but in actuality they ‘work for others’. How true!

In seeking to realise our self-interests we unintentionally serve the self-interests of others in the mediation that necessarily is the voluntary exchange process. No market would function if people tried to work only ‘for themselves’; their voluntary exchange behaviours must necessarily take account of the self-interest of others (see Adam Smith in Book 1, chapter 2, Wealth of Nations: ‘address the self-love of others, not your own’). That is what free markets bring about. In contrast, in Soviet Socialist Systems everybody in fact worked, under direct compulsion, for the State that decides what they and everybody else gets in return. This is the essential difference between markets and socialism.

Turning to Andy Logar’s sentence: “the planned economy -- where supply and demand were in the hands of technocrats and not the invisible hand of free-market capitalism”, we confront another source of Logar’s error.

It was Oscar Lange, the Marxist, pro-Soviet economist-cum-technocrat, who taught at Michigan and Chicago in the 1930s and 1940s, and who penned the notion that what he called the role of Adam Smith’s so-called “invisible hand” in directing market transactions (a wholly invented attribution he learned from an oral tradition in some US universities, as is often exposed on Lost Legacy, viz, there is no actual invisible hand), would be supplanted by the expected, though never realised, superior benefits of a centrally planned economy.

Lange specifically alluded to the invisible hand’s evident failures in the 1930s depression that contrasted allegedly with the far superior prospects of an harmoniously planned socialist economy, then being imposed without harmony by Stalin in Russia, and later on in Poland, in which the planners allegedly replaced the market’s ‘invisible hand’ (see his 1936. “On the Economic Theory of Socialism, Part I.” Review of Economic Studies 4, no. 1: 53–71; 1937 and Part 2, 4, no. 2: 123–142).

Paul Samuelson (Economics: an introduction to economic analysis, 1948, p 36) took up Lange’s challenge to the superiority of capitalism by recasting what Adam Smith actually wrote about ‘an invisible hand’ and invented the general rule that Smith said ‘selfish’ actions unintentionally led to ‘public benefits’, later re-cast as an early prediction of General Equilibrium theory. Unfortunately he attributed that nonsensical myth to Adam Smith, and even more unfortunately, most modern economists believe it, which Lost Legacy fights daily to challenge.

[NB: The ‘selfish’ myth actually came from Bernard Mandeville’s ‘Private Vice, Public Benefits’, Fable of the Bees, 1724 and resurrected by Ayn Rand, and broadcasted in the ‘greed is good’ libel].

In sum, Andy Logar’s pieces in the ‘American Thinker’(?) rightly critiques socialism, without really understanding the difference with capitalism, and, sadly, does not really appreciate Adam Smith’s political economy in Wealth Of Nations, nor his Theory Of Moral Sentiments.

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Friday, November 18, 2011

Self-Interest is Not Selfishness

James Garvey, editor, writes (17 November) a post in TP Talking Philosophy (founded in 1997 to in 1997 to publish quality philosophy in a readable and enjoyable format for readers both within and outside academe).
HERE

“Mad men and Hippies”

Spurred on by the Occupy Movement, I’ve been thinking again about the connection between morality and our economic troubles. I thought I blogged something about it at the start, and it turns out I did, in 2008. Maybe it’s interesting reading again (Ethics Stimulus Package). The idea, dredged up from a few lines owed to Adam Smith, is that we’re sometimes self-interested butchers and bakers (and maybe hedge fund managers), but we’re capable of acts of great selflessness too. Capitalism needs at least a dose of the former to work, but it would seem that it needs at least some of the latter too. I wondered then, and I wonder now, what leads us to ‘exercise our benevolent affections’, as Smith puts it. Some ages feel more in tune with those affections, some times seem better placed to express them. The interesting thing is what drives those changes, what pushes us, back and forth, between Mad Men and hippies, Gordon Gekko and … well, I’m having trouble settling on a contemporary name to set against his, but never mind. What is it, do you think, that makes moral sentiments wax and wane?”

Comment
The ‘butcher, brewer, baker’ paragraph is widely misunderstood, including among philosophers. This was not a ‘selfish’ property at work in the act of bargaining. Explicitly it is the opposite!

To persuade the ‘butcher, brewer, baker’ to supply the ingredients of your dinner, Smith advises you, a) not to rely on the tenuous feelings of their benevolence (as if there were unlimited dinners around and everybody was infinitely benevolent), or b) to appeal not to your own self-interest, but to ‘address’ their self love/ self interest. In short, to be other-regarding, not just self-regarding is the necessary quality of Smithian self-interest, a quality ignored by most readers of this passage who centre their attention of the ignorant 'hard' (bully) bargainer who have little experience of read-world bargaining.

A moment’s thought based on many moments observing people engaged in bargaining and persuasion, show the basic good sense of this statement by Smith. Two passionately self-centred bargainers, interested only in their own self-interests, would reach agreement with great difficulty, if at all.

Each self-interested bargainer requires the co-operation of others. The selfish, greedy person (a creation of Ayn Rand, not Adam Smith, and, before Ayn Rand, the creation of Bernard Mandeville, 1724) in failing to persuade others must resort to plunder and violence, or stop eating.

Bargaining is purposeful co-operation, which does not mean that every pair-wise encounter leads to happy bargains, a wholly utopian dream. If sentiments ‘wax and wane’ that is only human. Buyer’s regret and seller’s frustration are normal. But the emergence of market exchanges, from the ’propensity to truck, barter, and exchange’ throughout the long history of human societies from the ‘faculties of reason [Not rationality!] and speech’, took millennia to become common norms, amidst the long history, and longer pre-history, of the various failing and often bloody or tyrannical alternatives, the antipathy of beneficence and benevolence which regarded as major virtues.

Adam Smith’s Moral Sentiments was about an ethical alternative to the ‘bloody or tyrannical’ alternatives, the main roots of which were already present by the mid-18th-century experiences that he observed.

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Looney Tunes no 7

A fast track to good governance

Suresh Kumar Khaleej Times HERE

They are masters with their invisible hands close to (if not in) the proverbial till.”

Democratic Underground

HERE

The "invisible hand" has been extending its middle finger to the 99%'ers for about 30 years now.

Road Runner

FDL
“Talk to the Invisible Hand”

HERE or HERE

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"Bait-and-Switch" Using Adam Smith's Name to Sell More Copies

Johnathan Wight posts (16 November) in Economics and Ethics ('An occasional examination of economic theory, practice, and policy, informed by philosophical ethics (and a dash of whimsy') HERE:

Rifkin, [says Jonathan Wight’] in addition to not citing Georgescu, never really makes a case against Smith. In short, he uses Smith's name to generate reader interest, but it is a "bait-and-switch" tactic. There is no end of Adam Smith.

Rifkin, in addition to not citing Georgescu, never really makes a case against Smith. In short, he uses Smith's name to generate reader interest, but it is a "bait-and-switch" tactic. There is no end of Adam Smith.

Comment
‘Economics and Ethics’ is well worth readers bookmarking (follow the link for a taster). Alongside Jonathan Wight, the excellent Sandra Peart of the University of Richmond, Virginia, is also a co-founder.

I agree with Jonathan and would add that when some recent books with Adam Smith in the title they also present a false view of Adam Smith (e.g., Franks recent assertion about his version of Adam Smith and an equally misleading account of Charles Darwin and natural selection).

Thursday, November 17, 2011

Minsky's Contribution to the Current Macro Debate

DAN MONACO writes in The Straddle HERE

A Moment among the Minskians” from (Michael Stephens, November 16, in Economic Policy, Levy Institute”:

[Read more on Minsky as a ‘post-Keynesian’ economist HERE
and HERE

Dan Monaco, writing for The Straddler, attended this year’s Minsky Summer Seminar at the Levy Institute and put together an engrossing (and accessible) article that looks at the work of Hyman Minsky, paying particular attention to Minsky’s interpretation of Keynes (including his views about the misinterpretation of Keynes by mainstream economics). The article is sprinkled with excerpts from Monaco’s interview of Dimitri Papadimitriou:

Economists have lost their credibility because they do not actually deal with the real world,” Dimitri Papadimitriou, President of the Levy Institute, told me in my conversation with him. …

Minsky was in some ways a pioneer. He saw that economic theory assumed that everything is known and that there is some tendency of the system to reach for equilibrium and, at times, to reach periods of ‘tranquility,’ as he preferred to call them. Of course, he never believed that stability was possible. He didn’t believe in the invisible hand. There’s a reason why it’s invisible—because it’s not there.”

Comment
I strongly recommend that you follow all the links and spend ten to fifteen minutes at least judging for yourself the merits of what Minsky was arguing for his interpretation of Keynes’ General Theory in the context of post-war capitalism in the USA (he died in 1996), especially in the light of the current recession and financial/banking crisis, plus the chronic indebtedness of all European and American governments.

His approach to the modern theory of the “invisible hand” falsely attributed to Adam Smith, who was wholly innocent and never had a theory of the IH metaphor, Hyman P. Minsky reads the situation correctly. The IH doesn’t exist, (though he doesn’t directly nail the IH myth at the door of neoclassical economics), it is a fiction invented by (too?) clever neoclassical theorists in search of a respected figure head to give a gloss of historical authority to a convenient crowning of their undoubted mathematical achievements in proving the existence of general mathematical equilibrium in an imaginary world and, in passing, making, the Class A error of confusing their proofs with what happens in the real world with what happens in the mathematics of an imaginary world.

Whimpers that the ‘Emperor is Naked’ were (still are) drowned out in the loud exclamations of ‘genius’, ‘brilliant’, worthy of Nobel Prizes, and such-like praise for the simple reason that what was achieved was truly of that class. Economics is so divided politically and institutionally by the current standards of academe that young economists who challenge the creaking consensus risk their careers and access to publishing in the ‘leading’ journals, and as bad, risk their reputation among their peers, who conform and who slavishly demonstrate their conformity.

Johan Van Overtreldt’s history of the Chicago School provides a succinct summary of the worldview underlying neoclassical theory:

The basic assumption of neoclassical economic theory is the proposition that in a competitive market environment, individuals and corporations pursuing their own self-interests necessarily promote the best interests of society as a whole.

Thus, neoclassical economics, whatever its modifications or adjustments, is always in essence a cry for “pure” capitalism, while Keynesianism, whatever its color, is always at heart a proffered solution (more or less “radical,” depending upon one’s interpretation) to the problems of capitalism from within capitalism.


There’s more, much more, worthy of your time in the links. Some parts may appear more useful to economists, but most will appeal to general readers too.

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Wednesday, November 16, 2011

The Metaphor of an 'Invisible Hand' in Moral Sentiments

Rick Moniak, a Juneau resident, writes (16 November) in Juneauempire HERE

“Listen to the Invisible Hand”

“I may be taking a lot of liberty with a few random economic statistics to advocate for a socialist agenda. But the truth is I arrived here courtesy of economist Adam Smith’s “invisible hand”. The origin of this oft used term wasn’t an argument against government intervention in the free market as is commonly claimed by many economists. Smith used it first in The Theory of Moral Sentiments. He referred to the wealthy as having naturally selfish intentions, but postulated that they are led by an “invisible hand” to “divide with the poor the produce of all their improvement,” and thus “without knowing it, advance the interest of the society.”

Smith believed that most people gain nothing from their charitable acts aside from the joy of seeing the results firsthand. Similarly, he wrote “we often derive sorrow from the sorrow of others” when we directly witness their pain and suffering. It’s quite possible then that Smith’s “invisible hand” is a reference to the stirring of one’s moral conscience.
But it’s important to consider the fact the economy was almost entirely a local affair when Smith theorized about the invisible hand in 1759. It was hard, if not impossible, to ignore the plight of the poorer people living nearby. Interstate commerce and global trade have changed this. Out of sight and out of mind, the saying goes, and it’s well suited for the global capitalist who wants to keep his moral conscience from interfering with his selfish tendencies.

As Smith pointed out, care for the poor benefits all of society. He confesses he also takes few supply side economists will ever advocate restoring morality of this nature to the free market.”


• Moniak is a Juneau resident.

Comment
Apart from the imaginative attribution to the ‘invisible hand’ having a voice to listen to, there is not much to say about the rest of the piece by Rick Moniak. He seems to be confused between the IH metaphor as noun and as metaphor and, strangely, a noun with many meanings, significantly, those that support Rick’s Moniak’s rose-tinted imaginative attributions to Adam Smith.

Rick Moniak admits “taking a lot of liberty with a few random economic statistics to advocate for a socialist agenda”, which while revealing of his approach to advocacy, also reveals his bad habits in ‘taking liberty’ with Adam Smith’s texts.

At least he had read something of Adam Smith’s use of the IH metaphor in Moral Sentiments, but seems to have squeezed something into it that Adam Smith certainly didn’t. Smith was not just talking about a group of ‘wealthy’ persons (incomparably poor by today’s standards in modern capitalist economies), he referred to that relatively ‘privileged’ order in earlier societies that owned the land and, effectively, the men and women who toiled for him on that land, covering variously, oligarchs, kings, princes, barons and, in time, a ‘proud and unfeeling’ landlord, surveying his ‘extensive fields’ and ‘in imagination consumes himself the whole harvest that grows on them’. (Moral Sentiments, Book IV.ii.10: 184)

But, Smith points out, that in fact the ‘unfeeling landlord’ is ‘obliged to distribute among those who toil in his fields and pamper his whimsical needs in his ‘palace’ a ‘share of the necessaries of life, which they would in vain have expected from his humanity or his justice’.

Smith used the IH metaphor for this absolutely necessary transfer of his produce from his fields to the poor labourers and their families, and in so using the metaphor in this manner, ‘he described in a striking and more interesting manner’ the ‘object’ of the metaphor. This is what metaphors contribute to grammatical literacy, as Adam Smith defined metaphors in his “Lectures on Rhetoric and Belles Lettres” in 1763 at Glasgow University (page 29). For the record that is also how metaphors are described in the Oxford English Dictionary (1983) and as they are taught in every English language lecture and texts today. Smith’s class in Rhetoric was delivered as part of his Moral Philosophy class from 1748-63 (Edinburgh and Glasgow).

The IH metaphor was not a simple noun as suggested by Rick Moniak. The fact that in Smith’s view this ‘advance’ of ‘the interest of the society” was an unintentional consequence of the delusion of the rich landlords (shared with the Pharos of Egypt, the Kings of Babylon, and the Emperors of China) is a key aspect of his philosophy. It had precious little to do with “stirring one’s moral conscience”. Smith’s explicit point was that it was the landlord’s ignorance and delusion, not the ‘stirring of” his ‘moral conscience’ that ‘led’ him to share (for in truth the ‘unfeeling’ landlord had no choice but to do so – if he did not share even the bare minimum, his labourers could not work and would die, and 'no food, no labour'; no labour no 'greatness' to be 'proud and unfeeling about'). Also, that it would be a ‘vain’ hope if the poor relied upon him acquiring a ‘moral conscience’.

It certainly was not “hard, if not impossible, to ignore the plight of the poorer people living nearby”. The “plight of the poorer people living nearby” was ignored for generations to come, and had been since our predecessors left the forest and discovered shepherding and farming from about 11,000 years ago. Also, be clear that Smith meant by ‘necessaries’ the very basic necessities of life – and what was sufficient subsistence was as determined by ‘unfeeling’ landlords, as interpreted by the ‘landlords' ’ overseers, traditionally a set of violent bullies, not given in the main to feelings of humanity towards those at their mercy.

I suggest, politely, that Rick Moniak re-read Adam Smith’s Moral Sentiments on the ‘invisible hand’ (and read his Lectures on Rhetoric and Belles Lettres on metaphors) before imagining what Adam Smith meant by the IH metaphor of 'an invisible hand'.

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Monday, November 14, 2011

Adam Smith on Government

Kalekristos Zerisenay writes (14 November) in Shaeba (People’s Front for Democracy and Justice’)
HERE

The Invisible Hand: Visibly destroying Major Economies”

“The numerous economic theories that existed for centuries still continue to dominate domestic and international affairs. In this so-called “Age of Pragmatism”, economic policies derived from these theories are affecting the well-being of humanity, and unlike many of us think, ideologies have never subsided. The ongoing economic and financial crisis in major economies is a testimony. The liberal economist Adam Smith in his book “the Wealth of Nations” clearly pointed out that there is an invisible hand that regulates the market, and there is no need for governments’ intervention in the economy. He further made clear that a government’s role in national affairs must be limited to maintaining law and order. 

The theories of this distinguished economist are the foundations of the capitalist system, and rich countries owe him a great deal. Unfortunately, the invisible hand, described as a natural force that regulates the market, is raising doubts at this historical time, even in countries that strictly adhere to the principle of market economy.

As early as 2008, the invisible hand suddenly froze and quit regulating the market. Financial institutions that were immune to government regulations were among the first to file for bankruptcy. Paradoxically, against their adherence to the principle of market economy and the rhetoric of the ‘Invisible hand’, these banks did not waste time to invite governments to intervene in the financial markets and rescue banks and corporations from collapse.


Comment
Another politico with an axe to grind using a theory he has concocted out of a version of Adam Smith’s Works that bears little resemblance to Adam Smith’s writings.

Adam Smith did not say in Wealth Of Nations that there “is an invisible hand that regulates the market”. He mentioned the metaphor of ‘an invisible hand’ only once if Wealth Of Nations, 1776 (and once only in his earlier Moral Sentiments (1759), and on neither occasion he did not mention “regulating” either by using the word “regulating’ nor the word “market” in relation to 'an invisible hand'.

Kalekristos Zerisenay clearly has not read either book , but then most who speak confidently of Adam Smith’s meanings have not read Smith’s books. So he is not alone, but he is wrong.

Neither did Smith say that “there is no need for governments’ intervention in the economy.” He outlined in detail the role of governments in Book V of Wealth Of Nations, briefly on the ‘Expences of Defence’, its “first duty” to “protect the society from the violence and invasion of other independent societies”; the ‘Expence of Justice” to ‘protect as far as possible every member of the society from the injustice or oppression of every other member of it’ (sadly, many military governments in Africa and elsewhere are the source, rather than the remedy for ‘the injustice or oppression’ that is all too common in these societies); the the ‘Expence of public Works and public institutions’ which are beyond the capacity of private individuals to fund and maintain;(which also in many countries are sources of endemic corruption, again, not the remedy), whose role ought to be one of ‘facilitating commerce’ (but they all too often stifle it, including by corruption) and the ‘Expence for educating Youth’, including the establishment of ‘little schools in every parish’ especially for the ‘inferior ranks of the people’. Smith also hinted at a role for government in eradicating ‘leprosy and other loathsome and offensive diseases’ (such today including Aids and such like). Lastly, and no doubt still controversially because of its relevance for many countries, he argued against the establishment of a single state religion, as Christianity used to dominate in Scotland and England in the 18th century, and today a single version of a single religion rigidly dominates in many countries in Africa, Middle-East, and Asia.

With the exception of a state-enforced monopoly of religion, Smith saw a major role for government intervention. If the ‘Expences of government’ are included and the requisite annual revenue from taxation to fund its expenses taken into account, a major role for government intervention in the economy was recognized and detailed by Adam Smith. He make “clear that a government’s role in national affairs” cannot “be limited to maintaining law and order.”

Whatever actions were taken to de-regulate aspects of banking and financial institutions by some modern governments, this did not feature in Adam Smith’s Works, despite what some economists and politicians claimed they were doing in Adam Smith’s name. In fact, Smith advocated intervention in the use by banks in his day of certain risky financial instruments, despite such actions being a breach of ‘natural liberty’.

Kalekristos Zerisenay needs to read Adam Smith urgently before he continues to misinform his colleagues in the ‘People’s Front for Democracy and Justice’.

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To Criticise Libertarianism, First Get Your Facts Right

“bgamall” writes in Hubpages from Reno.NV HERE:

This is a contentious piece by a politically-motivated person, and normally I would ignore such twaddle, but it struck me as a fine example of the dangers of running with similar-sounding words in an attempt to add authority to a poor argument about modern politics in the United States.

“Libertarianism: Just a Smoke Screen for Avarice and Racism”

“Spontaneous order is one of two major assumptions in Libertarian thought. The other is the necessity of voluntary relationships. The two are closely related and make assumptions that are simply not true. These assumptions lead to outright lies.

Spontaneous order was a concept developed by Adam Smith. He believed that order arises in society spontaneously through the invisible hand of self regulation. He cites the development of language, the market economy, and the development of law. Regarding law, judges were to find the law rather than make the law. The natural law was out their lurking about, and all one had to do was to find it!

Natural law is a concept that was popular with the rise of historic liberalism, which was similar to today's libertarianism. Libertarians count as fathers, John Locke and Adam Smith. Adam Smith did not say that benefits from government could not exist, but rather were not the best way to help the poor. George H. W. Bush's thousand points of light and the importance of charity would have been praised by Adam Smith
.”

Comment
I have little sympathy for bgamall’s ‘thesis’, if the coherence of calling it a thesis could be applied to it.

On the facts that I know about, ‘spontaneous order’ was not an idea of Adam Smith’s – ‘unintended consequences’ is the nearest we get to it in Smith’s works, and even that notion included the possibility of dire consequences of an action and not just the possibility of only ‘benign’ consequences.

Natural Law philosophy pre-dated Adam Smith’s thinking, inventive as it was, and was brought to Scotland from Grotius and Pufendorf’s works in the 17th century, the latter books of Pufendorf being a rich source for the teaching of Moral Philosophy in Scottish Universities, especially at Glasgow under professors Carmichael and Hutcheson (Smith’s tutor), and his texts had wide circulation across much of Western Europe into the 19th century. John Locke, among others was influenced by Pufendorf on natural law.

The ‘invisible hand’ was never about ‘self regulation’, as firmly asserted by Bgamal; it was a metaphor used only twice by Adam Smith in his major Works, first in strict reference to landords feeding their serfs, slaves, and peasants from the produce of their lands. This was he case for many millennia since 110,000 year ago and arose from an absolute necessity. Nobody can labour without daily food, hence, no food, no labour, and its companion, no labour, no food (Moral Sentiments Book IV, 1759). The second reference to the IH metaphor (a widely used metaphor in the 17th-18th centuries by theologians, preachers, dramatists, poets, and novelists) by Smith was in strict reference to some, but not all merchants, who were risk averse to investing their capital abroad, and preferred, instead, to invest domestically, which had the unintended benefit of being a public benefit because their investment added to ‘domestic revenue and employment’ (Wealth Of Nations). Self Regulation was nowhere mentioned by Smith in his use of the IH metaphor (nor were markets, nor equilibrium, nor supply and demand, nor any of the other imaginative inventions of modern economists).

In Smith’s Works he was quite clear that the likely origins of “the division of labour, from which so many advantages are derived is not originally the effect of human wisdom, which foresees and intends the general opulence.” It is the unintentional consequences of human actions that had the important unintended effects that they had and have. And the outcome of human actions could lead to benign as well as destructive consequences, which is an important corollary of unintended consequences and needs to be remembered rather than brushed over in the idea (Hayek’s I believe) of ‘spontaneous order’.

Instead it is “the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another. Whether this propensity be one of the original principles in human nature, of which no further account can be given, or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech is not our present subject to enquire” (WN I.ii.1: 25).

Bgmal links ‘spontaneous order’ and writes “many aspects of man's cruelty, greed, and racism have also been manifested by spontaneous disorder” thus creating an effect that appears to be a criticism of Libertarianism. But Smith is not guilty; his critique of mercantile political economy is all about the malign unintended consequences of sovereigns, legislators and those who influenced them. Acting to deal with a particular problem – seeking finance for the regular wars they engaged in, the state introduced tariffs to ‘protect domestic industries’ from the outflows of gold. By doing so they unintentionally undermined the domestic economy and distorted resource allocations, not always as intended, and antagonised suspicious neighbours, adding to the risks of war.

The Elizabethan Apprentices Act unintentionally lowered product quality, created troublesome local monopolies, raised prices, and undermined consumer choices; the Settlement Acts intended to localise poor relief, instead they restricted the movement of labour and localised poverty; the trade Guilds aimed to encourage local enterprise, stifled innovation and ended in ‘conspiracies against the public’, and the Cromwellian Navigation Acts intended to provide a strong navy for the defence of the islands of Britain, instead they instituted exploitative monopoly pricing of imports and exports sent to the North American colonies, distorting domestic capital allocation (eventually, leading to a Rebellion).

That some modern libertarians – and most modern economists – have many fallacious ideas about Adam Smith is not a valid reason to vilify libertarianism by distorting the substance of an argument based on misunderstanding Adam Smith’s work as well.

Bgamal has some ways to go before he articulates a valid case against Libertarian ideas. Selective quotations from individual Libertarians about race, religion, and business ethics, are never convincing of a congenital link between libertarianism and certain disreputable ideas and a political philosophy. Many leaders among social democrats and religious leaders in the 20th Century are on the record supporting Eugenics, many business leaders give financial support to Biblical ideas of the Earth’s age as only 6,000 years, and what they call ‘intelligent design’ (the direct opposite of Smithian ‘unintended consequences’), and some do business with quite appalling regimes. Neither side of this argument is ‘Lilly white’ (metaphor).

Stick to the content of libertarian arguments, not the tittle-tattle of the association of individuals.

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Sunday, November 13, 2011

A Welcome Sign of Somebody Noticing?

Robert Vienneau writes the blog: Thoughts on Economics, and posts a most interesting (and for me, a satisfying) piece
HERE

"He's Mixin' Up The Truth With Something Funny, I Start To See"

“I consider the following propositions to be well-established:

Adam Smith did not use the phrase "The invisible hand" to refer to the optimality properties of a static general equilibrium supposedly brought about by the workings of competitive markets.

Thomas Carlyle did not coin the phrase "The dismal science" to refer to Thomas Malthus's anti-utopian theory of population. According to that theory, human population responds endogenously to increased prosperity, thereby making impossible any rapidly established, long-lasting general rise in per capita income beyond the custom and habits of mankind.

John Maynard Keynes, in The General Theory of Employment, Interest, and Money, did not explain widespread and persistent unemployment by sticky, rigid, or slowly adjusting money wages and prices - a pre-Keynesian theory that, in fact, he opposed.

Many economists, I claim, teach the opposite of these propositions.

…It seems to be a quixotic and never-ending task to oppose demonstrably false statements about economics, often made by economists. Gavin Kennedy illustrates such a quest in defense of my first proposition.


Which is re-posted on another blog HERE

Facts & other stubborn things
the blog of Daniel Kuehn

and a commentator, Blue Aurora writes HERE:

Indeed, Gavin Kennedy is an excellent example of someone who goes on the noble (if very tedious) task of righting incorrect beliefs, as Robert Vienneau points out on his blog.”

Comment
Yes, it is sometimes disappointing that there is no, or very little reaction in the Blogosphere to Lost Legacy and the numerous issues in which it contends with common misinterpretations and manifestly incorrect attributions to Adam Smith among mainstream economists, including Nobel prize winners, of Smith’s Works.

This would not be so common if economists were to read what Adam Smith actually wrote and appreciated the 18th-century context in which he worked.

Robert Vienneau fights his own battles, mostly in higher theories from economists, including Piero Srafa, Keynes and rumbling debates about David Riccardo’s theories.

It can get “tiring”, even “very tiring’ from time to time. The founding struggle of Lost Legacy (title of my first Adam Smith book published in 2005) over the modern attributions of a wholly invented meaning of “an invisible hand” continues.

IN 2009 I opened a ‘new front’ in respect of Adam Smith’s supposed theological roots. In part this came to a (delayed) focus in the publication of "The Hidden Adam Smith in his Alleged Theology” (Journal of the History of Economic Thought, September, 2011). I have wrote a longer chapter, "Adam Smith On Religion” for The Adam Smith Handbook, edited by Chris Berry, Craig Smith, Maria Paganelli, Oxford University Press (forthcoming, 2012).

It remains to be seen what response it receives from among Adam Smith scholars (so far, the response has been positive; the stiffer test will be that of theologians and those wedded to the idea that Smith was an unreconstructed Calvinist – though, be clear, I am not challenging what theologians believe – only whether Adam Smith believed in Revealed Chritianity in that sense from around 1744).

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Friday, November 11, 2011

Difference Between Selfishness and Self Interest For Adam Smith

Getty Lustila, Georgia State University, writes (6 November) in The Partially Examined Life Blog HERE:

David Hume and Adam Smith in the Context of Eighteenth-Century Moral Philosophy, Part 1”

“Moral philosophy in the eighteenth century was principally concerned with three issues. First, was “the selfish hypothesis,” which maintained that all declarations of public interest were ultimately expressions of private interest. Second, was the explanation and justification of moral judgment. And third, was the character of moral virtue.

The selfish hypothesis, though largely a minority view, was defended equally by Thomas Hobbes, Bernard Mandeville. The mechanists considered man to be a machine, one whose parts functioned “every bit as naturally as the movements of a clock or other automaton follows from the arrangement of its counter-weights and wheels.” (Descartes, Treatise of Man, 108; Mandeville, The Fable of the Bees: And Other Writings, 36) Man’s principal commitment to his own self-love undercuts genuine other-regarding action and stymies the opportunity for moral virtue.

David Hume and Adam Smith repudiated this thesis. Hume referred to the self hypothesis as one that proceeded from “nothing but the most depraved disposition.” (An Enquiry Concerning the Principles of Morals, 247) For Hume, the fact that a good amount of people act selfishly a good amount of the time fails to ground the claim that such people always acted selfishly (much less the charge that all mankind act in this way!) Man’s selfishness admits of degrees, something that is obvious to our “common sense and our most unprejudiced notions.” (An Enquiry Concerning the Principles of Morals, 250) In Hume’s estimation, only philosophers—with their love of simplicity in principle—could affirm such an absurd view of human nature as the selfish hypothesis. Likewise, Smith claimed that “how selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him.” (The Theory of Moral Sentiments (Penguin Classics), 1) For Smith, all human beings are naturally ‘in-tune’ with one another through the faculty of sympathy; which, acting as a mirror for others, allows us to take part in their suffering and joy. The ability to sympathize with our fellows is not a virtue (in the traditional sense). Instead, the faculty of sympathy is a constitutive part of human agency: devoid of sympathy, we are not human. Smith and Hume recognize that sympathy is most naturally felt for our family and friends. Nonetheless, they equally affirm that man’s moral sense has developed and expanded through the progress of history; a process that will continue to be realized through his continual interaction with the others, the world, and himself
.”

Comment
This is a neat summary of some complex philosophy developed in the 18th century and I am happy to commend Getty Lustila’s article as a good first step to reading the texts that she mentions.

The difference between ‘selfishness’ and Hume–Smithian ‘self interest is mostly misunderstood by those who fall into conflating Smith’s meaning of these words and not just in the modern invention of the IH metaphor, when attributed to Adam Smith (i.e., that selfish actions ‘miraculously’ generate ‘public good’ – which is pure Bernard Mandeville, and Ayn Rand) but also in the misreading of the famous ‘butcher, brewer, baker’ quotation from WN (Book I.ii: 26-7), often commented upon on Lost Legacy.

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Looney Tunes no 6

1
Analysis: "A slap in the face by the invisible hand HERE

Bridge Michigan

"Pivotal policy decisions will be nothing more than applications of property rights. The invisible hand that has stopped a new international bridge between Detroit and Windsor is an outrage".

2
water gun diplomacy
Stuff.co.nz HERE

"Over the last few years the invisible hand ate all its own fingers and became the all-too-visible stump."

3
Tent sale and killer clowns
The Citizen.com (blog) HERE:

"It seemed as if some unseen hand – no doubt the invisible gloved hand of a clown – had taken control of the wheel and was steering my car straight towards that tent."

4
Invisible Hand.. - PS3Trophies.org
Lil Mermaid Girl HERE:

This probably is stupid, but where is the Invisible Hand? What does it look like?”

5
Toulouse School of Economics HERE
THE INVISIBLE HAND MEETS THE INVISIBLE GORILLA: THE ECONOMICS AND PSYCHOLOGY OF SCARCE ATTENTION

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Wednesday, November 09, 2011

Markets and Morality from an Unexpected Source

Nelson Jones writes in New Statesman HERE

“Morality and Markets”

For whatever the virtues of personal relationships the great moral insight of the market economy derives from its very impersonality, which for the first time made possible a kind of objective ethics. And the market is reciprocity in action. As Adam Smith famously said, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

The title of the St Paul's report, Value and values, is a reminder of how much of our moral vocabulary consists of metaphors derived from the marketplace. Value is a measure of what something is worth. And a "worthy" person is morally an upright one. If someone does you a favour you are in their debt, you owe them. And there's no such thing as a free lunch. Sooner or later will come payback time. You will be held to account for your actions. Respect, in life, has to be earned. Conversely, we believe that criminals should "pay" for their crimes, that betrayal is a sell-out and that politicians who lecture the rest of us while enjoying the privileges of office are morally bankrupt.

The moral language of the markets is as old as the Bible. The Old Testament reports that a king of Babylon was "weighed in the balance and found wanting", and tells us that the price of a virtuous woman is "far above rubies". In the "parable of the talents" (a talent being a large quantity of silver), Jesus speaks of spiritual capital as a sum of money with which you should speculate to accumulate. As for Muhammad, he worked for most of his life as a trader.

What all this suggests to me is that the trading relationship that developed in the first market economies enabled people to think about ethics and morality in new and interesting ways, and has thus been a source of moral progress.

Before the formalisation of relationships in the marketplace, there were "primitive", intuitive forms of social relationship: parent and child, sexual partnership, the wider kinship systems of the tribe, and the relationship of subordinate to superior in a dominance hierarchy. All such "natural" relationships are mediated by, and encourage, pre-moral forms of reciprocity: bribes, threats, genetic claims, feelings of social solidarity, etc.

Such relationships may contain the seeds of morality, but by themselves are not moral; in fact they can impede morality as we now understand it. We think it's wrong to bribe or threaten others or promote our relatives against better-qualified non-relatives, for example. For most of human history, and in some places even today, this would not have seemed obvious. That it seems obvious to us is one of the moral lessons of the market.

"Personal relationships good, impersonal market forces bad" is thus at best a simplification and probably highly misleading. A properly functioning market will expose and punish underhand behaviour. The main problem with today's financial markets is that they have become dysfunctional.


Comment
An interesting line of argument from, at least to me, an unexpected source. The New Statesman is a leftish commentator, with a circulation long past its hey days of the 1960s, but still likely to espouse leftish views as if they matter.

The oft-quoted reference to Adam Smith’s, is as often misunderstood. Smith was not downplaying the morality of benevolence (see his Moral Sentiments, 1759), his focus was on the inability of benevolence to feed, clothe, and shelter all those who need these things every day.

Nature is niggardly; it releases its bounties to a degree by toil only. Humankind has spent many millennia slowly discovering how to release Nature’s bounties, with the achievement of complete global success some way off, though the commercial system (later called capitalism in its varied forms) began to achieve this from the 15th century, following its earlier phases that were terminated in the thousand-year interregnum from the Fall of Rome in the 5th century. From the 1800s the spurt in per capita incomes, unequally enjoyed no doubt, began to reach unprecedented levels, first in North West Europe, later across Europe and parts of the globe (see Deirdre McCloskey. Bourgeois Dignity: why economics cannot explain the modern world, 2010).

Taking the age when the Bible’s books started to be written dates vary, but c.6-800 BCE appears to be accepted, i.e. the books that eventually made up the Hebrew Bible commenced about 2,800 years ago, that is, a very long time after humans left the forest for shepherding and farming (Cain and Abel’s supposed time) that commenced in a small segment of South East Europe and the Near East, from c.11,000 BCE. The Hunting and Gathering hundreds of millennia is often somewhat idealised (and sanitised) in moral terms by many anthropologists, using fieldwork among today’s tiny remnants of pre-historic societies. Shepherding and farming commenced to develop their long-existing primitive exchange relationships, which Smith identified as being present from its earliest forms by the faculties of reasoning (not rationality!) and language (WN I.ii.1.2: 25).

Exchange in its full sense (not just as market ‘trade’) depends on the development of crude morality as an alternative to the sharing of the bounties of nature and the fruits of toil (labour) by violence, though the alternatives of plunder or trade existed in parallel in varying degrees for tens of millennia to the present. Exchange in its market forms presumes the existence of property and, increasingly, of justice, as enforced by ruling norms of violence. The early great ‘civilisations’ were also great examples of tyrannical armed-state violence, which, Smith wrote, protected the rich against the poor (WN V.i.b.12: 715), to which we should add by observation and the evidence, also to protect the rich against each other! The proportion of family deaths from dynastic quarrels about primogeniture challenges must have been significant in all civilised societies (e.g., Europe either side of the Roman Republic and Empire).

Market relations composed of long and complex supply changes were fundamental to the formation of moral relationships correctly identified by Nelson Jones. I am not so sure about identifying reciprocity with “bribes, threats, genetic claims, feelings of social solidarity”, but this may just be a matter of brevity. Reciprocity is a fundamental building block for the emergence of bargaining as defined by Adam Smith, and strongly features in pre-history, as it does in signs of reciprocity relationships in some earlier animal species (bats and primates). It certainly existed in early humans that descended from the common ancestor leading to humans and today's chimpanzees. I have called this implicit ‘quasi-bargaining’ (from my unpublished essay: The Prehistory of Bargaining, 2003).

Humans learn their moral standards in society in discovering what behaviours are acceptable/unacceptable to others. Adam Smith develops this theme in his Moral Sentiments (1759). Our predecessors practised the norms of the acceptability/non-acceptability of certain behaviours long before modern religious movements imposed their theological imprints of divine accountabilities and God’s sanctions after death. Workable standards of inter-personal relationships were formed millennia before Bronze-age tribes invented monotheism. After market relations became dominant they did not diminish moral behaviours, contrary to some current assertions in many leftish magazines and newspapers. Pointing to notable counter-examples, as if they are uniquely practised or caused, or congenital to markets (e.g., Karl Polanyi) is fallacious.

That is why I was struck by Nelson’s article in the leftish New Statesman and I congratulate them for that.

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