Wednesday, March 15, 2006

Invisible Hand, no. 30

A variation on the misattribution to Adam Smith of the mystical qualities of Shakespeare’s ‘bloody and invisible hand’ (Macbeth 3:2) and its elevation from an isolated metaphor used only once in “Wealth of Nations” in relation to domestic versus foreign investment policy (and definitely not about markets, let alone a ‘theory’ of markets), is illustrated in a piece by Ernest Partridge in OPEDNEWS.com (http://www.opednews.com), entitled “The Right and The Left, in a nutshell” (his introduction to ‘Conscience of a Progressive’, described as ‘a book in progress’).

Ernest Partridge writes:

Each individual, by acting to maximize his or her personal self-interest, will always act “as if by an invisible hand” (Adam Smith) to promote the well-being of all others in this (so-called) “society:” that which is good for each, is good for all. Accordingly, the optimal economic system is a completely unrestricted and unregulated free market of “capitalist acts by consenting adults.” (Robert Nozick) Moreover, private ownership of all land, resources, infrastructure, and even institutions, will always yield results preferable to common (i.e. government) ownership and control. Finally, the regressives firmly believe that because economic prosperity and growth are accomplished through capital investment, the well-being of all is accomplished by directing wealth into the hands of “the investing class;” i.e. the very rich, whereby that wealth will “trickle down” to the benefit of all others.”

Comment

I have nothing to say on the differences between ‘regresssives’ and ‘progresses’, at least as Ernest Partridge presents them, but I wish to draw your attention to his variation of what Smith actually said when he mentioned, en passant, the invisible hand (Wealth of Nations, IV.ii.9: p 456).

Smith wrote:


‘…he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.’

Partridge wrote:

“…by acting to maximize his or her personal self-interest, will always act “as if by an invisible hand” (Adam Smith) to promote the well-being of all others in this (so-called) “society:” that which is good for each, is good for all.”

Can you see the difference? It is by no means a trivial slip of the pen.

Partridge shifts the statement from ‘led by an invisible hand’ to ‘as if by an invisible hand’, and by placing his version in quotation marks, immediately followed by ‘(Adam Smith)’ he asserts, in the conventional literary manner, that Partridge has made a direct quotation from the Works of Adam Smith. In this Partridge is in error.

If Partridge can show me a reference from the works of Adam Smith that Smith ever used the words ‘as if by an invisible hand’, I will send $1,000 to his nominated charity. The fact is, Smith didn’t express it the way Partridge asserts.

And neither can Partirdge assert that Smith claimed ‘that which is good for each, is good for all’. Manifestly, it is not always the case as Smith in many place states unambiguously. Monopolists do what is good for themselves, but is bad for consumers, who pay increased prices above the competitive prices brought about by competition; polluters lower their costs of production, or enjoy more ease, whilst others suffer externalities and the costs of cleaning up the mess left by polluters.

Smith never used the words ‘laissez faire’ and did not include such policies in his ‘Wealth of Nations’ – others asserted that he did, though the evidence against laissez faire in his book is overwhelming. Smith was not an extremist.

Smith’s words state: ‘he is in this, as in many other cases’, allowing for cases where, as above, his intentions do not lead to ends he intended and neither ‘will always act “as if by an invisible hand” (Adam Smith) to promote the well-being of all others’. There is no ‘will always act’ about it! Partridge’s claims about Smith are in error.

He should correct them before his book is published if he is committed to being accurate about those he quotes from. A case based on false evidence becomes no case at all.

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