Friday, December 22, 2006

Dr Drummond's Students in Good (but not invisible) Hands

Accounts of markets are always interesting to economists, especially those emerging markets which are in transition from simplicity to complexity. Economic development, as in China, tracks the emergence of markets from within the statist society that was communism.

Dr Drummond provides an excellent example of the genre, reporting on his stay in BeiBei (in connection with an academic exchange visit). I quote the opening paragraphs and strongly recommend that you read the whole piece at: :

Adam Smith, generally considered to be the father of economic thought, was mystified by the operation of markets. How could they be so efficient without some sort of managerial oversight? Smith concluded that markets were coordinated by the “propensity in human nature…to truck, barter, and exchange.” That is, to engage in commerce is just as much a part of the human experience as to engage in survival or reproduction.
Each Thanksgiving we celebrate the bountiful harvest of almost 500 years ago when the first successful colonists arrived in the “new” world. As I walk the streets of Beibei [China], I frequently wonder what it looked like five thousand years ago as the early inhabitants of this river valley pursued their “propensity…to truck, barter, and exchange.” My initial guess is that not much has changed.”

What follows is fairly modern Adam Smith, without it being overtly so. When I read the first paragraph I thought it was about to burst into praise of the invisible hand fable, but my heart lifted when it raised the truly Smithian idea of ‘truck, barter and exchange’.

The closer you get to real markets with real people, and away from the abstractions of so-called general equilibrium neo-classicism, the less likely you will fall into the stupor of belief in mystical or miraculous invisible hands (which have nothing to do with Smith’s theories of markets).

Dr Drummond’s students are in good hands.



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