Wednesday, January 17, 2007

A Critique of Foley on Smith that Also Does Not Understand Smith

With following parting blast, Stephen J. Grabill, Ph.D., Research Scholar in Theology and Executive Editor, Journal of Markets & Morality, has a justified go at Duncan Foley for his book, ‘Adam’ Fallacy’ (critiqued here on several occasion):

If Adam’s fallacy is Smith’s rationalization for laissez-faire capitalism as Foley argues, what shall we call Foley’s “imaginative reconstruction” of economic history? How about “Foley’s Myth”?”

I too took the view that Duncan Foley’s book should be treated as “Foley’s Fallacy” and I shall look at Stephen Grabill’s article with a similar critical eye. He writes:

In Wealth of Nations, Smith wrote what has become one of his most quoted passages and the inspiration for Foley’s critique:
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. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

This passage is offensive to many because it seems to prefer selfishness to benevolence.”

Please Stephen, read the passage you quote again and explain how Smith ‘seems to prefer selfishness to benevolence’? It doesn’t say anything about his preferences. In fact, he had a high regard for benevolence, he just didn’t observe it as being sufficient for every person on the planet being able to ensure he or she would get their dinner by relying on other people’s benevolence; there isn’t enough food for dinners for everybody to expect everybody else (how?) or other people to benevolently give them their dinners, and certainly not if all others were expecting the same benevolence from every other.

That is not a statement of moral preference; Smith observed and reported the situation in the world as it was, and not much has changed since (otherwise nobody would be hungry and everybody would have the living standards of the average American).

But more fundamentally, Smith does not advise selfishness in that passage, and you can see why if you read it carefully. If he had advised everybody to be selfish (in the style of Bernard Mandeville, Fable of the Bees, 1724, who did justify selfishness as being a good thing, much as Geko did in ‘Wall Street’), nobody would get their dinner, because each party to the transaction, you and the ‘butcher, brewer, and baker’, would selfishly insist on the other party foregoing their selfishness so that you could satisfy yours!

So, if two people acting selfishly doesn’t get you your dinner, and relying on other people’s benevolence won’t either, what does bring the transaction to a satisfactory conclusion? Smith provides the answer: you must not pay regard to your own selfish interest and neither must the butcher, etc., but each must address the self-interest of the other party.

They must in fact ‘never talk to them of our own necessities but of their advantages’ in concluding the transaction. They must, in short, persuade them that it is in their interest that they conclude the transaction, as they must do so in practice. Bargaining is not an act of compulsion or some kind of coercion. It is a voluntary transaction that benefits both parties by each serving their self-interest by serving the self-interest of the others. This is far from selfishness, which relies on deception, stubborn disregard for the self-interest of others – ‘pay up or else’ – and degrees of violence that transforms voluntary transaction into various types of plunder.

I suggest that Stephen re-read Wealth of Nations, Moral Sentiments and, for good measure, Smith’s Lectures on Jurisprudence, which were delivered at the same time, in the same classrooms, to the same students between 1751 and 1763. These ideas were not separated in time as the publication dates of Moral Sentiments (1759) and Wealth of Nations (1776) suggest to those who are unaware of how Smith worked (as were the originators of the ‘Das Adam Smith Problem’ in the mid-19th century).

Moreover, Smith did not write about ‘competition on capitalist markets’, nor did he deny ‘real consequences of capitalist development’, for the simple reason ‘capitalism’ was a 19th-century, not a mid-18th-century phenomenon (the word capitalism was first used in 1854, not 1754). Smith wrote about market transactions, how they had evolved from the division of labour since pre-history, and how they fitted in with the conditions for social-harmony that he expounded at length in Moral Sentiments.

Foley does not understand this because he appears to been disillusioned with neoclassical economic analysis (to which I say, ‘Hear, hear’!) but that is to do with his academic education under the influence of the general equilibrium models based on abstract mathematics and not real markets transactions involving real people. These modern models have nothing, or almost nothing, to do with Adam Smith or anything he wrote.

That is why I call his book, Foley’s Fallacies’, and on that we can agree.

[Read the review by Stephen Gragill, which contains several other points I have not dealt with on this occasion, at:]


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