Tuesday, April 03, 2007

What nobody 'should know' about Adam Smith

“6 economists everyone should know” in “Mental Floss: feel smart again”:

Ever felt a push from behind on your way to work, but when you turned around no one was there? It was probably Smith’s "invisible hand," the force that leads individuals pursuing self-interest to provide useful goods and services for others. Champion of the free market, Smith [wiki] pretty much founded economics as a systematic discipline, and his ideas echo through the profession to the present day. If you don’t believe in economic forecasting, read Smith’s masterwork, The Wealth of Nations (1776). Smith, a native Scot, argued that Great Britain couldn’t afford to hold its rebellious American colonies - an impressive conjecture considering Britain’s world domination at the time.”

The ideas attributed to Adam Smith by Chicago that ‘echo through the profession to the present day”, sadly, usually have little to do with Adam Smith from Kirkcaldy, especially in relation to the use of the metaphor of ‘an invisible hand’.

Smith’s comments on the £100 million economic cost of seven-year war on behalf of the British colonies in North America, who contributed nothing in costs, except blood from the local militia troops and civilians, to protect £20 million trade business was not a forecast so much as good sense. His analysis of the cost-benefits of colonial trade generally was spot on. But he was not alone. David Hume and Edmund Burke agreed with him, as did the colonial leaders. Only the myopia of the British government and king prevented common sense.

However, feeling “a push from behind on your way to work” is going too far. The metaphor was about being ‘led by an invisible hand’, not pushed from behind, and it had nothing to do with markets.

[Read it at: http://www.neatorama.com/2007/04/03/6-economists-everyone-should-know/]


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