Monday, June 04, 2007

Lack Of Rigour Where You Least Expect It

Following my note on the Heterodoxy v Orthodoxy, I visited TPM Café to read ‘Challenging Orthodoxy, Part II: ‘Rigor v Neoclassical economics’ by Thomas Palley.

This was, I assure, you a survey visit, not a search for anything in particular. It read well, until I reached a paragraph that contained the following:

Now suppose we grant all of the above [the assumptions of the Arrow-Debreu model], in that case there does exist a competitive market equilibrium that has properties similar to those described more loosely by Adam Smith’s invisible hand. However, even then the equilibrium may be wholly undesirable from a societal standpoint in that someone could end up with almost everything and the rest with almost nothing.”

My initial reaction was disbelief, followed by astonishment. The article is about rigour and neo-classical economics, yet what is rigorous about anything ‘described loosely by Adam Smith’s invisible hand’? It’s a metaphor, for goodness sake, not a theory about ‘competitive market equilibrium’! In fact it is not about markets at all.

Does Thomas Palley know the context that Adam Smith used the metaphor ‘an invisible hand’? Is it something he picked up at graduate school?

May I politely suggest that everybody reads the whole chapter in Wealth Of Nations in which the metaphor is used and thinks about what it says, which, if I may be so impertinent to suggest, says merely that the risk aversion of merchants leads them to prefer to look after their scarce capital close by them, and which can be summed up in the statement that the ‘whole is the sum of its parts’.

That neoclassical economists have made the metaphor into a mystical ‘force’ is bad enough, but if heterodox luminaries, of the status of Thomas Palley, are so far off target too, what chance does my paper, ‘Adam Smith’s Invisible Hand: from metaphor to myth’, have of convincing any of the attendees (heterodox or orthodox) at the 34th annual meeting of the History of Economics Society (@ GMU, 8-11 June)?


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