Saturday, August 18, 2007

Silly Saturday Stories, no 3

To last month’s ‘Invisible Foot’ we had ‘an Invisible Economic Hand’, and today its: ‘Invisible hand missing fingers’. The imagination of sub-editors clearly knows no bounds.

'Invisible hand missing fingers’ ‘heads a review by Andrew Allentuck: of P. J. O’Rourke’s new book, ‘On the Wealth of Nations’, in the Canadian Globe and Mail (18 August) here:

Smith, who died in 1790, was the last man to know everything. A philosopher, he wrote Theory of Moral Sentiments, arguing that man's innate ability to identify with others was stronger than selfishness. In Wealth of Nations, he used self-interest as the key to explaining why people seek profit and why the process of seeking is good for everybody. Work and payment had to be voluntary. This was to be the basis for laissez-faire economics, the concept that markets, left to themselves, would make the most of everyone's talents and resources.”

Andrew Allentuck probably makes good sense, in the stle of P. J. O’Rourke with his closing remark:

O'Rourke's work is a blend of interpretation and misunderstanding wrapped in some soon-to-be-dated jokes. "Economists cannot predict the future any better than Jennifer Aniston and Donald Rumsfeld could predict Brad Pitt and Iraq." P. J. O'Rourke on Smith is headed for obscurity. Its references to soon-to-be-forgotten personalities will leave it cherished by fans of O'Rourke's wisecracks and ignored by everybody else

However his own interpretation of Adam Smith (‘laissez-faire economics’, ‘good for everybody’, and ‘left to themselves’), is some long way off from what Adam Smith actually wrote in Wealth Of Nations about self interest and he wrote absolutely nothing about ‘laissez faire’, anywhere in any of his Works

People confuse him with the French Physiocrats, whom Smith met in 1766 and did not agree with them on that specific demand for laissez faire, not surprisingly first uttered by a merchant in the French dirigiste regime of M. Colbert!

His name was M. Le Gendre, described as a ‘most sensible and plain spoken’ merchant,. His actual words reportedly were ‘laissez nous faire’ (leave us alone) and they were addressed in 1690 to Colbert, the 17th century minister whose regulation of merchants was notorious for its oppressive licensing, inspection and control, and for its stifling inefficiencies (this was French bureaucracy at its worst).

Jean Vincent, Seigneur de Gournay, popularised a version of Le Gendre’s appeal to be freed of petty regulation among the Physiocrats, though being French he did not appear to be in favour of free-trade.

The author who took the Le Gendre’s words and dropped ‘nous’ and turned laissez nous fair’ (let us alone) into ‘laissez faire’ (let alone) into a principle of economic policy, was the Marquis d’Argenson (1694-1757), who was an active promoter of economic theory and a member of the world’s first economics club (salon in France), the Club d’Entresol (1726). He was also a Foreign Minister of France at the Court of Louis XV for two years. He did not publish his ideas, but circulated them in manuscripts around the French intelligentsia, as was the custom.

Boisguillebert (1646-1714), another early pioneer of French economics, used the words laissez faire in his writing, but it was it was d’Argenson who turned it into a maxim and made it central to the writings of some of the Physiocrats. Quesnay, for example, did not include laissez faire in his General Maxims of Government (1758).

These an other interesting bit of history can be found in ‘Economic Thought and Policy, Oxford University Press, 1949, 54-89 by D. H. Macregor (Professor of Political Economy at Oxford).

Smith didn’t use it either because, I suspect, he knew how devious and monopolistic were ‘merchants and manufacturers’ and never fell for the idea that they could be ‘left to themselves’. After all, the English government in the 17th cntury devolved powers to the town guilds, originally to promote employment and quality manufacturing, and Smith was well aware of how the town merchants had turned the law from a promoter of employment and industry into a protection racket for monopoly pricing and restricive employment.


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