Monday, October 22, 2007

Absolute Nonsense on 'Digg' About Adam Smith

On a blog called ‘Digg’ (here) I found this in my in-box:

The Economics Nobel: Giving Adam Smith a Helping Hand

"Scottish philosopher Adam Smith asserted that when everyone acts out of self-interest, everyone will eventually benefit, as if a benevolent "invisible hand" molds the economy. Economists now know that view is naive: They can prove that in some situations, rational people will act in ways that leave everybody a loser. But such dreary outcomes can s….”

I am not quite sure what Digg is about and I half recognize the quotation as something published recently, but it most decidedly is not what Adam Smith said, though it is believed by many to be something he might have said.

It is not Adam Smith who was naïve about self interest leading to less than ’benevolent’ outcomes for ‘everyone’. In both Moral Sentiments and Wealth of Nations he was more than alert to the stupidity of that assumption or assetrtion.

In Moral Sentiments he majored heavily on the absolute need for a firm system of justice to deal with individuals acting in their self interest by tormenting neighbours, invading property, engaging in rapine and destruction, and generally pursuing their self interests which in the absence of justice would smash society 'to atoms'.

In Wealth Of Nations he gives over 50 instances in Books I, II, III, IV of instances where individuals act against the public interest in favour of forming monopolies, ‘conspiring’ to raise prices and of ‘clamouring’ to persuade the legislature to erect tariff protection at the expense of the majority of the population, apart from sovereigns engaging in wars for trivial ends from wrong notions of ‘jealousy of trade’.

Any notion that he believed for a second that ‘when everyone acts out of self-interest, everyone will eventually benefit’ is absurd and, frankly ignorant, and exposes the people who assert the nonsense as non-readers of either of his books, plus his Lectures in Jurisprudence, let alone his correspondence.

Modern ‘Economists’ were not the first to prove ‘that in some situations, rational people will act in ways that leave everybody a loser’. Adam Smith said so over 230 years ago. What do they think Adam Smith's Book IV of Wealth Of Nations was about?

That modern economists influenced by neoclassical attributions to Adam Smith of ideas he never held are surprised that game theorists have shown that people can act against others is really a comment on the non-historical approach they have to economics as a discipline.

I am sure their mathematical proofs of Adam Smith’s actual ideas are worthy of a Nobel Prize, and good luck to them, but we less deluded economists who know our intellectual history also know that acting in one’s self interest to the dis-benefit of others is not ‘irrational’ at all – it’s what people do and always have done, and probably always will do. Homo economicus does not exist except in the fertile imagination of the Chicago school.

Adam Smith advanced the proposition that if self interested individuals, acting in the self interest, wish to engage in the domestic business of ensuring their dinner was made available by the 'butcher, the brewer, and the baker', they had better address the self interests of these trades, not their own, and mediate their differences by the process of bargaining.

Selfish individuals can get their dinner only by coercion, or from the scraps made available by those with necessarily limited amounts of benevolence.

Only Jesus (allegedly) fed the multitude with loaves and fish; for mere mortals who do not have sufficient ingredients of dinner to feed many more than their families, they have to obtain what they want from others who want something from them. Smith called it bargaining, which is voluntary and non-coercive.


Blogger Vance Maverick said...

Digg is just pointing to a note in Science...which really ought to be getting these things right.

6:02 am  
Blogger Gavin Kennedy said...

Hi Vance

Thanks for the link. I am still trying to establish what Digg is about; what its posters contribute; who it's for, etc?

Are we supposed to comment on it? If so, how?

Any advice would be appreciated.


6:52 am  

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