On Midi Jacks and Adam Smith
I’ve no idea what ‘midi jacks’ are or do (something to do with music systems) but the guys (‘dude’ is a popular word here) in the Createdigitalmusic Blog do know (here).
In a lively debate about midi jacks, two contributors enthusiastically disagree (politely) over the choice to repair or buy replacement parts and slip into economics:
“Atomic_Afro”:
‘Bliss man, I don't mean to start a flame thread about this... I think it's a reasonable discussion to have. But let me give you a piece of advice. Read Adam Smith's "The Wealth of Nations", and think about some of the ideas it contains. There are others from David Ricardo to Friedrich Hayek that are worth reading as well, but Smith is a great place to start. I encourage everyone to read up on the basics of economic theory as it helps to raise the level of these sorts of discussions.’
To which “Bliss” replies:
‘Afro, I am up on Adam Smith. I studied business in college -- although with a focus on the music business. I got this from somewhere on the web over a year ago:
‘Economist Adam Smith in his book 'Wealth of Nations' argued that the invisible hand of the market would guide people to act in the public interest by following their own self-interest, since the only way to make money would be through voluntary exchange, and thus the only way to get the people's money was to give the people what they want. One does not get one's dinner by appealing to the brother-love of the butcher, the farmer or the baker. Rather one appeals to their self interest, and pays them for their labor.’
There's more than a bit of wisdom in that statement. However, there also is more than a bit of implied caution. That if one only appeal to another's self-interest, one's self, i.e., the "brother-love", can be lost in the transaction. "Better to have a full stomach than a full heart." The idea that we can separate ethical and moral considerations from business is a foolish notion, in my opinion.’
Comment
Bliss implies he has not read Adam Smith and states he ‘learned up’ on Adam Smith at a business college. His tutor almost certainly had [NOT] read Adam Smith either.
The myths about the invisible hand are widespread and deep. It has been switched from supporting an argument of Adam Smith about risk-avoiding merchants contemplating the risks of foreign trade into an all purpose guide to individuals in markets.
Like adult spoil sports in the matter of the myth about Santa Claus visiting every single child on the planet with presents each December (physically impossible), tutors in economic classes from the local college course in business to the hallowed lecture halls at the Ivy League top universities, a similar myth is told to young adults by the mass of lecturers, including Nobel prize winners about ‘an’(!) invisible hand, supposedly associated with Adam Smith (he only used the term once in Wealth Of Nations, and his reference was not about markets, ‘guiding’ each and every market participant in the world in trillions of participants.
The real wonder about markets is that there is no central direction; there are no invisible hands, feet, or disembodied parts, guiding anybody. There does not need to be! The relative prices of whatever is exchanged are the only guides needed. It’s called the price system. That's what Adam Smith actually said.
Got it, er, dude?
In a lively debate about midi jacks, two contributors enthusiastically disagree (politely) over the choice to repair or buy replacement parts and slip into economics:
“Atomic_Afro”:
‘Bliss man, I don't mean to start a flame thread about this... I think it's a reasonable discussion to have. But let me give you a piece of advice. Read Adam Smith's "The Wealth of Nations", and think about some of the ideas it contains. There are others from David Ricardo to Friedrich Hayek that are worth reading as well, but Smith is a great place to start. I encourage everyone to read up on the basics of economic theory as it helps to raise the level of these sorts of discussions.’
To which “Bliss” replies:
‘Afro, I am up on Adam Smith. I studied business in college -- although with a focus on the music business. I got this from somewhere on the web over a year ago:
‘Economist Adam Smith in his book 'Wealth of Nations' argued that the invisible hand of the market would guide people to act in the public interest by following their own self-interest, since the only way to make money would be through voluntary exchange, and thus the only way to get the people's money was to give the people what they want. One does not get one's dinner by appealing to the brother-love of the butcher, the farmer or the baker. Rather one appeals to their self interest, and pays them for their labor.’
There's more than a bit of wisdom in that statement. However, there also is more than a bit of implied caution. That if one only appeal to another's self-interest, one's self, i.e., the "brother-love", can be lost in the transaction. "Better to have a full stomach than a full heart." The idea that we can separate ethical and moral considerations from business is a foolish notion, in my opinion.’
Comment
Bliss implies he has not read Adam Smith and states he ‘learned up’ on Adam Smith at a business college. His tutor almost certainly had [NOT] read Adam Smith either.
The myths about the invisible hand are widespread and deep. It has been switched from supporting an argument of Adam Smith about risk-avoiding merchants contemplating the risks of foreign trade into an all purpose guide to individuals in markets.
Like adult spoil sports in the matter of the myth about Santa Claus visiting every single child on the planet with presents each December (physically impossible), tutors in economic classes from the local college course in business to the hallowed lecture halls at the Ivy League top universities, a similar myth is told to young adults by the mass of lecturers, including Nobel prize winners about ‘an’(!) invisible hand, supposedly associated with Adam Smith (he only used the term once in Wealth Of Nations, and his reference was not about markets, ‘guiding’ each and every market participant in the world in trillions of participants.
The real wonder about markets is that there is no central direction; there are no invisible hands, feet, or disembodied parts, guiding anybody. There does not need to be! The relative prices of whatever is exchanged are the only guides needed. It’s called the price system. That's what Adam Smith actually said.
Got it, er, dude?
6 Comments:
Ha! Find it very amusing you picked up this story.
This was a forum post, not a blog post, so I directed it over to our blog readers.
http://createdigitalmusic.com/2008/01/31/midi-jacks-radio-shack-economic-theory-and-invisible-hands/
And, of course, you're right.
Hi Peter
No problem. I was amused by the context - midi jacks - and found it irresistible as I am not usually discussing Adam Smith in such way-out contexts.
Glad you see the funny side too.
Gavin
Hi Gavin,
I just wanted to say that my argument over at CDN was intended to highlight the influence that corporate marketing and advertising has on the consumer. That corporations intend to influence markets to some extent by influencing the behavior of consumers through marketing and advertising campaigns.
Will hundreds of millions of viewers tune in to watch the Super Bowl this coming Sunday? You bet. Will each of those viewers also be a fan of professional football? Most likely not. Many will only tune in so that they can feel as if they are taking part in the circus and show -- they regard it as nothing more than 4th of July of the wintertime. For those and many others the Super Bowl is the only football game, amateur or pro, that they watch during any year. So, how many supermarkets and liquor stores, who have their own marketing and advertising campaigns, are also trying to cash in on the hype that the major TV sponsors of the Super Bowl have cooked, brewed, and are currently serving to the public?
I'm not sure that I created the impression that Adam Smith's "invisible hand" is responsible for the behavior of consumers. What I intended to express and explain was that the behavior of consumers is often influenced by the invisible hand of hype that's delivered through the channels of corporate marketing and advertising campaigns. In response to Atomic_Afro, where I quoted a passage that referenced Adam Smith and his work "Wealth of Nations", it was with the intent of saying that people are a component of business. That ethical and moral considerations play a part regardless of the corporation's duty to its shareholders. I admit that I was not that explicit. Nevertheless, my intention was not to drag Adam Smith's legacy through the mud, so to speak.
This comment has been removed by the author.
Hi Bliss
The intelligent and polite level of the debate referring to Adam Smith and the market for 'Midi-Jacks' is what made me want to comment originally.
Your comment is also well-thought out about the impact on markets among large numbers of consumers drawn to watch a major football game is well put, and excepting the reference to invisible hands, is straight down-the-line Adam Smithian
Adam Smith noted the affect of mourning for a notable funeral on tape, which is analagous on a small scale to the consequences of Super Bowl hype.
Smith, writing in the 18th century did not know about mass marketing at today's levels, but he did observe rising demand for an item and the effect on price.
I did not comment on your correct mention of the role of ethical and moral considerations on consumers decisions in markets, more from lack of time last night than not thinking your remarks unimportant. They are. You are right about that aspect of economic debates today.
Adam Smith was a moral philosopher and taking his two works together, 'Moral Sentiments' and 'Wealth Of Nations', he clearly understood the point that you make.
Thanks for commenting on Lost Legacy - please do so any time - and thanks for a snap insight into appropriate discourse in the digital music business.
Gavin
Hi Gavin,
Thanks for your comments. I've bookmarked your site. As of today I'm checking it regularly. Food for thought is a good thing!
Best,
bliss
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