Religion and the Invisible Hand
Edwin Stepp writes (9 January) “Bigger Is Not Better” in Vision (‘insights and new horizons’) (here).
“In their keynote article 'Seeding the Sustainable Economy', The Worldwatch Institute 2008 State of the World project co-directors, Gary Gardner and Thomas Prugh, advocate that a new economic model is needed to protect the earth’s environment, continue development of poor nations and attack the vast problem of global poverty. Arguing that the economic philosophies that got us where we are today are now outdated, the academics write, “The world is very different, physically and philosophically, from the one that Adam Smith, David Ricardo and other early economists knew—different in ways that make key features of conventional economics dysfunctional for the twenty-first century. In Smith’s and Ricardo’s time, nature was perceived as a huge and seemingly inexhaustible resource.”
“One radical idea introduced into the economic equation is the concept of “happiness.” How much economic growth is needed to ensure happiness in a society or community? Gardner and Prugh cite studies and surveys showing that economic prosperity has not delivered happiness to prosperous societies.”
“Interestingly, they note, the country of Bhutan has now made “gross national happiness” its official goal in development as opposed to increasing gross national product or other measures of economic growth. Of course, the measurements of that goal will remain quite subjective, and the pressure from its citizens to enjoy the materialism of developed nations could easily overwhelm it in the end. But at least one government is daring to practice rather than just preach the common wisdom that “money can’t buy happiness.”
“The report also notes changes in individuals and consumers as they begin to understand that the ever-increasing consumption of Western societies cannot continue forever and perhaps not even for very long. The marketplace demand for green products is increasing and with it will come profit potential for companies that adapt to the trend. “The celebrated insight of Adam Smith was that the ‘invisible hand’ leads self-interested individual actions to positive collective outcomes. This is a powerful idea, but it has overshadowed the equally important communitarian dimension of human societies,” Gardner and Prugh write. “People are motivated not only by self interest but also by the desire to participate in a larger community.”
Comment
Vision proclaims itself as a Christian voice, but not a proselytizer for any particular beliefs, except the Bible.
Edwin Stepp quotes ‘approvingly that “a new economic model is needed to protect the earth’s environment, continue development of poor nations and attack the vast problem of global poverty.” There’s not much information about the ‘new economic model’ and it notes that “The world is very different, physically and philosophically, from the one that Adam Smith, David Ricardo and other early economists knew—different in ways that make key features of conventional economics dysfunctional for the twenty-first century.”
My worry would be that the economics ‘that Adam Smith, David Ricardo and other early economists knew’ is somehow seen as having some relationship to the ‘key features of conventional economics dysfunctional for the twenty-first century’, which manifestly is quite untrue, at least as far as Adam Smith conceived of ‘economics’. It is also the case that ‘conventional economics’ (which is a large church) does not correspond to the real world of today.
Gary Gardner and Thomas Prugh, authors of Seeding the Sustainable Economy, (The Worldwatch Institute 2008), whom Edwin Stepp quotes with approval, advocate ‘happiness’ as a radical new idea for the new economics. The very next paragraph about Bhutan’s experiment with introducing ‘gross national happiness’ as an objective demonstrates the weaknesses of that idea, and the dangers: ‘the measurements of that goal will remain quite subjective, and the pressure from its citizens to enjoy the materialism of developed nations could easily overwhelm it in the end.’
When governments introduce objectives there is always the danger that they will not be realised, to which there are two responses: the objective is dropped and something else is tried, or the objective ceases to be voluntary and becomes mandatory (for the “peoples’ own good”!), to ‘prevent’ them ‘overwhelming’ the chosen objective made by politicians.
The introduction of “The celebrated insight of Adam Smith was that the ‘invisible hand’ leads self-interested individual actions to positive collective outcomes” also worries me. The notion that ‘the invisible hand’ leads to ‘positive collective outcomes’ is problematical.
Whatever else its status, it was not a general notion of Adam Smith. It is a manufactured attribution of a ‘principle’, ‘concept’, ‘theory’ or ‘paradigm’ that there is a disembodied invisible entity guiding individuals to act in their self interest and, miraculously, they benefit society without intending to do so.
I can see why believers in an invisible God would be attracted by the notion of an invisible hand in markets, but that was not Adam Smith’s contribution in his use of the metaphor. I can see why monopolists, ‘greed-is-good’ polluters and protectionists would delight is having benign consequences attributed to them when going about their business in anything but a socially benign manner.
Adam Smith mentioned the metaphor once in Wealth Of Nations in reference to risk avoidance (Book IV.ii.p 456) but he also gave over 50 examples of individual self interest working decidedly against the social interests of those affected by the people imposing on them (Books I and II, Wealth Of Nations). Why the interpretation is inflicted on Adam Smith is a question of the integrity of the authors of the misinterpretation.
Many have never read Wealth Of Nations and are culpably neglectful; some go so far as to link in quotation marks paragraphs from Book I to the invisible hand only used once in Book IV, without disclosing their fabrication, and assert, brashly, that Smith meant the invisible hand to be applied generally to markets.
Edwin Stepp can relax. As Adam Smith never made a general proposition out of the invisible hand (anonymous modern economists did so, and still do), he need not feel obliged to dismiss his potential relevance to a selection of today’s problems.
“In their keynote article 'Seeding the Sustainable Economy', The Worldwatch Institute 2008 State of the World project co-directors, Gary Gardner and Thomas Prugh, advocate that a new economic model is needed to protect the earth’s environment, continue development of poor nations and attack the vast problem of global poverty. Arguing that the economic philosophies that got us where we are today are now outdated, the academics write, “The world is very different, physically and philosophically, from the one that Adam Smith, David Ricardo and other early economists knew—different in ways that make key features of conventional economics dysfunctional for the twenty-first century. In Smith’s and Ricardo’s time, nature was perceived as a huge and seemingly inexhaustible resource.”
“One radical idea introduced into the economic equation is the concept of “happiness.” How much economic growth is needed to ensure happiness in a society or community? Gardner and Prugh cite studies and surveys showing that economic prosperity has not delivered happiness to prosperous societies.”
“Interestingly, they note, the country of Bhutan has now made “gross national happiness” its official goal in development as opposed to increasing gross national product or other measures of economic growth. Of course, the measurements of that goal will remain quite subjective, and the pressure from its citizens to enjoy the materialism of developed nations could easily overwhelm it in the end. But at least one government is daring to practice rather than just preach the common wisdom that “money can’t buy happiness.”
“The report also notes changes in individuals and consumers as they begin to understand that the ever-increasing consumption of Western societies cannot continue forever and perhaps not even for very long. The marketplace demand for green products is increasing and with it will come profit potential for companies that adapt to the trend. “The celebrated insight of Adam Smith was that the ‘invisible hand’ leads self-interested individual actions to positive collective outcomes. This is a powerful idea, but it has overshadowed the equally important communitarian dimension of human societies,” Gardner and Prugh write. “People are motivated not only by self interest but also by the desire to participate in a larger community.”
Comment
Vision proclaims itself as a Christian voice, but not a proselytizer for any particular beliefs, except the Bible.
Edwin Stepp quotes ‘approvingly that “a new economic model is needed to protect the earth’s environment, continue development of poor nations and attack the vast problem of global poverty.” There’s not much information about the ‘new economic model’ and it notes that “The world is very different, physically and philosophically, from the one that Adam Smith, David Ricardo and other early economists knew—different in ways that make key features of conventional economics dysfunctional for the twenty-first century.”
My worry would be that the economics ‘that Adam Smith, David Ricardo and other early economists knew’ is somehow seen as having some relationship to the ‘key features of conventional economics dysfunctional for the twenty-first century’, which manifestly is quite untrue, at least as far as Adam Smith conceived of ‘economics’. It is also the case that ‘conventional economics’ (which is a large church) does not correspond to the real world of today.
Gary Gardner and Thomas Prugh, authors of Seeding the Sustainable Economy, (The Worldwatch Institute 2008), whom Edwin Stepp quotes with approval, advocate ‘happiness’ as a radical new idea for the new economics. The very next paragraph about Bhutan’s experiment with introducing ‘gross national happiness’ as an objective demonstrates the weaknesses of that idea, and the dangers: ‘the measurements of that goal will remain quite subjective, and the pressure from its citizens to enjoy the materialism of developed nations could easily overwhelm it in the end.’
When governments introduce objectives there is always the danger that they will not be realised, to which there are two responses: the objective is dropped and something else is tried, or the objective ceases to be voluntary and becomes mandatory (for the “peoples’ own good”!), to ‘prevent’ them ‘overwhelming’ the chosen objective made by politicians.
The introduction of “The celebrated insight of Adam Smith was that the ‘invisible hand’ leads self-interested individual actions to positive collective outcomes” also worries me. The notion that ‘the invisible hand’ leads to ‘positive collective outcomes’ is problematical.
Whatever else its status, it was not a general notion of Adam Smith. It is a manufactured attribution of a ‘principle’, ‘concept’, ‘theory’ or ‘paradigm’ that there is a disembodied invisible entity guiding individuals to act in their self interest and, miraculously, they benefit society without intending to do so.
I can see why believers in an invisible God would be attracted by the notion of an invisible hand in markets, but that was not Adam Smith’s contribution in his use of the metaphor. I can see why monopolists, ‘greed-is-good’ polluters and protectionists would delight is having benign consequences attributed to them when going about their business in anything but a socially benign manner.
Adam Smith mentioned the metaphor once in Wealth Of Nations in reference to risk avoidance (Book IV.ii.p 456) but he also gave over 50 examples of individual self interest working decidedly against the social interests of those affected by the people imposing on them (Books I and II, Wealth Of Nations). Why the interpretation is inflicted on Adam Smith is a question of the integrity of the authors of the misinterpretation.
Many have never read Wealth Of Nations and are culpably neglectful; some go so far as to link in quotation marks paragraphs from Book I to the invisible hand only used once in Book IV, without disclosing their fabrication, and assert, brashly, that Smith meant the invisible hand to be applied generally to markets.
Edwin Stepp can relax. As Adam Smith never made a general proposition out of the invisible hand (anonymous modern economists did so, and still do), he need not feel obliged to dismiss his potential relevance to a selection of today’s problems.
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