Sunday, March 30, 2008

Shallow Psycho-babble and the Invisible Hand

Graeme Anfinson of North Dakota (29 March) writes in Left in East Dakota (‘I woke during my American Dream’) here:

Adam Smith the populist’

‘Michael Perelman's The Invention of Capitalism … destroys the myth that classical economists were against government economic intervention and points out that in order for market capitalism to develop, state power was needed to force a largely self-sufficient society into selling their labor for wages’.

If the State caused people to become wage-labourers from the 15th century to the appearance of capitalism in mid-19th century Britain (and elsewhere) it is a remarkable first in the history of the State, showing a consistency of purpose unarticulated in published sources, and a remarkable success across all States of varying types in countries across the globe.

Graeme quotes directly from Michael Perelman's, The Invention of Capitalism, page 208:

I suspect that Smith's work earned much of his popularity because he expressed so eloquently what others deeply felt. Unlike many of the less educated populists, Smith was usually able to sublimate his rage into his charming theory of the invisible hand, in which competition and even aggression is channeled into harmonious actions that better the world. Frequently, cracks appeared in this fantasy, and the harsh reality of the world around him intruded. At such times, we can catch a glimpse of Smith's theory of primitive accumulation.”

Michael Perelman apparently is confusing what some 20th-century economists invented as a theory of Adam Smith’s when it was anything but a ‘theory’ (or any of the other elaborations as a ‘paradigm’, ‘concept’, or whatever), as if Wealth of Nations is riddled through with the metaphor of ‘an invisible hand’.

That his ‘charming’ metaphor is entirely absent from his theory of commercial markets (Book I and II) and makes a single appearance in a single paragraph in Book IV at the tail-end of an analysis of the consequences of risk avoidance is not well known, even among talented and senior economists as Michael Perelman, is amazing, though the new invention of it being caused by Adam Smith’s ‘sublimated rage’ is, er, of historic proportions.

Talk about history being but a fable agreed upon…

Smith's vision of the bizarre heroism of the petit bourgeoisie seems to reflect his own rage at those who refused to adopt the values that were so dear to him. Even if Steuart's [Sir James Steuart] language was brutal, I suspect that society has more to fear from the repressed emotions of someone like Smith. His metaphor of the invisible hand may be relevant in this regard. We may equate friendship with an open, outstretched hand, but an invisible hand has something sinister about it. In this spirit, Macbeth requested that the darkness of night, "with thy bloody and invisible hand," cover up the crimes he was about to commit.’ ”

Note how Adam Smith’s metaphor is no longer a ‘charming theory’; it’s now only a metaphor, which is how it always was for Adam Smith. Michael Perelman has at least read Emma Rothschild’s classic, Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment, Harvard, 2001 (or the earlier American Economic Review article, 1994) and should know that beside Shakespeare’s use of the invisible hand metaphor, its use is well known in literature, going back to classical times, and fairly common in the 17th-18th centuries.

Perelman resorts to phycho-babble: ‘I suspect that society has more to fear from the repressed emotions of someone like Smith’ and derives from this that his belief that ‘his metaphor of the invisible hand may be relevant in this regard’.

Good grief! Therapy upstages good-old basic reading of the original source to derive the meaning of a text.

Graeme Anfinson, a self-proclaimed leftist, asserts that he ‘can't recommend Michael Perelman's The Invention of Capitalism enough’. With the above selection’s from it, I can see why. Leftists have a conspiracy bias hardwired into their beliefs about the working of commercial societies and adding psycho-babble gives it a touch of modernity.


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