Monday, April 28, 2008

Adam Smith Did Not 'Design' a 'Perfect' Economy

Ray Pairan writes in his Blog (HERE):

Contrived Economic System - Collapse Imminent”:

The current economic system that underlay's this totalitarian economic society is a contrivance that has evolved over decades bolstered by a civil society and social consciousness that corresponds to the precepts and direct control exerted by the business elite. It is just one of innumerable economic models humanly imaginable that could have served as a basis for the economic foundation of economic society. As it stands the global community has settled upon the 'bones' of what once may have been a 'free market' system envisioned by Adam Smith, Ricardo, and other utopian classical economic thinkers who failed to inject the element of human unpredictability into their 'perfect' economic models.

Do to the direct manipulation by the business elite of this malleable economic system we have ended up with a distorted hideous dysfunctional relic. The distortion of the labor market by the business elite in order to reduce our equality of interest within the system envisioned by Adam Smith is now perturbing the system (Chaos Theory, Complex Systems - Santa Fe Institute) sending ripple upon ripple of economic disturbance across the globe
.”

Comment
There are few things more tedious than a prediction by somebody who has a ‘theory’ of how the world works, particularly when the ‘theory’ is based on such false premises as Ray’s, such as:

what once may have been a 'free market' system envisioned by Adam Smith, Ricardo, and other utopian classical economic thinkers who failed to inject the element of human unpredictability into their 'perfect' economic models.

Presented thus, and including Adam Smith on his main charge is, well, laughable, in the sense that it is so wrong that my flabber is gasted.

There was nothing perfect in Adam Smith’s world. He regarded mankind as ‘weak and imperfect’, to say the least, which, incidentally, led to his scepticism about the possibility of people living like saints (see his Moral Sentiments).

Moreover, he specifically and explicitly rejected the notion that the society had to be ‘perfect’ for it to function:

Mr. Quesnai, who was himself a physician, and a very speculative physician, seems to have entertained a notion of the same kind concerning the political body, and to have imagined that it would thrive and prosper only under a certain precise regimen, the exact regimen of perfect liberty and perfect justice. He seems not to have considered that, in the political body, the natural effort which every man is continually making to better his own condition is a principle of preservation capable of preventing and correcting, in many respects, the bad effects of a political economy, in some degree, both partial and oppressive. Such a political economy, though it no doubt retards more or less, is not always capable of stopping altogether the natural progress of a nation towards wealth and prosperity, and still less of making it go backwards. If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered. In the political body, however, the wisdom of nature has fortunately made ample provision for remedying many of the bad effects of the folly and injustice of man, in the same manner as it has done in the natural body for remedying those of his sloth and intemperance. (WN IV.ix.28: p 674)

That should dispose the ridiculous – there is no other suitable word for it – notion that he 'envisioned' “a 'free market' system”, and as one gratiously also described, as a “utopian”, because he was among those who “failed to inject the element of human unpredictability into their 'perfect' economic models”. This is a charge so manifestly untrue as to defy the excuses of a saint.

If there is one thing that separates Adam Smith from modern economists, it is that he injected large doses of ‘human unpredictability’ into his wordly political economy. Where does Ray Pairan get his ideas from? Certainly not from anything Adam Smith wrote.

I suspect Ray has never read Adam Smith, and yet he pontificates about the ‘imminent collapse’ of modern society!

Well Adam Smith also advised a young man who wrote to him about the ‘ruin’ of Britain following reverses in the British governmeent's attempts to supress the colonists in America: ‘There is a lot of ruin in a nation’.

Might be time for some youthful humility when predicting the end of the world as we know it and using Adam Smith as a star witness.

3 Comments:

Blogger Ray Pairan Jr. said...

The capitalist system is a failure simply because of aberrations and manipulations (by the business elite that enhance their financial position at the expense of 95% of the world populous) that are perturbing the complex system. Chaos Theory and economic models that aren't linear are being developed at the Santa Fe Institute. Adam Smith, Karl Marx, and all the other classical Economists though they had strains of logic were basically linear thinkers attempting to apply their linear models to a world that is comprised of a multitude of complex systems any one of which can be perturbed from optimality.

Don't extract one article out of the 44 articles (as http://structuraleconissues.blogspot.com/ ) that I've written because unless you’ve read them all you've obviously missed the entirety of my thoughts and are basing your conclusions on insufficient information or a prejudicial attitude.

Ray Pairan Jr.

1:25 pm  
Blogger Gavin Kennedy said...

Ray
Thank you for your comment.

Adam Smith was not an economist – he was a moral philosopher who also lectured on jurisprudence and ‘political economy’, ‘police’ as it was called.

It was Karl Marx who invested him with the attribute of being a ‘Classical Economist’; it was not something that adequately describes him. Malthus and Ricardo came after him and developed their ideas quite independently of Adam Smith, taking themselves into cul de sacs.

Smith studied the political economy of mercantile Britain from the perspective of an historian, philosophy, ‘sociology’, political behaviour, and social evolutionary changes across prehistory and recorded history. His thinking was anything but ‘linear’ in the sense that you might mean (late 19th century linear mathematics applied to economic magnitudes, narrowly defined). I am aware of the evolution of complexity theory and the publications of the Sante Fe Institute and I consider them a step forward, but not the whole answer.

Your sentence: ‘what once may have been a 'free market' system envisioned by Adam Smith, Ricardo, and other utopian classical economic thinkers who failed to inject the element of human unpredictability into their 'perfect' economic models’, is wrong in respect of Adam Smith and you should recognise it by reading his works, not by accepting misleading summaries from academe.

There is nothing ‘utopian’ in Adam Smith. He did not write about future states of the world – he never knew either ‘capitalism’ as a phenomenon nor as a word in English (first used in 1854) – nor was he idealistic about how people behave.
I will look into your invitation to read your ‘44 articles’, though I should make clear I was not making comments on your predictions, or your theory. I was simply correcting the absolutely incorrect statements that you made about Adam Smith. I am not convinced yet that it is worth reading the rest if you are so wrong about him (but I will give it a try), given the accessibility of his works in many translations and editions.

Also, words like ‘Totalitarian’ ought not to be used in serious discourse when they manifestly are inappropriate.

Gavin

3:56 pm  
Blogger Ray Pairan Jr. said...

Words like 'totalitarian' in relation to our current economic society are quite appropriate given the contrived nature of our current economic system. A global economic system that has clearly evolved to serve the best interests of the top 5% of business elite (investors, CEO's, and others) at the expense of the 95% of the global population.

There is nothing egalitarian, equitable, or democratic about the nation-state civil societies. Powerful business interests use their surrogates (lobbyists in the U.S. alone 35,000) to subvert the will of the people.

By the way it is very convenient to 'poke holes' at my articles given the fact that I'm presenting larger concepts than a comprehensive 'tree level' view of subjects.

It is also very disturbing that the vested interests of the capitalist world are constantly attempting to subvert the voice of the people.

The global community will not have their voice distorted or reduced to 'ash' - I'm certain that they are intelligent enough to read my articles for what they are reflections of reality that don't require interpretation by corporate global surrogates.

Also, I was referring more to the "invisible hand" context that Adam Smith was so kind to convey.

For those who would like to read the complete undistorted article in its entirety. Notice the small out of context reference that was has been to Adam Smith by Gavin Kennedy:

Contrived Economic System – Collapse Imminent

The current economic system that underlay’s this totalitarian economic society is a contrivance that has evolved over decades bolstered by a civil society and social consciousness that corresponds to the precepts and direct control exerted by the business elite. It is just one of innumerable economic models humanly imaginable that could have served as a basis for the economic foundation of economic society. As it stands the global community has settled upon the ‘bones’ of what once may have been a ‘free market’ system envisioned by Adam Smith, Ricardo, and other utopian classical economic thinkers who failed to inject the element of human unpredictability into their ‘perfect’ economic models.

Do to the direct manipulation by the business elite of this malleable economic system we have ended up with a distorted hideous dysfunctional relic. The distortion of the labor market by the business elite in order to reduce our equality of interest within the system envisioned by Adam Smith is now perturbing the system (Chaos Theory, Complex Systems – Santa Fe Institute) sending ripple upon ripple of economic disturbance across the globe.

Through the business elite’s manipulative contrivances that allow them to scour the planet in search of low wage labor while labor is relatively constrained from free mobility because of nation-state laws and economic circumstance the bargaining power of labor is now negligible. With direct control over the civil society and complete influence through their media interests and other outlets of communication the business elite continue to validate the instituted governmental, religious, and societal norms that enhance their direct unfettered control over all the working class. We will never know whether the utopian economic system envisioned by Adam Smith would ever have functioned as envisioned but one thing is abundantly clear any economic model that doesn’t account for the inherent instability of human beings is irrelevant.

Instability is now the touchstone reflected in the daily perturbations coursing across the economic system, civil society, and social consciousness. With income ‘dripping’ in imperceptible ‘drops’ down upon the outstretched ‘hands’ of toiling workers their now exists such an extreme mal-distribution relative to the top 5% of the business elite that consumption (spending) by the working class is almost completely choked off. Coupled with inflationary price distortions that have raised food, and energy costs beyond the reach of only the most income resilient citizens of the developed world we have a fast approaching economic societal disaster moving into view. The shock waves of which are already further perturbing the contrived system with 65,000 retail stores projected to close within the upcoming months, durable goods (big ticket items – cars, refrigerators, etc.) orders falling precipitately, unprecedented mortgage foreclosures, and other to numerous indicators of a working class no longer able to just acquire credit from the ‘company stores’ (banks, credit cards) in order to shore up our paltry wages.

This totalitarian economic society contrived in the interests of the business elite channels greed, corruption, environmental destruction, inequity, disruption, unreliability, instability, governmental malfeasance, and government by lobbyist into a stream of putrid slime that is raining its filth across our planet. It is time to take back our governments, exert our power in numbers, pressure our governmental representatives into the realization that they’ll be held to account for their treasonous actions unless they dislodge the lobbyist tentacles, protest, and organize within the remaining viable labor unions. Act now not tomorrow – from the standpoint of economic justice they’ll be no tomorrow if we disregard reality.


I will no longer continue to respond to comments that don't touch upon the central concepts of my articles. Anyone interested should read my articles and draw their own conclusions.

http://structuraleconissues.blogspot.com

Sincerely,
Ray Pairan Jr.

4:46 pm  

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