Tuesday, April 08, 2008

Malthus Was Not the Author of the 'Dismal Science'

Ren, writing in Accounting Solver (HERE) asks:

WORLD GRAINS PRODUCTION BALANCE SHEET 6: Can the balance be sustained?

He opens with the following:

"While Adam Smith introduced the invisible hand to economics, Thomas Malthus caused economics to be called the dismal science. Malthus observed that population was growing at a rate several times faster than food production, eventually leading to starvation and wars.

The World Grains Production Balance Sheet shows that there might be some truth in Malthus’ prediction…"

REN also provides an exposition in an earlier post (25 December 2007) of what he understands by the invisible hand:

Adam Smith’s invisible hand has pretty much influenced entrepreneurial and corporate thinking. The most common interpretation of the invisible hand is: in pursuing self-interest, individuals promote the common good; a free and democratic market is best for business and the economy. The common interpretation, however, ignores or has forgotten that Adam Smith also posited that there should be strong moral norms underlying the effective and efficient workings of the invisible hand. Without strong moral norms in individuals, societies and nations, the invisible hand leads to poverty and unequal distribution of wealth, big business taking advantage of instead of taking care of, wars for economic gain, even global warming.”

I agree that Ren’s exposition of the invisible hand that ‘The most common interpretation of the invisible hand is: in pursuing self-interest, individuals promote the common good’, but the trouble is that this is not what Adam Smith wrote.

It is what modern economists from the mid-20th century began to assert Adam Smith was the originator of such a theory, mainly to give justification to their theories of how markets work. Smith didn’t introduce ‘the invisible hand to economics’; Chicago economists did so indepedently of what is in Wealth Of Nations.

Adam Smith described how markets work in Books I and II of Wealth Of Nations without mentioning anything about invisible hands. Not a lot of economists either know nor believe that (and ignore it when advised of it, as I often do on Lost Legacy).

Usually the famous quotation about the ‘Butcher, the Brewer, and the Baker’ supplying your dinner from their self interest (they get in return your money price enabling them to purchase what they want elsewhere) and they then add to it (without admitting what they are doing – normally we would call that ‘sleight of hand’) a quotation from Book IV of Wealth Of Nations that mentions the metaphor of the invisible hand on an entirely different subject (risk avoidance).

To say this is a deception may be thought to be a trifle extreme, but that is exactly what it is. A student behaving thus in a tutorial would be spoken to about such use of argument by the tutor.

As for the allusion to Malthus and the ‘dismal; science’ that too is a matter of ignorance (wilful or accidental). It qualifies as an ‘urban myth’.

The notion of economics as the dismal science comes from a pamphlet written by Thomas Carlyle attacking John S. Mill in 1849, not Malthus or Ricardo in the early 19th century.

The cause was a slave rebellion in Jamaica of which Mill advanced the perfectly respectable notion that black slaves were every bit as human as their white slave masters and should be treated as such.

Carlyle was enraged at such a notion and railed against economists for purveying such notions in what, can only be described, as the most disgusting of terms. I leave it to readers to Google Carlyle on slavery to read his words, which was published in his pamphlet, ‘On the Negro Question’, an edition of which was published as ‘On the Nigger Question’.

Incidentally, Thomas Malthus was writing about what became known as the ‘Malthusian Trap’, in which per capita incomes of the majority of the population remained at subsistence level throughout all of human history (except for the elites) until around 1800, when in a corner of Western Europe, per capita incomes and consumption began to rise decade-on-decade for the very first time and have continued to do so.

The notion that Malthus and Ricardo represented economics as 'dismal' is a post 19th-century re-construction (Malthus being 'pessimistic', and Ricardo being 'difficult to read.


Blogger Michael Kruse said...

"...Thomas Carlyle attacking John S. Mill in 1949..."

Should this be 1849? Thanks for a great summary of the issues.

7:20 p.m.  
Blogger Gavin Kennedy said...

Hi Michael

Embarrassing and careless mistake on my part, for which grovelling apologies. Many thanks for drawing my attention to it and allowing me to correct it.

I am glad you enjoyed the rest of the article.


6:06 a.m.  

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