Wednesday, May 14, 2008

The Invisible Hand Strikes Again?

THE SUNCOAST NEWS (Pasco County, Florida)14 May, reports on local residents not wanting Wal-Mart in their midst, though it had all the permits from officialdom, but suddenly Wal-Mart decided not to build there because of the economic downturn. Its author declared that this was an example of Adam Smith's invisible hand:

Public protest and the ability to agitate for redress of whatever grievances we might have are rights as old as our republic. We take them quite seriously
Still, when it comes to getting things done, there's nothing like another concept that was put to paper during the 18th century, Scottish moral philosopher Adam Smith's invisible hand. There's nothing like the power of the market when it comes to getting things done

Yes, markets are powerful by signalling to people what they might choose to do if a situation persists. But this has nothing to do with Adam Smith and his use of metaphor of ‘an invisible hand’. It’s what people on the information they have and choose to do that moves markets, not disembodied hands.

Adam Smith’s use of the metaphor had nothing to do with his reference to ‘an invisible hand’ in Book IV of Wealth Of Nations; his statements on how markets work is stated in Books I and II and did not mention anything about invisible hands.

It's an everyday example of the myth of the invisible hand at work.


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