Adam Smith and Social Evolution
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"As every individual, therefore, endeavors as much he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." (The Wealth of Nations)
Adam Smith realized that markets were capable of coming up with answers to questions that no human had the ability to solve. It was as if the system itself were exhibiting intelligent behavior. This is what he referred to in 1776 as “the Invisible Hand.” Today, scientists would call it emergent behavior in a complex adaptive system. But this behavior posed a problem—how did it happen that the world would be arranged in such a way that individuals seeking their own ends should happen to lead to such a happy state? For Smith, the answer was clear: God designed it that way. Leaving aside the theological question, however, what he proposed was perhaps the first realization of the idea of a creative rational mechanism: a designer (in this case God, but without necessarily using superhuman intellectual ability) could create a system that was capable of coming up with rational and creative decisions through an arrangement of many components, each following simple rules.
The quotation from Adam Smith is from Book IV.ii.9: 456 and as usual the interpretation put on it is less than satisfactory for reasons discussed regularly on Lost Legacy.
The statement that “ This is what he referred to in 1776 as “the Invisible Hand” is quite misleading. As is this too: “how did it happen that the world would be arranged in such a way that individuals seeking their own ends should happen to lead to such a happy state.”
A moment’s thought about this assertion shows it to be false. All human actions whatever their motivation or none have consequences. Sometimes these consequences produce ‘happy states”, broadly applied, and as many others produce ‘unhappy consequences”.
What happened to the so-called ‘invisible hand’ then? The history of the world is replete with unhappy consequences of human actions, well recognised and identified in Wealth Of Nations. They provide rich sources for many other quotations thrown out by people who, for the most part, we can be sure have never read Wealth Of Nations for themselves.
Adam Smith refers in Books I and II of Wealth Of Nations to over 50 instances of people acting in their self interests (as they see them) in which the outcome for society is less than beneficial. These two books cover a third of the Wealth Nations and in none of these instances (nor indeed in any others) does he mention ‘an invisible hand’. The metaphor was not a general consequence at all.
To say that: ‘It was as if the system itself were exhibiting intelligent behavior’, is nonsensical statement.
‘Systems’ do not create or exhibit ‘intelligent behaviour in any sense that it might mean for a human or other animal intelligent behaviour. Societies are not ‘intelligent’; the people in them may be, but they do so as individuals. What the author is trying to slip in is something akin to ‘an intelligent designer’, by which we move into the realm of the supernatural, and of which nothing can be said (who or what designed the intelligent designer’?).
“For Smith, the answer was clear: God designed it that way”. I beg to differ. It is anything but clear in Smith that this was his meaning. He wrote his books and delivered his lectures within the imposed consensus of his day, much as academics in Soviet Russia and its client states were careful to slip in phrases from Marx to pass the vigilant eyes of the state commissars. Smith and others were obliged to nod to the Church vigilantes who could make life difficult for people suspected of apostasy.
Emergent behaviours that improved the survivability of an individual and progeny in their environments, if replicated across the group, spread and continued to ‘improve’, not consciously but by ‘conversation’ and ‘exchange’. Those behaviours that had a different outcome, led the group to extinction over time.
Each of the apprximately 20 predecessors of the Sapien species in the main survived for a million years; Sapiens have existed, so far, for upwards of 60,000 years, perhaps more, but nowhere yet as it lasted as long as its predecessors. And it has been, at several stages, minutely close to extinction, ‘saved’ only by minimal changes in behaviours, and locations that made those marginal differences (a single bush fire or similar ‘accident’ could have made a fatal difference).
Smith was on the right track but did not have enough knowledge of what we know now to have completed his social-evolutionary analyses.