Sunday, August 10, 2008

The Very Visible Hands of Markets

Sometimes a journalist (who may have a background in some formal economics education) hits the nail on the head about the reality of markets, as Adam Smith intended.

But Smith’s legacy has become victim to some lazy modern economists raiding his works to ‘lift a metaphor’ to justify their own life’s work by using his iconic name to bless by association their imaginary economies that allegedly validate general equilibrium theory.

Enter the lists one Simon Caulkin, management editor of The Observer (UK), 10 August, HERE:

One of the fallacies earnestly and unquestioningly maintained by New Labour is that we live in a primarily individual economy. We don't. To adapt Adam Smith, it's not through the efforts of the individual baker, farmer and consumer that toast, eggs and tea materialise on our tables in the morning - it's through the very visible hand of Tesco, Associated Foods, Nestlé and the utility companies. No organisations, no breakfast.”

I like it. Caulkin's observation would shame many professional economists who prattle on about ‘invisible hands’ mysteriously working their ‘magic’, blessed by a divine spirit, to keep markets doing their job, as if the same economists didn’t know how markets worked without the mumbo-jumbo emanating from mid-20th century economists.

Can you imagine a student economist answering a question on markets by simply writing that “it’s all down the invisible hand (see Adam Smith, passim)”, and his grader, a fully paid-up member of the ‘invisible hand mythology paradigm’, ticking the answer and passing her?

I take Simon Caulkin’s paragraph as better news on the Lost Legacy front that the usual Sunday nonsense about invisiblle hands that I have to comment upon most weeks.



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