Friday, October 10, 2008

A Pleasant Shock from a Forbe's Book Review

A book review ‘Learning From The Prisoners’ in by David Henderson 10 October, includes this passage:

The authors err badly, though, in writing that the prisoners' dilemma shows Adam Smith's mistake in claiming that each firm pursuing its self-interest leads to an outcome that is best for them all. Adam Smith never said that. Smith's focus was on what's good for the society in general, and he had no special concern for the wellbeing of firms.

Indeed, the temptation to cheat on cartel pricing is one of the main protectors of consumers. In the bigger picture, therefore, the prisoners' dilemma, because it leads to cheating on cartel pricing, is a major pillar of the modern Smithian view that free markets are good for consumers

What a breath of fresh air such critical comments in a book review can evoke at present.

David Henderson tells off two opinionated authors, Avinish K. Dixit and Barry J. Nalebuff, for their clichéd assertions about Adam Smith.

The mythical Adam Smith that modern economists take on trust from their tutors without reading Adam Smith's works for themselves has a habit of undermining their credibility.

Congratulations David Henderson. Read the full review HERE.


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