Sunday, October 12, 2008

A Quotation From Adam Smith Too Far?

Cynicuseconomicus (HERE), 11 October, assesses a global conspiracy:

Economic Crisis - Conspiracy and the New World Order?

I have had some comments that have suggested that the crisis is all a big conspiracy for a new world order. As regular readers will be aware, I am more inclined towards the principle of foolishness and stupidity. I followed a link to the Daily Kos, and had a quick look through an article to get a feel for a feel of how these theories are being presented. I remain unconvinced that this is all the result of a plot, but do have concerns at the power that might be taken by government resultant from nationalisations, and the cosying up of world leaders to 'fix' the problems. The latter brings to mind a quote from Adam Smith:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices

Whilst not entirely apt, I think that the idea carries over to this well. This leads neatly into the current state of the panic that is driving countries to act in unison.”

A quote too far, perhaps?

The notion that a group of mercers, butchers, tinsmiths, carpenters, wheelwrights, and such like, acting under law that established their monopolies by incorporation in the towns where they traded, while keeping a jealous eye on any interlopers trying to setup shop in the town but not having served the required seven-year apprenticeship to a master living in the town (and he having served his apprenticeship too), had any similarity to modern bankers, speculators, and such like, is only just short of being ludicrous.

Smith had no time for the Incorporated Towns and their in-built monopolies that ‘widened the market and narrowed the competition’, enabling their trades folk to charge higher prices to a town’s citizens.

As for conspiracies and new world orders, follow the link to the cynic’s Blog.


Blogger bradbrusavich said...

Professor Kennedy,

I have been intrigued by your blog posts and feel fortunate to have stumbled upon them in my research for a paper in a competitive analysis and business cycles course paper. The first paper asks us to respond entirely to Adam Smith's (supposed) ideas about division of labor, self-interest and the invisible hand and how they are relevant today; how supply and demand reflect Smith's invisible hand concept; ands lastly, what a current example of Smith's invisible hand concept would be.
If I am understanding correctly, Smith's reference to the invisible hand was more a common metaphor of his times rather than a statement on economic conditions, theory or an economic idea or philosophy. Have you read "Adam Smith and the Invisible Hand" by Helen Joyce from Cambridge University?

12:26 am  
Blogger Gavin Kennedy said...

Many thank bradbrusavich for the lionk to Helen Joyce's paper. I had not read it before.

In my (humble) view she is completely incorrect about Adam Smith's use of the metaphor of 'an invisible hand', though it is the strongest case I have seen for what many economists (including Nobel prize winners for which detials of this year's awards are out to today).

I will read closely her paper later
and comment on Lost Legacy.

Initial point:Adam Smith was not 'profoundly religious' (his mother was) and, while this is widely believed by some current religious affiliates,it is not shared by many philosophers who are familiar with his works. This is an intended topic for my next research project, the reading for which I am undertaking just now.

It seems on first reading that Helen Joyce is stating what are known as 'invisible hand explanations', which gives imaginative scope to linking them to Adam Smith without explaining anything about how an invisible hand works (it certainly cannot be modelled) and falls back on a 'mystical' notion without content, a somewhat surprising state of mind for a mathematician.


6:30 am  
Blogger CynicusEconomicus said...

I am not sure that this the description of my quote as 'ludicrous' is entirely fair. If you read the quote again, I say the 'latter', meaning governments cosying up together is the point that brings together the comparison. I also say that it is not 'entirely apt', and in doing so, am implicitly saying that it is out of the original context.

However, on a more positive note, an interesting blog, and I am glad that your comment pointed me here.

10:15 am  
Blogger Gavin Kennedy said...

Thanks cynicuseconomicus for clarifying your point.

A fair number of commentators use the quotation about 'people in the same trade' etc., without the distinction you make. I am cyncial enough to expect the managers of the spending of the bailout will behave less than responsibly (with not a few 'scandals' to emerge later.

Lost legacy is sometimes a blunt instrument...


12:26 pm  
Blogger CynicusEconomicus said...


Many thanks for such a gracious reply, and 'yes' on the likelihood of the scandals.

11:43 pm  

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