Tuesday, December 30, 2008

Adam Smith Accused of the Myth of the Invisible Hand

David Orr comments on “Shelf Life” posted by Woody Tasch, December 30th, 2008, on Powell’s Books Blog (HERE):

But if we are going to get to the durable ideas that will show us the way forward, the way back towards life, then we are going to have to get around one product of "economic fantasy" whose shelf-life has been, and continues to be, particularly stubborn.

This is the myth that was planted in the modern mind by Adam Smith in the late 18th century. This is the myth-masquerading-as-market-making known as the Invisible Hand. Its shelf-life puts irradiation and ultra-pasteurization and EDTA to shame

Ah, but the fact is Adam Smith didn’t do any such thing. He used the metaphor of ‘an invisible hand’ once in Wealth Of Nations (Book IV), and his use of it had nothing to do with market-making, thoroughly covered in Books I and II, and without any mention of ‘invisible hands’.

Check it out for yourself.

The myth came from mid-20th century economists who invented a different use for the metaphor from that which Adam Smith used it (only once!) and their successors oversold it to the general public, who trust what prominent economics, including some Nobel prize winners, tell them.

See my paper, 'Adam Smith and the Invisible Hand: from metaphor to myth', downloadable from the Lost Legacy Home Page (in red ink near the top).



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