Tuesday, December 09, 2008

An Epidemic of Invisible Hand Nonsense

Three Silly ‘Atrocities’ Attributing the Myth of the Invisible Hand to Adam Smith:

1: “Will Obama raise fuel taxes?” by John Kemp in the UK guardian.com HERE:

Adam Smith's theory of the "invisible hand" has price changes acting as a signal to ration demand and encourage supply.”

Oh, no it didn’t!

Adam Smith wrote nothing about ‘invisible hands’ in his statements about ‘signals’ from ‘price changes’ to ‘ration’ or ‘encourage’ ‘supply’ or ‘demand’. The statement is false, misleading and a myth.

2 Pat Crowley writes about Rhode Island’s Future (HERE)
and asks:

Adam Smith’s Invisible Finger: where does it point in Rhode Island?”

Rhode Island has nearly $50,000,000 worth of faith in the invisible finger of Adam Smith. Actually, the number is $50,381,453.25. That is the amount of money we gave out to Rhode Island companies in bonds, grants, loans, loan guarantees, matching funds, or tax credits".

It doesn’t point anywhere because he didn’t use the metaphor for such a purpose (anyway, if it is invisible, how would anyone know where it is ‘pointing’)?

If Rhode Island's government spends $50 million, ask the state accountants where it has gone. If it has no discernable effect on economic activity, ask the politicians. It has nothing to do with Adam Smith.

3 In KXnet.com (HERE) (8 December), we get this nonsense about Adam Smith:

Shocker: Denying Companies Illegal Labor Forces Wages, Benefits To Rise”

“Now, typically you wouldn’t invoke Adam Smith and his “invisible hand” in an instance where the government is arresting and deporting workers, but in this instance it works

A meaningless jumble about Adam Smith’s views, using the myth of ‘an invisible hand’.

From standard economics: if the supply of labour reduces for any reason, and effectual demand remains the same, then there will be upward pressure on wage rates. Adam Smith said as much in Books I and II of Wealth Of Nations without invoking anything remotely related to the metaphor of ‘an invisible hand’, only mentioned once, in Book IV and for an entirely different subject.



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