The Invisible Hand - Again!
Dolores S. Saltzman writes a guest column in the Ithacajournal.com (HERE):
“Insights of Adam Smith shed light on current financial crisis”
The 18th century writings of Adam Smith, especially the work popularly known as “The Wealth of Nations,” supposedly informed American economic policies for the last 30 years. Smith famously said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest.” In trying to further understand how markets worked he sometimes used the familiar term “invisible hand.” Personal gain was surely a powerful motivator. We must agree. Call it greed if you wish, but in the case of markets, personal self-interest is often beneficial to society."
Comment
The sentence, “In trying to further understand how markets worked he sometimes used the familiar term “invisible hand” is utterly wrong in respect of Adam Smith.
He used the metaphor of ‘an invisible hand’ only once in Wealth Of Nations (Book IV, Chapter 2) and used it nowhere else in that long book; in particular he did not use it in reference to ‘how markets work’ at all (covered clearly in Books I and II).
Dolores S. Saltzman repeats a modern myth about Adam Smith and the invisible hand that is promoted by people who have not read Wealth Of Nations, or his Theory of Moral Sentiments (in which he uses the metaphor again, only once and, again, not in reference to how markets work. That makes only twice in over a million words!).
‘Tis a pity because it could have been a good article.
“Insights of Adam Smith shed light on current financial crisis”
The 18th century writings of Adam Smith, especially the work popularly known as “The Wealth of Nations,” supposedly informed American economic policies for the last 30 years. Smith famously said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest.” In trying to further understand how markets worked he sometimes used the familiar term “invisible hand.” Personal gain was surely a powerful motivator. We must agree. Call it greed if you wish, but in the case of markets, personal self-interest is often beneficial to society."
Comment
The sentence, “In trying to further understand how markets worked he sometimes used the familiar term “invisible hand” is utterly wrong in respect of Adam Smith.
He used the metaphor of ‘an invisible hand’ only once in Wealth Of Nations (Book IV, Chapter 2) and used it nowhere else in that long book; in particular he did not use it in reference to ‘how markets work’ at all (covered clearly in Books I and II).
Dolores S. Saltzman repeats a modern myth about Adam Smith and the invisible hand that is promoted by people who have not read Wealth Of Nations, or his Theory of Moral Sentiments (in which he uses the metaphor again, only once and, again, not in reference to how markets work. That makes only twice in over a million words!).
‘Tis a pity because it could have been a good article.
Labels: Invisible Hands
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