Tuesday, February 03, 2009

Adam Smith's Use of Metaphors

Evelyn Pyburn writes a guest commentary for Big Sky Business Journal HERE:

Don’t Give Up on Markets”

“The financial meltdown has led many people, especially politicians, to blame the problem on market failure and to jump on the regulatory bandwagon. Though the problems on Wall Street are much more related to regulated markets than free markets, the call is for more regulation to fix failed regulation. Couple this with the fact President-elect Obama and a Democratically controlled Congress are unlikely to embrace Adam Smith’s notion of the invisible hand, and we can expect the anti-regulatory sentiment born in the Reagan administration to wane quickly

It’s better not to “to embrace Adam Smith’s notion of the invisible hand”, that way they only drop a metaphor that had nothing to do with anything Adam Smith wrote about markets.

Markets work without disembodied hands of unknown relevance, as Smith explained clearly in Wealth Of Nations in Books I and II. There is not need for mystical explanations for how markets work. Smith certainly didn’t link markets to quasi-spiritual influences in his use of a well-known 18th-century literary metaphor of ‘an invisible hand’.

Another metaphor he used had to do with the ‘operations of banking’ in the form of their “providing, if I may be allowed to use so violent a metaphor, a sort of waggon-way through the air” [(WN II.ii.86: p 321).

I wonder what the epigones of the mid-1950s would have done if they had read that far in Wealth Of Nations and had picked on that metaphor to describe the mysterious role of banking to “enable the country to convert, as it were, a great part of its highways into good pastures and corn fields, and thereby increase very considerably the annual produce of land and labour”?

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