Wednesday, February 18, 2009

A Good Case for Markets Spoiled by Misuse of Quotations

Walter E. Williams posts (18 February) ‘Economic Miracle’ in The Patriot Post (‘the conservative journal of record’) HERE:

Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, "He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." Adam Smith continues, "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."

If you have doubts about Adam Smith's prediction, ask yourself which areas of our lives are we the most satisfied and those with most complaints. Would they be profit motivated arenas such supermarkets, video or clothing stores, or be nonprofit motivated government-operated arenas such as public schools, postal delivery or motor vehicle registration? By the way, how many of you would be in favor of Congress running our supermarkets?

While agreeing with much of the content of Walter E. Williams’s article, I am bound to say that he also exposes that he has never read Wealth Of Nations from which he quotes.

This is obvious from his lack of context to his quotation of the famous and sole ‘invisible hand’ paragraph from page 456 in Book IV of Wealth Of Nations, which doesn’t quite say what he alleges it does. But leave that alone. It is an error that many (most?) people make and I have answered it many times on Lost Legacy.

However, he then says: ‘And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest”, which is on page 27 of Book I, that is 235 pages earlier than page 456, and is by no means ‘later’. Clearly, Walter has never opened a copy of Wealth Of Nations, otherwise he would not have made such a crass error.

Is this important? Well, it is indicative that Walter relies on ‘popular’ versions of the misuse of The Metaphor, which are usually quite wrong.

I have read prominent economists, of unimpeachable standing, join the invisible hand paragraph (there is only one in the entire Wealth Of Nations written by Adam Smith) to the ‘butcher, brewer, and baker’ paragraph as if they appear together.

Even then, they miss the point Smith makes in the ‘butcher, brewer, and baker’ example: Smith advised those seeking their dinner to appeal not to their own self-interests, but to address themselves to the self-interests of the ‘butcher, brewer, and baker’. In short: you serve your own self interests by serving the self interest of others, which is not how most economists conclude from what is plainly written there.

But, this paragraph has nothing to do with The Metaphor of ‘an invisible hand’ as Smith used it, nor anything to do with how the numerous authors before and contemporary with Smith used it (download my paper, Adam Smith and the invisible hand: from metaphor to myth, from Lost Legacy’s home page, in red).

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Blogger Andres said...

While I agree with Walter Williams on how badly supermarkets would surely be run by Congress, I also believe that nothing has done more harm to the understanding of Adam Smith than this annoying practice, so common among dogmatic libertarians, of constructing paragraphs with bits of Adam Smith's thought that are taken out of context. This reaches the wide audience, people who will not eandeavour to read the entire book, so they'll remain ignorant, for example, of the fact that some of those bits come from the less liberal sections of the book, where Adam Smith discusses limitations to the doctrine of free trade.

In addition to this, if Williams really had the purpose of using Smith to illustrate the notion of social cooperation, instead of promoting free-market militancy, he would have found in other parts of the book -for example, the first chapters of Book I-, a deeper exploration of the notion of cooperation.

4:33 p.m.  
Blogger Gavin Kennedy said...

I agree with you completely. The case for free and feer markets where possible and state action to facilitate commerce, defend the populace, and enforce justice and liberty, where necessary, normally funded by taxation, with limited reliance on borrowing, is often compromised by so-called libertarian sloganising, often wrapped in totally idealistic notions of human nature.

Smith's was also a historical perspective on the present (he had little to say about the future, leaving to future generations about how they would cope with the inevitable future problems, of which the present had nothing useful to contribute, except through the acculation and safe preservation of knowledge, including knowledge of the past.

Smith was never an ideologue; there is no good reason why the present generations should be other than pragmatic.

8:05 p.m.  

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