Tuesday, February 03, 2009

Chinese Premier Wen Almost CertainlyHas Read Adam Smith

In Stephen’s Posterous (HERE):

Financial Times Editor Lionel Barber (LB) interviews Premier Wen of Chen (full text):

"LB: Premier Wen, I realise we’re running short of time. I had my own quote from the Theory of Moral Sentiments.

WJ: Well, I think for quite some time this book has not attracted due attention or attention that it deserves. I think it is as important as The Wealth of Nations. He made a reference to the invisible hand only on two occasions in these books. One, he refers to the market; the other, he talks about the morality. And please go ahead with your quote.

LB: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others and render their happiness necessary to it, though he derives nothing from it except the pleasure of seeing it.”

WJ: I think this is very well said, and I have been reading the book and this book I carried with me in my suitcase on the trip.

LB: Thank you very much for agreeing to talk to the Financial Times. It’s been very enlightening.
WJ: Thank you."

The full interview is most interesting and you should follow the link and read it.

I selected the reference to what Premier Wen said about Moral Sentiments and Wealth Of Nations becuase other claim to carry a copy of one of them around too (I believe Gordon Brown also makes this claim).

Of course, many select the first paragraph of Moral Sentiments to quote, thus safely giving the impression that have read it all. But what is interesting and signifcant in my mind is that Premier Wen probably has read both books because he says:

"He [Adam Smith] made a reference to the invisible hand only on two occasions in these books. One, he refers to the market; the other, he talks about the morality."

Now most people don't appear to know this fact of the singular reference to 'an invisible hand' in each book, and even fewer would fiferentiate between the use in Wealth Of Nations and its use in Moral Sentiments. Many economists - too many - appear to believe that Wealth Of Nations is riddled with references to the metaphor of an invisible hand and they talk was if there is absolutely no doubt that Adam Smith had a 'theory' of the invisible hand applied to his writings on how markets work.

The fact is he didn't have such a theory nor does he use the metaphor in refernce to how markets work (see Book I and II, in which Smith does not use the metaphor.

Premier Wen accurately stated Smith only used the metaphor once each in both books. That suggests that he has read both books and is more familiar with Smith's use than most Western economists.

True, he links the use in Wealth Of Nations to the market and, in my view, that is incorrect, but I think the realisation that Premier Wen has done what he says he has done is most encouraging, and it remains a bit of a shame that we cannot celebrate the same for the majority of economists, who arrogantly tells us what Adam Smith was about, from sadly, a position of real ignorance.

Congratilations Premier Wen.

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