Thursday, May 14, 2009

Hyperbole and the Invisible Hand

Walter Williams (Townhall.com) HERE in ‘aconservativeedge’ 18 February writes: “The Invisible Hand Is As Certain As The Law Of Gravity

Adam Smith: “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.”

Comment
Hyperbole in pursuit of making a statement does not improve its merits. In this case, it is almost laughable and certainly inappropriate. Gravity is a phenomenon across the entire universe, not just under apple trees. The invisible hand is a literary metaphor and as such it is not subject to the law of gravity.

The lines that Walter Williams quotes, from Book IV, chapter II, Wealth Of Nations (page 456) have been torn out of context.

Smith is talking about those merchants who prefer to conduct their business close to home and not abroad. He was not talking about all individual merchants. Their reasoning is their concerns for ‘their own security’ (it says so in the rest of the paragraph not quoted).

Risk aversion is well known today, so there is no excuse for not mentioning it (some insure against risks, some don’t). The merchants discussed by Adam Smith coped with foreign trade risks by not trading abroad with foreigners. The metaphor of ‘an invisible hand’ is a metaphoric treatment of their risk-averse behaviour. But many merchants did trade abroad and still do.

At the time, Britain exercised a monopoly of trade with its colonies in North America, enforced by the Royal Navy under the Navigation Acts (1660, as amended). These merchants were less risk-averse than the subject of the paragraph, only partly quoted. For taking the risks they received higher profits.

Apparently, they were not ‘led by an invisible hand’ – a strange omission if you think about it, given the importance of foreign trade in Smith’s analysis.

Next, Walter Williams exposes himself to a doubt that he has actually read Wealth Of Nations. He writes:

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.”

But the ‘benevolence of the butcher, the brewer, or the baker’ is not ‘added later’. It comes many pages earlier in fact, in Chapter II of Book I, on page 26, which is long before page 456! It also had nothing to do with Book IV.

What can one say? Not much.

Labels: ,

0 Comments:

Post a comment

<< Home