Monday, June 08, 2009

That Metaphor Again

“Quotable: Invisible hand or invisible foot?”
In Freedom Politics by Gary Galles preposted by R. Lee Wrights in on Rational Review HERE:

Important people are commemorated on their birthdays. But the birthdays of some, such as Adam Smith, history’s most famous economist, are unknown. However, we do know he was baptized on June 5, 1723, making it an appropriate time to remember him. Smith is most remembered for articulating how the ‘invisible hand’ of market interactions can coordinate a society based upon liberty — i.e., private property and voluntary exchange — more effectively than the coercive power of the state. Unfortunately, Smith’s crucial insights are overlooked by politicians who talk of liberty, but legislate and regulate away its center piece — voluntary arrangements.” (5 June)

Smith is ‘most remembered’ for what modern economist in mid-20th century attributed to him (Paul Samuelson, Milton Friedman, etc.,) incorrectly in respect of an invisible hand of ‘the market place’.

Smith’s use of The Metaphor referred to the risk-avoidance of some, not all, merchants who thereby preferred the home to foreign trade. He didn’t use The Metaphor in Books I, II, III and V of Wealth Of Nations, though non-readers of his book would get the impression that the metaphor of an invisible hand is used throughout his magnum opus. It isn’t; only once does he use it in Book IV after describing why merchants prefer home to domestic trade – in consideration of their ‘own security’.

Long before the 18th century, societies legally protected ‘private property and voluntary exchange’ and had laws about contract. Liberty came later, slowly at first (the long struggles in feudal societies across Europe from the 11th to the 17th century) and then fairly rapidly from the 18th to the 21st century.

Liberty is about the rule of law, not men; Habeas Corpus; trial by juries; independent judiciaries; separation of powers; freedom of speech and assembly; and accountable governments.

Adam Smith criticised the mercantile political economy of his day, and in many shapes and forms its essential characteristics still function in all modern societies (Big Governments, protectionism, subsidies, tariffs and prohibitions, jealousies of trade, and hostile trading policies).

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