Sunday, June 14, 2009

Widespread Use of The Metaphor, But Nothing to Do With Adam Smith

Tomdonovanvoiceover writes in Tom Donovan Voiceover Blog (HERE):

“The Invisible Hand”

Used to be The Invisible Hand, a term first penned by Adam Smith, an 18th century Scottish philosopher, referred only to free market dynamics and the trading of goods and services.

He had in mind an uncoordinated and unregulated exchange of value – a “this for that” proposition between citizens and nations he believed produces greater abundance and contributes to increased individual and collective happiness.
In essence, he was thinking about the reasons to employ one’s time gainfully. You see, Mr. Smith believed a benevolent God steers the Universe to maximize our bliss. Work produces wealth. Wealth produces happiness. Work is divine, or nearly so, anyway.

Nowadays, his metaphor is assigned to all manner of things, good or bad, economic or not.


Comment
I chose this piece on the invisible hand metaphor, not for its economics or its historical lack of accuracy, nor even for its religious errors, but as an example of the unintended consequence of a few very smart economists caught up in their triumph over the anti-capitalist challenges of foreign communist systems and domestic socialist (or is that ‘liberal’) critical voices, inventing a quasi-plausible (they had read the Texts, hadn’t they?) attribution to a famous progenitor of their science that shrouded their formal models with a mystical, absolutely unscientific glow.

As long ago as 1876, critics in the British Academy queried why political economy was included in Section F as a science, given its heterogeneous nature, both with pretensions to being a science and with major exhibitions of its unscientific nature, melded as it was with religious, quasi-religious, and sociological vague notions of types.

From the 1950s, the science of economics reached a maturity and coincidentally adopted mystical allusions of an inherent harmony of forms, blessed with an invisible and redundant entity leading its elements to act in the manner which their psychological states would bring about anyway.

For the record, the metaphor of an invisible hand was not “first penned by Adam Smith” (it was a well known metaphor in the 18th century and has a much longer lineage back into classical times: see my ‘Adam Smith and the invisible Hand: from metaphor to myth’: email me at the top of the page for a copy).

Adam Smith’s use of the metaphor did NOT refer “only to free market dynamics and the trading of goods and services” – it didn’t refer to these categories at all!

It appeared in a late chapter of Wealth Of Nations (Book IV, chapter 2) in regard to the consequences of risk aversion in terms of their “own security” of some, but not all, merchant traders, who because of their risk aversion they preferred to invest locally rather than in foreign trade. Having explained these circumstances, Smith slipped in the metaphor, for the only time in Wealth Of Nations.

He did NOT have “in mind an uncoordinated and unregulated exchange of value – a “this for thatproposition between citizens and nations he believed produces greater abundance and contributes to increased individual and collective happiness.” He never mentioned the invisible hand in Books I and II (where he discusses “an uncoordinated and unregulated exchange of value – a “this for that” proposition between citizens”.

Mr. Smith did NOT believe that “a benevolent God steers the Universe to maximize our bliss.” As a moral philosopher he taught the views of many philosophers, ancient and modern, without necessarily asserting to his students that any one of the many philosophic systems that he taught were true, as can be seen if you read his Moral Sentiments (1759).

In fact it is quite clear that such assertions are not true (see my: ‘The Hidden Adam Smith in his Alleged Religiosity’, which can be obtained by emailing me at the top of the page).

Tom Donovan may believe that “Work produces wealth. Wealth produces happiness. Work is divine, or nearly so, anyway”, but that is nothing to do with Adam Smith’s ideas.

UPDATE

Tom has edited his original blog entry HERE
It is well worth reading as amended because he incorporates what is the correct presentation of Adam Smith in relation to the invisible hand metaphor and the correct presentation of opinions about hsi religous views.

Well done, Tom.

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4 Comments:

Blogger Tom said...

Thank you for the corrections, Professor. I have drafted some changes to my blog post. Would respectfully ask your help editing my references to Mr. Smith before I publish. Would you email me at tpmdonovan@aol.com

2:30 pm  
Blogger Gavin Kennedy said...

Hi Tom

I did not mean to be offensive in any manner; what you posted is commonly heard among economists, particularly with the metaphor of the invisible hand. I am in constant debate with colleagues over the meaning of this metaphor, as a scroll down my Blog shows.

You can read my views on this metaphor by emailing: gavinK9ATgmailDOTcom.

Gavin

3:44 pm  
Blogger Gavin Kennedy said...

Tom

What an excellent transformation you have made on your Blog to the criticism I made yesterday.

I concur with your revised version in all respects.

If only all those others who make wrong attributions to Adam Smith did someting similar!

Readers can follow the link to Tom's excellent new piece on the main article to which these comments refer.

Thanks Tom

Gavin

9:03 am  
Blogger Tom said...

Thanks, Professor! Appreciate your kind remarks.

9:17 am  

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