Friday, August 07, 2009

Almost Entirely Wrong

One STDV (“Daily, Politically Incorrect Musings on Race, Culture, Intelligence, and Politics”)HERE:(6 August) posts:

Darwin Takes on Adam Smith's "Invisble Hand" Theory”

Via Lover of Wisdom comes this article applying Darwin's theory of natural selection to economics. The author contends Adam Smith's "invisible hand" idea doesn't apply in markets where relative success is important.
“Smith is celebrated for his “invisible hand” theory, which holds that when greedy people trade for their own advantage in unfettered private markets, they will often be led, as if by an invisible hand, to produce the greatest good for all... My prediction is that it will eventually be supplanted by a version of Darwin’s more general narrative
...”

The central theme of Darwin’s narrative was that competition favors traits and behavior according to how they affect the success of individuals, not species or other groups. As in Smith’s account, traits that enhance individual fitness sometimes promote group interests.”

Comment
A mixture of misinformation, myth, and acute observation! In short, he gets Adam Smith mostly wrong and Charles Darwin mostly right.

Adam Smith didn’t have a theory of ‘an invisible hand’. It was a metaphor for people sometimes responding to their perceptions of whatever they considered important that sometimes, but not always, had beneficial outcomes for them and sometimes, but not always, unintentionally had beneficial outcomes for the group (or society).

Smith never opined the view that “when greedy people trade for their own advantage in unfettered private markets, they will often be led, as if by an invisible hand, to produce the greatest good for all...”.

Smith considered selfish acts as anti-social and ‘licentious’. He never said that ‘they will often be led, as if by an invisible hand’. That is pure tosh. Nor did he think that such behaviour would ‘produce the greatest good for all.’ That is wishful nonsense.

I am relaxed about people being ‘politically incorrect’, but I prefer that people are correct in what they attribute to Adam Smith.

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8 Comments:

Blogger OneSTDV said...

All of the (mis)information about Adam Smith's "Invisible Hand" was copied from the New York Times article by Cornell economist Robert Frank.

4:09 a.m.  
Blogger Gavin Kennedy said...

Hi OneSTDV

I suspected that the misinformation came from some such modern economist, who got it from his tutor, and so on, back to the 1950s. Few actually read Adam Smith, despite the Wealth Of Nations still being in print.

My paper, "Adam Smith and the Invisible Hand: from metaphor to myth" is available at:

http://www.aier.org/aier/publications/ejw_wat_may09_kennedy.pdf

Apologies for reacting to your innocent involvement.

Gavin

1:10 p.m.  
Blogger entech said...

I doubt anyone that takes the “invisible chains” being literally true for the reason gravity holds the planets in orbit rather than a literary device would be taken seriously; why then is the “invisible hand” raised to magical significance.
There is no conflict between Smith and Darwin. If evolutionary theory is taken to mean that small incremental changes lead to large changes overtime and compare this to the opening line of chapter one Wealth of Nations “THE greatest improvement ... seem to have been the effects of the division of labour.” . Then, considering early agriculture where it could be that one person was particularly good with horses and the others would give part of their product to avoid being kicked; the trade of farrier developed with assistance from a good metal worker who became the blacksmith. The natural side effect being that the farmer was better off for spending all his time and effort in the job he was good at, because the fees he paid to the “technical” people still left him with a greater return for his effort. This eventually evolved into the separation of agriculture and Industry.

5:49 a.m.  
Blogger Gavin Kennedy said...

entech
I think I agree with most of your comment in broad outline.

Gavin

7:30 p.m.  
Blogger Andres said...

I of course do not hold an "invisible hand" theory, in the Mandevillian-Hayekian sense. And surely I do not ascribe such thought to Smith. However, I believe that the application made by the author of an alleged Darwinian principle to Economics is shallow and simplistic. Even if this is not a law in the Mandevillian sense, a fact which I believe is clear in social interaction is that individual sucess does in fact, in some cases, and under some conditions, promote collective goals. In fact, one of the most outstanding facts about human life -in my humble opinion- is how socioeconomic development allows the survival of many who, from that "Darwinistic" point of view, would hardly be called winners. In particular, advanced societies support large masses of working underachievers, people who'll never go beyond their daily duties. They not only survive: they procreate (sometimes breathtakingly, which means their underachieving genes thrive.

12:26 a.m.  
Blogger Gavin Kennedy said...

Andres
I see where you are coming from, being a keen student of Darwin.

However, alwasy beasr in mind that Darwin is about survival, not winning. It is the 'fittest to survive' and not the 'fittest win'.

Those fish that did not adapt to living on land also survived.

See: Dawkins: "The Ancestor's Tale".

Gavin

9:15 a.m.  
Blogger Andres said...

Gavin: Your clarification is up to the point. My idea would need to be polished and perhaps paraphrased: What I meant is that economic development creates conditions where many can survive, even if they're not the best, the brightest and the strongest.

ANDRES

3:28 p.m.  
Blogger Gavin Kennedy said...

Andres

Yes, we are on the same branch of the tree of knowledge.

Gavin

7:02 a.m.  

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