Tuesday, September 08, 2009

Next Major Project: modern use of the invisible hand


I have completed my response to Daniel Klein’s (“In Adam Smith’s Invisible Hands: comment on Gavin KennedyHERE: response to my article: “Adam Smith and the Invisible Hand” (HERE): My final response will be published next week in Econ Journal Watch (September 2009) HERE:

It is now time to move on to my next project (larger in scope and more ambitious): To consider the role played by the use of the invisible hand metaphor by modern economists. Yes, I shall name, though probably not shame, them.

My main charge against them collectively, is that they wrongly attribute their allusion to the invisible hand by name to Adam Smith – because the modern (post-1930s) (miss)use (miss)associates the metaphor with their quite different meanings – and they imply and, in many cases they directly claim, that Smith have said things about markets that he never did. I shall also offer an alternative explanation for the ubiquity of the invisible hand in modern discourse.

I suspect, somewhat cheekily, that many modern economists have never read Wealth Of Nations, nor do they realise how limited was Smith’s use of the popular 18th-century metaphor (once only in Wealth Of Nations, 1776, once only in Moral Sentiments, 1759, and once only in his short, posthumous essay on the History of Astronomy (1744-58), no one of which was connected conceptually to the others.

To date, I have collected some preliminary research materials on the modern usage of the invisible hand (some of which go well beyond its use as a metaphor; some authors believe that there is an actual entity of ‘an invisible hand’ operating in markets, some of them attributing the entity to the invisible God.

Until now, I have waited before embarking on my own assessments for Warren Samuels, a distinguished Smithian scholar, to publish his considered analysis of the modern uses to which the invisible hand metaphor has been put. His 2008 article: Adam Smith’s Invisible Hand, in The Street Porter and the Philosopher: conversations in analytical egalitarianism, edited by S. J. Peart and D. M. Levy. Ann Arbor: Michigan University Press, was the initial article I awaited, but I was advised that another article by Warren Samuels, is to be published in Jeffrey Young’s, (editor), forthcoming Elgar Companion to Adam Smith, Cheltenham: Elgar Publishing, in October 2009.

From private conversations, I understand this is a formidable piece of work and out of respect for Warren's work, I have held back to see to what degree his analysis of modern usage conforms to mine. I understand that he may also reply directly also to my Econ Journal Watch paper.

Where does this take us? Well, my hypothesis for the new project tests my assertions from time to time, that the invisible hand metaphor is a relatively modern adaptation of the 18th-century metaphor purporting to show the presence of an invisible hand in modern market capitalism, seen almost daily in the world media, and more importantly, as asserted in refereed journal articles and authoritative pronouncements in academic texts.

If its usage was confined purely to popular media, it could safely be ignored, but when Nobel Prize Winners and respected authorities from our discipline elaborate on the modern theory of ‘the invisible hand’, we need to separate ideology from analysis. The robust criticism I occasionally encounter of my counter-thesis suggests an investment in emotional subjectivism on the part of some economists.

Any help readers offer to me during this research project will be graciously accepted.

I have been tracing the early beginnings of the discipline’s interest in applying the metaphor to modern economies, starting with late 19th-century economists, some of whom were identified by Daniel Klein and others in correspondence with myself. I am particularly interested in early 20th-century exponents from Chicago University in the 1930s and thereafter.

For example, from Paul Samuelson (Economics, 1948: p 36) I noted that he reported, somewhat critically, on the oral tradition at Chicago which included ideas about the invisible hand operating in market economies. Among the first reference to this use of the invisible hand, I was directed to Oscar Lange’s article in The Review of Economic Studies (vol 13, 1945-46, p 19-32). Lange was at Chicago during the 1930s (as was Samuelson).

In his 1946 article Oscar Lange writes:

The market has, therefore, been compared (by Adam Smith and others) to that of an invisible hand which produces out of the autonomous decisions of many separate units” (p 26).

What did he mean “by Adam Smith and others”? Who were the “others”?
Any information would be welcome from readers, including references, sources, and biographies. Though retired, I have access to a good library at a University and can probably follow up even vague references or books titles.

Thank you in anticipation of any help received.

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