Thursday, October 22, 2009

An Infamous Misquote

Hank” writes in Own The Dollar (“Don’t Let the Dollar Own You”) HERE:

Famous Quotes About Money And Investing From Adam Smith The Father of Capitalism » Stock Quotes Online”

“Who Is Adam Smith? Adam Smith wrote “The Wealth of Nations” which is considered the first modern work of economic theory. The Wealth of Nations discussed that the free market, while appearing chaotic and unrestrained, is actually guided to produce the right amount and variety of goods needed by society by a so-called “invisible hand”. The invisible hand of the market is the term economists use to describe the self-regulating nature of the marketplace. The invisible hand is created by the combination of our economy’s self-interest, competition, and supply and demand forces, and is capable of allocating resources in society. Adam Smith is widely cited as the father of modern economics and capitalism.

Hank writes an "infamous summary" of Adam Smith’s “quotes”

Yes, “the invisible hand” is a “term” used by many modern economists to “describe” the underlined sentence above, but it was never used by Adam Smith to do so.

It is a complete myth that Smith used the metaphor of “an invisible hand” in this manner. He used the metaphor only once in Book IV of Wealth Of Nations and not in a description of “self-regulating markets” , “competition” or “supply and demand forces”, all of which he discussed in Books I and II of his Wealth Of Nations but without mentioning "an invisible hand".

This fact is checkable by those economists who purvey the myth of Smith’s use of the “invisible hand”, should they ever bother to read Wealth Of Nations.

Whether Smith was the founder of “modern economics”, as taught today, is doubtful; even more doubtful, is the proposition that Smith founded “capitalism”, a 19th-century phenomenon and a word first used in English in 1854 (Oxford English Dictionary) by the novelist William M. Thackeray, in his book “The Newcomes” (Smith died in 1790).

Hank” has some explaining to do. Merely repeating what his tutors told him, or his textbooks claimed, is no substitute for showing exactly where Adam Smith wrote that the “invisible hand” produced “the right amount and variety of goods needed by society”.



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