Sunday, January 24, 2010

A Correct Quotation

Emmanuel writes (23 January) in International Political Economy Zone (“attitudes of elegant despair on subprime globalisation”) HERE:

What Would Adam Smith Do About Ben Bernanke?”

“At the risk of a dressing down from Gavin Kennedy, Adam Smith would get rid of B-B-B-Bennie of the Feds straight away and get another Fed chief. As you probably know, Bernanke's renomination as Federal Reserve chairman is being subject to political football at the moment. See the Financial Times and the Wall Street Journal for more.

Let us return to one of Smith's most quoted statements:

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” [(WN I.ii.2: 26-27)

While naive readings of this statement (think Chicago School) believe it to be an argument for selfishness, an interpretation more consistent with Smith's prior works suggests otherwise. This more nuanced argument is profoundly others-centred. In contemporary vocabulary, we do not beggar-thy-neighbour during transactions by trying to sucker them into a bum deal. We should think, "how can we offer our neighbours a fair deal ?"...one that meets with approval in the eyes of the impartial spectator?”


Comment

"At the risk of a dressing down from Gavin Kennedy”. Dressing down from me?

Na. No way, surely. In debate, I am a kitten (of the domestic pussy-cat variety).

Emmanuel gives a correct interpretation (so rare from his neck-of-the-woods) of Smith’s ‘butcher, brewer, baker’ passage. It is about two self-interested parties bargaining over the content of a man’s dinner (note the 18th-century diet of a man about town – meat, bread and beer).

Smith’s advice is from Persuasion 101: address the other fellow’s interests, not you own. And the advice is to both sides – the buyers and the sellers.

Two lines immediately earlier, Smith described the elements of bargaining:

Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.”

Sound advice. I have presented Smith’s advice for bargaining to Smithian scholars, who presented their own views – or somebody else’s – and demonstrated that their reputations as Smithian scholars did not extend to an understanding of bargaining (my day-job for thirty-plus years).

By addressing their interest we seek to align them with the bargain we wish to make. They do the same too. Neither of us can insist on our version of the deal only; we have to mediate our differences under the influence of each of us trying to show why the deal is good for the other.

I discuss Smithian bargaining in my Adam Smith: a moral philosopher and his political economy (2008), Palgrave Macmillan: ‘Bargaining exchanges’, pp 112-116, in which I draw into the discussion Smith’s ethical views from Moral Sentiments.

However, on the question of whether Bernanke should resign of be fired, I am neutral. I follow my policy on Lost Legacy of only commenting on political issues, if I ever do, in the country where I vote (Scotland).

UPDATE:
This comment arrived Monay 25 January but got 'lost' in publishing it, and I am not sure to which post it refers, this one or yesterday's:

"Extremely helpful towards a basic understanding of Smith's famous quote; thank you." (JMJanssen)

Thank you J. M. Jansen for writing to Lost Legacy. Much appreciated. Gavin

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3 Comments:

Blogger Brian Woods said...

Prof Kennedy,

Not directly apropos the post, but today during Intermediate Micro we were informed, twice, that the 'Invisible Hand' would intervene to 'correct' the market equilibrium (price and quantity) when the Gov added some taxes!

Glad you forewarned me about this.

Brian P

7:07 p.m.  
Blogger Gavin Kennedy said...

Brian

Good for you.

I have just complete a draft of short paper, at the end of which I put forward my considered view on what Adam Smith actually t by his use of the metaphor of an invisible hand when he mentioned it on the two occasions he did in Moral Sentiments and Wealth Of Nations.

I shall post details shortly on Lost Legacy and how to download it.
Gavin

7:58 p.m.  
Blogger Emmanuel said...

Thank you, Professor Kennedy!

5:22 p.m.  

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