Thursday, March 04, 2010

Another False Attribution to Adam Smith

The Rev. Darcey Laine (Religious Task Force for a Living Wage) in Star Gazette HERE

“Adam Smith wrote about the "invisible hand of the market," which guides the free market to produce an optimal result for all. Today it often seems that the market has become the only guide to morality for our society.”

Comment
Where – anybody – did Adam Smith write about the “invisible hand of the market”?

Modern economists in the 1950s began writing about the “invisible hand of the market”, but Adam Smith decidedly did not.

Does anybody know which economist first asserted that he did?

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3 Comments:

Blogger Aria said...

The original quote from the Book IV of [...] Wealth of Nations reads:

“...But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. “Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it...”

So he technically did not assert "... of the market". As a matter of fact, there are various interpretation of his saying.

11:04 pm  
Blogger Gavin Kennedy said...

Aria
It's not just a technical issue. In context he was not even talking about markets. His reference was to some (but clearly not all as many merchants trade abroad) merchants whose risk-avoidance to the high risks of foreign trade led them to trade locally. Their security was their motive and an invisible hand had no role to play.

It was a metaphor for what drove them to invest locally. In doing so, on the arithmetical law of the whole is the sum of its parts, they added to local investment.
Gavin

9:00 am  
Blogger Gavin Kennedy said...

Aria
It's not just a technical issue. In context he was not even talking about markets. His reference was to some (but clearly not all as many merchants trade abroad) merchants whose risk-avoidance to the high risks of foreign trade led them to trade locally. Their security was their motive and an invisible hand had no role to play.

It was a metaphor for what drove them to invest locally. In doing so, on the arithmetical law of the whole is the sum of its parts, they added to local investment.
Gavin

9:01 am  

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