Mark Blaug's Criticism of the 'Historical Travesty' of the Myth of the Invisible Hand

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Paul Walker, a regular reader of Lost Legacy, commented on yesterday’s post with a quotation from Mark Blaug’s, "Economic Theory in Retrospect", 5th ed. Cambridge: Cambridge University Press, which I think needs a wider circulation than would occur if left in the comments to a post. It is particularly apposite in regard to my new paper for the University of Richmond Summer Institute in June (working title): ‘Paul Samuelson and the Genesis of the Modern Economics of the Invisible hand Doctrine’.

"[ ... ] Smith's faith in the benefits of 'the invisible hand' has absolutely nothing whatever to do with allocative efficiency in circumstances where competition is perfect a la Walras and Pareto; the effort in modern textbooks to enlist Adam Smith in support of what is now known as the 'fundamental theorems of welfare economics' is a historical travesty of major proportions. For one thing, Smith's conception of competition was, as we have seen, a process conception, not an end-state conception. For another society, a decentralised competitive price system was held to be desirable because of its dynamic effects in widening the scope of the market and extending the advantages of the division of labour - in short, because it was a powerful engine for promoting the accumulation of capital and the growth of income."
Blaug, Mark 1996. Economic Theory in Retrospect. 5th edn. 60-1. Cambridge: Cambridge University Press.

Comment
I was unaware of this statement by Mark Blaug – and I applaud it warmly – though I purchased a copy of Blaug’s masterly survey of history of economic thought in the 1960s when I was a student, though the subject was not part of the curriculum for an Honours degree in economics – no surprise there then –
(there were a few courses from Economic History, a different degree, that could be taken, which I did).

‘Tis a pity that I was unaware of Mark’s thought, which coincide with mine and derive from my quite independent reading since just before I retired in 2005.

I would like to think that my paper on Paul Samuelson’s popular textbook, Economics: an introductory analysis (1948-2010 – 19 editions, 4½ million sales in 40 languages) demonstrates how Samuelson – perhaps the most talented theorist (Nobel Prize winner) and certainly the best textbook writer for over 60 years) – was instrumental in popularizing the modern myth of the invisible hand, which had nothing at all to do with Adam Smith’s limited use of it as a metaphor.

The Misunderstood Invisible Hand (Part 94)

‘amv’ posts in ‘coffehouse eonomics’ (A Tour Guide to Economics–Field Reports of Four Hohenheim Grads) HERE:

'Again the invisible hand: I just can't get enough (amv)'

“Adam Smith‘s ‘invisible hand‘ is a poetic expression of the most fundamental of economic balance relations, the equalization of rates of return, as enforced by the tendency of factors to move from low to high returns.[...] Smith also perceived the most important implication of general equilibrium theory, the ability of a competitive system to achieve an allocation of resources that is efficient in some sense. Nothing resembling a rigorous argument for, or even a careful statement of the efficiency proposition can be found in Smith, however.”
(Arrow, Hahn 1971: 1-2) [General Competitive Analysis, San Francisco: Holden Day]

Comment
Arrow and Hahn in the same article described the invisible-hand ‘as surely the most important contribution [of] economic thought’ for something they invented themselves. For Smith the invisible hand certainly could be described as a ‘a poetic expression’, but it had, for Smith at least, nothing to do with ‘the equalization of rates of return, as enforced by the tendency of factors to move from low to high returns’, nor did Smith actually write anything about ‘the most important implication of general equilibrium theory’, and as for it achieving ‘an allocation of resources that is efficient in some sense’ that is hardly a recommendation – an efficient allocation, or a Pareto optima, could include a grotesque maldistribution of income such that millions starve and a few don’t, but nobody can be made better off without a few others being made worse off.

‘amv’, a graduate, would know about the limitations of welfare ‘efficiency’ criteria, but having bought into Arrow, Hahn and others’ expositions of the ‘invisible hand’, and not having read Smith closely enough, she/he makes a mistake.

‘amv’ even quotes paragraph 9, Book IV, chapter ii, page 456 of Wealth Of Nations, but clearly has not read and understood the immediately previous 8 paragraphs of Smith’s exposition. If she/he had done so, the idea might have dawned that Smith was writing about something other than what Arrow, Hahn, Samuelson others imagined and invented in mid-20th century.

Paul Samuelson and the Invention of the Invisible Hand

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Gavin Kennedy

Bernard M. Villegas writes (25 April) in mb.com HERE

‘The pitfalls of mathematical economics’

‘The pioneer in the "mathematization" of economics in the last century was the late Paul S. Samuelson who died last December 2009 at the age of 94. As reported by Michael Weinstein in The New York Times (December 14, 2009), quoting another Nobel laureate in economics, Robert Solow (who was one of the readers of my doctoral dissertation at Harvard): When economists "sit down with a piece of paper to calculate or analyze something, you would have to say that no one was more important in providing the tools they use and the ideas that they employ than Paul Samuelson."

Shortly after his death, an article appeared in the Financial Times authored by Stephanie Flanders entitled "Nobel laureate who turned economics from scattered thoughts to science dies." According to Flanders, Samuelson spent a large part of his career organizing scattered thoughts on economic theories since at least the time of Adam Smith in the 18th Century: "Welfare economics, the theories of consumption, capital accumulation, economic growth, finance and international trade all became subject to his rigorous 'picking and arranging'. It is difficult to name an important postwar debate in economics in which Samuelson did not play a role. He once boasted: 'My finger has been in every pie.' "

This work of systematization started with the doctoral dissertation at Harvard entitled The Foundations of Economic Analysis which he submitted in 1941 when he was only 19 years old. The dissertation contained only a few pages full of mathematical formulas. As Samuelson himself wrote: "To a person of analytical ability, perceptive enough to realise that mathematical equipment was a powerful sword in economics, the world of economics was his or her oyster in 1935. The terrain was strewn with beautiful theorems begging to be picked up and arranged in unified order." Through his pioneering work, economics began to comply with the definition of a "science", i.e. an organized body of demonstrated truths. Before this effort of systematic organization of theories, economics was known as political economy, a branch of philosophy. In fact, the first practitioners of economics such as Adam Smith, David Ricardo, and even Karl Marx were, strictly speaking, moral or social philosophers rather than economists in the present sense of the word.’

Comment
I am tidying up a paper at present, ‘Paul Samuelson and the Modern Economics of the Invisible hand’, and this post by Bernard M. Villegas on Paul Samuelson who died in December 2009, aged 94, is apposite in that it partly covers ground in my paper. Its main point about possible limitations of mathematics is put well and you should follow the link to read all of it.

The quotation from Stephanie Flanders of the FT and BBC (familiar to tv viewers since the General Election) that Samuelson spent much time ‘organizing scattered thoughts on economic theories since at least the time of Adam Smith in the 18th Century’ is revealing (I read a similar one recently).

Among the scattered thoughts was that of Adam Smith, in particular about ‘an invisible hand’, which I discuss in my paper, following Samuelson’s treatment of the metaphor through 19 editions of his popular text, Economics: an introductory treatment (1948: McGraw-Hill) which over 62 years sold 4½ million copies in 40 languages, earning the undisputed title of the best selling economics textbook of all time.

Samuelson’s Economics reached so many students and their tutors (with many of the former becoming tutors themselves in campuses all over the world) that I suggest that he was the source for the modern version of the metaphor of ‘an invisible hand’, which is now ubiquitous and thoroughly entrenched in the discipline.

However, Samuelson relied on the ‘scattered thoughts’ of his tutors’ in his undergraduate years at Chicago (he graduated in 1935 and went to Harvard for his PhD), which is clearly seen in his paragraph on Adam Smith in the first edition of Economics (1948):

‘Even Adam Smith, the canny Scot whose monumental book “Wealth of Nations (1776), represents the beginning of modern economics or political economy – even he was so thrilled by the recognition of order in the economic system that he proclaimed the mystical principle of the “invisible hand”: that each individual in pursuing only his own selfish good was led, as if by an invisible hand, to achieve the best good of all, so that any interference with free competition by government was almost certain to be injurious. This unguarded conclusion has done almost as much good as harm in the past century and a half, especially since too often it is all that some of our leading citizens remember 30 years later, of their college course in economics. Actually much of the praise of perfect competition is beside the mark.’

We know these are ‘scattered thoughts’ and that Samuelson did not get them from Wealth Of Nations because there is no evidence that Adam Smith was ‘thrilled’ about recognising ‘order’ (there is no mention of this in Wealth Of Nations, or anywhere else) and that he did not ‘proclaim’ the ‘mystical principle of the “invisible hand”. He buried it without comment in the middle of his book and did not discuss it anywhere else in Wealth Of Nations. If it had been enough to become ‘thrilled’ at the thought, he would have placed it nearer the front of the book when he discusses markets, supply and demand, competition, capital formation and money.

Smith did not write: ‘that each individual in pursuing only his own selfish good was led, as if by an invisible hand’. For Smith ‘self interest’ did not elide into ‘selfishness’ – quite the reverse! – and the metaphor was not written ‘as if by an invisible hand’ (a simile). There was no ‘as if’ about it.

From these errors, Samuelson went onto to construct a version of the invisible-hand that had no connection to Adam Smith. Its mathematics, eventually, were impressive by the 19th edition (2010): General Equilibrium, Pareto Optimality, Nash Equilibrium (Prisoner’s Dilemma), and the contribution of ethical interventions to mitigate the misdistribution of income (Samuelson was a 'centrist' not a fundamentalist).

For Smith, the reference to the invisible hand was metaphorical, and he applied it to a case where some, but not all, merchants chose to invest locally and not abroad from their concerns about the security of their capital, which on the simple arithmetical count from the ‘whole is the sum of its parts' led to higher domestic output and employment than otherwise would be the case. Smith considered this to be advantageous to the public good. That’s all.

The object of the metaphor of ‘an invisible hand’ was the risk-aversion (modern idea) of certain individuals leading them to behaviours with a public-good outcome. It’s hardly the greatest idea ever known to mankind.

A Minor Rant and an Observation

Scott Smith interviews Douglas French of the Mises Institute on Right Side News (25 April) HERE:

‘Doug French: Ludwig von Mises and Free Market Thinking’

‘Adam Smith's Invisible Hand, marginal utility and human action, stand as a kind of holy trinity of free-market economic thought. (There is also the profound Misesian analysis of the business cycle, but that is of slightly less consequence than the three concepts just mentioned.) Taken together they are a devastating rebuttal to statists everywhere and certainly to the absurd and soul-destroying policies by most of the nations in the world today, including Western ones.’

Comment
Many ‘Austrian’s I admire, but sometimes the insufferable certainties some of them express about everything upon which they pontificate about makes me feel uncomfortable. Von Misses and Murray Rothbard are always spoken of as ‘geniuses’, of incomparable brainpower, and only await their due recognition by lesser mortals. A show of occasional humility would do them a world of good. Follow the link.

End of rant.

PS: 'Adam Smith's invisible hand' was not a 'concept' - it was made into concept - nor was it comparable to marginal utility analysis. If that is claimed as an example of the intellectual prowess of Austrian economic, I think they have some ways to go to know the difference between a metaphor which presents its object in 'a striking and interesting manner', i.e., necessity in the case of rich landlords in Moral Sentiments, and the consequences of risk-avoidance behaviour of some merchants in Wealth Of Nations

Ayn Rand versus Adam Smith

Art Carden posts (22 April) on the Blog: Division of Labour a report of a debate between Yaron Brook and James Otteson on Ayn Rand and Adam Smith. Dan Klein asked Art to ask Yaron Brook to answer a question and what follows is Yaron Brook’s reply and a number of comments. Here is the question and to read the responses and comments follow the link HERE:


"Take Smith's famous thought experiment about -- by some fantastic unstated mechanism -- you ("a man of humanity in Europe", in 1759) could prevent an earthquake in China by cutting off your pinky. Smith says that of course you would do so, and then addresses why. Yorum, would you cut off your pinky? Assume that knowledge of the whole affair would necessarily remain entire personal. If yes, and you claim to square that with "selfishness," aren't you using words in an opportunistic and unmanageable way?"

Ayn Rand Institute's Onkar Ghate responds:

“The question’s undertone is that everyone “just knows” it’s right to cut off your finger. Moral theory’s task is to rationalize this incontrovertible conclusion; Rand’s theory can’t, however, because it’s an abuse of language to call the action selfish.
But it’s a mistake to think that Rand’s ethics begins with the moral beliefs that happen to saturate the culture, not with reality. True, it would be an abuse of language to label the action Smith envisions “selfish”: it is self-sacrificial. Precisely for this reason, Rand’s ethics would pronounce the action immoral.

To understand the radical difference between Smith and Rand here, one must grasp the principles at work. Consider first the details of Smith’s imagined scenario in The Theory of Moral Sentiments, III.I.46.

If a “man of humanity,” Smith writes, heard about a devastating earthquake in China (that has no personal effect on him), he would feel sorrow. But if he didn’t directly witness the disaster, he would sleep undisturbed; indeed, he would feel more disturbed by “the most frivolous disaster that could befall him,” say the prospect of losing his finger the next day.

But now suppose, Smith says, the man were not a passive bystander but an active participant. Would he choose himself over others? “To prevent . . . this paltry misfortune to himself, would a man of humanity be willing to sacrifice the lives of a hundred millions of his brethren, provided he had never seen them?” Smith’s view is that no man could be so monstrous. And Smith’s question is: Why is our chosen action so different from our passive reaction?” [Continued]

Comment
Follow the link to see how the debate unfolds. It well worth the effort. I regularly quote Adam Smith on the earthquake in China and what the ‘little finger’ episode means.

BTW, book marking Division of Labour is an excellent way t read thoughtful economics.

A wee notice of a great article by Amartya Sen

Amartya Sen’s article (23 April), ‘The economist manifesto’ is reproduced in the New Statesman HERE:

It should be read by all readers of Lost Legacy (Follow the link).

Amartya Sen presents the authentic Adam Smith and corrects the mistaken views of many modern economists and their interpretations of his moral philosophy and political economy.

A Thoughtful View From CATO

Gerald O’Driscoll writes in the Wall Street Journal (22 April) “CATO Blasts Mercantilism” and reproduced in part in Right Side News Blog:
HERE

‘Free markets depend on truth telling. Prices must reflect the valuations of consumers; interest rates must be reliable guides to entrepreneurs allocating capital across time; and a firm's accounts must reflect the true value of the business. Rather than truth telling, we are becoming an economy of liars. The cause is straightforward: crony capitalism. ... If we want to restore our economic freedom and recover the wonderfully productive free market, we must restore truth-telling on markets. That means the end to price-distorting subsidies, which include artificially low interest rates. No one admits to preferring crony capitalism, but an expansive regulatory state undergirds it in practice. Piling on more rules and statutes will not produce something different than it has in the past. Reliance on affirmative principles of truth-telling in accounting statements and a duty of care would be preferable. Deregulation is not some kind of libertarian mantra but an absolute necessity if we are to exit crony capitalism.

If we had any quibble with this article it would be, first of all, along the lines of the utilization of the term "crony capitalism." It seems to us that another term, historically more precise, would be mercantilism. In America, those who regularly deal in sociopolitical terminology seem determined to substitute their own words for words that already available. We don't understand why this is necessary. Somehow, for instance, America lost sight of what "liberal" meant in Europe; thus to use the term "classical liberal" in America often needs an explanation now…

… Likewise, "crony capitalism" may have more of a meaning in America than Europe, though mercantilism has considerable potency in our opinion. We read this in the Library of Economics and Liberty: "In contrast to the agricultural system of the physiocrats or the laissez-faire of the nineteenth and early twentieth centuries, the mercantile system served the interests of merchants and producers such as the British East India Company, whose activities were protected or encouraged by the state." …
… Indeed, the process of mercantilism advantages some private interests over others. The United States, like Europe, has been moving toward a full-blown mercantilist-style system for some time now. Perhaps the system could be termed neo-mercantilism. It doesn't have all the formal elements of mercantilism (as regards government accrual of gold bullion, etc.) but it certainly has supported a strong relationship between a favored business class and the government itself. …

… The problem with such approaches, of course, (from a purely anarcho-capitalist point of view) is that one needs an "enforcer" to ensure that such concepts are properly adhered to, and almost inevitably one may end up with a regulatory authority once again. It would seem, therefore, based on this article and similar rhetoric - especially from CATO which seems to espouse "reasonable" libertarianism - that there is still, even within American libertarian circles, an impulse to distrust markets themselves, and their inherent disciplinary abilities. We would like to offer up the idea that the Invisible Hand itself is a formidable disciplinary device. Wouldn't a company that consistently misleads customers or investors run itself out of business - regardless of whether it was under an affirmative obligation to exercise a duty of care?’

Comment
G. P. O’Driscoll, jr, is the author/editor, 1979, of Adam Smith and Modern Political Economy, Ames. IA: Iowa State University Press.

This long article (follow the link) is quite refreshing and suggests that some new thinking is underway at the Cato Institute (a libertarian think tank) about the status of modern US capitalism.

I have long argued that mercantile political economy did not disappear after Adam Smith; it continued, after the loss of the British colonies in North America, in the Caribbean, Canada, India, South Africa (later most of Africa), in the North Pacific, and Australia and New Zealand. As Britain’s first empire fell away (George III would not compromise on anything, so he lost everything), its second empire grew in strength until full-blown colonialism was back in force. Coinciding with the growth of the modern state – still small by today’s standards – mercantile interests were back in business, so to speak, of which ‘crony capitalism’ is a very American alliteration.

I am not taken with the idea of the ‘invisible-hand’ as a ‘formidable disciplinary device’. How and with what means would a metaphor (for what?) exercise self-discipline? Asking if a company whether a ‘company that consistently misleads customers or investors run itself out of business - regardless of whether it was under an affirmative obligation to exercise a duty of care, invites my not entirely cynical response of: ‘I doubt very much if it would!

Similarly I have little faith in regulation, which I agree, tends to self-proliferate once embarked upon both from ever inventive amendments to existing processes and unintended extensions of the regulations to fringe and peripheral areas to ‘plug gaps’ and ‘evasions’ in the interests of multiplying head counts among the regulators.

Arthur Pigou and the Invisible Hand

Thom Lambert writes (19 April) in the Truth on the Market Blog http://www.truthonthemarket.com/2010/04/19/some-warnings-for-modern-pigovians-from-pigou-himself/:


“Some Warnings for Modern Pigovians (from Pigou Himself)”

“These various interventions to correct for externalities are the brainchild of Cambridge economist Arthur Cecil Pigou. Writing in the 1920s, Pigou recognized that negative externalities would result in “too much” of an activity and that positive externalities would result in “too little.” He thus concluded that when externalities exist “[n]o ‘invisible hand’ can be relied on to produce a good arrangement of the whole from a combination of separate treatments of the parts. It is therefore necessary that an authority of wider reach should intervene.”

Specifically, he asserted, [i]t is … possible for the State, if it so chooses, to remove the divergence in any field by ‘extraordinary encouragements’ or ‘extraordinary restraints’ upon investments in that field. The most obvious forms which these encouragements and restraints may assume are, of course, those of bounties and taxes.

In other words, the government should tax activities that create negative externalities and subsidize those that create positive externalities, thereby ensuring that the actors at issue bear the full costs and benefits of their conduct. If they do, they’ll act optimally, taking all actions that create benefits in excess of cost and none that don’t. Thus was born the idea of “Pigovian” taxes and subsidies — the notion underlying the proposed climate change legislation, President Obama’s bank tax, the various subsidies for electric vehicles, and scads of other government interventions into private affairs.”

Comment
This is a relevant point by Arthur Cecil Pigou (1877-1959), author of The Economics of Welfare, 1920 because it illustrates what his generation of economists were thinking of the phrase, the invisible hand, in those decade before Keynes’ General Theory. Pigou developed an economic rationale for welfare intervention in the externalities evident in a complex capitalist economy, and it sparked a massive interest in what became known as welfare economics that peaked in the post-war years up the 1960s (Kaldor, Hicks, Coase) and led to several spin-offs, including public choice theory. (‘Welfare economics’ was not just about social welfare re-distributive policies of modern states.)

The sentence: ‘“[n]o ‘invisible hand’ can be relied on to produce a good arrangement of the whole from a combination of separate treatments of the parts’ recognizes a conventional and mistaken treatment of the ‘invisible hand’, later popularized by such as Paul Samuelson, and comments on its practical validity.

This created the divergence between those of saw the need for a theory justifying intervention and those who preferred to rely on markets to act out what they claimed for them, using the ‘invisible hand’ as the ‘miraculous’ power of markets to create the ‘best of all possible worlds’.

Anti-Mankiw?

Kenneth Anderson writes (18 April) in The Volhok Conspiracy HERE:


“Anti-Mankiw”

To which an anonymous correspondent replied:

‘Economists — being relatively little interested in intellectual history — will probably forget who originated them in time. Adam Smith’s ideas influence almost everything economists do and yet most economists seem to go through earning their Ph.D.s without ever cracking open “The Wealth of Nations.” That’s real immortality — people are so used to your ideas they forget to cite you or even read your original writings.’

Comment
Mankiw is a professor of economics at Harvard University and author of a set of popular economics textbooks and roughly describable as a ‘new Keynesian’ economist. Follow the link to read Kenneth Anderson’ post on what’s supposedly going on in the discipline, to which ‘anonymous posted his comment/her comment.

The lack of interest in economic history among modern economists is chronic – only bravest young (or retired) economists study the works of past economists – aided by the disparaging efforts of conventional departmental heads who tell staff who show any interest in history of ideas to stop it because their work doesn’t count for tenure (a pernicious system of job protection allegedly protecting academic freedom, but, ironically, promoting the sacking of those who do not conform to the ruling order!).

That so few economists read the Wealth Of Nations, though many more have a copy unopened in their libraries, is a major reason why myths about Adam Smith abound, some still infecting policies in their false guise as ‘Smithian’, such as the invisible-hand, laissez-faire, and ‘selfishness’ or ‘greed’.

Robert Solow Criticises Important Micro-Foundations of Modern Economics

Hat Tip to: ‘Aaron Anderson ‘ at ‘to compete with phrase mongers’ Bog HERE
for re-publishing
a review by Robert Solow (Institute Professor of Economics emeritus at MIT and winner of the Nobel Prize in Economics in 1987) (12 January) in The New Republic (HERE):


“Hedging America”

How Markets Fail: The Logic of Economic Calamities
 By John Cassidy
( Farrar, Straus and Giroux, 390 pp., $28

“If this is how more or less free, more or less competitive markets can deal with something as simple as a spiral notebook, how much more remarkable it is that they can do the same for something as complicated as a computer or a refrigerator. But there seems to be no other practical way to run a modern economy efficiently. That is what Adam Smith understood: a competitive market economy, motivated primarily by individual pecuniary self-interest, can produce coordination where one might expect only chaos.

He invented for that process the memorable image of the Invisible Hand. In the following two centuries and more, an army of economists has spent an enormous amount of time and intellectual effort refining and elaborating Smith’s initial insight, teasing out exactly how far that logic can be carried, how the hand operates, investigating when and how it breaks down, and elucidating odd or complex special cases such as professional team sports, or Internet services, or health care. (A recent issue of the highbrow American Economic Review contains highly technical articles aimed at understanding particular aspects of oil prices, gasoline taxes, urban transit, art auctions, and “two-sided matching markets” like that connecting graduate students and graduate schools.)

In one way it is an interesting intellectual game; in another, it is a deadly serious battle for very high stakes. For in the course of producing and distributing goods and services, market outcomes generate incomes, wealth, status, and power. Any modification of market outcomes modifies the allocation of incomes, wealth, status, and power. So it is no wonder that the discussion has become thickly encrusted with ideology. And one convenient way to turn subtle argument into ideology is to create dichotomies where there are originally fine gradations of more and less. For example: are you for or against “the free market”?

…By “utopian economics,” Cassidy means, in the first instance, the careful elaboration of the precise scope of Adam Smith’s Invisible Hand. It turns out to be a lot more complicated and attenuated than sloganeering can afford to acknowledge. To begin with, if a market economy is to be advertised as doing an acceptable job, we need a definition of a good economic outcome.

Comment
I urge you to read Professor Solow’s review of John Cassidy’s in full by following the link. It is a first class exposition of what modern economists contributed to elaborating on the myth that Adam Smith’s use of the simple metaphor was a theory of markets, supply and demand, price determination, perfect competition and all that was derived for these subject by economists in the 20th century, most of which had little to do with where Adam Smith left 18th-century economics when he died in 1790.

Professor Solow does not see it quite like that, but he dissects modern micro-economics meticulously to show that the (‘utopian’) theories of perfect competition, Pareto optimality and General Equilibrium are flawed as descriptions of the real world and that policies derived from them are – and remain – unsound. He does not derive his arguments from the strange gap between Adam Smith’s use of the metaphor and the assertions of modern economists that their inventions about the invisible hand (as an actual entity) are not valid, as is reported regularly on Lost Legacy. Instead, he accepts, as did Paul Samuelson and many others, that these assertions were valid and they deserve to be linked to the full authority of Adam Smith.

John Cassidy’s book is on order, so I cannot include his book in my comments until I read it. However, Solow’s demolition of modern versions of how perfectly competitive economies are supposed to work is masterly, even on their own terms. Smith was not ideological about competitive markets; he analysed their benefits and took account of the real-world practicalities from their 18th-century mercantile nature and realistic possibilities for their reform on a case-by-case basis. The political realities of the way legislators made decisions, largely under the influence of
Interest groups, precluded root-and-branch changes, as they still do today.

In an imperfect world, Smith preferred markets to state interventions, but always recognised where state interventions were necessary. I think readers of Solow’s review of John Cassidy’s book will understand Smith’s caution and why modern economic ideologues of right and left are not really relevant in a practical sense.

Solow's criticism of aspects of modern micro-economics is flawed in that he links them to Adam Smith's alleged inventions of the invisible hand, a charge of which he is wholly innocent.

Completed the First Phase of an Important Paper on the Genesis and History of the Modern Myth of the Invisible Hand

With all the excitement caused by the General Election, and now the Icelandic volcano and the lack of air travel to and from Scotland (which has trapped my daughter in Reykjavik), I am happy to report to Lost Legacy that I completed this afternoon an early draft of my paper, ‘Paul Samuelson and the Modern Economics of the Invisible hand’, which I have been working on for several months (or several years if you take account of the beginning of my interest in the subject from 2003).

This takes the debate on the invisible hand from its historical background to its recent modern history and, again, covers entirely new ground from the mid-20th century and into the early 21st century.

This new paper is for the University of Richmond (VA) Summer School in June and completes the set of papers I have written and presented to various academic bodies on Smith’s use of the invisible hand metaphor:

1 ‘The Invisible Hand’ in (2005) Adam Smith’s Lost Legacy, Chapter 39, 35-38. Palgrave Macmillan.

2 ‘Adam Smith and the Myth of the Invisible Hand’ (2007), presented at the `History of Economics Society’ annual conference, George Mason University, Fairfax, Virginia.

3 ‘an Invisible hand’ in (2008), Adam Smith: a moral philosopher and his invisible hand, Chapter 12, 210-26. Palgrave Macmillan.

4 ‘Adam Smith and the Invisible Hand: From Metaphor to Myth’, Econ Journal Watch, May 2009, vol.6, no. 2: 239-63: (ejw_wat_may09_kennedy-Klein.pdf_

5 ‘A Reply to Daniel Klein on Adam Smith and the Invisible Hand’, Econ Journal Watch, September 2009. vol. 6, no 3: 374-88 (ejw_wat_sep09_kennedy.pdf)

6 ‘The Centrality of the Invisible Hand in Smith’s Books: using a metaphor as an antidote to “tiresome” and “less pleasant” narrative styles’, April 2010.
Social Science Research Network, available at: http://ssrn.com/abstract=1585801

The final draft of the new paper will be available in May.

Paper On Centrality and the Invisible Hand Does well

PAPER ON SIGNIFICANCE FOR ADAM SMITH OF HIS USE OF THE METAPHOR, ‘AN INVISIBLE HAND’ reaches top ten for downloads on Social Science Research Network

‘The Centrality of the Invisible Hand in Smith’s Books: Using a Metaphor as an Antidote to 'Tiresome' and 'Less Pleasant' Narrative Styles’ by Gavin Kennedy, (Edinburgh Business School, Emeritus Professor, Heriot-Watt University)

To Download a copy of the text from the Social Science Research Network, visit:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1585801 Citation details:

Kennedy, Gavin, The Centrality of the Invisible Hand in Smith’s Books: Using a Metaphor as an Antidote to 'Tiresome' and 'Less Pleasant' Narrative Styles (April 7, 2010).

Available at SSRN: http://ssrn.com/abstract=1585801

Comment
I am pleased to see interest in the paper and hope this continues. There is a long way to go for the discipline to realize the importance of understanding how far too many modern economists have taken the popular 17th-18th century metaphor of ‘an invisible hand’, as actually used by Adam Smith, some of the consequences of which can be seen in the short-sight complacency of many economists in the run-up to the recent financial crises.

Smith never believed that there was actually ‘an invisible hand’ guiding the economy so as the ensure that no matter what individuals did when pursuing their self-interest, often eliding into ‘selfish’ motives, everything would work out for the ‘best good for all’ (See Samuelson, Economics: an introductory analysis, and through the 19th edition, 2010).

That modern economists from 1950s came to believe this complacent invention, and advised legislatures, businesses, academics, lobbyists and media influences, that Smith said so, gave the invention an wholly undeserved credibility.

Why I Persist Against The Consensus

I am asked why I persist in criticising the ‘unanimous’(?) consensus today that Adam Smith’s(?) ‘Invisible-hand’ guides markets, supply and demand, and individuals to serve the public good. Is it all that important? He’s been dead for over two centuries, I am reminded.

Well, yes, it important today because, given the consensus, the alleged ‘mystical powers’ claimed for ‘an invisible hand’ (including it being the ‘hand of God’) in public policy causes inappropriate reliance on a non-existent entity, with consequences we see in corporate behaviours and government behaviours.

I see the main problem since the 1950s as being associated with wholly ubiquitous, modern assertions of the invented ‘doctrine’ of Adam Smith’s invisible hand.

The mainstream view (Samuelson 1948, 1st edition, 36; cf. Samuelson and Nordhaus’s in their 19th edition, 2010, 29) that Smith taught that the pursuit of ‘selfish’ outcomes by each individual, ‘as if led by an invisible hand’, resulted in the ‘best good of all’ is a wild generalisation, not supported by Smith’s texts, and worse, by modern experience.

The nine paragraphs in pages 452-56 of Wealth Of Nations, containing the invisible-hand metaphor, show that Smith was discussing merchant traders deciding between investing their capital abroad versus investing it locally, the latter perceived by some merchants, but not all, to be less risky than the former.

It was not the general case at all, as asserted and implied by Samuelson.

Those (risk-averse) merchants who chose to invest locally, by the arithmetic of the ‘whole is the sum of its parts’, added to the national output of the ‘necessaries, conveniences, and amusements of life’, which to Smith was consistent with his meaning of the ‘public good’. It is also a strictly limited understanding of what is mean by 'public good' (in fact, it sounds more 'Stalinist' than Samuelson, and others, would have been comfortable with).

The rest of Book IV shows the likelihood that the same domestic contributors to the ‘public good’ were the main constituency from which the mercantile pressures for tariff protections, prohibitions and hostility to trading partners contributed to the pubic ‘bad’.

Smith also lectured on rhetoric (1748-63), in which he described metaphors as giving ‘due strength of expression to the object to be described and at the same time [doing] this in a more striking and interesting manner’ (LRBL, 29). What then was the ‘object to be described’ by the 'invisible hand' metaphor?

For Smith, the ‘object’ was the necessary consequence of the individual, risk-averse, merchant’s ‘own security’ which led to the individual contributing to total output. Yet, modern economists, since the 1950s, have made the invisible-hand metaphor its own object!

For that, and other reasons, I continue to tackle errors of attribution to Adam Smith of ideas he never held or, where he might be said to hold weak versions of them, it is necessary to be mindful of their context before generalising too much, e.g., his criticism of chartered merchant companies and anti-market criticisms of modern corporations.

If being dead for over two centuries is a barrier to being relevant today, why then do the purveyors of the myth of Adam Smith and 'his invisible-hand persist in quoting him as the authority for their modern economic policies?

On Casting the First Stone ...

Richard Beck, Associate Professor and experimental psychologist at Abilene Christian University, writes on his Bog, Experimental Theology HERE:

"HE WILL SNORE WITH THE MOST PROFOUND SECURITY OVER THE RUIN OF A HUNDRED MILLIONS OF HIS BRETHREN..."

“Adam Smith (yes, the Adam Smith) on the most problematic facet of human moral psychology, how the incomprehensible suffering of humanity cannot compete with our workday hassles and preoccupations:

[Richard quotes the first part only of the passage from Moral Sentiments from ‘Let us suppose that the great Empire of China… through to: ‘and the destruction of that immense multitude seems plainly an object less interesting to him, than this paltry misfortune of his own’ (TMS III.3.4: 136-7.

He does not complete the passage, which is unfortunate because this gives him and his readers a totally unbalanced view of what Adam Smith actually said. It is also a fairly common way in which truncated quotations, often torn out of context, have contributed to Adam Smith’s Lost Legacy.]

Comment

To assist a more balanced understanding, here is the missing half of the quotation that Richard failed to offer his readers:

‘To prevent, therefore, this paltry misfortune to himself, would a man of humanity be willing to sacrifice the lives of a hundred millions of his brethren, provided he had never seen them? Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it. But what makes this difference? When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble? When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self–love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration. kIt is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self–love can be corrected only by the eye of this impartial spectator. It is he who shows us the propriety of generosity and the deformity of injustice; the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves. It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters (TMS III.3.5: 137).

This reverses the apparently somewhat cynical view of human behaviour from the first part quoted by Richard and, presumably misunderstood by his Blog readers. Smith held a rounded, moral view, of how 'a man of humanity' would really react to the tragedy in China (then a year or more sailing time to get there - and the same back to Britain too).

Recent earthquakes in China and other places are known within seconds via modern media and the responses from 'people of humanity' are in accord with Adam Smith's assessments.

However, the kidnapping behaviour of certain 'Christian sects' from the US (and France) leaves much to be desired.

NEW PAPER ON SIGNIFICANCE FOR ADAM SMITH OF HIS USE OF THE METAPHOR, ‘AN INVISIBLE HAND’

‘The Centrality of the Invisible Hand in Smith’s Books: Using a Metaphor as an Antidote to 'Tiresome' and 'Less Pleasant' Narrative Styles’

by Gavin Kennedy, (Edinburgh Business School, Emeritus Professor, Heriot-Watt University)

Abstract:

‘Daniel Klein and Brandon Lucas’s highly original article (from a suggestion by Peter Minowitz), “In a word or Two, Placed in the Middle: the invisible hand in Smith’s Tomes” (October, 2009) is discussed. This paper presents an alternative account of the role of the metaphor in Adam Smith’s thought. Part 1 (‘Centrality of Smith’s Invisible Hand metaphor’) acknowledges the persuasive evidence from Klein and Lucas for the physical centrality of the metaphor in Smith’s two books. In support of centrality, details are provided of his close involvement in the print production of his books. Part 2 (‘Smith on metaphors’) considers Smith’s teachings on the use of metaphors. Part 3 (‘Significance of the invisible-hand for Smith’) discusses the two cases where Smith used the invisible hand as an antidote to ‘tiresome and less pleasant’ narrative styles by showing that a metaphor represents in a ‘more striking and interesting manner’ their objects, using the examples of how ‘rich landlords’ and some ‘merchants’ acted in conformity with the absolute necessity of their circumstances, with unintended consequences. Misleading explanations by Paul Samuelson and others derived since the late 1940s of Smith’s use of the invisible-hand metaphor are challenged.’

To Download a copy of the text from the Social Science Research Network, visit:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1585801

Citation details:

Kennedy, Gavin, The Centrality of the Invisible Hand in Smith’s Books: Using a Metaphor as an Antidote to 'Tiresome' and 'Less Pleasant' Narrative Styles (April 7, 2010). Available at SSRN: http://ssrn.com/abstract=1585801

Play The Hand You Are Dealt

David Chan writes The Invisible Hand’s Blog HERE
http://pinchmehard.wordpress.com/2010/04/07/bad-news-for-alberta/

Suzanne Fields writes in the Washington Times HERE

“Toward a new capitalism”

“But the old capitalism, as we knew it, is giving way to a new capitalism, whether we like it or not. "The day has passed when the engine of capitalism, the financial market, will be allowed to operate more or less unimpeded by government," the provocative economist Irwin Stelzer told a lecture audience the other night at the American Enterprise Institute, a Washington think tank. He cautioned that his remarks were a "thought experiment," not a blueprint for analysis of the present economic predicament. He threw out several challenges of the status quo:

"If market capitalism is to survive the assaults of statists and populists, the former far more dangerous than the latter, we need what might be called a neo-orthodoxy - the development of new adaptations of the basic truth taught by great economists from Adam Smith to John Maynard Keynes. From these adaptations might emerge a new capitalism, the latest form of this most resilient of economic systems."

Market capitalism, Mr. Stelzer observes, must temper its "creative destruction" to be "less destructive, even if it means being less creative." One of the most difficult challenges for liberal and conservative alike is to figure out how to weigh the benefits of globalization for consumers against the costs to earners of high wages.

The underlying argument is for conservatives to pick their games carefully and, like good poker players, play the hand they're dealt, not the hand they wish they had. Capitalism can remain resilient. Paradise lost can become paradise regained.”

Comment
Another apocalypse-soon message, this time with a bit of class compared to the usual ravings from people who hear voices in the night and have a perfect master system to solve all problems, with the proviso that 7 billion people join together to implement their wonderful changes to everything.

Mr. Irwin Stelzer is an economists and his broad message has an element of plausibility in it. He calls for ‘Market capitalism’ to ‘temper its "creative destruction" to be "less destructive, even if it means being less creative." The allusion, of course, is to Joseph Shrumpeter’s beautiful expression that characterises capitalism as ‘the perennial gale of creative destruction’, a wholly laudable force that has raised living standards since our predecessors lived in forests. I am not sure how Irwin suggests we arrange to bring about the curbing of the ‘perennial gale’. Which legislature would vote that into law?

Irwin correctly describes the ‘new capitalism’ as ‘the latest form of this most resilient of economic systems’. This can be seen by observing how much capitalism has changed since Smith’s day, though some ancient elements of the old capitalism remain, such as the mercantile spirit which Smith railed against, continue in various forms across the globe. There are also different versions of capitalism in evidence in North America, Europe, Russia and, uniquely, that found in China.

I liked one paragraph in particular (it’s good advice at all times; I say the words italic often enough to my children):

“The underlying argument is for conservatives to pick their games carefully and, like good poker players, play the hand they're dealt, not the hand they wish they had. Capitalism can remain resilient. Paradise lost can become paradise regained.”

Be Wary of Philosophers With a Self-Licensed 'Duty'

Larry Arnhart writes in Darwinian Conservatism 6 April HERE:

[The Left has traditionally assumed that human nature is so malleable, so perfectible, that it can be shaped in almost any direction. Conservatives object, arguing that social order arises not from rational planning but from the spontaneous order of instincts and habits. Darwinian biology sustains conservative social thought by showing how the human capacity for spontaneous order arises from social instincts and a moral sense shaped by natural selection in human evolutionary history.]

“Aristotelian Liberalism (5): Adam Smith's "Moral Sociology"

“Since Rasmussen and Den Uyl argue for an Aristotelian defense of liberalism, one might expect that they would find common ground with Adam Smith, who promoted liberalism and developed a theory of the moral sentiments that he thought largely coincided with Aristotle's moral theory.

Contrary to this expectation, Rasmussen and Den Uyl criticize Smith's Theory of Moral Sentiments. They write:

". . . Although this work appears to offer a moral theory, that theory is marred by an insoluble dilemma: the 'impartial spectator' who makes the final judgment about moral propriety must either make that judgment on the basis of his sentiment or not. If so, what justifies that sentiment over the others being observed in the actions considered? If not, a standard other than sentiment is being used, which seems disallowed by the theory itself and would require its own justification. Nevertheless, it is possible to ignore this problem and treat this work as expressing a theory of moral sociology. If we do this, the actions of the impartial spectator can be considered as descriptive of moral attitudes rather than justificatory, and the work as a whole could be regarded as an account of how moral attitudes and norms are generated in a free society.”

“Philosophers have a duty to shape popular culture to conform to their rational understanding of the truth. Philosophers must take responsibility for shaping the souls of their fellow citizens (LAN, 218-29)”.


Comment
I found this discussion by Larry Arnhart informative and interesting and commend it to readers of Lost Legacy. Not many readers may be interested in such philosophical jousts but reading them often helps understanding of what Adam Smith’s Moral Sentiments was about. Smith did not write the last word on moral sentiments and the ‘impartial spectator’, but understanding more about what he did write, especially through the perspectives of critics is a fine way to sharpen your own perspectives.

For a ‘justificatory” moral sentiments the idea of moral sentiments moves away from Smith’s idea of a description from within the person, based on observed experience from living in a society, towards some external mode arising from where? I am relaxed about “moral attitudes” being “descriptive” rather “than justificatory”. The impartial spectator “as a whole could be regarded as an account of how moral attitudes and norms are generated in a free society”, which I think is Smith’s point.

I remain suspicious of the claim that:

“Philosophers have a duty to shape popular culture to conform to their rational understanding of the truth. Philosophers must take responsibility for shaping the souls of their fellow citizens (LAN, 218-29)”.

That is tellingly dictatorial. Smith, after all declared that the ‘philosopher does nothing, but observes everything’. It was Marx who claimed that it was not the duty of philosophers' to understand the world but to change it', which was a self-written license to impose a tyranny.

Follow the link and see what you think.

Definitely Worth Another Look

Geoff Hautefort ("le monde perpendiculaire de Geoff Hautefort”) quotes Joe Stiglitz’s article in The Guardian (20 December) is HERE

“This year's Nobel Prize celebrates a critique of simplistic market economics, just as last year's award (of which I was one of the three winners) did. Last year's laureates emphasised that different market participants have different (and imperfect) information, and these asymmetries in information have a profound impact on how an economy functions. In particular, last year's laureates implied that markets were not, in general, efficient; that there was an important role for government to play. Adam Smith's invisible hand - the idea that free markets lead to efficiency as if guided by unseen forces - is invisible, at least in part, because it is not there.

This, too, is not news to those who work day after day in the market (and make their fortunes by taking advantage of and overcoming asymmetries in information). For more than 20 years, economists were enthralled by so-called "rational expectations" models which assumed that all participants have the same (if not perfect) information and act perfectly rationally, that markets are perfectly efficient, that unemployment never exists (except when caused by greedy unions or government minimum wages), and where there is never any credit rationing.

That such models prevailed, especially in America's graduate schools, despite evidence to the contrary, bears testimony to a triumph of ideology over science. Unfortunately, students of these graduate programmes now act as policymakers in many countries, and are trying to implement programmes based on the ideas that have come to be called market fundamentalism.
Let me be clear: the rational expectations models made an important contribution to economics; the rigour which its supporters imposed on economic thinking helped expose the weaknesses underlying many hypotheses. Good science recognises its limitations, but the prophets of rational expectations have usually shown no such modesty.

Vernon Smith is a leader in the development of experimental economics, the idea that one could test many economic propositions in laboratory settings. One reason that economics is such a difficult subject, and why there are so many disagreements among economists, is that economists cannot conduct controlled experiments. Nature throws up natural experiments, but in most circumstances, so many things change so rapidly that it is often difficult to untangle what caused what.

In principle, in a laboratory, we can conduct controlled experiments, and therefore make more reliable inferences. Critics of experimental economics worry that subjects bring to experimental situations modes of thought determined outside of the experiment, and thus that the experiments are not as clean and the inferences not as clear cut as in the physical sciences. Nonetheless, economic experiments provide insights into a number of important issues, such as the improved design of auctions. Most importantly, the irrationality of market participants, which was the focus of Kahneman's work, has been verified repeatedly in laboratory contexts.

The Nobel Prize signifies how important it is to study people and economies as they are, not as we want them to be. Only by understanding better actual human behaviour can we hope to design policies that will make our economies work better as well.”

Comment
Yes, the article is worth reading through (most of it is above) I have already quoted Stiglitz’s recant from his previous orthodox views on the invisible hand. The article in full is reproduced from a French Blog.

Support that explores the crumbing grounds on which the Chicago type economics of their version of Adam Smith stands – ‘the granite of self-interest’ according to George Stigler (1976) – cannot be repeated enough across the discipline.

Read and pass it on, please.

Spontaneous Order A More Likely Example Than an Invisible Hand

Dr. Jeffrey Folks taught for thirty years in universities in Europe, America, and Japan. He has published many books and articles on American culture and politics. He writes in American Thinker (3 April) ">HERE

“Aerobics and the Invisible Hand”

“Adam Smith was right about human behavior. An invisible hand extends throughout human affairs, even to the placement of chairs in an aerobics class. This hand reaches into all social and economic affairs because all those affairs involve self-interest. When the invisible hand is stayed by the intrusion of authority, the result is less than satisfactory. Smith's insight into human nature was remarkably shrewd and wise, and it applies to nearly every aspect of human affairs. Free individuals prefer to decide for themselves where they place their chairs, just as they prefer to live where they like, work where they like, and spend their money as they like. There is something remarkably sane and true about allowing individuals to make decisions for themselves.”

Comment
Interesting article about some aerobic participants who normally arrange where they stand an participate in their class place their chairs as opposed to a new tutor who arrived before them and placed the chairs in an orderly manner which, unknown to the new tutor, apparently didn’t suit the established group of attendees, who normally arrive separately and set their chairs where they find it most comfortable for them.

This, to Jeffrey Folks is an example of the invisible hand at work which sorts chair positions the way the attendees want them to be placed. I find this kind of thinking a stretch of the imagination. Exactly, what is the mechanism by which the invisible hand does this?

Clearly, the independent actions of the arriving attendees placing their chairs were they want them to be, with late comers choosing their spots in knowledge of where earlier arrivals have placed theirs (allowing for some number of the earlier arrivals having ‘favourite’ spots and later arrivals have to choose, perhaps, from ‘second-best’ positions – unless, the invisible hand always chooses the ‘first best’ spots every time).

I can see why attendees would aim to occupy the spots they find most comfortable, but discount that there is an invisible hand at work – its called individual choice. Smith actually mentions in Moral Sentiments how a person entering his chamber finds his chairs in disorder in the middle of the room and he is ‘angry’ because his servant has not placed them with ‘their backs to the wall’ and so takes the ‘trouble’ to place them so (see TMS IV.1.4: 180). His servant would get short shrift if he claimed it was the ‘invisible hand’ that did it, not him!

People at football matches who stand up and obscure the view of those behind them get shouted at – I know from my days when I watched live football matches.

I think Jeffrey Folks really means ‘spontaneous order’ in his example, not Adam Smith and the invisible hand.

Announcement XVI

The Blogger Managers have ordered a shift in the Lost Legacy blog site to a new berth - at Blogspot.

This took place an hour ago and I had no choice but the comply, hence limited notice of the shift.

Apologies for inconvenience this causes.

Warnings came down in the old site was slowly grinding to a halt. I asked what was wrong and the need to move was the reply.

Gavin

The End is Nigh - Or Maybe Not

Paul B Farrell, JD, PhD writes Paul B Farrell’s Wall Street War Zone HERE

“There are 25 Reasons the “Invisible Hand,” the Soul of Capitalism, is Dead!”

“What most distinguishes the “New American Capitalism” from Smith’s original brand of capitalism? We’ve lost our ”soul.” In the New Capitalism there is no soul, it is dead. Wall Street, the original spirit-guide of capitalism is now soulless, lacking a moral compass. That was not the goal of Smith’s model: In his Theory of Moral Sentiments Smith clearly saw capitalism driven by a moral code. The “invisible hand” guiding capitalism and government was not a soulless network of materialistic algorithms designed simply to maximize wealth and concentrate power in the hands of the few. But it is today. We wrote about this historic turning point at length for MarketWatch in “The Death of the ‘Soul of Capitalism:’ 25 reasons why America has ‘lost its soul’ and collapse is inevitable.”

Comment
Another apocalyptic deluded doom-laden prophesy with an indeterminate date upon it.

Like the others, it misses the point.

Systems do not have ‘souls’. Capitalism, no more than hunting, shepherding or farming, has a ‘soul’ or whatever is meant by that as a metaphor.

Society is moved by individuals, not by a sui generis entity somehow disembodied within it. That’s the problem with turning metaphors into objects.

Of course, Paul Farrell has a ‘soul’; he is of the sort that he wishes everybody else is – a man frustrated by the soulless others who make up society. He doesn’t ‘lack a moral compass’.

No doubt before the recent financial upheavals, Paul Farrell also didn’t like capitalism, or Wall Street, or whatever is the object of his bile today. He’s always had the view of himself as a man worthy of praise for his moral behaviour. It’s not him; it’s the damn system …

As we say in Scotland, “Aye, that’ll be right’.

Lost in Transmission?

From Brian Ferguson:

"Gavin: It'll be interesting to see whether he recognizes that what matters here is not so much the invisible hand as the impartial spectator."

Comment
I managed to copy this comment from a regular reader. Thanks Brian. Looks like a good poimt you make.

I shall try to do the same for future posted comments because I 'lose' several regularly using my Blogger hosted site.

It would help if commentators would head their posts with the title of the item they are commenting upon, so I can post it if the original disappears in the system.

Dropping moderation is not an option because I regularly inundated with spam for shoes and boots, unknown chinese language products, and the usual rubbish too.

Gavin