Thursday, May 20, 2010

A New Exposure Series on the Genesis of the Invisible Hand Myth from the 1950s No. 1

From John Lindauer, Economics: a modern view, 1977, W. B. Saunders Company, p.12:

Patron Saints: free-enterprise Adam Smith (1723-1790)’

‘As long as self-interest existed to keep people and firms working as hard as possible to produce the most valuable goods and services, as long as politicians and kings did not muddle up people’s behaviour by interfering with their freedom to produce and buy, the “invisible hand” of self-interest would guide the economy to prosperity.

This is propaganda, not economic science, and pretty poor history too.

Lindauer writes as if ‘politicians and kings’ were autonomous agents in 18th-century mercantile political economy.

Where did legislators and those who influenced them get their protectionist ideas from if not the merchants and manufacturers whose self-interest led them (not an invisible hand!) to realise the benefits to them of tariffs and protection against foreign imports.

Politicians and kings responded – often for bribes – to the pleas of those merchants and manufacturers for ‘patriotic’ protectionism, who gained extra profit from the resultant higher prices by ‘narrowing the market’.

That was Smith’s candid message in Wealth Of Nations.

So what was new and different about the 1977 America and Europe in the textbook by John Lindauer? Nothing. Only worse. The plaintive lobbying business within the political system was well funded, well organized and flush with funds. Kings no longer interfered but the politicians did, and many of them made small fortunes and larger numbers of votes from doing so.

There was no ‘invisible hand of self interest’ but there was self-interest in promoting the propaganda of the myth of the invisible hand. That many respectable economists accepted without challenge the myth of the invisible hand (and many still do) is regrettable.



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