Tuesday, June 01, 2010

On the Genesis of the Myth of the Invisible Hand Metaphor, no 9

Alec Cairncross, 1944. An Introduction to Economics, London: Butterworth & Co.

There was no need to shackle the natural cupidity of businessman – indeed it was almost impious; for the “invisible hand” of market forces would transform cupidity into an unintentional benevolence. It was not the charity of bakers which assured us of our daily bread, but a more calculable and powerful motive – their self-interest. It was this motive which made the world go round without the meddlesome intervention of governments. Self-interest, spurned by the moralists as a vice, was exalted by economists as the driving force behind material progress and an adequate substitute for government regulation’ (p 400-1)

Comment
I am digging back into textbooks from my own collection in France and finding some references to the invisible hand of earlier vintage than I have expected.

This one from Alec Cairncross (later Sir Alec) was written before he became a member of the wartime civil service at the Ministry of Aircraft Production (1941) and published (1944) when he was a Lecturer In Political Economy at the University of Glasgow (where Adam Smith studied (1737-40) and eventually was a Professor of Moral Philosophy (1751-64). As Cairncross studied for his PhD at Cambridge, it is not clear where he picked up the above ideas. But his inclusion of the reference suggests there was a quite separate oral tradition in the UK from that at work at Chicago in the 1930s.

I shall write to his daughter, also a distinguished economist, at Essex College in the University Of Oxford (where Smith studied from 1740-44) and ask if she could throw some light on the question.

Professor Cairncross, latterly as Professor of Applied Economics at the University of Glasgow, when the third edition of his text was published in 1960, expanded the 1st (1944) and 2nd editions (1955), and with some obvious additions and excisions, kept his reference to the invisible hand almost word perfect (pp 601-2). It subsequent history is that it was in paperback edition in 1973 and a 6th edition is claimed for it in 1980.

All Lost Legacy’s reservations about the use of the invisible-hand metaphor in previous posts on the this series apply to this book too.

6 Comments:

Blogger entech said...

I have recently come across a book Edwin Cannan, Wealth: A Brief Explanation of the Causes of Economic Wealth [1914]. Just started reading and it looks interesting. Although Adam Smith is referred to quite a lot there is absolutely no mention of an invisible hand.
David

7:45 a.m.  
Blogger Gavin Kennedy said...

en tech
I too have a copy of Cannan's Wealth (3rd edition).

Gavin

10:51 a.m.  
Blogger Gavin Kennedy said...

entech

Did you notice Cannan paraphrases from the 'invisible hand' paragraph in Moral Sentiments in respect of the phrase that the desire for food is limited in every man by the narrow capacity of the human stomach' (p 200, chapter 12, 'Incomes from Work' 'Occupational inequalities')?

Gavin

5:19 p.m.  
Blogger entech said...

I have the electronic version from EconTalk, and came on that part while doing a search on Adam Smith. It seemed to have a familiar ring.
The whole chapter is interesting, especially to a failed Marxist. I can never quite lose the importance, in my mind, of the labour theory of value. It seems so obvious that, say, coal is of little value until someone digs it from the ground.
Prior to the industrial revolution it was mainly for household use, “keeping the lums reeking”. When it was essential to industry coal mining really took off. Labour was employed because it created something of value, a very important corollary.
Earlier in the same chapter he has the sentence, “Here again the only reason for overlooking the truth is its extreme obviousness.” Could this account for the resistance to your view of the invisible hand? The quote is slightly out of context, but aren’t nearly all of the modern references.

David

12:59 a.m.  
Blogger Gavin Kennedy said...

entech

It depends on what we mean by value. 'Toil is the foundation of life' in the sense that without toil by someone there can be no life - people have to eat, keep out the cold with covering or the sun with shade, and sleep in safety - and human life is social with others. Toil has value in what he enables to eb or to happen.

We can distinguish between 'rude' society, where labour (toil) unambiguously is the property of those who undertake it as individuals, and more complex societies, where toil is a co-operative effort with degrees of complexity from the simple tribal team to more and more 'round about' systems of toil where exchange predominates.

In the latter, the division of property is more complex - no individual unambiguously owns the product of toil; it is shared, not necessarily equally, among all who participate in the sum of the toil, including passively in not obstructing others engaged in toil.

The problem with the labour theory of exchangeable value it does not account for the splintered effect of social co-operation. It tries to create an explanation that is untenable and, in practice, is tyrannical - everything is owned by what is called a 'State', mythically owned by everybody, but in practice owned by a self-selected elite who find it necessary to use repressive methods against those who question the myth.

Smith respected those at the 'bottom' who toiled endlessly for the benefit of others at the 'top'. His perspective was that everybody benefitted from those who toiled. He thought opulent societies should share the wealth created by toil and could share it without destroying the co-operate nature of opulent societies.

Gavin

7:30 a.m.  
Blogger Gavin Kennedy said...

entech

It depends on what we mean by value. 'Toil is the foundation of life' in the sense that without toil by someone there can be no life - people have to eat, keep out the cold with covering or the sun with shade, and sleep in safety - and human life is social with others. Toil has value in what he enables to be or to happen.

We can distinguish between 'rude' society, where labour (toil) unambiguously is the property of those who undertake it as individuals, and more complex societies, where toil is a co-operative effort with degrees of complexity from the simple tribal team to more and more 'round about' systems of toil where exchange predominates.

In the latter, the division of property is more complex - no individual unambiguously owns the product of toil; it is shared, not necessarily equally, among all who participate in the sum of the toil, including passively in not obstructing others engaged in toil.

The problem with the labour theory of exchangeable value it does not account for the splintered effect of social co-operation. It tries to create an explanation that is untenable and, in practice, is tyrannical - everything is owned by what is called a 'State', mythically owned by everybody, but in practice owned by a self-selected elite who find it necessary to use repressive methods against those who question the myth.

Smith respected those at the 'bottom' who toiled endlessly for the benefit of others at the 'top'. His perspective was that everybody benefitted from those who toiled. He thought opulent societies should share the wealth created by toil and could share it without destroying the co-operate nature of opulent societies.

Gavin

7:32 a.m.  

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