Doubts On The Invisible Hand But..
Alex Merced writes the Blog, LIBERTY IS NOW HERE:
‘Capitalism and Democracy’
‘Detractors to Capitalism often will make satire of the idea of "the invisible hand" as if Free Market Capitalist believe there is an actual invisible hand. The Invisible hand is a metaphor for much more beautiful and plausible idea; that the actions and choices of every individual under no coercive influence can best manage scarce resources. I mean to anyone who calls themselves anti-establishment, how can this not be a beautiful idea, the lack of central power, the freedom from a top down world. Detractors will then make arguments about "Market Failure" essentially making claims that the market doesn't achive impossible and often impracticle goals such as EQUAL income distribution.’
Comment
I am not by any means a detractor of capitalism (nor of Smith’s version of commercial society) and I do not regard Lost Legacy’s critique of the modern invention of the ‘theory’ of ‘an invisible hand’ and its attribution to something Adam Smith is alleged to have written is based on a mere ‘misunderstanding’.
The assertions and repetitive claims of modern economists that the market is led by ‘an invisible hand’ (and Smith said so) has been turned against economists for it’s patent failure to do what they claimed for it.
I have debated this issue with many distinguished economists who appear oblivious to what Adam Smith actually wrote, who have dismissed my critique of their certainties. Seldom have I found any of them agreeing that the invisible hand is a metaphor, despite the evidence from Adam Smith that he used it as such – mostly they ignore the evidence (many appear not have a clue what a metaphor is and its role in literature). I have yet to receive their responses to my paper detailing the invention of the modern myth by Paul Samuelson from 1948-2010 (copies on request to Lost Legacy: gavinK9 AT gmail DOT com).
The sentence that ‘The Invisible hand is a metaphor for much more beautiful and plausible idea; that the actions and choices of every individual under no coercive influence can best manage scarce resources.’
Simple? Yes. True? Not quite!
If we parse the sentence we find:
All metaphors re-state in a ‘more striking and interesting manner their object’ (Adam Smith, Lectures on Rhetoric and Belles Lettres’, November, 1762, p 29).
And the objects of Smith’s use of the metaphor of ‘an invisible hand’ were clearly stated in both occasions when Smith used it.
How many asserters believe that there is an ‘actual’ invisible hand’ (including those who assert that it is the ‘hand of God’) are aware of the actual objects to which Smith referred? Damn few, if any.
In Moral Sentiments (1759) the object to which he refers is the ‘reason’ for the behaviour of ‘rich landlords’ who are compelled of necessity to feed their peasants from their stocks of food. Why? Because if they didn’t they would soon have nobody able to work on their land producing the food upon which the power and greatness of was based.
They are under ‘under no coercive influence’ to do so only in a limited sense, but if they didn’t, the economic arrangements under which they ruled would rapidly whither. Not all forms of coercion are enforced by laws and tyranny; some forms are caused by necessity.
In Wealth Of Nations (1776) the object to which he refers is the ‘reason’ for the behaviour of some but not all merchant traders, who feel less secure about sending their capital abroad because of the risks necessarily involved in long- distance ventures, prefer to trade locally. It is their insecurity that drives them to behave in this manner.
That is the object to which he refers as the ‘reason’ for the behaviour of those traders who behave in this manner and to which he applies the metaphor of them being ‘led by an invisible hand’ to make his point in a ‘more striking and interesting manner’.
Again, these traders are not ‘coerced’ by laws and tyranny to behave in this manner. It is their ‘insecurity’ that compels them to behave in this manner, aand Smith says so in the very paragraph from which modern economists (but not anybody who read Wealth Of Nations in the 18th century, nor the most part of the 19th century) make out in what can only described as a degree of naivety in believing that the ‘invisible hand’ is its own object, and in extreme, that it actually exists.
Alex Merced pleads for what he calls ‘a beautiful idea, the lack of central power, the freedom from a top down world’ for which I concur as an appropriate description of the power of markets. To make this idea a reality, he should ditch once and for all the obfuscation the modern invention of ‘an invisible hand’ and search, as Adam Smith did, for the actual drivers of market phenomena. That it wasn’t anything of divine origin, nor an actual mystical disembodied hand, is shown by the fact that apart from two examples of his use of it as a metaphor, he said nothing at all about 'an invisible hand' when he analysed markets in detail in Books I and II in Wealth Of Nations.
In fact, the metaphor in both cases – feudal, rich landlords nor risk-averse merchants in mercantile 18th century Britain - neither of which were really remotely connected to competitive market conditions.
‘Capitalism and Democracy’
‘Detractors to Capitalism often will make satire of the idea of "the invisible hand" as if Free Market Capitalist believe there is an actual invisible hand. The Invisible hand is a metaphor for much more beautiful and plausible idea; that the actions and choices of every individual under no coercive influence can best manage scarce resources. I mean to anyone who calls themselves anti-establishment, how can this not be a beautiful idea, the lack of central power, the freedom from a top down world. Detractors will then make arguments about "Market Failure" essentially making claims that the market doesn't achive impossible and often impracticle goals such as EQUAL income distribution.’
Comment
I am not by any means a detractor of capitalism (nor of Smith’s version of commercial society) and I do not regard Lost Legacy’s critique of the modern invention of the ‘theory’ of ‘an invisible hand’ and its attribution to something Adam Smith is alleged to have written is based on a mere ‘misunderstanding’.
The assertions and repetitive claims of modern economists that the market is led by ‘an invisible hand’ (and Smith said so) has been turned against economists for it’s patent failure to do what they claimed for it.
I have debated this issue with many distinguished economists who appear oblivious to what Adam Smith actually wrote, who have dismissed my critique of their certainties. Seldom have I found any of them agreeing that the invisible hand is a metaphor, despite the evidence from Adam Smith that he used it as such – mostly they ignore the evidence (many appear not have a clue what a metaphor is and its role in literature). I have yet to receive their responses to my paper detailing the invention of the modern myth by Paul Samuelson from 1948-2010 (copies on request to Lost Legacy: gavinK9 AT gmail DOT com).
The sentence that ‘The Invisible hand is a metaphor for much more beautiful and plausible idea; that the actions and choices of every individual under no coercive influence can best manage scarce resources.’
Simple? Yes. True? Not quite!
If we parse the sentence we find:
All metaphors re-state in a ‘more striking and interesting manner their object’ (Adam Smith, Lectures on Rhetoric and Belles Lettres’, November, 1762, p 29).
And the objects of Smith’s use of the metaphor of ‘an invisible hand’ were clearly stated in both occasions when Smith used it.
How many asserters believe that there is an ‘actual’ invisible hand’ (including those who assert that it is the ‘hand of God’) are aware of the actual objects to which Smith referred? Damn few, if any.
In Moral Sentiments (1759) the object to which he refers is the ‘reason’ for the behaviour of ‘rich landlords’ who are compelled of necessity to feed their peasants from their stocks of food. Why? Because if they didn’t they would soon have nobody able to work on their land producing the food upon which the power and greatness of was based.
They are under ‘under no coercive influence’ to do so only in a limited sense, but if they didn’t, the economic arrangements under which they ruled would rapidly whither. Not all forms of coercion are enforced by laws and tyranny; some forms are caused by necessity.
In Wealth Of Nations (1776) the object to which he refers is the ‘reason’ for the behaviour of some but not all merchant traders, who feel less secure about sending their capital abroad because of the risks necessarily involved in long- distance ventures, prefer to trade locally. It is their insecurity that drives them to behave in this manner.
That is the object to which he refers as the ‘reason’ for the behaviour of those traders who behave in this manner and to which he applies the metaphor of them being ‘led by an invisible hand’ to make his point in a ‘more striking and interesting manner’.
Again, these traders are not ‘coerced’ by laws and tyranny to behave in this manner. It is their ‘insecurity’ that compels them to behave in this manner, aand Smith says so in the very paragraph from which modern economists (but not anybody who read Wealth Of Nations in the 18th century, nor the most part of the 19th century) make out in what can only described as a degree of naivety in believing that the ‘invisible hand’ is its own object, and in extreme, that it actually exists.
Alex Merced pleads for what he calls ‘a beautiful idea, the lack of central power, the freedom from a top down world’ for which I concur as an appropriate description of the power of markets. To make this idea a reality, he should ditch once and for all the obfuscation the modern invention of ‘an invisible hand’ and search, as Adam Smith did, for the actual drivers of market phenomena. That it wasn’t anything of divine origin, nor an actual mystical disembodied hand, is shown by the fact that apart from two examples of his use of it as a metaphor, he said nothing at all about 'an invisible hand' when he analysed markets in detail in Books I and II in Wealth Of Nations.
In fact, the metaphor in both cases – feudal, rich landlords nor risk-averse merchants in mercantile 18th century Britain - neither of which were really remotely connected to competitive market conditions.
Labels: Invisible Hand
2 Comments:
So the Essential issue was my use of the Metaphore? In that sense I agree, the metaphore get more ridicule and does hide and make market seem silly. Yet it's this metaphor that's constantly used against market advocates such as myself so I felt it needed to address the beauty of markets.
I enjoyed the post, feel free to respond all you want I enjoyed the read.
Alex
It would help your (and mine!) if you exposed the nonsense about the invisible hand metaphor, whether from opponents of markets and ideologues of markets who believe IHs exist.
By exposing the myths the IH creates (an easy target to ridicule), opponents have to tackle the undoubted power of markets (like all human constructions, less than perfect, but better then known alternatives).
Gavin
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