Thursday, August 19, 2010

How to Weaken a Good Case

James Arvanitakis, a lecturer in the Humanities at the University of Western Sydney, writes in the Centre for Policy Development (Australia) (19 August) makes to good case for a stimulus HERE:
wanders into mythical waters alleging that Adam Smith described ‘an “invisible hand” of the market’:

‘Supporting The Stimulus Package: They Got It Right’

‘When describing the “invisible hand” of the market in the eighteenth century, Adam Smith made it clear it was a metaphor to depict a broad range of activities – it is a pity that contemporary politicians and commentators read it literally. The stimulus package confronted this myth – and Rudd and Swan should be commended for it – despite their other shortcomings.

It might be a good idea for James Arvanitakis to read ‘an invisible hand’ properly as a metaphor, as Smith taught his students in his Lectures on Rhetoric and Belles Lettres ([1762] 1983, page 29): namely to express ‘in a more striking and interesting manner’ its object.

It would be even better, to be accurate too. Smith never expressed the metaphor in relation to markets; that is an invention of modern economists (Samuelson, among many others).

Smith’s three (only) references to the metaphor of ‘an invisible hand’ were not about markets.

In his History of Astronomy (written: 1744-50s; published posthumously, 1795) its object was the heathen god, Jove (Jupiter); in Moral Sentiments (1759) its object was the ‘rich (feudal) landlord’; and in Wealth of Nations (1776) its object was some, but not all, merchants who preferred to trade locally rather than abroad (risk aversion) in a commercial mercantile economy noted for its domestic monopolies, tariffs and the Navigation Acts, none of which were remotely competitive markets.



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