Thursday, September 23, 2010

Student Essays That Spread the Myth of An Invisible Hand

In (‘the world’s largest Q & A site’; Wiki Answers) they have set the following as a question:

Why is the working of the invisible hand the central theme of the wealth of nations?

This question struck me as it is coincidental to something I am working on in response to a most interesting academic paper by Daniel Klein and Brandon Lucas on their findings that both mentions of the ‘invisible hand’ in Adam Smith’s “Moral Sentiments” and “Wealth Of Nations” appear at, or almost at, the dead centre of these respective tomes in the editions (1 to 7) of them which were published during his life time.

The details of their fascinating paper and their arguments and the implications of what they regard as ‘intentional’ by Smith are part of a new publication, to which I have been invited to respond (subject to a referee’s judgement). I will not go into their arguments and their evidence on this occasion, nor to my responses (which I am writing this week for an early deadline – the invitation arrived only yesterday).

I have no idea of the status of ‘’, nor its purpose or business model, so I cannot judge its scholarly credibility. I can only say that the essay ‘question’ as it stands is only of value if we accept that the modern economists’ obsession with the statement of an invisible hand.

The ‘invisible hand’ in the question was founded on a myth, not shared by Adam Smith, that was invented in the late 1940s by Paul Samuelson, among others. Because of the global success of Samuelson’s textbook: ‘Economics: an introductory analysis’, 1948, and through 19 editions to 2010 (latterly with co-author William Nordhaus of Yale) and its sales of 4½ million (plus an active second-hand, re-sale market), Smith’s metaphor became linked in the public mind with perfect competition and the lack of it (an astonishing feat in itself)! It was believed to be real - not a metaphor.

If is about providing ‘essays’ for students, then these myths will continue at the expense of education, if students repeat the myths for their tutors. Worse, graduates in later life, who act on the assurance that there is ‘’an invisible hand’ leading (even selfish actions pace Samuelson, et al) to social beneficial outcomes, will contribute to
the disappointing chaos seen in the recent financial crises, or as bad, if not worse, will act on the assertion that the economy requires top-down regulations, crafted by governments, which will cause disappointing performances and the slower spread of opulence, especially to the poorest in our societies.

The modern myth of Smith’s ‘invisible hand’, separated from its object as a metaphor, as Smith taught was the proper use of metaphors, has become a pernicious doctrine of the 20th century, when treated as its own object (see Adam Smith’s Lectures on Rhetoric and Belles Lettres ([1762-3] 1980, p 29).

There is much work to be done to undermine this myth.



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