A Step Towards Understanding the Invisible Hand Metaphor - Then Two Steps Back
Brendan Jordan writes in Power, Identity, Resistance (PIRana Wiki Blog) HERE:
“Brendan's Reading Blog in response to questions 1 & 2 on the e-mail sent October 8th”
“1. Adam Smith's two claims regarding the 'invisible hand' of a market economy, found on pages 18 and 477 in The Wealth of Nations both reach the same conclusion regarding the benefits of appealing to man's self-interest. However, Smith's claim on 477 is much more ambitious than his former claim, since he explicitly conveys how the "invisible hand" of a market ensures that man's self-love can contribute to the collective well-being without his explicit knowledge or consent. Although Smith cites the "invisible hand" phenomenon specifically in reference to how a man's support of domestic industry for his own security can benefit the collective, he clarifies this statement by noting that this invisible hand is evident in "many other cases." On page 18 Smith writes of how natural economic exchange is based upon the self-interest of each individual, and not their benevolence. From reading page 18 it can be inferred that "by treaty, by barter, or by purchase" man can satisfy a variety of wants, efficiently and with a low opportunity cost to himself. However, unlike his later claim Smith does not explicitly connect how self-interest giving rise to exchange can benefit society as a whole. Smith's claim on page 18 omits the words "invisible hand" and is also mostly confined toward the reasons for and the effects of self-interest and exchange with regards to division of labor whereas Smith's claims on page 477 are much broader in their scope.”
Comment
I found this piece intriguing. Brendon Jordon writes an interesting account of what he calls “Adam Smith's two claims regarding the 'invisible hand' of a market economy” (even quoting “page 18 and 476” of Wealth Of Nations). [This is not the definitive Glasgow Edition of the book from Oxford University Press, where the pages are 26-7 and 456 respectively and therefore Brendon is quoting from another edition.]
Still, that leaves a major problem. Smith used the metaphor of ‘an invisible hand’ only once in Wealth Of Nations (456) and only once in Moral Sentiments (184) (he also used the ‘invisible hand of Jupiter” in his Essay on Astronomy [1795, posthumous)], but this use was as a noun, not a metaphor). The reference to page ‘18’ being meant an invisible hand is by Brendon’s controversial attribution, of which more below.
Brendon writes: “… Smith cites the "invisible hand" phenomenon specifically in reference to how a man's support of domestic industry for his own security can benefit the collective …”, which is quite correct and very pleasing to see – clearly he has read the passage, which is a step up from the usual reports of Smith’s use of the Invisible Hand metaphor, by people who have not read WN. He then spoils his case by adding: “On page 18 Smith writes of how natural economic exchange is based upon the self-interest of each individual, and not their benevolence. From reading page 18 it can be inferred that "by treaty, by barter, or by purchase" man can satisfy a variety of wants, efficiently and with a low opportunity cost to himself. However, unlike his later claim Smith does not explicitly connect how self-interest giving rise to exchange can benefit society as a whole.”
The “butcher, brewer, baker” case centres on how parties make their bargains to acquire their dinners from those others who sell them items on their menus, specifically by the conditional proposition: “Give me that which I want, and you shall have this which you want” adding “it is in this manner that we obtain from one another the far greater part of the far greater part of the good offices which we stand in need of” (26).
Smith does not mention the Invisible Hand metaphor because the metaphor is redundant in these exchange cases: prices and offers and demands are visible, not invisible, neither are the items they wish to exchange. They use persuasion and conversation to find a price acceptable to both of them and the mechanism is by their not talking to the other party of “own necessities but of their advantages” to conclude their transactions.
In short, they achieve their own self-interests by serving the self-interests of the other party and they mediate their initial differences on price and quantity, by raising their offers or lowering their demands until they reach a single visible price and quantity.
Two extremely egotistical, self-interested would-be bargainers will never conclude a transaction unless they change their behaviours. Which is why the invisible-hand metaphor is inapplicable to such cases, and why Adam Smith never spoke of the ‘invisible hand of the market’. That last was an invented attribution by modern economists from the 1950s (see Paul Samuelson, Economics, 1948, p 36).
Moreover, consider the two cases where he did use the Invisible Hand metaphor: in Moral Sentiments (1759) he refers to feudal landlords – indeed all to all landlords from when farming was ‘discovered”, Pharaohs, Babylonian Kings, and Roman Emperors, etc., included, who used some of their crops to feed their slaves or serfs; and in Wealth Of Nations he refers to some, but not all, merchants and manufacturers, who prefer domestic investment to the riskier (in their view) investment abroad.
Now feudal landlords did not operate in a market; they fed their slaves and serfs because their own fortunes and “greatness” depended on doing so; neither did those investors in 18th-century Britain whose risk-aversion led them to add to domestic output and employment operate in free markets, especially considering the mercantile political economy with its tariff protection and prohibitions, its Government enforced Acts of Settlement, Apprenticeship Statutes, Incorporated Town Guilds, Chartered Companies, Patents, Primogeniture and Entail Laws and the Navigation Acts enforced by the Royal Navy.
The invisible–hand metaphor’s object in Feudal times was the invisible absolute necessity of keeping alive sufficient slaves and serfs at subsistence to work their fields (and for the slave and serfs to work to survive); this mutual dependency was the object of the metaphor. The invisible-hand metaphor in 18th-century Britain was the invisible risk-aversion of those who preferred the safer home trade to the riskier foreign trade.
In neither case was the invisible-hand metaphor about how visible exchange in markets work, with visible prices, quantities of visible trade goods. The invisible-hand is not real; it does not exist physically.
Smith spoke on the role of metaphors in his Lectures on Rhetoric and Belles Lettres 1762-3 (published in 1963 and 1983, page 29). A metaphor expresses the object to which it related “in a more striking and interesting manner”; no metaphor is the object of itself.
“Brendan's Reading Blog in response to questions 1 & 2 on the e-mail sent October 8th”
“1. Adam Smith's two claims regarding the 'invisible hand' of a market economy, found on pages 18 and 477 in The Wealth of Nations both reach the same conclusion regarding the benefits of appealing to man's self-interest. However, Smith's claim on 477 is much more ambitious than his former claim, since he explicitly conveys how the "invisible hand" of a market ensures that man's self-love can contribute to the collective well-being without his explicit knowledge or consent. Although Smith cites the "invisible hand" phenomenon specifically in reference to how a man's support of domestic industry for his own security can benefit the collective, he clarifies this statement by noting that this invisible hand is evident in "many other cases." On page 18 Smith writes of how natural economic exchange is based upon the self-interest of each individual, and not their benevolence. From reading page 18 it can be inferred that "by treaty, by barter, or by purchase" man can satisfy a variety of wants, efficiently and with a low opportunity cost to himself. However, unlike his later claim Smith does not explicitly connect how self-interest giving rise to exchange can benefit society as a whole. Smith's claim on page 18 omits the words "invisible hand" and is also mostly confined toward the reasons for and the effects of self-interest and exchange with regards to division of labor whereas Smith's claims on page 477 are much broader in their scope.”
Comment
I found this piece intriguing. Brendon Jordon writes an interesting account of what he calls “Adam Smith's two claims regarding the 'invisible hand' of a market economy” (even quoting “page 18 and 476” of Wealth Of Nations). [This is not the definitive Glasgow Edition of the book from Oxford University Press, where the pages are 26-7 and 456 respectively and therefore Brendon is quoting from another edition.]
Still, that leaves a major problem. Smith used the metaphor of ‘an invisible hand’ only once in Wealth Of Nations (456) and only once in Moral Sentiments (184) (he also used the ‘invisible hand of Jupiter” in his Essay on Astronomy [1795, posthumous)], but this use was as a noun, not a metaphor). The reference to page ‘18’ being meant an invisible hand is by Brendon’s controversial attribution, of which more below.
Brendon writes: “… Smith cites the "invisible hand" phenomenon specifically in reference to how a man's support of domestic industry for his own security can benefit the collective …”, which is quite correct and very pleasing to see – clearly he has read the passage, which is a step up from the usual reports of Smith’s use of the Invisible Hand metaphor, by people who have not read WN. He then spoils his case by adding: “On page 18 Smith writes of how natural economic exchange is based upon the self-interest of each individual, and not their benevolence. From reading page 18 it can be inferred that "by treaty, by barter, or by purchase" man can satisfy a variety of wants, efficiently and with a low opportunity cost to himself. However, unlike his later claim Smith does not explicitly connect how self-interest giving rise to exchange can benefit society as a whole.”
The “butcher, brewer, baker” case centres on how parties make their bargains to acquire their dinners from those others who sell them items on their menus, specifically by the conditional proposition: “Give me that which I want, and you shall have this which you want” adding “it is in this manner that we obtain from one another the far greater part of the far greater part of the good offices which we stand in need of” (26).
Smith does not mention the Invisible Hand metaphor because the metaphor is redundant in these exchange cases: prices and offers and demands are visible, not invisible, neither are the items they wish to exchange. They use persuasion and conversation to find a price acceptable to both of them and the mechanism is by their not talking to the other party of “own necessities but of their advantages” to conclude their transactions.
In short, they achieve their own self-interests by serving the self-interests of the other party and they mediate their initial differences on price and quantity, by raising their offers or lowering their demands until they reach a single visible price and quantity.
Two extremely egotistical, self-interested would-be bargainers will never conclude a transaction unless they change their behaviours. Which is why the invisible-hand metaphor is inapplicable to such cases, and why Adam Smith never spoke of the ‘invisible hand of the market’. That last was an invented attribution by modern economists from the 1950s (see Paul Samuelson, Economics, 1948, p 36).
Moreover, consider the two cases where he did use the Invisible Hand metaphor: in Moral Sentiments (1759) he refers to feudal landlords – indeed all to all landlords from when farming was ‘discovered”, Pharaohs, Babylonian Kings, and Roman Emperors, etc., included, who used some of their crops to feed their slaves or serfs; and in Wealth Of Nations he refers to some, but not all, merchants and manufacturers, who prefer domestic investment to the riskier (in their view) investment abroad.
Now feudal landlords did not operate in a market; they fed their slaves and serfs because their own fortunes and “greatness” depended on doing so; neither did those investors in 18th-century Britain whose risk-aversion led them to add to domestic output and employment operate in free markets, especially considering the mercantile political economy with its tariff protection and prohibitions, its Government enforced Acts of Settlement, Apprenticeship Statutes, Incorporated Town Guilds, Chartered Companies, Patents, Primogeniture and Entail Laws and the Navigation Acts enforced by the Royal Navy.
The invisible–hand metaphor’s object in Feudal times was the invisible absolute necessity of keeping alive sufficient slaves and serfs at subsistence to work their fields (and for the slave and serfs to work to survive); this mutual dependency was the object of the metaphor. The invisible-hand metaphor in 18th-century Britain was the invisible risk-aversion of those who preferred the safer home trade to the riskier foreign trade.
In neither case was the invisible-hand metaphor about how visible exchange in markets work, with visible prices, quantities of visible trade goods. The invisible-hand is not real; it does not exist physically.
Smith spoke on the role of metaphors in his Lectures on Rhetoric and Belles Lettres 1762-3 (published in 1963 and 1983, page 29). A metaphor expresses the object to which it related “in a more striking and interesting manner”; no metaphor is the object of itself.
Labels: Invisible Hand, Smith on Metaphors
0 Comments:
Post a Comment
<< Home