Mark Blaug's Criticism of the 'Historical Travesty' of the Myth of the Invisible Hand
Paul Walker, a regular reader of Lost Legacy, commented on yesterday’s post with a quotation from Mark Blaug’s, "Economic Theory in Retrospect", 5th ed. Cambridge: Cambridge University Press, which I think needs a wider circulation than would occur if left in the comments to a post. It is particularly apposite in regard to my new paper for the University of Richmond Summer Institute in June (working title): ‘Paul Samuelson and the Genesis of the Modern Economics of the Invisible hand Doctrine’.
"[ ... ] Smith's faith in the benefits of 'the invisible hand' has absolutely nothing whatever to do with allocative efficiency in circumstances where competition is perfect a la Walras and Pareto; the effort in modern textbooks to enlist Adam Smith in support of what is now known as the 'fundamental theorems of welfare economics' is a historical travesty of major proportions. For one thing, Smith's conception of competition was, as we have seen, a process conception, not an end-state conception. For another society, a decentralised competitive price system was held to be desirable because of its dynamic effects in widening the scope of the market and extending the advantages of the division of labour - in short, because it was a powerful engine for promoting the accumulation of capital and the growth of income."
Blaug, Mark 1996. Economic Theory in Retrospect. 5th edn. 60-1. Cambridge: Cambridge University Press.
I was unaware of this statement by Mark Blaug – and I applaud it warmly – though I purchased a copy of Blaug’s masterly survey of history of economic thought in the 1960s when I was a student, though the subject was not part of the curriculum for an Honours degree in economics – no surprise there then –
(there were a few courses from Economic History, a different degree, that could be taken, which I did).
‘Tis a pity that I was unaware of Mark’s thought, which coincide with mine and derive from my quite independent reading since just before I retired in 2005.
I would like to think that my paper on Paul Samuelson’s popular textbook, Economics: an introductory analysis (1948-2010 – 19 editions, 4½ million sales in 40 languages) demonstrates how Samuelson – perhaps the most talented theorist (Nobel Prize winner) and certainly the best textbook writer for over 60 years) – was instrumental in popularizing the modern myth of the invisible hand, which had nothing at all to do with Adam Smith’s limited use of it as a metaphor.