Thursday, February 03, 2011

A Critic Defending Adam Smith Gets It Wrong

Peter Foster writes in Financial Post, Canada (HERE) and makes a trenchant criticism of The IMF’s Dominique Strauss-Kahn's views on Adam Smith and inequality. (Follow the link to read further details -it's a bit ideologicaL, both ways).

However, one section refers to Adam Smith’s comparison in Wealth Of Nations between the living standards of the poor in the commercial societies and the subjects of an Indian Prince in Africa, who lorded it over 10,000 of his naked ‘savages’.

Peter Foster appears to fault Dominique Strauss-Kahn, who favours equality, with this observation, based partly on a misrepresentation (by Foster or Strauss-Kahn – it’s not clear to me which) of the example of the African Prince, cited above:

Smith himself noted that even the poor people of his own day, thanks to the unacknowledged wonders of the Invisible Hand, lived better than had kings of previous times. That’s because they had access — via work — to coats, shoes, kitchen utensils and the odd sack of oatmeal.”

Now, Adam Smith never said any such thing, as a check in Wealth Of Nations shows: WN I.i.11: p 23-4. This is in the very first chapter of WN on the division of labour and the ‘assistance and cooperation’ consequent on the employment of ‘many thousands’ in commercial societies.

Nowhere does it say anything of ‘the unacknowledged wonders of the Invisible Hand’.

I am all for the defence and promotion of markets (‘Markets where possible, the State where necessary’), but I draw the line about ignoring Smith’s central reason for the acquisition of the 'necessaries and conveniences of life’, which Smith called real wealth, specifically the spread of the division of labour (which appeared about 11 millennia ago, even in a complex form in the relatively primitive societies of shepherding and farming that formed after the Ice and prior to the evolution of commercial societies) (See Smith’s Lectures on Jurisprudence [1762-63] 1978).

This had nothing to do with a so-called invisible hand of the market (the idea is patently absurd) and only discredits a legitimate challenge to Adam Smith on the existing inequalities that have featured in all societies since the earliest bands of hunter-scavenger-gatherers.

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3 Comments:

Blogger entech said...

I don’t think Maitland is a good example.

First he says the IH is the source of Smith’s ethics, “that it was derogatory to the honour of God Almighty that he should have left his master-workmanship Man in a state of war:”
A kind of providential harmony? Not really consistent with the usual scepticism of the enlightenment thinkers.

20 or so lines later, “Adam Smith threw really very little weight on these a` priori arguments about harmony, in which Bastiat delights; they are not essential parts of his argument against the mercantile theory, they are obiter dicta.”

Maitland is writing about a period about 50, or so, years before and after Smith. He leaps about through the whole period in his discussion of political theories and concepts of individual liberty. Smith is introduced in the argument for “commercial freedom” against mercantile theory. “... his opponents justified a meddling policy as productive of wealth, and Adam Smith completely refuted this justification. But what is the really powerful part of the refutation? Not the assertion about an invisible hand, but the detailed proof that all the restraints on free trade imposed or suggested had failed, and must fail.”

Not a word about market forces. He treats the IH as an assertion rather than a metaphor and comes to a strange conclusion: Smith thought it was part of the Divine Plan, but only mentioned it “in passing” and thought it was not important..

David

1:56 a.m.  
Blogger Gavin Kennedy said...

Thanks David
Daniel Klein drew Maitland's contribution to my attention in 2009 (my copy is in France), to counter my assertion that not much attention had been given to the IH by Smith's contemporaries or until the 20th century. My notes show I was not impressed by Maitland's contribution, which was about liberty, a matter he was interested in as a jurist. Maitland was at Cambridge and not a political economist. Those who hold to libertarian ideas are impressed by him, though what liberty has to do with the IH escapes me, since Smith's two examples, feudal landlords and mercantile-protected merchants, are a long was from Samuelson's perfect competition, GE or Pareto.

Gavin

10:06 a.m.  
Blogger nemo said...

As a non-economist but with some knowledge and understanding of the use of figures of speech including metaphors, I agree with your interpretation of the use of the IH analogy and your notion that later – and ideological – uses serve to distort and freight the metaphor with other baggage. Your contextualising the IH figure in its contemporary implications and much narrower scope is plausible. Later interpretations and usage of the invisible hand conceit, to nod in the direction of Althusser, are ‘over-determined’ and are coloured with theological, ‘hand of God’ baggage, as if capitalism and market forces are divinely guided and sanctified. Thus the metaphor seems to be operating a post-Smithian usage so that it entails the notion of the market as a force of nature, like gravity. Rather a debateable transference of imagery to something more concrete by modern schools, their ‘embodiment’ of that which after all said and done, is incorporeal. As Hume puts it: ‘A wise man…proportions his belief to the evidence.’
Terry Martin

10:35 a.m.  

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