Saturday, July 09, 2011

Praised and Criticised In Equal Measure

Zach Vaughan writes in Wandering Reveries somewhere in Texas (HERE):

A Libertarian in Leftywood writes in L.A.Liberrty:

‘The Invisible Hand: What Is it?’

‘It’s probably not what you think it is. The only mention of the invisible hand by Adam Smith in the Wealth of Nations occurs in Book IV, chp. 2, paragraph 9:

"By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."

From this single mention, an entire mythology has arisen about the invisible hand and it’s role in the market. For quite some time, I’ve been reading Adam Smith’s Lost Legacy, which is a blog written by Gavin Kennedy, who spends much of his time countering the myth of the invisible hand. Today’s post addresses the invisible hand claims of the Rothbard/Mises school: Another False Attribution to Adam Smith. I recommend reading Mr Kennedy’s blog; it’s certainly given me a new, and more accurate, perspective of Adam Smith.’

An endorsement. At last!

Lost Legacy ploughs a lonely furrow and it is nice to receive evidence that somebody reads and finds in it something of value.


An angry Libertarian – is there any other type - (no name, that I could find) responds (HERE):

That Cornuelle once studied under Mises does not make him part of the “Rothbard/Mises” school. To the contrary, one would describe him as primarily a neo-classical economist of a different sort entirely. One of the only Austrians who seems to ever use him with any regularity is Peter Boettke (whom that site quotes, and who tries to distance himself a bit from the Austrian mainstream).

Go ahead and perform a google search of the terms “cornuelle” and “austrian economics.” You will find that the vast majority of links are related to Boettke. If you try ”invisible hand” and “austrian economics,” it’s primarily Boettke and a couple by Peter Holcombe.

You will find no entry of Cornuelle in the Mises wiki; you will find no literature by Cornuelle available through Mises. In fact, the only mention of Cornuelle at is a letter to him by Murray Rothbard in the mid-50’s on an issue of disagreement. This is because Cornuelle was not an Austrian. Here is Rothbard himself explaining how Cornuelle very much lost his way from his more laissez-faire origins.

The fact of the matter is this: Mises, as far as I know, had never used the phrase “invisible hand.” The author’s closing paragraph attributing Cornuelle’s understanding of the invisible hand as having directly come while “[s]itting at the feet of Mises,” and taking “his teacher’s words as gospel” is at best speculative though likely a gross, irresponsible yet convenient fabrication.

I haven’t read everything Mises or all the great Austrians have ever written - this is true. But I’ve certainly read a far greater deal more than that author or you or most non-economists - and I’ve read enough to know that I’ve never come across the term “invisible hand” in any Austrian literature outside the two aforementioned economists and in historical context.
Which should be enough to laugh at the author’s opening statement of alleged discomfort. To jump from a small number of mentions to it being central to the school requires two assumptions: (1) no thinker may ever deviate from his primary philosophical course, and as such (2) any idea, no matter how little promoted by a small minority of adherents (even, with all due respect to Boettke and Holcombe, by minor players), must thus be attributed as part of the greater school of thought and even to a teacher who never said such a thing. This is, of course, preposterous.

Yes, a very small number (two, by my count - though perhaps there are other even lesser-known ones) of Austrians have sometimes used the invisible hand as a metaphor. And while Austrians may recognize Smith’s “invisible hand” as some catalyst of insight, Austrians in general simply do not subscribe to the “invisible hand” as an unseen, even magical force at work, just as they do not believe the market can ever reach equilibrium. As Mises and Rothbard and Kirzner all taught: the market is a process. It is the interactions of many using available, visible cues to make decisions. Each individual makes these decisions on his own behalf based on his own subjective criteria. Through this cooperative and competitive interplay - as results from the decentralization of an unfettered market - supply and scarcity is related, and demand and efficiency are discovered.

Perhaps this is mere nuance for those who believe an economy can be centrally planned, but the point is this: if you are to disparage the opinions and economists of the “Rothbard/Mises school” as it is so put, at least go after the opinions and economists who are actually best representative of it.

I re-posted the critical Comments in full. They contain some valid points in controversy with which I acknowledge.

I was making a wider point, not meaning to focus solely on Mises, et al, on the IH metaphor, but wider on the approach of Mises’ people with whom I have been acquainted over the years. I purchased and read Human Action in 2005 and was not impressed with its dependence on logicality, though its structure is an impressive argument. I discussed Rothbard’s take on Adam Smith on Lost Legacy some years back, and was totally unimpressed both by his assertions (he muddled Smith on the division of labour) and by his arrogant and abrupt manner. Several people who knew and met him confirmed my impressions from my reading of his personality, evident in his writing.

Despite what ‘Angry Libertarian’ (why are ‘Austrians’ so certain and so angry?) asserts, the IH metaphor is a regular source of my disputes with those of them I have met and read about.

However, I did not mean to imply anything about what Mises views were on Adam Smith’s use of the IH metaphor. I perhaps, wrongly, linked Cornuelle to Mises school, for which I apologise, and I hope in publishing “Angry Libertarian’s” in full the correction goes some way to making amends.

I accept "Angry Libertarian's" assurances that Mises did not make assertions about Adam Smith's use of the IH metaphor, and I shall bear that in mind in future and I shall distinguished between authoritative views on Austrian economics and less-informed persons who may wrongly assert t the contrary.

I do not deliberately ‘fabricate’ ideas or associations – Lost Legacy spends a great deal of time responding to such behaviours in others, especially on the myths of Adam Smith’s use of the IH metaphor, Smith’s beliefs in ‘laissez-faire’, the ‘night watchman state’ and even his alleged ‘labour theory of value’. Nor do I accept the notion of ‘equilibrium’ (general or partial), and much of the logico-centric use of mathematics to map human interactions.

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