Looney Tunes No. 15

1
When will 'ragging' be wiped out?

Ceylon Daily News HERE

“"They seem to be 'programmed' into behaving the way they do, by some sinister and invisible hand.”

2
Apostates In Our Midst

TBogg HERE

“the invisible hand whispered in my ear”

3
National Lampoon
Evan J. Kessler

“the guy with two first names who masturbates with the invisible hand of the free market, by tossing some campaign slogans his way.”

4

ICT AND OTHER SECTORS COVERGED (PART 3)

HERE

“Adam Smith thought that politics and the economics are two different activities. … That is how he came up with his “invincible hand” (you cannot quite see what guides business in a capitalist society).”

5

The Belittle Big Bodies Banzai: A Year-End OWS Salute and Immune Key to 2012

HERE
Truthout

“Envision freeing the market's invisible hand from the jaws of Big cartels and corporatist scams.”

Worth a Good Look

Donald J. Boudreaux reviews Deirdre McCloskey’s “Bourgeois Dignity: Why Economics Can’t Explain the Modern World”, Chicago: University of Chicago Press, 2010, in the Independent Review Institute's "journal of political economy"
HERE

"In an exhaustive history of English-language economics prior to Adam Smith, Jacob Viner wrote: “A constant note in the writings of the merchants was the insistence upon the usefulness to the community of trade and the dignity and social value of the trader, and in the eighteenth century it appears to have become common for others than the traders themselves to accept them at their own valuation” (Studies in the Theory of International Trade [New York: Harper & Bros., 1937], p. 107). …

I, too, would have reacted in this way to Viner’s observation had I not read Deirdre McCloskey’s Bourgeois Dignity. Although Viner himself quickly sped past his own observation to discuss other matters, my attention was gripped. This fact about attitudes in the eighteenth century, I realized, is evidence for the revolutionary theory that McCloskey offers to explain the Industrial Revolution.

And if any fact about human history demands explanation, it is the Industrial Revolution …the “Great Fact,” as McCloskey herself names it. ...

A fact so great does not languish for long without attempts being made to explain it. Such attempted explanations are as old as the Great Fact itself. They include exploitation of wage workers, slavery, colonialism, Protestantism, Catholicism, science, temperate climates, temperate citizens, glorious political revolutions, and lower transportation costs and the resulting expansion in trade.

None of these explanations, however, explain when the Great Fact manifested itself (the eighteenth century) and where it began (northwestern Europe).

… One of the many rewards of reading Bourgeois Dignity is to receive from a world-class historian as penetrating and eloquent a tour of commercial and industrial history as can possibly be fitted into a single volume. Along with this tour, the reader also is treated by a world-class economist to a masterful review of each of the major (and some not so major) contending explanations of the Great Fact.

Having convinced her readers (or at least this reviewer) of the inadequacies of each of the previously offered explanations of the Great Fact, McCloskey argues that what does explain it is a sea change in attitudes toward the bourgeoisie. For the first time in history, the bourgeoisie of northwestern Europe in the eighteenth century came to possess dignity. The bourgeoisie and their activities finally came to be regarded by a large enough swath of society as dignified and respectable.

Being group animals, we care deeply what other people think about us. And what people think about us is typically conveyed, to us and to others, by talk. McCloskey insists that, first in Holland and soon afterward in England, the way people talked about profit-seeking merchants and commercial and industrial innovators changed. That talk became more admiring. What we might call the “dignity return” to bourgeois activities rose.

And at the same time, at least the relative “dignity return” on non-bourgeois activities fell. Less were the relative amounts of dignity meted out to those who specialized in slaughtering people in battle or in idling about in manor houses counting the hectares on which peasants toiled to produce sustenance for the nobility and the clergy.

As the dignity return to bourgeois activity rose relative to that of other occupations, so predictably, too, did the amount of bourgeois activity. People do respond to incentives! The Industrial Revolution was launched.

Of course, McCloskey’s rhetoric-centered theory of the Great Fact does not deny the importance of secure property rights, the benefits of prudent and industrious behavior, the helpfulness of low-cost means of transportation, and the wonders of science. Even the most boundless glorification of the bourgeoisie would have done nothing to spark the Industrial Revolution if, say, private-property rights in northwestern Europe were insecure or if the terrain there was so rugged and harsh that transportation over even short distances cost a prince’s ransom.

… Secure property rights existed in England long before the Glorious Revolution of 1688, and prudent, sober attitudes about saving did not first appear then and there. Nor did big cities (by eighteenth-century standards) and their potentially thick markets. Nor did science. Nor did reductions in transportation costs.

It is possible that eighteenth-century northwestern Europe was the site of a perfect storm of all or most of these conditions coming together for the first time in history—secure property rights and a respect for science comingling for the first time with falling transportation costs and saved surplus values wrung by Calvinists from exploited peasants.
...
I close with a cavil. I dispute the truth of Bourgeois Dignity’s subtitle Why Economics Can’t Explain the Modern World. Economics can explain the modern world. Solid evidence is McCloskey’s own work. Although appointed to faculties of English, history, and communications in addition to economics, she is above all an economist. And her contributions as an economist to our understanding of the modern world rank second to none among scholars from whichever fields you might name.

McCloskey does economics correctly—as a systematic, open-minded, truth-seeking inquiry unburdened by dogmas about what does and doesn’t count as a “legitimate” explanation.

The economics that she rightly accuses of falling short in its efforts to explain the modern world—the economics that ignores human passions other than for the prudential pursuit of observable material gain and that bullyingly rejects as sissified any methods of inquiry other than those expressed in formal mathematics—is, although dominant, not the only species of economics. Economics properly done can indeed help to explain the modern world. Bourgeois Dignity is exhibit A.

Comment

I commend Donald Boudreaux's review in the Independent Review Institute's Blog HERE It is worth reading in full. Boudreaux writes for the Cafe Hayek Blog, which is worthy of reader's attention for its daily snippets on free trade and its enemies. My extracts above are brutal in deference to copyright rules, which if I have trespassed upon, I beg forgiveness.

I read McCloskey's, Bourgeois Dignity, recently and posted an appreciation of it, and her, on Lost Legacy.

I also commend a look at the Journal of the Independent Review Institute, of which I knew nothing until following Boudreaux's link.

Just The Facts Ross, Just The Facts

Ross Gittins reviews Robert Franks’ “Darwin Economy”, for the Sydney Morning Herald, a newspaper on which I worked for a few months, long ago, as a 17-years-old assistant nightshift proof-reader HERE

“Smith was the Scottish moral philosopher, who published his most famous work, The Wealth of Nations, on the eve of the industrial revolution in 1776.

Among all his insights about how the economy works, the one for which he gets most credit is the ''invisible hand''. This is the notion that impersonal market forces channel the behaviour of greedy individuals to produce the greatest good for all.”

Comment
The problem is that though the “Insight” for which Adam Smith "gets most credit is the ''invisible hand'', the fact is, and remains, that he never wrote anything about the metaphor of “an invisible hand’ that can be remotely linked to such a non-Smithian assertion as “impersonal market forces channel the behaviour of greedy individuals to produce the greatest good for all.”

It is an invented myth, asserted and promulgated widely by Paul Samuelson with 5-million sales, plus an active used-book market, over twenty editions to 2010, plus numerous foreign language translations, from as recently as 1948 in his monumentally successful textbook, “Economics: an introductory analysis”, p 36, McGraw-Hill, New York.

The immense prestige of Paul Samuelson, winner of the first Nobel Prize in economics and author of “Foundations of Economic Analysis” (1947) which had carried all doubters before it by 2010. The effect has been a startling exhibition of the power of misattributed beliefs, when a reference to Adam Smith’s Wealth Of Nations (1776 and five editions to 1790)) would show that Smith did not use anything like the word “selfish” in connection with the invisible hand, and nor did his Moral Sentiments (1759, and six editions to 1790), the latter book dismissing ideas of ‘selfishness’ as “licentious”, and which certainly did not “produce the greatest good for all” (an idea of Bernard Mandeville's, 1724).

That Robert Franks believes that Adam Smith did say that which was attributed to him by Paul Samuelson, is beyond doubt, but that Adam Smith patently did not say such a thing (check his texts!) is also beyond doubt. The only arbiter on what Adam Smith actually wrote is what Smith wrote and not what neither Paul Samuelson nor Robert Franks claim that he did.

This cold fact undermines Robert Franks’ claims for the future supremacy of Charles Darwin as the ‘father” of economics in 100 years time (an impossible claim to verify in 2011). The other assertions of Robert Franks about what Darwin meant by “natural selection” are also false, as I have shown in my earlier posts commenting on his book.

HERE HERE HERE HERE HERE

Perhaps Ross Gittins (a journalist as well as an economist) would benefit from reading these posts.

Why Adam Smith Was No Ideologue

Catherine Baab-Muguira writes in The Motley Fool Blog (“To Educate, Amuse, and Enrich”) HERE

“Did Our Founding Fathers Believe in Free Markets?”


Putting it matter-of-factly, Alan Pell Crawford, author of Twilight at Monticello: The Final Days of Thomas Jefferson says, "Rightwing politicians and their publicists, like their liberal counterparts, are interested in the past only as repository of pseudo-facts. They plunder the past to make debating points, most of which are unsupportable."

Crawford cites the Founders' views on government regulation as an example. "The evidence seems to suggest that Jefferson and Washington and the men of their time and place had no problem with government regulation of markets," he says.
"County courts in Virginia exercised what conservatives today would consider outrageous power over economic relationships and transactions. They could set the prices innkeepers could charge their customers -- that sort of thing. We might now recognize such powers as unwise or misguided, but Jefferson and Washington seem to have taken it for granted," he adds.

… The market as innocent until proven guilty

Dr. Hugh Rockoff, a professor of economics at Rutgers University and co-author of History of the American Economy, offers a complementary view: "Madison and Hamilton envisioned a society in which the bulk of economic activity would be carried out in private markets by private individuals trying to get the best returns they could on their labor and capital."
"I think the founders saw this sort of economy both as efficient -- as the best way of generating a large flow of goods and services -- and as a way of protecting other personal liberties from despots," says Rockoff.

While the Founders' ideas largely came from Scottish Enlightenment-era economic thinker Adam Smith, as Rockoff explains, Smith is himself often misunderstood. "Nowadays we tend to think of Smith as a rigid free-market ideologue," he says. "But as anyone who has actually read Smith from cover to cover can tell you, Smith was anything but."

As Rockoff puts it, "Smith believed that the presumption should be that we leave people free to go about their private business as they see fit until experience has shown us that their liberties have to be constrained for the common good. It's a court of law: the market is innocent until proven guilty."

An enlightened, experience-based approach


No matter the ongoing political debate, the Founders' approach to the economy sets a good example for present-day Americans, argues Rockoff.

"We need to think through our policy toward each sector of the economy in the light of experience," he says. "We can't know what the founders would say about current problems, but we can adopt their 'enlightened,' experienced-based approach to trying to solve them."

What is called for, it seems, is less arguing and further study.”

Comment
I am not sure what the Motley Fool Blog is about but I have to admit heartily agreeing with the above sentiments, both from what I know of Adam Smith’s lifetime writings and from my memories of reading the Federalist Papers in full out of interest (I have a copy in my library In France from my student days from an undergraduate course on Colonial History).

I like the notion that “The market as innocent until proven guilty”. It certainly sums up Adam Smith’s approach. So does the idea of “An enlightened, experience-based approach”, which the Scottish-based David Hume Institute (of which I was a Trustee for five years until December this year) celebrated as its explicit public role in current Scottish affairs.

Ideologues are less interested in evidence as they are in their fixed ideas about the world and how it operates. Adam Smith was predominantly interested in how his world in 18th-century Britain operated and, above all, how it arrived that way from its history, based on the evidence available to him.

Wealth Of Nations is crammed with what some modern scholars, in too-much-a-hurry, call ‘distractions’, such as the whereabouts of a former King’s wedding bed, or interests rate in Biblical times, and wheat prices per quarter and average for the years from 1202 to 1764, even prices at Eton College, and many, many more. Readers of his Lectures On Jurisprudence can become fatigued over his minute dissection of the evolution of Roman laws, as can readers of his Lectures On Rhetoric and Belles Lettres (which is why so many do not recognize the English language role of metaphors).

I wish there were more people like Catherine Baab-Muguira writing on Adam Smith today. It would certainly help restore his legacy towards its proper place in the minds of those who are served instead a cold dish of balderdash by too many modern scholars (who should know better).

Review Part Eight Of Dr David Graeber’s “5,000 Years of Debt”

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Review: DR DAVID GRAEBER, DEBT: THE FIRST 5,000 YEARS, NEW YORK, 2011

Part Eight

[My review-reports of Dr Graeber’s Book have been interrupted by end of term examinations and my requirement to grade MBA/MSc papers in three subject that I taught for many years. I have continued reading when I can and making notes. I expect more papers to arrive before close of play this evening and my grading to continue over the holidays.]

The next three chapters, 8, 9, and 10 cover a wide geographical spread (The Celtic Fringe on the British Isles, through Europe to India and China) and to what Dr Graeber calls the ‘Axial’ economies, and the early market societies that blossomed almost simultaneously across the known world (Africa, the Americas and Australia remained predominantly hunter-gatherer and elementary agricultural societies).

He postulates that there are times of “historical opportunity’ and by “understanding” them we “can begin to have a sense of the historical opportunities that exist at the present” (p 212).

Critical to then (“roughly between 660 and 500 BC” (BCE) was the invention of coinage. This invention was guided from the top when “local rulers” (in the “Great Plain of Northern China, in the Ganges river valley of northeast India, and in the lands surrounding the Aegean Sea”, almost simultaneously replaced existing credit systems, though why and how this ”social transformation” happened remains unknown. It continued as issued coinage for a thousand years and then “dried up” around 600 AD (CE), and slavery was abolished, creating a cyclical process of periods of “credit money” (accurate records) alternating with “gold and silver” (accurate scales) (p 213), possibly coinciding with periods of “relative social peace“ and periods of generalised” violent periods (fall of Rome and warlords in Western Europe). Dr Graeber’s account of these periods is worth reading, if only to grasp his quite original thesis.

The “First Agrarian Empires (3500-800 BC”) (BCE) with their “virtual credit” give way to “Axial Age” (800 BC- 600 AD) when “coinage and bullion” took over. Then the “Middle Ages” 600-1450, a return “virtual credit money”, which led to the “Capitalist Empires” (1450-1971), and now we are back to “virtual money” (p 214).

Points to note: that “virtual money” implies a “lack of trust” (anonymity?) (p 215). Debts become “negotiable instruments” passed on in third-party transactions. Creditors must have had some faith in the final redeemer of the note; the trick being to pass on a credit note ‘before the music stops’. It’s not clear to me in what form a merchant repaid the lender – with what? Another credit note? Bullion? In this period Kings started wars to recover debts and to cancel all debts in their kingdoms (p 215-16). Also debtors and lying were endemic partners. “Peasant revolutionaries” made standard demands to cancel debts and led to “social breakdown” and disorder entirely (p 216).

Debts could be repaid in the form of agreed items, no doubt requiring bargaining as to what counted and the amount (nascent bartering behaviour?), though not mentioned by Dr Graeber (pp 218-20). Charging interest emerged but still requires agreement on what is added to whatever form of repayment of the debt is acceptable. Even one’s children could be accepted as a repayment, surely a barter-type transaction: which children, what age and sex, how healthy, and so on, against how much of the debt? Dr Graeber does not discuss or report such likely behaviours, which I find disappointing.

Chapter 9 on the Axial Age is most interesting (Dr Graeber never bores the reader, at least not this one for whom the parallel phenomenon across the large geographical space is quite new). Among the events was the issuing of coins as currency by all the petty kingdoms (p225). Bullion was “stockpiled in temples “as sureties for loans” , borrowed for what purpose is not stated. Once removed and broken into small pieces it was “placed in the hands of ordinary people” to be “used in everyday transactions” (p 227). Such as ….? With the king’s stamp on them, coins were a pictorial symbol of a king’s power, and when paid to soldiers, who spent them among the civilian population for whatever “necessaries, convenience, and amusements”(Adam Smith) that they required, they helped to fuel markets that made available whole ranges of products – many more than in a barter or a debt system of payment in fewer items. “Constant warfare” can be a “powerful impetus to the development of market trade” (p 226) but was not “ultimately a winning proposition” (p 227). The carnage of Axial warfare was extremely high; it also produced an “unprecedented outpouring of ideas” (p 228), (as did the Second World War, and as the 18th-century naval competition earlier).

Dt Graeber’s account of monetisation in India and China is most interesting (pp 232-37). His discussion of cash transactions is hampered by his view that “cash transactions” is about “how many of X will go for how many of Y, calculating proportions, estimating quality, and trying to get the best deal for oneself”, which Dr Graeber presents as a “new way of thinking about human motivation”. At root, Dr Graeber (p 238) believes that trade is an exchange of “equivalents” (X = Y) when exchange is actually a ratio (X/Y). It may be that X/Y for one party is > 1 and for the other it is also > 1; they do not need to be, nor are they normally, equivalent. I usually value what I get for what I want more than I value what I give up; indeed, this is the common motivation for exchange. Kids realise this when they trade their cds for video games. We can be both “better off” after the transaction than we were before it and they do not need to “calculate’ the ratio (far too complicated for everyday exchanges); they only have to “feel” better-off. Dr Graeber’s summary discussion (p 248-9) shows his counter-poising “materialism” to “morality and justice” when in reality the need for “morality and justice” is a product of the absence of material necessities among the poor.

Adam Smith and "Neo-Liberalism"

Mike Norman writes the Mike Norman Blog HERE

“Neoliberalism for dummies

“My contention is that the invisible hand of Adam Smith is the god of 18th century Deism that creates the universe and then lets it operate automatically in accordance with the laws of nature He has ordained.

This is one reason that economics as a discipline compares itself to physics. Another is Smith's association with his contemporary Isaac Newton, who influenced Smith's thinking about natural processes. While my view of direct influence is rejected by some Smith scholar's for lack of evidence, it seems that even if Smith was not directly influenced by either Deism or Newton, these were dominant ideas of his time and his work arguably reflects these overarching themes.

However, as Smith scholars correctly observe, Adam Smith cannot be blamed for spawning neoliberalism, which is a bastardization of his ideas by some New Classical economists, as well as New Keynesians, subsequent to the marginal revolution ushered in by Alfred Marshall. Marshall himself cautioned against using his ideas in a simplistic fashion to draw unwarranted conclusions from mathematical models. Marshall realized that economic models are thinking aids and not expressions of either natural laws or God-given ones.

What began as political economy with Adam Smith and David Ricardo has become theological economy under Milton Friedman and neoliberalism. It is a theology that the privileged are using to exploit the credulity of the masses with yet another superstition.”

Comment
Mike Norman seems to be close to being on the right track, and should be commended for that. However, being close is not the same as being correct.

Ship’s captains searching for landfall at Pitcairn Island in the Pacific, and using contemporary charts with the first discoverer’s position on them, missed the island by many miles, until later Royal Navy navigators rediscovered it and, accidently found out the truth of the disappearance of Fletcher Christian after the Bounty mutiny. They corrected their charts for it thereafter. **

The “invisible hand” in the 17th-18th Centuries was indeed a popular metaphor with orthodox (not Deist) religious preachers, sermon writers and others. Among the others were: Shakespeare in Macbeth –a murderer not God; there were also: Daniel Defoe in Moll Flanders and Colonel Jack; Voltaire, in Oedipe; Glanvill; Dufesnoy; Lenglet; Rollin; Bonnet; Robinet; Walpole; Kant; and Reeve (for details, see: Kennedy: Adam Smith: a moral philosopher and his political economy, 2nd ed. 2010, pp 150-52). For a fully comprehensive list of religious references, see: Peter Harrison, “Adam Smith and the History of the Invisible Hand”, History of Ideas, September 2010.

Whether Adam Smith saw the metaphor in a deist context remains controversial, but he was not a believer in the revealed religion of Christianity (See Kennedy: “The Hidden Adam Smith in his Alleged Theology”, Journal of the History of Economic Thought, September, 2011). It is stretching it to say that Isaac Newton (1643-1727) was Smith’s (1723-90) “contemporary”.

That Adam Smith admired Isaac Newton is evident in Smith’s History of Astronomy (1744-c50, published posthumously in 1795). I believe that the marginal revolution and Marshall’s early contributions, leading to the mathematical dead-end of neo-classical economics, had more to do with the 19th-century mathematics prevalent when Marshall was alive than the calculus of Newton a hundred years earlier. Modern physicists and mathematicians are reported to be “amused” at what modern economists considered to be “advanced mathematics, as so much had moved on since the late 19th century, with which economists consider to be their “hard science”.

Smith certainly cannot be “blamed for spawning neo-liberalism” and modern economics, as taught (preached!) with religious zealotry and intoned by some politicians in the 21st century. Both interest groups, adding to their assertions their modern myths of Smith’s meaning when he used (only twice) the invisible hand metaphor in his published works.

Mike Norman is absolutely correct in drawing attention to Alfred Marshall’s cautions about using mathematics as anything more than “teaching aids”. Adam Smith would probably approve of Mike’s summary:

“It is a theology that the privileged are using to exploit the credulity of the masses with yet another superstition.”

So, well done Mike Norman. Have a good holiday.

** See my Kennedy, Captain Bligh: the man and his mutinies, Duckworth, 1989

Chris Dillow is Right: History Does MATTER!

Chris Dillow writes (20 December) the intelligent Blog, Stumbing and Mumbling’ (it grows on you), self-billed as “An extremist, not a fanatic:
HERE

“HISTORY MATTERS”

“I am one of the richest humans who ever lived. This is not because I am uniquely hard-working or intelligent; such notions are only slightly less cretinous than the idea that I owe my wealth to my great social skills. Instead, I’m rich because I had the good fortune to have born in England in the late 20th century* - in a time and place where history has been kind.
We are not self-made men, but rather creatures of history.

And if history is so powerful an influence, other things are less so - one of these being the managerialist whims of politicians.
It’s in this context that we should regret the decline of history teaching.
Herein lies a paradox. I get the impression that those who would most like to see history given more importance in schools are Tory traditionalists who want to teach some Sellar and Yeatman-style story of our sceptre’d isle. However, Sellar and Yeatman were wrong**. History is not just “what you can remember.“ It has effects whether you know it or not. We are who we are because our ancestors did what they did. Knowing this, however, undermines right-wing fairy tales about people being the products of their own decisions. In this sense, Tories are the last people who should want history taught.”

Comment
That’s very Smith-like too. He studied history to write about what brought Britain to the way it had become in the 18th-century. It is also why he did not make a habit of making predictions about what would happen, which seems to be the main feature of the modern economics profession. Indeed, economists are expected, and are hired at good salaries and pension plans, to predict the immediate future – they seldom make predictions about the far future (unless they are climate-change specialists).

I share Chris Dillow’s regrets about the decline of history in our education systems. I am also even more regretful about the recent decline among economics departments in academe of the rapid, and near extinction, of the teaching of the history of economic thought, as a taught subject in both undergraduate and graduate teaching and research, hastened by the deliberate downgrading of the status of the history of economic thought by the controllers of the professional journals – the main route to appointment, let alone recruitment, in academic department - and the habits of appointment committees.

This wanton ignorance of history shows in the shameless failure of academic economists to show average success, let alone fail to excel, in their short- to medium-term predictions of the economies they claim to have familiarity with. Predictions in theory ‘ought’ to be possible, but the real world is not like that, whatever the shyster palm-readers claim to do (do you get regular copies of their glossy promises too?).

Understanding how we get to where we are is more productive of positive results in showing what may/could be done to improve performances of whatever our momentary concerns.

Smith’s Wealth Of Nations is a deep criticism of mid-18th century political economy – his “violent attack” Smith called it on the “whole commercial system of Britain” - was dominated by economic thinking from the past and the prejudices of government ministers and sovereigns. He did not make predictions that if everything was changed to meet some ideal conditions, such as the abolition of tariffs, no government regulations, no “jealousy of trade”, immediate adoption of “laissez-faire” - he never mentioned the words – and, above all, leave markets to the so-called “invisible hand” - he never spoke of this metaphor in relation to markets, all would be right with the world.

Now, many economists of left and right believe, with the passions of ignorant certitude, that these were what Adam Smith was about. He wasn’t.

He studied history in all that he wrote from his first (unpublished in his lifetime) essay on the History Of Astronomy to the last editions of Moral Sentiments and Wealth Of Nations, and he drew conclusions from what he learned about how the past continued to work in the present. He was never a revolutionary in a hurry. His proposals when they were made were cautious, careful, and measured against the realities of how society worked. He never fell for the fallacies of the “wooden pieces on a chessboard”, nor did he advise governments, legislatures, or sovereigns to act as if people could be forced the act against their natures.

In short, I suggest economists study more history (and the history of our ideas are a good place to start), with, perhaps, a little less attention given to utopian mathematical, perfectly competitive models of non-existent economies, the create as they go along.

This task requires a detailed study of history, such as Smith made – and taught (see his Lectures On Jurisprudence, [1762-3] 1978) - and not from a skimpy passage through an invented ‘history’ of a few popular books.

Adam Smith On "Invisible Hands" and Banking Regulations

Louis René Beres, educated at Princeton (Ph.D., 1971) is Professor of Political Science at Purdue University writes in OUP Blog HERE

“Occupy Wall Street, Adam Smith, and the Wealth of Nations”

“Famously, in an assessment that remains fashionably au courant with most present day conservatives, Smith claimed to have discovered an “invisible hand”, a critical convergence of satisfactions whereby the unstoppable compulsions of individual self-interest, and the equally insistent needs of an entire nation, might somehow seamlessly coincide.” …

... “In his Theory of Moral Sentiments (1759), Adam Smith first noted that human beings are not made happier by their possessions, but that the rich, in seeking the “gratification of their own vain and insatiable desires”, may still advance the “interest of society”. With remarkable originality, Smith explained, the wealthiest members of the nation, without ever intending any such generalized benefit, “are led by an invisible hand” to bring forth reductions in social inequality.”

Comment
This is a well-written and thoughtful assessment of the Occupy Movement in New York, as expected from a Professor of Political Science. There is, however, a major flaw in Professor Beres’s characterisation of Adam Smith’s moral philosophy and political economy. This can be explained, if not excused, by Professor Beres’s almost certainly innocent appreciation of modern economics, including its myths of Adam Smith’s use of a well-known 17th-18th century metaphor of an “invisible hand”. Smith used the metaphor two occasions only in his published works, once in his Moral Sentiments, 1759, and once only in Wealth Of Nations, 1776. [A third instance occurred in his posthumously published essay on the History of Astronomy in 1795, written from 1744 -c.1750, where he clearly used it as a noun, not a metaphor, referring to a belief in a pagan superstition about the Roman god, Jupiter.]

In Moral Sentiments (1759), Smith referred to a “rich and unfeeling landlord”, who, despite his illusion that he consumed everything in his many fields, was “led by an invisible hand” to feed his servants, retainers, overseers, serfs and labourers, from the same crops in the same fields. In doing so, he distributed the basic “necessaries” of life and unintentionally assures the “multiplication” of the species (TMS IV.ii.10: 185). However, he is “led” by necessity to behave in this manner, not by his fellow-feelings or compassion for the “thousands whom he employs”, but by his obvious dependence on them, as they are on him, – no food, no labour and no labour, no food. The metaphor describes this mutual dependence. It “describes in a more striking and interesting manner” this mutual dependence by the metaphor of “an invisible hand”. See Adam Smith on the role of metaphors in his “Lectures on Rhetoric and Belles Lettres” [1763] 1983, p 29).

In Wealth Of Nations, Smith refers to some, but not all, merchants, who are concerned about the security of their capital if they send it abroad, which leads them to prefer to invest in “domestick industry” rather than in the “foreign trade of consumption” (WN IV.ii.9: 456). He states the object of the metaphor of an invisible hand, namely, their insecurity, by describing it “in a more striking and interesting manner”. He mentions their relative feelings of insecurity (three times in the relevant paragraph and also several other times in the previous eight paragraphs).

Whether this metaphor is about “reductions in social inequality” in Moral Sentiments or “a critical convergence of satisfactions whereby the unstoppable compulsions of individual self-interest, and the equally insistent needs of an entire nation, might somehow seamlessly coincide” is very much open to debate, especially if it is asserted that all self-interested actions, including selfish self-interest, lead to benign outcomes. They most certainly do not. Many domestic merchants demand tariffs and prohibitions, contrary to the interests of domestic consumers, but certainly in their own non-benign self-interests.

That is why Adam Smith advised that government should regulate, by direct interference, those banks that issue paper promissory notes in very small amounts (WN II.ii.94: 324), and also those banks that charge usurious rates of interest (WN i.ix.5: 106; 1.iv.15: 357), despite these being contrary to "perfect liberty" These and many other examples, show that Adam Smith was not opposed to regulation on ideological grounds, as claimed by some extreme conservatives.

Professor Louis René Beres, in reporting the alleged views of Adam Smith in today’s debates, ought to recognize that he has assumed certain ideas that Smith never had and that these ideas come from distortions of his Legacy by modern economists and politicos.

Once More on Robert Frank's Invented Charles Darwin

Elliott “chats” with Robert Frank in FireDog Lake HERE

“Smith’s theory of the invisible hand, which says that competition channels self-interest for the common good, is probably the most widely cited argument today in favor of unbridled competition–and against regulation, taxation, and even government itself. But what if Smith’s idea was almost an exception to the general rule of competition? That’s what Frank argues, resting his case on Darwin’s insight that individual and group interests often diverge sharply. Far from creating a perfect world, economic competition often leads to “arms races,” encouraging behaviors that not only cause enormous harm to the group but also provide no lasting advantages for individuals, since any gains tend to be relative and mutually offsetting.”

Comment
I agree that: “Smith’s theory of the invisible hand, which says that competition channels self-interest for the common good, is probably the most widely cited argument today in favor of unbridled competition–and against regulation, taxation, and even government itself”. But not a word of it is true about Adam Smith being the author of it.

Adam Smith never said anything like that statement. It is a complete fabrication – or rather several fabrications run together, popularised by modern economists and was repeated endlessly by ideologically-committed politicos in the Cold War decades since the 1940s, and then raised to shriek-levels since the Cold War ended with the fall of communism in the 1990s.

First, Adam Smith never had a “theory of an invisible hand”; he used the IH metaphor as a metaphor, it was never a “theory”. It was a figure of speech, referring to specific objects, as all metaphors in English are crafted to do (see: "Adam Smith, Lectures in Rhetoric and Belles Lettres", [1763] 1983, p 29).

In Moral Sentiments, the object of the IH metaphor was the unavoidable necessity that “rich and unfeeling” landlords had to feed their serfs, servants, and armed retainers, from the crops in their lands (no food, no toil). In Wealth Of Nations the IH metaphor was the response of some, but not all, merchants to their concerns for the "security" of their capital who preferred to invest in “domestick industry”. In each case, the public good benefitted from the unintentional survival and procreation of the species, or the unintentional addition to the “annual revenue and employment “ in boosting “domestick industry”.

Whether all self-interested actions had such benign outcomes depends on a case-by-case consideration. The notion that "an invisible hand" “channels self-interest [that always benefits] the common good” is a gross exaggeration. The fact that benign self-interest “channels benign self-interest for the common good”, perhaps, is an acceptable interpretation in the two cases only mentioned by Adam Smith that he identified, but not all self-interest is always benign; many actions, unintentional or otherwise, are not in the public interest. Some (indeed, many) “merchants and manufacturers” exercised their self-interest in non-benign monopoly activities, when they met their “competing” compatriots”, even for diversion”, they end up “conspiring against public”, they lobby (indeed “clamour” for) the legislature to set tariffs and other trade prohibitions, they conspire with “competitors” in secret “combinations” to hold wages down and to reduce them, and, from spreading “jealousy of trade, they join the jingoistic clamour for the government for wars against rival trading countries to “narrow the competition” and to “raise prices”.

Robert Frank rests “his case on Darwin’s insight that individual and group interests often diverge sharply”. This is hardly a new insight, neither unknown nor ignored by Adam Smith. What is Wealth Of Nations about other than a critique of “mercantile political economy” where “merchants and manufacturers” pit their individual self-interests against those of all consumers as a group? In what manner was this already discovered and clearly – even repeated - viewpoint of Adam Smith in 1776 become “Darwin’s insight” 82 years later at the Linean Society?

Robert Frank’s book was reviewed on Lost Legacy on 23 September (HERE ,
so I won’t rehearse my critique here. Smith spoke of the unintentional actions of thousands of “merchants and manufacturers”, who can, and did, consciously react to events in pursuing their self-interests; Franks refers to Darwin – though not to Darwin’s theory of natural selection, as published in 1859 in “Origin of Species”, in that he has some elks who are born with larger antlers than others, and some hawks born with keener eyesight that others, both benefitting from either dominating smaller antlered elks in contests with rival elk males for female sex partners, or other less well-sighted hawks in food contests for the survival baby hawks. These favoured antlers or eyesight are genetic benefits ensuring, all things considered, the survival, having been born with these advantages, of a larger number of progeny surviving per season.

The difference between humans and both elks and hawks is that genetic differences, advantageous or disadvantageous, are not within the control, consciously or otherwise, of neither the elks nor the hawks, hence they cannot consciously engage in “arms races”, nor avert them; each generation is a prisoner of their nature and their environment. In comparison, the actions of humans are within their ability to consciously change them, or not to do so, up to a limited point. They are able within wider parameters, to act consciously as their existing generation, and those yet to come. Humans are not prisoners of their nature nor their environment to the same extent as elks and hawks. Behavioural changes may occur for the better or worse, among humans in their societies. “Arms races” can be averted by agreement; elks and hawks cannot “call a truce” and voluntarily "disarm"!

Adam Smith understood that – so have most philosophers. Darwin understood that too, though not the invented ”Darwin” invented by Robert Frank, or his reviewers – none so far that I have seen makes these elementary points that demolish the thesis upon which he bases his politics and the prospects for Adam Smith's reputation in a hundred years time.

Looney Tunes 14

1

SayUncle

“So it looks like the “Invisible Hand” has dictated that cheap, reliable, working-class pistols sell well.”

2

Can you get an invisible hand ship guide Lego Star Wars 3

Lego Star Wars 3: The Clone Wars Questions & Answers for Nintendo Wii - ChapterCheats.com. HERE

3
Where to find a financial winner in uncertain times

The Independent

"Whatever happens to the eurozone, the prospects for growth in the developed West are bleak, with the invisible hand of deleveraging set to constrain activity for several years,"

A Play About Adam Smith, David Hume, and a 21st-century Modern Scottish Woman

I was able to get out to see a play in Edinburgh's Traverse yesterday. This is my review of it (with remarks about a review to be published in the Sunday Herald HERE ).

"The Tree Of Knowledge" by Jo Clifford

Mark Brown’s review of Jo Clifford’s, The Tree of Knowledge, in the Sunday Herald, left me somewhat bemused. I attended the Thursday matinee and failed to see what Mark Brown saw in its script and in the performances of the three actors. It was a moral play written and played with a moral tone, albeit somewhat stretching the factual history of Adam Smith and David Hume and their respective philosophies. But plays are not judged on their author’s historical accuracy, so much as the theatricality of the production. I think script and the actors worked well together.

Hume’s role, acted by Gerry Mulgrew, was to speak as an ‘atheist’; he was in fact a "sceptic", not an atheist. Hume rejected atheism on philosophical grounds, because what cannot be known to philosophy (the existence or non-existence of a god) cannot be asserted (see "Philo" in Hume's“Dialogues on Natural Religion”). But it added bite to the performance by Gerry Mulgrew that went well.

Jo Clifford’s Smith, acted by Neil McKinven, probably had more camp than historically justified, but it held the attention of the audience and gave scope to Neil McKinven to display his range. The absence of women in a man’s life, of course, does not alone make him a latent homosexual. He was a ‘man of the world’ (a phrase regularly used in his correspondence) and, like his contemporary, James Boswell, he knew where to find sexual partners within yards from his home in Panmure House in the Canongate. His devotion to his “very religious” mother in real life was intense.

He left his mother’s house in Kirkcaldy in 1737, aged 14, when she was 43, and, apart from a few years, they were separated on and off for 20 years, until he took her to live with him at Panmure House, Edinburgh in 1778 (she was then 84). Her health declined over his many absences. She died in 1784, aged 90. She was the major cause of his not marrying, despite his much noted relationship with ‘the lady in Fife’, interviewed at the turn of the century by Smith’s first biographer, Dugald Stewart.

Jo Clifford, the author, struck the right theatrical note with the camp Adam Smith in her dramatization of him and his friend, the “atheist” David Hume (it would take too long in a play to explain the philosophical difference dramatically). These characterisations, however, worked well in the context of their stage impact.

Eve (acted by Joanna Tope) presented the particular moral problems raised by the author. Eve and her mother were victims of male domestic violence and this was illustrated dramatically with all the pain that they were, but certainly this violence is not unique of the 21st century, nor as it anything to do with ‘the market”. It was present in 18th-century Scotland and elsewhere. So were women bearing a dozen or more children, most of them dying before their 5th birthday. Pin-factory workers endured six ten- to-twelve hour shifts a week, with no holidays, sick pay, social security, or the dreaded Health and Safety, in stark contrast to modern computer chip-factories. They were uneducated from 6 upward, except for two or three years in “Little Schools”. at least in Scotland, the brightest might get a chance to go to college if charity was available and if sponsored by a sympathetic school-master. Eve, herself got herself into a college, an option closed to 18th-century girls and women, even in the ancient Universities that were still closed off to women until the end of the 19th century and early 20th century.

So, while Eve acted he part with gusto (I certainly felt her anger), I couldn’t help counting some of the modest blessings of this century compared to Smith's.

Academics Discuss Dr Graeber's Book On "Debt"

A contributor (I am not sure of the author – Favio Rojas?) contributes to orgtheory.net discussion, “grabber {sic] forum (part 2) the attack of neo-classical economics”) HERE

“The first chunk of Graeber’s book is a anthropological account of barter. Where does it exist? …Why pile up on specialized goods and wait for other people to pile up on what you want and then trade? That’s bizarre.

The conclusion? Adam Smith was wrong to say that people have a natural tendency to “truck and barter.” Why? It’s a strange, unintuitive form of economic exchange. Therefore, money is not the natural solution to barter, since barter, for the most part, does not exist.

If direct exchange of goods (barter) is not the embodiment of rational action, then what is? The answer, I think, is generlized exchange. A true believer in economics text books would correctly point out that generalized exchange can be described in terms of utility functions. Fair enough, but that’s not the point.”

Comment
Follow the link to read the whole post and the interesting comments that follow.

I have no brief for neo-classical economics; my concern is with Adam Smith’s legacy, usually placed among Classical economists.

Paragraph 1 above raises a non-issue: “Why pile up on specialized goods and wait for other people to pile up on what you want and then trade? That’s bizarre.” No, it is the image that is “bizarre”. Barter is inconvenient because specific surpluses may not coincide with other’s people’s surpluses. It is from an accidental surplus that may arise in the course of daily life that a person may seek to exchange them for something more useable by her. But if nothing is available, “no exchange”, says Smith, can be made” (WN I.iii.2: p 37). He reports that that “things were frequently … valued according to the number of cattle and women which had been given in exchange for them” (p 38). The difference on this supposed transaction between Smith and Graeber is that the latter uses evidence to show that barter exchanges did not in fact take place. However, Dr Greaber says the male-dominated theory was that human life or reputation was “immeasurable”, yet life-long debt servitude, in terms of cattle and sex slavery were a common consequence.

Dr Graeber’s point that the evidence does not show a mere transition from barter to money must be well taken (and I do). Smith did not have access (nor did anybody else in the 18th century) to the post-1850s literature and the research of thousands of anthropologists that Dr Graeber has at the click of his laptop. But Smith was right that the “inconveniences” of “non-coincidental demands”, whatever their cause, were resolved eventually by the invention of money from c.3,000 BC (BCE)..

Smith’s asserted that the “propensity to truck, barter and exchange” originated probably with the acquisition of reason (not rationality!) and speech. (WN I.ii.1: p 25), and references to the Oxford English Dictionary settle his meaning. Multiple references to Dr Graeber’s interesting descriptions of the forms of exchange in place in ancient societies mostly involved the awful consequences of the institutional tyrannical disposition to control the exchange of women and children. I found these descriptions somewhat distressing in terms of humanity. Dr Graeber named these social systems as the age of “Human [!] Economies”

Dr Graeber conflates modern theories of rational utility maximization (at best merely mathematical equations) and all that follows from them, as being representative of modern economics, which he is most welcome and justified to critique, but for some reason he believes, wrongly, that they were the views of Adam Smith, which they most certainly were not. None of these abstract mathematical structures developed since 1870 are representative of Adam Smith’s moral philosophy and political economy (1759 and 1776), which is why I strongly disagree with Dr Graeber’s (?) assertion that “generalized exchange can be described in terms of utility functions”. The central point in all of Adam Smith’s philosophy was that “exchange” was, and is, a “universal”, common across the human species since its formation from “the necessary consequences of the faculties of reason and speech”.

My exposition of the role of exchange in the human species, perhaps unique to it, could be expressed, to coin a phrase, as: “Exchange: the first 200,000 Years”.

Adam Smith Was Never a Utopian

Veronique de Rugy, senior research fellow at the Mercatus Center at George Mason University. writes in Reason.com
HERE

“The Never-Ending Budget Battle”

“The pursuit of budget reform will lead us back to concerns that occupied the classical political economists, such as Adam Smith. As F.A. Hayek wrote in 1948, “Smith’s chief concern was not so much with what man might occasionally achieve when he was at his best but that he should have as little opportunity as possible to do harm when he was at his worst. It is a social system which does not depend for its functioning on our finding good men for running it, or on all men becoming better than they are now, but which makes use of men in all their given variety and complexity, sometimes good and sometimes bad, sometimes intelligent and more often stupid.”

Comment
I do not recognize exactly where F. A. Hayek took this idea from Adam Smith’s Works, but I am inclined to appreciate its sentiments as possibly implied by Adam Smith.

How realistic could anybody get about the reality of human societies. Utopians invent human behaviours that they ought to match, but seldom do. Many economists went further and invented rigorous equilibrium worlds that could do not ever exist in reality. Utopian ultra-libertarians speculate on how society could be arranged, missing out the dangerous transition before it got there, and what might be required to keep it there.

Their anarchist forebears (Prince Kropotkin certainly) imagine how human society could be like the “fellowship” and “solidarity” of flocks of roosting birds in nature (from my distant memories of his book). Socialists believe in trying to construct their workers’ world in electoral success in the world we have, becoming corrupted as they try the levers of power, while communists believe in a period of the “dictatorship of the proletariat” from which a truly communist society will emerge as the state whithers away, without ever spelling-out how their communist utopian would function (as Marx and Engels steadfastly refused to do). The “Occupy Movement” hope that something important is about to happen as they occupy the pavements, but nobody agrees among them what that something is.

Adam Smith was different. He made no predictions about the future. He led no political movement. He avoided utopias, such as Laissez-Faire, perfect competition, the abolition of all tariffs, or the abolition of government and the state. His epigones invented his association with these ideas, all contradicted in his Moral Sentiments and Wealth Of Nations. He never mentioned once the cry of some French Physiocrats for “laissez-faire”, he advocated expenditures by the state on major and some minor headings, including two – education and health -with certain prospects of growing considerably. And, most importantly for modern economists, he never used the invisible hand metaphor as a general expectation that it neutralised “greed” and “selfishness” and led to the bliss of general equilibrium and the public good.

He wrote frankly about the foibles of human beings, mean and women, and gently mocked those who considered “place” or “cutting a figure” at a Ball, or saw ruling as if humans were like wooden pieces on a chess board obeying politicians’ plans.

He identified how mankind arrived at where it was in 18th-century Britain in a corrupted constitutional monarchy and political system, but with the elements of Liberty in place (rule of law, trial by jury, habeas corpus, independence of the judiciary, and parliamentary control of taxation by elections). It was perfect liberty, but it laid the foundations for measured improvements in advance of elsewhere. He suggested reforms to economic measures, and to the false ambitions of empire, and warned of the narrow ambitions of “merchants and manufacturers” and the influence of landlords on the legislature.

I think F. A. Hayek’s summary is pretty well on target. I commend it as a watching brief for libertarians in place of fantasising about utopia.

Review Part Seven Of Dr David Graeber’s “5,000 Years of Debt”

REVIEW: DR DAVID GRAEBER, DEBT: THE FIRST 5,000 YEARS, NEW YORK, 2011
Part Seven

Dr Graeber summarises Chapter 6 (“Games with Sex and Violence”) in Chapter 7 (“Honor and Degradation”), and asserts that “human economies, with their social currencies – which are used to measure, assess and maintain relationships between people, and only perhaps incidentally to acquire material goods – might be transformed into something else”. However, “we cannot begin to think about such things, without taking into account the role of sheer physical violence” (p 165). Indeed, such “Human” Economies practise violence at their core and their periphery. They are quite barbaric and not given to “sweetness and light”. They are not paragons of virtuous societies.

Mostly, his accounts show that men practise “sheer physical violence” in their social institutions against women. Predominantly, this violence was an internal phenomenon from within the so-called “human economies” and it was practised in numerous cultures (for want of a better word) in them over many millennia. The “African slave trade ”, which, writes Dr Graeber, was characterised by its “very brutality”, was “imposed from outside” of the Human Economies. We know this in great detail from the written records and public debate in European and North American legislatures, a source that was not so well documented in the Human Economies where slavery was practised widely in all historical regimes in Europe, the Near East, the Mediterranean, Central Asia, and China. One main difference between millennia-long classical institutional slavery across the globe and the Atlantic trade, noted by Dr Graeber, was the “suddenness” by which the Atlantic slave trade was imposed on tropical Africa (and, incidentally, lasted over a couple of centuries, not millennia. This short, but for the individual victim life-long and a dreadful event, compared we should note to the agonies of slavery practised in “Human Economies” for millennia, is not noted by Dr Graeber, as if he believes that it was a necessary characteristic of market economies only; it wasn’t. The implication, sometimes hinted at by Dr Graeber, is that he believes that historically, commerce in markets, is a uniquely immoral and brutalising phenomenon. This is a bold (even reckless) implication, given the long list of rival candidates throughout history that remain much better qualified for such a negative accolade, among which I suggest must be what Dr Graeber designates, ironically, as the “Human” Economies.

As Dr Graeber moves through his thesis (still worth reading for its coverage of anthropological literature, not normally accessed by most economists), he opens discussions of slavery as an export along, with “goods, cattle and people” in Ireland from “600 AD (CE)” (p 171). “Money”, he writes, “was employed almost exclusively for social purposes: gifts; fees to craftsmen, doctors, poets, judges, and entertainers, [and] various feudal payments" (p 172). Once again, this is clear evidence of exchange, in a Smithian sense, occurring across the social fabric – giving something to get something in return, whatever their respective “values” (which “value” would only be of interest to neoclassical and Marxist economists). Exchange in Smith’s sense is not recognised by Dr Graeber, in order, I suggest, to keep the conceptual integrity of his claimed Human Economy intact, despite the scattered evidence from his own accounts of exchange occurring when no “money” was involved. However, he is compelled to observe of the Irish “social” exchanges, that they were, “albeit in the sort of unwieldy arrangement that markets later developed to get round” (p 172). It was the “unwieldy arrangements”, not their cause, by which monetary markets resolved them. Whether Smith was correct of the existing problem being universal ‘barter’, he was correct about the improvements from resolving them. Smith was not conversant with the anthropological record (no surprise, neither was anybody else).

From page 176, Dr Graeber treats readers to a discussion of the “Origins of Patriarchy” covering, what amount to ‘Honour Killings’ (sadly, too often regular news items in the British press of events happening even today). Historically, says Dr Graeber, “war, states, and markets all tend to feed off one another”, and it was in “Mesopotamia” where an “explosion of debt” threatened to turn all human relations – and by extension, women’s bodies – into potential commodities” (p. 179). Yet in chapter 6, his account shows that human relations in his “Human Economy” achieved the miserable low status of “women’s bodies” independently in Africa without “states and markets”, nor anything remotely resembling the mobilisation of men into standing, or semi-standing, armies of Mesopotamian Sumerian societies (3,500-800 BCE).

In Irish and nearby Scottish societies at the time, from 3000 to 2,000 BCE (BC), “war” was more like small raiding parties, and continued for long enough when Norse and Viking invaders from outside swept in small raiding parties across their territories, well into the early centuries of the first millennium. Women were also the prime victims, if they were not killed, along with their men folk and children, they were often transported across the Irish Sea in like manner to the Atlantic slave trade millennia later. Modern DNA analysis of Irish and Scottish populations show interesting genetic markers of their distant origins, and some surprising evidence of unexpected sexual contacts by Irish male slaves with the wives of the raiders, c.1200 years ago Those Viking or Norse women, who quietly bore Irish children, were almost certainly vulnerable to a death sentence if caught by their, perhaps unsuspecting, men folk.

Dr Graeber’s account of the emergence of coins in Ancient Greece is interesting, linked to Greek Philosophy, the Homeric world, and moral debates (Plato, etc.,). He notes, of course, that there was an “omnipresent danger of predatory violence that reduces human being to commodities” (p 194) and to “encourage the very worst sorts of behaviour” (compared to what and where?).

Two factors might be important in these territories - changing ideas of social relations and literacy, both of which once started, their consequences continued to change the European world, when wedded to science and innovation, spreading eventually to the whole world (Western Philosophy was based largely on the Classics – Scottish university faculty wrote and lectured in Latin up to the 18th-19th centuries. Despite the succession of empires, with large populations, devastating wars and social breakdowns, the modern world began to emerge in the 18th century. The fall of the Western Roman Empire in the 5th century stalled European civilisation until the c.15th century. Meanwhile, despite the stunning advances in knowledge and technology in China and India (and in the early centuries from the spread of settled Islam), their potentiality as rival forerunners of a market-driven industrialisation sank into stagnation until the late 20th century, not helped by disastrous experiments in communism.

Much of what Dr Graeber considers to have been retrograde steps in moral standards is wrapped around his notions of debt as the key determinant of the world’s misery.

His conclusions to the three chapters covered so far in my notes (pp 207-10) open with another swipe at Adam Smith: “we seem” he writes, “to be trapped between imagining society in the Adam Smith mode, as a collection of individuals whose only significant relations are with their own possessions, happily bartering one thing for another for the sake of mutual convenience, with debt almost abolished from the picture, and a vision in which debt is everything, the very substance of all human relations – which of course leaves everyone with the uncomfortable sense that human relations are somehow an intrinsically tawdry business, that our very responsibilities to one another are already somehow based on sin and crime. It is not a very appealing set of alternatives” (p 207). I am not sure what Dr Graeber means in this paragraph, nor do I recognise the Adam Smith of Moral Sentiments (1759), where he mocks the “poor man’s son” who is “visited by ambition” and “admires the conditions of the rich”, and is determined to emulate them to become rich in possessions whatever the costs (“trifling conveniences”, Smith calls these possessions). The dreadful consequences on his life are that he exposes himself to “anxiety, to fear, and to sorrow” and finally to “diseases, to danger, and to death”, all in pursuit of a “splenetic philosophy of no great value and certainly never to be described as “necessary for happiness” (TMS IV.1.8: pp 181-3). Typically, Smith notes that the misguided actions of such people can have unintended beneficial effects on society’s progress to opulence (TMS IV.1.9 and 10: pp 183-5) though he does not think much of the moral sense.

Amazingly, Dr Graeber explains why he “developed the concept of human economies: ones in what is considered really important about human beings is the fact that they are each such a unique nexus of relations with others’ in that “no one could ever be considered exactly equal to anything or anyone else”, adding that in a human economy, money is not a way of buying and trading human beings, but a way of expressing just how much one cannot do so” (p 208). This paragraph is of truly Orwellian proportions, much like Stalin's rule in Russia.

He admits to describing societies in which men disproportionally dominate women, and use violence to exchange them and their children to each other in marriages, and in payments to their husbands or fathers for debts in exchange for ‘tawdry” (by any definition) pieces of cloth, given by men a believed by men but otherwise meaningless magical property and “brass rods”. Among insiders their made-up, but convenient beliefs, suit the beneficiaries, the rapists (the women remain silent during their, perhaps life-long ordeal or too old the be sexually useful; they don’t have a voice in these ‘human’ economies – that are already living artifacts, disposed of at men’s will and fancy, and moved around like today’s sex traffickers).

Later, they were transferred to outsiders to suit personal preferences in who should go and who should stay in local chains of violent conspiracies of brutal kidnapping. This Human Economy is also claimed to have existed in Ireland, Scotland and much of England, in the wake of Roman, Anglo-Saxon, and Norman invaders, as well as long periods of Norse and Viking, raiders from their many settlements. Later in the second millennium, the Atlantic slave trade devastated swathes of tropical Africa, aided and abetted, so to speak, by compliant men in Human economies. That some anthropologists have uncovered in all these internal and external depredations “a unique nexus of relations with others” enshrined by the principle “no one could ever be considered exactly equal to anything or anyone else” (to which weird notion I shall return in following reviews) is one way of describing a situation with all the subtlety of making something mean whatever an author wants it to mean in well-documented (except possibly in their Celtic fringes) hierarchical societies.

Looney Tunes no 13

1

"Quote of the Week – what Durban is really about"

By Ben HERE

"The invisible hand of the secret commie world government revealed again!"

2

"The Unnamed Bicycle Column: Christmas Magic"

Patch.com HERE

“... magic moment everyone hopes for, that moment when Glee Road intersects with Bliss Avenue and rains down eight tons of Happy is replaced with the crushing reality of Adam Smith's invisible hand waving bye-bye to your child's dreams and aspirations. ...”

3

Adam Smith Didn’t Ever Say Anything About the Invisible Hand Like This Pure Nonsense!

a) Solar PV in perspective 2011

"Renewable Energy Focus HERE:

"The invisible hand, said Adam Smith, would take care of any inefficiency in the market.”

b) Obama's Very Visible Hand Strangles Business

By News HERE

“Adam Smith observed markets flourish “as if led by an invisible hand.”

WorkplaceChoice.org

Part Six of a Review Of Dr David Graeber’s “5,000 Years" of Debt"

DAVID GRAEBER, “DEBT: THE FIRST 5,000 YEARS”, MELVILLE HOUSE PUBLISHING, NEW YORK, 2011. Part Six.

[My analytical ‘reviews’ of David Graeber’s book, as I read through it, are my initial responses, , more like notes from a first reading that I would make when working in a library on a subject’s literature for a research project. Here, my draft notes are made with a view to summarizing them into a considered appraisal of the book’s merits.

I shall continue to publish my draft conclusions for those who have not yet read the book. For those who are too busy to read my notes in their present form, I shall present a summary review later. My initial comments are subject, where necessary, to re-drafting, excision and elaboration. Any comments, etc., may be posted as usual, or, as some have done already, sent to me privately. Of course, should Dr Graeber wish to exercise a right to reply to the final review, it shall be published on Lost Legacy without my editing, as a matter of scholarly manners.]

Chapter six: “Games with sex and death”, reveals much of the millennia-old institutional rape, slavery, and death, in what Dr Graeber calls the “human economy”, from, we should note, long before more recent commercial markets replaced them. Travellers’ observations from the 18th century, and intensive anthropological, archaeological and sociological research on a more scientific basis from about the mid-19th century, funded it should be noted by the rise and spread of commercial economies, revealed their true nature, somewhat massaged by Dr Graeber’s ‘completely new theory’.

Characteristically, Dr Graeber has a dig at the alleged economists’ insistence that ‘barter’ was ”the innocent exchange of arrows for tepee frames, with no one in a position to rape, humiliate, or torture anyone else” (p 126). This is pure rhetoric at the cartoon level, stopping just short of saying that ‘economists’ knew about what they allegedly hid from view, and therefore, are somehow implicated in it. I note here that Adam Smith relied on French travellers’ accounts of North American native settlements, such as P. F. Charlevoix (1722) and J.F. Lafitau (1735), and that he made use of what was available to him, writing in his mother’s house and garden in Kirkcaldy without access to a university library (he had returned from France in 1767 , three years after he had left Glasgow University). Dr Graeber, and modern anthropologists, have access to large libraries of the detailed work of thousands of researchers since the 18oos, and to ever-expanding Internet resources only a click away and with shelves groaning with the weight of books, specialist periodicals and monographs. They also have access to funds to fly thousand of miles quickly (it took up the three weeks to travel from Edinburgh to London in the earyl 18th century) and safely (health and security wise) to and from their subject’s research sites. He describes modern economists as being “touchingly utopian” for not being familiar with the work of anthropology; fair enough, though I didn’t get far very in this chapter without noting Dr Graeber’s own “touchingly utopian” approach to what he reports, as if the institutional mass rapes and the bondage of women, common in the ‘traditional societies’ he describes, is excused by the cultural traditions he describes or the mores of something he calls the ‘human economy’. When Adam Smith wrote of rapine by European armies at war, he in no way hid or excused it, nor was he silent of the depredations of “merchants and manufacturers”, “rich and unfeeling landlords”, nor the crass policy limitations of legislatures and those who influenced them, in his published works. His most well known sympathisers suffered the attentions of the authorities after Smith died in 1790, particularly in 1793-4 in a bout of repressions by judicial authorities, following the outbreak of revolutionary terror in France - see Dugald Stewart’s biography for his treatment after he read his eulogy to Adam Smith to the Royal Society of Edinburgh in 28 January and 16 March 1793.

People in societies in ‘Human Economy’ apparently “used one another as currency”, but “its hard to say more because the history remains largely unwritten” (p 128). If that is true, surely Dr Graeber in 2011 ought to be a little less strident in his contempt for Adam Smith for being as unsure in the 1770s about, not just ‘history’ being absolutely unwritten, but also because the because the very subject of anthropology in his days was entirely unknown.

He writes, strangely, that: “sexual exploitation was at best incidental (usually illegal, sometimes practised anyway, symbolically important). Again, once we remove some of our usual blinders, we can see that matters have changed far less, over the course of the last five thousand year or so, than we really like to think” (p 129)! In this chapter, it seems to me that Dr Graeber demonstrates his own blinders when he describes “primitive money”, which is “used almost exclusively for the kinds of transaction that economists don’t like to have to talk about” (p 129-30). Really? While modern neo-classical economists don’t even “like to talk”, recruit, or award tenure about the history of economic thought they, and Dr Graeber, repeat the myths they invented about Adam Smith. Many economists also research into economic history and the means by which people have transacted with each other.

Indeed, as Dr Graeber’s account of “primitive money” exchange transactions shows, he is blind to the nature of these exchange transactions, the common denominator of which, in his “human economy”, is the institutionalisation of the licensed rape of women and the disposal of children over many cultures and through many millennia, wrapped in male-invented superstitions, so-called magic, and religion. Far from eliminating exchange relationships, Dr Graeber's formalised theories of “human economies” are obfuscated by “quite ingenious” (p 131) theories, sometimes wrapped in jargon. He argues that passing over a token for a wife was not buying her to effect a transfer, (p.131), despite the sexual access and time honoured burden of labour services the transfer sanctioned. He says it was a rearrangement of “relations between people” (p 131) and is, he writes, “if buying anything, it’s the right to call her offspring his own” or, was the “purchase of the future fertility of her womb”. According to Philippe Rospabe , it “is not Payment” (1993, “Don Archaique et Monnoaie Sauvage”; it is, instead, “an acknowledgment that one is asking for something so uniquely valuable that payment of any sort would be impossible: (p.131-2). That’s all right then! Except that affecting a transfer of something, anything, valuable in some sense to the men involved, secures the transfer, without which there would be no transfer. That activity in any language is a transfer by exchange. Empty jargon about “non-equivalents” convinces only those who are blinded by it.

Similar tales of non-exchange transfer are taken up in the following pages after clear, not just symbolic, payments in various “complex systems”, including paid-for “marriage” by transferring sisters (p. 132), the “swapping and trading of “wards”, a.k.a. bondage relationships (p.132) among men, that is, exchanging human beings for “bundles of brass rods”, which rods are only allowed to be held by men,’ (p. 132), paying compensation for a man’s adultery (to men, not to women) with “raffia-palm cloth” (137), “hierarchical gifts” to elders (p. 138), “camwood bars” as gifts exchanged in marriage negotiations among men, the women are not involved (p. 138), compensation to men for a woman’s adultery (assumed to have occurred by superstition, or a death-bed confession), if she died in childbirth (p.138), or if a male “sorcerer” identified culprits “divination” after sickness For slipping and falling from trees (p.139), young women become “wards” or “pawns”, and any children they have “in payment of blood-debts” (p.139), the “constant game of securing or redeeming pawns” to “transfer rights in women” among men (p 139). Dr Graeber notes (eventually) that what is “being traded were, quite specifically, human lives”, such as a sister or a “different woman, a pawn he had acquired from someone else” (p. 140), specifically a “young woman’s life”. He quotes Mary Douglas (1963. ‘The Lele of Kasai’, Oxford University Press) as “one gigantic apparatus for asserting male control over women” (only men could own pawns), (p. 140)! But no. Not even after this, what were explicit exchanges of ‘A’ for ‘B’ – something given for omething that is received - Dr Graeber insists this is not within the realm of Adam Smith’s ancient propensity for exchange. However, whatever else is alleged to going on in all of the events that he highlights in his “new theory” as examples there is an exchange of things that maybe not very valuable in themselves (however measured), but of immense exchangeable value (the ratio of what is given for what is received) to those men who can exercise these exchanges of women with them. Exchange for Adam Smith was not necessarily about the exchange of “equivalents” (whatever than means).

Summarising these culturally derived customs, some anthropologists have divided “economic life” into “three spheres of exchange’: ordinary everyday economic activity, mostly the affair of women in “village markets”; transactions using “local currency” (cloth and brass rods) for acquiring “certain flashy and luxurious things” like “cows, and foreign wives”, but mainly for the “give and take of political affairs, hiring curers, acquiring magic, initiation into cult societies” (p. 146) and to acquire universal “rights in women”. Dr Graeber introduces an account of suspected “cannibalism” among these gruesome rituals (gently put as “consuming human flesh”, or ‘pretending to do so”, p. 147-9).He moves on to discuss the Atlantic slave trade in detail, which, of course, for Dr Greaber, is a consequence of human economies (a strange adjective in view of the inhuman horrors described in his account of them) coming “into contact with commercial ones” and, particularly, “commercial economies with advanced military technology and an insatiable demand for human labour” (p. 155). I note from the index that Dr Graeber discusses aspects of the millennia-old African slave trade with the Arab low-tech commercial economies later in the book (so I shall return to it later).

On the African cases he discusses in detail in Chapter 6, in what he calls the “human economy”, which developed over time into incredibly socially complex “exchange systems”, showing us that talented anthropologists have studied them in depth. But he insists these exchange systems are not in any way versions of exchange as understood in sense of Adam Smith’s exchange theory (the propensity that has been basic to human beings since the evolution in early humans of “the faculties of reason and speech” (WN I.ii.2. 26). Of course, if Dr Graeber recoils from the ideas, models and theories of neo-classical economics as taught today, I am not surprised that he came to that conclusion, but he is, however, charging at windmills believing they are really made out of Adam Smith’s moral philosophy and political economy. They were not, and are not, because these windmills bear little real resemblance to the ideas of Adam Smith, as I have tried to argue since I first read an account of Dr Graeber’s thesis and I continue to do so as I read his considered account of the issues at stake. We do not understand the same things about the Adam Smith born in Kirkcaldy in 1723 because Dr Graeber is enamoured with the fantasy Chicago Adam Smith.

Partly, this clash of two visions of Adam Smith is based on Dr Graeber’s notion of the absolute necessity for “equivalence” on both side’s of transactions for the exchange of anything, which certainly can be taken from modern textbooks on economics (marginal utility), but not from Adam Smith’s legacy. This fact is disruptive of Dr Graeber’s thesis; he needs an “equivalence theory” to make his debt theories work and to rubbish Adam Smith’s concept of exchange in the famous identification of ‘truck, barter, and exchange” in Wealth Of Nations (WN I.ii.1: p 25). Dr Graeber sees “truck and barter” and asserts that “exchange” therefore only means “commercial trade and capitalist markets” (Karl Polanyi’s error too). First of all, ‘truck and barter”, as shown earlier in my review of his book, is about exchange by bargaining – something for something - which is why the word “exchange’ was included by Adam Smith. Second, exchange is not necessarily about money either; it can be about money and it can be about anything at all that can be exchanged. The bronze age-authors of the Bible knew about exchange, for in Genesis the exchange with Adam and Eve was to refrain from eating from the tree knowledge in exchange for and for not know of “good and evil”, and death. Meanwhile, they could live in the Eden Garden, “work it and take care of it” (Genesis 2. 13). According to the fable, they ate from the tree and were expelled and, in consequence both knew of good and evil, and death. There were no “equivalents” in that transaction! And nothing changed about the meaning of exchange for 200,000 years, assuming of course, that only humans among primates and other animals consciously exchange ‘things’, tangible and non-tangible.

In Adam Smith’s essay on the origin of languages, he conjectures about the necessary steps by which a language would be developed by two ‘savages’ who, for simplicity, did not speak any language and were “bread up remote from the societies of men” (A. Smith, “Considerations Concerning the First Formation of Languages”, 1761, I.1; often published with Moral Sentiments). They would naturally begin to form that language by which they would endeavour to make their mutual wants intelligible to each other by uttering certain sounds”. Smith examined the process by which they would likely move from ‘nouns’ through to adjectives and verbs, to grammar, and so on. This process, he surmises, involved their mutual agreement, and that implies the exchange of specific sounds, as they mutually progressed towards a commonly understood language. Dugald Stewart, a family friend for many years and therefore with regular access to Smith’s private thoughts, remarked in his eulogy in 1793, of the methods by which Smith constructed his philosophy: “Something very similar to [his method in the Language essay] may be traced in all his different works, whether moral, political, or literary…” (Dugald Stewart, Account of the Life and Writings of Adam Smith, 1793, II.44: p 292). No money was involved in their mutual agreed exchanges and it had nothing to do with commerce. Adam Smith was never so narrow in his concept of “truck, barter, and exchange” as Dr Graeber, and most modern economists he despises so much. As a student of Adam Smith’s works, and absent Dr Graeber’s blinders, I consider him, modestly, to be wrong).

Looney Tunes no 11

1
'Not Right About Anything: The invisible hand of your heart'

“The invisible hand of your heart. SEX!”

Ian McGibboney
HERE

2
"The Great Recession, Business Investment and Crony Capitalism"

Ashwin on Macroeconomic Resilience Here

"The neoliberal transition unshackled the invisible hand (the carrot of the profit motive) without ensuring that all key sectors of the economy were equally subject to the invisible foot (the stick of failure and losses and new firm entry"

3
'How do We Choose our Mates? The Big Bang Theory vs. the Algorithm'

Pamela Haag in “big think” (2 December) HERE

“an invisible hand of the (erotic) market guides us to Mr./Ms. Right through a sociobiological brew of pheromones, adaptive preferences, and other mysterious but irresistible forces of attraction that only look chaotic from afar.”


4

“Fox News for president”

“Returning to "buyer beware" markets as we eliminate federal regulations (Adam Smith's "Invisible Hand" felt around the neck of the middle class)."

Kansas City Star (blog) HERE http://blogs.kansascity.com/unfettered_letters/2011/12/-fox-news-for-president.html

Part Four of a Review Of Dr David Graeber’s “5,000 Years of Debt"

DAVID GRAEBER, “DEBT: THE FIRST 5,000 YEARS”, MELVILLE HOUSE PUBLISHING, NEW YORK, 2011.

Part FOUR

As I get into Dr Graeber’s book, I confess that I find it interesting because of its wide-ranging number of subjects that interest me. I know that the narrative is moving slowly and methodically to a conclusion for which I expect not to have much sympathy. I must admit also that I find Dr Graeber exasperating whenever he mentions Adam Smith. He has a cartoon image of his philosophy, and is influenced too much by modern neoclassical economics and of what I take from his references is an aversion to ideas of exchange and, above all, of anything smacking of markets, or at least his versions of them.

In Chapter Four, “Cruelty and Redemption”, the reader is treated to a medley of themes which irritated me for the certainties by which they were asserted, but with which I have doubts, both theoretical and experiential.

For example, “in competitive markets, trust itself becomes a scarce commodity” (p 75), more a cynic’s wisecrack in a long meeting, than a credible statement applying to all market transactions in all markets all of the time. People have different levels of risk-aversion and various markets develop to mitigate levels of risk felt by players. Trust among market makers has to reach some minimal degree for individuals to participate in markets that function and for many other daily activities to be performed (ride a train, fly in a plane, buy and eat a sandwich, walk along a dark road, and so on). But why does Dr Graeber direct his particular ire against “competitive markets”?

Experience of low-market economies everywhere shows the reverse – it is when low levels of trust are socially predominant, among significant proportions of a population that development is inhibited in stagnant poverty. Trust is an essential quality of competitive markets since per capita living incomes began to rise inexorably from the early 1800s in north-west Europe, and by the late 1800s spread elsewhere through to today. On visits I made to South Africa on business (on bargaining counter-trade agreements) the local development of markets was inhibited by the high- levels of distrust (mainly associated with criminal gangs and over-bearing local corrupt administration of justice. Similarly, in the southern (poorest) regions of mainland Italy and Sicily, whole villages did not trust the villages around them, so that large infra-structure projects were endlessly delayed (and more expensive) by attitudes of visceral non-cooperation and long-standing vendettas, blood feuds, and chronic distrust.

Dr Graeber quotes extensively from the writings of Friedrich Nietzsche for several pages (pp.76-78, 80). Allowing for his gloomy literary style, it was Nietzsche who asserted that the earth was drenched “red by the blood of animals” who had not kept their promises; a striking, if overly dramatic, way of making a brutal point about trust. Trust is deep in the habits of acting to reciprocate mutual obligations, which is the very essence of reciprocity norms that were repeatedly practised by generations of primates and early humans in the wilds of Africa for scores of millennia ago and today too. Failure to reciprocate is seldom punished today by systematic blood letting but the consequences of foregone future mutual reciprocated conveniences in small groups can have no mean consequence in conditions of narrowing already minimal choices amidst poverty, particularly in the shorter lifetimes of ancient societies. Because ‘one good turn deserves another’ it was and is very human to neither forgive, nor forget someone’s failure to reciprocate good turns.

When Dr Graeber discusses Nietzsche he links his themes of ‘ancestor worship as somehow related to Adam Smith’s alleged “assumptions about human nature” but passes over Smith’s characterisation of the norms of early societies in his earliest thinking, in his “History of Astronomy”, written from 1744 to the 1750s, and then kept hidden in his bureau drawer in his bedroom until he died in 1790, having given instructions to burn everything else, but to publish the hidden essay. His executors published it posthumously in 1795.

In HA Smith discusses primitive explanations for nature’s ‘terrors’, and how ‘these appearances’ terrified early mankind. Eclipses of the sun and moon excited and terrified early humans by disturbing their imaginations, making them receptive to wild notions from whomsoever gave plausible explanations (HA, II.9, 43). They were ‘disposed to believe everything about them which can render them still more … the objects of [their] terror’ as proceeding ‘from some intelligent, though invisible causes, of whose vengeance and displeasure’ they are ‘the signs or the effects’. Thus ‘cowardice and pusillanimity’ is ‘natural to man in his uncivilized state’ (HA, III.1, 48), who linked the irregular events in nature, of which some are ‘awful and terrible’ and some ‘perfectly beautiful’, to some ‘invisible and designing powers’, and found in the origin of Polytheism, belief in the ‘favour or displeasure of intelligent beings, to gods, daemons, witches, genii, fairies’ (HA, III.2, 49). ‘And thus, in the first ages of the world, the lowest and most pusillanimous superstition supplied the place of philosophy’ (HA: 49-50; cf. TMS II.ii.1.2: 94).

Smith points to the ignorant origins of primitive religion in the minds of ignorant listeners, whose ignorance hardly changed from early societies to the richer myths of the gods of the Athenians, then in the ignorant forms among the common people into modern times, alongside the narratives of revealed religion, such as shared by the Old Testament of the Jews, and the New Testament of Christianity. My paper “The Hidden Adam Smith in his Alleged Theology”

(Journal of the History of Economic Thought, Volume 33, Number 3, September 2011) discusses these ideas sufficient to show that Adam Smith held private secular and skeptical views on superstitious religious explanations of the bulk of Dr Graeber’s theories in chapter 4, of which pages 80-87are largely about theology.

Before moving to chapter 5, I would point out that it was nowhere true of Adam Smith (whatever Nietzsche’s views) that he believed that ‘we are rational calculating machines that self-interest comes before society’ (p.78). Some modern economists certainly believe and teach that view but it is a wholly invented narrative when ascribed to Adam Smith. It was popular among modern economists from the 1870s, sometimes characterized by the infamous myth of ‘Homo economicus’ in neo-classical theory, with it ‘rational choice theories’, ‘welfare theorems’, and ‘general equilibrium’. None of these and the whole corpus of mathematical modeling has any textual authority in Adam Smith’s Works. Maybe it is in this common misunderstanding that we have the source of Dr Graeber’s, sometimes dismissive, anger towards Adam Smith in that he subscribes to a wholly invented Chicago “Adam Smith” from the 1970s that is not representative of the Adam Smith born in Kirkcaldy, Scotland, in 1723.

[Apologies: I missed posting part four on Thursday - it was late before I returned from a grandson's birthday party, -and today I wrote Part Five, posted immediately below.]