Thursday, January 19, 2012

Small Steps in the Right Direction

James Higham writes for Orphans of Liberty HERE

James covers some of the distorted ideas about Adam Smith, especially about markets and morals. He picks up the distortions of Smith in the “concept” of the invisible hand and the claims of Ayn Rand (and her mentor, Bernard Mandeville, 1724, in “Private Vice, Public Virtue”, today known as the “greed is good” school of mindless radicalism.

“Adam Smith”

“Thought this a most significant take on Adam Smith who, like all great ideas people who’ve influenced humanity, has been partly read and misread as has been people’s wont and their own prejudices:
Smith saw economics as a branch of moral philosophy, and he saw capitalism as an ethical project whose success required political commitment to justice and freedom, not merely an understanding of economic logistics.
The notion of classical liberalism certainly embraces economic freedom but it also embraces that pesky bit “unless/until it is to the detriment of others”. Cue the moral dimension.

A great deal of contemporary (neo-classical) economics can be understood in terms of translating Smith’s Invisible Hand metaphor into a systematic theoretical form, with a particular emphasis on the economic efficiency of perfectly competitive markets.

However the popular view of Smith that has resulted from this emphasis is twice distorted.

Firstly, it is based on the narrow foundations of a few select quotations from The Wealth of Nations (WN) that are taken in isolation as summing up his work (Smith only mentions the ‘all important’ Invisible Hand once), and secondly these quotations have been analyzed in a particularly narrow way.

Both selection and interpretation have been driven by contemporary economists’ interest in justifying orthodox economic methodology and their peculiar (Mandevillian) assumption of the selfish utility maximising homo economicus.

And that’s the nub of the matter.

But anyone who cares to read Smith’s Wealth of Nations for themselves will find an economics discussed and justified in explicitly moral terms, in which markets, and the division of labour they allow, are shown to both depend upon and produce not only prosperity but also justice and freedom, particularly for the poor.

This is more than just a philosophical nicety and sets it at odds with the Randian dystopic view of freedom, the free market’s motivation and the cold indifference of the amoral “business is business”. This extremist position is a central plank in the platform of the crony capitalists and justifies all the corruption and I’m all right, jack of the Dimons et al.
It has zero to do with classical liberalism
. “

Steps in the right direction are always welcome away from the neo-classical inventions of an Adam Smith not born in Kirkcaldy in 1723, but invented in US academe in the late 1940s (Paul Samuelson) through to today. It was an ideological attempt to defend capitalist market economies from the pressures of the competing Soviet experiment in totalitarian centralised planning, which fortunately collapsed after 1989, before the Cold War turned Hot.

Some erroneous ideas die slowly, some at a glacier-like pace. The ‘invisible hand’ and ‘greed is good’ fantasies are two such erroneous ideas.

Lost Legacy welcomes even the smallest steps away from the largely Chicago Adam Smith.

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Blogger airth10 said...

"The invisible hand of the market is giving way to the visible, and often authoritarian, hand of state capitalism."

The quote from an article in The Economist:

5:33 p.m.  

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