Monday, February 13, 2012

These Guys Should Know Better

Rob Norton HERE
Concise Encyclopedia of Economics, quoted by “Utah” in the Rio Norte Line HERE

"Unintended Consequences" by Rob Norton

“The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, “is led by an invisible hand to promote an end which was no part of his intention,” that end being the public interest. “It is not from the benevolence of the butcher, or the baker, that we expect our dinner,” Smith wrote, “but from regard to their own self interest.

This authoritative source (from Liberty Fund) has been instrumental in spreading the fallacious notion of the entirely modern notion (from the late 1940s, pace Paul Samuelson) that there is “an invisible hand” at work in capitalist economies, and worse, that Adam Smith initiated the idea.

One excellent antidote to the “invisible hand” myth is Warren J. Samuels’ last book (he passed away just before it was published): “Erasing the Invisible Hand: essays on an elusive and misused concept in economics”, 2011, Cambridge University Press). I suggest that the good people of Liberty Fund read it.

Generalising from a single instance of Smith’s use of the IH metaphor and joining it to another quotation on an different subject is always dangerous when presenting Adam Smith’s ideas.

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