Saturday, March 17, 2012

A Leftist Who Misreads Adam Smith





Gavin Kennedy

“klukie” posts (17 March) in Democratic Underground HERE and HERE and massages quotations to mis-report Adam Smith on his use “an invisible hand”, a popular 18th-century metaphor (not a simile!) only twice in his published Works while alive, Moral Sentiments, 1759 and Wealth Of Nations, 1776, and once only as a noun, “the invisible hand of Jupiter”, in an Essay on the History of Astronomy, posthumous, 1795.

Adam Smith’s Psychology"

The founding father of modern free market economics, Adam Smith, is best known for his famous simile in The Wealth of Nations (1776) about the “invisible hand,” which seemed to endorse a dark view of human nature. He wrote: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

However, that’s perfectly OK. “Man…is led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”

In neither case did the metaphor of “an invisible hand”, nor did his example of the nature of bargaining in Wealth Of Nations (Book 1, chapter 2, paragraph 2) “endorse a dark view of human nature”. Klukie has misunderstood Smith’s paragraph on bargaining (a common error among modern neo-classical economists of both Left and Right political stances).

Far from “endorsing a dark view”, his passage reveals an important aspect of seeking one’s self-interests: the necessity for “addressing” the other person’s self-interests, not just your own, if a positive conclusion to your bargaining is to occur. Unless your offer addresses the other’s interests, you will deadlock, which is a common outcome in bargaining between two egotistic parties. Neither wants to move, therefore neither gets what they want.

“… later on in his masterwork Smith even seemed to provide a rationalization for unvarnished greed and a no-holds-barred predatory economy when he commented: “In spite of their natural selfishness and rapacity… are led by an invisible hand to…advance the interest of the society...”.

Smith in Wealth Of Nations (WN IV.1.10: page 184) discusses “a proud and unfeeling landlord view[ing] his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest than grows upon them”. He goes on to say that the "unfeeling landlord" is obliged to distribute among those ”who toil in his palace and in his fields (“the thousands whom [the landlords] employ”) “that share of the necessaries of life, which they would in vain have expected from his humanity or his justice”.

Why did the landlords, “in spite of their natural selfishness and rapacity” share their harvests with the “thousands whom they employ”? Clearly, it was from their mutual dependence on those that labour. If they did not feed the labouring poor, and their families, there would be no “economy of greatness” for the landlords. No food meant no labour! No labour meant no food for anyone. Landlords had no choice. Even slaves had to be fed.

This did not mean the “rapacious” landlords ensured that their toilers basked in splendour and a surfeit of full rations; the distribution of food was left to overseers, not known for their humanity, not their gentle kindness (they mimicked their masters. The toilers received the rations their overseers considered sufficient.

The fact that Smith did not spell all this out did not mean he was unaware of the realities of life for the peasantry, and later, tenant farmers (let alone the realities of the “splendours” of Rome, Egypt, Babylonia and Asia for the slaves). Recall that his text of Moral Sentiments (1759) represented his Lectures in Moral Philosophy, Jurisprudence, and Rhetoric delivered to audiences of the sons of landed interests, the aristocracy, merchants and manufacturers, and bright lads on scholarships from Church ministers, legislators and the men of the law (from age 14 to 17).

“Klukie” writes in comparatively free societies, with protections of democratic rights and the law in the 21st century; 18th-century Scotland was not anything like that. I see no signs that “Klukie” is aware of the historical context in which Smith and others worked. Smith pushed out the boundaries of frankness about the realities faced by people in Scotland, and taught in the shadow of the ever-present “zealots” of the Church seeking “subversion” and “heresy” in whatever Professors taught their students. The three previous Professors of Moral Philosophy at Glasgow were all called before the Glasgow Presbytery to answer charges of “heresy”.

I will come back to rest of “Klukie’s” post (follow the links), which is of a similar misleading and partisan perspective of the Works of Adam Smith, ironically, a habit shared by modern neoclassical economists of a contrary disposition to that which “Klukie” would probably be sympathetic.



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