New Defence of Modern Inventions of the Existence of Invisible Hands At Work in Society
Daniel Klein, a professor at George Mason University, Fairfax Virginia, is one of those original thinkers that stands him out from the crowd of overly-safe players who dominate in academe on both sides of the Atlantic, and on both sides of the Pacific as far as Australasia. His recent thinking, expressed in his new book, “Knowledge and Coordination: A Liberal Interpretation”, Cambridge University Press, is typical of his, on and beyond the frontier of accepted doctrine.
This new article is a recent example of his contributions to the discourse among scholars related to Adam Smith’s thinking. I quote the first few paragraphs as a sample to entice readers to follow the link to read it all. I shall comment on Daniel’s paper in more detail as soon as I can.Daniel B. Klein HERE
The Freeman (“ideas on liberty”) May 2012 • Volume: 62 • Issue: 4 •
“We must look at the price system,” wrote Friedrich Hayek, “as . . . a mechanism for communicating information if we want to understand its real function.” Hayek’s talk of communication was a great advance in economic thinking. Talk of communication is common among market-oriented economists. In their textbook Tyler Cowen and Alexander Tabarrok write: “[P]rice signals and the accompanying profits and losses tell entrepreneurs what areas of the economy consumers want expanded and what areas they want contracted.” Such talk is both illuminating and beautiful.
But the price of eggs communicates, in a literal sense, nothing more than: Yours for $1.89. If we are to be literal, we must mind the element of communion, or community, in communication. Literally, communication is a meeting of minds. The knowledge communicated passes through us as commonly experienced ideas, images, or notions.
For the entrepreneur computing her profit or loss, there really is no communication in the literal sense, no meeting of minds—whose mind would she meet? In no literal sense do prices and other market phenomena tell entrepreneurs what to do. We want to talk of prices as “signals,” but we must recognize that they are not literally signals.
In discussing market forces in The Wealth of Nations, Adam Smith illuminated their marvels by using simile and metaphor. He sketched an aspect of social coordination: “It is the interest of the people that their daily, weekly, and monthly consumption should be proportioned as exactly as possible to the supply of the season.” The grain dealer adjusts his prices and quantities in ways that conduce to such coordination:
Without intending the interest of the people, he is necessarily led, by a regard to his own interest, to treat them, even in years of scarcity, pretty much in the same manner as the prudent master of a vessel is sometimes obliged to treat his crew. When he foresees that provisions are likely to run short, he puts them upon short allowance. Though from excess of caution he should sometimes do this without any real necessity, yet all the inconveniences which his crew can thereby suffer are inconsiderable in comparison of the danger, misery, and ruin to which they might sometimes be exposed by a less provident conduct. [Emphasis added.]
The simile of the prudent shipmaster is a miniature of the metaphor of the being whose hand is invisible: “[The individual] generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. . . . [A]nd by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” (Emphasis added.)
When a simile or metaphor is made elaborate, it may become allegory. The dictionary defines allegory as “an expressive style that uses fictional characters and events to describe some subject by suggestive resemblances; an extended metaphor.”
Daniel Klein’s new emphasis on the role of allegory is a continuation, albeit as a new theme, of his dogged defence of the modern meanings attributed to Adam Smith’s in his use of the metaphor of “an invisible hand”. I have commented upon, indeed criticized, his stance on metaphors in various debates we have had in print on the “invisible hand” since 2009. Apart from describing my focus as “too narrow”, his latest contribution attempts to broaden his defence of his own rather orthodox stance by invoking a role for allegories in Smith’s “Moral Sentiments” and his “Wealth Of Nations”.
Daniel shows commendable originality in his theory of the applicability of allegories. I applaud him for that. But the issue remains to what extent does the cover of allegories had light to the sometimes laughable extent to which the misattribution of the versions of the invisible hand in economics, philosophy, and general discourse (some of which I try to capture in Lost Legacy’s “Loony Tunes” series from media sources).
I shall return to Daniel’s always interesting thoughts on allegories later this week.