Daniel Klein On Allegories (Part 1)

Daniel Klein is a keen promoter of the work of young postgraduates at George Mason University.  He also devotes some of his time to older retirees like myself.  I first met Daniel at a conference dinner at Balliol College, Oxford University, where Smith was a student (1740-46). The International Adam Smith Society staged the conference in January 2009, to commemorate the 250^th year of the publication of the Theory of Moral Sentiments in 1759.

We exchanged views during a conference dinner on Adam Smith’s use of the metaphor of “an invisible hand”, without agreeing, but always politely.  The upshot was that months later, Daniel, as the editor of Econ Journal Watch, invited me to contribute to a debate with him on the “invisible hand”.  He published a long piece from me: “Adam Smith and the Invisible Hand: From Metaphor to Myth”, Econ Journal Watch, Vol. 6, No. 2, May 2009, pp 239-263 (available HERE). Daniel published his reply, robustly disagreeing, but well within the established polite norms of scholarly discourse, for which I remain grateful. I learned a great deal from him, as I continue to do from his many articles and papers, which he invariably sends to me on or before publication. Two years later in 2011, he invited me to continue our debate in Economic Affairs, the journal of the Institute of Economic Affairs.  Daniel Klein, with a young colleague, Brandon Lucas, wrote “In a word or two, placed in the middle: the invisible hand in Smith's tomes” Klein and Lucas, (Economic Affairs, 2011, March, vol. 31, March 2011: 43-52) and I responded with ”Adam Smith and the role of the metaphor of an invisible hand” (Economic Affairs, 2011, March, vol. 31, March 2011: 53-55).

Daniel Klein, George Mason University, Fairfax, Virginia, is a gifted author, who writes both inside the boundaries of economics and outside those boundaries in the realms of moral philosophy and literature (always under the “presumption of liberty”).  His recent podcast for ‘The Library of Economics and Liberty’ on Adam Smith’s Theory of Moral Sentiments (1759) HERE http://www.econtalk.org/bookclub.html, was a tour de force of erudite understanding of Smith’s views, clearly explained. Too many modern economists do not attempt to read TMS because they remain unaware of it, or if they are aware, they simply give up trying to read it. 

Hence, we have form, as they say in police TV dramas, and this is important when I offer comments today (and tomorrow) on Daniel’s latest paper, “Allegory and Political Economy: Communication and Cooperation” in ‘The Freeman’ from the Foundation for Economic Education HERE  [Follow the link to read Daniel’s paper in full.]

Comments

This introductory background sets the tone of our debates about Smith’s meaning when he used the popular 17^th-18^th-century ‘invisible hand’ metaphor, which I insist should be treated as a straight forward metaphor, as used regularly in the English language.  It was used in this context when Smith taught Rhetoric from 1748 to 1763 and it remains today as he defined it when he used it once only in both in TMS and WN (see his ‘Lectures in Rhetoric and Belles Lettres’, [1762] 1983, Oxford University Press).  Daniel disagrees and considers the IH metaphor has some special quality within it of importance to the policy agenda he favours. 

Metaphors are defined in the Oxford English Dictionary, that definitive arbiter of the English language. Daniel, on the contrary, insists that the IH metaphor for Smith may have a deeper, quite different meaning, as defined by Leo Strauss, a mid-20^th-century theorist, in his theories of ‘esoteric’ and ‘exoteric’ meanings, in which words can have meanings different from the ordinary meaning of such words, especially when an author deliberately intends to mislead censorious authority about his true, private views, supposedly hidden by Smith during his lifetime.  This could be true on matters of religion, but not in his use of language and grammar, where he held and practiced strong views in all of his Works.

I suggest this latest article from Daniels is a new example of his proclivity for introducing original thoughts into modern debates from the views of modern authorities on 18^th-century issues. These articles are always illuminating and provocative in that they make readers think.  Daniel’s current paper is no different.  In this response, however, I challenge some of its ideas.

First, let me assert that when Daniel intellectualises the “ordinary business of life”, he risks adding confusion to the simple straightforward meaning of words. One example of Daniel’s approach is provided by his comments on prices not being signals.  Communicating, contrary to Daniel, can take place without ‘communion’, other than the basic need for a common meaning, as in a common language and common symbolism shared by the sender of a signal and its receiver.  We see or receive many signals and may reject, ignore, or act upon them.   We are not permanently ‘in the market’ like stockbroker addicts.

A signpost at a road junction pointing east, say, signals where the traveller should go if the place name is where she wants to go.  There is no communion implied, nor is it necessary; a wooden signpost does not speak or hear.  The message and her response too, are silent; however, her actions are visible. Daniel is far too restrictive in the matter of signals.   Similarly for the entrepreneur ‘computing her profit or loss’. To whom must she communicate with while simply computing the figures?  She may prefer not to communicate with anybody about the figures!

In trying to create something out of the simple role of prices or directions as non-signals, requires, he claims, deeper analysis of their nature, Daniel lays the basis for what he intends to introduce.  Why does Daniel limit price signals to a “meeting of minds”? We see signals and choose whether and how to react to them – we don’t have to follow all directions for places we do not wish to visit, nor do we have to buy eggs, nor take a vacation in Florida. Much of the advertising projected at us is not responded to, other than passively – as when we change channels or turn over the page.

Daniel’s example of the non-signal of a price of ‘$1.89’ for eggs may be spoken to those within earshot, who may or may not understand the language of ‘$1.89’, or it may be written on a sign, and readers and listeners may or may choose to stay and haggle for a lower price, or may seek a larger number of eggs for paying $1.89. (The could just pay the price and go home. The speaker or writer can haggle, disengage, or evaluate the likelihood of selling eggs at the $1.89 price, depending, perhaps, on how many others have bought or refused to buy at that price earlier in the day. A potential buyer may not know the history of the outcome of those earlier transactions; the seller may not know the intensity of the buyer’s need for eggs.  Further communication by bargaining may elucidate such information. Price signals may end possible transactions; or they may start them. No market in the world functions without visible known prices or specific speech announcing their offers.

I am not happy with the idea that “prices and other market phenomena tell entrepreneurs what to do”, like some sort of instructions that must be obeyed.  That is a gross simplification, unfortunately typical of Economics 101.  We can choose to ignore all or just particular signals. Tyler Cowen and Alexander Tabarrok (two distinguished senior scholars) in their textbook, quoted by Daniel, are being too literal, presumably writing for an introductory economics course.

[Part Two in a day or so]