NYT "Essayist" Confuses Bernard Mandeville and Adam Smith

William Deresiewicz, an essayist, critic and the author of  “A Jane Austen”, the Opinion pages:  Education.”  Writes in the New York Times, Sunday Review (13 May) HERE

“Capitalists and Other Psychopaths”

“Mandeville believed the individual pursuit of self-interest could redound to public benefit, but unlike Adam Smith, he didn’t think it did so on its own. Smith’s “hand” was “invisible” — the automatic operation of the market. Mandeville’s involved “the dextrous Management of a skilful Politician” — in modern terms, legislation, regulation and taxation. Or as he versified it, “Vice is beneficial found, / When it’s by Justice lopt, and bound.”

Comment

Read the tendentious article and judge its objectivity for  yourself – for instance Deresiewicz reports a survey that finds that 10 per cent of a sample have psychopathic tendencies, which sample becomes all capitalists!  His knowledge of Jane Austen does not include much exposure to statistics.

I selected the above paragraph for comment.    The “essayist, critic and author” confuses Bernard Mandeville and Adam Smith, as do many critics and worshipers of Smith (like Ayn Rand), presents a modern invention of Smith’s use of “an invisible hand” metaphor that is distinctly different from what Smith actually said, and jumps to his irascible, even vitriolic, conclusion.

Adam Smith never wrote about an invisible hand of the market or of any other of the fantasies among critics of and apologies for corporate capitalism.   Smith’s was a simple example of a merchant (not all merchants) concerned about the “security” of his capital and therefore preferred to invest locally in “domestic industry” rather than take the risks associated with sending it “out of his sight” abroad on “foreign trade” or shipping.  From this inhibition, he was driven by his perception of risk to invest it domestically, which had the consequence that domestic “revenue and employment” (known today as GDP) rose by the arithmetic amount of his domestic investment (the whole is the sum of its parts – hardly heavy maths!).  Smith regarded this growth as a public benefit, because it created paid work for poor labourers. 

In short it was a specific example, for which Smith used the metaphor of “led by an invisible hand” to describe “in a more striking and interesting manner” the metaphor’s object – the invisible (to others) motives of the merchant from his aversion to risk.  That is all the famous and misunderstood figure of speech of Smith’s was about.  A specific, not a general case for what all merchants did; it is an example of the rules of English grammar, which an “essayist, critic and author” should recognise instantly.  [Note to William Deresiewicz: Adam Smith taught “rhetoric” from 1748-63 and defined metaphors in his “Lectures of Rhetoric and Belles Lettres”, p 29 [1763] 1983 Oxford University Press.]  

Smith never claimed that “self interested” individuals, whether merchants, kings, legislators, landlords, and the general public, acted so that whatever they did when motivated by self-interest led somehow to public benefits.   That would be absurd.   In fact, Smith detailed, on over 70 occasions in Books I, II, and III of Wealth Of Nations, examples of the malign, not benign, outcomes of the self-interested actions of individuals.   The whole of Book IV is a "violent" polemic against the self-interested actions of traders in mercantile political economy.  In Moral Sentiments, the book is replete with examples of self-interested individuals behaving immorally, with no redeeming features either for themselves or for others from their conduct.   Gekko's "Greed is Good" mantra is not part of Adam Smith's philosophy.

Any claimed resemblance between Bernard Mandeville’s ‘private vice, public benefits’ philosophy – described by Adam Smith as “licentious” – and Smith’s articulation of “self-interest” is a category one error.