Loony Tunes no 72

1

Sign Language from the Invisible Hand?

Dean Baker writes in My FDL Reader Diaries HERE 

2

"The Invisible Hand made me do it" and 10 other top tweets from #EndofTheWorldEconfessions: http://t.co/XbTDgYr7 via @MarketWatch HERE 

3

Michael Graham: Off air | Universal Hub

By adamg  HERE 

“The invisible hand of the free market just punched Michael Graham in the balls. “

4

The Invisible Hand Strikes Back

Anthony Wile writes HERE 

Some Good News That Cheered me Up

In EconJournal Watch HERE

I am informed today that an EJW count of downloads on my May 2009 paper is available: “Adam Smith and the Invisible Hand: From Metaphor to Myth” by Gavin Kennedy

Abstract

“Adam Smith and the ‘invisible hand’ are nearly synonymous in modern economic thinking. Adam Smith is strongly associated with the invisible hand, understood as a general rule that people in realising their self-interests unintentionally benefit the public good. The attribution to Smith is challengeable. Adam Smith’s use of the metaphor was much more modest; it was re-invented in the 1930s and 1940s onwards to bolster mathematical treatments of capitalism (Samuelson, Friedman) and to support innovative analysis by associating the metaphor with ‘spontaneous order’ (Hayek). The effect has been to ignore insightful explanations about how markets function as a process in favour of semi-mystical beliefs in imagined outcomes, wrapped in an isolated 18th-century literary metaphor, which does not explain anything.”

Looking it up, I was astonished to find that there has been a total of 16,329 downloads (all formats) since May 2009!

For this magnificent result – beyond my wildest expectations – I must thank Daniel B. Klein, professor of economics at George Mason University, Fairfax Virginia.   Following an across-the-dinner-table inconclusive discussion that we had at Balliol College, Oxford (which Adam Smith attended 1740-46) on our different perspectives of the significance of Adam Smith’s use of the metaphor of “an invisible hand”, I received an invitation from Daniel to conduct a discussion of our different perspectives of the “invisible-hand” metaphor in Econ Journal Watch, which he edited.  

I jumped enthusiastically to accept the invitation and sent him my paper to which he replied, plus many most helpful suggestions to make my arguments clearer – though he abandoned trying to translate my English into “American” spelling and grammar (as a Scot, English is the only foreign language I am fluent in but I draw the line at learning “American” …).

However, joking aside, Daniel’s courtesy and help in promoting ideas with which he was in deep disagreement, was in the highest standards of the Republic of Letters, and I hold him in the highest regard as a scholar, and I say truly, as a gentleman.

So, 16,000 plus, downloads! It is the 6^th highest download of a EJW paper since 2009.

Well, well.   Should any reader be interested, they can download the paper from: http://econjwatch.org/291

Meaningless Tosh

J Jasper, a finance and economic double major from Samford University, writes “The Invisible Hand Still Exists” Blog HERE

“THE INVISIBLE HAND STILL EXISTS - ECONOMICS BEYOND THE TEXTBOOK”

“Finally, the reason for the title of my blog is because of how much more meaning it has as the world gets older, richer, poorer, and middle-classier. People seem to act in a way that they deem to suit their best interest. They are guided by an invisible hand to help their families, to buy a Lamborghini, and to make an A on their tests. They function in such a way that they minimize costs and increase their own economic revenue and profit. They seek advantages like college degrees so that they have a stronger ability to compete for a job. The invisible hand is present when they decide to eat at Taco Bell for the cheaper costs, and it’s present when they decide to treat the president to the finest cuisine in town.”

Comment

Judging by the content, J. Jasper, writes his economics well within the content of modern economics textbooks, but manages to do so well outside of Adam Smith’s works, of which he displays a passing acquaintance with a collection of the usual out-of-context quotations from Adam Smith that bear little relevance to Smiths thinking.

He shows no familiarity with Adam Smith’s “Lectures on Rhetoric and Belles Lettres" (1762-3), or of his definition of the role of metaphors, nor indeed the grammar of the English language, as found in the Oxford English Dictionary, and specifically its definitions and examples of the role of metaphors.

From this veil of ignorance, Jasper proclaims a new role for Smith’s use of invisible hand metaphor that guides all individuals to do whatever they do, for whatever reasons, with whatever consequences, in the sure knowledge that it creates the ‘best of all possible worlds’.  This nonsense includes all outcomes from self-interested actions be they supporting legislation to curb imports with tariffs and protections, or evading costs of extraction or production methods using unsafe, unclean, or fouling processes, all monopolistic practices, and legislative protections, special privileges, and conspiracies against consumers.

All this is a far cry from Adam Smith and ”an invisible hand” in the two only occasions in which he used it. Smith had no illusions that “merchants and manufacturers” were led by an omnipresent invisible hand to “to help their families” in a cartoon-like, wonderland of good, clean, fun. Smith did not trust them to act in such a public-spirited manner if they could get away with rigging their markets and raising prices against consumers. Evidence since 1776 shows that Smith’s reservations about their conduct were well founded.  Smith’s views on the incompetence of governments to direct economies have likewise been confirmed, has Hayek also predicted in is critique of socialism.

There is no invisible hand.  It was used by Smith as a metaphor.  It had and has no existence beyond its metaphoric role in “describing in a more striking and interesting manner” it object. In Moral Sentiments it described the absolute necessity for the rich landowners to feed their serfs, slaves, and servants upon whose labour the landlord depended, for without food these people could not survive to work the landlord’s fields (nor would their children form the next generation).   In Wealth Of Nations it described why some, but not all merchants, invested their capital domestically rather than risk it abroad, which thereby arithmetically added to “domestic revenue and employment”.  Of course, many merchants sent their capital abroad, thus arithmetically reducing domestic revenue and employment.  In both case, there were unintended consequences from the landlords’ and the merchants’ actions.   Whether there were net benefits to society depended on specific cases.

The rest that Jasper writes, unhappily, is meaningless tosh.

Recovering ...

Hi Readers!

Thanks for the messages of concern both published on Lost Legacy and those written privately.
Always nice to know I am not forgotten, just yet.

I hope to be back today - probably later, as I was on my exercise bike for 7 minutes and it exhausted me.

My mail box had some interesting papers and articles worthy of a response, but I have two pressing papers awaiting to be sent to publishers that are now late.

I shall have a go at them first and then try Lost Legacy stuff later this afternoon.

Keep checking friends and critics.

Gavin

Apologies

Gavin has been taken into hospital following an infection, he apologises for being unable to post, but hopes to be home soon and back to business as usual.  Please check back in a few days.

Many thanks,

Florence
(Gavin's daughter)

Another Leap into Darwinian Selection Applied to Economics

"Darwin’s Invisible Hand: Market Competition, Evolution and the Firm"

Dominic D. P. Johnsona, (Oxford University), Michael E. Price (Brunel University), Mark Van Vugt  (University of  Amsterdam)  HERE

“Abstract

Competition among firms has been suggested to reflect the ruthless logic of Darwinian selection: a free market is a struggle for survival, in which successful firms survive and unsuccessful ones die. This view appears to bolster three pillars of neoclassical economics: (1) that economic actors are self-interested; (2) that self-interest leads to public goods (Adam Smith’s “invisible hand”); and (3) that together these lead to market optimization. However, this chain of reasoning leads to a paradox. We show that the application of Darwinian selection to competition among firms (as opposed to among individuals) invokes group selection, which leads to exactly the opposite predictions: notably altruism and the suppression of individual self-interest. We apply an alternative evolutionary model of economic competition, Multi-Level Selection (MLS) theory, which integrates the effects of selection at both individual and group levels. This approach reveals that, while individuals may generally pursue their own self-interest (as in the standard evolutionary account), humans also have evolved traits that—as if led by an invisible hand—steer our self-interest to align with the good of the firm or wider society as well. But it is the hand of Darwin, not Smith.”

Comment

I have yet to read the paper in full, for which I shall post my ideas on it in due course, but I think it worthy of some publicity on Lost Legacy just now.  Judging from the reasoning expressed in the abstract I see several flashing red lights.  I do not defend neoclassical economics or its thinking, but I consider that the source of my unease with it lies in each of the “pillars’ attributed to neoclassical economics.

To say that “economic actors” are “self-interested” as if it is true in itself and for all matters, cuts off the complex ways in which such self-interested actors express their self-interests in societies of other self-interested actors (and is an example of the weakness of neoclassical economics).  It is insufficient to note a characteristic of self-interest without recognizing the unalterable necessity for those same actors to mediate their self-interests with other self-interested actors (as Smith noted in both TMS and WN).  We are not merely individuals in a crowd of self-interested egos indifferent to the self-interests of others.  We need other self-interested actors to co-operate with us, as we must co-operate with them.  No human, other than the occasional mystic, could survive without the daily co-operation of others (we would not survive childhood without our parents, particularly our mothers – fathers are less important than males generally), not adulthood acting as if we are at “war” with everybody we rely upon. 

Smith did not say that all self-interested actions “led” to “public goods”, nor did he describe all public goods as the necessary outcome of “an invisible hand”.  He identified only two cases suitable for the metaphoric description of certain actions as being “led by an invisible hand”. He noted that there were “many other” cases where the metaphor may be appropriate, but nowhere did he say that all cases were applicable. In both cases in which he used the metaphor to discuss the unintended outcomes of the specific motives leading individuals to act in a certain specified manner, in which the consequences of actions, not the motives, had different “unintended outcomes” in each case.  The distinction is important. 

To use the metaphor of “an invisible hand” correctly it is necessary to identify its particular “objects” as a metaphor (see Smith’s “Lectures On Rhetoric and Belles Lettres” [1783] 1983, 29).  The assertion of “an invisible hand” leading to market optimization” is a wholly modern assertion (from Pareto’s Theorem and General Equilibrium theories, not Adam Smith). Parenthetically, I think to describe the actions of “proud and unfeeling landlords” as about “market optimisation in Smith’s example as leading to “market optimisation” is absurd.

Darwinian selection operates on individuals whose breeding outcomes over a very large number of generations may result in selecting for the successful survival of the group  (it can also lead to evolutionary dead ends).  Applying this idea in toto to competition between firms is a massive unpredictable leap of faith.  Whether the outcomes of any particular Darwinian selection process leads “to exactly the opposite predictions: notably altruism and the suppression of individual self-interest” is another mighty speculative leap, even assuming that self-interested humans eschew “altruism” and so on in human societies (which I think is crass), let alone, whether this applies among chimpanzees, among others.

 The authors of this paper have formed a theory of which I am not sure they properly apply it, nor have they challenged their assumptions.  But I shall do them the courtesy of reading their text before pronouncing any suggestions or conclusions. (I am rather busy just now on a chapter project for Princeton University Press, now running up against its deadline).

A Polite Exchange of Views II

 A Correspondent responds:

“Without disputing that it’s wrong to read Smith solely through the lens of IH, what make you of those who argue that even if the metaphor is rare in Smith’s work, the more general claim that Smith relies extensively on either unintended order explanations (as argued, say, by Otteson and Craig Smith) or on “invisible hand-like” explanations (Fleischacker) throughout his work.  That is to say, a broad range of prominent scholars have argued that in fact it’s not wrong to find unintended order mechanisms in Smith, and even to place these as central in Smith –what they deny is that this can then be appropriated to contemporary policy in any simple way.  Is this what you want to claim as well? Or do you want to do further and say that the entire approach of regarding Smith as an unintended order theorist is misguided?”

Comment

Smith identified an example of the generality of unintended consequences in human behaviour in the “invisible hand” paragraph (WN IV.ii.9:456):

Employing his capital in domestic industry increases the arithmetic total of domestic capital in an economy and this “necessarily” increases the annual revenue (GDP) of the society.  This is a plain statement of arithmetic fact.

The object of the metaphor of “an invisible hand” is “his own security” which leads him to behave as he does.  He is not “led” by an actual invisible hand; he is “led” by his concerns for his “own security” expressed metaphorically.  Confusing the two leads to a belief in unexplainable mystical forces – in some versions, ‘to hand of God’ theology both of which belittle science and ignore even the elementary roles of the grammar of metaphors in the English language.

Smith also says: “he is in this, as in many other cases led by an invisible hand”, leaving the reader to apply her own examples, rules he demonstrated in his single example.   He does not imply that there is an actual “invisible hand” at work, nor does he say or imply that the IH is a characteristic of something, such as “of markets”, or “supply and demand”, or “competition”, or “equilibrium”, or anything else; for Smith the IH is a metaphor, not a general noun. 

Notably, in his own two examples in TMS and WN, Smith gives two different cases of “an invisible hand” as an adjectival metaphor, first for the “proud and unfeeling landlord”, led by the absolute “necessity” to feed” those “whom “he employs” from the produce of his fields, and secondly for an ‘insecure’ merchant who is led to invest domestically rather than send his capital abroad.  In the first case, the landlord risks starving his serfs and consequently unable to labour; in the second case, the merchant perceives he risks losing his capital in a ship wreck or piracy, or fraudulent trickery by distant foreign strangers, or some other disaster from his inability to supervise his interests at distance from his presence.  These potential calamities “led” the landlord and the merchant to act as they did, and in both cases there are unintended consequences in that by being “led” in to do something for his immediate interest, he unintentionally also served the “public interest”, specifically, the “multiplication of the species” (TMS) or the “annual revenue of society” (WN).

You ask me to comment on: “either unintended order explanations” (as argued by Otteson and Craig Smith) or on “invisible hand-like” explanations (Fleischacker) throughout his work.”  To which I would add Robert Nozik’s classic on “invisible hand explanations” (1977), Emrah Aydinonat’s (2008) work on “unintended consequences” (which he equates with the “invisible hand), Maki’s ”invisible-hand consequences”, and many others.

My general comment is that I prefer to think of Smith’s use of the IH metaphor as leading people to actions that met their immediate interests and which in due course had “unintended outcomes”.  The IH metaphor is not an unintended “mechanism”.   The two different motives identified in Smith’s two examples had unintended consequences after the persons concerned were “led” (expressed metaphorically) by “an IH”. The unintended consequences were perceived to be benefits to "the society".  In some actions by people (merchants fearing foreign competition) the consequences are “always worse for the society” (WN, 456). Therefore, for each use of the IH metaphor (or any other metaphor) we must identify their “objects” (Smith, Lectures On Rhetoric and Belles Lettres”, 1763).

 On one level, actions once taken may benefit the society; the serfs in return for hard labour (enforced by the Landlord’s overseers, a strata well-known for its liberal sense of generousity) and were able to feed their families, and through the generations, propagate the species.  At another level, the agrarian system was a punishing life of toil and associated misery and labourers’ per capita incomes remained around $1 day for millennia (McCloskey).  As for domestic merchants benefitting the society, including those who join them from their insecurity in foreign trade, they also have a universal proclivity for advocating tariffs and prohibitions on foreign goods, which among other consequences, mal-distributes capital, raises prices, distorts domestic consumption and lowers potential opulence, and does not benefit the society.

To identify the ‘many other cases” that Smith may have found suitable for using the IH metaphor we must first identify in all cases their possibly different objects, otherwise the IH metaphor may not apply. None of Otteson, Craig Smith, with whom I have discussed the IH metaphor, nor Fleishacker, with whom I have corresponded mention/accept the IH’s invisible hand’s purely metaphoric qualities, nor do several other prominent scholars, with whom I have debated, such as David Friedman, Daniel Klein, and many other correspondents on the Lost Legacy Blog.  Daniel Klein came closest in simply dismissing the metaphoric aspects (without explanation) as “too narrow”.

In general, I would go along with “unintended consequences” as an idea, but not with “invisible hand explanations”, especially linked or sourced to Adam Smith or his use of the IH metaphor.  The “invisible hand” is not an explanation; it describes metaphorically the motives of some actors for acting, and it is those actions, not their motives, that have unintended consequences.

A Polite Exchange of Views

A correspondent writes privately politely critiquing my take on the Invisible-hand in Adam Smith’s two only mentions, one each in his Theory of Moral Sentiments and Wealth Of Nations:

“I agree that it’s mutual dependence and not, say, natural teleological order or some such thing that indeed led them to act as they did’.  But to be fair, what really matters here isn’t the motives or the final causes but the effect, which – as is made clear in the next line you rightly quote – is wealth redistribution, and indeed a relatively egalitarian vision of such.  So I wonder – is it really wrong for contemporary pundits to find in the IH of this sort a fundamentally economic reading?  Perhaps this would be clearer if you were able to cite some specific invocations of the invisible hand associating it not merely with unintended consequences and wealth redistribution – which indeed seems to me defensible – and instead with the sorts of mechanisms that you note below (e.g. price system, equilibrium, etc).”

My response:

Thank you for your explanation of your point of view,

I see what you are getting at but you may have missed my point.  I am discussing what Adam Smith wrote in 1759 and from that text what he most likely meant.  This discussion must include Smith’s understanding of the role of a metaphor in English grammar, as clearly expressed in his “Lectures on Rhetoric and Belles Lettres”, 1763 (and, incidentally as understood still today in English grammar: see the entry for ‘Metaphor’ in the Oxford English Dictionary, 1983). 

Metaphors express in “a more striking and interesting manner their object” (LRBL, 1763, 29).  They do not describe the consequences, as you seem to suggest.  Take a statesman who is described metaphorically a “pillar of the State”; the pillar does not exist; the metaphor of “the pillar” describes the statesman in a ‘more striking and interesting manner’, and we would expect him to act in a sober, solid and judicious manner, and indeed, describe him that way if we did not use a metaphor.  Readers would generally think of him as the kind of statesman that holds up the virtues of the State, which would have consequences for those affected by his conduct and demeanour, implied more richly by the ‘pillar’ metaphor than merely by describing his “sober, solid and judicious manner”.  

The consequences of his manner are not metaphorically described as “a pillar”.  The likely consequences are suggested in our mind by the image of the metaphor in our imagination, perhaps derived from the images we might have of the great architecture of Cathedrals or Samson’s Temple. The statesman’s demeanour is the cause of the resultant sober, solid and judicious consequences; the consequences are not the object of the metaphor. These distinctions, I believe, really do matter.

In the TMS case, the “proud and unfeeling landlord” viewing his fields and imagining he consumes everything in them forgets (in Smith description) the “thousands whom he employs” and forgets the obligation to feed them their bare subsistence (as interpreted by his overseers).  Only from what is left over can he indulge in his own actual and still generous consumption of the “best bits”.  His obligations to his labourers must include their families, the prime compulsion for which is: if he does not feed his labourers their, no doubt, bare subsistence, none of them can labour in his fields more than a day or so, and if they do not labour the landlord, and his overseers too, will soon be in desperate straights.  No food for the labours, means no labour; no labour, means no food for anyone. Even in the worst manifestation of slavery over the millennia, the slaves had to be fed some minimal amount from the resources of the slave-owners (created by the slaves).

Regarding the IH metaphor as referring to the consequences, not the motives of the actions that cause the consequences, seems to suggest the IH referred to “wealth redistribution”, which is also stretched to include a supposed “egalitarian vision”.  Human societies, before they left the forest, lived on “subsistence” only (small families, short life spans, with not much, if any, additional “conveniences”).  These came later with shepherding and farming.  Therefore, as labourers, to be assured of their “subsistence” was not much of a climb, if any, in their per capita income over the millennia (not that they lived long enough to notice). With richer farming landlords, even owners of large flocks, there were real differences in per capita incomes between them and their labourers (as we can see in the detritus of past civilizations across Europe, Asia, and Central America) including the abandoned “conveniences and amusements” familiar to students of archaeology.

I conclude that the expression “led by an IH” did not describe “in a more striking and interesting manner” the unintended outcomes following the consequences of the motivated actions of those “led by” the IH; in both of Smith’s cases the unintended outcomes followed the motives, described by the IH metaphor, that “led” to the consequences.

In WN Smith refers to the felt insecurity of some, but not all, merchants that “led” them to invest domestically, the consequence of which was an increase in domestic investment, which “led” to an arithmetical increase in domestic “revenue and employment”.  That is all.  Modern economists have made much more out of it than Smith’s text supports, and got into a fuddle when it was clear that the attribution of the IH to 18^th century mercantile, and later, to modern capitalist/state economies, fell foul of the observed imperfections of mixed economies. Samuelson backtracked in his later editions from his original (1948) explanation of Smith’s IH metaphor by confining the IH to theoretical “perfect competition”, particularly after W. D. Nordhaus became his co-author from the 12^th (1985) to the 20^th edition (2010).  As Perfect competition does not exist (never has); it follows that the mythical IH does not exist in the form believed by modern economists and some politicians.  Nevertheless the IH is still widespread in use across all media, and among modern economists.

I hope this clarifies my stance.  

Reciprocity and Bargaining

 JAMES MADEIROS (3 DECEMBER) posts on Sociology Degree Programs HERE 

“Reciprocity: Society’s Invisible Hand”

“The most common (and commonly defended) positions regarding personal choice revolve around free will and fate, but these two stances exclude one of the most powerful predictors of human action and interaction: societal influence.

This is especially true when it comes to the concept of the “rule of reciprocation,” which defines the invisible hand that pushes us to give back when others give to us. This pressure is most acutely felt when people fail to reciprocate and are then saddled with guilt that makes them feel uncomfortable – a feeling that is avoided by reciprocation.”

Comment

The problem with some versions of sociology is its proclivity for making things up (as happens with some exponents of economics!).  Relating reciprocation uniquely to society’s pressure on individuals and calling it “the invisible hand” is that it fails the evidence test from the widespread behaviour exhibited among some, but not all, pairs of primates (see Robin Dunbar, “Grooming, Gossip and the Evolution of Language”).

Similarly, among humans reciprocity is practised, but not unanimously. Reciprocity is a powerful behavioural exchange habit that predates by hundreds of millennia its appearance among modern humans. Reciprocity, where the implied exchange may be separated by time delays, pre-dates the relatively more recent exchange behaviour practised in human bargaining – where the implied exchange is immediate and rarely occurs among primates (and some bats) practising reciprocity. 

Hence the attempt by James Madeiros to make Sociology Degree Programs appear authoritative, complete with its own ‘invisible hand’ of society,  exposes its shallowness.  

Like Thanksgiving, Christmas Anticipated Visible Signals Promote Supply to Meet Demand - Not "Miraculous Invisible Hands"

After writing my Blog post on the appearance of turkeys at Thanksgiving, attributed to the “miraculous” invisible hand in many US posts last week, a flyer was popped through the letter box today from “COPAS”, ‘very very special turkeys’ (established 1957) proclaiming that “Christmas is what we do best” (www.copasturkeys.co.uk).

I thought of the multitude of posts on US economics blogs making false fuss about Thanksgiving being evidence of the “miraculous” powers of the “invisible hand”.  I commented on one such post from “White Sepulchre” last Friday (see below).   The 8-page flyer from our local butcher, celebrates the “Griffith’s family business spanning over 50 years”.  And justly so.

It unintentionally (I am sure) while celebrating its excellent business record it simultaneously demolishes the “miracle” of the Invisible Hand”. The cause of its success lies in its entrepreneurial flair for responding to the anticipated demand for turkeys every Christmas and the anticipated visible price times quantity of turkeys likely to be sold in the days before 25 December.

That is how visible prices lead producers to anticipate market demand.  That is the only “miracle” required with not a hint of an “invisible hand” leading the Griffith’s family to do what that anticipation of the Christmas-related demand for turkeys signals they should do.

Copas produces up to “24 varieties of slow growing traditional breeds” in their flocks.  They are “reared in open barns, cherry orchards and grass meadows” and not in “crowded interiors” with only a few weeks of open air freedom towards Christmas.  The Copas diet is a “natural blended cereal, rich in oats, and natural vegetation” and not “animal protein with growth promoting additives”.   Fully mature birds take “6 to 7 months” to mature" (by May) and not “tasteless birds only 2 months old (in October).  All birds are prepared on the farm premises and not “transported long distances for preparation, instantly frozen, chilled and gas treated, with water added to increase weight”.”  Every Copas bird is “quality guaranteed” whereas standard turkey producers offer no guarantees.

These amount to formidable product discrimination for Copas turkeys, plus Copas branded side sauces, chutney, fruit, and stuffing “accompaniments“.  This is no “miracle”; its good dedicated competitive business sense, led by anticipated visible signals, not “invisible hands”.

[Disclosure: I have absolutely no connection, beneficial or otherwise, with Copas, and anyway Lost Legacy would not accept such commercial gifts from anyone. The flyer was on our table at lunchtime and I picked it up to read while my wife was doing the Times Crossword.  Our noisy grandchildren has just left to go home for lunch.]

George Washington's Theological Invisible Hand

I was looking up modern textbook writes, after Samuelson’s popular text in 1948 and through 20 editions to 2010 and found an earlier post by Greg Mankiw, who teaches economics 101 at Harvard, and is the author of best selling introductory textbooks. In 2006 (4 July) he posted the following on his popular Blog:

“No people can be bound to acknowledge and adore the Invisible Hand which conducts the affairs of men more than those of the United States."

The answer: George Washington in his first inaugural address.

If you read the speech, you will find that Washington was referring to God, not to the workings of supply and demand. But then Smith may well have thought of the market's "Invisible Hand" as having a degree of divinity as well.

Was it mere coincidence that Washington and Adam Smith both used the "Invisible Hand" metaphor? Perhaps, but consider this story from Princeton professor Alan Krueger:

“NOT long ago, I asked my research assistant, Melissa Clark, to track down a passage from "The Wealth of Nations" by Adam Smith. Although I expected her to consult the modern edition, she instead requested the original 1776 edition from Princeton's Rare Book Library. The librarian accidentally gave her the fifth edition, published in 1789, and therein she discovered a remarkable signature: George Washington”

Happy July 4th everyone!'

Comment

If it was the 5^th edition of WN, this was a 3 volume-set that was printed in London in February 1789. The First Inaugural address was delivered in New York on 30 April, so the printed sheets for this edition were probably in circulation in sheet or bound form a month or so later, plus the time taken to ship them to New York (3 weeks?).  Truly, it was ‘hot off the press” by the time George Washington acquired the 3 volumes (the anecdote just refers to the ‘fifth’ edition).

Professor Peter Harrison, Oxford University, connects the invisible hand to the order of nature” from about 40 references in theological books and sermons (see Peter Harrison’s “Adam Smith and the History of the Invisible Hand”, Journal of the History of Ideas, September, 2011) and he writes of the prevalence of the divine association of God’s “invisible hand” in Smith’s and George Washington’s time:

“In short, the idea that God could accomplish his purposes, in spite of the intentions of human agents, was a standard way of deploying the notion of the invisible hand throughout the seventeenth and eighteenth centuries.”

Harrison’s article expands on the theme that the “invisible hand” was a  theological idea (I saw a draft copy before Harrison published his paper).  I have criticised the idea that the “invisible hand” had a theological meaning to Adam Smith (Kennedy, G. “The Hidden Adam Smith in his Alleged Theology”. Journal of the History of Economic Thought, Volume 33, Number 3, September 2011).

George Washington would have been well aware of the theological use of an “invisible hand” without waiting to receive his copy of Smiths 3-volume WN, read it, find the single non-theological mention of an ‘invisible hand’ tucked away near the middle of the book in an obscure argument about the effect of the felt risks of foreign trade by some, but not all, British merchants, leading them to prefer domestic to foreign trade and the arithmetically positive consequence of them so doing for British “annual revenue and employment”.  One wonders why the “hand of God” only “led” this small group of merchants to prefer domestic trade out of their “concern or their security” (mentioned four times by Smith – how many hints as to the grammatical “object” of the metaphor do readers require?).  How about all the rest of British merchants?

Given the near total dependence of the former British colonies on British trade, due to the monopolistic British Navigation Acts that guaranteed the prosperity of British traders, George Washington might have wondered why some British merchants preferred to trade locally rather than enjoy the fruits of the British trade monopoly.   It was that monopoly that was one of the reasons that motivated former colonists to join Washington’s rebellion.

I should have thought that George Washington was more inclined to find in God’s providential care much spirtual comfort from God's “invisible hand” behind the rebellion and “to acknowledge and adore the Invisible Hand which conducts the affairs of men more than those of the United States”.  I doubt that Washington was thinking about Adam Smith’s obscure reference when he composed his speech – and Greg Mankiw hints as much too.