Not Quite Right
Robert Nielson Blogs at
Opus LibertasHERE http://lobotero.com/2013/01/04/24736/
“The Flaw of the Invisible Hand”
“Introductions to economics usually start with gushing tales about the
magic of the free market. It is usually stated that the free market allows
everyone to get the best quality goods at the cheapest prices. The magical
invisible hand guides everyone to the best place without any unnecessary
government intervention. Below is a link to a video typical of the kind.”
Comment
There is no invisible hand.
It is a metaphor for why people in particular cases act as they do (Adam
Smith gave only two specific examples).
The metaphor “describes in a more striking and interesting manner” its
grammatical object (Smith Lectures on Rhetoric and Belles Lettres”, 1762-3, p.
29).
Paul Samuelson popularised the false idea that ‘selfishness’ led to “public benefits”, attributing it
to Adam Smith (Samuelson, Economics, 1948, p 36). Five million readers later and the IH myth is now entrenched
in public discourse.
Example, merchants seek protection from imports, preferring domestic
monopoly – why? Because they are led by their self-interest. This does not benefit the public. The IH myth fails!
6 Comments:
In fairness, he did say:
"(I’ll ignore for the moment that it completely misrepresents what Adam Smith said)."
What of the argument that Smith's "invisible hand" metaphor is similar to later concepts of "spontaneous order?"
I wish I wouldn't have written that last question, given that all I had to do was look one blog post below this one.
Hi Jonathan
Smith's use of a metaphor follows English language grammatical rules - he taught rhetoric from 1748 to 1763. It referred to specific motives leading to actions that had unintended consequences.
The idea of "spontaneous order" refers to events that took a particular form. It is not about motives. It does not identify what caused the events (they are "spontaneous"), which, in my view weakens the idea.
A metaphoric statement does not exist - it is a grammatical figure of speech - but good metaphors can be powerful images. Smith used a long standing popular metaphor in the 17th-18th century, especially among theologians (invisible 'hand of God'. You cannot see the motive, but you can see the consequence, which in Smith's two cases were not intended.
Gavin
Unlearningecon
Thanks for the comment but it is not clear what you mean.
If he did say that in the video, then well and good.
Gavin
Robert Nielson's original post has the passage you quote in full:
"Introductions to economics usually start with gushing tales about the magic of the free market. It is usually stated that the free market allows everyone to get the best quality goods at the cheapest prices. The magical invisible hand guides everyone to the best place without any unnecessary government intervention. Below is a link to a video typical of the kind. (I’ll ignore for the moment that it completely misrepresents what Adam Smith said). Its short and simple, but it is a simple argument. This is the typical free market argument with its claim that left alone it will bring the best world for everyone."
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