Still No Justice for Adam Smith
Abigail Savitch-Lew reports that Daniel Klein, George Mason University reveals in ”The Brown Daily Herald, April 3, HERE that Adam Smith “is well known for praising what he called the market’s “invisible hand”.
Daniel and I have debated several times in 2009-11 Smith’s meaning in his using, twice only, the metaphor of “an invisible hand”.
Smith may well be “well known for praising …the market’s invisible hand”, but nowhere did he refer to “an invisible hand” in relation to “markets” when he did so. This is a pure modern invention, sparked by a reference to such a story by Paul A. Samuelson, in his popular “Economics: an analytical introduction”, 1948, and now believed world-wide. The story remains fictional today.
In Smith’s first use of the metaphor in “Moral Sentiments” (1759) he referred to agriculture in the first Empires (China, Babylon, Egypt, warlord, and feudal societies (in fact, since “Providence divided the land”, that is, since a very long time ago). The landlords fed their serfs, not out of their humanity, but from necessity because unfed serfs, even slaves, could not work.
In Smith’s second use of the metaphor in “Wealth Of Nations” (1776) he referred to merchants choosing to avoid foreign trade in preference for domestic trade, because of their fears for the security of their capital if sent abroad (accidents at seas, trustworthiness of foreign partners, and preferences for domestic justice). Again, there is no reference to markets. By investing domestically, these insecure merchants arithmetically added to “domestic revenue and employment”, which was a public benefit.
Smith discusses markets in detail in Books I and II of Wealth Of Nations without ever mentioning the “invisible hand” metaphor. If the metaphor had been in any way central or even relevant to markets Smith surely would have made that point here. But he didn’t which is not a mystery when the metaphor (in fairly common use by poets, preachers, and novelists in the 17th – 18th centuries) is treated grammatically as a metaphor and not, as moderns' claim, a “theory”.
Smith himself defined metaphors as used to “describe in a more striking and interesting manner” their object (Smith: “Lectures in Rhetoric and Belle Lettres”, 1763, p 29). Their object in Smith’s two uses were: the absolute necessity of feeding slaves or serfs in order them to work –they had no other source of subsistence – and the insecurity felt by some, but clearly not all, merchants, that added to domestic revenue. Neither the “unfeeling” landlords were motivated by their humanity, not were the “insecure” merchants motivated by public duty. But their actions had unforeseen consequences that benefitted the public good (feeding their dependents contributed to the propagation of the species and investing domestically added to “public revenue”).