The Cambridge (and Chicago's) Oral Tradition of the IH metaphor and What Samuelson Made of It
I
return to Keynes’s 1926 essay discussed yesterday, “The End of Laissez-Faire” (“Essays
in Persuasion”, Collected Writings of John Maynard Keynes, vol. IX, pp 272-94.
Macmillan).
I have referred several times in recent
years to what I detect as a sort of oral tradition in the 19th
century and early 20th century at Cambridge University (England) and, possibly,
also at Chicago University (USA).
My evidence for this is mainly indirect as direct evidence in print is
absent, which is one of the curiosities of the history of the invisible hand
metaphor in economics.
The metaphor is discussed or mentioned by
faculties of both universities as if the figure of speech was known in relation
to Adam Smith in these faculties by themselves and their students but was virtually
unknown among the wider literature.
In print, Ricardo, Mill, and others, did not
mention the IH in respect of Adam Smith.
Printed mentions of the IH were extremely rare from the 1790s (when
Smith died) through to 1875. Dugald Stewart quoted Smith’s use in his Lectures
in Political Economy (1809) without comment (reprinted in 1856 in Stewart’
Collected Works); Thomas Chalmers used the metaphor in his theological works in
1846; Angus Onken in 1854: Frederick Maitland, a Cambridge Professor of Laws,
linked the metaphor to laissez-faire in 1856; Leslie in 1879; H. T. Buckle in
1885; J. K. Ingram in 1888; J. Bonar in 1893; William Smart, 1899; and F. W.
Hirst in 1909. Compared to these
almost en passant few, the contrast of the tens of thousands of modern economists
per year after Samuelson is quite remarkable.
Altogether, the few men and a couple of women
in the hundred years after Smith died, and while his books remained in print in
numerous new editions, who did not make much of the alleged significance the IH
metaphor in Adam Smith’s thinking is in stark contrast to modern beliefs from the 1940s through to the 21st
century.
These facts have always struck me as odd when I trace the opening
salvoes from the long-range effects upon the circa 5 million readers of
introductory textbooks by Paul Samuelson.
He was a Nobel Prize winner, innovative mathematical economist
extraordinaire, and rightly is the celebrated dominant voice in the quality and
design of introductory textbooks for 19 generations of the world’s student
economists entering university and college courses from 1948 to 2010. Samuelson, if anybody, was mainly responsible
for this phenomenon across the discipline and modern media.
The ultimate irony is that most economists
credit Adam Smith with the authorship of the idea that “every individual in
pursuing his own selfish good was led, as it by an invisible hand to achieve he
best good of all” (Samuelson, 1948, p.36). Again, the facts show that Adam Smith wrote no such thing.
But the literary libel is now so firmly embedded and so many reputations have
been invested in believing it that few economists are unable to even check
their beliefs against Smith’s actual words or meaning.
Lastly, I return to the evidence of the oral
traditions of Adam Smith in Cambridge throughout the 19th century.
Whereas, Frederick Maitland, as a student in the law faculty, not in
economics, writes: "Even his famous passage about the ‘invisible hand’ reflects
the philosophy which we associate with Paley rather than the economic dogma of
‘laissez faire’. As Sidgwick and Cliff Leslie have pointed out, Adam Smith’s
advocacy of the ‘obvious system of natural liberty’ is derived from his
theistic and optimistic view of the order of the world, as set forth in his
Theory of Moral Sentiments, rather than any proposition of political economy
proper” (Sidwick, Principles of Political Economy, p 20).
Somebody was teaching about Smith’s use of the ‘invisible hand’ metaphor in the Cambridge philosophy courses in the 19th century. Where students and tutors heard it, Keynes also heard it in his classes at Cambridge (perhaps Marshall’s). Arthur C. Pigou, Marshall successor as the Professor of Political Economy also heard it in his classes. And he mentions the IH metaphor in his ‘Economics of Welfare’ (1917, 22, 29, etc.,) as the central (oral) dogma in teaching and tutorials at Cambridge.
Somebody was teaching about Smith’s use of the ‘invisible hand’ metaphor in the Cambridge philosophy courses in the 19th century. Where students and tutors heard it, Keynes also heard it in his classes at Cambridge (perhaps Marshall’s). Arthur C. Pigou, Marshall successor as the Professor of Political Economy also heard it in his classes. And he mentions the IH metaphor in his ‘Economics of Welfare’ (1917, 22, 29, etc.,) as the central (oral) dogma in teaching and tutorials at Cambridge.
Samuelson refers to an oral tradition,
presumably at Chicago where he was an undergraduate from 1931-35. He writes of
the ‘invisible hand’ and the conclusions derived from it by tutors and
students: “Even
Adam Smith, the canny Scot whose monumental book “Wealth of Nations (1776),
represents the beginning of modern economics or political economy – even he was
so thrilled by the recognition of order in the economic system that he
proclaimed the mystical principle of the “invisible hand”: that each individual
in pursuing only his own selfish good was led, as if by an invisible hand, to
achieve the best good of all, so that any interference with free competition by
government was almost certain to be injurious. This unguarded conclusion has done almost as much good as
harm in the past century and a half, especially since too often it is all that
some of our leading citizens remember 30 years later, of their college course
in economics.” (Samuelson, 1948, p 36).
Putting a date line to this quotation from Samuelson’s classes at
Chicago we arrive close to 1790 to the year that Smith died. That places it
pretty much in the period when mentions in print were too few to be significant
but the number of oral interpretations of Smith’s meaning were fairly common in
teaching to Samuelson’s recent past. His own introductory textbook remedied that alleged deficiency (and how!) over
the next 19 years by giving the "unguarded conclusion" a harmful and "injurious" life line.
[GK: edited 21 May]
[GK: edited 21 May]
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