Thursday, May 30, 2013

Tim Worstall is Absolutely Right on Adam Smith's Use of the "Invisible hand" Metaphor

 Tim Worstall regularly posts in the “Pin Factory Blog” from the Adam Smith Institute (London) HERE  and his post on 20 May was a particular joy for me to read:
“23 Things We're Telling You About Capitalism XVI”
It's also rather irritating to be told, again, "that as Adam Smith said about the invisible hand". No, he didn't: he used the phrase once in WoN, about the propensity for domestic investment even in the face of the free movement of capital. It was absolutely nothing at all about the glories of market coordination. Grr.
Regular readers will know why I am joyous.  New readers can scroll down any week’s posts and read why.
I have long found Tim Worstall an invigorating author on most days; this particular series on “23 Things We’re Telling You About Capitalism” (this one is “no. XIV”) is no exception.  Follow the link and read the series from No.1 “things you should know’.
As many readers will know, I describe myself as a moderate libertarian to distinguish myself from some Libertarians, resident on the further shores of hard-line libertarianism, who deny any role for government in market based societies.
I think I am closer to Adam Smith’s expressed sense on the appropriate balance between the degree of government/market roles in a free society under the rule of law, not of politicians (or princes) or “merchants and manufacturers”, and now, “service providers”.
However, Tim Worstall is a star in the Adam Smith Institute for snappy, well thought through pieces on what distinguishes a market-based approach from the usual knee=jerk cry from both “left” and “right” ends of the political spectrum (though from both ends there are occasional surprises) to “regulate” this or that.  Smith’s approach was to suggest that we should treat such cries with extreme caution.  I concur and find in practice that such cries are often made as ill-though out (though well-intended on fewer occasions than is good for us).
Tim’s writing is consistent: as in the above sentences, he is brief, pointed and relevant. I can honestly say that he is the first author I have seen in print who understands the truth of what Adam Smith used the “invisible hand” metaphor to express in a “more striking and interesting manner” its “object” (grammatical sentences in the English language are composed of “subjects and objects” – see Adam Smith’s, “Lectures on Rhetoric and Belles Lettres” [1762-3] 1983); see also the Oxford English Dictionary, or any elementary , or even advanced text book on English grammar). 
The IH metaphor was a figure of speech and has nothing to do with theories of markets, price theories, supply and demand, sociological power, theories of General Equilibrium, Pareto’s Theorem, and so on among the wishful fantasies of educated people who forget their knowledge of English grammar.  Smith was a longstanding lecturer in Rhetoric and his students knew of the role of metaphors, as did academic colleagues across Europe, which is why none of them appeared to mention in print anything significant about the “invisible hand” in his teaching until individuals after 1875.  `nor was the IH as significant in economics until after 1944 when Paul Samuelson mentioned it in his people textbook, Economics: an introductory textbook (McGraw-Hill).
Lost Legacy has been banging on about this theme since 2005.  It is gratifying to note that at least one educated and literate author has understood this elementary point.
[Disclosure: I am a Fellow of the Adam Smith Institute (London).] 


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