Tuesday, July 16, 2013

What Can Shakespeare Teach Modern Economists?

"Sick Economies: Drama, Mercantilism, and Disease in Shakespeare’s England in Penn Current
(News, ideas, and conversations from the University of Pennsylvania)
HERE (Originally published on February 26, 2004)
The body has long played a role in Western perceptions of the economic. In 18th-century France, physiocrats talked of the blood-like circulation of wealth, while Scottish economist Adam Smith wrote about the “invisible hand” of the market.
Half-understood notions of analogy, good and violent metaphors, overworked similes, and wishful allegories, are the stuff off bad writing and the absence of perspicuity. This last, in Smith’s firm view, was the main object of good writing.
Of such offences Adam Smith was not guilty.  He was an accomplished Rhetorician from the classical mould.  He lectured on Rhetoric and Belles Lettres from 1748 to 1751 in a borrowed meeting hall belonging to the Philosophical Society. 
Smith’s lectures were delivered to a “respectable auditory” of Edinburgh citizens and also some students of law and theology from the local university attending in their spare time.  Edinburgh University at that time, and for another 60 years did not have classes in rhetoric. From attendees fees, Smith earned around £100 a year from his Rhetoric lectures, a goodly sum at that time.
Most fortunately for scholars today, a set of Smith’s Rhetoric lectures were taken down by students attending Glasgow University the 1762-3 session and were found, fortuitously, among the papers offered for sale in an Aberdeen house-clearance in 1962.  These verbatim lectures notes were published in the “Glasgow Edition of the Works and Correspondence of Adam Smith” from 1976-83 as “Lectures on Rhetoric and Belles Lettres”.
In this context, that part of the sentence quoted above, specifically, that the “Scottish economist Adam Smith wrote about the ‘invisible hand’ of the market” is absolutely untrue.  Nowhere in anything Adam Smith wrote did he refer to the ‘invisible hand’ of the market”.
Yet such authors who regularly make such assertions are apparently immune to (polite) correction.   Not surprisingly, at least to Lost Legacy’, the same immunity to polite correction extends beyond the ill informed, such as the author of the above, but also to the well-informed scholars with whom I have corresponded, and from their writings, it applies to the highly well-informed, Noble prize-winners and leading scholars too, who, as regularly, give the same false assertions an unjustified status of credibility.
So, why is the misreading of, or the plain invention of, the “invisible hand of the market”, apart from its associated misattribution to Adam Smith, so important?
As a literary error, it is possibly less important in the great scale of history, but it is of the utmost importance and significance in the science of political economy.  I have tended to underplay this aspect, though, of course, it is of the utmost importance in the real world affecting billions of people going about the “ordinary business of life”. 
If the belief of an “invisible hand of the market” becomes the agenda for economic policy choices and disappointed, and decision makers acting on that belief are likely to be sorely misled.  Moreover, if opponents of the consequential policies that flow from those beliefs, do not like the outcomes that follow and adopt alternative agenda instead – such as derived from the equally fictional “visible hand of the state” – we end up with the inevitable political economy of “turn-about” politics depending on which party’s turn it is on attaining office to reverse the policies and institutions of the previous government.
Lastly, back to Shakespeare.  He knew nothing of the “invisible hand of the market”, but he did know of the “invisible hand” metaphor.  In fact he used it once as: “They bloody and invisible hand” (Macbeth 1605: 2.3).  Similarly many other authors used it in the 17th-18th centuries, as well as countless preachers (“Hand of God”), including preachers known to and possibly heard by Smith ((William Robertson, Hugh Blair, etc.,).
'Tis a pity that some academics invented a fiction about Adam Smith and the "IH of markets" and have followed a fictional entity supposedly guiding markets to an equilibrium that doesn't exist at the cost of policies appropriate for market economies that do exist.  
Thank goodness medicine didn't similarly tread water, otherwise the ignorance of medicine in Shakespeare's time would still be with us! How long before modern economists wake up and smell the coffee? (Note the use of simile and metaphor).


Blogger Gene Callahan said...

"This last, in Smith’s firm view, was the main object of good writing."

The absence of perspicuity was the main object of good writing?! I really don't know what "this last" means here.

"They bloody and invisible hand"


7:23 pm  
Blogger Kate said...

As I recall, Smith mentions "IH" 1-2 times in WN, and again in TMS. The imagery of a kind of self-ordering is there, but I do agree that it doesn't look much like the "IH" used today, i.e., as a concept upon which some bootstrap normative legitimacy and hide (affirmative, positive-hand) policies like, oh, tax cuts.

My own interpretation of the IH is that it was a way for Smith to illustrate the way that human instinct (something he got from Hume?) tends to preserve the survival of the species - whether it's in developing social mores or fighting over the fruits of our industry - despite our more embarrassing, cruel tendencies.

For example, "Providence" or capital-N "Nature" intends our material progress. And so aren't we lucky that our instinct to truck and to barter (a manifestation of, among other things, greed) helps this along?

8:42 pm  
Blogger Kate said...

Another thing I wanted to note - the human instincts that drive us to truck and barter also, unbeknownst to us, tend to undermine concentrations of power. Thus trade (and our desire for wealth and material symbols of status) eventually breaks down the power and wealth of aristocracy, which is seen as some sort of man-made institutional obstacle to the "natural" workings of human behavior/instinct.

8:46 pm  
Blogger Gavin Kennedy said...

Thanks Gene
“Half-understood notions of analogy, good and violent metaphors, overworked similes, and wishful allegories, are the stuff off bad writing and the absence of perspicuity. This last, in Smith’s firm view, was the main object of good writing.”
The word “last” was intended to refer to “perspicuity” because I was contrasting Smith on “bad writing”, of which “bad writing”, he said includes “the absence of perspicuity”.
Maybe I should have expressed my meaning “better” than I did, that is, with a “perspicuity of stile” that “avoided all ambiguity”, the “imputation of vulgarity”, and the “dungeon of metaphorical obscurity” (Smith, Lectures on Rhetoric and Belles Lettres”, chapter 2).
His is a hard act to follow.
“They” instead of “thy” is my sloppy proof reading. Apologies.

9:32 am  
Blogger Gavin Kennedy said...

Thank you for your comment.
Smith's two examples of "an invisible hand" refer to actions motivated by the private reactions of individuals to choices they may make. The "rich landlord" chooses to feed his serfs from the produce of his land, which the serfs labour upon, because he needs them fit and alive to continue labouring for him. This has the unintended consequences that labourers also continue to procreate children, which assures to continuation of the species.
Some merchants who fear the perceived risks, avoid sending their capital abroad in foreign trade, thus adding to domestic industry.
Both outcomes benefit society. But their motives are "hidden" (cannot be seen); metaphorically they are "led by an invisible hand" to act as they did. Such actions have unintended consequences.
Not all hidden motives (greed, jealousy, hatred, etc.) lead to positive outcomes; they also have unintended consequences.
I would not agree that there is anything intentional or that Smith believed there was. We know from natural selection that nature is not always benign.

9:52 am  
Blogger Gavin Kennedy said...

I am not sure of the role of “instincts” as you seem to be. Human pre-history is upwards of 200,000 years, itself a relatively short spasm in the pre-history of the several species that descended from the speciation of proto-humans from the ancestors of our human species and the primates (chimpanzees) 4 to 6 million years ago. None of this, of course, was known to Adam Smith or David Hume.
His conjectures about our immediate ancestors as hunters and gatherers are thereby interesting, and how some of them in established areas developed primitive farming and shepherding, followed by elements of commercial activity. Even the Hebrew Bible, written in the 8th century (BC, or today BCE) in Genesis moves from the Eden Garden (gathering – with Adam and Eve labouring before the “Fall”), to Cain’s move to a city, ‘east of Eden’. Towns, etc., had to be fed, either by taxes on farming by kings and emperors, and, or, elements of trade.
The majority of the human species stayed with hunting and gathering until the 20th century, while from pre-Roman times, early commerce was present, even during the millennium after the fall of Rome in the 5th century.
I am not clear how “instinct” played a role in this process. Social evolution is not in a straight line nor is it automatic. It could have stalled or gone awry for many more millennia, if not forever, or ended in catastrophic disaster (still might!). Many species have thrived and are now extinct. We are not special in this respect.

10:38 am  
Blogger Kate said...

Prof. Kennedy,

Thanks so much for your feedback. I really do like the description of the IH as an illustration of unintended consequences. What I am still getting stuck on where our "propensity to truck and barter," among other behaviors (say, for example, our propensity to get shiny gadgets to show off to our neighbors, as he describes in TMS) comes from - at least according to Smith. He seems at times to borrow a little from Rousseau (when man becomes social, he looks at himself through the mirror of others' eyes and becomes, well, vain and corrupt) in that it seems natural, embedded in our psyche or our very nature somehow. And Smith says it "is well that Nature" gave us these propensities, because the unintended consequences just happen to make us all richer.

I am happy to leave it to the anthropologists, psychologists, and historians to figure out why we do these things (conjectural history is something only Great Minds can get away with), but what trips me up is to what extent Smith, as the Father of Modern Capitalism, really thinks that we can't help but be the truck-and-barter kind of creature, or whether - as Prof. Weintraub pointed out recently - he would have been open to other sorts of coordinated action. (with its own set of unintended consequences). In saying this, I recognize that he did suss out some less-than-ideal unintended consequences for at least some kinds of collective action (eg organized religion, state-chartered corporations, schools).

And if Smith was open to other kinds of collective action, then it sort of undermines his role as the normative foundation of laissez-faire.

Anyway, thanks for continuing this debate! I am quite enjoying myself.

10:55 pm  
Blogger airth10 said...

"Thank goodness medicine didn't similarly tread water, otherwise the ignorance of medicine in Shakespeare's time would still be with us! How long before modern economists wake up and smell the coffee?"

This not the first time I have encountered this comparison between medicine and economics. I thought the analogy was wrong when I first read it and so is it this time. There is something more tangible about medicine than there is about economics. Economics is more about constantly reinventing the wheel, so to speak, whereas medicine is not such an eternal puzzle.

And it is foolish to think that economics has treaded water since the time of Shakespeare. If that was the case there would still be vast slums in all the cities of the UK. But medicine has not been immune to treading water either. Just look at the persistence of cancer.

Speaking of simile and metaphor, economics and medicine each have their cancers.

11:54 am  
Blogger Gavin Kennedy said...

airth 10
I think you may be taking the wrong object of the metaphor here. Medicine is the science of interventions into the malfunctions of the human body. Treatments have changed much since Smith’s time (blood letting, etc.,) as medicine science has changed in that time period, though the body itself has broadly remained much the same.
Economies have also changed from largely agricultural to markets, in ways that human bodies have not changed similarly. The science of economics has changed in many invented was and economies have changed in not yet understood ways, and also much disputed explanations of the changes and the proposed interventions, some of them directly contradictory to each other.
The science of economics has `trod water’ rather than cumulatively melded into greater understanding. Where there is consensus it is bitterly contested.
Medicine is a practical science – it either works or it doesn’t. It is practiced all over the world. Witch doctors and fraudsters there are, but medicines that work are more common.
Cancer is slowly unraveling its secrets to persistent scientific enquiry and testing. In this century Cancer is expected to be conquered.
I cannot say the same thing about the science of economics. But the various economies will continue in some form (even back to the stone age) even if there are set backs, like nuclear disasters or climate change, or biological disasters, and so on. How humans feeding themselves will exist as long as a few humans survive.

7:05 pm  
Blogger Gavin Kennedy said...

I am glad you enjoy our exchanges.
You write: “What I am still getting stuck on where our "propensity to truck and barter," among other behaviors (say, for example, our propensity to get shiny gadgets to show off to our neighbors, as he describes in TMS) comes from - at least according to Smith.”
Smith considered the “propensity” to “exchange” came with the faculties of “reason and speech”.
Exchange was the general behaviour covering all areas of human conduct from the origins of language in which two people had to agree on which sounds meant whatever, through to what was exchanged between them (modes of conduct, mutually acceptable behaviours, obligations, through, much later, to things).
Man was never independent of other men, a la Rousseau: Man was always a social animal. He was not corrupted by all other men, but some were, as ever. As are our species cousins, the primates, especially chimpanzees.
Smith used the metaphor of society’s mirror in 1759 to describe the effects of a man brought up alone without that “mirror” to qualify his behaviour by what was acceptable to other men – the ‘great school of self-command’ to enforce the norms of acceptable behaviour on youth as a positive influence, not negative behaviours like “vain and corrupt”.
Remember “exchange” in Smith was not limited to trade and nor was trade seen as a purely competitive activity. The modern “self-interested” egoistic utility maximiser is not Smithian; it is a negative image delivered by mathematics.

8:07 pm  
Blogger airth10 said...

Thanks Gavin, for clarifying and reinforcing the distinct difference between economics and medicine that I made in my earlier response. Economics deals with a much more unruly 'body' than medicine does.

10:24 am  
Blogger Gavin Kennedy said...

Glad to help.
I like your summary of the problem about "unruly" economics.

3:50 pm  

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