Monday, October 28, 2013

Adam Smith Never Believed That "Greed is Good" and Economics Students Who Act As If They Should Be Greedy Are Woefully Misled By Their Tutors


Thomas Mucha, editor of Global Post, with an MA from Chicago, writes a report on why Economists are horrible, horrible people. So says science
In short: economists don't feel bad about acting in their self-interest because — well — the economic theories tell them that they should be selfish.”
Comment
I wonder to what extent this bold assertion is a product of Chicago economics, post-Samuelson, who was a student there in the 1930s, and also the product of several decades of advancing the theories of “self-interest” as being an endorsement of “selfishness”? There are daily reports across the media and throughout academe of direct statements to that affect from mainstream neoclassical economics, complete with endorsements of this mistaken theory allegedly based upon the writings of Adam Smith in Wealth Of Nations. The "Greed is Good" theme played well until recently and gave legitimacy to this tendentious and immoral, view of economics, even though credit as the source for such ideas belongs to Ayn Rand, and not to anything written by Adam Smith.
I accept the bold treatment of the specific research among behavioural theorists, though I can question, what in my view are the tendentious assertions made by neoclassical economists often identified as the source of assertions lauding the unintended benefits of selfishness. The claim that selfishness leads to public benefits (which we can trace to a view advanced by Samuelson in 1948) is not found in Adam Smith.
Empirically, the high scores in the survey of current economics students that consistently differ (marginally) from other students are certainly indicative of real differences between them, either in their pre-dispositions in general attitudes (causing some students to avoid the subject) and in their post-course, learned differential dispositions from what they are taught (“maths makes economics a hard science”). 
I can think of several causes of such dispositions, such as the need in modern neoclassical courses for prior ability in maths to do well in the subject, lauded by proud faculty as the necessary gateway to tenure and high, post-graduation salaries in business.   But if the “selfish = self-interest” fallacy is embedded in the “hard science” presumption then the supposed association reinforces the difference between the participants in the survey.
However, the view that ‘selfishness is consistent with Adam Smith on “self-interest”’ is manifestly unwarranted and is not supported by anything that he wrote in any edition of “Moral Sentiments” (1759) or in “Wealth Of Nations” (1776).  If you think you know differently, please feel free to post a comment to that affect.
The claim that Adam Smith ever said anything in praise of “selfishness”, even in a pragmatic and regretful acceptance of it, is wholly unwarranted.  Unfortunately such notions are widespread in US academe, particularly since Samuelson’s textbook, “Economics: an analytical analysis”, was first published in 1948, p 36  (McGraw-Hill) and in its 19 editions to 2010 and was studied by 5 million students, few of them who read or thought about Adam Smith. (See Kennedy, G. 2010. “Paul Samuelson and the Invention of the Modern Economics of the Invisible Hand”, History of Economic Ideas. Vol. xviii, no. 3, pp 105-19).

6 Comments:

Blogger Soccer Dad said...

this would be a much much better post if you had taken the time to dig out some quotes from AS to the opposite effect

12:05 a.m.  
Blogger Matt Clements said...

An article about the contrast between self-interest and greed, and the problems the latter casues: http://onlinelibrary.wiley.com/doi/10.1111/ajes.12026/abstract

11:03 a.m.  
Blogger Gavin Kennedy said...

Soccer Dad
Thanks for your comment.
However, as you may know, writing a Blog daily is quite a user of time. I have made similar comments on other Blog posts that provide extracts from Adam Smith - especially his reference to people of the same trade seldom come together without the conversation turning into a conspiracy against the public to reduce competition and raise prices, etc., and his attacks on merchants pressing for legislation to restrict foreign competition, for the same ends.
Today's post was directed at the specific charge that Adam Smith is quoted in economic theory as encouraging greed, when in fact he did not. It is incumbent on modern economists who both believe and teach this nonsense to show that he did advocate greed.
By the way - what happened to your five blogs that appear to have stopped in 2010?
Gavin

12:17 p.m.  
Blogger Gavin Kennedy said...

Matt Clements
Thank you for your suggestion. I shall read the reference and come back yo you.
Gavin

12:19 p.m.  
Blogger Joung W. Hwang said...

I am not an expert on this subject but my understanding has always been that the "Greed is Good" view is extrapolated from the following passage in the Wealth of Nations: "It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest."

8:00 a.m.  
Blogger Gavin Kennedy said...

Hi Joung W. Hwang.
Welcome to Lost Legacy. I have outlined my response to your comment as a Blog post today (31 October) as the word limits on the comments facility are too low for long posts.
Gavin

12:38 p.m.  

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