Thursday, November 28, 2013

Paul Walker on the "Invisible Hand" Part 2

Paul Walker of Anti-Dismal writes “Invisible Hand 2” HERE
Perhaps the point I'm trying to get at is better said by James Otteson. When discussing Smith's essay on "Consideration Concerning the First Formation of Languages, and the Different Genius of Original and Compounded Languages" Otteson writes: “The reader, furthermore, would be correct to detect in this essay the early hints of an argument that Smith will later develop into perhaps his most powerful, what we will call the Invisible Hand Argument: individuals, when seeking to satisfy their own localized desires will tend to behave in ways that will also benefit other - even others they do not know and about whom they therefore have no particular concern, and without their intending to do so.
 This Invisible Hand Argument would, I feel, be seen in Smith's work even if the actual references to the "invisible hand" were removed.
When Otteson goes on to talk about "What Smith Got Right" the first thing he mentions is Smith's model of spontaneous order. Otteson argues this is made up of several elements, one of which is "general welfare and the "invisible hand"". Otteson says, “Smith was under no illusion that people in their normal daily activities actually care about the general welfare. Luckily, however, people do not have to. The nature of the unintended system of order suggests that they will tend to conduce to the benefits of everyone concerned regardless - at least in the long run.
So I would (says Paul) argue that the "invisible hand" in a broad sense, permeates Smith's works.”
Paul’s post includes a full extract from Lost Legacy of my post of yesterday, which again is an example of the fair treatment of contrary opinions in scholarly debate.  In his response above, Paul gives a straightforward example of how he thinks about the issues of Smith’s thinking and my initial remarks here are directed to that example.
James R. Otteson is a distinguished scholar on Adam Smith for whom I have considerable admiration, especially from my meetings with him and from his books and papers. James Otteson. 2002. “Adam Smith’s Market Place of Life”.. Cambridge University Press, develops a most interesting perspective on how Smith’s thinking can be seen as much deeper than he often specifically specifically articulates, provided the reader takes all of his surviving works into consideration, including in this example, Smith’s essay, “Considerations Concerning the First Formation of Languages and the Different Genius of the original and compound Languages” (1761; published in “Lectures in Rhetoric,& etc.” 1983, which also includes in Lecture 3, 22 November, 1762: “Origins and Progress of Language”.
Paul describes James Otteson’s speculative assessments of Smith on “Language” and concludes that it describes “what we will call the Invisible Hand Argument”, without of course mentioning the invisible hand, or what authority such a decision had anything to do with Adam Smith.  My caution to Paul here is that subsequent interpretations of the meaning of the “IH” may not (and I suggest” do not) explain Smith’s intended meanings. 
The “invisible hand argument” itself owes much to Robert Nozik’s, 1974, “Anarchy, State, and Utopia” (Basic Books) written by a political philosopher, from which it spread across political philosophy and throughout economics.  It was an attractive idea or concept and those economists educated in the modern orthodox schools generally applied it to Adam Smith’s use of the ”IH metaphor” as if Smith meant that without explicitly saying so.  Recently, for instance, N.Emrah Aydinonat, published, 2008. “The Invisible Hand in Ecconomics: how economists explain unintended consequences”, Routledge, with complete assurance what Smith meant by the “invisible hand” that is conveyed by an “invisible hand explanation”, but without the textual authority from what Smith wrote within the grammatical confines of the role of metaphors in the English language or with the explication of what Smith taught in his lectures in the 15 years that he taught Rhetoric in Scotland.
I recognise that scholars since Smith are perfectly entitled to advance their ideas, as Robert Nozik, James Otteson, Craig Smith, Emrah Aydinonat and a multitude of others have done regarding a potentially attractive use for the mysteries of Adam Smith’s meaning in using the ”invisible hand” as a metaphor, but I question whether it is appropriate to back-project their ideas onto Adam Smith, as if their ideas are derivable from Smith’s perfect sense as a metaphor in English grammar (or in Latin for that matter).
Hence, my continuing efforts to bring this subjet to the attention of fellow economists.  “La Lotta Continua”! (to crib from an Italian leftist group’s posters around Rome when I worked at FAO.
I also think Owen hits the target too.  He writes in the comments to Paul’s post: “I also wonder if by using the invisible hand in this way misleads us into thinking that unintended consequences are generally positive, ignoring the very often negative consequences.”  Species can die out from unintended consequences too.
The consequences of unintended events are not always or necessarily positive – maybe even most times – as expressed in the popular warning: “Beware what you wish for”.  Archeologists report on the detritus of previous civilisations and earlier societies that vanished from unintended events and consequences. I surmise that self-interest played a role in those events and that self-interest is and was not always benign.  Markets can be more benign than past civilizations but there is no automatic certainty that they will be unless the necessary protections are in place, especially the rule of liberty and justice, as Smith advised and “men of system” ignored.


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