Saturday, February 15, 2014

The Corruption Over Time of Metaphors

 John Sparkman posts in Daily Racing Form “Invisible Hand of the Market” HERE
“The father of modern economics, Adam Smith, introduced the metaphor of the invisible hand of the market in his seminal book “The Wealth of Nations” in 1776. Smith’s metaphor for what he conceived as a natural, self-regulating function of a free market is readily visible in the accompanying table detailing the sharp decline in the number of Thoroughbred stallions and mares in North America over the last 20 years and the accompanying fluctuations in stud fees over the most recent decade.
Metaphors are one of our most useful literary inventions, but they tend to become corrupted over time, and whether the changes visible in stud fees are due to factors that can be described as purely “the market” perhaps depends on one’s definition of the market. The marketplace for Thoroughbred stallion seasons of 2014 is governed by Smith’s invisible hand, for sure, but it also is highly dependent on the invisible – to the public – hands of veterinarians sheathed in rubber gloves. …
Adam Smith’s invisible hand of the marketplace works best when it is indeed invisible. A 12 percent increase in stud fees in one year makes the self-regulating properties of the market all too visible for comfort.”
An interesting export of economics into the breeding horses, but it is one that is founded on a false premise. Adam Smith did not conceive of his use of the “invisible hand” metaphor as his “metaphor for what he conceived as a natural, self-regulating function of a free market”.
A more careful reading of the passage in Wealth Of Nations (WN IV.iii. 9 p 456) show it referred to the merchant’s “insecurity” of sending his capital abroad because of his perceived risks in doing so.  His perceptions were of course invisible to onlookers. 
Metaphors “describe in a more striking and interesting manner” their “object” as defined by Adam Smith in his “Lectures on Rhetoric and Belles Lettres”, p 29, 1762-3, and in the Oxford English Dictionary, vol III. 1983.
Adam Smith made no references to the market in the "invisible-hand" paragraph in WN– that is a 20th century invention – but he did identify the stated metaphor’s object three times in the quoted chapter (p 452), including in the “invisible-hand” paragraph (p 456).
In contrast to John Sparkman’s assertion that “Adam Smith’s invisible hand of the marketplace works best when it is indeed invisible”, Smith was quite clear that markets work through highly visible PRICES.  Indeed they would not work at all without VISIBLE prices!
Think about it.  There is no role for an "invisible hand" in enabling markets to work, but there often is to metaphorically :
"describe in a more striking and interesting manner" the often limited intentions of human motives in acting as they do.  Interestingly, Adam Smith  also understood this in his highly insightful reference to the "unintended consequences" of human actions, some of which actions are disappointing to those acting with their beneficial intentions.


Blogger airth10 said...

The mention of thoroughbred stallions and the invisible hand together provokes a 'loony tune' thought.

Perhaps the invisible hand was employed to clean out the stables.

4:14 am  
Blogger Gavin Kennedy said...

Your humour is catching.

12:43 pm  

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