LIBERALISM UNRELINQUISHED

A statement of no surrender on the word "liberal."

Statement:

In the 17th and 18th centuries there was an ascendant cultural outlook that may be termed the liberal outlook. It was best represented by the Scottish enlightenment, especially Adam Smith, and it flowed into a liberal era, which came to be represented politically by people like Richard Cobden, William Gladstone, and John Bright. The liberal outlook revolved around a number of central terms (in English-language discourse, the context of the semantic issue that concerns us).

Especially from 1880 there began an undoing of the meaning of the central terms, among them the word liberal. The tendency of the trends of the past 130 years has been toward the governmentalization of social affairs. The tendency exploded during the First World War, the Interwar Years, and the Second World War. After the Second World War the most extreme forms of governmentalization were pushed back and there have since been movements against the governmentalization trend. But by no means has the original liberal outlook been restored to its earlier cultural standing. The semantic catastrophes of the period 1880-1940 persist, and today, amidst the confusion of tongues, governmentalization continues to hold its ground and even creep forward. For the term liberal, in particular, it is especially in the United States and Canada that the term is used in ways to which we take exception.

We the undersigned affirm the original arc of liberalism, and the intention not to relinquish the term liberal to the trends, semantic and institutional, toward the governmentalization of social affairs.

Signatures:
Our goal is to gather at least 500 signatures (we hope even more wish to sign!). We have focused our efforts on people from Anglophonic countries because in most other countries “liberal” largely retains the original meaning.

Current Signatories:

Australia
Timothy Andrews, Executive Dir., Australian Taxpayers’ Alliance
Winton Bates, Blogger, Freedom and Flourishing
Chris Berg, Dir. of Policy, Inst. of Public Affairs
Juel Briggs, Businesswoman
Gabriel Buckley, National President, Liberal Democratic Party
Mark Hornshaw, Lecturer in Econ., U. of Notre Dame Australia
John Humphreys, Visiting Lecturer of Economics, U. of Queensland
Darryn Jensen, Senior Lecturer in Law, U. of Queensland
David Morrison, Reader in Law, The U. of Queensland
Julie Novak, Senior Fellow, Institute of Public Affairs
James Paterson, Dir. of Dev. and Communications, Inst. of Public Affairs
Suri Ratnapala, Prof. of Public Law, The U. of Queensland
Brad R. Taylor, Postdoctoral Fellow, The Australian National University
Canada
Brian Lee Crowley, Managing Director, Macdonald-Laurier Institute
Pierre Desrochers, Associate Prof. of Geography, U. of Toronto
Bradley Doucet, English Editor, Le Québécois Libre
Pierre Lemieux, Professeur associé, Université du Québec en Outaouais
Janet Neilson , Director, Inst. for Liberal Studies
Xavier de Vanssay, Prof. of Economics, York U.
New Zealand
Bernard Robertson, Barrister, Wellington
Paul Walker, Economist, Christchurch
South Africa
Brian C Benfield, Prof., Insurance and Risk Mgt., U. of the Witwatersrand
Eustace Davie, Director, Free Market Foundation
United Kingdom
Victoria Adams, President, Queen Mary Libertarian Society
Nigel Ashford, Prof. of Politics, Staffordshire U.
Philip Booth, Prof., City U., London and Inst. of Economic Affairs
Ryan Bourne , Head of Public Policy, Inst. of Economic Affairs
Sam Bowman, Research Director, Adam Smith Institute
Eamonn Butler, Director, Adam Smith Institute
Peter Cleppe, Head of Brussels office, Open Europe
Timothy Congdon, Chair of The Freedom Association
Iain Dale, Drivetime presenter, LBC Radio
Stephen Davies, Education Director, Institute of Economic Affairs
Tim Evans, Senior Fellow, Adam Smith Institute
Roger Fox, Visiting Fellow, U. of Buckingham
Andrew Haldenby, Director, Reform
Jonathan Isaby, Chief Executive, The TaxPayers’ Alliance
Lee Jenkins, Deputy Editor, The Backbencher Magazine
Ketan Jha, Managing Editor, Sussex Law Review
Gavin Kennedy, Emeritus Prof., Edinburgh Business School, Heriot-Watt U.
Stephanie Lis, Head of Communications, Inst. of Economic Affairs
Mark Littlewood, Dir. General & Ralph Harris Fellow, Inst. of Economic Affairs
Alan Macfarlane, Prof. of Anthropology, Cambridge U.
John Meadowcroft, Senior Lecturer, King’s College London
Chris Mounsey, UX Director, Blogger, Devil’s Kitchen
Kristian Niemietz, Senior Research Fellow, Inst. of Economic Affairs
Mark Pennington, Prof. of Public Policy, King’s College London
Robert Sauer, Prof. of Economics, U. of London
Marc Sidwell, Managing Editor, City A.M.
Craig Smith, Lecturer, The U. of Glasgow
Christopher Snowdon, Research Fellow, Inst. of Economic Affairs
Tim Worstall, Senior Fellow, Adam Smith Institute
United States
Sherzod Abdukadirov, Research Fellow, George Mason U.
Paul Dragos Aligica, Senior Fellow, George Mason U.
William Allen, Professor of Economics, UCLA
Jonathan Anomaly, Lecturer, Duke
Larry Arnhart, Prof. of Political Science, Northern Illinois U.
Jose Azel, Senior Research Assoc., U. of Miami
John Baden, Chairman, FREE
F. William Ballou, Member, Mont Pelerin Society
Doug Bandow, Senior Fellow, Cato Institute
Tom W. Bell, Prof. of Law, Chapman U.
Bruce Benson, Prof. of Economics, Florida State U.
Daniel Bier, Executive Editor, The Skeptical Libertarian
Simon Bilo, Asst. Prof. of Economics, Allegheny College
Walter Block, Prof. of Economics, Loyola U. New Orleans
Peter Boettke, Prof. of Economics & Philosophy, George Mason U.
Cecil Bohanon, Prof. of Economics, Ball State U.
Mark Bonica, Asst. Prof., Baylor U.
Peter Bos, President, Polydyne, Inc.
Donald Boudreax, Prof. of Economics, George Mason U.
Jason Briggeman, Adjunct Faculty in Economics, Central Texas College
James Broughel, Program Manager, Mercatus Center at George Mason U.
Henry N. Butler, Executive Director, Law & Econ. Center, George Mason U.
Nicolas Cachanosky, Asst. Prof. of Economics, Metropolitan State U. of Denver
Peter T. Calcagno, Prof. of Economics, College of Charleston
Bruce Caldwell, Prof. of Economics, Duke U.
Troy Camplin, Lecturer of English, U. of North Texas at Dallas
Nicholas Capaldi, Prof., Center for Spiritual Capital, Loyola U.
Alejandro Chafuen, President, Atlas Network
Henry C. Clark, Visiting Prof., Clemson U.
Michael Clark, Prof. of Economics, Hillsdale College
Warren Coats, Retired, International Monetary Fund
John P. Cochran, Emer. Dean Sch. of Bus. & Emer. Prof. of Econ., Metrop. State U. of Denver
Joseph Connors, Visiting Asst. Prof., Wake Forest U.
Christopher J. Conover, Research Scholar, Duke U.
Kevin Currie-Knight, Postdoctoral Fellow , U. of Illinois, Springfield
D. Allen Dalton, Adjunct Faculty in Economics, Boise State U.
Daniel D’Amico, Assoc. Prof. of Economics, Loyola U.
Harry David, Copy Editor and Proofreader, Invisible Order
Antony Davies, Assoc. Prof. of Economics, Duquesne U.
Shawn Decker, Research Chemist, Entrepreneur
Gregory Delemeester, Prof. of Economics, Marietta College
Henry Demmert, (retired), Santa Clara U.
Gregory Dempster, Prof. of Econ. and Business, Hampden-Sydney College
Arthur M. Diamond, Jr., Prof. of Economics, U. of Nebraska
Jennifer Dirmeyer, Asst. Prof., Ferris State U.
Matt Dobra, Prof. of Economics, Methodist U.
William Doss, Deputy Dir., Grassroots Programs, Leadership Institute
Lenore T. Ealy, President, The Philanthropic Enterprise
Richard Ebeling, Professor of Economics, Northwood U.
John B. Egger, Prof. Emeritus, Towson U.
Ross Emmett, Prof. of Pol. Economy and Pol. Theory & Const. Democracy, Michigan State U
Richard Epstein, Prof. of Law, New York U.
John Estill, Lecturer, San Jose State U.
Larry Eubanks, Assoc. Prof., U. of Colorado at Colorado Springs
Williamson M. Evers, Research Fellow, Hoover Institution
Fred Foldvary, Lecturer in Economics, San Jose State U.
Corrie Foos, Co-Founder, Mont Hamilton Society
Micah Frankel, Prof., California State U.
David E.R. Gay, Prof., U. of Arkansas
Warren Gibson, Economics Lecturer, San Jose State U.
Ephraim Gildor, President, Gildor Investments
Peter Gordon, Prof. Emeritus, USC
Joe Green, Asst. Prof. of Political Science, Dixie State
Walter Grinder, President Emeritus, Institute for Civil Society
James Gwartney, Prof. of Economics, Florida State U.
Colleen Haight, Associate Prof. in Economics, San Jose State U.
Eric Hammer, Research Fellow, George Mason U.
Michael Hammock, Asst. Prof. of Economics, Middle Tennessee State U.
Thomas W. Hazlett, Prof. of Law & Economics, George Mason U.
Christine Dunn Henderson, Senior Fellow, Liberty Fund, Inc.
David R. Henderson, Research Fellow, Hoover Institution
Stephen Hicks, Ph.D., Prof. of Philosophy, Rockford U.
Arnold Hite, Prof. of Economics, Charleston Southern U.
Fergus Hodgson, Editor in Chief, PanAm Post
Andrew Hofer, Managing Dir., Brown Brothers Harriman & Co.
Robert M. Hoffman, Publisher, U. of Chicago Press
Randall Holcombe, Prof. of Economics, Florida State U.
Steven Horwitz, Prof. of Economics, St. Lawrence U.
Lee Hoskins, Senior Fellow, Pacific Research Institute
Daniel Houser, Prof. of Economics, George Mason U.
Hunter Hustus, Mr, Northeastern U.
Sanford Ikeda, Assoc. Prof. of Economics, Purchase College, SUNY
Jonathan B. Imber, Prof. of Sociology, Wellesley College
Brian Jacobsen, Assoc. Prof., Wisconsin Lutheran College
Garett Jones, Associate Prof. of Economics, George Mason U.
Jerry L Jordan, President, Pacific Academy for Advanced Sciences
Mitchell Kaufman, Philosophy Instructor, U. of Washington
Carrie B. Kerekes, Asst. Prof. of Economics, Florida Gulf Coast U.
Daniel B. Klein, Prof. of Economics, George Mason U.
Eric Kohn, Chairman, America’s Future Foundation – Chicago
David Kopel, Research Dir. & Adj. Prof. of Const. Law, Denver U.
Alan Charles Kors, Prof. of History, U. of Pennsylvania
David Kotter, Assoc. Prof. of Theology and Economics, Colorado Christian U.
Jason Kuznicki, Research Fellow, The Cato Institute
Warren Lammert, Founder, Granite Point Capital
Richard Langlois, Prof. of Economics, The U. of Connecticut
George Leef, Director of Research, Pope Center for Higher Ed. Policy
Jean Leonard, Owner, Great Divide Publishing
Peter Lewin, Clinical Prof., Economics, U. of Texas at Dallas
Hyrum Lewis, Assoc. Prof. of History, Brigham Young U.-Idaho
Jody Lipford, Prof. of Economics, Presbyterian College
Loren Lomasky, Prof. of Political Philosophy, U. of Virginia
Phillip Magness, Academic Program Dir., Inst. for Humane Studies, George Mason U.
Spencer MacCallum, Director, The Heather Foundation
Alexei Marcoux, Assoc. Prof. of Business Ethics, Loyola U. Chicago
Frederic Marks, Author, Capitalism: The Liberal Revolution
Michael L. Marlow, Prof. of Economics, California Polytechnic State U.
Christopher S. Martin, Asst. Prof. of Economics, Hillsdale College
Donna Matias, Prof. of Law, U. of San Diego
William H.A. McBride, Chief Economist, Tax Foundation
Deirdre McCloskey, Prof. of Econ. & History, U. of Illinois at Chicago
James E. McClure, Prof. of Economics, Ball State U.
Tom Means, Prof. of Economics, San Jose State U.
Stephen Miller, Assoc. Prof. of Economics, Western Carolina U.
Lotta Moberg, Economics Instructor, George Mason U.
Adam D. Moore, Assoc. Prof., Information School, U. of Washington
Julian Morris, VP of Research, Reason Foundation
John Moser, Prof. of History, Ashland U.
James Mulcahy, Adjunct lecturer, SUNY at Buffalo
Mike Munger, PPE Director, Duke U.
Todd Myers, Assoc. Prof., Grossmont College
Patrick Nolan, Distinguished Prof. Emeritus, Sociology, U. of South Carolina
Philip Nuetzel, VP – Mortgage Modeling and Analytics, Wells Fargo Home Mortgage
Barbara Oakley, Prof. of Engineering, Oakland U.
James Otteson, Teaching Prof. of Political Economy, Wake Forest U.
Alexandre Padilla, Assoc. Prof. of Economics, Metropolitan State U. of Denver
Tom G. Palmer, Executive Vice President, The Atlas Network
George Pearson, Board Chair, Kansas Policy Institute
Sam Peltzman, Prof. of Economics, U. of Chicago
Patrick Peterson, Chief Networker, Silicon Valley Freedom Initiative
Benjamin Powell, Prof., Texas Tech U.
Ivan Pongracic, Jr., Professor of Economics, Hillsdale College
Greg Ransom, Blogger, Taking. Hayek Seriously
Roger Ream, President, Fund for American Studies
Andrea Millen Rich, President, Center for Independent Thought
Jeff Riggenbach, Senior Fellow, Randolph Bourne Institute
Mario J. Rizzo, Associate Prof. of Economics, New York U.
Dalibor Rohac, Policy Analyst, Cato Institute
Kevin Rollins, Editor, Free Liberal
Clark Ruper, Vice President, Students For Liberty International
Paul H. Rubin, Prof. of Economics, Emory U.
Thomas Carl Rustici, Asst. Prof. of Economics, George Mason U.
Thomas Saving, Prof. Of Economics, Texas A&M U.
D. Eric Schansberg, Prof. of Economics, Indiana U. Southeast
Michael Schwarz, Asst. Prof. of History, Ashland U.
Daniel Shapiro, Prof. of Philosophy, West Virginia U.
Amity Shlaes, Chair, Calvin Coolidge Presidential Foundation
William F. Shughart II, Prof. of Public Choice, Utah State U.
Randy T. Simmons, Prof. of Political Economy, Utah State U.
Sarah Skwire, Fellow, Liberty Fund Inc
Adam C. Smith, Asst. Prof., Johnson & Wales U.
Daniel J. Smith, Asst. Prof. of Economics, Troy U.
George H. Smith, Lecturer, Cato Institute
Jeffrey Smith, Prof. of Economics, U. of Michigan
Vernon Smith, Prof. of Economics, Chapman U.
Nicholas Snow, Visiting Asst. Prof. of Economics, Kenyon College
Jason Sorens, Lecturer, Dartmouth College
Mark Steckbeck, Prof. of Economics, Campbell U.
John Stephens, Site Design and Operations, Econ Journal Watch
Edward Peter Stringham, Prof. of Economics, Texas Tech U.
John Strong, Owner, EtherPros
Michael Strong, CEO, FLOW
Amy H. Sturgis, Asst. Prof. of Liberal Studies, Lenoir-Rhyne U.
Daniel Sutter, Prof. of Economics, Troy U.
James Stacey Taylor, Associate Prof., The College of New Jersey
Harry E. Teasley Jr., Emeritus Chairman, Reason Foundation
Justin Teeman, Guest Lecturer of Psych., U. of Central Oklahoma
Fernando Tesón, Eminent Scholar, Florida State U.
David J. Theroux, Founder and President, The Independent Institute
Clifford F. Thies, Prof. of Economics & Finance, Shenandoah U.
Diana Thomas, Assoc. Prof., Creighton U.
Michael D. Thomas, Asst. Prof., Creighton U.
Clint Townsend, Leadership Manager, Students For Liberty
Matthew Tyrmand, Deputy Dir., American Transparency-OpenTheBooks.com
Douglas Den Uyl, VP of Educational Programs, Liberty Fund
Richard Vedder, Prof. Of Economics Emeritus, Ohio U.
Marion Warin-Miller, Translator/Writer, Franco-American Translations
Nikolai G. Wenzel, Visiting Asst. Prof. of Econ., Florida Gulf Coast U.
Michael White, Mercatus Center Donor
Bonnie Wilson, Associate Prof. of Economics, Saint Louis U.
Abel Winn, Asst. Prof. in Economics, Chapman U.
Bill Woolsey, Assoc. Prof., The Citadel
Martin Morse Wooster, Author,
Zenon X. Zygmont, Prof. of Economics, Western Oregon U.
Todd Zywicki, Prof. of Law, George Mason U.

Comment

I signed the petition because I broadly agree with its aims, though I have some reservations on details, which is to be expected among academics (any 5 economists in a room would have  5+ interpretations of economic theory and practical policies, etc.).  

I have long admired the Works of many of the above signatories, such as” For example: Vernon Smith, James Otteson, Mike Munger, Deirdre McCloskey, Daniel B. Klein, Ross Emmett, Donald Boudreax, Peter Boettke, Bruce Caldwell, Philip Booth, Tim Worstall, Craig Smith, Iain Dale, Eamonn Butler, Sam Bowman, and Paul Walker.  

Almost all of the above disagree to some extent and intensity with my take on the use by Adam Smith of the “invisible hand” metaphor, as readers of Lost Legacy may have noticed; I have sometimes profound differences with others on aspects of their thinking, but not so profound as to withhold my signature. I interpret such thinking on my part as well within the ambit of the word “liberalism”, which is not a dogma, nor an ideological stance. My own stance on ‘Liberalism’ in today’s society can be summed as: ‘markets where possible; state where necessary’.

Readers of Lost Legacy who are broadly sympathetic to the project to clarify and re-instate the English language meaning of ‘Liberalism’ may contact the sponsors at:  http://liberalismunrelinquished.net/

WHICH ADAM SMITH?

Simon Constable scribes (27 April) piece for the Wall Street Journal HERE

“Five Shrines to Capitalism” (From Florence to London to Wall Street)

“In the spirit of WSJ Sunday's focus on the financial, here are five tourist sites important in the history of capitalism:

Adam Smith's Grave: Pay homage to the father of economics, Adam Smith, by visiting his grave in the Canongate cemetery in Edinburgh's Old Town. A native Scot, Smith wrote the 1776 tome "Wealth of Nations," creating modern economics.”

Comment

I am in two minds over this piece. First, I am always pleased to see references to an "Adam Smith Trail" located in Edinburgh down the High Street/Royal Mile that historically is much like the 18th century street that Smith walked up and down while fit (and was carried in later years by Porters) despite the modern buildings that replaced numerous predecessors over the years.

My own guided walking tours, which I have undertaken over the years when fitter physically than I am now, started from Adam Smith's Statue besides St Giles Cathedral opposite the current Edinburgh City Council building, which in Smith's day was occupied  by Commissioners of Customs and the Salt Duties and where he worked four days a week from 1778-90. His statue was erected in 2008 and unveiled by Noble Laureate,  Professor Vernon Smith. 

Further down the Royal Mile, we visited Smith's grave in the Canongate Church Yard, almost next door to Smith's residence in Edinburgh, and from which his mother, Margaret Douglas Smith would have visited the Kirk for Sunday Worship.

Next stop was Panmure House, home for Adam Smith's Mother and his cousin, Janet Douglas, his mother's housekeeper, and himself (1778-90). His beloved mother died in 1784 and was probably buried her family's Kirk yard across the Firth of Forth near Strathendry, Fife.  Janet, who died in 1788, who was also a Douglas, was probably buried in Fife too.  There is no mention of them being buried in the Cannongate Yard in the Church records, though Smith's burial in recorded there a few days after he died in 1790.

Panmure House is under renovation just now since the house was acquired by Edinburgh Business School and funding for the renovation to make it suitable as an international educational resource for Heriot-Watt University, including post-graduate degrees in modern economics and moral philosophy, as well as for pre-univeristy economics courses for school-students, and set-piece, prestigious events delivered by Nobel-level luminaries.

Secondly, I am concerned about the assertion that Smith's Wealth Of Nations created "modern economics", or the similar claims that Smith was the 'father of economics'.  Given that Smith's teachings on political economy are often only partially understood by modern economists in the almost lazy ignorance of  his moral philosophy (and total ignorance of his other works on Rhetoric, History of Astronomy, and Lectures On Jurisprudence), I recoil from calling him the 'father' of what followed after he died in 1790 until recently in the 21st century.  In the context of modern understanding on Adam Smith's Works and ideas, his so-called intellectual descendants 'children' today are closer to being a bastard breed indeed.

My current state of health precludes me for some months, at least, conducting Adam Smith tours down the Royal Mile, but I am optimistic (as ever!) that I may be able to resume them in 2015.   But please keep in  touch should you visit Edinburgh in 2014 in case my fitness improves sooner.

Lastly, I am uncomfortable with describing Adam Smith's places where he lived and worked (Kirkcaldy, Glasgow, Edinburgh, Oxford, London, Paris, Bordeaux, Toulouse, and Geneva as "shrines" to "Capitalism".  Smith was by choice a modest man.   Moreover, the never knew the word "capitalism", which was not used in English until 1854 (by Thackeray in his novel, The Newcomes).   There is much about what we know as 'capitalism' today that Smith would have been forcibly critical (he certainly was morally critical of much of the behaviour of "merchants and manufacturers" in the 18th century in his Wealth Of Nations.  Much of that self-interested conduct in the 18th century is still with us in both markets and in government interventions in the economy in the 21st century. 

DAVID WARSH WRITES ON PIKETTY'S 'CAPITAL IN THE 21ST CENTURY'

David Warsh writes in this week’s “Economic Principals” - the best source for regular reports on what is going on in the practice of economics in the real world HERE: www.economicprincipals.com (low subscription) worth every penny to be kept informed by the informed David Warsh.

“Paris Takes Its Place”

"Economist Receives Rock Star Treatment": That was the headline yesterday on Jennifer Schuessler’s story in The New York Times. The facts bear her out. Thomas Piketty, 42, of the Paris School of Economics, seemed to be everywhere last week. Publication of his 685-page Capital in the Twenty-First Century had been moved up by two months, sales were soaring (46,000 copies so far), a triumphant tour of Washington (meeting with Treasury Secretary Jack Lew) and New York (appearing at the United Nations) has been completed. Encomiums were pouring in. “Pikettty has transformed our economic discourse,” wrote Paul Krugman in the current New York Review of Books. “We’ll never talk about wealth and inequality the way we used to.” 

Not bad for an economist who traded an appointment at the Massachusetts Institute of Technology for a job as a researcher for the French government in 1996, when he was 25.  “I did not find the work of US economists entirely convincing,:” he writes in the introduction to Capital in the Twenty-First Century:

I was only too aware of the fact that I knew nothing at all about the world’s economic problems.  My thesis consisted of several relatively abstract mathematical theorems. Yet the profession liked my work. I quickly realized that there had been no significant effort to collect historical data on the dynamics of inequality since [Simon] Kuznets [in the 1950s and ’60s], yet the profession continued to churn out purely theoretical results without even knowing what facts needed to be explained.

He went home to collect some of the missing facts.

Piketty wanted to teach at the Ecole des Hautes Etudes en Sciences Sociales, the elite institute whose faculty had included many of the foremost figures in the Annales school, including Lucien Febvre and Fernand Braudel – a group of scholars, most  of them quantitative historians, that achieved enormous influence around the world publishing in the journal Annales. Economies, sociétés, civilisations (or Annales. Histoire, Sciences Sociales as it is called today).

Piketty got that job, along with time to do the research he wanted, first producing a book in 2001 on high incomes in France since 1901, then enlisting Anthony Atkinson, of Oxford University, in a similar investigation of Great Britain and severalother countries.  His friend and countryman Emmanuel Saez, of the University of California at Berkeley, produced similar data for the US. The World Top Incomes Database (WTID) is the result.  Data on wealth, following the methods of Robert Lampman, of the University of Wisconsin, came next. Starting in 2003, Piketty began setting up the new Paris School of Economics; in 2006, he was named its first head.  He resumed teaching and writing the next year.  

Piketty’s thesis is set out succinctly on the first page of his introduction:

When the rate of return on capital exceeds the rate of growth of output, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.  There are ways nevertheless democracy can regain control over capitalism and ensure that the general interest takes precedence over private interests, while preserving economic openness and avoiding protectionist and nationalist reactions.

What are those measures?  Four chapters in the fourth section of the book draw a variety of policy lessons from the first three parts for a “social state:”

The right solution is a progressive annual tax on capital. This will make it possible to avoid an endless inegalitarian spiral while preserving competition and incentives for new instances of primitive accumulation.

Piketty says he’s left Paris only a few times on short trips since returning nearly twenty years ago.  My hunch is that, after last week, it will be a long time before he takes another. He’s left behind a beautiful book, one that will receive a great deal of attention around the world in the years to come.  He’s gone home to work on others.

Comment 

This new book by Thomas Piketty, “21st Century Capital”, of which we are going to hear a lot more about it - meantime read some reviews  HERE   HERE   HERE  HERE

I shall first read Piketty’s book and then comment upon it.  From the review/reports I have read his book looks interesting, though it seems to simply accept that modern economists’ accounts of Adam Smith (‘invisible hand’, ‘laissez-faire’ and all that) are accurate, when they patently are not.  Karl Marx is also beyond redemption in the hands of modern marxists, who wasn’t up to much in Karl’s original efforts either, without mentioning the practice of modern marxists.

Notions of evolving to some kind of equality - the driver of modern social democracy - and the vague ‘hope’ of equality evolving ‘naturally’ are, increasingly in my view, just that: “notions”.  What is more interesting is what happens when people realise that the equality garb is, er, invisible too!

Hence, I look forward to my summer reading.  Meanwhile, follow the early reviews and read for yourself. I hope Thomas is a more balanced author when he is both praised and criticised than last year’s tempermental author of a very long book, David (er, Graeber).

TIM ASKS: "ISN'T IT TIME FOR THE TRUTH ABOUT THE "INVISIBLE HAND' TO HAVE 'SUNK IN"?

Tim Worstall posts on Forbes (25 April) HERE

 2014/04/25/this-is-what-adam-smith-meant-by- invisible-hand/

“This Is What Adam Smith Meant By Invisible Hand”

“Please do note that Smith wasn’t saying (not at all in the book but most certainly not in the invisible hand phrase) that all markets all the time markets leads to the optimal society.  Nor was he trying to say that there’s not a place for reasonable government action, often to make markets work better. Rather, he was making one simple point about where people prefer to invest.

Judged by the Goldman Sachs spiderweb, savers have embraced a little bit more investment tourism this side of the world’s financial crises, but home bias still rules when it comes to stock markets.

We estimate that over the last decade, domestic holdings of broadly-defined domestic equity in developed markets (DM) have gone from around 81% to 76%, and from 90% to 88% in emerging markets (EM). This ‘home bias’ is visible not only in equities, but also in debt securities and other assets.Which is a little odd, given the benefits of diversification and the spread of portfolio optimisation theory. Particularly as passive investing has gained in popularity and it has become much easier to move capital across borders: why not take some cheap country risk?

The answer being that people don’t really like taking country risk. Here’s Smith:

“First, every individual endeavours to employ his capital as near home as he can, and consequently as much as he can in the support of domestic industry; provided always that he can thereby obtain the ordinary, or not a great deal less than the ordinary profits of stock. (WN IV.2.6: p 452-6)

“Thus, upon equal or nearly equal profits, every wholesale merchant naturally prefers the home-trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade. In the home-trade his capital is never so long out of his sight as it frequently is in the foreign trade of consumption. He can know better the character and situation of the persons whom he trusts, and if he should happen to be deceived, he knows better the laws of the country from which he must seek redress.”

As ever with Smith there’s a lot more of that before we come to his conclusion:

“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

That is, the answer to Alphaville’s question is in the one  piece of Smith that everyone knows, that invisible hand, 

but which almost everyone gets wrong. It’s not about markets nor their joys, it’s purely and simply about the 

fact that people prefer to invest at home rather than entrusting their fortunes to some swarthy Johnny Foreigner.

Publication of Wealth of Nations was 238 years ago. Isn’t it time all of this sunk in?”

Comment

Tim Worsthall is good, isn’t he. He also writes daily on the Addam Smith Institute’s  “Pin Factory Blog” (http://www.adamsmith.org). HIGHLY RECOMMENDED.  

Readers, like me, may not agree with every policy conclusion Tim comments upon )I agree with most!) but you are guaranteed an excellently expressed daily read. 

I hope Lost Legacy is beginning to get through about the modern myth of the “invisible hand” to Adam Smithian scholars here and in the international community.

FROM THE ARCHIVES

From Lost Legacy’s archives (10 November, 2010): “A Fiction Expert Quotes the “invisible Hand As If It Were True”: Eleanor Courtemanche: “The 'Invisible Hand' and British Fiction 1818-1860: Adam Smith, Political Economy, and the Genre of Realism”, Palgrave, HERE

The Publisher’s blurb:

“Some economic ideas are too interesting to be left to economists. This book argues that Adam Smith’s metaphor of the ‘invisible hand’ – in which selfish economic actions are mysteriously transformed into aggregate social benefits in a capitalist economy – implies an entire spatial and temporal system in which the morality of any particular action can only be understood in the context of society as a whole. The ‘Invisible Hand’ and British Fiction argues that while political economists focused only on the optimistic outcomes of capitalist moral activity, Smith’s model of ironic morality also influenced the work of novelists including Austen, Dickens, Martineau, Thackeray, Gaskell, and Eliot. Their realist novels represent the reconciliation between individual ignorance and systemic overview as much less stable than the economic synthesis, using omniscient narrative voices, multiple perspectives, and humor to depict a wide variety of possible outcomes. Smith shares with the realists a vision of modern society that is structured around a fragile trust in the benefits of unintended consequences.”

Comment

This books apparently is based on a mythical idea that had no part in Adam Smith’s use of the metaphor of “an invisible hand’, namely that:

“Adam Smith’s metaphor of the ‘invisible hand’ – in which selfish economic actions are mysteriously transformed into aggregate social benefits in a capitalist economy.”

In no way did Smith say anything about “selfish economic actions”. Nor did he say these alleged actions were “mysteriously transformed into aggregate social benefits in a capitalist economy”. Markers are not ‘mysterious” as Smith shows in Books I and II of Wealth Of Nations. Markets are no invisible – price signals can be see; if they were invisible nobody would know about prices.

In fact he never said anything about “capitalist economies” (a word unknown to Smith – its first use was in English was1854 in a work of fiction The Newcomes by William Makepiece Thackerary (OED). Smith wrote about ‘the age of commerce’ not capitalism.

Eleanor Courtemanche is almost right in saying: “ Smith shares with the realists a vision of modern society that is structured around a fragile trust in the benefits of unintended consequences.”

There is nothing “fragile” about “unintended consequences”. A consequence is real, not “fragile”; it is whatever happens as a consequence of an action. Whether it is a benefit or not is something else entirely.

Adam Smith’s point in his single example in Wealth Of Nations was that those traders who preferred not to invest abroad (Europe or North America), because they perceived the risks of doing were too risky and who invested locally in Britain, added to the total domestic investment, which in consequence added to local revenues and to employment (the whole is the sum of its parts). This a benefit to employees and employers, particularly in the jobs created for the poorer majority. This was a quantitative benefit.

He said nothing about the qualitative benefits of each specific investment. As Britain at the time, and for decades afterwards, had an economy dominated by tariff protection and outright prohibitions, by other distortions caused by the Act of Apprentices, Trade Guilds, monopolies of many kinds, the Act of Settlement, Drawbacks and Bounties, and the Navigation Acts, it was not clear if domestic investment led to beneficial consequences for everybody in a general sense, and Smith certainly did not presume that it did (see his critique of mercantile laws in Book IV of Wealth Of Nations).

The claim that consequential outcomes were beneficial – even from “selfish acts” – is a wholly invented myth, wrongly attributed to Adam Smith in the 1950s onwards.

4 COMMENTS:

Eleanor said...

“Hurrah! Someone is interested in my forthcoming book! I'm pleased to receive interest from neighboring intellectual fields, though I suspect our methodologies and goals are a little different.
The "invisible hand" concept has a complicated genealogy, some of which I trace in my analysis of Adam Smith's three uses of the term. You're right about the history of the word "capitalism," which I discuss in the relevant chapter. And you're also correct that Smith's use of the term is very different from the 20th century use, such as Hayek's, which made much more use of the idea of "price signals."
I suggest, humbly, that Smith's use of the "invisible hand," as trivial as it appears in the "Wealth of Nations," represents all there is of moral theory in early political economy, and that it profoundly influenced ideas of society as morally complex and ironic in novels at this time. Economics affects other cultural works, just as they can affect economic theory. We "fiction experts" specialize in things that appear to be false (stories, metaphors, ideals of social order) but also, somehow, are true.”

Gavin Kennedy said:

“Eleanor
Thank you for your response, which I read with interest and which informs me of where your ideas are coming from, and leading to.
A number of English theorists have and are commenting on Smith’s use of the metaphor of an invisible hand (Straus in recent times has come to my notice).
Some attempts are made to justify interpretations by modern economists of “Adam Smith’s use of the IH metaphor” against my insistence that his use conformed to his statements in his “Lectures in Rhetoric and Belles Letters” [1762-3] 1983, p 29 (Oxford UP/Liberty Fund), that a metaphor can have no “beauty unless … it gives due strength of expression to the objects to be described and at the same time does this in a more striking and interesting manner”.
Many of the attributions by modern economists since Paul Samuelson’s textbook, Economics (1948), have been invented, including that the IH metaphor was about the unintended consequence of ‘selfishness’. A wholly fallacious idea when applied to Smith.
You write: “I suggest, humbly, that Smith's use of the "invisible hand," as trivial as it appears in the "Wealth of Nations," represents all there is of moral theory in early political economy, and that it profoundly influenced ideas of society as morally complex and ironic in novels at this time.”
However, Smith’s use of IH metaphor was ignored at the time (1776-90) and for many decades after that, which hardly conforms to: “all there is of moral theory in early political economy”.
Sparse references, solely in passing when quoting from Adam Smith, were made by political economists (the norm was to ignore it) in the last quarter of the 19th century, and were almost absent for much of the first half of the 20th century. There was an oral tradition at Cambridge and isolated appearances of references in print (A. C. Pigou ) in the 20s and 30s (Alexander Gray). Again this was hardly “profoundly influenced ideas of society”.
Both before Smith used the IH metaphor for his purposes (16th-17th centuries) and afterwards, the impetus to use it widely had nothing to do with Adam Smith’s use at all [see my Adam Smith: a moral philosopher and his political economy, chapter 12, 2nd edition paperback, 2010, Palgrave Macmillan, for literary, theological references to 1790; and try Google’ for 19th-20th century references].
At £18.99, minus your Palgrave author's discount, it's a snip.”

Eleanor said...

“I'll be sure to check out your book, especially since your choice of publishers was so wise!
I agree that the use of the "invisible hand" today is disproportionate to the use of the term in Smith, and that it became much more widespread in the 20th century. However, the underlying idea that there can be secular laws governing a complex society (I get this from Polanyi), and that those laws are somehow morally ironic, came originally from political economy and was deeply influential in other areas of early 19c culture, especially as political economy became a source of intense public interest after 1800.
It might well be the case that this popular interest also represented a slight misreading of Smith, and that within the later tradition he came to stand for a set of values he would not necessarily have endorsed -- and I do suggest a difference between Smith and later political economists, who I think ignored much of Smith's moral judiciousness and sense of irony. The question of why this metaphor has become so widespread in this century is also an interesting one, and one that actually becomes even more interesting if one reads it as a joke or trivial slip on Smith's part, as some commentators have argued.
Thanks for your interest!”

Today’s Comment (Gavin)

This notice of Eleanor Courtemanche’s 2010 book arrived today in a Google Alert and I looked back to my original review and the brief exchange of comments by Eleanor and myself.

It may be of interest to some readers; my comments still stand. 

I note Eleanor’s remark that “especially as political economy became a source of intense public interest after 1800” and would comment that much of that interest in political economy included close interest in Adam Smith’s Wealth of Nations (1776) evidenced in numerous editions of  Smith’s “Wealth Of Nations”, edited sometimes by prominent teachers of political economy and muliple references and quotations from it in their own works.

It is relevant too that for all the attention to Smith’s Works from 1790 (when he died) to 1875, nearly 100 years later, there was practically no interest in nor mentions in print of Smith’s use of the “invisible hand” metaphor.  Since the 1960s, the invisible hand metaphor became ubiquitous across economics textbooks, scholalry articles, and, since the 1970s, across all popular media to today.

The late Warren Samuels, the most serious Smithian scholar of his (and our) generation, analysed and documented this astonishing phenomenon in his last book, “Erasing the Invisible Hand” (Cambridge University Press, 2011). 

Proponents of the myth of the ‘invisible hand’ have yet to challenge these indelible facts of the modern invention of Smith’s use of the now famous metaphor, both as to how it was mostly ignored from 1776 to the 197os, and as suddenly became the single “fact” best know to be synonymous with his name today, well beyond the confines of the discipline of economics, including schollars like Eleanor Courtemanche from English scholarship.

I would have thought, from my knowledge of Adam Smith’s teachings on rhetoric (Smith: “Lectures on Rhetoric and Belles Lettres”, 1763 (1983), Oxford University Press) that English language scholars would be familiar with the role of metaphors in the English language and not easily buy-into the common myth’s of what Smith supposedly meant when he used the IH metaphor in 1759 and 1776 (and in his posthumous Work, ‘The History of Astronomy”, 1795).

LOONY TUNES 95

1 

Onozaki T.; Yanagita T (2003) on Onozaki, T. Yanagita, T. Monopoly And Oligopoly Led By An Invisible Hand; [2] Allan M. Lees The Invisible Hand; [3] Jan Narveson The "Invisible …:

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垄断，寡头和“看不见的手” 注：没有中文版本，只有英文版本

下载全文 资源分 350 (Volume-OnPage: Volume 18, Number 3, October 2003, pp. 537-54) 

[GK: It’s still nonsense in any language]

NEW BIG BOOK ON ECONOMICS OF INEQUALITY ON THE WAY

"Economist Receives Rock Star Treatment": That was the headline yesterday on Jennifer Schuessler’s story in The New York Times. The facts bear her out. Thomas Piketty, 42, of the Paris School of Economics, seemed to be everywhere last week. Publication of his 685-page Capital in the Twenty-First Century had been moved up by two months, sales were soaring (46,000 copies so far), a triumphant tour of Washington (meeting with Treasury Secretary Jack Lew) and New York (appearing at the United Nations) has been completed. Encomiums were pouring in. “Pikettty has transformed our economic discourse,” wrote Paul Krugman in the current New York Review of Books. “We’ll never talk about wealth and inequality the way we used to.” 

Not bad for an economist who traded an appointment at the Massachusetts Institute of Technology for a job as a researcher for the French government in 1996, when he was 25.  “I did not find the work of US economists entirely convincing,:” he writes in the introduction to Capital in the Twenty-First Century:

I was only too aware of the fact that I knew nothing at all about the world’s economic problems.  My thesis consisted of several relatively abstract mathematical theorems. Yet the profession liked my work. I quickly realized that there had been no significant effort to collect historical data on the dynamics of inequality since [Simon] Kuznets [in the 1950s and ’60s], yet the profession continued to churn out purely theoretical results without even knowing what facts needed to be explained.

He went home to collect some of the missing facts.

Piketty wanted to teach at the Ecole des Hautes Etudes en Sciences Sociales, the elite institute whose faculty had included many of the foremost figures in the Annales school, including Lucien Febvre and Fernand Braudel – a group of scholars, most  of them quantitative historians, that achieved enormous influence around the world publishing in the journal Annales. Economies, sociétés, civilisations (or Annales. Histoire, Sciences Sociales as it is called today).

Piketty got that job, along with time to do the research he wanted, first producing a book in 2001 on high incomes in France since 1901, then enlisting Anthony Atkinson, of Oxford University, in a similar investigation of Great Britain and severalother countries.  His friend and countryman Emmanuel Saez, of the University of California at Berkeley, produced similar data for the US. The World Top Incomes Database (WTID) is the result.  Data on wealth, following the methods of Robert Lampman, of the University of Wisconsin, came next. Starting in 2003, Piketty began setting up the new Paris School of Economics; in 2006, he was named its first head.  He resumed teaching and writing the next year.  

Piketty’s thesis is set out succinctly on the first page of his introduction:

When the rate of return on capital exceeds the rate of growth of output, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.  There are ways nevertheless democracy can regain control over capitalism and ensure that the general interest takes precedence over private interests, while preserving economic openness and avoiding protectionist and nationalist reactions.

What are those measures?  Four chapters in the fourth section of the book draw a variety of policy lessons from the first three parts for a “social state:”

The right solution is a progressive annual tax on capital. This will make it possible to avoid an endless inegalitarian spiral while preserving competition and incentives for new instances of primitive accumulation.

Piketty says he’s left Paris only a few times on short trips since returning nearly twenty years ago.  My hunch is that, after last week, it will be a long time before he takes another. He’s left behind a beautiful book, one that will receive a great deal of attention around the world in the years to come.  He’s gone home to work on others.

Comment 

This new book by Thomas Piketty, “21st Century Capital”, of which we are going to hear a lot more about it - meantime read some reviews  HERE   HERE   HERE  HERE

I shall first read Piketty’s book and then comment upon it.  From the review/reports I have read his book looks interesting, though it seems to simply accept that modern economists’ accounts of Adam Smith (‘invisible hand’, ‘laissez-faire’ and all that) are accurate, when they patently are not.  Karl Marx is also beyond redemption in the hands of modern marxists, and weren’t up to much in Karl’s original efforts either, without mentioning the practice of modern marxists.

Notions of evolving to some kind of equality - the driver of modern social democracy - and the vague ‘hope’ of equality evolving ‘naturally’ are, increasingly in my view, just that: “notions”.  What is more interesting is what happens when people realise that the equality garb is, er, invisible too?

Hence, I look forward to my summer reading.  Meanwhile, follow the early reviews and read for yourself. I hope Thomas is a more balanced author when he is both praised and criticised than last year’s author of a very long book, David (er) Graeber.