ADAM SMITH ON INTENDED AND UNINTENDED CONSEQUENCES

Albert Loan (29 April) writes via Humane Studies Review Winter 1991/92 (HT for link and headline to Don Boudreax at Cafe Hayek) HERE 

“SPONTANEOUS UNDERPINNINGS OF SPONTANEOUS ORDER

“Voluntary institutions such as surety and assurance embody norms of reciprocity, trust, honesty, fellowship, and thrift without which no stable social order is possible. The evidence shows that when these norms are articulated and expressed through voluntary action, they are enhanced and strengthened to everyone’s benefit. Attempts to mimic the invisible-hand process that has generated them will not only fail; they will actively undermine and destroy these norms. Theory and empirical research combine to suggest four things: first, that such norms and institutions are needed for the successful functioning of any society; second, that the more complex the social order, the greater the need for them; third, that such institutions may appear spontaneously but cannot be deliberately created; finally, that much state action will undermine or destroy these norms and institutions, with potentially catastrophic effect.”

Comment

The above quotation has some positive philosophical elements provided we understand Adam Smith’s meaning in using the “invisible hand” metaphor’.  Smith’s use of the IH metaphor is illustrated in his “Theory of Moral Sentiments” (TMS IV.i.10: 183-5) where he used the metaphor to “describe in a more striking and interesting manner” (Smith “Lectures on Rhetoric and Belles Lettres”, 1762-3), p. 29) the more complex explanations for the behaviour of the “proud and unfeeling landlord” towards his serfs, servants, retainers, and labourers - the “thousands whom he employed”, mainly in desperate servitude.  

The labourers, etc., laboured in the landlords fields in return for food for themselves and their faamilies; the landlord fed them from the produce of his fields.  Labourers could not labour without food; landlords depended on their labourers for without them they could not sustain their life-styles and ‘greatness’.  Instead of a longish paragraph detailing the relationships that promoted the behaviours of both landlords and labourers, Smith chose  the metaphor of “an invisible hand” to describe in “a more striking and more interesting manner” the mutually dependent relationships exhibited in his example, specifically that landlords were “led by an invisible hand” to “make nearly the same distribition of the mecessaries of life, which would have been made had the earth been divided into equal portions among all its inhabitants” (WMS IV.i:184 [last line] -185 [first line]. 

Moreover, Smith he introduced the interesting observation about “intended” and "unintended" consequences” in the same paragraph: landlord’s were motivated to take the action of feeding their labourers from the surplus above the landlord’s requirements, and that action enable their labouters to continue working his fields (without food the labourers’ could not labour - nor could their landlords eat!).

Further, and significantly, the landlord’s motives led to an action that caused the absolutely necessary basis of the food-for-labour and labour-for-food exchange (albeit enforced by the brutalities of the overseers) which had unintended consequences too: “and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species”.

So the complex relationship that evolved socially from the original mass slavery of the early Empires (Egypt, Babylon, China) into War-Lord and Feudal times in Europe that the “proud and unfeeling” landlords exchanged with his serfs, and, from those times, into tenant agriculture and, eventually into commerce and markets with population growth across Europe.

Since Smith’s times, intended and unintended consequences have come to be applied in modern economics (Hayek, for instance).  But the invisible hand metaphor has come to mean something trivial and profoundly in error in the idea of something “mystical”, even theologically “miraculous”, allegedly operating in markets, supply and demand, prices, self-interest and general equilibrium.

Whereas, in Smith’s presentation he refers to the motives of agents that leads them to actions that have intended benign (or malign) consequences, that in turn may have unintended consequences, that also may have beneficial or detrimental consequencs to wider society.  

Thus, we get the odious nonsense that selfish motives have benefial outomes for society, despite the intentions of selfish motives causing the initial actions, whereas this may or may not be an unintended consequence of the original selfishness of the original agents.

Ultra-conservatives who parade ands celebrate the notion that their selfishness has beneficial consequences (because Adam Smith said so!) are comforted by the "invisible hand" myth. Leftists also parade the IH myth that ultra-conservatives rejoice in because it fits their anti-market hostilities in favour of states run by politicians, bureaucrats, advisers, PR experts, interest groups, lobbyists, media folk, and 'celebrities'. 

I suggest we stand firm in favour of "markets where possible; state where necessary".