EVOLUTIONARY SCIENCE FINDS THE 'INVISIBLE-HAND' DEFICIENT

David Sloan Wilson Departments of Biology and Anthropology, 

Binghamton University, Binghamton, NY, and John M. Gowdy,

Department of Science and Technology Studies, Rensselaer

Polytechnic Institute, Troy, NY, USA (December, 2014) post in the

Journal of Economics HERE

“Human ultrasociality and the invisible hand: foundational developments in evolutionary science alter a foundational concept in economics”

Abstract

“Advances in the study of social behavior require a revision in the economic concept of the invisible hand, which states that self-interested behavior leads to well-functioning societies without individuals having the welfare of the society in mind. Evolutionary theory shows that self-interest does not robustly benefit the common good because behaviors that are “for the good of the group” seldom maximize relative fitness within the group. The evolution of group-level functional organization requires a process of group-level selection. Species that have become highly adaptive at the group level are called ultrasocial. The idea that an invisible hand leads to social harmony is valid primarily for ultrasocial species, where selection at the group level results in individual-level behaviors that produce group-beneficial outcomes. Individuals do not necessarily have the welfare of the group in mind, but neither do their behaviors or underlying proximate mechanisms resemble the economic concept of self-interest. Evolutionary science therefore provides a valid concept of the invisible hand, but one that is different from the received version, with far-reaching implications for economics, politics, and public policy.”

Comment

It is not just that the study of social behaviour that requires a revision “in the economic concept of the invisible hand”. It also requires a mandatory revision of the so-called economic concept of the so-called “invisible hand”, because as presented the above absolute statement is in error.  

If the so-called invisibe-hand theory has been challenged by the “study of social behaviour”, it suggests that both disciplines are now widely contaminated with a false at theory.

Self-interested behavior” does not always lead to “well-functioning societies without individuals having the welfare of the society in mind”.  Self-interested behaviour may or may not “lead to well-functioning societies”, which is an uncontestsble fact. Adam Smith is usually quoted confidently (and mistakenly, as it happens) as the author of the metaphor of “an invisible hand” because he used it twice only in two original statements in “Moral Sentiments” (1759) and “Wealth Of Nations” (1776) and once in his posthumous “History of Astronomy” (1795). A careless misreading of what he actually wrote, which he sharply qualified in many other statements throughout both of his main texts led to today's confusion on what he meant. Quite separately, false versions circulated among political economists in the 19th century, first in an oral tradition in  Cambridge (UK), and then in a few books by modern economists in the early 20th century. Then after 1948 Paul Samuelson gave the false theory ‘legs’, so to speak, in the USA, the false theory of the “invisible hand” in print took off across academe and across the media until by the 21st century the “invisible hand” theory was almost unanimous and widely believed.

I am encouraged by the Abstract by David Sloan and John Gowdy that appears to raise appropriate questions about the applicability of the “invisible hand” in evolutionary science.  Exectly the same questions should be asked about exponents of the false notion that it applies in economics.  Moreover, instead of reading short passages from Adam Smith (who remains the innocent victim of academic posterity in these matters), of the invisible hand read all ot his Works instead in which he introduces the metaphor twice only with his references to the “public good”.  Such reading also reveals over 50 cases where he discusses self-interested actions by people that led to what could only be described as “public bads”.  

Moreover, reading Book IV of Wealth Of Nations would do much to correct false notions about what he said on the “invisible hand”. He described Book IV as a “violent” attack on the entire “commercial system”, then operating in Britain in the 18th century and he was repeatedly uncomplimentary, to put it mildly, about “merchants and manufacturers”, and their private self-interested behaviours that were often at the expense of the public good.

That evolutionary science points to errors that challenge a so-called” foundational concept in economics” should surprise no economist who has read Adam Smith closely.  

Scroll down previous posts in ‘Adam Smith’s Lost Legacy’ for detailed discussions of the myths about Adam Smith’s alleged use of the ‘invisible-hand’ metaphor that allegedly states that “self-interested behavior leads to well-functioning societies without individuals having the welfare of the society in mind”.  It is not what Smith wrote or regarded as a general truth.