ANOTHER SMALL SIGN OF PROGRESS

Asad Zaman posts on WEA Pedagogy Blog HERE

“Failures of the Invisible Hand”

The introduction of an economics textbook by Manikiw quotes Adam Smith regarding the invisible hand and deduces the following claims:

1. Participants in market economies are motivated by self-interest. (SI)
2. Decentralized market economies work very well, and maximize the welfare of society as a whole. (FM: free markets)
3. The reason for excellent functioning of decentralized market economies is that all participants are motivated by self-interest. This self-interest works better than love and kindness in terms of promoting social welfare. (GG: greed is good)
4. The principles listed above were summarized in the concept of the “Invisible Hand” by Adam Smith. (AS)

Manikiw writes that these ideas remain central to modern economics. Our paper on “Failures of the Invisible Hand” shows that all four of these claims are wrong. Some years ago, I was naive enough to think that a refutation of key claims of a central text would at least arouse debate. But I have long since learned that challenges to the core ideologies are simply not to be discussed. THe paper is rejected by many journals with superficial comments not engaging with or disputing the claims.

Comment

Another small sign that the discussion about Adam Smith’s use of the “invisible-hand” metaphor is slowly attracting attention and Lost Legacy is not entirely alone in questioning the current widespread consensus in mainstream economics that it refers to, variously, markets, self-interested “greed” miraculously, or at least mysteriously, co-ordinating the billion/trillions of decisions by producers and consumers which mediates supply and demand to bring about the public good and etceteras.

While I do not agree with everything that the authors, Rafi Amir-ud-Din and Asad Zaman, say in support of their contentions in “Failures of the ‘Invisible Hand’” (15 July, 2013) , I do applaud their efforts and I am pleased they have posted it on the Social Science Research Network, which has a large pool of economists either subscribing their own papers (thus recording and dating their scholarly priorities; sometimes important to faculty recruitment boards) and is useful for reading the papers of others in their broad fields of work.

Hence my congratulations to Rafi Amir-ud-Din and Asad Zaman. I shall possibly comment on their paper later (though I am intensely busy just now).