A SLICE OF THE HISTORY OF EARLY MONETARY POLICY

Monique Spence posts (8 May) in The Cayman Reporter HERE

“The Future of the Cayman Islands Part III”

‘Economics, Politics, Geo Political Economics”

“Adam Smith’s ‘Wealth of Nations’ first published in 1776 is considered a precursor in the Liberal Economics Theory. Adam Smith dispersed the idea of a “national economy” in which nation’s determined economic conditions, and instead advocated replacing the “national” economy with a “cosmopolitical or world-wide economy.” Writers such as Friedrich List and Alexander Hamilton wrote critiques of the underlying of Smith’s Liberal concepts.

Liberal economists believe that the political and economic realms are separate, and that they should remain separated, so that political elements interact independently and without influence over the economic realm, which itself acts independently and separately of the political realm. This is the foundation for the ideas of the “free market” and the often quoted Adam Smith phrase, “the invisible hand of the free market,” which was only mentioned once in the entire volume of the Wealth of Nations. The ascension of liberal theorists marked a separation in the academic and theoretical studies, in which Political Economy was separated as a field, and saw the emergence of Political Science and Economics as separate studies.”

Comments

The is extracted from a critique of British foreign policy towards the recently independent USA (follow the link - worth a read). Modern versions of his views deserve scepticism as they are often unrepresentative.

Monique is right to refer to the fact that the “invisible hand” is only mentioned once in Wealth of Nation (and once only in his Theory of Moral Sentiments) and in neither case was it related to the “free-market”.

Indeed, after Smith died in 1790, the “invisible hand” was mentioned in print only a couple of times until 1875, and then a few other times in print up to the 1930s. However, after 1948 it began to be widely quoted as “the invisible hand of the free market” and mis-credited to Adam Smith.

It was wrongly attributed to Adam Smith (as was “laissez-faire”, another idea Smith never mentioned) and declared to be a “foundation idea” of his. It was not.

Monique is on the right track and the rest of her essay is interesting.