AT LEAST ONE OTHER AUTHOR SEES THROUGH THE MODERN MYTH OF THE INVISIBLE HAND

“Yeger”posts on Opinion HERE  “The fabricated myth of the invisible hand”

This is the nearest anyone else has gotten to the truth about Adam Smith’s meaning embedded in his reference to the “invisible hand” in only three times that he mentioned it in all of his published Works:

“However, everything we know about the invisible hand is wrong. Selfish behaviour by everyone neither leads to a harmonious society nor to an efficient economy, and Adam Smith never argued that way. In fact, he frequently argued that selfish actions by certain individuals were harmful to society as a whole. The invisible hand is nothing but a fabricated myth and the picture we cherish of Adam Smith is an ideological construct.

The fundamental problem is that Adam Smith never defined the idea. Our knowledge of the invisible hand is therefore an interpretation of how Smith used the phrase. This leads to another problem: In all of his writing the invisible hand only appears 3 times.”

1:

“Smith argued that the ancient greeks were superstitious because they believed that the** invisible **hand of god, and not the laws of physics, was responsible for the natural events.”

Comment

Correct: Smith referred to the pusilanimous superstition of the Romans that their god, Jupiter, fired thunderbolts at enemies of Rome (particularly during thunderstorms). Jupiter was often depicted on coins and other images with lightning emanating from his finger. It was a powerful image for believers in a superstitious belief. 

Having experience of such thunder storms while living in Rome on a UN FAO assignment in the 1970s, I can testify to the noisy nature of such storms. In summary, this use of the invisible hand of Jupiter in Smith’s “History of Astronomy” (posthumous, 1795; written between 1744-58)  was not as a metaphor - it was an adjective describing what they believed was Jupiter’s albeit invisible hand.

2.

“In the second appearance of the invisible hand Smith argued that medieval landlords were obliged to share parts of their wealth with their servants to prevent them from starving. Thereby landlords would further the good of society without their intention or their knowledge.”

Comment:

Realistically, landlords were motivated by their dependence on feudal serfs/slaves for their production of agricultural produce upon which the landlords’ power depended. If their serfs had no food they could not labour in the landlord’s fields; the serfs laboured in order to receive their shares of what they produced - realistically, their shares depended on the landlord’s unsympathetic overseers.

There were no markets involved. The only consequence as Smith put it, was the long term “propagation of the species” not the good of society. Credit, if there was any to be noted, belonged to both landlords and their serfs, and their purely unintended co-operation, largely enforced by violence.

3.

“The final appearance of the invisible hand was in the context of national security. Smith warned that if a society was outsourcing too much of its production for higher profits national security would be threatened. However, Smith also expected merchants and industrialists to favour their home markets because they knew local laws and customs and would also prefer the reduced uncertainty of trading in close proximity. Due to this preference the merchants would further the interests of society without knowing or intending it.”

Comment

Tangental, at best.

Smith specifically refers to a merchant whose behaviour was guided by his concerns about the security about his capital if he sent it abroad to foreign jurisdictions where he did not know well the foreign people he dealt with or have faith in their legal systems should he be cheated and sought redress.

Hence, he invested domestically. His intention was to avoid the added risks of exposing his capital to avoidable foreign risks. Smith spent nine paragraphs explaining this situation in Wealth of Nations (Book IV. Chapter 1, paras I- IV). He makes no reference in these paragraphs to “national security”. It was solely concerned with the security of the merchant because it was that insecurity that motivated the merchant to keep his capital closest, intentionally under his control.

However, in acting intentionally in this manner, Smith asserts that the merchant unintentionally beneffited the domestic economy by arithmetically adding his capital to “domestic revenue and employment”, which was a “public benefit”. 

Yes, “It was the modern economists who created this entirely new Adam Smith and by extension the idea of the invisible hand.”

The process of creating myths about Adam Smith’s use of the “‘invisible hand” metaphor in post-1948 economics was boosted by Paul Samuelson’s famous textbook, “Economics: an analytical introduction” McGrae Hill, 1948-2010. That myth grips modern economics almost unanimously today.

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