MISLEADING ASSERTIONS ABOUT THE INVISIBLE HAND
Andrew Carl Bosworth at Sichuan University in Chengdu, China, posts on “Multipolar Future”: complexity, national autonomy, individual sovereignty, neutrality, balance of civilizations” HERE
“Olde-tyme classical economists often talked about the wisdom of the market, the “invisible hand.”
Quote: “In economics, the invisible hand is a metaphor used by Adam Smith to describe unintended social benefits resulting from individual actions. The phrase is employed by Smith with respect to income distribution (1759) and production (1776).”
This a false hypothesis. The fact is that the “invisible hand: was hardly mentioned by “classical economists” who lived after Smith died in 1790. Indeed, the invisible hand” metaphor was not mentioned by anybody while Smith was alive and when his two books, Moral Sentiments (1759) and Wealth of Nations(1776) were published and circulating in Europe and North America.
Most readers appear not to have noticed his use of the fairly common expression of the “invisible hand”, circulating among theologians and preachers in the 17th and 18th centuries (see the great Calvinist orator, the preacher, Thomas Chalmers, in 1836, who, almost alone mentions Smith’s use of the IH.
For Smith, though, he used the invisible hand as metaphor, not as a descriptive proper noun. The first mentions of the IH and Adam Smith appear in the 1870 (5 mentions) amd later from the 1890s, mentions appeared intermittingly until Paul Samuelson included the IH in his famous textbook on economics (19 editions and 5 million sales to 2010). From then on the modern phenomenon of linking Adam Smith to the modern version of the IH, took off exponentially, to many hundreds of thousands per year and continues daily today.
The quote from a classical textbook is a modern construction of events and not an historical one. ‘Providence’ reported Smith in TMS divided the land between humans; history records a different sequence of events, reported more accurately by Richard Cantilon: “It does not appear that Providence has given the right of possession of Land to one man preferably to another; the most ancient Titles are founded on violence and Conquest” (Cantillon: Essay on the Nature of Commerce, 1730-34/1931).
Far from a supposedly heavenly arrangement, the agricultural systems that flourished for millennia up to Smith’s times were based on the mutual, often violent, dependence of the landowners on their serfs, slaves, peasants, and labourers - who were the source of their “greatness’ - and their labourers depended on their oppressive Lords - the source of their sustenence from a share of the products of their labour. Without serfs, the landlords would soon perish; without landlords, the serfs would soon starve. But their mutual dependence worked, subject to events - invasions, plagues, famines, wars and environmental disasters. Moreover, Smith drew the conclusion that the long-term consequence was one of the “propagation of the species”.
Turning to the IH in Wealth of Nations we find a too general interpretation of Smith’s use of the IH metaphor by Andrew Carl Bosworth: He writes: the “phrase” (?) describes “the unintended social benefits resulting from individual actions.” This is far too general an interpretation, though very common in modern textbooks and lectures.
In WN, Smith is discussing a singular case of a merchant who is concerned about the risks to his capital if it is sent abroad, out of his sight and control, and into the hands of a foreign legal system of which he is unsure of its probity. In response, this merchant invests his capital locally where he is surer of the integrity of the legal system, where he knows the other merchants with whom he deals and is confident of the independence of outcome if he has cause to seek legal redress.
However, by acting to protect his interests he intends only his security but in doing so he unintentionally also adds his capital to “domestic revenue and employment”, which is a “public benefit”, albeit outwith his singular intentions.
There is nothing about the IH describing the “unintended social benefits resulting from individual actions” as a general rule. This is an extraordinary and unwarranted assertion by Andrew Carl Bosworth (and by those who generally assert Smith’s singular example into a general rule).
Indeed, Book 4 of WN, containing the singular use of the IH metaphor in the above example, there are several dozen examples of the intended motivated actions of merchants (and government ministers) in which the outcomes, documented by Adam Smith, are clearly against the interests of consumers, and other merchants, and actually present a mortal threat to the broader interests of the society of which they are members, including inter-country relations and escalating tensions leading to retaliatons, blockades, and outright warfare, which were all too common in the 18th century.
Smith regarded his analysis in Book 4 as a “violent” criticism of his country’s foreign trade mercantile policy. The invisible hand metaphor did not “describe unintended social benefits resulting from individual actions” as a general rule. Individual actions could and still can provoke violent responses and widespread social suffering too, hence it could not have been a “general rule” of Adam Smith's.