ANOTHER GREAT ARTICLE IN EVONOMICS
Professor David Sloan Wilson posts (28 January) on EVONOMICS HERE
“Failed Economics: Tyranny of Mathematics and Enslaved by the Wrong Theory”
“The strange world of modern economics”
Adam Smith (1723-1790) observed that people following their narrow concerns somehow combine to make the economy work well, as if guided by an invisible hand. …
…. When Adam Smith invented the metaphor of the invisible hand, he was saying that human economies are like bodies and beehives in this regard. …
… Smith did not say that people are entirely self-interested. That would come later, from his followers and disciples. He had a sophisticated and nuanced conception of human nature that he described most fully in his book The Theory of Moral Sentiments. According to Smith, people have genuine concern for others in addition to themselves. They have a sense of right and wrong that leads to the establishment of norms enforced by punishment. They are interested in their reputation as much as their monetary income, and so on. Shakespeare would have felt comfortable with Smith’s conception of human nature. People still responded primarily to their local social environment, so the invisible hand metaphor remained apt, but their preferences couldn’t be collapsed into a single generic concept of self-interest.
The exciting ideas currently being posted on EVONOMICS are a pleasure to read and I srongly urge readers of Lost Legacy to follow the link and start re-thinking where we are in economics.
The ideas I have been trying to articulate since my book, Adam Smith’s Lost Legacy, (Palgrave-Macmillan) was published in 2005 are finally finding indirect re-inforcement in EVONOMICS.
Of course, as seem above they are not yet up to speed on Adam Smith’s use of the “invisible hand” metaphor. For example, he did not ‘invent’ the IH metaphor - it was widely in use from the 17th century, mainly in a theological context, though also in literature (Shakespeare, for example).
Smith’s use of the IH metaphor was sparing - once in Moral Sentiments (1759) and once in Wealth of Nations (1776). Note that his use was not metaphoric in his History of Astronomy (posthumous, 1795). Note also David Sloan Wilson refers to Smith’s singular use above “as if guided by an invisible hand” which is a simile, and not strictly metaphoric, as defined by Smith in his Lectures on Rhetoric and Belles Lettres.
David Sloan Wilson is correct in his description of Smith’s thoughts in Moral Sentiments, which link well with Smith's treatment in Wealth of Nations of the mutual dependence of each on all others as Smith noted:
“In civilised society [men] stand at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons… But man has almost contant occasion for the help of his brethren, and it is vain to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them it is for their own advantage to do for him what he requires of them” (Wealth of Nations, WN I.ii.2. p. 26]
It is in this mutual dependence that human kind cannot be purely rational egoists whatever mathematicians may hve thought. Humans are not purely physical entities subject to the unchanging (Newtonian) laws of gravity, predictable over endless time. The are mutually inter-dependent and each must accommodate to joint decisions in bargaining processes (the subject matter of the immediately following paragraphs in Wealth of Nations, WN I.ii.2. pp. 26-27).
Having spent 35 years researching, studying Smithian bargaining, teaching, consulting, and writing at all levels and in several countries, I am conviced that the homo-economicus model is an absurdity. Associating Adam Smith with such ideas is a gross libel of an innocent moral philosopher. David Sloan, presumbly impressed by the near unanimity of most modern economists on their misinterpretation of Adam Smith, still claims that Smith’s use of the the invisible hand metaphor remains apt. It doesn’t and never was apt. Paul Samuelson misled generations of readers of his Economics (1948 and 19 editions). It is time to lay that myth to rest.
FOLLOW THE LINK AND START READING EVONOMICS REGULARLY!