LEGAL EXPERT MISQUOTES ADAM SMITH AND "DESPISES' PEOPLE WHO MISQUOTE ADAM SMITH!
Stan Burman: “an entrepreneur and freelance paralegal who has worked in California and Federal litigation since 1995 and has created over 300 sample legal documents for California and Federal litigation, posts (8 August) on Useful Qutations HERE
“Quote by Adam Smith on the invisible hand”
“A quote by Adam Smith on the invisible hand is the topic of this blog post”.
“Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to society. He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was not part of his intention.” Adam Smith”
The above quotation from paralegal who has “worked in California and Federal litigation since 1995” and who is “the author of over 300 sample legal documents for California and Federal litigation” is an embarrassing example of the work of a supposedly proficient and accurate legal professional. I would have severe reservations about employing Stan in such a role, especially if my freedom or my client’s freedom depended on the probity of his legal work.
Stan’s version of Adam Smith’s statement on the “invisible hand” metaphor and the context in which Adam Smith used it is erroneous. Here is what Adam Smith actually wrote in Wealth of Nations:
“As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By preferring the support of domestick to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other eases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it” (WN IV.ii.10: p. 456).
Smith was making a specific statement relating to the context he was writiing about. The context was that of a merchant who intentionally avoided foreign trade because of his reservations about the probity of the foreign merchants he would have to deal with. He therefore avoided foreign trade and inested locally. In so doing he unintentionally added to domestic capital and employment.
It is not correct to generalise to all merchants from a necessary consequence of the risk-averse merchant’s actions by “persuing his own interest.” The risk averse merchant benefits society but there are many cases of merchants “pursuing their own interests” who intentionally seek to benefit themselves at the expense of others in society. This can be seen in the clamour by many merchants to impose tariffs on imported goods, even outright prohibitions on foreign imports, which necessarily reduces foreign competition and raises domestic prices against the interests of domestic consumers. Such behaviour is definitely not a domestic public benefit.
Stan, however, comments thus, and criticises Adam Smith as if Adam Smith, not Stan, made the mistake that was wholly down to Stan’s incorrect version of that which Adam Smith correclty stated. Stan asserts:
“This is an excellent quote by Adam Smith and one that I totally agree with as people who are acting in their own self-interest do tend to provide an overall benefit to society. I do agree that the invisible hand can work wonders but I also realize that there are many individuals and in particular, large corporation that act only in their own self-interest without any regard for the rest of society such as the big banks and other politically connected companies. I despise the people who mindlessly spout the quotes of Adam Smith to suit their own agenda. Now that I have read more quotes by Adam Smith I see clearly now that while he clearly believed in free enterprise he was not as much of an advocate for limited government as many “free market” ideologues make him out to be.”
Instead of reading quotes from Adam Smith, Stan should read Wealth of Nations itself. He even makes the following statement;
“I despise the people who mindlessly spout the quotes of Adam Smith to suit their own agenda” [!]. A case of the pot calling the kettle black?