Robin Sukhu posts (9 September) on The Millstone Miss. US. HERE
"THE INVISIBLE HAND” OF THE MARKET
Countless times I have heard the phrase “the invisible hand of the market” used as justification and as a defense of neoliberalism. The” invisible hand” is used as an argument to support deregulation, free trade, privatization among other things. Invariably, people mention Adam Smith’s 1776 work “The Wealth of Nations”.
I have never read “The Wealth of Nations” and I doubt that most experts who quote from the book have read it. However, I decided to download “The Wealth of Nations” and see for myself. (Here is the link to the book: http://political-economy.com/wealth-of-nations-adam-smith/)
The book is approximately 1400 pages. I searched for the term “invisible hand” fully expecting it to appear numerous times. It occurs only once. This sole occurrence it is not defending free markets at all. It seems to be offering an argument that British businesses will not exploit British citizens because the British companies will be bound by some sense of compassion for their fellow citizens. The “invisible hand” of decency will regulate British corporate interests at home. (How corporations acted towards non-British citizens is not addressed.)
I skimmed various parts of the book to attempt to get the gist of it. The book appears to be arguing for regulations to control corporate hegemony. From what I have gleaned, it seems to be an argument against free markets!”
Wonderful initiative of Robin Sukhu to open Wealth of Nations and read about Smith’s use of the ‘invisible hand’ metaphor. Tis a pity that more unconditional advocates of market economics don’t bother to do the same. Markets are better (agreed) than state-run franchises by donors to political infuence, but they do not always work when captured by “merchants and manufacturers” with dubious intentions, as Smith noted several times in Wealth of Nations, especially in Book 4!
Robin extrapolates from what he considers are the implications of Smith’s singular reference to the invisible hand and gets way-laid somewhat.
Smith’s reference was a singular one, It is not about ‘decency’. It is about a merchant who is concerned about the security of his capital if he sends it abroad, so he it invests it locally. In short, he responds to the relative perceived risks to him of investing at home or abroad.That is his motive for intentionally investing in his home market. The consequence of his intentional motivated intention is that he unintentionally is led arithmetically to add to “domestic revenue and employment” which is good for the local public. That’s all!
Yes! Nothing about ‘invisible hands of the market”, or “supply and demand”, or “general equilibrium”, or Pareto’s “theorem”, or the many other invented notions of modern economists, few of whom have read Wealth of Nations.
It’s an “Emperor is naked” moment. The crowd believes the modern myth of Smith’s use of the IH metaphor so individuals believe it too, though it has been invented and made up as a common ficition by deluded admirers of the authority of crowds, who have forgotten to read Smith (including Nobel Prizewinners) for themselves.
So congratulations Robin, you have commenced a journey leading to the truth.