Saturday, October 29, 2016

Adam Smith's Metaphoric "invisible hand" and the Mythical Invisible Hand of Modern Economists

David Sloan Wilson posts (6 September) on EVONOMICS HERE
The Death of the Invisible Hand: Why the Narrow Pursuit of Self Interest Always Fails. Regulation comes naturally for small human groups but must be constructed for large human groups.”
“New theories are not good enough, however. We also need to change the metaphors that guide behavior in everyday life to avoid the disastrous consequences of our current metaphor-guided behaviors. That is why the metaphor of the invisible hand should be declared dead. Let there be no more talk of unfettered competition as a moral virtue. Cooperative social life requires regulation. Regulation comes naturally for small human groups but must be constructed for large human groups. Some forms of regulation will work well and others will work poorly. We can argue at length about smart vs. dumb regulation but the concept of no regulation should be forever laid to rest.”
COMMENT
David Sloan Wilson is on the right track (metaphor) but his focus in on modern versions of an 18th-century metaphor, whereas modern versions have been misattributed to Adam Smith (1776), who used the metaphor quite differently from that which Paul Samuelson’s (1948) invented version wrongly asserted to be Smith’s.
In fact, today’s words “an invisible hand” have no metaphoric value in modern times - they are used by modern economists as an actual entity (though it does not exist!).  Metaphors do not exist materially. See Adam Smith on metaphors in his “Lectures on Rhetoric and Belles Lettres” (1762-3), as taught by him from 1748 to 1764. Also check the Oxford English Dictionary’s entry.
Moreover, there is no real connection between Adam Smith’s use of “an invisible hand” as a metaphor in “Wealth of Nations” (1776) and such modern attributions as it being about “the market”, “supply and demand”, “economic equilibrium”, “Pareto’s theorems” “general equilibrium”, “consumer utility”. “economic growth” and scores of other attributions presented in the daily media - it has even become common in political discourse, especially in dictatorships and for the secret misuse of political power.
Metaphors do not “Guide” actions, they describe in an interestng manner, for example as in Adam Smith’s brilliant metaphor of the “Daedallian wings” of paper money compared to that of solid gold (Wealth of Nations). The metaphor’s meaning is in the use of the words in their context. 
Adam Smith was not in favour of “unfettered competition” (David Sloan should know that). Smith was unimpressed with the competitive qualities of actual “merchants and manufacturers” who favoured, lobbied, bribed, and otherwise induced governments to curtail imports, even to ban them outright (“Jealousy of trade”), to reduce competition and thereby raise prices. 
Smith never hinted at support for “no regulation”, as he makes clear in Wealth of Nations.
Samuelson, a brilliant mathematician (worthy of the title of mathematical genius) started off the wildest goose chase (metaphor!) by his incorrect attribution, to Smith's 'invisible hand', which was picked up by the 5 million readers of his textbook, many of whom became economists (including myself), media commentators, and politicians, and now Samuelson’s error is reproduced in stone (metaphor!) across the world’s media.

My Blog: www.adamsmithslostlegacy.blogspot.co.uk has campaigned against Samuelsons’ mistaken version of Adam Smith’s use of the IH metaphor since 2005. There are faint signs that the message is getting across. I prefer David Sloan Wilson to join that campaign and not “throw out the baby with the bath water” (metaphor!) in attacking a wholly innocent Adam Smith.

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