FROM ACORNS BIG TREES CAN GROW

Asad Zaman posts (29 June) on WEA Pedagogy Blog HERE

Adam Smith & the Invisible Hand

"In response to a comment by David Chester regarding Adam Smith and the Invisible Hand, I am reproducing the section in the paper which deals with this issue. This answers his question about how what is attributed to Adam Smith differs from what he actually said.

[Excerpt from the paper: Failures of the Invisible Hand]

Section 6: Recent Vintage of the Invisible Hand

The main goal of this section is to show that the modern interpretation of the IH is relatively recent. The idea that Mankiw (together with other modern economists) attributes to Smith is not actually present in Smith’s writings. In fact, modern writers borrow the authority of Adam Smith to provide weight to a very dubious idea of recent coinage.

We first note that modern interpretation of the “IH” is radically different from any interpretation of this concept that existed before the second half of the twentieth century. There is a growing body of literature (e.g., Grampp, 2000; Minowitz, 2004) which insists that the metaphor used by Smith was never meant to be anything more than a metaphor, and that the meanings inferred from Smith’s idea of IH by the modern economists support only their own interpretation of economic policies. Kennedy (2009) shows that three leading modern economists laud the IH as the “profoundest” and “most influential” contribution of Adam Smith. Nonetheless, their interpretation of the term and its significance is not supported either by Adam Smith or by readers of Adam Smith until the late nineteenth century."

The above is from a paper availale from SSRN HERE

Amir-ud-Din, Rafi and Zaman, Asad, Failures of the 'Invisible Hand' (July 15, 2013). Forum for Social Economics, Vol. 45, Iss. 1, 2016. Available at SSRN: https://ssrn.com/abstract=2293940 or http://dx.doi.org/10.2139/ssrn.2293940

SEE ALSO: REFERENCES:

Ashraf, N., Camerer, C. F., & Loewenstein, G. (2005). Adam Smith, behavioral economist.

Journal of Economic Perspectives, 19, 131–145

Blaug, M. (2007). The fundamental theorems of modern welfare economics, historically contemplated. History of Political Economy, 39, 185–207

Grampp, W. D. (2000). What did Smith mean by the invisible hand? Journal of Political

Economy, 108, 441–465

Kennedy, G. (2009). Adam Smith and the invisible hand: From metaphor to myth. Econ Journal Watch, 6, 239–263

Minowitz, P. (2004). Adam smith’s invisible hands. Econ Journal Watch, 1, 381–412

Rothschild, E. (1994). Adam Smith and the invisible hand. The American Economic Review, 84, 319–322

COMMENT

The truth, albeit slowly, is emerging about the modern misinterpretation of Adam Smith's use of the metaphor of an invisible hand. At present, that truth is confined to the sidelines of economic discourse but what begins there can spread towards the core.

I am encouraged. Follow the link and spread the news ...