Great Writing from Dartmouth

W. Simons writes (5 June) in At This Point (The Dartmouth History Blog) HERE

‘On Alan Greenspan, Metaphors, and Allegory (With a Detour to Montaillou)’

There was first of all Alan Greenspan’s op-ed in the Wall Street Journal of March 29, 2011, which contained this gem:
Today’s competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith’s “invisible hand” that is unredeemably opaque. With notably rare exceptions (2008, for example), the global “invisible hand” has created relatively stable exchange rates, interest rates, prices, and wage rates.

….This is why, to come back to my point of departure, I do have a certain amount of sympathy for Greenspan’s formulation, droll as it might seem at first. With all his linguistic prowess and educated in a world that was blessedly Google-free, he at least had the wisdom to remind us of Adam Smith’s old metaphor, the invisible hand. It has been used and abused in the past, sure enough, and Greenspan himself stretched it to absurd limits, so to speak. And yet, his op-ed may have succeeded in breathing new life in the metaphor. We can now once again contemplate the key question: whose invisible hand exactly is this, anyway?

Comment
I’ve had my problems with Dartmouth people in the recent past (see earlier Lost Legacy posts and comments this year) but I have to say this extract is among the very best pieces I have read recently. Well written, erudite and informative, from an author well versed in a good literary style (if only I could write nearly as well). The author is in the Dartmouth History department.

I recommend heartily that readers follow the link and enjoy good writing seldom found nowadays (at least outside the History department of Dartmouth College).

I shall pass over the references to the metaphor of an invisible hand – Simmons’s focus is on what Greenspan made of the metaphor when he ‘stretched it to absurd limits, so to speak’. Read the rest of the essay on ‘allegories’ and ‘metaphors, and the Detour to Montaillou!

A Libertarian With Sensible Doubts About the Invisible Hand

Shawn Reed
 posts in Journal Talk (HERE) a comment on Dan Klein and Brandon Lucas’s article: “In a Word or Two, Placed in the Middle: The Invisible Hand in Smith’s Tomes”, HERE: discussed on Lost legacy in February.

‘I find myself, in general, agreeing with the possibility of a phrase in the middle being of extra-importance, somehow, to Smith, but I do find some of the arguments for that importance to be somewhat lacking, even to one inclined to be supportive of the notion, to say nothing of how a reader unsympathetic with the priority of the Invisible Hand in Smith would take the arguments. …

The Invisible Hand is certainly an important idea, especially to those of us sharing libertarian/free-market priors, but I am not convinced that its location in the book is much more than a divined pattern where no pattern exists. If our minds are predisposed to see stories where no story exists, could this not likely be one of those instances? …

There seem to be two main cases discussed in the paper for why smith would put something so central in the middle (contrary to the general inclination of putting the important at the beginning or the end). Either Smith was intentionally obscuring his controversial views from the censors/casual readers, and leaving that controversial view to be found by those with eyes to see, or he saw a certain aesthetic value in having his most important thought in the middle. If he was being intentionally obtuse, what was Smith hiding from? Religious persecution? Doubtful. Political outrage/maintaining his cultural royalty position? If that were the case, aren’t there enough other other relatively incendiary/anti-government-intervention passages in the book that would succeed in pissing someone off if they were going to get pissed off by the idea of an invisible hand doing better at organizing markets than their own machinations? If “economics is a challenge to the conceit of those in power,” then isn’t that challenge made clear elsewhere? Why bother with esoteric writing when so much of it is exoteric? I realize that, having still not read any leftist understandings of Smith, I may still be laboring under the false notion that Smith’s pro-market, anti-governmental-intrusion (by and large) is plain to any fair-minded reader encountering WN and TMS. Perhaps I already have had the blinders lifted, so to speak, and I would be labeled a loon if I were to explicate Smith with my modern eyes in 1780. In what ways would Smith’s Invisible Hand be a challenge to the status quo, that he would need to obscure its centrality?’ …

Comment
The doubts expressed so thoughtfully by Shawn Reed are worthy of readers of Lost Legacy following the links and reading them through. Let me explicate what was going on in Smith’s mind based on careful interpretation of exactly what he was doing. My view is that the Invisible Hand as used by Smith was meant metaphorically. We do not have to read into the two occasions on which he used the metaphor complex deeper mysteries ascribed to Smith as argued by Klein and Lucas. On the evidence that Klein and Lucas have assembled so carefully, I accept that the centrality of the metaphor in both of his books was intentional (see Lost Legacy: October, November 2009, and April 2010) but the question is: what was Smith’s intention? I wrote a detailed answer to Klein and Lucas is ‘The Centrality of the Invisible Hand in Smith’s Books: Using a Metaphor as an Antidote to 'Tiresome' and 'Less Pleasant' Narrative Styles’, which is downloadable (free) on the Social Science Research Network (SSRN) here:

Briefly, Smith had no need to hide his basic critique of the prevailing ideology of government intervention, known as Mercantile Political Economy. He carefully avoided attacks on living individuals, was deferential to the King, raised no flags of revolution and was circumspect in his policy recommendations. He was no ideologue; his proposals tended to be modest.

Abstract:

‘Daniel Klein and Brandon Lucas’s highly original article (from a suggestion by Peter Minowitz), “In a word or Two, Placed in the Middle: the invisible hand in Smith’s Tomes” (October, 2009) is discussed. This paper presents an alternative account of the role of the metaphor in Adam Smith’s thought. Part 1 (‘Centrality of Smith’s Invisible Hand metaphor’) acknowledges the persuasive evidence from Klein and Lucas for the physical centrality of the metaphor in Smith’s two books. In support of centrality, details are provided of his close involvement in the print production of his books. Part 2 (‘Smith on metaphors’) considers Smith’s teachings on the use of metaphors. Part 3 (‘Significance of the invisible-hand for Smith’) discusses the two cases where Smith used the invisible hand as an antidote to ‘tiresome and less pleasant’ narrative styles by showing that a metaphor represents in a ‘more striking and interesting manner’ their objects, using the examples of how ‘rich landlords’ and some ‘merchants’ acted in conformity with the absolute necessity of their circumstances, with unintended consequences. Misleading explanations by Paul Samuelson and others derived since the late 1940s of Smith’s use of the invisible-hand metaphor are challenged.’

To Download a copy of the text from the Social Science Research Network, visit HERE:

Further comment:
Smith also lectured on Rhetoric and we have student notes of those lectures (Lectures on Rhetoric and Belles Lettres: 1762-63 [1983: Liberty Fund]). And in the same chapter Klein and Lucas derived the centrality thesis, Smith made specific references to the role of metaphors, which he illustrated, once each in both Moral Sentiments and Wealth Of Nations.

In both examples, once in Moral Sentiments and once in Wealth Of Nations, the context was definitely not about competitive markets. There was nothing competitive about life for labourers and their families in the quasi-feudal regimes of ‘Rich landlords’ (TMS IV.ii: 184-85), nor for merchants in 18th-century mercantile Britain (WN IV.ii.9: 456).

Neither circumstance was driven by market considerations: the landlords had no choice but to feed their serfs out of their grain stores if they were to be fit to labour for them on the land each season and survive the winters each year, and the merchants who chose to invest locally were led by their insecurity over sending their capital abroad, hence some, but not all, preferred to invest only at home where their capital was within their sight and control. Necessity led landlords to supply food to their labourers and the insecurity of merchants led them to invest locally. These were the objects of the metaphor of ‘an invisible hand’.

The metaphor of an invisible hand that ‘led’ landlords and some merchants to behave as they did was expressed by the metaphor in a ‘more striking and interesting manner’ (see Smith on metaphors in his Lectures on Rhetoric and Belles Lettres; 1763-63; 1983: 29). That’s all!

From the metaphor – hardly noticed until the late 19th century – a theory has been invented linking it to the market (even to the ‘hand of God’) from the 1950s, which was not justified by the context in which Smith used the metaphor, nor by Smith’s avowed use of metaphors in his lectures that he taught his students. The erroneous belief in the 'mystical' - even 'miraculous' - invisible hand led many economists to attribute to markets wondrous powers they never had and in broadcasting their beliefs they misled themselves and those they influenced into a complacency that ignored what was happening in the real world as shown in the current financial crisis - as witnessed by Greenspan's confession last year.

Shawn Reed has begun his journey towards the truth about the invisible hand. I hope what he reads may help him clarify his current doubts and questions.

An Unbridled Error

Stephen Fleischman, writer-producer-director of documentaries (see www.amahchewahwah.com, e-mail stevefl@ca.rr.com), writes in the
The Smirking Chimp HERE:

“Hypocrisy Unbridled”

“Going back to Adam Smith, the concept that the "invisible hand" of the free market would keep the capitalist economy in balance has been the conventional wisdom. Capitalism must grow or die. And grow it did. Mergers and acquisitions became the modus operandi as corporate enterprises struggled with their competitors to survive.”

Comment
Stephen Fleischman writes a racy and articulate polemic against the “hypocrisy” of certain ideas about capitalism, as taught him from his long experience in tv news media.

Yes, the “conventional wisdom” may very well be as stated above, but this view has nothing to do with anything Adam Smith wrote. The “conventional belief” was an invented myth by certain economists in the 1950s. Indeed, it is a distortion of the significance of Adam Smith’s single reference to “an invisible hand” in Book IV of his Wealth Of Nations which also discusses markets in Books I and II, without mentioning “an invisible hand”.

This is more than an academic quibble. If you believe that markets are kept in “balance” (whatever that means!) by such an entity then you are in severe danger of complacency when events show that markets are out of “balance”.

Recent events have shown how fragile such beliefs attributed to Adam Smith are with leading personages, such as Alan Greenspan, who included in his very public “mea culpa” a renunciation of his belief in the “invisible hand”, as if Adam Smith had somehow let him down and was responsible for his own self-deception, courtesy, it may be said, of listening too much to Ayn Rand.