Tuesday, April 05, 2005

Invisible nonsense

Thanks to the wonders of Google I receive a Adam Smith alert each day wherever the name Adam Smith appears in the google search regime. Sometimes this refers to a Congressman called Adam Smith, sometimes to a Smith running in a race alongside somebody called Adam. Hovever, occasionally we hit 'bingo'.

One such was a piece from the Sun, a local newspaper on Ohio.com, on 3rd April 2005, called "Sweeping economic forces reshapes jobs, lives". This was a story about a distraught phone caller reacting to his loss of his job, almost incoherent in his distress.

The author asserted: "The 18th century economist Adam Smith had it right when he charactersied the guiding force in the economy as an invisble hand. Our understanding of the larger forces is often obscured by the struggles of the moment."

This is the balming equivalent of saying the 'God moves in mysterious ways' applied to economics. The fact that Smith never alluded to such nonsense is missed completely. His reference in "Wealth of Nations" to the 'invisible hand' had nothing to do with a "guiding force in the economy", as if that made it alright then. He was referring to the unintended consequence of 'merchants and manufacturers' (the latter not to be confused with their 19th century descendants who ran large factories employing thousands, with steam, later electric, power driven machinery, of which he knew nothing) choosing to prefer the home to the foreign market and by so doing achieving the optimum end of economic growth (Wealth of Nations, IV.ii.4-12).

This had nothing to do with the "guiding force of the economy", a wholly invented 20th-century generalisation from a single (indeed the sole) reference to the invisible hand in the "Wealth of Nations". The unintended consequences of people can be helpful and also detrimental to growth. The so-called invisible hand is not always benign; it can be destructive as well as beneficial. Hence, assessing every act of business as being part of a grand, unfathomable scheme by some higher order, perhaps devine, is plain silly.

Whether the closure of the plant leading to the distress of the caller to the Sun could be part of an unintended benign intention of the management, or it could be due to unexceptional incompetence or even malicious criminality, we do not know without further details.

As an example of the misapplication of Adam Smith's Legacy it has few rivals. That his Lost Legacy has reached the editorial pages of a local Ohio newspaper reveals the extent to which Adam Smith's true views have become distorted to the point of being a paraody of them.


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