Saturday, July 23, 2005

Tim Cohen - a welcome breath of fresh air

From Johannesburg, South Africa, in Business Daily (“news worth knowing”) on 22 July 2005 an article on “Stakeholder capitalism” that carries a most welcome approach to linking the name of Adam Smith with modern market economies under the guise of the so-called invisible hand.

Tim Cohen, editor at large, writes a remarkable rebuttal of the misuse of Smith’s metaphor. The heading says that “Stakeholder capitalism” (which sounds like welfare capitalism plus state regulation) is “one more bind on Smith’s invisible hand” and proceeds to demolish the whole concept behind stakeholder capitalism.

It also makes an unusual move in articles on Smith and the invisible hand. It actually suggests readers look at what Smith actually said in “Wealth of Nations” and decides that the invisible hand has no role in markets! Wonderful!

Tim writes:

“Adam Smith was not an economist, he was only feeling his way towards the idea in 1776. He was a moral philosopher. His insight was so profound because he recognised early, and judged correctly, the moral effect of people acting according to their own interests, and found, to his own surprise almost, the result was not entirely distasteful. What’s important here is that he was merging mass commercial activity with individual psychology; not with structure or function or class role, but the essential striving nature of humankind. He was not endorsing greed, nor theorising about market perfection, nor necessarily supporting the merchant class.”

And he ends with a suggestive assessment of the invisible hand as Smith meant it to be:

“The only thing that stands against them is a simple, crisp, trenchant, time-tested insight, or, to put it another way, modern economics. But proponents of the invisible hand should take heart, because its detractors have no idea of the power they oppose. They are not opposing a system, or a class, or a political group — they are opposing human nature. That is the real invisible hand.”

Congratulations to Tim Cohen; an excellent candidate for July’s Lost Legacy Prize.


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