Wednesday, November 08, 2006

Three Economists Who Understood Adam Smith on Markets

Walter E. Williams reviews ‘Common Sense Economics’ by Professors James Gwartney (Florida State University), Richard Stroup (Montana State University) and Dwight Lee (Georgia University), in ((‘where your opinion counts’) on 8 November 8, 2006. Read it all at:

‘Professors James Gwartney (Florida State University), Richard Stroup (Montana State University) and Dwight Lee (Georgia University), three longtime colleagues of mine, have recently published "Common Sense Economics." It's a small book, less than 200 pages, that addresses a serious economist dereliction of duty: making our subject understandable to the ordinary person.’

‘Elements eight and nine address the other keys to progress: Investment, better ways of doing things, sound economic institutions, and Adam Smith's idea that market prices direct buyers and sellers toward activities that promote the general welfare.’

At last, someone discusses Adam Smith without, incorrectly, adding anything about invisible hands!

Instead they state the very point Smith made in Wealth of Nations, when he discussed markets, prices, and buyers and sellers, exactly as his point should be expressed. There is no need to introduce misleading invisible hands into discussion about markets.

Smith never did use the metaphor when analysing how markets work; in fact, he only use dit once in the entire book (which might surprise those brought up in the Chicago tradition of neoclassical economics).

He used ‘an invisible hand’ once, as a metaphor, nothing more nor less, and it was in a chapter that dealt with the unintentional consequences of the actions of people, buut not in reference to markets.

Strange, that I have never yet (just in case I missed it) seen a neoclassical mathematical equation that had a term for ‘an invisible hand’ included in it, despite a so-called ‘theory of the invisible hand’ supposedly being part of Smith’s analysis of markets and worthy of being repeated endlessly as if it was significant.


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