Saturday, December 30, 2006

Another Pop at Foley's Fallacies

It is always pleasurable to read an intelligent piece by someone who knows something about Adam Smith and who keeps up with mainline controversies on the subject. One such is Bruce MacEwan, a practising US lawyer and creator and host of a legal blog, “Adam Smith, Esq. (‘…an inquiry into the economics of law firms)”.

I bookmark ( site for my occasional visits which proved their worth today in a posting entitled "WEALTH" AND "CONSCIENCE". Bruce MacEwan writes in a comment on David Warsh’s review of Duncan Foley’s, ‘Adam’s Fallacy’, discussed here several times, on the basis of which I re-titled Foley’s book, ‘Foley’s Fallacy.’

Where Foley goes wrong in his critique of neoclassical economics (a sub-branch of late 19th-century mathematics) is he blames Adam Smith for where the profession has gone. While agreeing that neoclassical economics under the beady eyes of Chicago’s Homo economicus is a dead-end, Foley’s fallacy is to pin its causes on Adam Smith who is, in fact, wholly innocent of the charges, and Foley makes his case solely by tampering with the evidence (admittedly the crime scene was compromised originally by the neoclassical consensus).

Bruce regales Foley with the following dismissal of his fallacy:

“To start, there could be no better introduction than this discussion of the interplay between his most famous work, obviously, The Wealth of Nations, and its predecessor by 17 years, the relatively unsung Theory of Moral Sentiments.”

“Indeed, these extra-homo economicus considerations are not just competitive with rational, gimlet-eyed, calculating analytics, at times they overwhelm "reason" altogether:

"What is it that prompts the generous, on all occasions, and the mean, upon many, to sacrifice their own interests to the greater interests of others? Is it not the soft power of humanity, is it not that feeble spark of benevolence which Nature has lighted up in the human heart, that is capable of counteracting the strongest impulses of self-love?"

Now, for some reason, the received wisdom handed down over 200 years later about Adam Smith is that he abandoned these views with publication of The Wealth of Nations. Well, I'll spare you the academic arguments, but suffice to say there's not a scintilla of evidence that was the case. Indeed, the better reasoned side of the debate, able to marshal far more evidence in support of its view, is that Smith intended a third and possibly even a fourth volume (cut short by his death, and his mandated destruction of all his unpublished manuscripts) reconciling and extending Moral Sentiments and Wealth of Nations by adding to the mix a treatise on the theory and impact of law and another on science and the arts.’

‘Moral Sentiments’ is indeed ‘relatively unsung’ compared to ‘Wealth of Nations’ and it is marginally less well read by contributors to the ‘received wisdom’ (not that many of them show evidence of reading either of Smith’s books, beyond some quotations torn out of context and bled of their original meaning). It is also worth noting, and is particularly germane to the point that Bruce MacEwan, David Warsh and I agree upon, that while 17 years separates their publication in 1759 and 1776 respectively they were in fact developed as sets of ideas together during Smith’s earlier career as a Professor at the University of Glasgow between 1751-64. We know this to be true because his lectures were copied down as they were delivered by some students and these were published between 1885-1980, entitled as ‘Lectures in Jurisprudence’, ‘Lectures in Rhetoric and Belles Lettres’, and ‘Early Draft’ of Wealth of Nations (available in the Glasgow edition, published by Liberty Fund).

If there had been a deep cleavage of ideas on moral sentiments and political economy, this would have been obvious to Smith as he taught both subjects together to the same students in his classroom.

In addition to knowledge of the minutiae of the contemporary evidence, we also have knowledge of their contents, prompting Bruce MaxEwan to ask:

“So where are we left here in the 21st Century?

Economics, a somewhat feckless discipline for the last few decades (there you have, in a nutshell, why I never entertained the notion of pursuing a Ph.D. in economics), has opted to "model what it can at the expense of ignoring what it cannot," and "moral sentiments" are famously unsusceptible to modeling.
One of my fonder, if milder, hopes is that my beloved discipline of economics will come to grasp more strongly the world as it really is with all its human complexity and contradiction, and return from its exile in the arid, mathematically intricate "blackboard economics" domain of homo rationalis economicus.”

To which I would join him in a New Year toast from Edinburgh to the realisation of his hopes to pull back modern economics to the political economy as understood by Smith and to which other disciplines could contribute, especially law, a subject on which Smith took a close interest (he was awarded his LL.D by Glasgow for his impressive lecture series).

I am never comfortable with so-called scientists who abhor the notion of doing something so mundane as looking outside their windows at what is happening in the real society and real word they live in. ‘Tis a pity that Duncan Foley started on the right track but now assists the perpetuation of the fallacies about Adam Smith as the corner stone of his own fallacies – and follies.


Blogger Unknown said...

Dear Prof. Kennedy:

Many thanks for your astute additions to the discussion, and of course for your kind words. Try as I might, I have been unable to locate an email address or other contact info for you and I would like to return the courtesy of raising a toast to you; Edinburgh is perhaps my second favorite City (after my beloved home town of New York).

All the best for the New Year,

Bruce MacEwen

7:02 pm  

Post a Comment

<< Home