Wednesday, December 06, 2006

More on Folley's Folly

Foley's 'Adam Smith's Folly' is reviewed on Freakonomics and while critical, it accepts the Chicago version of Adam Smith, which is the real cause of the confusion about Smith's moral philosophy and his political economy. There is no contradiction between Smith on moral sentiments and his mixed-motivations of people in markets.

Homo economicus is a post-Smithian invention, widely, but as incorrectly, credited to Adam Smith, who gave no comfort for those (e.g., Mandeville) who attributed selfishness or greed as the drivers of the economy, which in aggregate benefits all. Nor did he state that individual actions no matter their intentions or lack of them, necessarily or always, result sum to society's benefit. They could benefit society, but may not, and, in fact, Wealth of Nations provides a catalogue of detailed refutation that the self-interested actions of monopolists and protectionists, to which today we could add polluters and the tragedy of the commons examples, were of benefit to society.

'Spontaneous order' theories are partial and depends on the circumstances, unless you believe in Dr Pangloss. That social evolution works well with the theory of spontaneous order is undoubted by me, but that it is iron law that individual actions, whatever they consist of, are collectively beneficial is not a view expressed by hayek, as far as I can discern.

I posted the following comment on Freakanomic's blog:

"Duncan Foley’s book should have been titled: ‘Foley’s Folly’ (but then it would not sell so well). Adam Smith cannot be accused of asserting that self-interest is the only motivation that is important in economics; Smith taught moral philosophy and jurisprudence (which included political economy) together to the same classes of students.

The proper target for the narrow vision of Homo economicus should be the Chicago interpretation of Adam Smith (a wholly different writer to the Adam Smith of Kirkcaldy).
Smith used the metaphor of the invisible hand only once in Wealth of Nations and once in Moral Sentiments, and his use had nothing to do with his theory of markets. That is an invention of Chicago, and is widely taught by neo-classical economists, of which Professor Foley, writing a history of economic theory should know about.

That he apparently does not choose to acknowledge this fact, perhaps inconvenient for his title, is a case for calling it ‘Foley’s Folly’, not "Adam's."


Post a Comment

<< Home