Monday, March 19, 2007

Brown's Reverence for Adam Smith Not Based on Understanding

In the Guardian Unlimited (19 March 2007), under the heading: “Why Brown reveres the man on the new £20 note”, we find Tristram Hunt addressing the admiration of Gordon Brown, British Chancellor of the Exchequer, for Adam Smith:

“Yet the Smith who Brown reveres is not the laissez-faire free-marketeer of neoliberal lore - the Smith whom Sir Keith Joseph put on his infamous 1979 reading list for civil servants and who saw the magic of economic growth delivered by the invisible hand of the market. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their self-love, and never talk to them of our own necessities but of their advantages," as he famously put it in The Wealth of Nations. This was the "greed is good" Smith of the Gordon Gekko school of raw capitalism.”

"But over the last 20 years a rather different Smith has emerged. One of the traditional difficulties of interpreting his philosophy used to be the problem of uniting his Theory of Moral Sentiments (1759) with The Wealth of Nations (1776). The former stressed the role of virtue, sympathy and benevolence for the proper functioning of the public realm, while the latter highlighted the public good accrued from the private greed of the butcher, brewer and baker."

[Emma] Rothschild has even suggested that Smith's evocation of the "invisible hand" rather than being a hymn to the benign wonders of the free market is, in fact, "best interpreted as a mildly ironic joke". His use of the phrase in The Wealth of Nations was specifically concerned with reducing import duties, while it also alluded to Macbeth's calling forth of darkness "with thy bloody and invisible hand" to cover up his crimes.”

I hope Gordon does not read the famous ‘butcher, brewer, and baker’ paragraph so casually as to confuse it with Gekko’s ‘greed is good’ speech from Hollywood. It has nothing to do, and neither did Smith, with greed. Quite the reverse, in fact. Read it more carefully. It is about the dangerous futility of looking for what you want, in this case your dinner, from the benevolence of others – despite any inclinations they might have for your plight, nobody but a beggar would rely on others for their needs (there just ain’t enough to go round for everybody to live off others).

In civilized societies we are all dependent on others. It would be the height of greed to expect others to do other than to exchange their surplus output for your surplus output. We work to produce the annual output of society and from our revenues we buy our shares of what everybody has produced. That’s what markets do, and do better, Smith noted, than all other modes of production that have been tried so far.

We address others who have what we want (our dinners and much else besides) and are willing to exchange what they have for what they want, mediated by the invention of money, which we obtain by working to produce what others want. If Tristram Hunt or Gordon brown know of a better system for resolving our total dependence on each other we await the details. Abusing markets as ‘raw capitalism’, is no substitute for offering a workable alternative that does not include the ‘raw tyranny of socialism’.

Emma Rothschild’s writings on the metaphor of the invisible hand are extremely good (Rothschield, 2001, ‘Economic Sentiments: Adam Smith, Condorcet and the Enlightenment’, pp 116-56, Harvard,).

Tristram attributes it to being ‘specifically concerned with reducing import duties’ rather than being ‘a hymn to the benign wonders of the free market’. I do not think so; it is in a chapter in Book IV of Wealth of Nations (p 456) on restraints on imports, but the metaphor is applied to the consequences of the human motivation of risk aversion and had nothing to do with markets (that is covered in Book I).

Mixing the two up is a cause of much misunderstanding that had nothing to with Adam Smith.

[Read Tristram's article at:,,2037055,00.html]


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