Monday, September 17, 2007

A Libertarian on Adam Smith

In the Blog: Colliding Softly (here) there is an article “On the Art of Writing and Science” (the author is not identified), much of which I would probably be sympathetic to, except for these two paragraphs:

When Adam Smith wrote about the division of labor and how the individual actions of people doing essentially different things come together to create change in a unified direction as by “an invisible hand”, it made sense. In rural society, where most people were working on the family farm, dividing chores meant increasing efficiency. This is even more true for the industrialization, where the division of labor could increase productivity by enormous numbers.

But does this mean division of labor always makes for increased production? Certainly not. History proves only the fact that division of labor was more productive (or, maybe, less unproductive) than the immature market production processes available at that time

The author quotes from Murray Rothbard (whom I have criticised for his views on the division of labour and for muddling his reading of this chapter in Wealth Of Nations: see Lost Legacy archives for details), and I am, not impressed if the author regards Rothbard as a reliable source on Adam Smith.

As for ‘come together to create change in a unified direction as by “an invisible hand”, I am totally perplexed by what this part of the sentence means. Smith never mentioned ‘an invisible hand’ as a prime principle or even a part of his political economy.

If the metaphor of the invisible hand had been a principle it would have been appropriate to include a mention of it in Book I or Book II, even Book III. But it comes up in Book IV of Wealth Of Nations as a metaphor in a lonely paragraph that has no connection whatsoever with the division of labour, nor for that matter with the working of markets.

Joining in this manner to the division of labour would be read by thousands of readers, who have not, and probably will never, read Wealth Of Nations, who will conclude that Smith did mean what this paragraph implies he did. But the truth is he didn’t.

So why do libertarians perpetuate the myth that Adam Smith did have a theory, concept, principle, or belief in an invisible hand (when not accusing him of outright plagiarism or following Schumpeter's highly negative assessment of his works)?

I find the libertarians’ assessment of Adam Smith perplexing. Yet they can be so right on other things.


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