Tuesday, March 11, 2008

Bruce Fein's Follies From Confused Identities of a Witness

Bruce Fein, an authoritative and distinguished constitutional lawyer, writing in the Washington Times (11 February) here makes two statements under his title ‘Economic Follies’

But politicians generally, like the French Bourbons, tend to forget nothing and learn nothing. They believe they can outfox the laws of supply and demand and improve on Adam Smith's "invisible hand" in allocating economic resources.

‘Smith recognized the happy convergence of private greed and public good in competitive markets. Farmers, businessmen and professionals alike would be spurred by competition to innovate and minimize prices to capture consumer patronage

Adam Smith’s use of the metaphor of ‘an invisible hand’ was not referring to the ‘laws of supply and demand’. He was referring to the risk avoidance of certain merchants who preferred to conduct their business locally, even if it was more profitable to trade abroad (as it was in mid-18th century Britain with its American colonies), because the risks, trouble, and uncertainties of the characters of the people they might deal with abroad (or getting there) were not worth the risks of business failure, let alone piracy, storms at sea, and other accidents of voyages. [WN IV.ii.9: p 456]

Inserting the (obligatory) reference to Adam Smith in the paragraph adds absolutely nothing to the correct reference to the ‘law of supply and demand’). Bruce Fein should know that, but anybody scribbling about economics knows it looks more authoritative if they can work in the name of Adam Smith, even if they are completely wrong in the association, because most people, except Adam Smith readers, would not realise their error.

I know Bruce Fein is out of his depth in the sentence: ‘Smith recognized the happy convergence of private greed and public good in competitive markets.’

This was never anything that was written by Adam Smith. Quite the reverse! The notion of ‘private greed’ and ‘public good’ was not Adam Smith’s. It was the title and the philosophy of Bernard Mandeville’s popular book: ‘The Fable of the Bees, Or Private Vices, Publick Benefits’ [1724] A recent edition was published by Liberty Fund.

Adam Smith severely criticised Mandeville’s assertion and he described his philosophy as ‘licentious’ in his first book, 'The Theory of Moral Sentiments’ (1759) [TMS VII.ii.4: pp 306-14]. He did not change his mind about the findamental errors of the notion of ‘private vice, public benefits’ through his books four edition to 1790.

Obviously, Bruce Fein does not know this, for otherwise he would not have written his sentence (would he?). Lawyers are trained to lead evidence that will not trip up their case, and on these errors he should not have called on Adam Smith as a supporting witness.


Blogger Mark Koyama said...

H Gavin, I am slightly apprehensive about challenging your knowledge of Adam Smith but I think your latest critique is off the mark and have written a blog post about it href="http://oxonomics.typepad.com/"

6:01 pm  
Blogger Mark Koyama said...

or rather at

6:02 pm  

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