Saturday, December 20, 2008

Santa Clause and Invisible Hands

Chuck’ (claiming to be ‘a fictional character in a fictional on-line magazine’) writes the Chuckling (on line magazine) Blog, HERE:

Annual Xmas post”

“Like you, we live in a superstitious nation in which the airwaves are saturated with references to all the worst sorts of mumbo jumbo. And children, you know, are very susceptible to that kind of nonsense, especially when they see it on tv.”

“The reality is that wars and recessions, boom times and depressions will come and go and Adam Smith’s "invisible hand" will continue to assure social results that are beyond the ability of a regular Joe to influence

Adam Smith’s so-called ‘invisible hand’ is a myth. It was manufactured in the mid-20th century from a single instance in Wealth Of Nations (1776).

It is a law of arithmetic that the whole is the sum of its parts, and in Smith’s case, the metaphor is about the consequence of individuals acting in accordance with their degrees of risk avoidance, to which he appended (once only) the popular 18th-century literary metaphor.

The mythical invisible hand sits well in a ‘superstitious nation’ when economic commentaries ‘are saturated with references to all the worst sorts of mumbo jumbo’, in which otherwise intelligent economists ‘are very susceptible to such kinds of nonsense, especially when they’ they hear it from Nobel prize winners who claim the authority of Adam Smith for its provenance.

Given what has been made Adam Smith’s singular use of the metaphor in Wealth Of Nations in Book IV, entirely absent from any connections to his clear explanation of how markets work in Books I and II, the widespread belief in the magical powers of ‘an invisible hand’ applied to markets is akin to believing in Santa Clause at Christmas.

Santa is a harmless enough mythical story to entertain little children, but such beliefs become a serious source of error when legislators and those who influence them believe in invisible hands, supposedly guiding people’s behaviours, especially when there exists a strong set of behaviours, well documented by Adam Smith, who warned of the power of certain behaviours to damage the very economies supposedly benefiting from them.

Merry Christmas readers.

Now back to grading exams…)



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