Wednesday, January 21, 2009

A Blogger Attacks Others for Not Knowing Their Adam Smith, but Doesn't Know Him At All

‘Rogue109’ writes on Peach Pundit Blog (‘Fresh political pickins from the Peach State’ Here:

Some Georgia State Senators do not understand market economies of scale or the impressive, positive results of true capitalism

A comment from a reader challenges this assertion, to which ‘Rogue109’ replies assertively:

Your analysis of Adam Smith is incorrect. Smith believed in the “invisible hand” of competition that allowed businesses which were the most competitive and profitable to win the day. By freeing up markets and not parsing out contracts to certain groups irrespective of competitive bidding, the very goal of keeping as many hands in the market is achieved, which is what appears to be odinseye2k’s and your goal. This legislation would go against the very ideals you espouse.”

I have no comment on the Georgia State Senators or their proposals, but it is 'Rogue109' who does “not understand market economies of scale or the impressive, positive results of true capitalism”, especially as he appears to believe that “Smith believed in the “invisible handcompetition that allowed businesses which were the most competitive and profitable to win the day.”

Adam Smith certainly believed in competition – he wrote about how competitive markets worked in Books I and II of Wealth of Nations, but, alas for ‘Rogue109’, Smith never said anything about ‘invisible hands’ in his full account of how competitive markets worked.

Moreover, ‘Rogue109’ cannot supply any quotation from Books I and II (or Books III, IV and V for that matter) which mentions ‘an invisible hand’ in connections with markets, competitive or otherwise.

To make it easier for ‘Rogue109’ to find Smith’s only reference to an invisible hand, he/she will find it on page 456 of Book IV, chapter 2, paragraph 9.

Should he take the trouble to look it up, he/she will discover that Smith was not talking about markets at all, nor what would make “profitable to win the day”.

In fact he was describing how some merchants would be willing to sacrifice profits, not maximise them, by investing locally rather than in foreign countries.



Blogger Rogue109 said...

Hey! Rogue109 here. While it is certainly your prerogative to disagree with my interpretation of the philosophy of Adam Smith, at its core the complete posting was about the General Assembly of the State of Georgia going against the very fundamental concept of free markets by proposing legislation which would direct Georgia Department of Transportation contracts 10% of the time to small businesses which employ 50 people or less.

If the legislation was passed by the General Assembly and signed by our Governor, Sonny Perdue, it would introduce market inefficiencies that would result, ultimately, in the taxpayers money being spent in a less than optimal manner.

I'll cross post your comments on the site and hope you have a good day!

7:54 pm  
Blogger Gavin Kennedy said...

I may heartly agree with your sentiments but they have nothing to do with Adam Smith's so-called invisible hand.

The general myth of the invisible hand having anything to do with markets is widespread and prevelant, especially in the USA, even among economists, including a few Nobel prize winners, who should know better.

Lost Legacy tries to return the profession to Adam Smith's actual legacy, which had plenty to say about competition and the benefits of markets, but nothing at all to say about invisible hands in markets.

I did not comment specifically about the Georgian State politicans - I only comment on politics in the country where I vote (Scotland and the UK).

Thank you for your courtesy in your response. A g'day to you too.

8:10 pm  

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