Saturday, January 24, 2009

January's Lost Legacy Prize

Neuromesh Blog HERE:

The fact is, most people can’t be trusted to simply take a fair share of the resources available. Adam Smith’s ‘invisible hand’ is a fallacy, the idea that a free economy where people act in their own interest will be led by an invisible hand that guides them towards the good of the whole. Economic theory has been led by this (or at least, hidden behind it while pretending to believe it) for a hundred years, but constantly we’re reminded that humans acting in their own self interest will do it unsustainably.”

‘The fact’ is that Adam Smith never made the claims for his single use of the metaphor of ‘an invisible hand’ in Wealth Of Nations that have been asserted on his behalf by the economics discipline, including Nobel Prize winners, particularly since the 1950s with the triumph of the mathematical proof of general equilibrium theory, and by propagandists for the capitalist alternative to Soviet communism throughout the Cold War.

Incidentally, capitalism was so superior in economic welfare for the mass of the population, even with a not too good record, that the calamities occasioned by central planning never was never likely to catch up to be near as good, that it is ironic that economists became lyrical about a mystical disembodied hand that was, and remains, redundant in explaining how markets work (and communist planning doesn’t) and was unnecessary to be required such a role.

For Adam Smith the invisible hand was a mere metaphor for the consequencs of risk avoidance.

So Neuromesh is right.



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