Tuesday, February 17, 2009

Misuse of The Metaphor

Guest blogger: Bill Chu, Chair, Canadians for Reconciliation,
writes to Chinese in Vancouver Blog HERE:

For those who emigrated from China, their perspective on the homeless should be a bit better. However in its shift to capitalism, China inherits all its viruses. The prime one being the assumption that an individual in pursuing his own self-interest will promote the good of his community as a whole through a principle called “the invisible hand”. In Adam Smith’s words, a free market will work, as if guided by “an invisible hand”, for the public interest and common good.”

I have long been worried that a common Chinese approach to the history of economic ideas has been to use the existing orthodoxy in respect of Adam Smith as the authentic body of ideas by which he and events should be judged, for or against.

Chinese leaders speak of the invisible hand metaphor as if Friedman and others are right to describe it as a theory by which one’s self-interest, also known (incorrectly) as selfishness, promotes “the good of his community as a whole”.

Bill Chou is a clear example of this, though in Bill’s case he criticises the so-called ‘principle’. But Bill is completely incorrect to say that “In Adam Smith’s words, a free market will work, as if guided by “an invisible hand”. Adam Smith never said “as if guided by “an invisible hand”; the ‘as if’ is a 20th century attribution to Smith’s 18th century words.

Moreover, Adam Smith did not link The Metaphor (it deserves capitals give its modern infamy) of ‘an invisible hand’ to the ‘free market’. That too is a 20th-century attribution by modern economists from the 1950s onwards.

When Smith used The Metaphor in Book IV of Wealth Of Nations (the only time he did use The Metaphor in Wealth Of Nations!) he was not writing about free markets, or even about markets; he was writing about why some, but not all, merchants who were risk-averse, because they were concerned about ‘their own security’, when choosing between the monopolised colonial trade with the British colonies in America and their own domestic trade in Britain.

Check it out; read the whole Chapter 2 of Book IV: ‘Of Restraints upon the Importation from foreign Countries of such Goods as can be produced at Home’, pp 452-72 – The Metaphor is used on page 476 – in the Oxford University 1976 Edition (and pages 420-39 in the Edwin Canaan 1937 edition).

Bill's other comments on the attitude of some new Chinese migrants into Canada towards the homeless is a timely reminder that negative attitudes to the less fortunate is regrettable - 'there but for fortune go I'.



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