Sunday, August 30, 2009

Edmund Gets It Wrong Too

Edmund Conway, apparently the economics editor, writes in The Telegraph (London) HERE:

What Gordon Gekko got wrong”

The "invisible hand" is shorthand for the law of supply and demand and explains how the pull and push of these two factors serve to benefit society as a whole. The simple conceit is as follows: there is nothing wrong with people acting in their self-interest. In a free market, the combined force of everyone pursuing his or her own individual interests is to the benefit of society as a whole, enriching everyone.

Smith used the phrase only three times in his 1776 masterpiece The Wealth of Nations, but one key passage underlines its importance: "[Every individual] by directing [his] industry in such a manner as its produce may be of the greatest value he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good

Edmund Conway gets it wrong too.

Geko’s script writer was expressing Bernard Mandeville’s philosophy (The Fable of the Bees, 1724), and, in modern form, the ideas of Ayn Rand. He was not expressing anything written by Adam Smith.

Adam Smith’s use of the popular 18th-century metaphor of ‘an invisible hand’ in Wealth Of Nations (1776) had nothing to do with his exposition of supply and demand. Smith clearly states his theory of supply an demand in Books I and II of Wealth Of Nations without once mentioning ‘an invisible hand’.

Edmund Conway discloses, inadvertently I am sure, that he has never read Wealth Of Nations:

Smith used the phrase only three times in his 1776 masterpiece The Wealth of Nations

If he had read it even once he would know that Smith only used the metaphor, ‘an invisible hand’ ONCE in all 900-plus pages of Wealth Of Nations, in Book IV, chapter 2, paragraph 9, page 456 (Oxford University Press, 1976).

I wonder where the other two references are? If Edmund Conway can show us any other references to the metaphor in Wealth Of Nations, I and most other Adam Smith scholars would be most surprised to say the least.

As a journalist, Edmund should know that statements claiming to be fact should always be checked and then double-checked by Editors, especially economics editors.

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