Thursday, September 24, 2009

William Letwin Recognises a 'literary embellishment'

William Letwin, 1963. p. 225. The Origin of Scientific Economics: English economic thought, 1660-1776. Methuen & Co:

The invisible hand is introduced as a literary embellishment, an elegant way of summarising an argument already stated, and not, as it has been misrepresented, a dogmatic assertion of ‘natural harmony’ on economic life.”

Reading my notes for my forthcoming paper on the use made of the popular literary metaphor, the “invisible hand”, by modern economists who are ideologically wedded to their invented notion that the economy is managed by an unknown disembodied entity, with miraculous powers of intervention that sometimes lead participants to unknowingly benefit society, though for which role no term is included in the mathematics of general equilibrium, and its alleged presence in the real world is judged only by outcomes, not processes, I came across the above quotation.

It struck me for two reasons.

First, it is unusual – most modern economists give the metaphor a far greater role in the real world, as if they believe the entity actually exists (some even call it the “hand of God”, for which the supporting literature is quite vast, going back to the 17th century).

Secondly, William Letwin is one of the few examples that I have come across who approaches his discussion of Smith’s use of the metaphor with an erudite and eloquent discussion of the previous eight paragraphs (WN IV.ii.1-8: 452-455) in which he fully explains the process that leads some, but not all, merchant traders to invest locally rather than invest their capital in the foreign trade of consumption or the carrying trade.

It is only after his explanation that he introduces the phrase of the “invisible hand”. Most economists do not mention his explanation or its context (they may be unaware of this, relying on their generalisation of a short quotation, which clearly applies to a specific case in Smith’s example, into a whole economy principle for which it was never intended.

Letwin notes, brilliantly in my view’, that Smith used the metaphor because of the audience to which he address Wealth Of Nations:

“… gentlemen and squires, members of Parliament, busy, not excessively intelligent or devoted, who would take instruction at length only if it were presented in a pleasurable form, perhaps under the guise of sheer pleasure.”

Or, as I often put it, “legislators, and those who influence them”.

Letwin's book is an excellent survey of his chosen subject (students should consult it for material on its theme). It is an excellent read by a literate scholar.



Blogger citizen said...

Seeking to make contact. Will seek email online. Am in Ratho. Best wishes, Colin Sanderson.

1:29 pm  

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