Saturday, May 29, 2010

On the Genesis of the Myth of the Invisible Hand, no. 8

George Reisman [1990] 1996. Capitalism: a treatise on economics, Ottawa, Illinois, Jameson Books.

‘It was largely the operations of this principle [tendency of the rate of profit to fall] that Adam Smith had in mind when he employed the unfortunate metaphor that a free economy works as though it was guided by an invisible hand’ (p 173)’.

This is a monumental text, not recommended for the impatient.

However, Reisman gets marks for correctly describing the invisible hand as a metaphor (double for classing it as ‘unfortunate’), but gets no marks at all for attributing it – without any textual basis – to changes in the rate of profit:

‘as profit falls or rises, drawing more resources or reducing them to sectors according to the profit fall or rises’.

Smith’s use of the invisible hand metaphor had nothing to do with rises of falls in the rate of profit, except so tenuously as to be unsupported by the English language, as used by Adam Smith.

Also there was no such use of the words, ‘as though it was guided by an invisible hand’.

Check it out: Wealth Of Nations, Book IV, chapter 2, page 456.

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