Tuesday, July 06, 2010

Another Set of Errors About Adam Smith

Gina Burgess writes the Refreshment Refuge Blog, HERE:

“A Study of Economics and the Downfall of the USA”

“Classical macroeconomic theory was best described by Adam Smith in 1776 in his writings The Wealth of Nations calling macroeconomy the “invisible hand of the marketplace”. He had a philosophy of laissez fair which is “leave it alone and it will work itself out”; in other words, equilibrium is the natural state and shifts in supply and demand will bobble the economy but not devastate it. The basic premise is that somebody somewhere will always want to buy something in the right quantity and at the right price. “Self-adjustment was expected in the labor market.” (Shiller, Bradley R. Essentials of Economics. Fifth Edition, 2005 p 254, 2005). Therefore, in the long term, the economy is stable and has steady.


1 Adam Smith did not call the ‘macroeconomy’ the “invisible hand of the market place”.
The word ‘macroeconomy’ did not exist in English in the 18th century.

2 He never linked the metaphor of an invisible hand to markets or the market place.
3 He never had a philosophy of laissez-faire (he never used the words).

4 He did not have a theory of equilibrium.

5 He did not think that in the ‘long run’ the economy was ‘stable and steady’.

If the author is so wrong about Adam Smith what value should a reader place on her account of the "downfall of the USA"?

Has Gina read Wealth Of Nations?



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