Sunday, July 18, 2010

Don't Rely on Wikipedia for Knowledge of Adam Smith

Anonymous writes in Rewards HERE:

"Bullies are the invisible hand "of the intellectual rewards."

“In economics, the “invisible hand”, additionally accepted as the “invisible duke of the market”, is the appellation economists use to call the automated attributes of the marketplace. It is a allegory aboriginal coined by the economist Adam Smith in The Theory of Moral Sentiments. For Smith, the airy duke was created by the affiliation of the armament of self-interest, competition, and accumulation and demand, which he acclaimed as actuality Able of allocating assets in society. This is the founding absolution for the laissez-faire bread-and-butter philosophy. (Information quoted and taken from Wikipedia)”

‘a(sic) allegory aboriginal coined by the economist Adam Smith in The Theory of Moral Sentiments.’ Rubbish! (There is no politer way of expressing it.)

The metaphor was already well known in literature long before Adam Smith published Moral Sentiments (1759). It appeared in classical literature, and, for example, in Shakespeare (Macbeth, 1605) and Defoe (1722). Smith was born in 1723 and the metaphor was very popular in theological works and church sermons.

Smith’s first published use of the metaphor of an invisible hand had nothing to do with markets (or ‘competition, and accumulation and demand’) at all; it referred to the behaviour of ‘rich landlords’ using some of their annual output from agriculture to feed the serfs and peasants, which by any count was an unavoidable obligation, because, otherwise, there would be nobody alive to clear, plant and harvest the rich landlords’ crops each year.

His second use was in Wealth of Nations and it had nothing to with ‘markets’ or ‘competition, and accumulation and demand’. It was a metaphor, expressing in a ‘more striking and interesting manner’ the choice made by some, but not it all merchants, to prefer local investment because of their perceived greater risks of investing abroad. The context had nothing to do with ‘competition’ at the time, given that 18th-century Britain was dominated by mercantile political economy with its monopolies, tariffs and prohibitions in respect of trade.

These institutional interventions did not ‘actuality’ ‘allocate assets in society’.

It was the act of investing locally that added to national output and employment – the ‘whole is the sum of its parts – a mere arithmetic consequence of the risk aversion of the local traders.

The assertion that the whole is the sum of its parts’ is hardly ‘the founding absolution for the laissez-faire bread-and-butter philosophy’. Moreover, Adam Smith never referred to ‘laissez-faire’ on anything he wrote. The belief that he did is a modern invention by economists who have never read Adam Smith’s works.
The author confirms my assertion of his/her never having read Adam Smith with the revelation that: ‘Information quoted and taken from Wikipedia’, a wholly unreliable resource, quite often on a level with the corny ‘jokes’ found in Christmas crackers.



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