Wednesday, September 15, 2010

Adam Smith No Neo-Classical Ideologue

Michael Hais and Morley Winograd post on Generational Economicsin Huffington Post HERE:

Unlike classical economics, which equates wealth with money, this new paradigm states that wealth is maximized when the largest number of people are generating ideas in a competitive, evolutionary environment.”

“Complexity economics argues that the classical economic paradigm enunciated in the 18th century by Adam Smith in The Wealth of Nations, was wrong in suggesting, "wealth is created by the pursuit of narrow self-interest." Instead, Eric Beinhocker, whose book The Origin of Wealth: Evolution, Complexity and the Radical Remaking of Economics, is intentionally titled and written as an answer to Smith, argues, "Norms of unchecked selfishness kill the one thing that determines whether a society can generate (let alone fairly allocate) wealth and opportunity: trust. High-trust networks thrive; low-trust ones fail." While the Generation X Republican prescriptions for returning to the discredited laissez faire doctrines of the past rest on the argument that you can't trust government, Millennials know that the only answer to the question "Who do you trust?" is "each other

[The two authors are are fellows with NDN and the New Policy Institute. They are the co-authors of "Millennial Makeover: MySpace, YouTube, and the Future of American Politics" (Rutgers University Press, 2008].

Whatever else is relevant in the biographies of Michael Hais and Morley Winograd, it does not include much familiarity with the moral philosophy or, indeed, the political economy of Adam Smith.

Even a poor undergraduate, who is not paying much attention to a lecture on Adam Smith, would know at least that he never (not once!) “equates wealth with money”. He always emphasized (many times) that wealth is the ‘annual output of the ‘necessaries, conveniences, and amusements of life’, in short the goods and services produced by an economy. He was adamant that money (gold, silver, currency notes and such like) was not wealth. The authors of this, otherwise, interesting piece are grossly mistaken.

They also assert that ‘classical economics’ in the person of Adam Smith, ‘enunciated in the 18th century’ a ‘paradigm’ that ‘wealth is created by the pursuit of narrow self-interest."

That is a contentious assertion, if I may say so, that owes its origin in the form of ‘narrow self-interest’ more to modern economics than it does to Adam Smith (the ‘greed is good’ school of Hollywood script writers and the school of neo-classical economics).

I am all for articles on complexity economics in part criticism of one-dimension modern neoclassical economics, but it does not help that case in grossly misinterpreting the multi-dimensional Adam Smith, author the Theory of Moral Sentiments (1759) and Wealth of Nations (1776).



Blogger El caballer que diu kek said...

Just genius! Gotcha! Sadly can't rate, 5/5! As all the other's I've been reading of you about Smith so far.

12:16 am  

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