Noam Chomsky Almost Gets Adam Smith on the IH Metaphor
Noam Chomsky’s podcast on Adam Smith’s singular use of the metaphor of an “invisible hand” versus modern versions, which make it mean something entirely different, and which is now ubiquitous, is revealing (HERE):
This short statement – I assume he was speaking from memory - is an interesting and positive development. He makes clear that he has read (but perhaps too quickly) Adam Smith’ singular mention of “an invisible hand” in Wealth Of Nations and appreciates something of its context (which more than can be claimed by most neoclassical economists), though he muddles the full context and the circumstances of some, but not all, merchants who choose not to invest their capital in “domestick industry”, rather than export it abroad to participate in the “Foreign trade of consumption”.
Chomsky errs (unintentionally, I am sure) in consequence from his too hasty read because he misses Smith’s emphasis on the reason why they do so (mentioned several times, in fact), namely and specifically– their feelings for the “insecurity” of their capital once it is out of their sight. Other merchants, perhaps the majority of those investing “domestickly”, invest at home for other good reasons – habit, small scale, position in “domestick” markets, never having been tempted to invest abroad, and unfamiliar with how foreign trade works, and noticeably because they benefit from monopoly their positions in tariff-ridden Britain.
However, it is the former group of merchants of whom Smith specifically writes about. By choosing to invest in “domestick industry” these “insecure” merchants add to domestic “revenue and employment” – the former adds to the “Great Wheel of circulation” and “domestick” growth; the latter set new employees on society’s road to “opulence” (taking, of course, the long view). It is this aspect of the consequence of their behaviour that Smith comments upon as a “public” benefit.
Smith specifically says of this group that they are “led by an invisible hand” using a fairly common 17th-18th century literary metaphor to “describe in a striking and more interesting manner” the object of the metaphor, namely the “concern of these merchants for the “security” of their capital leading them to do act from choice in this way.
In short, it’s a metaphor; the “invisible hand’ describes what causes there merchants to behave as they do (you cannot see inside their heads – their motives are invisible; but it does not actually exist as a visible entity – that is: there is no “invisible hand”. The merchants’ “insecurity” of course, is invisible – it operates in their heads; the consequences are visible when they place their capitals in “Domestick industry”.
Hence, neoclassical theorists with their fantasies of “invisible hands” of markets, supply and demand, maximising “utility” functions, and so on are disingenuous. They clutch a flimsy straw and manufacture a mental image to explain the wonders of markets - which Smith did in Books I and II of Wealth Of Nations without mentioning the IH metaphor – even finding a miraculous “equilibrium” in this best of all worlds, when in fact it is probably only the least worse of all possible worlds (itself a positive achievement in this Vale of Tears, in my humble view).
Except, these imaginary inventions of modern, neoclassical, economics, had nothing to do with Adam Smith and his use of the IH metaphor, nor of the invented simile that Noam Chomsky brings into being when he undermined in his half-right version of Smith’s use of “led by an invisible hand”, by adding the wholly invented words “as if” to Smith’s own pristine words, “led by to invisible hand”, thereby making it a simile.
Now, we can be sure that Chomsky knows the difference between a simile and a metaphor (after all he is highly distinguished linguist). Ironically, Chomsky uses Smith’s metaphoric use of “led by an invisible hand” in order to chastise neoclassical theorists for their Cold-War inspired inventions of the magical properties of markets to show them superior to Soviet planned economies, from the 1930s, which anyway became disasters on their own account. Chomsky, of course, believes markets are also a capitalist (neo-con) disaster.
Oscar Lange, a Marxist, and a proponent of socialist planning (1936, 1938, 1945) was countered, first by Paul Samuelson in his famous textbook, Economics: an analytical analysis (1948), who claimed (absolutely wrongly) that Adam Smith said that the “invisible hand” meant “selfish” (he did not) behaviours were transformed (“miraculously”) into social benefits through markets (and repeated over the following 19 editions to 2010). This nonsense was widely disseminated to its to over 5 million readers and became the neoclassical orthodoxy (it still is) though its provenance is a compete invention, as is Chomsky’s “as if” insertion into Smith’s usage.
Lange, Chomsky, Samuelson, et al were all veterans of the Cold War. The “invisible hand” episode is a minor unintended consequence of the larger events wrapped in that global confrontation of yester decades. But the ideological confrontation continues in the functionality of markets, and Adam Smith’s legacy continues to be dragged into it despite the very obvious and glaring error in the counter-factual – specifically that very visible prices determine everything important needed for markets to work; there is no mystical invisible hand at work – nor needed.
The meaning of the metaphor lies in its “object” – see Adam Smith on the role of metaphors in his Lectures On Rhetoric and Belle Lettres ([1763] 1983, page 29, Oxford University Press). I am sure that Chomsky knows all about Smith’s conventional views on the role of metaphors.
The object of “an invisible hand” in Moral Sentiments was the absolute necessity, so obvious that it is invisible (cannot be seen by others) – that is, not thought about by the “unfeeling landlord” – yet still operates by leading him to distribute basic necessities to his slaves, serfs, peasants, and etc., form the mutual dependence on them (no food, no work) and their mutual dependence on him (no work, no food). In consequence, his dependents survived and procreated, and early agricultural society continued, with interruptions to the initiation of the “Commercial Age” with the Fall of Rome in the 5th century, and emerged again, gradually, after its reconstitution in the rule of War Lords, and then Feudal Lords, a thousand years later.
The object of “an invisible hand” in Wealth Of Nations was the “concern of some merchants for their capital’s security”, which, invisible to others operates in their heads, and leads them to invest in “domestick industry”. In consequence, domestic GDP grew and commercial society continued. The rest, as they say, is history.
This short statement – I assume he was speaking from memory - is an interesting and positive development. He makes clear that he has read (but perhaps too quickly) Adam Smith’ singular mention of “an invisible hand” in Wealth Of Nations and appreciates something of its context (which more than can be claimed by most neoclassical economists), though he muddles the full context and the circumstances of some, but not all, merchants who choose not to invest their capital in “domestick industry”, rather than export it abroad to participate in the “Foreign trade of consumption”.
Chomsky errs (unintentionally, I am sure) in consequence from his too hasty read because he misses Smith’s emphasis on the reason why they do so (mentioned several times, in fact), namely and specifically– their feelings for the “insecurity” of their capital once it is out of their sight. Other merchants, perhaps the majority of those investing “domestickly”, invest at home for other good reasons – habit, small scale, position in “domestick” markets, never having been tempted to invest abroad, and unfamiliar with how foreign trade works, and noticeably because they benefit from monopoly their positions in tariff-ridden Britain.
However, it is the former group of merchants of whom Smith specifically writes about. By choosing to invest in “domestick industry” these “insecure” merchants add to domestic “revenue and employment” – the former adds to the “Great Wheel of circulation” and “domestick” growth; the latter set new employees on society’s road to “opulence” (taking, of course, the long view). It is this aspect of the consequence of their behaviour that Smith comments upon as a “public” benefit.
Smith specifically says of this group that they are “led by an invisible hand” using a fairly common 17th-18th century literary metaphor to “describe in a striking and more interesting manner” the object of the metaphor, namely the “concern of these merchants for the “security” of their capital leading them to do act from choice in this way.
In short, it’s a metaphor; the “invisible hand’ describes what causes there merchants to behave as they do (you cannot see inside their heads – their motives are invisible; but it does not actually exist as a visible entity – that is: there is no “invisible hand”. The merchants’ “insecurity” of course, is invisible – it operates in their heads; the consequences are visible when they place their capitals in “Domestick industry”.
Hence, neoclassical theorists with their fantasies of “invisible hands” of markets, supply and demand, maximising “utility” functions, and so on are disingenuous. They clutch a flimsy straw and manufacture a mental image to explain the wonders of markets - which Smith did in Books I and II of Wealth Of Nations without mentioning the IH metaphor – even finding a miraculous “equilibrium” in this best of all worlds, when in fact it is probably only the least worse of all possible worlds (itself a positive achievement in this Vale of Tears, in my humble view).
Except, these imaginary inventions of modern, neoclassical, economics, had nothing to do with Adam Smith and his use of the IH metaphor, nor of the invented simile that Noam Chomsky brings into being when he undermined in his half-right version of Smith’s use of “led by an invisible hand”, by adding the wholly invented words “as if” to Smith’s own pristine words, “led by to invisible hand”, thereby making it a simile.
Now, we can be sure that Chomsky knows the difference between a simile and a metaphor (after all he is highly distinguished linguist). Ironically, Chomsky uses Smith’s metaphoric use of “led by an invisible hand” in order to chastise neoclassical theorists for their Cold-War inspired inventions of the magical properties of markets to show them superior to Soviet planned economies, from the 1930s, which anyway became disasters on their own account. Chomsky, of course, believes markets are also a capitalist (neo-con) disaster.
Oscar Lange, a Marxist, and a proponent of socialist planning (1936, 1938, 1945) was countered, first by Paul Samuelson in his famous textbook, Economics: an analytical analysis (1948), who claimed (absolutely wrongly) that Adam Smith said that the “invisible hand” meant “selfish” (he did not) behaviours were transformed (“miraculously”) into social benefits through markets (and repeated over the following 19 editions to 2010). This nonsense was widely disseminated to its to over 5 million readers and became the neoclassical orthodoxy (it still is) though its provenance is a compete invention, as is Chomsky’s “as if” insertion into Smith’s usage.
Lange, Chomsky, Samuelson, et al were all veterans of the Cold War. The “invisible hand” episode is a minor unintended consequence of the larger events wrapped in that global confrontation of yester decades. But the ideological confrontation continues in the functionality of markets, and Adam Smith’s legacy continues to be dragged into it despite the very obvious and glaring error in the counter-factual – specifically that very visible prices determine everything important needed for markets to work; there is no mystical invisible hand at work – nor needed.
The meaning of the metaphor lies in its “object” – see Adam Smith on the role of metaphors in his Lectures On Rhetoric and Belle Lettres ([1763] 1983, page 29, Oxford University Press). I am sure that Chomsky knows all about Smith’s conventional views on the role of metaphors.
The object of “an invisible hand” in Moral Sentiments was the absolute necessity, so obvious that it is invisible (cannot be seen by others) – that is, not thought about by the “unfeeling landlord” – yet still operates by leading him to distribute basic necessities to his slaves, serfs, peasants, and etc., form the mutual dependence on them (no food, no work) and their mutual dependence on him (no work, no food). In consequence, his dependents survived and procreated, and early agricultural society continued, with interruptions to the initiation of the “Commercial Age” with the Fall of Rome in the 5th century, and emerged again, gradually, after its reconstitution in the rule of War Lords, and then Feudal Lords, a thousand years later.
The object of “an invisible hand” in Wealth Of Nations was the “concern of some merchants for their capital’s security”, which, invisible to others operates in their heads, and leads them to invest in “domestick industry”. In consequence, domestic GDP grew and commercial society continued. The rest, as they say, is history.
Labels: Adam Smith On Metaphors, Noam Chomsky
3 Comments:
“selfish behaviours were transformed into social benefits through markets" - doubtless (not being a Smith scholar, I don't want to doubt) you are right that the IH metaphor has little bearing on this idea, but surely that idea of the selfish and the social is in there in Smith. What about the butcher passage (I dimly remember reading that a couple of decades ago). We don't expect our local butcher to be a conscientious socialist in order to do what is best for society - isn't that the idea? I find that the most interesting idea to engage with - the idea that encouraging selfishness (of a sort) is what makes most sense socially.
Tom
When Adam Smith deals with selfishness he is clearly critical of it morally. He regarded selfish interpretations of human behaviour, such as found in Bernard Mandeville, as "licentious" (Moral Sentiments). Any idea of positive qualities arising from selfishness are not found in Smith's works. Which is why I have been so hostile to the benefits of 'selfish' behaviour invented by Paul Samuelson in relation to the invisible hand (Economics: an analytical introduction", p 36, 1948) and now widely believed among economists.
The 'butcher, brewer, and baker' passage is misread to interpret it as condoning or accepting selfishness.
The actual passage states that to persuade the tradesmen to supply your dinner (by 'higgle, haggle' bargaining) you must 'address' their self-interests, not you own. In short, we mediate our self interests by persuading them that it is in their interests to provide us with the ingredients of our dinner at mutually acceptable prices. We serve ourself by serving others. Two self-interested bargainers, thinking only for themselves, will not succeed in such transactions. Egoistic people do not meet their self-interests; they deadlock because neither moves and go hungry.
Examples abound in Lost Legacy under 'Bargaining'.
The mediation of self-interest makes sense socially' selfishness does not.
Thank you for your comment.
Gavin
Gavin,
Self interested bargainers will succeed in such a transaction. Think of why anyone buys or sells anything. A buyer is more interested in the service/product than their money, and the seller is more interested in the money than in the service/product. Two people acting selfishly can, and do, make transactions that are mutually beneficial.
Jimmy Hackett
Post a Comment
<< Home