Wednesday, January 18, 2012

Memo to John Kay: read Warren Samuels' new book

John Kay writes (18 January) the “accessible and relevant economics” Blog HERE

A real market economy ensures that greed is good”

“Adam Smith’s insight about the invisible hand is often interpreted in this way and modern mathematical economists have established that proposition more precisely. But if co-ordination were the only strength of the market economy, a computer could do that job equally well. Computers are very good at processing information.

I have known John Kay since he was a student at Edinburgh University in the 1960s and I have followed his impressive career as a top UK economist. However, not unexpectedly, perhaps, for regular readers of Lost Legacy, I do not agree with the implications of John’s assertionoft “Adam Smith’s insight about the invisible hand”, nor the allusions to market economies ensuring “that greed is good”.

The connection between markets and “greed” is a wholly “licentious” idea from Bernard Mandeville (1724), and more recently by Ayn Rand in the 1970s, but not by Adam Smith either in Moral Sentiments or Wealth Of Nations.

Fortunately, Warren Samuels’ new book, “Erasing the Invisible Hand: essays on an elusive and misused concept in economics”, 2011, (Cambridge University Press), is now available to tackle the issues raised in John’s post (probably he would not be satisfied by reading Lost Legacy passim, being the thorough economist that he is).

Samuels would more likely satisfy him from his thorough scholarly exploration of the history of the invisible hand covered in this new book, both from Adam Smith’s time (Smith is shown to be innocent of the attributions made to him for the modern misreading of Smith by modern economists, since the 1940s).

In what manner “modern mathematical economists have established that [invisible hand] proposition more precisely” is not shown. Warren Samuels shows by his exhaustive analysis of the many arguments claiming that “an invisible hand” operates in the economy that no such entity exists nor can add anything to our understanding of how markets work. I suggest, also, that no mathematical terms representing “an invisible hand” appear in any of the mathematical equations of those claiming to show that such a terms exists.

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Blogger airth10 said...


I think you should refresh us as to Smith's meaning of the invisible hand, for any new readers of your blog there might be.

Thank you

3:52 am  
Blogger Gavin Kennedy said...

New readers are always welcome. However, with hundreds of posts on the use and meaning of the "invisible hand" (including my debates with your good self), I think new readers are most likely to scroll down a new Blog with which they are not aquainted (I do).

In addition, I now enough about John to know he is perfectly knowledgeable of economic theory to make hisown mind up when he has read Warren Samuels' new book.


7:37 am  

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