Sunday, April 15, 2012

N. Gregory Mankiw writes (15 April) in the New York Times HERE  

"Competition is healthy for Governments too"

Most everyone agrees that competition is vital to a well-functioning market economy. Since the days of Adam Smith, economists have understood that the invisible hand of the marketplace works only if producers of goods and services vie with one another. Competition keeps prices low and provides an incentive to improve and innovate.”

Mankiw teaches undergraduates their economics.

Yet he makes a major error in his piece for the readers of the New York Times.

Adam Smith never said anything about “the invisible hand of the marketplace works only if producers of goods and services vie with one another.”

In fact he never said anything about “an invisible hand” in connection with the “market place” nor with “competition”.

Graduates from his university – and those who read his textbooks – go on to prestigious jobs in the US economy, politics and academe. 

If this is all that they know about Adam Smith’s use of the metaphor of “an invisible hand”, I think we should worry about what they, and their predecessors, advise on economics, and what he tells the Presidential candidate, Mitt Romney, if it includes a belief that “an invisible hand” operates in the economy to make everything alright.


Blogger airth10 said...

"The upshot is that competition among economics textbooks makes learning the dismal science a bit less dismal."

This is not a smart observation either, or true.

2:33 am  
Blogger Gavin Kennedy said...

Yes, but also, the term "dismal" science originates from remarks made by Carlyle in 1849 in a pamphlet he wrote entitled 'The Negro Question" (for the first edition it was entitled: the "N----- Question", with disgraceful contents and language to match).

Carlyle considered economics to be "dismal" because John Stuart Mill considered black slaves in the Caribbean were equal humans like White people! I would call Mill enlightened.

Given that students who used Text A had a different experience to students who used Text B were unlikely to judge the book they didn't use, I do not see Mankew's point, unless imitations and copying was rampant.


4:39 pm  
Blogger Will said...


What are the earliest uses of the "invisible hand" myth that you've found? It seems to me that Milton Friedman found it quite useful, and regularly presented the libertarian reading of Smith. But perhaps he was echoing an established tradition at Chicago?

4:45 pm  
Blogger airth10 said...

N. Gregory Mankiw writes (15 April) in the New York Times "Competition is healthy for Governments too".

That makes sense. During the Cold War a serious competition existed between capitalism and communism. That competition not only strengthened capitalism but it also convincingly proved to the world which economic system was more sympathetic to the predicament of humankind.

9:53 pm  
Blogger Gavin Kennedy said...

Not clear what you mean by earliest "uses of the "invisible hand" myth that you've found?

There are no mentions of Smith's use of the "invisible hand metaphor while Smith was alive (1723-90). The first mention I've found is in Dugald Stewart's Lectures on Political Economy at Edinburgh University (Stewart was a close family friend of Smith's, whose father attended Glasgow while Smith was there). After that passing mention oamong long passages of Wealth Of Nations without commenting on the IH metaphor, there are no mentions until 1875-1900, when 5 or 6 academic mentioned the metaphor. There is reputed to be a "oral" tradition at Cambridge, England, of mentions through to the 1930s, and Paul Samuelson mentions an oral tradition at Chicago from the same period.

Oscar Lange, a marxist at Chicago, made reference to a "substitute" for the IH in Socialist Planning, 1938, and then Samuelson in 1948 in his successful textbook, Economics: and introductory analysis, which was the "modern version", though corrupted by associating it to "selfish" motivations leading to public benefit, and worse, attributing this false idea to Adam Smith (p. 36)

From the 1960s, mentions exploded into tens of thousands across Western academe (see Warren Samuels, 'Erasing the Invisible Hand: essays on the elusive and misused concept in economics", 2011, Cambridge UP).

I should add that "the invisible hand" appear in classical times, and during the 17th-18 centuries it was well used by theologians (hand of God), poets, playwrights (Shakespeare), novellists (Defoe), politicians, and philosophers.

Does that help?

Gavin Kennedy

9:33 am  
Blogger Gavin Kennedy said...


I agree with you on the Cold War influence on the clash between socialist economies and capitalist economies.


9:35 am  

Post a Comment

<< Home