Friday, July 20, 2012

Falsehoods No Guide to Adam Smith

Micah Murphy speaks of “falsehoods” undermining empires but commits (unintentionally, I'm sure) a falsehood about Adam Smith while doing so in a post in ‘Truth and CharityHERE 
The Hersey of President Obama”
“Adam Smith, for all the good his thought may have done, believed that it was man’s greed and self-love that should drive the economy.
The Adam Smith who was born in Kirkcaldy in 1723, as opposed to the invented “Adam Smith”, lauded by some modern economists at Chicago University in the 1930s, did not articulate “beliefs that it was man’s greed and self-love that should drive the economy” (see Paul Samuelson’s account in Economics: and introductory analysis, p 36, 1948)
The Adam Smith who wrote Moral Sentiments and Wealth Of Nations spent considerable efforts to dissuade readers from accepting the writings of Bernard Mandeville (‘Fable of the Bees’, 1724) in praise of selfishness, which he described as “licentious”.   Mica also may be confusing Ayn Rand and her sympathy with “selfishness” with Adam Smith’s philosophy of self-interest as a driver of behaviour (a common mistake of modern commentators).
Adam Smith’s self-interest theory was clearly constructive when it was mediated by concern for the self-interests of others as specified, foe example in  “the butcher, brewer, and baker” example in Wealth Of Nations.  Two egoistic self-interested neighbours would never agree to anything.


Blogger airth10 said...


I think you are a myth maker yourself.

I didn't read what you said Samuelson wrote on p36 in his book Economics. I didn't read the words 'geed' or 'self-love'.

Perhaps you can disseminate the passage so we can understand what you mean.

11:28 am  
Blogger Gavin Kennedy said...

I have always advised my students that their patron saint should be “doubting Thomas” (though a student, showing a lack of imagination, once insisted that the “official” saint was somebody else (whose name escapes me). You certainly doubt whatever I say.
So to your query/assertion: I do not have my full set of Samuelson’s “Economics: an introductory analysis” (McGraw-Hill here in France, but I do have the fifth (1961), sixth (1964), and ninth (1973) editions. My first edition (1948) to the Twentieth (2012) is in Edinburgh.
In Chapter 3 (all editions, but varying page numbers), there is an edited extract minus some sentences and words, from Wealth Of Nations, Book IV, chapter 2, part of paragraph 9,
page 476.
A couple of pages further on (page 39) there is a sub-section entitled: ‘The invisible hand and “Perfect Competition”’ in which this sentence is repeated in all editions (different pages):
“Adam Smith, whose Wealth of Nations (1776) is the germinal book of modern economics or political economy, was thrilled by the recognition of an order in the economic system. Smith proclaimed the principle of the ‘Invisible Hand’; every individual in pursuing only his own selfish good is led, as it by an invisible hand, to achieve the best good for all, so that any interference with free competition by government was almost certain to be injurious.”
In the first edition this is on page 36.
I did not say you would read the words 'greed' or 'self-love'.
Many modern economists do lump “greed” with “selfish” in their versions of Smith’s actual words. 
Smith said neither.
I do not make words up, nor do I spread “myths”. I spend much time correcting modern myths about Adam Smith; not adding to them.
I do not accept that Smith was “thrilled” enough to proclaim anything (how did Samuelson know that for a fact?). There is no record in Smith’s Works of his state of mind.
Anyway, it is highly unlikely that it was a proclamation, though the invented claim supports the myth of “an invisible hand”, evidenced by Smith not mentioning the so-called ‘proclamation’ anywhere, either in Wealth Of Nations or Moral Sentiments.
Nor did Smith write before “an invisible hand” the words “as if”. Smith used the the IH metaphor, as I have explained here many times, as a metaphor not as a simile

12:56 pm  
Blogger airth10 said...


Thanks for that.

I am thinking, though, Smith would have been trilled to recognize an order in the universe, finding a deity, so to speak.

I remember I was thrilled when I discovered what ultimately cause communism to collapse. It wasn't much different from what Smith recognized.

2:29 pm  
Blogger airth10 said...


You write that Smith never wrote 'as if' before the invisible hand. Instead he wrote "... as in many other cases, led by an invisible hand"

What Smith wrote sounds very strong indeed, solider than 'as if'. 'As if' sound like the language that introduces a metaphor. But what Smith wrote sounds more a definitive comparison, something that is really out there but can't be seen. He gives the unseen phenomenon of the free, voluntary engagement of individuals in the betterment of society a name, an invisible hand.

4:08 pm  
Blogger Gavin Kennedy said...

There are metaphors and similes, easily distinguished. Similes use the format “as if”; straight metaphors don't.
The metaphor’s role is to “describe in a more striking and interesting manner “ its object. A simile does so in a less “striking manner”. It’s a matter of literary style. Metaphor are powerful, immediate, and memorable; simile require more effort to visualise. Smith in Wealth Of Nations speaks of problems with banks from "drawing” and “re-drawing” paper bills: “and have been so much clear loss upon the balance of their accounts. The project of replenishing their coffers in this manner may be compared to that of a man who had a water-pond from which a stream was continually running out, and into which no stream was continually running, but who proposed to keep it always equally full by employing a number of people to go continually with buckets to a well at some miles distance in order to bring water to replenish it.” (WN II.ii.76:316). This is a simile. It is a passable literary description but it does not grab your attention.
Consider Smith’s metaphor for the Bank of England:
“It acts, not only as an ordinary bank, but as a great engine of state.” (WN II.ii.85: 320).
Or yet another metaphor for the relative insecurity of paper money compared to gold and silver:
“the commerce and industry of the country, however...cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel about upon the solid ground of gold and silver.” (WN II.ii.86: 321)
Daedalus was a myth of a young man who attached feathered wings with adhesive and flew towards the sun, which melted the wings, and he crashed to his death on hitting the ground. The metaphor graphically caught the attention of educated readers far more dramatically than asserting that gold and silver are better risks that paper promises.
Smith’s use of “led by an invisible hand” is far more striking as a pure metaphor than it would be if transformed into a mere simile by writing “as if by an invisible hand”. Smith chose to write it as a metaphor, which in no way means that it actually exists! There are no actual Daedalian wings attached to paper money. To assert that Smith – or any reader – believed that the wings existed is pure fantasy. And even if they believed such wings to exist (either in the original Greek myth or since they first read of them as a metaphor) it is pure, fantasy.
Smith described in his History of Astronomy beliefs by pagan believers in “invisible beings” ruling people’s lives “for their own purposes” as “supercilious superstition”. It came from the earlier ages of human kind before philosophy began to discredit such notions. Believing something does not make it true.
There is no evidence supporting you. Indeed, his use of an IH was a common metaphor in the 17 th -18 th centuries by authors (Shakespeare), poets, novelists (Defoe), preachers in their sermons (Hugh Blair), and in general discourse.
“An invisible hand” remains a metaphoric expression of literary merit; nothing more. In Smith’s case in Wealth Of Nations it remains, as it was written by Smith, a metaphor for the invisible insecurity of some, but not all merchants, that "led" them to prefer investing their capital in “domestic industry” rather than risk it abroad in foreign trade. This insecurity, had visible consequences in the additional amount of “domestic revenue and employment”. See Book IV, chapter 2, para 1 to 9: 472-476.

1:01 pm  
Blogger airth10 said...

So let's give up the invisible hand and just say that individuals are led by self-interest and self-preservation, not by an invisible hand. And counter to a rational that believes otherwise, the result of multiple self-interests competing leads to the betterment of society and nations.

That I am sure is what Adam Smith was telling us.

4:46 pm  
Blogger gcallah said...

"So let's give up the invisible hand and just say that individuals are led by self-interest and self-preservation, not by an invisible hand."

Let's not, because there is no reason those motivations would HAVE to produce prosperity: humans could have been more like tasmanian devils.

"That I am sure is what Adam Smith was telling us."

I am sure it wasn't.

8:32 pm  

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