Tuesday, July 10, 2012

Leftists Thrive on Myths Perpetrated By Samuelson About Adam Smith

Roland Boer at: “On the international division of labour and the invisible hand (-shake of corruption)” Satlin's MoustacheBlogHERE http://stalinsmoustache.wordpress.com/2012/07/10/on-the-international-division-of-labour-and-the-invisible-hand-shake-of-corruption/
Alain Lipietz again:
Ricardo and the supporters of the Heckscher-Ohlin-Samuelson theorem seem, for instance, to believe that the international division of labour is the result of some world conference at which brilliant economists explained to an admiring gallery of politicians that – given relative levels of productivity, collective preferences and the initial endowment of factors – the free play of market forces would ensure the optimal division of production, and that each participant then went home convinced not only of the virtues of free trade but that the law of comparative costs ensured that the lot that had fallen to his or her country was quite justified, and that they could therefore force it to adopt the requisite specialization.
The problem with all of this is of course – now with a turn to Adam Smith – that the ‘invisible hand of the market’ is actually ‘the invisible handshake of corruption or the eminently audible boots of the military’.
Lipietz, Miracles and Mirages, pp. 16-17.”
I smiled weakly at Alain Lipietz’s sarcasm in the opening paragraph, because many Leftist commentators actually believe in physical conspiracies by cabal of capitalist bloated exploiters meeting as a secret government.
But my weak smile turned to head-shaking despair at Alain’s unfunny Leftist nonsense about the IH metaphor morphing into “the eminently audible boots of the military”.
That’s what happens when “Ricardo and the supporters of the Heckscher-Ohlin-Samuelson theorem” are taken as the first and last word in economic analysis from a wholly imaginary world yth pronounced as fit for the real one. 
Those who concede territorial understanding to the elegance of an argument and its ‘proofs’ to body of knowledge that is certainly examinable, but is much less certainly representative of the real world, allow Leftists to dominate a generation or more of opinion formers in public discourse that could help decide what might be done to help solve real problems affecting all of us.
Choosing between “Ricardo and the supporters of the Heckscher-Ohlin-Samuelson theorem” and those Leftists who have bought into the attribution to Adam Smith of “the ‘invisible hand of the market’ myth” (another invention of Paul Samuelson’s) there is not much to choose from.  Both are equally myopic.


Blogger airth10 said...

First of all I don't understand this myth, perpetrated by Paul Samuelson, that leftists thrive on. But if it is a myth it seems more like a Rightest one since it conforms more to what they believe in, unfettered capitalism.

However, I don't think it's so bad that Samuelson misappropriated Adam Smith's meaning of the invisible hand, if that is what he did. After all, Smith was pretty vague and confusing about his meaning of the invisible hand.

Samuelson put the invisible hand to good use, over and above what Smith meant of it. Samuelson was an artist like Smith was. Throughout history artists have borrowed ideas from each other and developed on them. (Smith borrowed the IH metaphor from Shakespeare's Macbeth.) And why not if it enriches Civilization. Samuelson's artistry and meaning of the IH metaphor in his economic tutelage helped spark an entrepreneurialship in capitalism at a time when it needed distinguishing from it chief rival, communist socialism.

Communist socialism didn't have anything equivalent to the invisible hand. Samuelson promoted the invisible hand as the pursuit of self-interest, being the mantra of the free market. The aura surrounding the invisible, as it is in Smith's meaning, is about positive unintended consequences. Communist socialism had nothing like that, no unintended consequences that ultimately benefits society like capitalism does.

Well, communist socialism did have its equivalent to the invisible hand, the invisible boot. But no good came of it in the end. The invisible boot forced labor out of people. Under communism people's labor wasn't their own; it belonged to the state. As result the communist state suffered and ultimately collapsed because people, being kicked around and getting no respect, got no incentive to be productive or reach their potential, which could have benefited the state.

On the other hand - economic talk, the invisible hand respects individual labor. The invisible hand essentially implies that through the pursuit of one's own labor and self-interest society will benefit the most. In his teaching Samuelson expounded on this idea. And his idea help win the day since it contributed to debunking socialism even though it wasn't exactly what Smith intended.

4:37 pm  
Blogger Gavin Kennedy said...

You misunderstood my point.
Leftists repeat the mythical version of the invisible hand in Adam Smith that is perpetrated by Samuelson because it suits Leftist ideology about what Smith was supposed to mean when he used the simple metaphor. Samuelson's invention of "selfish" motives tarnished Smith's moral stances. He never said that selfish motives produce public good. A ridiculous notion. Selfsh motives of self-interested merchants gave us tariffs, prohibitions, jealousy of trade, colonialism and slavery. These had heavy humanitarian costs.
Non existent 'Invisible hands' did not debunk socialism; they obscured the real driver of market benefits - very visible competitive prices that reflect their true social costs. Socialism does no have such visible true prices; it does not know its true costs.
All actions have unintended consequences. The absence of intention does not determine outcomes - they are unintentional. Intentions do not determine outcomes. That's the point. There are no invisible hands.

10:54 am  
Blogger airth10 said...


You are right. I did misunderstand your point.

I have never been able to find a passage where Samuelson spoke of selfishness. Do you have a source?


Well, I did find a source, in "The Collected Scientific Papers Of Paul A. Samuelson". Samuelson wrote: "Adam Smith was one of the first to speak as if within the impersonal market place of perfect competition there was a magical 'invisible hand' leading the system to a certain kind of optimum- even though each individual is merely pursuing his own selfish well-being."

It seems to me that Samuelson wrote to be entertaining about the 'dismal science', to make it more palatable for his student and readers of his articles. And one of the entertaining mechanisms he used was the invisible hand. Rightly or wrongly, he gave it a personality and a tangibility it lacked, so that people might better understand the phenomena of economics.

My feeling is that Samuelson did not mislead or alter the practice of economics in his linking the invisible hand to individual selfishness, as many might think. America and its habitants was already well on the road to selfishness. That idea had earlier been implanted in the American psychic by a passage in The Declaration Of Independence which announced vigorously the God given right to "Life, Liberty and the pursuit of Happiness”.

1:33 pm  

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