Saturday, September 08, 2012

From My Note Book no 7

After I posted no. 6 in this occasional series (taking time out to watch Scotland play football,  known as “soccer” in the USA, against Serbia in a qualification match for the World Cup in Brazil in 2014), I continued looking through my Note Books and found on a last 2 pages, my notes on ‘An Inquiry into The Nature and Causes of the Wealth of Nations by Adam Smith with an introductory essay and Notes by Joseph Shield Nicholson, MA, Sc.D. Edinburgh and London: T. Nelson and Sons, Paternoster Row, 1891.
Nicholson writes:
“American protectionist, H. Carey claims to be the only true interpreter of Adam Smith … fundamental position in Wealth of Nations that ‘ “capital employed on the home trade of any country will generally give encouragement and support to a greater quantity of capital of productive labour in that country than an equal capital employed in the latter trade employed in the carrying trade” (p 8).
[This passage seems to have come from WN IV.ii.6: 455 – the same chapter in which Smith mentions “an invisible hand”, which was probably why I recognised and noted it some time ago.]
In his comments, Nicholson also refers to Smith’s criticism of assertions about “socialistic” ‘selfishness’ in ’economic man”.
Nicholson then makes a direct quote from the invisible hand paragraph 9:
 “I have never known much good done by those who affected to trade for the public good.  It is an affectation, indeed, not very common among merchants and very few words need be employed in dissuading them from it” (WN ii.9: 456).
But Nicholson does not mention the famous “invisible hand”! Nicholson then moves very close by asserting:
“The leading idea of his [Smith’s] system is that in any civilised community, if men are left at liberty to pursue their own interests in the way they consider best, they will as a rule, although unintentionally, promote the public good” (p 14-15).
Again, Nicholson did not mention the famous “invisible hand”!
He continues by quoting these lines from paragraph 10 (pp 16-7):
The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it” (WN IV.ii.10: 456).
Nicholson also quotes directly from paragraph 4 of the same chapter 2, p 454:
“And, every individual endeavours to employ his capital as near home as he can…”
I conclude from these quotations and the omissions of mentioning the “invisible hand” metaphor by Shield Nicholson in his edited version of Smith’s Wealth Of Nations in 1891, along with the same omissions from Canaan’s edited version of Smith’s Wealth Of Nations in 1904 (detailed in Notebook no. 7 yesterday), believing they constitute further evidence that the “invisible hand” did not strike any particular resonance with senior academic economists, who were particularly familiar with Adam Smith’s Works in the late 19th century (I had already shown that nobody appears to have mentioned its so-called significance from 1776 to 1874). Certainly the post-1874 lone-long treatment by Maitland of the “invisible hand” (see my SSRN paper ‘The Myth of Adam Smith’s Invisible Hand - a view from the trenches”) were not to anything like the degree to which mid-20th century economists latched onto and entrenched the “invisible hand” in their academic work (post-Samuelson). Their students and readers, post-graduation, have been enthused (some might say “drooled”) over the myths about the “invisible hand” metaphor for having some mystical and special significance as an idea of Adam Smith’s – also a belief that it really exists. 
This very strange phenomenon is common to neoclassical, Keynesian, Austrian, Hayekian, Heterodox, and, even Marxist/socialist, economists.
I shall continue my efforts to bring the matter to their attention.


Blogger airth10 said...

Has anybody written a book or article on what Adam Smith might make of the today's world? Would he understand the concept of sustainability or sustainable development?

Being a moralist Smith would probably view sustainable development as a moral imperative. As The New York Times explained it, sustainable development is about “strategies for meshing human activity with the limits of the planet and the needs of future generations". That sounds like a proper moralist view.

As we were reminded Smith was not the father of capitalism. Nor is he the father of sustainable development. But Smith's ideas were incorporated in what became capitalism and sustainability.

In a way capitalism and sustainable development are synonymous and linked because without capitalism sustainable development would not be possible. Often, since the time of Malthus, we have been warned that our economic existence was in peril and was reaching its end. But some how (maybe because of an invisible hand) capitalism in its capacity has managed to muster the human and natural resources to overcome collapse and sustain us to the next level.

1:20 am  
Blogger Gavin Kennedy said...

airth 10

All but your last sentence is arguable, though I am not sure we can speculate on what Smith ma have thought about "sustainable development".
The problem with Malthus - who re-defined the problem is became famous for advocating more than once - was that as he was publishing the very problem of the so-called "malthusian" trap was being superseded by actual events of rising real per capita incomes instead of the usual cycles of $3 a day labour or less that had been experienced for millennia.
The very fact of discussing "sustainable" development suggests that the remedies are under way. This has nothing to do with IH metaphors.

5:10 pm  
Blogger airth10 said...


"This has nothing to do with IH metaphors."

Sorry, I put in there to get you attention.

2:00 pm  

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