Monday, December 10, 2012

A Polite Exchange of Views II

 A Correspondent responds:
Without disputing that it’s wrong to read Smith solely through the lens of IH, what make you of those who argue that even if the metaphor is rare in Smith’s work, the more general claim that Smith relies extensively on either unintended order explanations (as argued, say, by Otteson and Craig Smith) or on “invisible hand-like” explanations (Fleischacker) throughout his work.  That is to say, a broad range of prominent scholars have argued that in fact it’s not wrong to find unintended order mechanisms in Smith, and even to place these as central in Smith –what they deny is that this can then be appropriated to contemporary policy in any simple way.  Is this what you want to claim as well? Or do you want to do further and say that the entire approach of regarding Smith as an unintended order theorist is misguided?”
Smith identified an example of the generality of unintended consequences in human behaviour in the “invisible hand” paragraph (WN IV.ii.9:456):
Employing his capital in domestic industry increases the arithmetic total of domestic capital in an economy and this “necessarily” increases the annual revenue (GDP) of the society.  This is a plain statement of arithmetic fact.
The object of the metaphor of “an invisible hand” is “his own security” which leads him to behave as he does.  He is not “led” by an actual invisible hand; he is “led” by his concerns for his “own security” expressed metaphorically.  Confusing the two leads to a belief in unexplainable mystical forces – in some versions, ‘to hand of God’ theology both of which belittle science and ignore even the elementary roles of the grammar of metaphors in the English language.
Smith also says: “he is in this, as in many other cases led by an invisible hand”, leaving the reader to apply her own examples, rules he demonstrated in his single example.   He does not imply that there is an actual “invisible hand” at work, nor does he say or imply that the IH is a characteristic of something, such as “of markets”, or “supply and demand”, or “competition”, or “equilibrium”, or anything else; for Smith the IH is a metaphor, not a general noun. 
Notably, in his own two examples in TMS and WN, Smith gives two different cases of “an invisible hand” as an adjectival metaphor, first for the “proud and unfeeling landlord”, led by the absolute “necessity” to feed” those “whom “he employs” from the produce of his fields, and secondly for an ‘insecure’ merchant who is led to invest domestically rather than send his capital abroad.  In the first case, the landlord risks starving his serfs and consequently unable to labour; in the second case, the merchant perceives he risks losing his capital in a ship wreck or piracy, or fraudulent trickery by distant foreign strangers, or some other disaster from his inability to supervise his interests at distance from his presence.  These potential calamities “led” the landlord and the merchant to act as they did, and in both cases there are unintended consequences in that by being “led” in to do something for his immediate interest, he unintentionally also served the “public interest”, specifically, the “multiplication of the species” (TMS) or the “annual revenue of society” (WN).
You ask me to comment on: “either unintended order explanations” (as argued by Otteson and Craig Smith) or on “invisible hand-like” explanations (Fleischacker) throughout his work.”  To which I would add Robert Nozik’s classic on “invisible hand explanations” (1977), Emrah Aydinonat’s (2008) work on “unintended consequences” (which he equates with the “invisible hand), Maki’s ”invisible-hand consequences”, and many others.
My general comment is that I prefer to think of Smith’s use of the IH metaphor as leading people to actions that met their immediate interests and which in due course had “unintended outcomes”.  The IH metaphor is not an unintended mechanism”.   The two different motives identified in Smith’s two examples had unintended consequences after the persons concerned were “led” (expressed metaphorically) by “an IH”. The unintended consequences were perceived to be benefits to "the society".  In some actions by people (merchants fearing foreign competition) the consequences are “always worse for the society” (WN, 456). Therefore, for each use of the IH metaphor (or any other metaphor) we must identify their “objects” (Smith, Lectures On Rhetoric and Belles Lettres”, 1763).
 On one level, actions once taken may benefit the society; the serfs in return for hard labour (enforced by the Landlord’s overseers, a strata well-known for its liberal sense of generousity) and were able to feed their families, and through the generations, propagate the species.  At another level, the agrarian system was a punishing life of toil and associated misery and labourers’ per capita incomes remained around $1 day for millennia (McCloskey).  As for domestic merchants benefitting the society, including those who join them from their insecurity in foreign trade, they also have a universal proclivity for advocating tariffs and prohibitions on foreign goods, which among other consequences, mal-distributes capital, raises prices, distorts domestic consumption and lowers potential opulence, and does not benefit the society.
To identify the ‘many other cases” that Smith may have found suitable for using the IH metaphor we must first identify in all cases their possibly different objects, otherwise the IH metaphor may not apply. None of Otteson, Craig Smith, with whom I have discussed the IH metaphor, nor Fleishacker, with whom I have corresponded mention/accept the IH’s invisible hand’s purely metaphoric qualities, nor do several other prominent scholars, with whom I have debated, such as David Friedman, Daniel Klein, and many other correspondents on the Lost Legacy Blog.  Daniel Klein came closest in simply dismissing the metaphoric aspects (without explanation) as “too narrow”.
In general, I would go along with “unintended consequences” as an idea, but not with “invisible hand explanations”, especially linked or sourced to Adam Smith or his use of the IH metaphor.  The “invisible hand” is not an explanation; it describes metaphorically the motives of some actors for acting, and it is those actions, not their motives, that have unintended consequences.


Blogger gune said...

Adam Smith's metaphor analysis highlights three imperative principles-object of metaphor[assuming his own security],source of metaphor[where is the metaphor taken from?It affects to the quality of metaphor.],adequacy of metaphor[What is the sentiment to be expressed by the metaphor?It must be in the due strength of expression and at the same time in a more striking and interesting manner].How can we apply those principles to an invisible hand metaphor in Wealth of Nations?

1:45 pm  

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