Monday, May 20, 2013

The Cambridge (and Chicago's) Oral Tradition of the IH metaphor and What Samuelson Made of It

I return to Keynes’s 1926 essay discussed yesterday, “The End of Laissez-Faire” (“Essays in Persuasion”, Collected Writings of John Maynard Keynes, vol. IX, pp 272-94. Macmillan).
I have referred several times in recent years to what I detect as a sort of oral tradition in the 19th century and early 20th century at Cambridge University (England) and, possibly, also at Chicago University (USA).  My evidence for this is mainly indirect as direct evidence in print is absent, which is one of the curiosities of the history of the invisible hand metaphor in economics.
The metaphor is discussed or mentioned by faculties of both universities as if the figure of speech was known in relation to Adam Smith in these faculties by themselves and their students but was virtually unknown among the wider literature.
In print, Ricardo, Mill, and others, did not mention the IH in respect of Adam Smith.  Printed mentions of the IH were extremely rare from the 1790s (when Smith died) through to 1875. Dugald Stewart quoted Smith’s use in his Lectures in Political Economy (1809) without comment (reprinted in 1856 in Stewart’ Collected Works); Thomas Chalmers used the metaphor in his theological works in 1846; Angus Onken in 1854: Frederick Maitland, a Cambridge Professor of Laws, linked the metaphor to laissez-faire in 1856; Leslie in 1879; H. T. Buckle in 1885; J. K. Ingram in 1888; J. Bonar in 1893; William Smart, 1899; and F. W. Hirst in 1909.  Compared to these almost en passant few, the contrast of the tens of thousands of modern economists per year after Samuelson is quite remarkable.
Altogether, the few men and a couple of women in the hundred years after Smith died, and while his books remained in print in numerous new editions, who did not make much of the alleged significance the IH metaphor in Adam Smith’s thinking is in stark contrast to modern beliefs from the 1940s through to the 21st century.
These facts have always struck me as odd when I trace the opening salvoes from the long-range effects upon the circa 5 million readers of introductory textbooks by Paul Samuelson.  He was a Nobel Prize winner, innovative mathematical economist extraordinaire, and rightly is the celebrated dominant voice in the quality and design of introductory textbooks for 19 generations of the world’s student economists entering university and college courses from 1948 to 2010.  Samuelson, if anybody, was mainly responsible for this phenomenon across the discipline and modern media.
The ultimate irony is that most economists credit Adam Smith with the authorship of the idea that “every individual in pursuing his own selfish good was led, as it by an invisible hand to achieve he best good of all” (Samuelson, 1948, p.36).  Again, the facts show that Adam Smith wrote no such thing. But the literary libel is now so firmly embedded and so many reputations have been invested in believing it that few economists are unable to even check their beliefs against Smith’s actual words or meaning.
Lastly, I return to the evidence of the oral traditions of Adam Smith in Cambridge throughout the 19th century. Whereas, Frederick Maitland, as a student in the law faculty, not in economics, writes: "Even his famous passage about the ‘invisible hand’ reflects the philosophy which we associate with Paley rather than the economic dogma of ‘laissez faire’. As Sidgwick and Cliff Leslie have pointed out, Adam Smith’s advocacy of the ‘obvious system of natural liberty’ is derived from his theistic and optimistic view of the order of the world, as set forth in his Theory of Moral Sentiments, rather than any proposition of political economy proper” (Sidwick, Principles of Political Economy, p 20).  
Somebody was teaching about Smith’s use of the ‘invisible hand’ metaphor in the Cambridge philosophy courses in the 19th century.  Where students and tutors heard it, Keynes also heard it in his classes at Cambridge (perhaps Marshall’s).  Arthur C. Pigou, Marshall successor as the Professor of Political Economy also heard it in his classes. And he mentions the IH metaphor in his ‘Economics of Welfare’ (1917, 22, 29, etc.,) as the central (oral) dogma in teaching and tutorials at Cambridge.
Samuelson refers to an oral tradition, presumably at Chicago where he was an undergraduate from 1931-35. He writes of the ‘invisible hand’ and the conclusions derived from it by tutors and students: “Even Adam Smith, the canny Scot whose monumental book “Wealth of Nations (1776), represents the beginning of modern economics or political economy – even he was so thrilled by the recognition of order in the economic system that he proclaimed the mystical principle of the “invisible hand”: that each individual in pursuing only his own selfish good was led, as if by an invisible hand, to achieve the best good of all, so that any interference with free competition by government was almost certain to be injurious.  This unguarded conclusion has done almost as much good as harm in the past century and a half, especially since too often it is all that some of our leading citizens remember 30 years later, of their college course in economics.” (Samuelson, 1948, p 36).
Putting a date line to this quotation from Samuelson’s classes at Chicago we arrive close to 1790 to the year that Smith died. That places it pretty much in the period when mentions in print were too few to be significant but the number of oral interpretations of Smith’s meaning were fairly common in teaching to Samuelson’s recent past.  His own introductory textbook remedied that alleged deficiency (and how!) over the next 19 years by giving the "unguarded conclusion" a harmful and "injurious" life line.
[GK: edited 21 May] 


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