Monday, January 27, 2014

Adam Smith and Unintentional Desirable Outcomes

Anon” quotes from J. J. Rousseau and posts (26 January) on “Capitalist Imperialist Pig” (since 2004, no less) with a rather confusing, though well argued anti-Libertarian, intellectual slant, that sees the previous lives of humans from “100,000 year ago” as a universal “paradise”, until, that is, our distant predecessors began to leave the forest for shepherding and farming about 8,000 years ago, and then on to commercial societies.  That process is now complete, except for a few thousand acres in very remote pockets. HERE 
I think I've read that the phrase "invisible hand" occurs only once in Adam Smith's Wealth of Nations, but nothing else from economics is so sacred or sacralized. His insight was that the workings of a competitive market would produce a number of socially desirable outcomes. This insight was central to classical economics, and, dressed up in mathematical glad rags, central to neoclassical economics, and its offspring, like the Real Business Cycle theory. Now Adam Smith was a very clever fellow, and he knew that business men really hated free competition, and would work the levers of power to eliminate it, but he probably underestimated their skill at eliminating it.
No, I shall abstain from tackling the myth of the “invisible hand” metaphor (new readers may scroll down Lost Legacy and read my weekly jousts with the “sacred” myth). 
I shall amend the shy Anon author’s statement: “His [Adam Smith’s] insight was that the workings of a competitive market would produce a number of socially desirable outcomes.” That is too narrow an assertion, especially with the definite verb: “would" which should be “could” as there is nothing in Adam Smith’s “Wealth Of Nations” that is so definite about “socially desirable outcomes”.
Any reading of Smith’s WN would inform the attentive reader whom, sorry to say, is among a small minority of the small minority of modern economists who have read “Wealth Of Nations” at all, beyond a compendium of selected quotations.  Most, that is nearly all, modern economists never get very far with Wealth Of Nations, though quite a few have it on their book shelves.
If they did read it they would find mention after mention of Smith’s rather dismal view of the behaviour of “merchants and manufacturers” and the privileged minority who were eligible to become legislators acting against the interests of labours and toilers, as well as the general interests of the public (as did their feudal predecessors before them – “vile rulers of mankind”.
Sometimes, merchants and manufacturers did cause actions in their own self-interests that led society to “unintended consequences”, some of which accidently served the “public good”.  But this was not a general, let alone, a universal consequence of the self-interests of “merchants and manufacturers” (the word capitalism was not known in Smith’s time as it was first used in English in 1854).
In this respect, neoclassical economics was no improvement.  In fact its so-called ‘scientific’ methodology was a great diversion.
I shall leave "Anon" to his quarrel with Libertarians.  The "Hard" Libertarians do have some odd ideas, but, then,  that is why I am a "soft" Libertarian


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