Wednesday, July 30, 2014


Four economists and their views on the mathematicisation of political economy that has passed its tipping point. (Taken from a History of Economic Thought Blog, this morning).

1 "I am appalled ... by the extent to which there has been a tendency for economics to become a purely abstract branch of mathematics, no longer to be a political economy concerned with the facts of the real world but an intellectual exercise" (Milton Friedman 1985). 

2 “Indeed. I wonder how long it will be before economics 'departments' are housed in the mathematics faculty. Perhaps it has already happened somewhere."

3 “I would go further: Some argue that the culture of mathematics departments has overtaken graduate economics to the extent that realism is of lesser concern than elegance. I saw this culture first hand and when I took graduate mathematics classes as part of 
my graduate education.”

4 “Your daughter's professor was and is surely correct. Indeed, it is probably not an exaggeration to argue that a mathematics undergraduate has an easier time of it at economics graduate level than their economics counterpart. This is why we need more history of thought - and I don’t mean history of mathematics!”

5 "Yes, it has happened.  Until recently Chicago State University had a
Department of Mathematics, Computer Science, and Economics.  I believe
Economics has now been moved out of that department."

6  " Birkbeck College in London has a Department of Economics,
Mathematics and Statistics.
I suppose I was thinking more along the lines of when and if an economics
department is subsumed into a maths faculty, i.e. without the word
'economics' even making an appearance in the faculty title. But I think I
was getting ahead of myself."

7   "t also happened at Emporia State University when the Program in Economics was removed from the Social Science
Division and moved to the Department of Mathematics in Arts & Science.  Last time I looked it still is listed in the catalog
in the mathematics majors."


It is not just the mathematic techniques that led the way down this path to the cul de sac ; it was the theoretical assertions that accompanied them (rational expectations and assumed predictability of the future without studying how the historical past led to the present ).  With a multitude of schools of thought contending for our attention and the consequential stalemates of competing ideologies, economics has even less to say about the real economies of the world than our predecessors before economics replaced political economy and lost its claims to be taken seriously.

Tuesday, July 29, 2014


BEACON Researchers at Work: The Invisible Hand of Evolution

This week’s BEACON Researchers at Work blog post is by MSU postdoc Jeff MorrisHERE 
“Adam Smith, an 18th century Scottish philosopher, was struck by how economics obeyed natural-like laws despite the often capricious and irrational behavior of economic actors. Smith envisioned an intrinsic interrelation between producers and consumers that pulled economic behavior toward certain norms as if “led by an invisible hand.” The net result of many financial actors behaving selfishly is a well-regulated, self-organized system: the parts don’t have any intention of working together, but screw up and do it anyway.
… The chief problem with evolving cooperation is the tragedy of the commons. Briefly, if cooperation has a cost, then a non-cooperator that can still get the benefits of cooperation will always have a fitness advantage over cooperators. Theoretically, this advantage will always exist even if the breakdown of cooperation totally trashes the environment. We know the tragedy doesn’t always happen because we see organisms in nature working together – but how does evolution escape it?
Bill Hamilton proved that self-sacrifice could evolve by natural selection if the recipients of the sacrifice were related to the sacrificer – something we’ve come to call kin selection. In the microbial world, kin selection can happen when microbes live in close physical association with each other.”
An interesting and readable article by a newly appointed Assistant Professor of Biology, of which subject I know little but I read in related fields.  My recent reading included Edward O. Wilson: ‘The Social Consquest of Earth’, Norton, 2012. 
Inter alia, Wilson reports Bill Hamilton’s classic demonstration that self-sacrifice for near relatives is an overstated assertion among biologists. I cannot and do not claim to adjudicate on such matters, but I do know that co-operation and wilful exchange of benefits occurs across nature including where near relatives are not involved.  Edward O. Wilson’s theory of eusociality  is a better general explanation for these behaviours. 
But let me focus on Adam Smith and Darwinism.  
Smith was struck by how economics obeyed natural-like laws despite the often capricious and irrational behavior of economic actors.” 
Obeying “natural-like laws” is contentious.  The fraility of the generalisation lies precisely in the “often capricious and irrational behavior of economic actors.”  “Laws” that are not universally obeyed seem short of “natural”.  Moreover, whereas atoms and such like act alike across the universe in identical manners, which can claim  to be explained as “natural laws”, human beings act in mutlitudes of ways and multitudes of mixtures and combinations of possible ways, well outside any description of singular “natural-like laws”.
Humans are self-directed in their behaviours.  The benefits of co-operation were not instinctive; they had to be learned and other elements of co-operation had also to be learned; both evolved over time, though not universally nor simultaneously.
The “tragedy of the commons’, such as found in over-grazing a pasture or over-fishing a lake or ocean is explained not solely as “over population” - the original obsession of Garrett Hardin’s assertions - but of the absence of property rights and its management.  In the absence of property, a human adaptation from nature - animals have a sharp sense of the defence of their ‘property’ from rival intruders and over-exploitation by humans was and is common.  In the deep past until recently by vast spaces and very low human population densities (Europeans recently ‘discovered’ forgotten peoples that had migrated to the Americas via north-east Siberia and to Australia via south-east Asian island chains). 
This whas not a case of humans learning to “pull” economic behavior towards certain norms, as if ‘led by an invisible hand’. Jeff Morris reports this as a tension between “co-operators’ and ‘non-co-operators’, with the former accepting the costs and the latter seeking to avoid the costs.  The evolution of co-operation among humans took tens of thousands of years (and their Hominin predecessors that took millions of years) and not from just a few meetings, nor some formal agreements.
Jeff’s urge to link the long evolutionary processes of co-operation to the instantly recognisable “invisible hand”, used as a metaphor by Adam Smith (though for a distinctly different metaphoric purposes) and as a simile by Jeff, is unfortunate.  Social scientists and biologists even, should look where they tread when entering another domain in case they cause are misled.
There is no “invisible hand in the human domain”.  Co-operation among human kind was present as a possibility from the beginning.  In Nature, lions, tigers, hyenas and dogs (and insects too) sometimes hunt in packs (co-operation) and after the kill, they compete for their share of it.  Humans from the beginning of their speciation also faced the possibilities of hunting or gathering alone (with some degree of risk to their safety)  or acting in groups.  Before then they were dependent entirely upon what they found in rude nature, just as they found it, as was the case for all animals, whose bodily functions were suitable for their limited purposes, and always in competition with other living creatures.  Humans learned from their intelligence to adapt the fruits of nature to their different needs.  Groups that adapted did better over the millennia than other humans that did not. 
Economics as a science is not a finished product.  Attempts to find its natural laws are flawed.  Know-all assertions of ‘natural’ laws that ‘explain’ economic behaviours in the same manner as they may be stated in the natural sciences are idealistic.  When used to predict the future they are pernicious.  The best we can do is to approach an understanding of the recent past which may help us to explain the present.  But as a predictive science economics remains dissappointing.  
The fact that there are multiple ‘schools’ of economics nowadays - some going back to the 18th and 19th centuries - all fighting for the supremacy of their ‘schools’ over the multiple alternatives, suggests to me at least (I am in a school of one!) that a degree of modesty is required when speaking of economic certainties about the real world. 

Perhaps its different in biology?  Read Jeff Morris and see what you think.

Wednesday, July 23, 2014


Ellis Thorpe wrote the following letter to “The Scotsman”, Edinburgh,  22 July:
Smith’s legacy”
“IT CAN’T be gainsaid most people will be “delighted” Adam Smith’s house refurbishment is nearing completion (Jim Tough, Letters. 18 July). However, it may be debated if Smith’s legacy, as the father of modern economics, is “beyond question”.
Would he have recognised much of today’s economics with its algebraic and mathematical models? Did the proclivity for this methodology obscure the “bigger picture” in the run-up to the global financial crisis?
Perhaps Adam Smith would be better described as a political economist, as economics was once called. Have today’s university degree courses in economics shed economic history and the history of economic thought?
Arguably, and perhaps somewhat heretically, political economy will be taken up again, or controversially even economic philosophy.”
Ellis Thorpe.
The following is my response published in “The Scotsman’ (Edinburgh) on 23 July:
“Adam Smith’s Lost Legacy”
“Adam Smith’s lost legacy as represented by mainstream mathematically-inclined economists and their fantasies of ‘rational expectations theories’ have very little to do with anything written by him. 
Practically everything claimed about Adam Smith is mythical, peversely misunderstood, or asserted merely to support ideologies for ‘laissez-faire’ versus state regulations and unfunded spending. 
Smith was not the first nor the only 18th-century, political economist.  He wrote just before what we call the ‘Industrial Revolution’.  His focus was on history, not the future (he did not make predictions for the future; he tried to understand the past as a guide to the present). 
Ellis Thorpe asks if universities have “shed economic history and the history of economic thought” and he answer is ‘Yes’, but there are happy signs of a revival of student interest in such courses.  
Restoration of Panmure House, Smith’s last home, off the Royal Mile, may be part of that revival because economists certainly ought to examine the recent crises in US and EU economies to avoid repeating them.

(Prof) Gavin Kennedy (Edinburgh).

Friday, July 18, 2014


Interesting Discussion of Increasing Interest Among Economics Students in the History of Economic Thought
I have mentioned on Lost Legacy signs of discontent at Manchester U and Harvard U among some economics students in their standard modern economics classes, dominated as they are by higher mathematics allegedly ‘proving’ the dominant school of rational expectations ( “MaxU”) certainties are the driving force of human behaviours in markets.
This was to be expected given the apparent disconnect between recent events in several major economies from 2008 and the complacent certainties of the dominant ‘theologies’ driving many academic departments in recruitment of staff and students.   Economics no longer has a credible claim to its so-called ‘scientific’ status for its mainstream dismissal of the History of Economic Thought (HET) of the discipline as being worthy of study within an economics first degree, and, for the few graduates who aspire to an academic career, a ‘kiss-of-death’ for their chances of passing a selection board for entry-level appointments with even sniffs of HET in the academic cv.
Here are to recent posts relevant to what is beginning to happen to HET in academe and of which I was very pleased to read:
1. Steve Kates (Associate Professor RMIT University, Melbourne, Australia): 
“I found Jerry Green's description of how he ended up teaching his mini-course in HET quite remarkable, especially this:
"I am teaching a course on the history of economic thought this year -- actually it is running all year long so that half of it is still to come. . . . Last year I began my lectures in economic theory (the course that is required for all our graduate students) with a few minutes of historical introduction, before getting to the main part of the lecture. I always did this to some extent; it was not a new idea or a change in the course. However, for some reason it hit a responsive chord with two of the students and they asked if I would lead a reading group on history of thought this year. We made up a reading list and circulated it to all the graduate students -- 40 people indicated an interest in joining the group." 
If the academic world were made up of profit-oriented institutions in the normal sense, the latent interest would lead to more such courses finding their way into the world. In Auckland, in a fashion similar to the experience described by Jerry Green, I discovered that an HET group was set up by the students themselves to which they invite their own list of speakers. 
The manifesto put out by the Manchester University Economics Students earlier this year ( ) also raised the importance of HET as seen from a student perspective:
"History of economic thought and economic history are essential for students to be able to evaluate the quality of economic theory. To understand the historical development of a particular model or economic paradigm provides an invaluable insight into the problems it was designed to solve and how context influenced its formation. This is a vital counterweight to the hubristic belief that economic theory can represent universal truth and the refusal to recognise the limits to our knowledge."
Leaving aside "hubristic", I think this is exactly so, and I also agree with Jerry Green where he states that most academic economists are not against such courses. A course, for example, in the history of the theory of the business cycle would be the kind of mini-course that would attract serious interest and would be of genuine educational value - truly useful for an economist - although I suspect there wouldn't be all that many who would even know how to teach such a course or even where to begin.
It is a sad fact that the way that we now recognise academic success in economics is far distant from the history of economic thought, but it does not have to remain this way. There is clearly an interest, and also serious value in a restoration of the history of economic thought in the curriculum of economists. This is something that those who set the agenda both for HET and economics in general ought to be thinking seriously about.”
2. On 17 July 2014 David Colander, wrote <>:
“I don’t know anything about MIT, but a couple of years ago Jerry Green at Harvard responded to student requests and started a reading group that morphed into a  one semester, and then a two semester, graduate course.  We invited Jerry to  come up to Middlebury  and talk about the course, which was a very useful exploration of where recent economic ideas came from.  He did a lot of research preparing for the course.   Here is what he wrote me in an email as we were discussing the course.
I am teaching a course on the history of economic thought this year -- actually it is running all year long so that half of it is still to come. As you may know, this is not my field. However, last year I began my lectures in economic theory (the course that is required for all our graduate students) with a few minutes of historical introduction, before getting to the main part of the lecture. I always did this to some extent; it was not a new idea or a change in the course. However, for some reason it hit a responsive chord with two of the students and they asked if I would lead a reading group on history of thought this year. We made up a reading list and circulated it to all the graduate students -- 40 people indicated an interest in joining the group. Clearly this was too large for a small group discussion, and so we made it two "real courses".
This is not going to be a permanent fixture of my teaching, much as I have enjoyed doing it. I do plan to do it again, however, maybe condensed into one term and maybe for undergraduates instead of graduate students. 
So I think it was a one-time thing, and it certainly was not part of the core.  
The reality is that there is interest by students in the history of thought—especially as  it relates to current ideas, but  when push comes to shove, and one has to start thinking about getting published in acceptable journals, that interest fades.  The faculty recognize that, and provide the education that will further their student’s careers.
I think the best chance for history of thought to make some inroads into graduate programs is with mini-courses that some programs offer.  I will be going to Tel Aviv next year to teach a mini-course in the history of thought.   I think if the HES put together some mini-courses and provided ways for those course to be taught in grad programs, that it could be a useful outreach, and is the best way for history of thought to be presented to students. My sense is that students want relevant history of thought—faculty are not against it, but they  see the technical training as being that which they should focus on.  I remember when NYU gave up the history of thought course—Bill Baumol was there and was a strong supporter of history of thought—but he voted in favor of giving it up history of thought in order to make room for another technical course that he felt would help students more.  In terms of their future, that’s probably true, but it is sad that that is the case.”
 3. History of economic thought being reintroduced at graduate school? Alex Millmow
“At the latest HETSA Conference in Auckland, New Zealand there was a forum session on the future of economic thought. Various  strategies were discussed. One intriguing comment from the floor was that Harvard and MIT were reintroducing HET into their doctoral programs Does anyone know anything about this?”

Does any reader know of similar initiatives in their institutions or elsewhere?

Thursday, July 17, 2014


Donald J. Boudreaux (with Russell Roberts), Cafe Hayek Post a fascinating debate on Ideas about Ideas.

Donald J. Boudreaux, “Deirdre McCloskey and Economists’ Ideas about Ideas” (July, 2014)
Deirdre McClosky is over the halfway point of her 4 volume work on The Bourgeois Era. Two volumes have already appeared, Bourgeois Virtues (2006) and Bourgeois Dignity (2010), and a third is close to appearing. This Liberty Matters online discussion will assess her progress to date with a Lead Essay by Don Boudreaux and comments by Joel Mokyr and John Nye, and replies to her critics by Deirdre McCloskey. The key issue is to try to explain why “the Great Enrichment” of the past 150 years occurred in northern and western Europe rather than elsewhere, and why sometime in the middle of the 18th century. Other theories have attributed it to the presence of natural resources, the existence of private property and the rule of law, and the right legal and political institutions. McCloskey’s thesis is that a fundamental change in ideas took place which raised the “dignity” of economic activity in the eyes of people to the point where they felt no inhibition in pursuing these activities which improved the situation of both themselves and the customers who bought their products and services.
Two articles in particular (there are more) are very much worth a look.  I found their content and the style of debate highly commendable (no cheap shots).  Just sheer, readable intellectual exchanges by two of the best Adam Smith scholars publishing tday.

1. Donald J. Boudreaux, "Deirdre McCloskey and Economists’ Ideas about Ideas" [July, 2014]
3. Deirdre Nansen McCloskey, The Fruits of Humility, and Reading, in Economics: A Genial Reply to Don Boudreaux" [Posted: July 7, 2014]
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Wednesday, July 16, 2014


Panmure House, Adam Smith’s Last Home, Restoration Phase Begins

“Work to underpin the 300-year-old building, which was Adam Smith's final home, has been completed and the next stage will focus on the outside.

The next phase to restore the final home of the economist Adam Smith is getting underway in Edinburgh. It is part of a £3.6m project to secure the future of Panmure House, which had been left derelict.
Work to underpin the 300-year-old building has been completed and the next stage will focus on the outside.
The £430,000 programme of works will involve repairing and re-slating the 17th century roof, plus conservation of the exterior stonework and windows.
The works, which are to take nine months, are supported by a £150,000 grant from Edinburgh World Heritage and funding from the Friends of Panmure House, as well as individual donations from around the world.
The house was bought by Edinburgh Business School (EBS) at Heriot Watt University in 2008.
'Intellectual endeavour'
EBS is conserving the A-listed building as a living memorial to one of the most influential members of the Scottish Enlightenment and to develop Smith's house as a world-class centre for education, events, debates about Smith's life and current economic issues.
Professor Keith Lumsden, academic director and founder of Edinburgh Business School, and the chair of the fundraising committee of the Panmure House Campaign, said: "Adam Smith is often said to be the world's first economist.
"He is a vital part of Scotland's heritage and a beacon of intellectual endeavour.
"Revitalising his last home as an educational centre will help ensure his pioneering thinking lives on in the minds of future generations.
"We are delighted to be getting this vital stage of the project to renovate Panmure house underway, making it wind and water tight and restoring the exterior to its former glory."
Adam Wilkinson, director of Edinburgh World Heritage, said: "Panmure House is an important historic building, not only because of its links to Adam Smith, the Enlightenment and modern socio-economic thinking, but also as rare survival of a seventeenth century town mansion.
"We welcome the carefully considered scheme for its re-use as a centre for economics and social studies, very much in keeping with the spirit of its past.
"Rethinking a significant building at risk in this way will support the surrounding area, bringing wider benefits for the people of the Canongate today.”
At last!  After seemingly endless delays, the restoration of Panmure House is about to begin.
Donations (large and small) are still needed to keep the careful restoration of the all important inside of the building, which also includes modernisation for global Internet communications systems to send its special, graduate and school-level education facilities across the world.  

Chris Watkins, Edinburgh Business School, Heriot-Watt University, EH14 4AS, Scotland, UK.  (+44 131 451 3090) or email:

Tuesday, July 15, 2014


SEKTA (Money & Information on East African Business) writes (13 July) HERE 
The Theory Of Laissez-Faire – 2. The Meaning Of Laissez-Faire and The Invisible Hand – 2
In the 1700 and 1800, French businessmen felt they would be much better off if left alone without any business rules.
Philosophers who agreed, began to write essays that advocated Laissez-Faire, but it was a Scotsman who made the idea of Laissez-Faire famous.”
Adam Smith never mentioned “Laissez-Faire”!  How then did he make the idea of laissez-faire” “famous”?
SEKTA: “In his book, The Wealth Of Nations Adam Smith argued that all restrictions on business should be removed.
Yet, Adam Smith argued that even with “perfect liberty” there were cases where their liberty should be constrained by laws, examples: in matter of the interest rates charged for loans; in the matter of builders adding ‘party walls’ on the properties they build to prevent fires spreading to other people’s apartments.  He also stated quite clearly that those who believed that “opulence” would be impossible for any country without complete “natural liberty” were wrong as there were many cases of countries enjoying opulence without “perfect liberty”.
SEKTA: “One of the most important ideas in Smith book, was the concept of the ‘invisible hand’ Smith believed that this invisible hand would always guide the selfish acts of individuals to help the country”.
On the SINGLE occasion only, in Wealth Of Nations, when he mentioned the “invisible hand”, it was as a METAPHOR never as a CONCEPT (check the Oxford English Dictionary if you are not sure of the stark difference between the meanings of these words).   He never argued that the metaphoric “invisible hand” would “always guide the selfish acts of individuals to help the country.”  
SEKTA: By working for his own private gain, the businessman must produce as much as he can, and for the lowest price. In order to sell goods he charges very little. This will help society as a whole, even though that was not his intention. The invisible hand thus directs selfish acts for the good of the community.
In Wealth Of Nations Smith gives many examples of the “selfish” and “self-interested” actions of businessmen leading to disavantages for society Examples include the frequent lobbying of governments for tariff and prohibitions on imports that raised, not “lowered”, prices and “reduced production”, not increased it, and raised, not lowered, their profits.  These practices did not “help society as a whole” and neither did they “direct selfish acts for the good of the community”.
Smith did not “urge trust in the invisible hand, and not the government”.  Government role in law making and enforcing justice were fundamental for a free society.
SEKTA: “Every person is a much better judge of what is good for him than any President, Governor, or Legislator. When the government starts telling people what they should do with their money, they are telling people how to mind their own business. This will make a bigger mess than that which they tried to correct.”
That every person “is a much better judge of what is good for him than any President, Governor, or Legislator” is likely to be true or untrue, dependening on the examples chosen, it did not follow that their individual “judgements” were good for others in the commmunity, examples: buying drugs, including excessive alcohol and smoking, driving at high speeds, flying with unqualified pilots, seeking health checks from witch-doctors, entering building designed by unqualified architects, and so on.  
Selfish actions may, and often do, have negative consequences for others. “Presidents, Governors, or Legislators” may impose, often at the behest of lobbyists, paid by beneficiaries,  laws and regulations that worsen the interests of some or all consumers. 

Adam Smith is wholly innocent of that which SEKTA attributes to him.  The best remedy is to read Adam Smith for yourself and refrain from quoting what other ill-informed modern economists and journalists claim for him.

Monday, July 14, 2014


“The Politics and Economics of Inequality”
The Aspen Institute HERE  30 June.
“Some inequality of income and wealth is inevitable, if not necessary. If an economy is to function well, people need incentives to work hard and innovate. The pertinent question is not whether income and wealth inequality is good or bad. It is at what point do these inequalities become so great as to pose a serious threat to our economy, our ideal of equal opportunity and our democracy. Professor Robert Reich examines what's happened to income and wealth in this country, why it's a problem, and what we can expect in future years.”
Interesting observations from Robert Reich (“Who’s He?’ - “I don’t know”).  Watch him on You Tube.

Tends to confirm my oft stated stance ( and I suggest it was Adam Smith’s stance too) that addressing the problems of poverty is more important than focussing on inequality.


Livechat Agents” posted (9 July) the following in Managemenr.survival.comHERE 
 “History of Political Economy - Adam Smith’s Invisible hand”
Smith asserted for a configuration of normal liberty Smith (1776) p. 533 wherever single attempt was the maker of communal high-quality. Smith assumed even the egocentric inside association were held under self-control and operated for the high-quality of altogether once performing in a rilvalrous trade. Prices are frequently unrepresentative of the genuine worth of wares and facilities. Following John Locke, Smith thought genuine worth of items obtained as of the quantity of toil capitalized in them.
When the blunderbuss, the Brewers and the bakers acted under the self-control of an open trade financial management, their chase of egocentrism, thought Smith, paradoxically drives the procedure to right actual life costs to their simply principles. His timeless declaration on contention proceeds as tails.
Smith assumed that a trade created what he nicknamed the advance of luxuriousness. This included a catena of notions, that the division of toil is the driver of financial effectiveness, up till now it is restricted to the broadening procedure of markets. Both toil division and trade broadening needs further exhaustive Capital accumulation/accumulation of assets by the business persons and directors of trade and business. The entire configuration is underpinned by keeping the safeguarding of assets claims.”
I’m sorry to say I found the above mostly gobbledygook. I haven’t a clue to what its anonymous author refers through a glass (very) darkly.  It appears to be from Brisbane, Australia …

Even the reference to Wealth Of Nations (1776. p. 533) does not help as that page is a discussion about forestallers and engrossing in corn corn markets (WN IV.v.b: 22-25) in the 1976 Oxford University Press standard text.  Because its Book IV it refers to nothing about whatever is deeply hidden in the author's text.

Sunday, July 13, 2014


Henry Moore (“Hank”), a 23-year old libertarian blogger hailing from Montana, is the proprietor of The Libertarian Liquidationist. He is interested in politics and history and libertarianism since picking up Dr. Ron Paul's “The Revolution and End the Fed in 2009”, and in blogging since late 2011.  [The following is his entry for the Thorpe-Freeman Blog Contest, originally published at Notes on Liberty on May 22nd 2013, and The Libertarian Liquidationist on January 8th 2014]. Henry Moore posts on Liberty.Me HERE 
“Ham-Fisted Coercion and Incompetence versus the Invisible Hand of Self-Interest”
A Tale of Two Hands
I came across Gary Galles’ recent article in The Freeman about Leonard Read’s analogy of government coercion as a clenched fist, “ the Clenched Fist and the General Welfare.” I see a symmetry between this analogy and Adam Smith’s about self-interest unintentionally channeled into market organization, one that is so familiar to free market proponents and detractors alike that it is a common metaphor: the invisible hand.
Government coercion and market organization. Two very important concepts for any libertarian to master. Which one better provides for the general welfare? Smith and Read would contend the latter. The reasons for this are contained in the analogies. As Read and Galles point out, not much good can come from a clenched fist. Only violence and incompetence. It can punch. It can pound. That’s about it. What better description of government? Likewise, as Smith notes, the usefulness of markets is that they do better than government many of the noble things government tries to do, thereby rendering it redundant, if not unnecessary, in those areas. The all-too obvious fist of government regulations and mandates is no match for a more efficient, less obvious hand: self-interest."
The above Blog Post is almost pure ideology, devoid of contact with the real world.  It sweeps to one side the “violence and incompetence” of “punching and pounding” when used by mercantile-motivated self-interests enforcing trade-embargoes and prohibitions on behalf of dominant market-players, as happened when Europeans invaded foreign countries in the then undeveloped world from the 14th century.  The first things built by traders in distant lands were armed fortifications to protect the invaders from local harassment.  In these events the States Minsters and fixers played a role corrupted and influenced be local domestic market enterprises (East India Company, for example, for free shares and cash).
Modern markets also play their role in these grubby affairs and, for various reasons, do it “better than governments” on their own account, by “replacing open government collusions” to achieve “many of the IGNOBLE things that mercantile-influenced governments did in the past on behalf of their domestic businesses, often for a consideration, like Monarchist Honours and trinkets, as valued socially by the likes of ”Aldermen’s wives” over what Smith called their shuffles for “place”. In commercial matters, much of government legislation and diplomatic activities are directly related, not always openly, in favour of what today we call “big business” and Big lobbyists - Prime Ministers leading “trade missions” to China, for example.
The “clenched fist” of government coercion, however, is quite hyperbolic, especially nearer the top, and is more subtle and softer for all the occasional good it achieves, and downplays the great expense at which such good comes about, blaming its own inadequacies on the failings of “free” markets. The so-called invisible hand, for which there are multiple definitions, however, is mythical and does not exist. Supposedly, it is able to do more, and better, than the clenched fist, without stifling progress in other areas.
I agree that “what is unethical for an individual is also unethical for a group of individuals.” Outside the fantasies of perfect competition, universal morality is noble, but inconsistent with either market or state behaviours.
Adam Smith wrote his “Theory of Moral Sentiments” not because moral sentiments were shared and operated universally - they didn’t.  He set the standards by which moral behaviour might be judged. Those standards evolved in practise though not universally in societies prior to the 18th century. The daily and life-time contests between moral and non-moral sentiments continue from his days to ours, and no doubt beyond.  Nothing I have read on these questions has changed much up the 21st century, except that the richness of the tapistery of moral choices and their incidence is now probably more evident to us from our familiarity and direct experience of human behaviours, rather than from reading about them through the fog of previous times.
Self-interested behaviours are not a universal panacea for our mixed economies. Pure markets on their own or pure states in sole command are nowhere possible, nor experienced since the classical period. Exchange has always existed among humans - it predates the earliest markets. 

States and markets exist everywhere.  Where one or the other dominates there are failings in both of them. That is why the appropriate balance may be best approached by following the pragmatic dictum of “markets where possible, the state where necessary”. 

Friday, July 11, 2014


Dr Jones is a certified Osteopathic family physician.  He is interested in what works and has had plenty of experience with things that don’t. - See more at: HERE   posts on “Common Sence Medicine (key to resilient adaptation)” and HERE
“Economy and the ‘Invisible Hand’”
“A major part of all cultures is the economy—the work that people do and how they interact and trade. Our model, capitalism, has been very successful over the last four hundred years, but in order to succeed it too has evolved.
When Adam Smith first described capitalism he already saw that it changed and he proposed an “invisible hand” that guided it. Part of this guidance was provided by the “properly understood” clause that seemed always to be associated with “self interest”. Smith seemed to think that the invisible hand was provided by the morals of those participating.
In today’s marketplace, self-interest seems to have lost its constraining clause—greed is pronounced good. We have no problem using others for our own profit without their understanding or permission. Joe Stieglitz argues that the invisible hand has been killed by asymmetric information: where one side of an agreement has information not had by the other, which they use for their own gain. This puts a different spin on the invisible hand idea. We argue here that the choices of the informed consumer are the invisible hand that guides the marketplace.
This view is the basis of how we see capitalism evolving; if the invisible hand is going to guide us in the beneficial way that Smith saw, then we need to focus on increasing transparency wherever we can.
Almost a candidate for Lost Legacy’s ‘Nonsense on Stilts’ series.  Dr Jones clearly knows next to nothing about Adam Smith (but then I know nothing about Osteopathic medicine - and therefore I would not presume to offer advice about it).
T’is a pity he does not apply the same self-denying ordinance to his ideas on Adam Smith, who for one thing never “first described capitalism” - word definitely not invented in English until 1854 to describe a phenomenon of financial capital (Thackeray’s “Newcomes” novel). Nor did Adam Smith see that capitialsm “had changed and he proposed an “invisible hand” that guided it”.  This last is nearly a candidate for the award of a ‘Gold Leaved Cluster and Bar’.
Smith use of the metaphor of “an invisible hand” had nothing to do with “guiding” capitalism. Neither was it true that “Smith seemed to think that the invisible hand was provided by the morals of those participating”.
Dr. Jones says “We argue here that the choices of the informed consumer are the invisible hand that guides the marketplace.”  There is absolutely nothing invisible in what guides a market place.  Markets are guided by ALWAYS VISIBLE PRICES!  Moreover, they cannot work without VISIBLE prices.
The invisible hand metaphor refers to the hidden motivations of consumers and producers who operate in markets.  We cannot see into the minds of other people.  We can guess, assume, interpolate and deduce, but we can never be sure of the motivations of other people that cause them to to act.  
Now Adam Smith described metaphors as “describing in a more striking and interesting manner” their motivations (Lectures on Rhetoric and Belles Lettres, 1763).  They may be guided by what the regard as their self-interested actions by which they aim to achieve INTENDED consequences. But our intentions are not always realised and even if they are, our actions may also have UNINTENDED consequences.
Whether our intended consequences and /or their unintended consequences are beneficial to ourselves or to the wider populations affected by them can only be assessed on a case by case basis.  They cannot be assumed a priori to benefit the wider public, or even ourselves.
Neither did Smith “think that the invisible hand was provided by the morals of those participating”. Whatever this means, it is unrelated to anything Smith wrote, and he had a lot to say about the moral sentiments of people.
Dr Jones concludes that “We argue here that the choices of the informed consumer are the invisible hand that guides the marketplace.
People’s choices in markets in the form of their hidden motivated actions react to price signals and are what markets are about.  There is no guiding principle beyond that.  Neither does it require a metaphoric “invisible hand” to describe what are disparate actions from disparately motivated individuals.  

Stiglitz recanted from his earlier belief in the “invisible hand” when he concluded that there is no “invisible hand” on 10 July 2010 (see him doing so on ‘You Tube”).


“How Adam Smith Can Change Your Life
Russ Roberts (10 July). From Cafe Hayek HERE 

“My book on the lessons in The Theory of Moral Sentiments for modern life is now available for pre-order at Amazon. Release date is October 9. Not a novel. A guide to the good life and help for those who finally want to understand what Adam Smith’s other book is all about. Enjoy. 
Be Sociable, Share!”
This morning I received a message from Paul Walker, way down in the Southern Hemisphere in New Zealand, that Russ Roberts had authored a new book on Adam Smith.  
Intrigued, I thanked Paul for the Heads-Up and turned to my daily read of the world’s output that referenced Adam Smith.  Up pops a message from Cafe Hayek HERE  (a Blog worth a regular-daily, lively read too).  
I am intrigued. 
How does Russ Roberts make Smith’s ‘Theory of Moral Sentiments’ into a positive self-help read? 
His book’s cover is trendy too - Smith in his familiar head-shot pose, with the in-crowd’s sunglasses too! Yeah Man … 

Read it!

Thursday, July 10, 2014


Lost Language, Lost Liberalism
by Daniel B. Klein

GK: Comment
Daniel B. Klein is professor of economics at George Mason University, where he leads a program on Adam Smith. He is also JIN Chair at the Mercatus Center at GMU and Associate Fellow of the Ratio Institute, Stockholm. He is the editor of Econ Journal Watch, and the author of Knowledge and Coordination: A Liberal Interpretation (Oxford University Press, 2012) (Reviewed by me for the “Adam Smith Review”, 2014). Daniel is a co-founder of the “Lost Language, Lost Liberalism” campaign to rescue the word “Liberalism” from its modern meaning in favour of its original meaning prior to 1890.
Words: Liberalism; Liberty; Freedom; Justice; Property; Contract; Equality; and Equity.
These words were previously associated with Classic Liberalism but have since been subverted within the Academy and by osmosis come to mean many different things. I have agreed to support Daniel’s campaign on pragmatic grounds that he is hoping to lead modern economists and philosophers back to our common roots in Adam Smith.  I am not in 100% agreement with absolutely everything that Daniel believes but I agree with much of it because we are broadly traveling on the same compass bearing.
Readers may recollect that I have debated with Daniel Klein in several fora since 2009, including Lost Legacy, on Adam Smith’s use of the metaphor of ”an invisible hand” - liberals by nature are proud members in a community of scholars where various views on anything are legitimate, expected, accepted and celebrated …
“Introduction to 4L”
By Daniel B. Klein
“The liberalism that emerged particularly during the 18th and 19th centuries has been the jewel of western civilization. The liberal discourse of the liberal era featured a number of central words. Many of the central words became confused especially in the period 1880 to 1940. The central words are shown in the left side panel.
Most of the central terms were infused with certain core meanings. In 1870 in the West, though perhaps not dominating the culture, the liberal meanings were at least rather focal. But today for many of the words the core meaning is lost. Today the important words mean little to people, or mean something quite different from the original liberal meaning. 
The substance of a cultural system lies in its semantics. The semantics reside in central words. When central words lose their meaning, the civilization loses its character. Their semantics lost, people find themselves lost.
In most public discourse today, the central words are in confusion. Liberalism, the jewel of humankind, exists only vaguely, only half perceived, with little voice and standing. 
This website highlights the years 1880 to 1940, a period when liberal understanding was subverted and supplanted. Sure, all along the words had been matters of contention, but particularly during the 1880–1940 period the meanings were changed or just lost in a fog.
Vincent Ostrom (1997, 132) wrote, “a language can exist only so long as it continues to be acquired, used, and monitored as an instrument of communication and of actions constitutive of ways of life.” The intellectual life of classical liberalism receded sharply during the period 1880 to 1940.
There had previously been a liberal ascendance. It occurred over many generations and, in my view, was best represented by Adam Smith. Societies that enjoyed liberal culture and liberal principles suddenly prospered as never before—the famous hockey stick, which resulted, as Deirdre McCloskey (2010) says, from the moral authorization of honest income and liberal policy.
But the changes were challenging. Liberalism challenged established powers, the old regime, the established church, and long standing customs. The liberty principle emerged as humanitarian boon but also as a frightful engine of rapid change and turmoil. The rising collectivist reaction may have been, in part, something to fill spiritual voids—I don’t think liberalism itself gave much spiritual comfort. I regard liberalism’s commentary on life as rather stoical, informing us where not to look for meaning and fulfillment, and to tame and tamp down our primeval instincts for meaning and belonging. Like Hayek I interpret the state-collectivist reaction—painted in democracy, nationalism, and, by some, for a while, unabashed socialism, fascism, and communism—as, at least in part, a reconditioning of band-man instincts and mentalities, now with a new lease on life. The semantic changes reflected collectivist outlooks; cultural players gave a green light to many baneful forces, including the band-man penchants now reconditioned. 
This website compiles many quotations demonstrating the semantic confusions produced between 1880 and 1940 by opponents of classical liberalism. They knew their meanings differed from erstwhile liberal meanings, and they often declared a “new liberalism,” a “new freedom,” and so on.
The semantic changes did not just sneak up one night and effect a quiet changeover. This website shows that the tumult was apparent; people fought openly over semantics. The semantic struggle was fairly protracted. Even though the rising generations of, say, 1880–1920, seemed to have been nearly bereft of original liberalism, members of the liberal old guard rejoined with objections. This website provides “Rejoinder” quotations, deploring the semantic subversion, confusion, and statism. (By the way, many of the Rejoinder quotations are not agreeable to me; please do not suppose that I find all of the Rejoinder quotations just and agreeable.)
But the 1880–1940 story is little understood today. To understand the present confusion of tongues, people need to see the semantics of original liberalism, see what happened, and then look back and ask themselves: Did the whole public culture, during the reactionary period, take a wrong turn?
Karl Polanyi famously narrated two great transformations in his book The Great Transformation (1944). He saw that liberalism was a revolutionary cultural development. The book also tells of the liberal era provoking a great cultural reaction.
But Polanyi viewed liberalism as pernicious, a development needing encompassing governmental restraints and counteraction. He applauded the reaction that culturally engulfed and buried classical liberalism. He wrote: “The passing of the market economy can become the beginning of an era of unprecedented freedom” (256). The expression "the great transformation," used as the title of the book, appears only twice in the book (3, 227), and in both cases it refers to the social-democratic reaction to liberalism. Today we live with Polanyi’s great transformation; we have been living with it, or at least its onset, for well over a century.
Liberalism had provided a web of understanding. The cultural reaction did not so much replace the liberal web with an equally clear web, as much as it simply degraded the liberal web such that liberalism lost its cultural constitution. What we’ve gotten is governmentalization of social affairs, with accompanying darkness and confusion.
Today, some people realize that during the 20th century there was a big shift toward statism in the political culture. Classical liberalism was eviscerated. Classical liberal understandings collapsed during the early generations of the 20th century, reaching a nadir in the 1930s and 1940s. But people often date the onset of the change to the 1930s. This website shows that the fundamental change—the subversion of liberal semantics—had been in full swing for generations; it was well afoot by the 1890. By the 1930s there was practically no one left to defend or impart liberal enlightenment. 
The specters of national socialism, communism, and fascism then upset the trend of reaction against classical liberalism. The Western Allies mobilized and waged the Second World War as a war of free nations against unfree nations, with an asterisk for the USSR, which soon, in the Cold War, fit a Western-freedom narrative. During the post-WWII period there occurred some liberal re-awakenings. Everywhere, the bad consequences of statism started to show and the social democrats had to face down one embarrassment after another. Statist aesthetics and sentiments grew more diffident. 
But today still the culture has not made a return to liberal understandings. The postwar generations have largely continued in the cultural ruts of the reactionary period 1880-1940. 
Today the civilization muddles along in a fog. As though by system, the mainstreams of academia, popular media, and political culture obscures and excludes classical liberalism. Liberty remains a matter of great taboo.
An ngram of liberty, since 1750.

An ngram of liberty, since 1750.
Liberty, freedom, justice, property, liberal and so on—key words of western civilization—have been lost in confusion. In the United States, the mainstream political culture—represented by, among other things, K-through-12 schools, the colleges and universities, other governmental institutions, and most of the major media—finds no handle on large ideas and larger argumentation. Metaphorically speaking, they are accomplices in a vast betrayal that dates back well over 100 years. What has been betrayed is, as Smith put it, “the liberal plan of equality, liberty, and justice.” 
Today in the US most of the political culture is tepid, bound by status-quo policies, led by establishment players, and framed by Democrat vs. Republican, in the code of “liberal versus conservative”—a framework that epitomizes the breakdown of liberal understanding.
Google’s Ngram Viewer tracks usage of words and phrases quantitatively.  It doesn't tell you how people used the word or phrase, but nonetheless it can indicate semantic change.  Consider the following figure: 

Prior to 1880, rarely did someone write “the United States is” or “the United States has”:

Another special page, called Generations, provides textual evidence that the 1880–1940 shift came by new generations, which talked one way, displacing older generations, which talked another way.
On another page, Dan’s Reflections, I reflect further on the semantic changes and the predicament.
The compendia of quotations are accompanied by bylines for some authors. In writing the bylines we have cribbed fairly directly from Wikipedia and other such sources."

D. B. K.

Wednesday, July 09, 2014


Sam Bowman of the Adam Smith Institute posted (3 July) on the new look ASI website called “Blog”.
I meant to announce this shortly after my post complaining last week, about the unannounced change of name from the ‘Pin Factory’ Blog to the highly evocative, new title of ‘Blog”.
Apparently, these changes come with a move to WordPress from Drupal which means that ASI “can manage the site at the back end more cheaply and easily than ever before, and if/when we want to redesign the site in the future it should be relatively simple”. 
This is I suggest is an example of an in-house ASI move that is in the best interests of how participants in continuous improvement in their offerings both lower costs per unit of output and contribute to annual “endogenous growth” in an economy, which adds to employment opportunities, in this case at WordPress and causes changes at Drupal.  

Schumpeter called this the "perennial gale of creative destruction". It also means the ASI Blog “site is now fully responsive to mobile and table screen sizes, so reading on your phone should be a very pleasant experience from now on.”  This may also cause or continue innovations in the design and production of reciever devices.
Moreover, “as is often the case, the balance is between style and function, and it will take a while to get everything working properly.”
As is usual in new systems, “also using tags for posts” should “make it easier to find what you want from our archives”. 
Well, we shall see how it goes.  As long as the great quality of ASI’s posts continues, I am very happy to put up with any initial snags.
Give it a try:


There are several announcements of international conferences relating to Adam Smith appearing regularly, reflecting increasing interest in the  work of scholars across the world. 
I think these are of interest to many students, post-graduates, established academics, and wider audiences of the perplexed - those who are simply unsure of competing economic theories can offer in the wider world of politics, business and media.  
As a service to readers across the world Lost Legacy will post occasional news of such conferences and seminars, with contact details in case they should wish to consider attending or to enquire from their organisers for details about the subjects to be discussed. 
I shall post title of any papers advertised in their agenda’s that Lost Legacy may have an interest readers. 

IMPORTANT:Please contact the individual organisers of the events for details and not Lost Legacy! 

2014 History of Economic Thought Society of Australia conference (HETSA)
Dates: Friday 11 July to Saturday 12 July 2014
Venue: The University of Auckland, Old Government House, corner of Princes Street and Waterloo Quadrant, Auckland


Day 2: Friday 11 July 2014

“Instinct as a Foundational Concept in Adam Smith's  Social Theory”
Tetsuo Taka (Kyusan University, Japan)
International Adam Smith Society (IASS)
Dates: 20 July-22nd: Glasgow Scotland

Venue: University of Glasgow: School of Social and Political Sciences

“Themes from Smith and Rousseau”

Call for Papers
The International Adam Smith Society and the Rousseau Association will hold a joint meeting at The University of Glasgow July 20th -22nd 2015. The conference aims to bring together scholars with an interest in the work of either or both of these thinkers with a view to stimulating discussion of their shared interests and the relationship between two prominent members of the Enlightenment.

The conference aims to explore the ideas and shared concerns of Adam Smith and Jean-Jacques Rousseau.  Proposals for papers are invited on any aspect of Smith, Rousseau, or their shared intellectual interests including (but not limited to) pitié, sympathy, commerce, freedom, nature and science. Given the aim of the conference the organisers are particularly keen to invite papers that deal with both Smith and Rousseau.

Further details can be found on the websites

Please submit a title and abstract to Dr Craig Smith University of Glasgow (

Deadline for submissions of interest: 1st January 2015.

Comment:  I think readers may find this IASS conference topic as a whole very interesting given the likely strong attendance from across the world.   I know some of the organisers and they are among the very best in our field and likely to attract excellent speakers on both Adam Smith and J.J. Rousseau.