Invisible Hand no 35

For today’s exhibition of ill-informed journalism using Adam Smith in pursuit of a very unSmithian view of the world we have this editorial from The Telegram (‘the people’s paper’) published St John’s, NewFoundland, Canada (28 May)

“Harper follows ‘invisible hand’ policies”:

“Second, it shows Harper is prepared to act on beliefs that are very much in tune with philosopher Adam Smith, a Scotsman who died some 216 years before Harper was elected. Smith introduced the phrase “invisible hand” to describe the unseen force unleashed by the free market.

Smith believed this “invisible hand” would operate only when each person worked for the benefit of himself, without worrying about anyone else. When everyone focused on improving their own lot, he argued, the whole society ended up benefiting — similar to the economic notion of a rising tide lifting all boats.”

Comment
What a travesty of Adam Smith’s philosophy and political economy that is! No, he did not believe such selfish nonsense (the editorial writer confuses Smith with Bernard Mandeville, 1724: The Fable of the Bees).

Individuals could work for themselves and create a living hell for others. The Enron example ruined thousands o innocent people by their bosses 'improving their lot' without 'worrying about anybody else'. A thief ‘improves his own lot’, so does a polluter, and a rapist. Smith, a Moral Philosopher, never wrote such crass nonsense. It depends upon what the individual does, not the mere fact that he seeks ‘only’ to improve his own lot by ‘benefiting himself’. There is a clear difference. And educated journalists - editors to boot - should know better.

Society may end up benefiting from individuals focusing on improving their own lot, but it depends upon what they are doing. In the single case he discusses in Wealth of Nations (p 456), he is talking about individuals who prefer to invest their scarce money locally and not at a great distance with strangers. This natural concern for the safety of their money had the effect of developing their locality quicker than if they sent their investment elsewhere.

Should they fritter their income away instead of investing it anywhere they may ‘improve their lot’ by living in luxury, frequenting the comforts of taverns, whorehouses and drug dens, this would hold back economic development. Hence, it depends, as always, on the specifics.