A Post That Presents Adam Smith as he Intended

David Hoopes addressing Smith’s wider views on markets versus state management of economic decisions, presents a 99.9 per cent correct version of them (the other 0.1 per cent slight blemish is his mention, en passant, of the ubiquitous ‘invisible hand’, but let’s ignore that slightest of slips on grounds that to err is human...).

His article, ‘Why Are Markets So Scary? Some Things (Liberal) Academics Get Wrong’ is posted on Organisation and Markets (11 October) here :

He quotes from ‘Two very good papers can aid in a deeper understanding of the invisible hand.’ (Treat the reference to the metaphor as an inevitable knee-jerk reaction from the standard presentation of Smithian political economy whenever the word ‘markets’ is mentioned!).

The first paper is “James Q. Wilson’s ‘Adam Smith on Business Ethics’, from which he notes that “Adam Smith assumed people will behave with a moral sense. Wilson,” and comments: “By suggesting people be allowed to make decisions based on their own self interest Smith was not advocating selfishness and greed. What then was he advocating?’ The second is ‘ Harold Demstez’s “The Theory of the Firm Revisited” , who asks: “Is central economic planning necessary to avoid chaotic economic conditions?” The great achievement of the perfect competition model, what Demsetz argues should be called perfect decentralization, is its abstraction from centralized control of the economy.’

David Hoopes states that: ‘Few who have lived in these economies yearn for their return. Only those [that] have no idea of what it is like to have so many choices removed idealize such a life. How many academics would like living in a planned economy if planners decided the economy needed fewer academics and more farmers (cultural revolution anyone)? How many Hollywood actors would like living in an economic system where they were paid the same as everyone else, where central planners chose scripts, and where the government decides what kind of entertainment people “need?”

He concludes correctly: ‘Further, not only did Adam Smith not promote greed, but he believed in human sympathy and other virtues necessary for an economic system centered on liberty.’

It is such a change to have modern day economists actually understanding Adam Smith’s legacy that it is an undisguised pleasure to read their posts.

I recommend that you read David Hoopes’s full post on the Organisation and Markets Blog.