Adam Smith's Lost Legacy

Announcement V

2009-11-20T10:51:00.004Z

Five Topics

1 First of three moves today (Move 1): Transferring basics and temporary office to my daughter's today and tomorrow (may work on-line between old home and my daughter's for a week or two). Hence, very busy with 1st move boxes and some furniture.

2 From the above event there may well be interruptions to Lost Legacy - please have patience.

Move 2 is when our old house is cleared into temporary storage on 14December (old house changes hands on 18 December).

Move 3 is from our temporary abode with my daughter (her second baby due - imminent this week!) of our furniture and my library from the storage people on 4 February to our new house, a couple of miles away.

3 The need to moderate comments continues - the Chinese spammers continue to make 'comments' (about what I do not know) in Chinese - but the Moderator system on Blogger is 'suspect'. I post to publish and they disappear!

Please could potential commentators post their comments via the email address at the top of the home page?

4 Work proceeds slowly on the 'metaphor in the middle' riddle but it is proceeding very slowly. This is most frustrating.

5 My review/discussion of Murray Wilgate and Shannon C. Stimson, After Adam Smith: a century of transformation in politics and political economy, 2009, Princeton University Press, is held up until at least 14 December, for which my deeply-felt apologies. It is worthy of notice by all Smithian scholars.

Thank you

Gavin

Adam Smith on "Ruin of a Nation"

2009-11-19T17:34:00.003Z

Ben Stein writes on “Four lessons from the recession” in (19 November) in Fortune HERE which includes this observation:

“And another little note ... my much-missed father used to tell me with great approval Adam Smith's famous quote regarding prophecies of doom for America, "there is a lot of ruin in a nation."

Comment
Another example of a famous quotation from Adam Smith being misapplied in meaning and, in this case, in its location too.

Smith was not writing of “prophecies of doom for America”, a country that did not yet exist when he penned his observation, which was a mild rebuke in fact to an excitable young correspondent overreacting to British reverses in the war of independence waged by the British colonists in North America.

The then young man was John Sinclair (1754-1835) of Ulbster and Thurso Castle, Caithness (in northern Scotland), educated at Edinburgh, Glasgow and Oxford, and called to the English Bar in 1775, aged 21. Sinclair wrote to Smith in 1782 (aged 28, I think, from memory), in a not auspicious year for the King’s course:

“If we go on at this rate, the nation must be ruined. Smith replied: “Be assured, my young friend, that there is a great deal of ruin in a nation” (Adam Smith, Correspondence of Adam Smith, 1977): p 262, note 3, from Sinclair, Corr., i. 390-1).

It most certainly was not a prophesy “of doom for America” – it was a young man’s ill-informed mood-panic about military reverses for the British (particularly the British surrender at Saratoga (Ian Ross, The Life of Adam Smith, 1996, 327; new, second edition about to be published by Oxford University Press).

The only thing likely to be ruined by the end of the war was the British monopoly of colonial trade, a prospect about which Smith was not worried at all. His Wealth Of Nations. Book IV, is a polemic against mercantile political economy, the central idea behind England’s (after, 1707, Britain’s) foreign policy in the colonies.

Ben Stein (and Fortune's sub-editors) slipped up in his attributed meaning to Smith’s wiser words to young Sinclair.

The Very Best Short Summary of Adam Smith's Life and Work (Longish Post)

2009-11-17T17:36:00.004Z

Chris Berry, Professor of Political Theory at University of Glasgow is a leading expert on the life and work of one of the University of Glasgow's most famous academics, Adam Smith.

He has created a 10 minute talk (HERE), published by the University of Glasgow, that describes the making of the man, the global significance of his writing and explains why Smith's work still resonates with us today:

“ADAM SMITH IN 10 MINUTES”
“Adam Smith was born in Kirkcaldy in 1723. He entered Glasgow University at the early - but for the time not unusual - age of fourteen.

He studied logic, metaphysics, maths and later Newtonian physics and moral philosophy under some of the leading scholars of the day. In 1740 Smith was awarded a Snell Scholarship (which is still in existence today) to study at Balliol College, Oxford. Smith preferred Glasgow, however, because Oxford’s curriculum was antiquated and he thought the teachers were lazy since, in contrast to Glasgow, their salary did not depend on the number of students taught.

After a period of freelance lecturing, Smith returned to Glasgow University, first as Professor of Logic in 1751 and then a year later as Professor of Moral Philosophy, a post he held until he left academia in 1764.

The mid-eighteenth century saw a period of intense intellectual activity, known as the Scottish Enlightenment. Universities were key players in this outburst of enquiry, with Glasgow a major force. Smith himself is of course the figure of overwhelming historical significance. But he was not alone. Smith’s fellow professoriate included pioneering chemists William Cullen and Joseph Black, as well as engineer and inventor James Watt who also worked at the University). Another historically important figure is a pupil of Smith’s, John Millar. Who became Professor of Jurisprudence and the author of a key work in what we would call historical sociology.

The seeds of Smith's two great books were sown in his professorial years. The Theory of Moral Sentiments appeared in 1759 and drew on his lectures. It went through six editions in his lifetime. Smith’s intellectual range as a lecturer was extensive. Beyond courses in philosophy and jurisprudence he also discussed history, literature and language. He maintained his interest in science and wrote an essay on the history of astronomy. This is notable not only for the breadth of Smith’s knowledge but also as an attempt to link the development of different astronomical accounts to a basic human propensity to seek order.

Although his second great book the Wealth of Nations was published in 1776 we know that he had already considered many of its leading themes at Glasgow as he lectured on as he put it: 'those arts which contribute to subsistence, and to the accumulation of property, in producing correspondent movements or alterations in law and government'. In 1787 Smith was elected Rector of the University and in a letter of thanks remarked that he remembered is professorial days as 'by far the most useful and therefore as by far the happiest and most honourable period of my life'.
If Smith of popular repute is the ‘father of capitalism’, the advocate of ‘market forces’, the enemy of government regulation and believer in something called the ‘invisible hand’ to produce optimum economic outcomes then he would be a disappointed parent. All his work is deeply steeped in moral philosophy. Indeed the simple fact that the final edition of the Moral Sentiments containing extensive revisions appeared in 1790, the year of his death, tells us is that Smith’s commitment to the moral point of view endured alongside and beyond the publication of the Wealth of Nations.

The Moral Sentiments is a leading example of a particular approach to moral philosophy – one that regards it not as sets of rationally or Divine ordained prescriptions but as the interaction of human feelings, emotions or sentiments in the real settings of human life. In many ways it is a book of social and moral psychology. What we can call economic behaviour is necessarily situated in a moral context. But more than that the key theme of the book is an opposition to the view that all morality or virtue is reducible to self-interest. Indeed his opening sentence declares that everyday human experience proves that false, he writes: "How selfish soever a man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others, and render their happiness necessary to him, though he derive nothing from it except the pleasure of seeing it".
Our morality is founded on certain truths about human nature. Everyone is capable of sympathy, or fellow-feeling, and that ability enables us to imagine what we would feel if we were in the situation of another and, once we have made that imaginative move, we can then judge whether those feelings are appropriate. We have to learn about ‘situations’ but Smith believes that happens because humans are social creatures.

Smith illustrates the natural fact of human sociality by likening society to a mirror. It is this responsiveness to others - pleasure in their approval, pain in their disapproval - that Smith used to explain why the rich parade their wealth while the poor hide their poverty. The rich value their possessions more for the esteem they bring than any use they get from them and it is this disposition to "go along with the passions of the rich and powerful" that establishes the foundation for distinctions of status. And it is this desire for esteem that explains the incentive, we all possess, to better our condition. This is one of the links between the Moral Sentiments and the Wealth of Nations. In many ways the moral interactions Smith describes in Moral Sentiments bear on the practices that characterise his contemporary commercial society. The very complexity of that society meant that the bulk of inter-personal dealings were with strangers.

A ‘society of strangers’ is a commercial society which Smith identifies in the Wealth of Nations as one where 'everyman is a merchant'. A commercial society's coherence - its social bonds - do not depend on love and affection. You can coexist socially with those to whom you are emotionally indifferent. As Smith famously said:

“it is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self-love and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens”

Nothing in this means that Smith is denying the virtuousness of benevolence. When Smith came to write the Wealth of Nations he made it clear that the ‘wealth’ lay in the well-being of the people. This covered not only their material prosperity but also their moral welfare. Accordingly he thought to be in poverty is to be in a miserable condition and commerce is to be praised for improving human life.
The great achievement of the Wealth of Nations was to discern the principles of order in the seeming chaos of commercial or market behaviour – it wasn’t random, it could be reduced to some simple principles. It was for this reason that Smith was described as the Newton of political economy. It is no idle fact that the full title is Inquiry into Nature and Causes of the Wealth of Nations.

He identifies basic principles such as the human propensity to ‘truck, barter and exchange’ that he argues underlies the division of labour but says that this depends on a market and that requires some institutional structures like those that uphold justice such as government and how that in turn mutually relies on principles of public finance.

All of this is placed by Smith into a historical narrative. In his Glasgow lectures he had outlined an account of four stages of social organisation focused around the characteristic form of economic endeavour – hunter-gatherer, herder, farmer, commerce - and in the Wealth of Nations he gives a set-piece account of the transition from the farming to commerce. This process of social change was not brought about by deliberate human policy. This fact reveals for Smith a general truth about social life, namely, that it is pervaded by unintended consequences. This supports the widely-held view of Smith as an opponent of attempts to direct ‘the market’ but, in fact, what he really opposes is the attempt to direct individual’s activities, their ‘natural liberty’ to pursue their own ends in their own way. This is itself a ‘moral’ position and Smith never abandons that perspective.
In the opening chapters of the Wealth of Nations, he celebrates the productiveness of the division of labour with the example of pin-makers but later notes that those whose lives were spent performing a "few simple operations" were rendered "stupid and ignorant" and were incapable of "forming any just judgment concerning many even of the ordinary duties of private life". The 'morality' into which these individuals are socialised is defective; the 'mirror' in which they see themselves reflects back to them to their "mutilated" condition. This is the probable course of events, says Smith, unless "the public" takes remedial steps by instituting a subsidised system of elementary schooling. This example clearly illustrates how Smith's social and moral theories cannot be fully understood in isolation and must be seen as a whole.
Adam Smith’s legacy has had global impact and it is fitting that the work of a world-historical figure was forged in this world-class University.”

Comment
This short article is a measure of the quality Professor Chris Berry’s intellect and balance. He is without doubt the clearest scholar writing on Adam Smith today. He covers all of Smith’s scholarly range and shows its continuity and cross-linkages. What a breath of fresh-air is in Chris Berry's treatment of the "invisible hand"!

Professor Berry is the director of the Adam Smith Research Foundation at Glasgow University, which aims to promote and sustain research within the UK, European and international arenas. The Foundation promotes the engagement of staff in key policy debates and in shaping policy for the future. It provides the environment in which to foster further links between the Faculty's disciplines and supports the development of interdisciplinary research both within and beyond the University.

The Foundation seeks to honour the Enlightenment legacy of Adam Smith (1723-1790) with independent, original research that impartially advances utility and enhances social happiness or well-being in the Information Age.

The Foundation's five research themes are:
• Public policy, governance and social justice
• Work, ethics and technology
• People, places and change
• Macroeconomics, business and finance
• Legal and political thought

Professor Berry’s commitment to both the historical scholarship of the Scottish Enlightenment and to modern applications of moral and social science to contemporary issues, problems and situations,is a great credit to his and Scottish scholarship. If his approach and understanding of Adam Smith’s Legacy was the general approach across academia, and predominant among Smithian scholars, then Adam Smith’s Lost Legacy would have less to do.

Adam Smith on Government Roles

2009-11-16T14:34:00.003Z

By Dr Bharat Jhunjhunwala writing (22 November) in Organiser (HERE):

“Economy Watch - In defence of regulation of markets”

“This veneration of free markets was first propounded by famous economist Adam Smith about 200 years ago. He said that competition in a free market establishes public good as if an invisible hand was guiding the businessmen. There was no need to separately worry about public good. His logic was like this. Competition in the market pushes the businesses to produce goods at a lowest cost. This leads to cheap goods being made available to the people. For example, I had brought an electronic calculator from United States for my father in 1973 for 100 dollars or about Rs 1,000 at that time. Today, a much better calculator is available for Rs 50 because of the improvements brought about by competition. The slum-dwellers today have the pleasure of watching the TV and drinking cold water from the refrigerator because of the steep reduction in the price of these goods. Thus Adam Smith suggested that the government must not interfere in the market.”

Comment
Question to Dr Bharat Jhunjhunwala:

Exactly where does Adam Smith makes the statement: “that competition in a free market establishes public good as if an invisible hand was guiding the businessmen. There was no need to separately worry about public good?”

This is a paraphrase at best and a distortion of Adam Smith.

He never used the words “as if and invisible hand was guiding businessmen”. The addition of “as if” to his use of the metaphor of an invisible hand is fairly common among those who have not read Wealth Of Nations in general and the single paragraph in Book IV (chapter 2, paragraph 9: page 456) in which he uses the metaphor of ‘”an invisible hand”.

He most certainly never linked the metaphor to “competition” (which he discussed in Books I and II). He expressed reservations about leaving all decisions to “merchants and manufacturers” and such personages as bankers and their clients, especially where this “might endanger the security of the whole society” (WN II.ii.94: 324).

Nor did Adam Smith suggest such an extreme view “that the government must not interfere in the market”.

He saw a role for government, or public agencies, in stamping cloth and conducting assay tests on precious metals, to ensure that they been inspected for quality, that it should manage the currency and coinage, run the post office and general supervise markets and contract-making through an independent judiciary, and provide wholly or in part a national education system – and make a start on dealing on palliative care with “obnoxious diseases” like leprosy. All this, plus “facilitating commerce” by public works.

Adam Smith On Education and the Division of Labour

2009-11-15T10:23:00.003Z

Michael Robbins writes in digital emunction (“I refer to largesse in thought HERE:

“Best books of the year. A mug, a game. Benjamin Schwarz predictably plumps for biographies & Alice Munro, while Amazon readers appear to be, in Adam Smith’s words, “as stupid and ignorant as it is possible for a human creature to become . . . not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life.”

To which I was about to leap in and place Smith’s assertion in context by providing the full paragraph from Wealth Of Nations:

“In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expence of his intellectual, social, and martial virtues. But in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it” ((WN V.i.e.50: 782).

Moreover, to understand what Smith was up to it is necessary to see his comments on the effects of the division of labour as in reality as part of his belief in the importance of education provision, especially of the children of the poor majority of the families of labourers and their wives. So many speedy readers of Wealth Of Nations, searching for ammunition against the division of labour and commercial society, link the above paragraph directly to the division of labour and assert that Smith had reservations about the phenomenon of the division of labour that had raised living standards and technology well above those experienced by the remaining peoples in the Americas, Africa, and parts of Asia, who were limited to living of the fruits of the forest and small animals that lived there. But read this paragraph from the summary of the need for a nationwide programme on education:

“The same thing may be said of the gross ignorance and stupidity which, in a civilized society, seem so frequently to benumb the understandings of all the inferior ranks of people. A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it” (WN V.i.f.61: 788).

In this light, Smith addresses his readers – the educated minority in 18th-century Britain, mainly in the ‘middling’ and ‘superior’ ranks of society – with, in effect, a final reason if they remain unconvinced of the case he has made on its own merits, for which the government would have to udnertake substantial expenditure, with a final reason for agreeing to action now:

‘your safety in turbulent times depends on your having provided for the education of the ‘inferior’ ranks as a barrier to these people being led astray by ‘enthusiasts’ and malcontents.’

However, I casually read the comments below Michael Robbins’ post and found, first, this comment from “Henry”:

“I take it the Adam Smith quote is something of a joke. But why does the discussion of what people read so often have to start off on this note of snobbery & disdain? It turns me off immediately, so that I no longer care what you like to read.”

Plus a correct response from Michael Robbins:

“Well, now, Henry, if you’d read the Smith in question, you’d know he’s not being snobbish at all, but denouncing the conditions that lead to such ignorance. I don’t see how regretting that people read Dan Brown & Glenn Beck is snobbish, either: it simply is a regrettable fact, objectively.”

To which I can only say: it pays to read the whole article and any associated comments, before assuming that their authors have got it wrong!

Michael Robbins hasn’t got it wrong. He was using his selection from Smith’s quotation to provoke a post like that of “Henry”, which worked.

Well done, Michael!.

[I hope my additional selection from Wealth Of Nations added some value to Lost Legacy readers.)

Self-Interest is Not Selfishness

2009-11-13T09:36:00.005Z

In a post I made on 10 November (see below), Greg Baldwin posted a comment. I would normally just reply to the comment. However, I consider the exchange of wider interest and importance, and to avert it being missed by those who do not search for the rare comments Lost Legacy receives, I post the exchange of comments for wider readership:

“Greg Baldwin said...

Thanks for the comment. Secretly I want to believe that self interest and selfishness can be neatly distinguished, but I'll confess quotes like this from our friend Mr. Smith have not helped me to find the clear distinction:

"It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."

`Adam Smith, Wealth of Nations’

I'm not sure I fully understand everything Smith is trying to say here, but self-love + self interest do seem to be at least the basic ingredients for selfishness...no?

What am I missing?"

To which I replied:

Hi Greg

Thanks for your comment.

Many people quote the “Butcher, Brewer, Baker” example from Smith’s Wealth Of Nations (WN I.ii.2: 26-27) without appreciating exactly what he was saying. He advanced the same example in the 1762-3 lectures (23 March, 176: vi.46: 348) that he gave in Glasgow University (Smith, Lectures On Jurisprudence, Oxford University Press/Liberty Fund: 1978), hence it was an early part of his oeuvre long before he wrote Wealth Of Nations.

‘Self-interest’ and ‘self-love’ in 18th-century discourse did not mean selfishness and were clearly distinguished.

Bernard Mandeville (1724) celebrated selfishness as a virtue (as did Ayn Rand in the 20th century). Smith regarded Mandeville’s teachings as “licentious” (Moral Sentiments, 1759: TMS VII.ii.4: 306-14)).

Examine the quote: we expect our dinner “from their regard to their own self interest”. But there are two people in each transaction: the hungry would-be diner and the shopkeeper potentially supplying the meat, beer, or bread.

Smith excluded the virtuous motive of their “benevolence” as too weak to rely upon regularly (as common sense suggests it would be, except at the margin). So how is the transaction to be conducted?

“We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

We don’t talk of our necessities in the transaction but address “their self-love” - they are self-interested too! They have gone to the trouble of securing supplies of “meat, beer, and bread” and offering them for sale to potential customers.

The earlier transactions of the “butchers, brewers, and bakers” to secure their supplies (from farmers and those along the supply chain) involved multiple transactions on the same basis. All suppliers need access to freely bargained exchanges to supply their families with their needs from others.

In the sentences immediately preceding the ones you quote, Smith wrote:

“But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.”
(WN I.ii.2:26)

This is a clear description of the bargaining processes by which we obtain “those good offices which we stand in need of”.

Each party is self-interested in the outcome, but (and it is an important ‘but’) neither can obtain what they want without addressing what the other wants in voluntary exchange transactions. Two utterly selfish egoists would seldom, if ever, come to a voluntary agreement – neither would give up anything in place of demanding their price “or else”.

As Smith put it, in social converation we “persuade” to get what we want. Highlighting why something (what we offer to give) is good for someone is often a good place to start when seeking what we want to get.

That is the meaning of the paragraph from which you take the well-known quotation (in the process of which you elide from the 18th-century meaning of self-interest and self-love to a later meaning).

To read this as Smith advocating selfishness is quite different from the intended and explicit meaning of Smith's moral philosophy, as expressed in that paragraph.

And that Greg is the answer to you question: “What am I missing?”

Announcement IV

2009-11-11T09:39:00.002Z

I took a short break yesterday either side of lunch and posted on Lost Legacy.

However, the spam comments attack continues - 17 since Saturday - all in Chinese and the bits in English are weird.

Those few appropriate comments were published - the rest were rejected.

I have snatched moments to continue reading and I am making slow progress in my response to Daniel Klein's paper. I think I can now track what Adam Smith did in his various editions to maintain 'centrality' of the metaphor of "an invisible hand".
However, with about 1/3rd of my books despoatached to local charity shops, I have a long way to go to clear the house in a couple of weeks.

Keep reading.

Gavin

Eulogy To The Rational Expectations Hypothesis

2009-11-10T11:15:00.003Z

Dr Madsen Pirie writes in the Adam Smith Institute Blog (10 November) HERE: a trenchant expose of the failings of the rational expectations hypothesis:

“One of the few good things to come out of the financial crisis is a re-examination of the fundamentals of Austrian Economics. One of them is that value is entirely subjective, residing in the mind of the individual, not in the object contemplated, and that it changes over time and is different between individuals. This is light years away from the REH-based models that have dominated academic economics, and treated it as practically a subset of mathematics. For some years now most academic economists have talked only to each other, describing in ever more detail a fantasy world that never touches reality. If the crisis undermines the heresy of Rational Expectations, at least some good will have come from it.”

Comment
I agree entirely with Madsen Pirie and commend his Blog article to all readers. It is the best, clear and explicit statement on the dead-end, black hole into which most modern economists has slid into that I have read for a long while.

[Disclosure: I am a Fellow of the Adam Smith Institute.]

Smith on Banking Regulation

2009-11-10T11:01:00.003Z

Dr Hugh Goodacre, a teaching fellow at University College London, writes to the Financial Times (10 November) HERE on the subject of the “arbiter’s” role of the ‘invisible hand’ as presented earlier by Michael Rossman, who “praised” the “invisible hand” as “the arbiter of success and failure”.

Hugh Goodacre disagrees, pointing out that Adam Smith “makes it clear “that for an economy to be guided by his ‘invisible hand’ is not a reality, but an ideal”.

Moreover, says Goodacre, “the Bank of England acts “not only as an ordinary bank, but as a great engine of state”, and, according to Smith, “the stability of the Bank of England is equal to that of the British government” and ‘is too big to fail”.

Comment
Apart from the usual myth and invention about the role of the “invisible hand”, Goodacre is surely right.

Smith considered it permissible to override the imperatives of “Natural Liberty”, especially in banking (I have quoted many times his insistence of regulation to stop low-value ‘promissory notes’ being issued by banks at WN II.ii.94: 324), so those who quote him as an authority against regulation where it is appropriate, as defined by Smith, mislead their readers.

[Incidentally, the Financial Times, adds this proviso to the above brief letter:

“Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.” I am not sure why they are so draconian, though I am also sure my quotation meets the “fair use” criterion, but I am not sure that such necessary treatment portrays Michael Rossman's point of view adequately.]

Selfishness is No Virtue

2009-11-10T08:51:00.004Z

Greg Baldwin, President of VolunteerMatch, writes HERE:

“The Case Foundation: Why Don't People Want To Give?”

“From The Case Foundation”:

“Well, the easy answer is that it's hard to make people give because people don't really want to. The logic is simple and compelling. People don't give because we are by our nature self-interested creatures pursuing our own survival in a competitive world. Adam Smith and Charles Darwin saw us for what we are: a collection of individuals looking to get ahead, not give back.”

Comment
Greg Baldwin has got the wrong end of the stick. Adam Smith wrote in detail (Moral Sentiments, [1759- 1790), the exact opposite of Greg Baldwin’s assertion. There is precious little Smithian morality in selfishness.

Smith’s criticism of Bernard Mandeville (Private Vice, Public Benefit, 1724) is quite specific on selfishness and Greg Baldwin attributes to Adam Smith what Mandeville became notorious for – making a virtue out of selfishness, a theme taken up by Ayn Rand (The Virtue of Selfishness), another person confused with Adam Smith’s diametrically opposed and explicit views about morality. Self interest is not about selfishness.

If everybody tries takes and few give in exchange, commercial society would be impossible. The very act of exchange is about each giving something to the other party which they prefer in place of what they give up to get it.

If everybody expects others to give without them getting something back, we would soon be impoverished. Poverty is the absence of exchange relations; it is not caused by them, Greg.

On Searching Through Cupboards, Undisturbed Since 1998

2009-11-09T15:08:00.003Z

The sort out of my library of books continues.

This morning I began on some cupboards in the garage, shut since 1998, when we moved here and I came across some ‘lost’, though not forgotten, books on economic thought, many of which I have kept since the 70s, some of which I have regularly lamented ‘losing’. In that previous move from a big house, where I had a large-room lined with book shelves, to the currently ‘smaller’ house, my then ‘library’ was too big to accommodate, and about half of my library was shipped to France, the best parts of which are housed in glass-fronted cabinets to keep out the dust – the rest in boxes piled in our large bedroom.

The other half was sent to the current and recently sold house, and much of that half was partly stored (‘temporarily’) in boxes and in some garage cupboards. Since 1998, a fair amount of new books have spilled over in piles on the floor.

In short, my depleted library is now in a mess.

We move from here in December and I have a chance (or, of you prefer, I am under family orders) to sort the books out, to safeguard the good books, including those I work from, or intend to do so, and to dispose of the rest to charity shops around town.

Interestingly, among the ‘lost’ treasures that I found this morning was an 1843 edition of Wealth Of Nations, “with a Life of the Author” (Dugald Stewart’s eulogy to Adam Smith in 1793 delivered in 1793) and also “A View of the Doctrine of Smith, compared with that of the French Economists; with a method of facilitating the study of his works; from the French M. Garnier.” Published by Thomas Nelson, Edinburgh, ‘MDCCCXLIII’.

And no, M. Garnier doesn’t mention the ‘invisible hand’ as part of Smith’s doctrine.

However, this particular volume provoked a rather funny, in retrospect only, incident in the mid-80s. At the time, we rented accommodation for our French holidays and I used to take our kids, and those of anyone’s staying with us, to a chain resort called AquaCity on the Bordeaux coast, where they could play in a safe environment (patrolled by dozens of safety ‘wardens’, instantly recognisable in their leopard-patterned costumes) of flumes, pools, rides in large rubber tyres and water, water, everywhere. They loved it.

So did I, but not for the swimming; it was a perfect location for focussed reading, despite the background noise. I would sit down near the cafeteria, read my book, and the older kids would comeback roughly every half-hour to let me know and the little ones were safe – they knew where I was and I was left in peace to read.

Now, to be truthful, I was not quite into the spirit of AquaCity, in that when assured everybody was safe and enjoying themselves, I would sit under a small tree and read. I was, as always in those days, in a suit, tie and heavy shoes (a Business School habit). The temperature was usually in the 70s-80s.

On this particular occasion I was reading this very 1843 edition of Wealth Of Nations.

Absorbed as I was in Smith’s prose “Of the Expense of Defence”, I was oblivious to what was going on around me (my research interests were defence economics), until somebody began shouting nearby, so I looked up, and realised that s man on a nearby path was shouting at me in French. I caught a few words, but most was lost in excitable non-translation.

I looked either side of me for help and a couple nearby, said in English that the man was accusing me of looking at his wife! (She was about ten paces, half hidden behind him.)

But I was innocent. The entire AquaCity landscape was dotted with people, most in bathing suits, many in bikini’s and more than a few topless. After some more outpourings of vitriol, he stormed off, realising I was not French, and, no doubt considering the way I was dressed, as some sort of oddity, as well, in his mind, of me being a quasi-pervert (though why he attacked me I cannot imagine, when I could now see that he and his wife were parading around, as people of a certain age do in France, more than semi-naked).

Fortunately, most of the kids turned up just then, looking for their lunch and soft-drinks.

So, finding this ‘lost’ 1843 volume of the Wealth Of Nations today was worthy of note. It brought back that scene at AquaCity - we have often laughed at it at dinner parties since. But truly, I have missed that particular volume for twenty years or more. Finding it is a joy.

Looking through my copy today, I found a sentence in Book IV (page 188: WN IV.ii.30: 464-5), which I had marked in ink:

“As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England”.

No other passages are marked in this manner. As defence economics was my main subject in those years, I consider this as evidence as to the sole object of my full attentions that day….

Announcement 3

2009-11-03T20:28:00.003Z

I have a couple of pressing projects on the go:

1 Daniel Klein and Brandon Lucas's "In a Word or Two, Placed in the Middle" (October 2009), which is their most interesting paper on the significance of the "metaphor" of the "invisible hand" for Adam Smith (from an idea of Thucydides).

This is underway and I was estimating a response in a week or so.

2 A review of Murray Milgate and Shannon C. Stimson's "After Adam Smith: a century of transformation in politics and political economy", 2009, Princeton University Press, was to appear in chapter instlaments from this week.

However, we have had our house (downsizing after the children left the nest for their own homes) on the market since November 2008 (the month when the UK property market finally went into free-fall).

The market has picked up and we accepted a (negotiated) offer for our house. The purchasers required an early entry date ("before Christmas") and we agreed today to this condition, previously expecting a leisurely transfer in February 2010. This gives us about four weeks to dismantle the house contents down to sufficient for two persons instead of five. Plus move my library. And look around the market for a suitable new, smaller, house in south Edinburgh.

The immediate consequence is that I am going to be very busy domestically for several weeks emptying one house, moving some of our property into a daughter's house until we settle on a new house, placing most of our property into storage, ready for the new house, and sending some of the surplsu to our French house.

Scholarly-wise, this is most "inconvenient", while domestically it is a great relief, believe me.

I shall do what I can, when I can, on the above two projects, but slower than I had anticipated. Be sure, however, that the two projects will be completed and posted on Lost Legacy.

I regard Daniel Klein and Brandon Lucas's "In a Word or Two, Placed in the Middle" (October 2009), as the most important paper on the invisible hand for many a year and it requires a considered response. In my teens we called this a "put up or shut up" moment. I hope you will bear with me over the next few weeks as I prepare my "put up" response, or, if the case merits it, my "shut up" resignation.

My review of Milgate and Stimson, similarly, will plod a long somewhat slower but it will appear - that's a promise.

Thank you

Gavin

"Centrality" Exchanges in an Invisible Hand Debate

2009-11-02T22:27:00.005Z

Brad Delong has composed a selection of pieces on Adam Smith and the invisible hand controversy (including some interesting comments), of which Lost Legacy has contributed its two-pence worth these past 4 years (and health permitting and other circumstances, I shall continue to do so for the foreseeable near future).

You can find the collage HERE:

Presently, I am composing a response to the excellently argued paper from Daniel Klein and Brandon Lucas on the “centrality” of Smith’s only references to the invisible hand metaphor in Moral Sentiments and Wealth Of Nations and its position in the ‘dead centre’ of both books. You should read Daniel Klein and Brandon Lucas’s paper HERE – and in Brad Delong’s excellent Blog:

Nov 01, 2009
Was the Invisible Hand "Central" to Smith?
Daniel Klein, Professor of Economics at George Mason University and Editor of Econ Journal Watch, asks:
What probably would you put on the truth of a broad hypothesis of deliberate centrality?

Here's more background on the question:

In a Word or Two, Placed in the Middle: The Invisible Hand in Smith’s Tomes, by Daniel B. Klein and Brandon Lucas: Abstract: The meaning and significance of Smith’s expression “led by an invisible hand” has been long debated, and especially lately. We speak to the large debate only in fine, by focusing on the conjecture, first hinted at by Peter Minowitz, that Smith deliberately placed his central idea, as represented by the phrase “led by an invisible hand,” at the physical center of his masterworks. We bring supportive evidence and argumentation to the conjecture. The four most significant points developed are as follows: (1) The expression “led by an invisible hand” occurs pretty much dead center of the 1st and 2nd editions of Wealth of Nations, and of the final edition of the volumes containing Theory of Moral Sentiments. (2) The expression in WN drifted only a bit from the center, only about 5 percent from the center in the final edition (and even less if the index is excluded). (3) The rhetoric lectures show that Smith not only was conscious of deliberate placement of potent words at the center, but thought it significant enough to remark on to his pupils, noting that Thucydides “often expresses all that he labours so much in a word or two, sometimes placed in the middle of the narration.” (4) There numerous and rich ways in which centrality and middle-ness hold special and positive significance in Smith’s thought. In conjunction with larger considerations, these points may be helpful in assessing the significance of Smith’s famous phrase.

Here's a figure showing centrality through the 7 editions of each work.

This is an attempt to rescue the invisible hand from critics who argue that the invisible hand idea that is attributed to Smith was not a central part of his writing (e.g. see Gavin Kennedy).
In answer to the question, it doesn't seem very likely to me that this was intentional.
________________________________________
Note: If you are unfamiliar with the debate over the invisible hand, here is Gavin Kennedy:
...Lost Legacy has never been slow in criticizing the ‘Chicago Adam Smith’, a person with ideas that are far from the ideas of the Adam Smith born in Kirkcaldy in 1723.

George Stigler’s boast that “Adam Smith is alive and well and lives in Chicago” (1976) reflects to invention of the Adam Smith of the “invisible hand” (a mere metaphor for Adam Smith whose single use of it in Wealth Of Nations referred to the unintended consequences of the risk-avoidance of some, but not all merchants ... who preferred the home trade), and had nothing to do, at least in Adam Smith’s mind, with how markets worked, ... or how the price system worked.
The belief that the “invisible hand” was a significant ‘idea’, ‘concept’, ‘theory’, or ‘paradigm’ was wholly invented in the 1950s by neo-classical economists on the back of general equilibrium mathematics ... and in support of a worthy criticism of Cold War, Soviet central planning. It is now taught in every economics 101 class as if it had historical validity, mainly by people who have never bothered to read Wealth Of Nations. ...

Update: See " Yet Another Note on Adam Smith's "Invisible Hand": What It Is and What It Is Not" by Brad Delong.
Posted by Mark Thoma on Sunday, November 1, 2009 at 10:54 AM in Economics, History of Thought Tweet This Permalink TrackBack (0) Comments (19)

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RW said...

Kennedy's account makes sense and is consistent with Cold War historical patterns as well; e.g., Congress adding the words, 'under God,' to the Pledge of Allegiance in 1954 to better contrast our system with the godless commies (and satisfy the then rather powerful Knights of Columbus and their allies).
Reply Nov 01, 2009 at 12:35 PM

Dennis Ashendorf said...
Dr. Thuma,
You agree with Kennedy? You consider Klein's "statistical" argument unpersuasive?

Reply Nov 01, 2009 at 01:11 PM
Tom Hickey said...
Who cares what Adam Smith "thought" or "intended." We'll never know. His use of the term may give the concepts and explanations derived from it (for Smith did not do so) some authority. But if orthodox economics is dependent on arguments from authority for its underpinnings, we are all in big trouble.
The question is, what testable hypotheses can be derived from the concept further fleshed out by subsequent economists. That is to say, can it be shown empirically that there are "natural forces" that incline markets to equilibrium. If these forces are "natural," then how do markets fail (and they do). Is the exogenous shock explanation a testable hypothesis, or a simply an assumption necessary to make the contraption work at the margin?

Reply Nov 01, 2009 at 01:59 PM
Richard H. Serlin said...
Places like George Mason and Chicago are really seeming like echo chambers. Are there people at those departments who aren't willing to use weak, deceptive, or downright embarrassing measures to defend the dogma? Is there any attempt to hire people with other views and training?

Reply Nov 01, 2009 at 03:20 PM

Fred C. Dobbs said...
'Hypotheses non fingo', as somebody
said, well before Adam Smith.
Reply Nov 01, 2009 at 03:34 PM

john wycliffe said...
I'm sorry.

If we can't agree on what Smith meant by "the invisible hand," how can anyone even suggest that it was a central feature of his thinking?
Seems to me a central feature would be something that gets rather more attention, doesn't it?
Or have I shown myself to be woefully ignorant? If so, please to explain?
Reply Nov 01, 2009 at 05:14 PM

Tom Hickey said...
@ Fred C. Dobbs
Watch your language, buddy. Just kidding.

It was Newton who said this, and it is well known that Smith was "impressed" with Newton's work. It is quite possible that Smith modeled his thinking to some degree on Newton (this is controversial), Certainly, the idea of natural forces in economics bears a relation to the physical sciences that had been so influential in this period. This influence may have persisted and may continue to persist in orthodox economic thought. For example, the notion of a "representative agent" that goes proxy for all consumers is an attempt to achieve the kind of elemental reduction of the hard sciences.

On the principle of hypotheses non fingo, it is unnecessary to account for assumptions like natural forces in terms of causes. Asking why is not needed because showing how is sufficient. Gravity doesn't have to explained in terms of causes. It works as an explanation of planetary motion, filling in the Copernican view.
However, there is a great difference here between natural forces like gravity (which elicited the hypotheses non fingo response from Smith in the first place), which result in predictions that can be tested empirically, the assumptions of orthodox economics that do not. It's not a matter of why here, the how is in question, since the economic models haven't exactly produced anywhere near the same engineering results. At this point, why is a legitimate question, and "because Adam Smith said so," isn't adequate justification.

Proponents of orthodox economics would object that experiments cannot be designed to test hypotheses in economics as they can in the physical sciences. But that still leaves them to explain how the what the hypotheses are good for if they can't actually predict and often apparently don't work. Steve Keen does a pretty good job showing this in Debunking Economics.

Orthodox economics sees to be in a position similar to psychology when B. F. Skinner dominated the field. No one got hired and certainly not promoted without toeing the line. Until Abraham Maslow came along and revolutionized the field.
My sense is that Abba Lerner's functional finance could be the Copernican Revolution in economics. The people using it as the basis for modern monetary theory are showing how this provides a coherent explanation independent of "natural forces" and one that can be corroborated through social engineering (full employment with price stability) if the political understanding and will can be found. Plus, it puts and end to a lot of the quasi-religious myths.

Reply Nov 01, 2009 at 05:35 PM
Tom Hickey said...
Ooops — (which elicited the hypotheses non fingo response from "Smith" in the first place) should have been "Newton."
Reply Nov 01, 2009 at 05:39 PM

wjd123 said...
Adam Smith was a moral philosopher and not a physicist. I doubt he would recognize the economic presuppositions of neo-classicist today much less approved of them.
Their underlying presuppositions about the nature of economic man and efficient markets is, in my opinion, turning American capitalism into a particular virulent strand of capitalism that it would be hard for moral philosophers to justify much less recognize.

It's my impression, from what little I know of Smith, that these neo-classicists, have presumed, quite illegitimately, on Smith's writings about the needs of the butcher, the baker, and the candle stick maker to turn them into an unseen force guiding markets.

How convenient for them, but it doesn't square with the Smith who advocated regulations and certainly not with any claim of theirs that Smith thought the invisible hand was a necessary evil. If someone can quote a specific statement by Smith on the invisible hand, justifying it without reliance on presumptions, I'm listening.

I'm not an economists but assertions based on weak suppositions don't belong in economic text books. It's more the sort of thing from which historical fiction is fashioned.

I think neo-classical economists are using historical fiction to turn American capitalism into a particular virulent strand of capitalism with Adam Smith wouldn't recognize.
I mention this because of a certain sentiment I hear more and more today that I particularly loath: the presumption that those in positions of power will naturally use their position to maximize their self interests. It's most egregious when it's used to justify the multimillion dollar salaries of CEOs.

I loath this logic because it appears to be an attempt by those in positions of responsibility to absolve themselves of any personal responsibility for their actions: "It's the governments fault for not stopping us before we killed again." And then the appeal, "If you were in our shoes you would have done the same" as though what they are doing is natural. Both appeals fit nicely with the presuppositions of neo-classical economists about self interested economic man where economic man is a self interested sot.

I think of this latter appeal as an attempt to democratize the behavior of these CEOs because the "you" isn't an appeal to their peers who are among the top earners in our society even before exercising their stock options but an appeal to the guy on the street, Main Street, struggling to make ends meet.

The guy in the streets has enough trouble without having these fat cats trying to get into his or her head. The guy in the street isn't in their shoes and to suggest that if he were he or she too would stuff their bank accounts by back dating their stock options or getting their quarterly reports to look good by hock or crook, is insulting.

I believe that the more wealth you have the looser your attachment to society. In this respect the filthy rich are not much different than the desperate poor. The desperate poor can't afford the norms of society and the filthy rich can't be bothered with them. It's a natural fit for the wealthy when being scrutinized by society for their irresponsibility to point to others who are in a position to act irresponsibly and present it as the way of world.

There is, however, an ethical difference between the desperate poor and the filthy rich in that the ethical "ought" implies "can". So ethically the poor person's "can't afford" offers some mitigation against the accusations of irresponsible behavior by society whereas the rich person's "can't be bothered" doesn't. (Also, there is nothing keeping the poor from having a sub-set of unofficial norms which they can keep since they are the most in need of protection. For protection the wealthy hire lawyers.)

The above justifications by those in positions of power acting irresponsible along with every other rationalization that can be thought up to excuse their behavior can be found in the financial media. It's a cornucopia of apologetics for anti-social behavior.

The idea that in the capitalistic society of the neo-classical economist it's only naturally that we learn to walk and talk like their capitalists may be a growing truism with horrible consequences for society yet to be imagined even after the financial crisis, or possibly because of it.

I would hate to live in a society where the strongest motivation for the butcher to keep his thumb off his scales is the fear of the law. Fear of the law is for people who haven't internalized the idea of the good. Fear of the law is for those who need a government to blame for their lack of responsibility; it's for those looking for a way to rationalize their behavior. Therefore, the constant refrain heard from those walking away with millions or abusing their powers is, "I haven't done anything illegal."

When I was a kid in grade school--a long time ago when taxes on the top earners were 90%--a well respected neighborhood dentist came in to talk to my class about his profession. The one thing I remember him telling us about dentistry was "It will keep food on the table and a roof over your head." That was sufficent, there was no talk about "cavier dreams."
I suspect it would have been sufficient for Adam Smith butcher. I dare to hope that it is sufficient for the man or woman in the streets today dispite the best efforts of neo-classical economist to get into their heads with their particular virulent strand of capitalism.
Reply Nov 01, 2009 at 11:53 PM

anon/portly said...
Okay, Daniel Klein is obviously a nut, but the question of how central to Smith the "invisible hand" concept was, or at the least the things Smith was using it to describe, is an interesting question.
"By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."

I think this brings up several questions. How "many" other cases - a few, lots? What would some of those other cases be? Is the concept of "promot[ing] an end which was [unintended]" a big part of Smith's analysis, or not?

I don't think it's too crazy to see similarities between the merchants who Smith views as promoting the ends of society via risk-avoidance (as Gavin Kennedy notes) and profit-maximization (as Gavin Kennedy omits to note), and the well-known profit-maximizing merchants of this passage:

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest."
Would this be a candidate for one of those "many other cases," or not?
You might think I am merely attempting to make a point but there's no use my denying it: I consider this to be a devastating, final 'proof' of my assertions.
http://adamsmithslostlegacy.com/2009/04/invisible-hands-explain-nothing.html
Reply Nov 02, 2009 at 12:58 AM

reason said...
I'm with Tom Hickey on this. Who cares.
Reply Nov 02, 2009 at 01:49 AM

Fred C. Dobbs said...
Injecting 'the invisible hand' into the consideration of economics. Is that not a way to insert religion into the discussion, perhaps to suggest that the end really is near, as the 'invisible handwriting is on the wall'?
Reply Nov 02, 2009 at 02:26 AM

kharris said...
The problem with claiming a sparsely employed expression in Smith's writing to be central to the thought behind the writing is at least two-fold. First is that (OK, I know there will be objections, but stay with me) Smith is a very good writer. I'm not saying he is the sort of writer that today's reader can't put down, but neither is Shakespeare for a great many modern readers. Look at the sensation Smith caused in his own day. He managed to grab the attention of thinkers in his own time, and won praise in the process.

If a great writer had meant - as Smith suggested Thucydides did - to feature a particular idea by placing it carefully in the middle of the essay, wouldn't he have done so in a way that caused readers in his own age to notice? Kennedy's point is that "invisible hand" became a fad nearly 200 years after it was first shown to the world. If it were central to Smith's thinking, given that he is a good writer (more Herodotus than Thucydides, to my thinking), then wouldn't he have been able to make the expression a fad in his own time? If it did not become a sensation after the first edition, wouldn't he have made the sort of changes that would have given it greater prominence?

The second "fold" of the problem is that the claim of centrality based on location looks like special pleading aimed at push-back. If location is the only claim one can put forward for Smith's own intentions regarding the centrality of "invisible hand" thinking (thanks to Tom H, for inserting the "intentionalist fallacy" into the discussion), then the claim is a thin one. Do we know, for instance, that no other expressions were used in a roughly central position in the text - expressions that have not been adopted to make claims about Smith that are otherwise hard to support - but not elsewhere? If "invisible hand" is not unique in its Thucydidian locational qualities, then the argument for intent is weakened. I don't intend to do a search for every 2-to-5 word phrase in the middle 10% of the book to find out, but isn't it somewhat incumbent on Klein and Lucas to substantiate their argument with more than just Smith's fondness for a writing trick from Thucydides?
Reply Nov 02, 2009 at 05:32 AM

Barkley Rosser said...
"Invisible hand" was a general trope of the British
Englightenment. Smith was the first to apply it to
economics, although he did so in a way not consistent
with the current textbook interpretation.
It looks like it first appeared in a letter in 1712
from Robert Cotes to Isaac Newton in connection with
Newton's theory of gravity. Bodies are drawn towards
each other "as if by an invisible hand."
Reply Nov 02, 2009 at 06:52 AM

Barkley Rosser said...
I have just seen it noted that the phrase "invisible hand" appears in Shakespeare's "Macbeth," although in a much different usage. Pretty clear that the theory of gravity is closer to the concerns of Adam Smith than as means of undoing the mortal coil.

Reply Nov 02, 2009 at 07:03 AM
anne said...
http://shakespeare.mit.edu/macbeth/macbeth.3.2.html
1605
The Tragedy of Macbeth
By William Shakespeare
Act III. Scene II.
The palace.
Enter LADY MACBETH and a Servant
LADY MACBETH
Is Banquo gone from court?
Servant
Ay, madam, but returns again to-night.
LADY MACBETH
Say to the king, I would attend his leisure
For a few words.
Servant
Madam, I will.
Exit
LADY MACBETH
Nought's had, all's spent,
Where our desire is got without content:
'Tis safer to be that which we destroy
Than by destruction dwell in doubtful joy.
Enter MACBETH
How now, my lord! why do you keep alone,
Of sorriest fancies your companions making,
Using those thoughts which should indeed have died
With them they think on? Things without all remedy
Should be without regard: what's done is done.
MACBETH
We have scotch'd the snake, not kill'd it:
She'll close and be herself, whilst our poor malice
Remains in danger of her former tooth.
But let the frame of things disjoint, both the
worlds suffer,
Ere we will eat our meal in fear and sleep
In the affliction of these terrible dreams
That shake us nightly: better be with the dead,
Whom we, to gain our peace, have sent to peace,
Than on the torture of the mind to lie
In restless ecstasy. Duncan is in his grave;
After life's fitful fever he sleeps well;
Treason has done his worst: nor steel, nor poison,
Malice domestic, foreign levy, nothing,
Can touch him further.
LADY MACBETH
Come on;
Gentle my lord, sleek o'er your rugged looks;
Be bright and jovial among your guests to-night.
MACBETH
So shall I, love; and so, I pray, be you:
Let your remembrance apply to Banquo;
Present him eminence, both with eye and tongue:
Unsafe the while, that we
Must lave our honours in these flattering streams,
And make our faces vizards to our hearts,
Disguising what they are.
LADY MACBETH
You must leave this.
MACBETH
O, full of scorpions is my mind, dear wife!
Thou know'st that Banquo, and his Fleance, lives.
LADY MACBETH
But in them nature's copy's not eterne.
MACBETH
There's comfort yet; they are assailable;
Then be thou jocund: ere the bat hath flown
His cloister'd flight, ere to black Hecate's summons
The shard-borne beetle with his drowsy hums
Hath rung night's yawning peal, there shall be done
A deed of dreadful note.
LADY MACBETH
What's to be done?
MACBETH
Be innocent of the knowledge, dearest chuck,
Till thou applaud the deed. Come, seeling night,
Scarf up the tender eye of pitiful day;
And with thy bloody and invisible hand
Cancel and tear to pieces that great bond
Which keeps me pale! Light thickens; and the crow
Makes wing to the rooky wood:
Good things of day begin to droop and drowse;
While night's black agents to their preys do rouse.
Thou marvell'st at my words: but hold thee still;
Things bad begun make strong themselves by ill.
So, prithee, go with me.
Exeunt
Reply Nov 02, 2009 at 08:34 AM
Barkley Rosser said...
Thanks, anne. Figured you might come through on this one. Exeunt, indeed, :-).
Reply Nov 02, 2009 at 10:13 AM

Harold said...
Doesn't "the invisible hand" really refer to a belief that Providence (in the form of ever-improving Progress) had directed (non-Darwinian) evolution in such a way as to assure that "the best" always came out on top, an outlook prominent during the period of British late nineteenth-century imperialism.
Herbert Spencer's libertarian "political philosophy" (otherwise known as the "police state" theory of government, which holds that government's role should be limited to protecting private property, dates from this era.
Reply Nov 02, 2009 at 12:45 PM

Barkley Rosser said...
Harold,
Not in Newton or Smith, who way predate all that Victorian evolution...

The "Secret" of "Winning" Investment Advice?

2009-11-01T10:57:00.004Z

Ersun Warnke writes on “Investing for Value” in Salem-News.com HERE:

“The History of Value in Economics”

"Adam Smith is a well recognized figure in the economics world. Most people in our society, and especially in the business community, have probably heard his name in connection with the “free-market” or the “invisible hand.” What may be less known is that Adam Smith learned many of his economic ideas from François Quesnay.

Both Quesnay and Smith paid great attention to the question of value, because they understood that it is impossible to have a coherent economic theory that does not start by answering the question of its own purpose.

Quesnay postulated that land is the source of all value. Quesnay approached the question of value from a physical sciences perspective, and concluded that because food is the source of all energy expended in human activity, the land that produces the food is the source of all value. He theorized that because all human activity falls within the bounds of energy produced from food, the value of everything in an economy is limited by food production. In a mixed economy, where only some people produce food, food is traded by the food producers for the things they need. This economy is perfectly balanced because the value of everything is set by food production. All goods are valued relative to their cost of production, which is the food that the producers of goods must trade their goods for.

Quesnay was the European originator of the concept of a perfectly balance free market. Adam Smith expounded on this idea, and added to it the concept of labor as value. In Smith's theory, the labor expended on producing a good was equal to its value. This model of value is consistent with Quesnay, because labor expended is equal to food consumed, and so value in the labor model can ultimately be traced back to value in the land model. The major contribution of the labor theory of value is that it takes into account variations in the efficiency of production between various producers of goods and shows how markets can adjust the value assigned to different goods when the efficiency of their production changes.

This is but a brief overview of the theory of value in economics. The salient point is that “economic laws,” such as market efficiency, are rooted in a physical science approach to value. It is only by tracing value to an objective physical basis, such as the energy produced and expended in working the land, that it is possible to assert that there are physical laws that control economic activity.”

Comment
Ersun Warnke has a “theory”, of which he is so proud that he believes that it explains everything.

The problem is that he indulges in hubris without thinking for a moment that the plausibility of his “theory” may be compromised by the fact that others, iin over two-hundred years, have not noticed that the outcome of investment decisions, dependent as they are on the unpredictability of future events, would be predictable if only they followed Ersun Warnke’s “theory”, based as it is on a notion from Quesnay, and picked up allegedly by Adam Smith in the 18th century.

Smith admired Quesnay, whom he met and discussed with on his visit to France, 1764-6. Smith was critical too, especially of Quesnay’s focus on land as the sole source of productive labour; manufacturing, in Quesnay’s doctrine, was designated as “sterile” (WN IV.ix.38: 678), which Smith considered, rightly, as a major source of wealth creation (wealth, that is, defined as the annual output of “the necessaries, conveniences, and amusements of human life” (WN I.v. 1: 47).

Smith was more than skeptical (his personal respect for “Dr Quesnai”, the celebrity physician in the French Court, restrained his tone of rejection of the basic concept guiding the Tableau Economique) of Quesnay’s ideas.

He specifically rejected the pre-requisite necessity of an economy in “perfect liberty” for progress to opulence:

“Some speculative physicians seem to have imagined that the health of the human body could be preserved only by a certain precise regimen of diet and exercise, of which every, the smallest, violation necessarily occasioned some degree of disease or disorder proportioned to the degree of the violation. Experience, however, would seem to show that the human body frequently preserves, to all appearances at least, the most perfect state of health under a vast variety of different regimens; even under some which are generally believed to be very far from being perfectly wholesome. But the healthful state of the human body, it would seem, contains in itself some unknown principle of preservation, capable either of preventing or of correcting, in many respects, the bad effects even of a very faulty regimen. Mr. Quesnai, who was himself a physician, and a very speculative physician, seems to have entertained a notion of the same kind concerning the political body, and to have imagined that it would thrive and prosper only under a certain precise regimen, the exact regimen of perfect liberty and perfect justice. He seems not to have considered that, in the political body, the natural effort which every man is continually making to better his own condition is a principle of preservation capable of preventing and correcting, in many respects, the bad effects of a political œconomy, in some degree, both partial and oppressive. Such a political œconomy, though it no doubt retards more or less, is not always capable of stopping altogether the natural progress of a nation towards wealth and prosperity, and still less of making it go backwards. If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered. In the political body, however, the wisdom of nature has fortunately made ample provision for remedying many of the bad effects of the folly and injustice of man, in the same manner as it has done in the natural body for remedying those of his sloth and intemperance” (WN IV.ix.28: 673-4).

Smith did not envisage the “concept of a perfectly balance[d] free market”. That is a post-Smithian, 19th-20th century retrospective invention (used by some theorists to trace ‘general equilibrium’ theories back to Adam Smith). If anything, Smith was about ‘disequilibrium’ economics.

Smith did not just “add” to Quesnay’s land-is-value belief, “the concept of labor as value”. Moreover, the labour theory of value was a distraction, and in its muddled presentation in Wealth Of Nations it is not clear if Smith really had a ‘LTV’ at all. It certainly is not a basis for modern valuations to determine investment decisions.

There is no inherent ‘value’ in a commodity. Exchange value is a ratio; as Smith showed, it is what we give up to get what we want. “Give me that which I want, and you shall have this which you want” (WN I.ii.2: 26) is the meaning of offers in bargaining.

And exchange value can change rapidly and extraordinarily. Consider Richard III’s offer of a fine bargain: “A horse, a horse, my kingdom for a horse” (The Tragedy of Richard III, Shakespeare).

Ersun Warnke may prosper as an advisor of the readers of Salem News.com (I wish him well), but, probably, he, or more importantly, his readers, may not.

A Lost Legacy Open Book Discussion (II).

2009-10-31T10:53:00.002Z

After Adam Smith: a century of transformation in politics and political economy, 2009, Murray Milgate and Shannon C. Stimson, Princeton University Press, Princeton and Oxford.

There is no doubt that the popular (and academic) portrayal of the lifetime-works of Adam Smith is quite at odds with the actual contribution of the Adam Smith born in Kirkcaldy in 1723. It’s as if a completely new persona was invented bearing limited resemblance to him or his surviving works (sometimes referred to on Lost Legacy as the 'Chicago Adam Smith').

I sometimes wonder if anything similar happened to other historical figures from the ancient worlds of Greece and Rome – spectacularly in the case of Jesus – and the thousands who stand out in the great Pantheon of those who are known to us today for their places in the history of human endeavour.

We have The Glasgow Edition of The Life and Correspondence of Adam Smith, from Oxford University Press (and the low cost Liberty Fund editions): The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth Of Nations, plus his extant essays, The History of Astronomy (1744-<1758) and Origins of Language (1761). To these we have surviving student notes of his lectures, Jurisprudence (1762-63) and Rhetoric and Belles Lettres (1763), plus the surviving Correspondence of Adam Smith, and, most important, the definitive biography, The Life of Adam Smith (1996, 2nd ed. 2010) by Ian S. Ross.

We ought, therefore, to be pretty sure as to what constitutes Adam Smith’s oeuvre, but instead of his works being a model of pure scholarship, they are riven by contrary, incompatible, and mutually exclusive opinions as to what he wrote and what he meant, much of it advanced by scholars of indisputable integrity.

However, there is even considerable doubt as to the exact words he used to express his ideas, despite the ready availability of all of his works to whomsoever wishes to consult them – sadly, many scholars pontificate with the certainties of the highly opinionated, who clearly have not read his works for themselves or have forgotten what they may claim to have read years ago.

Now, something must have happened in the 219 years that separate his death from today. It’s not all down to elementary scholarly slackness. Ideas about the past, and the people who lived through them, do not form in a vacuum. Adam Smith – contrary to trite media assertions – did not write his books as veritable bibles; he was not the ‘high priest’ of economics; he did not ‘invent’ capitalism; not was he the manic believer in ‘laissez-faire’, and other similar nonsense (Smith neither used the word ‘capitalism’, nor ‘laissez-faire’).

Readers influence the accepted meanings of what an author writes (see, for instance, Willie Henderson, Evaluating Adam Smith: creating the wealth of nations’, 2006, Routledge). Smith's readers are no exception, and because Adam Smith’s name is often quoted (excessively so today) in support of, or as the problem of, current controversies in the (mis)management of economies, it adds to the intellectual – and popular – confusion as to what credence should be given to this or that declamation on one side of the other of those making the noise, which passes for political discourse in this first decade of the 21st century.

Lost Legacy readers will know that I am researching at present the origins of the spread of the notion of an actual (or metaphorical) “invisible hand” in the teaching of economics since the 1940s. From that teaching came forth consequential policies in business and government as students graduated and entered the “ordinary business of life”, and applied their teachers’ wisdom, either within society generally or in their own teaching careers. A conceptual virus spreads like the biological kind.

Earlier this year, I discussed Steven G. Medema’s excellent, The Hesitant Hand: taming self-interest in the history of economic ideas (Princeton University Press), which covered a slice through history from Adam Smith to 20th-century welfare economics. This fits well with what I am about to undertake with the book by Murray Milgate and Shannon C. Stimson, which takes a broader sweep through the first hundred years from Adam Smith to the end of the 19th century.

It short, Milgate and Stimson have studied how the “grand ideas” that are attributed to Adam Smith are “as much the product of the gradual modifications and changes wrought by later writers”, such that we “are much the heirs of later images of Smith as we are of Smith himself”. I concur with Milgate and Simson in at least this brief survey of their book (I have yet to read the details, which I shall share with you over the next week or so).

I consider from reading their introduction that this is an important quest for all scholars and students of Adam Smith. If their method is correct, and it substantiates their hypothesis, the similar hypothesis embedded in my current research will have stronger foundations.

I, and many readers of Lost Legacy, have lived through the last half of the 20th century, in which “the gradual modifications and changes wrought by later writers” on the unchanged original exposition of the ideas of Adam Smith lie in pristine innocence in his texts. Therefore, we can compare and contrast his original ideas with the “later images of Smith”, which are often a long way from those we read in the works written by “Smith himself”.

How we got from what Adam Smith wrote to what modern economists assert him to have written is an interesting study in the history of intellectual dilution. Murray Milgate and Shannon C. Stimson may have written the first part of that history; we shall discuss that proposition over the next week or two.

Modestly, I would hope that I can emulate their work, as I tackle the intense dilution of Smith’s work in the second-half of the 20th century, which dilution began, almost tentatively, in the late 19th century.

[Thanks to Robert Vienneau, who hosts the Thoughts on Economics Blog HERE: http://robertvienneau.blogspot.com/, drew my attention to Milgate and Stimson’s new book in a message commenting on Lost Legacy earlier this month.]

A New Slant on Adam Smith's Use of the Invisible Hand Metaphor

2009-10-30T16:59:00.003Z

A New Slant on Adam Smith: must be read HERE

“In a Word or Two, Placed in the Middle: The Invisible Hand in Smith’s Tomes
by Daniel B. Klein and Brandon Lucas"

"Abstract: The meaning and significance of Smith’s expression “led by an invisible hand” has been long debated, and especially lately. We speak to the large debate only in fine, by focusing on the conjecture, first hinted at by Peter Minowitz, that Smith deliberately placed his central idea, as represented by the phrase “led by an invisible hand,” at the physical center of his masterworks. We bring supportive evidence and argumentation to the conjecture. The four most significant points developed are as follows: (1) The expression “led by an invisible hand” occurs pretty much dead center of the 1st and 2nd editions of Wealth of Nations, and of the final edition of the volumes containing Theory of Moral Sentiments. (2) The expression in WN drifted only a bit from the center, only about 5 percent from the center in the final edition (and even less if the index is excluded). (3) The rhetoric lectures show that Smith not only was conscious of deliberate placement of potent words at the center, but thought it significant enough to remark on to his pupils, noting that Thucydides “often expresses all that he labours so much in a word or two, sometimes placed in the middle of the narration.” (4) There numerous and rich ways in which centrality and middle-ness hold special and positive significance in Smith’s thought. In conjunction with larger considerations, these points may be helpful in assessing the significance of Smith’s famous phrase."

Comment
Readers will know that Daniel Klein and I have been engaged in civilised debate in the pages of Econ Journal Watch (May and Sept) HERE, HERE and HERE
on the significance of Adam Smith’s use of the metaphor of “an invisible hand”.

Daniel has prepared a most interesting paper, which he believes supports, at least indirectly, his mainstream interpretation of the major significance of Smith’s use of the famous metaphor and its modern associations across the discipline. It is an original and careful piece of work and I hope many readers promote the link to it on their own Blogs.

I have read through the paper quickly and can commend it to you. It is worth reading. I shall review the arguments on Lost Legacy when I have studied it more carefully.

The Incorporated Towns Were Bad, but the East India Company Was Worse

2009-10-30T16:06:00.004Z

Sam Smith, who covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964 edits
UNDERNEWS (‘the online report of the Progressive Review’) (30 October) HERE:

“RECOVERED HISTORY: MEET THE REAL ADAM SMITH”

“…Adam Smith is routinely and thoughtlessly invoked as the founder of modern capitalist though, based on unrestrained trade, limited government, and the mechanics of market economies. To this day, The Wealth of Nations is held up as the espousal tome for free-market ideology that decries government regulation, excessive taxation, and wealth redistribution (in whatever contrived shapes it may take).

As Chomsky notes, Smith saw the East India Company and other stockholding corporations as bending state policy towards the good of the few at the expense of the many. Smith to this end was in favor of heavy-handed government regulation to prevent financial and corporate powers from manipulating government policy for their own ends. This led him to conclude on the nefarious impulse of corporate manipulation, that when "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."

Comment
Much as I agree with the drift of Sam Smith’s post – after all, it recognises that the Adam Smith myth was invented in the 20th century (and the 19th century before that with assertions that Smith supported laissez-faire, though he never said so himself) – I am compelled to apply the same standards of accuracy as I would demand of a modern purveyor of the myth.

The East India Company was a private company, granted a Royal Charter by government on behalf of the sovereign, which operated nearly a year’s sailing away (nearly two years there and back) in India, and, thereby, well-beyond the ability of the government, and, as important, the ordinary shareholders, to monitor, by Smith’s accounts, the appalling behaviours of its officers and servants. Smith’s strictures against the Company are detailed in Wealth Of Nations (Book IV and V).

However, the quotation offered is quite separate from his discussion of the behaviours of the Chartered Companies in Book V. It comes from Book I, on an entirely different subject:

“This led him to conclude on the nefarious impulse of corporate manipulation, that when "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” (WN I.x.2.27: 145)

This is part of a discussion of the role of the ‘towns corporate’ in Britain, where the old Trade Guilds still held sway: ‘Inequalities occasioned by the Policy of Europe’ (WN pp 135-59).

The inequalities that Smith speaks of were those associated where “the policy of Europe, by not leaving things at perfect liberty, occasions other inequalities of much greater importance” (WN 135), in particular ‘the “exclusive privileges of corporations”, or the “incorporated trades”.

To be employed in commercial activity in towns, the person had to serve a seven-year apprenticeship under a master, who was restricted to two apprentices only. Without an apprenticeship, served in the town, nobody could open a shop for trade (this happened to James Watt in Glasgow – he had served his apprenticeship elsewhere; Smith got a job for him at the University of Glasgow, just across the town boundary).

It was to these ‘tradesmen’ that Smith referred – small, single-trade shopkeepers and artisans, who owned their own little businesses and who exercised a monopoly of their trades in an “incorporated town”, who tended to exact monopoly prices for their merchandise or artisan services, and who swore to only buy from other incorporated tradesmen for any other items that they required, even where unincorporated tradesmen could supply at lower, more competitive prices.

In short, the Incorporated trades were a cabal of monopolists, living of their monopoly prices at the expense of the public.

But, be clear, these incorporated town monopoly trades and the tradesmen running them had nothing to do with Chomsky’s version of the East India Company, a massive international monopoly company operating East of the Cape of Good Hope to India and beyond,and behaving appallingly.

The local tradesmen who met for “for merriment and diversion” were small fry compared to the East India Company. Chomsky, apparently, conflates the two monopoly cases together.

Sam, a well-experienced journalist, knows of the importance of accuracy. So should Chomsky.

Almost Right But Not Quite

2009-10-29T21:15:00.002Z

Rev. Dr. Marilyn Sewell writes on “Economics and Religion” HERE:

“A word about the ancient god of the free market system, Adam Smith. When Smith is quoted regarding the "invisible hand" of the market, what is conveniently forgotten is his assumptions about the conditions necessary to make free markets work. Smith assumed that we would operate on a small scale and so would know the character of the people we trade with. He assumed that our financial dealings would exist in the context of our values. Instead, Smith's writing is used to justify the mad pursuit of shareholder profit, which is held to be holy and untouchable.”

Comment
Smith was not an “ancient god of the free-market system”.

He regarded primitive belief in gods as “pusillanimous superstition” (his History of Astronomy, 1744-58; published posthumously in 1795 on his direct instructions just before he died in 1790).

He did not have a theory of the “invisible hand of the market”.

The rest of the paragraph as a statement of his broad views is acceptable:

“Smith's writing is used to justify the mad pursuit of shareholder profit, which is held to be holy and untouchable.”

Modern interpretations, and not a few inventions too, of Smith’s views are almost wholly wrong. Dr Marilyn Sewell, a minister of the Christian religion, is excused. I presume she wrote the above in good faith.

The Significance of Property - Again

2009-10-29T16:56:00.003Z

Bruce Web is in debate with me HERE: and we both are stuck in conceptual confusion about the meaning of property – is it purely a legal term, distinguished by its codification by jurists and authors, or was it a quite unintended development by unknown people in the very distant past of pre-history, and to which the codifiers and the great judicial minds came much, much later, long after property-rights were practised and enforced by local violence?

The attempt, below, is to set the scene so that we may move on to the relatively short, six-centuries of struggle for Liberty (since medieval times), which manifested itself in such isolated, though significant events – in the consequences they had eventually – as, in England, Magna Carta (and the declaration of Arbroath in Scotland).

This was followed by a long, slow and gradual process from which liberty took its modern forms in the separation of powers, trial by juries, independence of the judiciary (for life and good behaviour), Habeas Corpus, the executive elected by universal suffrage and subject to an independent parliament, with powers of impeachment of the executive, freedom of speech, separation of Church/Mosque/Temple from the State, and rights of assembly. (I outline these aspects in chapter 16 of my “Adam Smith’s Lost Legacy”, 2005, Palgrave Macmillan.)

Property is a human phenonmenon, which in my view pre-dates legal forms and norms which came to be associated with it in recorded history (c.8,000 ya). In the forest, aeons ago, while Homo sapiens were forming through the speciation of the Hominines (from c. six million years ago, right through to the appearance of the first, fully humans c.200,000 years ago), primates were distinguishable from those that shaped and used stone-tools and those that didn’t (broadly speaking). At some time, some humans discovered the use and management of fire, learned to make covering using animal skins and vegetation, and to select and use natural materials for digging, processing, decorating and, on occasion, protecting themselves (and attacking others).

These skills were spread widely among human groups and for most groups these technologies and the knowledge that enabled learning, while relatively sophisticated compared to other species, were the norm (with languages) for all humans for much of prehistory.

Some tribes actually ‘lost’ some of these skills, examples being the tribes of Fuegans of South America, and those Aborigines cut-off in the island of Tasmania with rising seas levels, which tribes reverted to even more primitive living than their ancestors in the rest of South America and Australia, both of which were described by Europeans who visited them in the 18th–19th century, as the “brutes”.

The important thing is that while racists took the 'brutes' as representative of all tribe cultures, they were in fact the exceptions. But they had no notions of property as a possession and appear to have ‘lost’ the basic knowledge of subsistence-craft too; the majority of the world’s tribes practised early notions of property, albeit of a very primitive quality.

Property, through most of its pre-history, and the first millennia of recorded history, had no connection with its legal forms which came much, much later. Quoting legal ideas – early Roman, Norman, English or French law and such like - is not appropriate.

Our focus should be, for these discussions, on the role that property ‘mine’, ‘ours’, ‘their’s, and ‘yours’ – played in practice, long, long before literate societies recorded even crude details of its manifestations.

We should also not get hung up on later ideas about the lineage of property in its proto-modern forms. Nobody knows which tribes first ‘discovered’, ‘invented’, or ‘conceptualised’ forms of property. We can trace only the slimmest of evidence of the evolution of property (‘meum and tuum’; mine and thine), mainly by archaeological stone remains and clues from folk myths (which may be wildly inaccurate). It is almost certain that no one tribe of humans (or race groups, black, white, yellow, brown) can make a claim to be the originator. Stone tools were common in East Africa from long ago.

We do know that somewhere, sometime, and by somebody, property appeared from human action, not by design, somebody’s genius, or a ‘great leader’. It is the distinguishing characteristic of humanity; in its physical forms, it separates us from all other primates, past and present. It may have been a mixed blessing.

Property enabled the alpha males and females of a tribe to claim and exploit its territory and the people within it (the latter, a long established behaviour set among other primates); similarly within families, with allies, and individuals as the benefits of property (as a resource also to ensure obedience) became manifest.

Access to subsistence was related to the evolution of property (better tools, easily carried, replaced quickly; larger domains, natural obstacles to movement overcome; baskets for carrying food, and babies; heavier clubs and longer wooden poles to deal with predators; and so on).

With better and regular subsistence, life-spans increased, and populations increased too. Of course, all this was net of local losses from bloody conflict. Successful tribes grew larger, more mobile, more dangerous to distant neighbours – and their womenfolk – and the long journey to property in the forms of herding and farming began, not in a straight line, and not always in one direction.

John Locke summed it up in the phrase: “In the beginning, all the world was America”, using North America’s native tribes as the standard mode of subsistence of pre-Mediterranean, Egypt, Babylon, India, China, and Europe (and for non-Roman parts of 17th-century Europe, including the Highlands of Scotland).

Property distinguished the property-less ‘brutes’ from the property-abundant humans, especially after the division of labour and the “propensity to truck, barter, and trade” became established.

The correlation between property and rising total subsistence is manifest. Note, a rising total GDP did not mean, necessarily, a rising per capita GDP for long periods; per capita GDP remained static mostly, including from the 5th to the 15th century following the fall of Rome (except in plague years).

Our ancestor’s rulers diverted considerable subsistence into ‘civilised’ artefacts in stone buildings, walls and roads, and all the trappings of military might, which sometimes, along with plagues and famines, destroyed the very basis of their ‘civilisation’. All that dreary experience of history changed with the sustained rise in per capita incomes and, of course, total GDP from about 1800 onwards.

Should we continue our discussions, the above, very roughly, is where I am coming from conceptually.

Unfair to Adam Smith: his philosophy accords with modern psychology

2009-10-29T11:08:00.005Z

I return to another article in Psychology Today (HERE), this time written by Darcia Narvaez, Associate Professor of Psychology and Director of the Collaborative for Ethical Education at the University of Notre Dame:

“Moral Landscapes Living the life that is good for one to live: The Cultural Airspace of Harmony Morality, Which emotions does your cultural airspace promote?

“Although the philosophers David Hume (1751/1998) and Adam Smith (1759/2002) considered concern for others to be fundamental to human character, empathy turns out to be highly influenced by one's upbringing. Parents and culture shape which moral emotions we dwell on and which morality we favor. Emphasizing anger, hate, fear, contempt leads to Bunker morality; emphasizing compassion, concern, love, forgiveness leads to Harmony morality.”

Comment
Darcia Navaez, PhD, has, in my view, a similar problem to that of Jim Taylor, PhD (Lost Legacy, 23 October): neither of whom is really up-to-speed on the works of Adam Smith, but by citing them in support of their otherwise most readable articles, I assume they felt that it would make their pieces publishable in Psychology Today, whose sub-editors would note that a well-known name makes their pieces reader-recognisable.

Smith did not believe that human characters or behaviours were, to quote a fashionable but incorrect metaphor, "hard wired", or 'inherent', or 'instinctive' (that was a view of Francis Hutcheson, Smith's Glasgow tutor). These behaviours and sentiments are learned and can vary widely according to upbringing and context.

Smith’s (and Hume’s) understanding of human nature – the sympathetic “concern for others” – was supported by a lengthy discussion in “Moral Sentiments” (1759) on how these “concerns” were generated, and they are not much different from Darcia’s elaboration of “Parents and culture shape which moral emotions we dwell on and which morality we favor”.

I refer readers to Moral Sentiments from which I could quote extensively from Smith’s early chapters, but feel on this occasion, his simple illustration is sufficient to make his point:

“Were it possible that a human creature could grow up to manhood in some solitary place, without any communication with his own species, he could no more think of his own character, of the propriety or demerit of his own sentiments and conduct, of the beauty or deformity of his own mind, than of the beauty or deformity of his own face. All these are objects which he cannot easily see, which naturally he does not look at, and with regard to which he is provided with no mirror which can present them to his view. Bring him into society, and he is immediately provided with the mirror which he wanted before. It is placed in the countenance and behaviour of those he lives with, which always mark when they enter into, and when they disapprove of his sentiments; and it is here that he first views the propriety and impropriety of his own passions, the beauty and deformity of his own mind. To a man who from his birth was a stranger to society, the objects of his passions, the external bodies which either pleased or hurt him, would occupy his whole attention. The passions themselves, the desires or aversions, the joys or sorrows, which those objects excited, though of all things the most immediately present to him, could scarce ever be the objects of his thoughts. The idea of them could never interest him so much as to call upon his attentive consideration. The consideration of his joy could in him excite no new joy, nor that of his sorrow any new sorrow, though the consideration of the causes of those passions might often excite both. Bring him into society, and all his own passions will immediately become the causes of new passions. He will observe that mankind approve of some of them, and are disgusted by others. He will be elevated in the one case, and cast down in the other; his desires and aversions, his joys and sorrows, will now often become the causes of new desires and new aversions, new joys and new sorrows: they will now, therefore, interest him deeply, and often call upon his most attentive consideration.” (TMS III.1.3: 110)

Smith discusses this process as dependent on contact with others, sequentially, first with parents (and other adults), then in the company of other children (school, playground, street games, etc., the great 'school of self-command'), through to entering adulthood.

How one treats others influences how they treat us; and from long sequences of complex interactions among humans in society, we are subsumed in the interdependent outcomes known as the ‘way we live’. He uses the metaphors of the “looking glass” and the “mirror” to emphasise the two-way nature of the what today we call the socialization of humans in society.

I recommend that readers either read Moral Sentiments directly or, for a short introduction to Smith’s moral philosophy, try my book, Chapter 2: “so weak and imperfect a creature as man”, pp 47-61, in Adam Smith: a moral philosopher and his political economy, 2008, Palgrave Macmillan.

When Wealth Isn't Wealth

2009-10-27T14:18:00.000Z

Andy Absher writes in the Herald Bulletin online HERE

“Businesses compete because they must Discouraging risk-taking is a red herring”

“When you read Nancy Turner’s viewpoint, you would think the name of Adam Smith’s book was, “The Wealth of the Wealthy”. Though Smith makes many points, the point of competition isn’t so that the rich can get richer but so the common consumer can have the best price via market competition.”

Comment
Andy Absher makes this comment in the course of a local debate on Health Insurance, which is outside my remit on Lost Legacy (I only comment on political topics in the country where I vote – Scotland).

However, it is worth noting that Andy appears to confuse a different meaning of the word “wealth” with Adam Smith’s. Smith wrote Wealth Of Nations to clarify the real meaning of wealth from its confused meaning. That confusion remains active today.

The prevailing meaning of “wealth” in 18th-century Britain was that it manifested itself in gold and silver bullion (paper money in the form of promissory notes were of recent vintage – most people preferred their money in bullion form). A consequence of this version of money is that Sovereigns were supportive of policies that seemed to assure them of the greatest amount of gold and silver bullion accumulating in their treasuries year by year,

From this obsession they approved all kinds of policies that ensured they exported products abroad to earn more gold and silver than they had to send out of the country to pay foreigners for those products they imported. And they kept a tight reign on exports of gold and silver by means of protection (tariffs, prohibitions, monopolies of shipping and general hostilities towards other countries).

Adam Smith taught that the real wealth of a country was measured in the “annual output of the necessaries, conveniences, and amusements of life”, in short, what a country produced annually. Policies that led to more output were wealth creating; policies that restricted imports caused the purchase of expensive products that could be produced more cheaply at home, thus reducing the “annual output of the necessaries, conveniences, and amusements of life”, and made the country poorer as a result.

“The Wealth of the Wealthy” on this measure is meaningless. It smacks of a radical student’s slogan.

A Little Mystery To Be Solved

2009-10-27T11:09:00.003Z

Ben Hyde writes in “Ascription is an Anathema to any Enthusiasm” Blog (HERE) in:

“The Perverse and Invisible Hand”

““I have recently started reading Albert Hirschman’s 1991 book “The Rhetoric of Reaction: Perversity, Futility, Jeopardy.” I’m only 20 pages into it so no telling where it’s going. But so far, it has totally blown me away. The book is an outline of three styles of rhetoric that are commonly used by reactionaries, i.e. those who would react against progress. These are generic arguments good in most any situation. Introducing free speech, extending the franchise, ramping up public education, rearranging the kitchen? You name it these rhetorical devices stand ready and willing.

He labels the first of these “perversity.” Here in while [sic] reactionary pretends supports the goal he then goes on to explain that efforts toward that end are certain to backfire. Efforts to improve health care? Such efforts will decrease health care! Universal schooling? Such efforts will lead to wide spread idiocy. Do-gooders make things worse. The audacity of this argument is breath taking. But look at the record! How that French Revolution turn out?

Hirschman points out that observers of the French Revolution quickly deployed this argument. Even before the it all went to hell in a hand basket. Edmund Burke in particular used this perverse argument, and later when it things got ugly he got a lot of credit for being so insightful. So did Burke invent this technique? Hirschman argues that no, Burke was mimicking newly popular argument with a similar structure that had recently arisen in the circles he ran in. I.e. the hypothesis of Adam Smith. Aka, the Invisible Hand. This takes my breath away!

The invisible hand is a perverse argument. But in this case bad actions (individual greed, personal vices, and self interest) have the unintended consequence of creating a vibrant national economy. It’s as if God in his infinite wisdom had sus’d out how to turn his flock of sinners into something constructive. Smith might have given credit to divine providence but choose to give the credit to more amorphous but still spirtual invisible hand. Many of Smith’s readers saw right thru that. Particularly all those commercial actors looking to get the church off their case.”

Comment
I haven’t yet read Hirschman’s little volume, “The Rhetoric of Reaction: Perversity, Futility, Jeopardy”, (it’s now on order from Amazon for £13), so I cannot fully dissect what Ben Hyde is asserting.

He seems to be reporting that “Burke was mimicking newly popular argument with a similar structure that had recently arisen in the circles he ran in. I.e. the hypothesis of Adam Smith. Aka, the Invisible Hand.”

I find this intriguing to say the least. Had the “invisible hand” argument really “recently” arose “in the circles he [Burke] ran in”? If so, this is a discovery of momentous importance in the history of economic thought! More to the point: how did I miss it?

Or is it an idea of Hirschman’s that Burke used a rhetorical device to make his case against the French Revolution that was similar in construction to that device which Adam Smith used in the case of “an invisible hand”, with a side assumption on the part of Hirschman that Burke ‘ran in” the “circles” where they discussed Adam Smith’s metaphor of “an invisible hand”?

For this to be true, Hirschman must either have documentary evidence that Smith’s metaphor was widely discussed in the late 18th century (for which I have not found any trace so far) or he must assume that it should have been widely circulated because the metaphor was widely discussed in the late 20th century! Either basis for Hirschman’s argument is in itself a preposterous proposition.

Or, lastly, is it something that Ben Hyde drew from his reading of the first 20 pages of Hirschman’s book? Until I receive the book I cannot comment or sort out who was the author of what part of Ben’s post.

October Lost Legacy Prize Won by Kieran O'Hara - also a nominee for the 2009 Annual Prize

2009-10-25T16:22:00.004Z

Kieron O'Hara, UK Centre for Policy Studies writes (25th October) in Gov Monitor HERE:

“Capitalism And The Decline In Trust Of Our Markets”

“Smith has not been well-served by commentators whether admiring or hostile. He was neither the apostle of ‘greed is good’, nor the evangelist of free markets as the ideal resource allocation mechanisms at all times. In fact, his careful and lengthy examinations of human motivation, The Theory of Moral Sentiments and The Wealth of Nations still contain important lessons for our time.

It is particularly interesting that free market economics is widely blamed for the decline of trust throughout society, because rereading Smith reminds us how once upon a time the spread of markets was thought beneficial because it helped spread trust.

Our understanding of markets has fragmented since the days of Smith. Economists see them as mechanisms for optimally allocating resources, while sociologists see them completely differently as exchange mechanisms that tend to overwhelm other types of connection that hold societies together. … But Smith himself saw them as both social and economic. Their two different aspects could not be separated out.

Participation in markets helped people internalise the norms of socially-beneficial behaviour, spreading habits of trust and trustworthiness. They used pre-existing trust mechanisms, such as respect for contracts, the rule of law, sound money and a work ethic, and brought them all together in a perfect storm, magnifying their individual effects and transmitting trustworthy behaviour, self-discipline, moderation and stability across society.

Smith denied that markets could rest on selfishness (as many on the left maintain they do). Markets do indeed rest on self-interest, but that is not the same as selfishness. My self-interest is not simply the sum of my preferences at the moment (as many on the right will say it is). I am not the sole determinant of my self-interest; society makes a contribution too.

Whichever is the case (and they are not mutually exclusive), the knee-jerk reaction to blame market economics for the increase in individualism and the decline in trust is mistaken. Instead, following Smith, we should deduce that markets function less well, and are treated with more suspicion by consumers, when trust has declined for independent reasons."

Comment
Without doubt Kieron O'Hara deserves the October 09 Lost Legacy Prize for the best article on the Internet on Adam Smith (I would put it in for the best article on Smith in the year, but we must wait and see over November–December).

I am not prepared to risk overstepping the copyright conventions by publishing the whole article (though “it is better to ask for forgiveness than for permission”, as the Jesuits used to say).

The article is "COPYRIGHT © 2002 - 2009 Policy Dialogue Media Group International, INC. All rights reserved."

It can be read in full
HERE:

I strongly recommend that your follow the link and read Kieran’s full argument (and pass the news on to your readers and Twitter sites. It is astonishingly brilliant compared to the normal daily dross put out in the media, including by top economists.

Congratulations to Kieron O’Hara for showing his understanding of Adam Smith, and to Gov Monitor for publishing it.

Excellent Writing But Still Mythical

2009-10-25T13:05:00.002Z

Atanu Dey writes a highly readable and lively piece on “Why education matters” HERE

“I am sure that there is no secret cabal of powerful people with evil glints in their eyes plotting to keep Indians illiterate. But individual behavior motivated by private incentives - micro behavior - have consequences at the social level - macro outcomes - that are not intended by individuals. The most famous example of this is Adam Smith's "invisible hand" - the market mechanism that grinds out the socially beneficial outcome even though an individual is only interested in his or her own welfare. So also, there could be what we can call the "invisible fist" of the government which can pummel the life out of a society even though no single government official is doing anything more than making his or her life comfortable.”

Comment
Atanu Dey writes well and complains that 33 per cent of Indian adults are illiterate. An alarming statistic for any country and doubly so for the world’s largest democracy.

His clever construction of the possible reason why government action fails to address the illiteracy problem by drawing a parallel with the invented notion of an “invisible hand” in the economy, wrongly attributed to Adam Smith by modern economists is well stated. But good writing is still vulnerable to the evidence.

Because Adam Smith didn’t write anything about the “invisible hand” being a “market mechanism” that “grinds out the socially beneficial outcome even though an individual is only interested in his or her own welfare” - see numerous posts in Lost Legacy that expose this myth – it was at root a myth created by well-meaning modern economists as part of anti-Soviet planning propaganda during the Cold War (and over enthusiastic mathematicians carried away with their 'proof' of general equilibrium applying to the real world).

Their motives were laudable – Stalin’s Soviet planning was backed by repressive civil violence and threatened to cause World War III (and IV and V, etc.,). But by their apparent endorsement of unrestrained behaviours their own unintended consequences created a mythical monster that self-interest, elided by epigones in selfishness, worked out, Panglossian-like, for the “best of all possible worlds”, covering over a plethora of externalities that damaged the interests of the rest of society (pollution, environmental destruction, monopoly pricing, protectionism, and local wars arising from them.

By associating Adam Smith with the invented myths, they traduced his reputation too. Most economists actually believe that Smith was the author of the myth. He wasn’t.

Yet many climb on the bandwagon that the current recession ‘exposes’ the ‘failures’ of following Adam Smith’s policies, in particular ‘laissez-faire’ (which he never supported – nor mentioned even once), ‘lack of regulation’ (when in fact he specifically advocated the exact opposite where it came to bank policies “which might endanger the whole security of the society”; see WN II.ii.94: 324) and the mythical “invisible hand”, mere metaphor for an entirely different set of circumstances).

Tenuous Links Do Not a Theory Make

2009-10-24T14:35:00.003Z

Bill Bonner writes in Running Because I Cant Fly Blog HERE:

"Macro for Dummies"

“Later, economists of the Scottish enlightenment, notably Adam Smith and Adam Ferguson elaborated. Smith, like Harding, saw the economy ordered by the invisible hand of God. Ferguson saw markets as a ‘spontaneous order,’ which were the “result of human action, but not the execution of any human design”.

Comment
Adam Smith wrote nothing to suggest he saw the economy “ordered by the invisible hand of God”. Adam Ferguson, a former Chaplain to the famous Scottish Regiment of the Black Watch, may well have harboured such ideas, but Adam Smith didn’t reveal such beliefs, if he held them.

The meaning of the words, “result of human action, but not the execution of any human design”, does not necessarily imply that if it was not the result of “human design” it must have been designed by God; it could as well be the that their “design” was not necessary – it was not “designed” by anybody, or anything, but was the result of unintentional activities, some of which had unforeseen consequences.

Evolution of species shows that few, if any, life forms remained exactly the same from their predecessors over geological time; they change as their environments change, some became extinct, others change their forms, even dramatically from sea- to land animals, and a few changed from quadrupeds to bipeds, as the evolution of humans from Hominines show.

On Adam Smith’s alleged “invisible hand of God” theory, his religious beliefs did change from being a candidate for ordainment as a minister in the Episcopal Church of Scotland up to 1744 (at Oxford, aged 21) to a secular career as a moral philosopher.

I discuss this in my paper, “The Hidden Adam Smith in his Theology”, presented to the History of Economics Society, University of Colorado, Denver, June 2009 (available on request).