Monday, August 29, 2016

POTS CALLING KETTLES BLACK?

Stan Burman: “an entrepreneur and freelance paralegal who has worked in California and Federal litigation since 1995 and has created over 300 sample legal documents for California and Federal litigation, posts (8 August) on  Useful Qutations HERE
“Quote by Adam Smith on the invisible hand”
“A quote by Adam Smith on the invisible hand is the topic of this blog post”.
“Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to society. 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 not part of his intention.” Adam Smith”
COMMENT
The above quotation from paralegal who has “worked in California and Federal litigation since 1995” and who is “the author of over 300 sample legal documents for California and Federal litigation” is an embarrassing example of the work of a supposedly proficient and accurate legal professional. I would have severe reservations about employing Stan in such a role, especially if my freedom or my client’s freedom depended on the probity of his legal work. 
Stan’s version of Adam Smith’s statement on the “invisible hand” metaphor and the context in which Adam Smith used it is erroneous. Here is what Adam Smith actually wrote in Wealth of Nations:
“As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By preferring the support of domestick 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 eases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it” (WN IV.ii.10: p. 456).
Smith was making a specific statement relating to the context he was writiing about. The context was that of a merchant who intentionally avoided foreign trade because of his reservations about the probity of the foreign merchants he would have to deal with. He therefore avoided foreign trade and invested locally. In so doing he unintentionally added to domestic capital and employment. 
It is not correct to generalise to all merchants from a necessary consequence of the risk-averse merchant’s actions by “persuing his own interest.” The risk averse merchant benefits society but there are many cases of merchants “pursuing their own interests” who intentionally seek to benefit themselves at the expense of others in society. This can be seen in the clamour by many merchants to impose tariffs on imported goods, even outright prohibitions on foreign imports, which necessarily reduces foreign competition and raises domestic prices against the interests of domestic consumers. Such behaviour is definitely not a domestic public benefit.
Stan, however, comments thus, and criticises Adam Smith as if Adam Smith, not Stan, made the mistake that was wholly down to Stan’s incorrect version of that which Adam Smith correclty stated. Stan asserts:
“This is an excellent quote by Adam Smith and one that I totally agree with as people who are acting in their own self-interest do tend to provide an overall benefit to society. I do agree that the invisible hand can work wonders but I also realize that there are many individuals and in particular, large corporation that act only in their own self-interest without any regard for the rest of society such as the big banks and other politically connected companies. I despise the people who mindlessly spout the quotes of Adam Smith to suit their own agenda. Now that I have read more quotes by Adam Smith I see clearly now that while he clearly believed in free enterprise he was not as much of an advocate for limited government as many “free market” ideologues make him out to be.”
Instead of reading quotes from Adam Smith, Stan should read Wealth of Nations itself. He even makes the following statement;
“I despise the people who mindlessly spout the quotes of Adam Smith to suit their own agenda” [!]. A case of the pot calling the kettle black?


Visit his website at http://legaldocspro.net and his legal blog at http://legaldocspro.net/blog

THE ALLURE OF ANALOGIES FROM PHYSICS

Philip Ball, the author of: ”Invisible: The Dangerous Allure of the Unseen” and many books on science and art, posts HERE
It might seem unlikely, even insulting, to suggest that people can be regarded as little magnets or particles dancing to unseen forces. But the danger is not so much that “social physics” is dehumanizing. Rather, it comes if we do not use the right physics in thinking about society.
Physicists have learned that natural systems can’t always be described by classical, equilibrium models in which everything reaches a steady, stable state. Similarly, social modelers must beware of turning society into a deterministic Newtonian machine by applying inappropriate physical models that assume society has only one way of working properly. Society rarely finds equilibrium states, after all. Social physics needs to reflect that very human trait: The capacity to surprise.
Both the attraction and the pitfalls of a physics of society are illustrated in economics. Adam Smith never actually used the term “market forces,” but the analogy was clearly in his mind. Noting how market prices seem to be drawn to some “natural” value, he compared this to the effect of gravity that Isaac Newton had explained as an invisible force a century earlier. Smith also said in his seminal Wealth of Nations that an “invisible hand” maintains equilibrium in the economy.
Smith was not alone in following Newton. Newtonian clockwork mechanics were, at the time, regarded as the model to which all understanding of nature should aspire, perhaps even including the mechanics of the human body and of society.
Comment
Looking through my desktop I have found several draft posts that I do not remember posting as my replies. As the above is very relevant to my thinking and published writing, I shall publish my comments here.
The assertion that “Noting how market prices seem to be drawn to some “natural” value, he compared this to the effect of gravity that Isaac Newton had explained as an invisible force a century earlier”, is not quite what Adam Smith said, and the difference is important.
In a paper I wrote on this very subject in 2015, I argued:
“All bodies with mass exert gravitational pull on all others, but not all of them have the same mass or exert the same degree of mutual attraction that draws them physically towards each other or holds them in regular orbits. It does not follow that Smith’s use of gravity as a metaphor described an observed or plausible relationship between Market and Natural prices, either of which were sometimes above or sometimes below the other’s prices, as described in WN.
Smith’s metaphoric use of gravity was not intended as a scientific statement about the physics of a gravitational attraction embodied in prices. He ex- presses his reservations twice, first writing: “the natural price, therefore, is as it were, the central price, to which the prices of all commodities are continual- ly gravitating (WN I.vii.15: p.75) and then repeats it two pages later: “the mar- ket price of every particular commodity is in this manner continually gravitat- ing, if one may say so, towards the natural price” (WN I.vii.20: 77). Ultimate- ly, production costs (as defined) must tend to be met by market prices, inclu- sive of the participants’ profits, if economic production is to commence and continue. Natural and Market prices do not exhibit the definable physics of ‘mass’, nor do yhet operate in a definable or predictable order. If Smith’s metaphoric references were scientific statements, Newtonian or Epidoclean, Smith would have left out his semi-apologetic qualifiers because they would have been inappropriate, bearing in mind also that not all of his readers were expected to have studied classical or philosophical history. 
Smith generalises, in the round quite heavily, his metaphoric assertions about Natural and Market prices. Indeed, in the immediately following chapters he goes into detail about metaphorical gravity relationships: “yet sometimes par- ticular accidents, sometimes natural causes, and sometimes particular regu- lations of police, may, in many commodities, keep up the market price, for a long time together, a good deal above the natural price.”

Extract from: Kennedy, G. Adam Smith’s Use of the ‘Gravitation’ Metaphor, published in Economic Thought 4.1: x-xx, 2015.

IT SOON SHOWS IF YOU PRETEND TO HAVE READ ADAM SMITH AND THEN PONTIFICATE WRONGLY ABOUT HIS IDEAS

Jill Richardson posts (27 July) on OtherWords HERE 
There’s No Such Thing as a ‘Free Market
Capitalism with absolutely no government intervention is a myth — and always was. 
The debates leading up to the election this year will no doubt invoke the “American value” of capitalism. But what, exactly, does that mean? And what should it mean?
I’m no economist, but I took a few economics courses while earning an undergraduate business degree. Growing up in a capitalist society, I thought I understood the basic concepts underlying capitalism — free markets, competitive advantage, and so forth.
Then I actually read The Wealth of Nations by Adam Smith, the founding work that described what we call capitalism in the first place. That was a game changer.
We’re all probably familiar with Smith’s ideas at some level.
The market regulates itself, as each of us operates based on our own self-interest. Businesses try to earn profits, and consumers try to meet their needs at the best prices. The market ensures that the demand of consumers is met with supply from business.
The government’s job, the doctrinaire thinking goes, is to get the heck out of the way. It doesn’t set prices or quotas. It just lets the market function.
Adam Smith cast this arrangement in glowing terms in 1776. He was describing England during the Industrial Revolution. He thought it was amazing that millions of individual actors, each operating based on self-interest, could so efficiently revolutionize society without any central planning at all.
Only, he was wrong.”
COMMENT
Jill Richardson is wrong about Adam Smith’s ideas. I see no evidence that she has read Adam Smith’s Wealth of Nations despite har claims to have done so. 

Adam Smith knew nothing of what we now call ‘capitalism’ - the word itself was first used in 1854 in Thackeray’s ‘The Newcomes’. Moreover, the economic system prevalent in Smith’s times (1723-90) was quite different from what emerged after Smith had died, which was before the ‘Industrial Revolution’ - another term first used long after Smith’s life. Both ‘capitalism’ and the ‘industrial revolution’ occurred in the 19th, not the 18th century. 

Saturday, August 27, 2016

LOONY TUNES no. 167

1
In Nigeria Today (27 August) HERE
Sun Trust is the Bank for Small and Medium Enterprises
“The invisible hand of destiny like in all things that produce good works, led him along the way. The same destiny provided a guardian angel who guided him as he walked down the path of progression. Today Muhammad Jibril’s dream of remaining a key player in the banking sector has become a dream come true. He first hinted this reporter in Abuja that his Sun Trust Savings & Loans Limited later a mortgage bank, was only a step in actualising that dream.”
Comment
Dream on!  “The invisible hand of destiny …”!
2
Robert Romano, the senior editor of Americans for Limited Government, posts (26 August) on Investor’s Business Daily HERE 
For investors, the lack of growth here has meant a shifting of capital overseas, where all the production is. See how that works? The profit motive and the search for yield will always direct resources via the market's invisible hand. Here in the U.S. we're much better at buying things right now than selling them, and even then, the slowdown hurts as it restricts the resources available to consumers to spend.
So, what to do?
Fortunately for those who have had enough, it's an election year. We could keep doing what we've been doing, which is not working. Or if you prefer a change, there's always Donald Trump and Republicans.
3
Josh Guckert posts (26 July) on The Lbertarian Republic
In a video, Hasan Piker offers “Libertarianism Debunked” and Josh responds:
“The Young Turks Attempt to Debunk Libertarianism”
“Piker begins by non-ironically making this assertion just seconds after name-dropping the “invisible hand.” If he were more familiar with Adam Smith’s theory, he would know that what it means is that potential profiteers are required to do good, even if they do not have the best intentions. Otherwise, it becomes much more difficult for them to profit.
“The issue with the circumstances in the joke is that bartenders have an express profit motivation to please their customers. If they were to murder (intentionally or not) their patrons, they would be doing harm to their own pocketbooks. Word would quickly spread that their service was not reliable and that drinkers should look elsewhere. Therefore, the “invisible hand” motivates them to do well by their customers, even in the unlikely scenario that they wanted to poison them for some perverse reason.”
4
Robert Ingoglia, a writer in Hasbrouck Heights, N.J. ingogliar@gmail.com posts (26 August) on The Philadelphia Inquirer HERE
Don't say these things to your unemployed friends
“My layoff was, following this "logic," a golden opportunity to embrace the "invisible hand" (following Adam Smith) whose painful but deft touch would nudge me back into the upward track (following neoliberal Social Darwinism) by forcing me to update my superannuated skills. 

My reaction is this: "Perhaps what I should really do is reinvent a society which eschews discarding individuals while assuaging the consciences of the discarders by throwing the unemployed negligible amounts of money and copious quantities of putatively impartial rationalizations.”

Friday, August 26, 2016

LOONY TUNES no. 166

Kenneth Schortgen Jr is a writer for Secretsofthefed.com and The Daily Economist. . HERE 
The invisible hand always wins: Interbank lending rates rising despite central bank ZIRP and NIRP policies”
One of the biggest reasons why economic events such as hyperinflation are so devastating is because they occur in a flash, and usually beyond the reach of governments and central banks to be able to stop them.  And in a nutshell, the invisible hand of market forces will always outdo anything man can construct to oppose them, just as nature will always win out over technology in the long run.
2
Herb Nakada posts (24 August)  on The Williams Lake Tribune HERE
“Capitalism evolution concerning
“Selfishness rules capitalism.  What could go wrong?  Selfishness serves the common good with guidance of the “free” market and the “invisible hand” is a lie.”
3
SCOTT MERZBACH posts (24 August) on The Recorder HERE 
“Hood said there is what he calls an “invisible hand” that restrains public debate in favor of support for the superintendent’s position.
4
Leslee Kulba, posts (25 August) on  The Tribune paper group (Ashlee, USA) HERE 
“When the Guard Robs the Bank”

“…As study after study shows, a government that protects personal property also promotes prosperity. In a free market, people produce and trade value for value. If they don’t want to buy something, they don’t, until the price is right. If the price is never right, the seller finds something else he can do that society values enough to buy. In so doing, the “invisible hand” helps everybody stay relevant as a contributor to society. …
Doug Kass posts (25 August) on Real Clear Markets 
HERE
“Sell Your Stocks In September, or Get Dismembered?”
I issued a warning recently about the market's direction in autumn, writing:
"Nearly to a soul (with the exception of the perma-bull cabal), my bearish, neutral and mildly bullish friends are all frustrated by the absence of natural price discovery in the bond and stock markets.
And based on the last few trading days, the 'invisible hand' might be here for a while longer. At least, until it isn't.
Besides the fundamental and economic risks, the suppression in interest rates and volatility are leading to the loss of ever more market participants -- something not in the Fed's textbooks.
Sell in September or get dismembered?"
-- Doug's Daily Diary, Sell In September or Get Dismembered? (Aug. 23, 2016)
Comment
Individuals buy and sell shares, some join and some leave. Prices are decided by the net aggregate of the actions of individuals. That’s how markets work. There is no ‘invisible hand’ acting independently of what individuals do in aggregate. 
Markets function by VISIBLE prices. There is no steady equilibrium. The 'Marshalilan' supply and demand 'cross' as per his famous diagram and as taught in Econ 101. Market prices can change in milliseconds and/or in different time periods.
For the sake of graphical and mathematical precision, modern economists lost touch with reality.

LOONY TUNES no. 165

1
Roger Lowenstein posts (25 August) on FORTUNE HERE 
“Here's Why the Pundits Are Wrong About Warren Buffett”
If you believe in Adam Smith—and The Economist has, ever since 
James Wilson, a Scottish hat-maker and proponent of free trade 
and other liberal ideas, founded the magazine in 1843—allocating 
capital is a job that is best performed by the market. Thanks to the 
workings of the Invisible Hand, society is served when investors 
deploy their funds where they envision a high return at reasonable 
risk. Buffett has been doing it for six decades (he started in the 
1950s, with his own investment partnership, before gaining control 
of Berkshire).
COMMENT
The theme of the article in FORTUNE is that Warren Buffet, a talented individual, is an outstanding player in the real markets and from his results he is way ahead of the market rivals. Yet at the same time the article embraces the ‘invisble hand’ as the hidden player in the same market though its results are not as good as Buffet’s over the 60 years he has been operating! 
Something is wrong here. There is no such invisible hand. It is a misreading of Smith by modern economists, starting with Paul Samuelson in 1948.
2
Lara Zarum posts (25 August) on Flavorwire  HERE 
Trendspotting: Everyone is Terrible and Everyone will Die”
“Sometimes I dream of saving the world,” Elliot confides in voiceover in the first season. “The one with the invisible hand. The one that brands us with an employee badge. The one that forces us to work for them. The one that controls us every day without us knowing it. But I can’t stop it. I’m not that special.
3
Lizeka Tandwa posts (25 August) on News24 (breaking news first) HERE
Don’t get drawn into political battles, Cosatu warns Hawks

The trade union federation was concerned that the accusations being levelled against Gordhan would affect the market, and thus workers, negatively. An "invisible hand" was behind the allegations against Gordhan. "The impact of all this will affect workers in a negative way. There is almost nothing we can do with an invisible hand and the market," Dlamini said.

Wednesday, August 24, 2016

LOONY TUNES no 164

1
Shankar Tharoor (India) posts (22 August) in The Good Men Project (‘the conversation no one else is having’)
Financial wealth and muscle power play a vital role today in how candidates are selected to represent the rest of us in Parliament. We seldom know who funds them, and so, we are unaware of the invisible hand that governs us.”
2
Wanga Gwede  posts (24 August) in NYASA TIMES (MALAWI)
HERE 
MCP deputy secretary-general Eisenhower Mkaka said the party received intelligence reports that there was a plot to petrol bomb its headquarters, saying political competitors are creating divisions and wants to attribute violence to internal squabbles.
He said within the rank and file of MCP, there was no problem but those being bribed to cause confusion.
“We know pretty well of  an external ‘invisible hand’ that is fuelling the squabbles in MCP,” said Mkaka.
3
LORETTA SORENSON posts in TODAYS PRODUCER (‘National Association of Wheat Growers’) HERE 
Former NAWG president sees wheat a key part of global diet
“Kansas was given the nickname “Wheat State” for good reason. The state’s wheat history goes back to 1839, which pre-dates their 1861 Statehood. For decades Kansas led the nation in annual wheat production.
But even with a projected 2016 harvest of 393.6 million bushels of wheat, Kansas wheat acres — like wheat acres in every other U.S. state — are on a downward trend.
John Thaemert, former National Association of Wheat Growers president, says low wheat prices and tight agricultural profit margins are pushing farmers toward greater corn and soybean production. While some farmers grow small amounts of wheat, it’s no longer a dominant Kansas crop.
“The invisible hand of capitalism works well,” Thaemert said. “Money goes where it’s treated best. Because of the current low wheat prices and lower returns per acre, demand for wheat acres isn’t as strong as it used to be. Record high global wheat supply has also put pressure on wheat prices.”
COMMENT
Yet another example of a description of a market where visible prices of different elements of the production process are described, summarised by a wholly redundant reference to the “invisible hand of capitalism”, the role of which remains obscure. Markets work by VISIBLE prices and do not/cannot work without them.
Loretta tells us that ”Record high global wheat supply has also put pressure on wheat prices”. What else does she expect - even ECON 101 covers that phenomenon before the "invisible hand" nonsense obscures it.
4
Notice from Berkeley (23 August) of a Coloquium Events  HERE
The Invisible Hand of Homophily” Colloquium on August 31Tolman Hall
Speaker: Drew Jacoby-Senghor, Assistant Professor, Haas School of Business. Event Contact: ipsr@berkeley.edu, 510-642-5050

Despite the best intentions of both individuals and institutions, homogeneity within social networks stubbornly persists, profoundly shaping individuals’ social realities, from the interactions one has to the opportunities one is afforded. I explore how unconscious intergroup biases act as an invisible hand perpetuating homogeneous networks that, in turn, threaten to reify these biases.”

Tuesday, August 23, 2016

ON THE RECIPE FOR RABBIT STEW

George Monibot posts (22 August) in Ecoside Alert HERE 
ECOCIDE: NEOLIBERALISM – THE IDEOLOGY AT THE ROOT OF ALL OUR PROBLEMS"
“The invisible doctrine of the invisible hand is promoted by invisible backers.”
“What the history of both Keynesianism and neoliberalism show is that it’s not enough to oppose a broken system. A coherent alternative has to be proposed. For Labour, the Democrats and the wider left, the central task should be to develop an economic Apollo programme, a conscious attempt to design a new system, tailored to the demands of the 21st century.”
George Monibot’s How Did We Get into This Mess? is published this month by Verso
His (long) article in Ecoside Alert surveys his thinking and it is worth reading because it puts a Leftist’s case against ‘neoliberalism’ and proposes an alternative strategy. Unfortunately, new systems of economics and politics while designable are not implementable in human societes - the designers don’t have (and cannot be trusted) with such power to impose their designs. 
Monibot’s critique of neo-liberalism, allegedly was introduced by a small group of people who invented ‘neo-liberalism’ that now run the world. Monibot is recommending that another small group of people should design an alternative system and, presumably, introduce it  into in the real world. 
Reminds me of the first line of the recipe for rabbit stew: first catch a rabbit…

Sunday, August 21, 2016

TIME TO RECONSIDER ECONOMICS AS TAUGHT TODAY?

Anna Silim posts (August) in Evonomics HERE http://evonomics.com/new-economic-thinking/
What is New Economic Thinking?
Three strands of heterodox economics that are leading the way
“Neoclassical economic theories describe a world in which rational agents act as optimal decision-makers. Guided by possession of a full set of information, self-interested agents maximise utility while firms maximise profits. As a result, the economy is said to behave in a static and linear manner and the system tends towards a state of equilibrium: supply equals demand and an optimal price is set. Macroeconomic patterns are simply the sum of microeconomic properties (Blanchard 2010).
In this model, economies are not necessarily always in equilibrium; exogenous shocks, such as the development of a new technology, can disrupt them. But these disruptions will be temporary and market mechanisms will work to push the economy back to equilibrium. From a neoclassical perspective, economic development occurs through cyclical patterns of equilibrium, shocks, destabilisation and restabilisation. In each cycle the content of the economy such as the goods and services it offers might change, but its very nature essentially remains the same.
This conventional model can be challenged on four fundamental fronts: the tendency to equilibrium, exogenous shocks, individual rationality and systemic consistency. In the real world, economies are not static and geared towards equilibrium; they are dynamic and in constant flux. This dynamism is endogenous; it originates within the system, not from exogenous shocks. Consumer preferences are not formed by individuals acting solely on their own but are the result of a complex process that includes observing and interacting with other consumers. Economic agents do not have a fixed set of preferences based on rational assessment; they are subject to whims and to mimicking the behaviour of other agents. As a result, the nature of the economic system transforms over time.
In reality, the economy is a complex ecology rather than a complicated machine. It does not respond in predictable ways. It is path-dependent, with each phase building on the previous one.”
COMMENT
This and similar articles in EVONOMICS (the next evolution of economics) are rich contributions to the debate. Worth subscribing to by all modern economists.

LOONY TUNES no. 163

1
Mark Fisher posts (August) VARIETY (US Edition) HERE
Edinburgh Theater Review: ‘Anything That Gives Off Light,’ Directed by Rachel Chavkin
“That in turn led to an exodus to the U.S. and, with it, some of the ideas that characterize the American mindset to this day. Slipping seamlessly from continent to continent and century to century in Chavkin’s fluid production (complete with country-folk interventions by the onstage band), the play suggests the spirit of free enterprise, exemplified by the “invisible hand” theory of Scottish economist Adam Smith, has led to desolation in the Scottish countryside and environmental ruin in the coalfields of West Virginia.”
Comment
Usual nonsense about Adam Smith’s use of the “invisible hand” metaphor. Compare with Bill Dunlop’s review of the same play in LOST LEGACY's Roll of Honour, no. 2.
2
Editorial (22 August) in Phillippine Daily Enquirer HERE 
And perhaps more importantly, the Philippines has been granted another round of good luck by the invisible hand of the global economic system in the form of low borrowing costs and ample liquidity that are expected to continue over the medium term.
COMMENT
"low borrowing costs and ample liquidity" are decided by the motivated actions of individuals not by a metaphoric "invisible hand" that does not exist. Metaphors describe their objects: see Adam Smith's Lectures in Rhetoric and Belles Lettres in a manuscript discovered in 1962, consisting of student notes taken down from Smith's Lectures in 1762-63, published by Oxford University Press in 1983. 
3
Editorial posted (21 August) in The Augusta Chronicle HERE 
Our Economy and Stake
 “Economist Adam Smith, who wrote the legendary book An Inquiry into the Nature and Causes of the Wealth of Nations – published, appropriately enough, the year this country was born – talked about the “invisible hand” of individual self-interest that drives free economies as the moon influences the tides.

It is, in short, human nature that directs the economy of a free people.
4
Kim Stanley posts (August) a Wall Paper HERE

The Invisible Hand Never Picks up the Check

ROLL OF HONOUR no. 2

1
From Bill Dunlop’s review (21 August) of a 2016 Edinburgh Festival play: Anything that Gives off light”
At one point, the 1745 Rising gets dragged in, along with a disconnected diatribe aimed at highlanders, despite some thirty per cent of Charles Stuart’s army being disgruntled lowland Episcopalians.
Adam Smith gets his ‘invisible hand’ flung in his face, although it’s clear that Smith’s frequently misinterpreted reference is to the propitious connections between Scots merchants in Holland, the Americas and his native Kirkcaldy.
COMMENT
Bill Dunlop raises an interesting possibility worthy of further research  Smith's use of the metaphor certainly appears in a chapter dealing with that trilateral trade. I shall think of that context and post later.

Saturday, August 20, 2016

ROLL OF HONOUR

NEW REGULAR COLUMN FOR LOST LEGACY

In recognition of the recent andwelcome trend of accurate references to Adam Smith’s meaning when he used the metaphor of “an invisible hand”, and correct presentations of his ideas, Lost Legacy will post such welcome recognition under the heading:
ROLL OF HONOUR, No. 1, and so on.
There were two such posts recently and their references are reproduced in the new column.
LOONY TUNES (spelt as such to avoid infringing the universally known copyright of the deservedly popular film and media enterprise) will continue as before, though I hope that entries in the new Roll of Honour column will increase in frequency.
ROLL OF HONOUR no. 1
1
Dan Byrnes responds to a question on QUORA . See Dan Byrnes at at: Dan Byrnes Word Factory [http://www.danbyrnes.com.au ]
QUORA asks: What are some criticisms of the invisible hand? HERE 
Dan Byrnes, answers:
“My criticism of “the invisible hand” is that it has become something mystical in US politics and right -wing ideologies, and allegedly is far more precise in operation than it was ever, as an idea, intended to suggest. It is after all, merely a metaphor. The idea behind remarks about the “invisible hand” is that markets do tend to be self-organizing, but it is sheer naivete to imagine that this tendency to self-organisation cannot be manipulated for good or ill by parties with various and other sorts of market-exploiting ideas in mind. Just one of the forces meant to distort or redirect “the invisible hand” is, and it is hardly surprising, is advertising.”
COMMENT
Dan Byrnes is absolutely right in his criticism of modern versions of the “invisible hand” and I commend his post to readers (please pass it on).
2
Andreas OrtmannDavid BaranowskiBenoit Walraevens, joint authors of “Schumpeter’s Assessment of Adam Smith and The Wealth of Nations: Why He Got It Wrong” (UNSW Business School Research Paper No. 2015 ECON 28).
This paper is a most interesting assessment of Schumpeter’s well known critique of Adam Smith’s Wealth of Nations and very personal criticism of Adam Smith. The authors are to be congratulated on their thorough assessment of Schumpeter’s assessment, which also informs readers of the distinctive role of Smith’s analysis of Rhetoric, for which he is less famous - even grossly neglected - Lectures on Rhetoric and Belles Lettres (1762-3) - as I have long suggested on Lost Legacy.
Schumpeter had not read LRBL because it was not available as a version witten down and compliled by two anonymous students who attended Smith’s Lectures delivered in Glasgow in 1762-3. Because Schumpeter was not aware of Smith’s interest in the role of rhetoric in the expostion of ideas he has an excuse for his otherwise ignorant criticism of Adam Smith.
Interestingly, Adam Smith taught rhetoric for longer than any other subject. He was commissioned by Lord Kames and James Oswald (MP) to deliver public lectures for fee-paying attendees, mainly from the general public and from students studying law or religious beliefs at the nearby Edinburgh university, as well as several professors from Scotland’s Universities (Glasgow, Edinburgh, St Andrews and the university college at Aberdeen). Smith’s reputation grew each winter from 1748-52. Reportedly, Smith earned £100 a winter series which was close to the salary of a university professor.
Ortman, Baranowski and Walraevens demonstrate how Smith’s passion for rhetoric as a teaching method was applied throughout Wealth of Nations and remembering that his focus was on persuading government ministers (politicians) and significant others by the perspecuity of his arguments about the dangers of mercantile policies associated with foreign trade - such as the Navigation Acts - that led to European wars, colonial revalries and the inhibition of foreign trade.
The paper is available from:
The Social Science Research Network Electronic Paper Collection:
I strongly advise readers to follow the link and read some truly original scholarship about Adam Smith.
3
At Last: a paper on the "invisible hand" and Adam Smith that I can agree with and I recommend it to all readers of LOST LEGACY. The paper includes a demolition of Robert Franks fantasies about Charles Darwin.
Drop the authors a line and ask (politely) for a copy.
To summarise it would not do it justice. Hence, I post its location. I recommend that readers follow the links and read it in full:
Smith’s Wedge: The Invisible Mishandling of Context in Robert Frank’s The Darwin Economy By Stephen T. Ziliak and Samuel Barbour, Department of Economics Roosevelt University 430 S. Michigan Ave Chicago, IL 60605 sziliak@roosevelt.edu sbarbour@mail.roosevelt.edu January 29, 2016 Forthcoming, Schmollers Jahrbuch
LINK
Try this link sent by the authors for a copy of their paper:
Abstract
In The Darwin Economy a distinguished behavioral economist, Robert Frank, promises to put Adam Smith’s “invisible hand narrative” into “context”. Neglecting history, empirical evidence, original sources, and a voluminous secondary literature, he fails to deliver. Frank predicts that one hundred years from now professional economists will name not Adam Smith but Charles Darwin as the intellectual founder of their discipline. The reason he gives is “Darwin’s wedge”—a term he coins to emphasize a divergence between individual and group interests which in turn causes wasteful competition and collective loss. He credits Darwin for the insight. We find the very same “wedge” and insight in a book wholly neglected by Frank and most economists after Stigler, namely, Smith’s The Theory of Moral Sentiments. Working with original sources we show that Frank’s view of the invisible hand—and thus of modern economics—is not sustainable. Contextual economics after Schmoller is of course voluminous but it is hardly known by Frank, who is wedded to the axiomatic approach and “no cash on the table” conjecture favored by most neoclassicals. We highlight the problem with evidence on the economics of labor-managed firms and with a revival of a once-famous study by Carleton Parker on large scale farming, unregulated migrant labor, and the Wheatland Hop Field riot of 1913.

Keywords: invisible hand, Schmoller, migrant labor, labor-managed firms, Wheatland JEL Classification: B3, N3, J6, B41, Q10.