In fact, Smith used the phrase “invisible hand” only once in The Wealth of Nations, to describe whether merchants invest their capital at home or abroad – and not, as Friedman claimed, as a general theory of markets.
This being of great interest as we mull taxing wealth. Will people invest at home or abroad if we tax the result of having invested at home more?
No, he described what was going on he didn’t invent anything, other than a name, perhaps.
This is why lefties don’t understand what’s going on, they think economics is just an evil invention and without the invention we’d all be living in a land of milk and honey.
They think “economics” is all about money, and if we ignored all that and were all just nice and shared all the time, everything would be lovely.
And to be fair, almost everyone thinks economics is all about money, because our lefty educational establishment goes to great lengths to keep everyone ignorant of the fact that it merely describes the allocation of scarce resources with alternative uses, and who gets to decide how they’re allocated.
Meanwhile, the right-wing private educational establishment is perfectly happy concentrating on money and how to get it, because that’s what its client base wants.
“economics … merely describes the allocation of scarce resources with alternative uses, and who gets to decide how they’re allocated”
Plus a dose of the study of human behaviour – how people react to incentives.
Oddly, call it anthropology and it’s left-wing.
“Meanwhile, the right-wing private educational establishment is perfectly happy concentrating on money and how to get it, because that’s what its client base wants.”
Absolutely not. The private school sector is inspected by either OFSTED or the ISI. Both of which are appointed by the Department for Education to ensure they provide a “broad curriculum”. Which means they have to be about like state schools.
You can’t go creating an Ayn Rand School. If you want to indoctrinate your kids in objectivism you have to do it after school.
Ofsted may demand that private schools provide a broad curriculum but that does not mean that they are pale copies of state schools. When I was primary school age the local state primary only taught the subjects examined in the 11+ (Arithmetic, English and how to pass an IQ test) -and consequently got much better 11+ results than other primary schools in the town, while my prep school taught a broad range of subjects (English, French, Latin, Arithmetic, Algebra, Geometry, History, Geography, Scripture, Art, “Nature Study” (Botany) and PE are the ones I remember) (Music was an optional extra).
State schools have, allegedly, improved as they now teach to passing SATs instead of the 11+ but they still cover fewer subjects less well.
Private schools have to *think about* money which they can only get by demonstrating to parents of potential pupils that they are worth paying for or by appealing to satisfied past pupils. This means that they *absolutely* have to *not* be like state schools.
Smith didn’t invent the word “economics” and wasn’t even the first economist. For centuries before there was plenty of intellectual interest in subjects like the balance of trade, circulation of gold and coinage, and the sources of wealth.
” Les Économistes” was the self-appelation of the physiocrat school in France, long prior to Smith, who believed that all wealth derived from land and farming and that manufacturing was basically a waste of time performed by surplus people who couldn’t find proper jobs working the land. I’ve editorialised this slightly and they to their credit they did come up with one of the first recognisable economic modes (the “tableau”) but it’s fair to say Smith’s ideas have better withstood the test of time. https://en.wikipedia.org/wiki/Physiocracy
You can go back much further of course, mercantilism as a school of thought goes back to at least the 15th century, economists like Antonio Serra and Nicolaus Copernicus (who also dabbled in astronomy) published treatises on the circulation of coin. Copernicus even derived a quantity theory of money, that the price level is driven up by an increase in the money supply, and formulated a version of what came to be known as Gresham’s law that bad coin drives out good. https://en.wikipedia.org/wiki/Mercantilism
Anyone who claims that Adam Smith “invented economics”, rather than the school of classical economics in particular, is simply so ignorant of the history of economic thought that I can’t see any reason to pay attention to their pontifications on why Smith needs to be reinterpreted in line with their own ideological preferences.
I’m quite happy to accept Smith doesn’t actually say what many people who claim to quote him as an authority actually think he says, and I would point out that even the fellows of the Adam Smith Institute, self-professed free-marketeers one and all, are not devoted followers who actually believe “Smith was right about everything”. Classics economics was supplanted as a school of thought because it turns out some stuff they got wrong or did not have the tools to explain. That’s no insult to Smith, who remains hugely influential, or to his originality, moral analysis, or his fine qualities as a wordsmith.
You’re quite right. Smith was describing economics. And what’s important is he was describing it for the benefit of those who weren’t participating in it. For those who participate learn by doing so.
Guardian seething because Smith was right.
To me the great problem with the “invisible hand” is that is sounds like some mystical, godlike thing, easily scorned and dismissed by secular progressives and those who worship other gods. I scorned it for this reason when a lefty. If Smith had said “self-organising on a few basic, simple principles” he would have been rather harder to dismiss.
Language matters. I remember as a kid being entirely baffled by “The Lord is my shepherd, I shall not want”. Why should I not want the Lord, because he’s a shepherd? I couldn’t make sense of it, and it was never explained. It wasn’t until much later that I realised “want” actually meant “lack”; that if I followed the Lord I would not want for – lack – anything. I’d have a life of plenty, rather than back-breaking subsistence on the edge of starvation, or to put it another way I’d be liberated from a world of scarce resources with alternative uses, for which I had to compete.
It was too late by then. I’d been soundly put off all that stuff.
is abstraction, people are not comfortable with such things,
or an ‘invisible hand’ is so much easier for the hard-of-thinking and, on that level, means much the same
Well, yes, except Smith didn’t use “invisible hand” as the all encompassing description. The Guardian (!) gets this right:
” In fact, Smith used the phrase “invisible hand” only once in The Wealth of Nations, to describe whether merchants invest their capital at home or abroad – and not, as Friedman claimed, as a general theory of markets.”
We know he had the concept in his head. He said it.
Once? Okay. How many times would he have had to say it til it counts?
Well, a lot of them were difficult, grumpy and smelly.
What put me off religion was the concept that “the meek shall inherit the earth”. I had no intention of dying & leaving all mine to a bunch of tossers.
“if I followed the Lord I would not want for – lack – anything. I’d have a life of plenty, rather than back-breaking subsistence on the edge of starvation”
Going by the history of the Christian church, it’s Lord rather gets off on ” back-breaking subsistence on the edge of starvation” amongst His followers.
You haven’t studied the history of the Christian church very well, nor have noticed that the 23rd Psalm is attributed to David. It is rare to find poor Jews enduting back-breaking subsistence on the edge of starvation. The poor in “Christian” countries live much better lives, materially as well as spiritually, than those elsewhere (one reason why poor people from Communist, Muslim and Animist countries try to come here).
Socialists believe in the invisible hand. That’s why they invented invisible handcuffs.