Tuesday, November 2, 2010

I don't buy it

As I have said on numerous occasions, I am not an economist, but I do understand social circumstances, and this idea of the invisible hand is completely flawed. One quote should be mentioned by the great proponent of the invisible hand, Adam Smith, who argues in the "Wealth of Nations" that "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." This suggests that some laissez faire system will prevent any problems with dinner served by the baker or the butcher. This reminds me of when I was abroad and I knew there was very little, sometimes no, regulation in terms of cuisine that was being sold either in the restaurants or on the streets. These people knew I was a foreigner and that I probably would never see them again. They were trying to make as much as possible by selling me refilled soda bottles with God knows what kind of water in addition to assuring me that everything they were doing was sanitary. I went in to the situation knowing that none of this was true. Nevertheless, this is why we have health inspectors and the FDA in the United States. We have them because we know people who handle our food will always have their best interest in mind, which can often mean that we will pay the price if that best interest means unsafe food. In these cases, I think it is safe to say that the free market is not the solution to the problem. The free market is the problem.


  1. This post reminds me of the headline of an Onion article I saw once. "Area Man Passionate Defender of What He Imagines Constitution To Be"

    Just replace "Area Man", "Defender" and "Constitution" with "Michael", "Critic" and "Adam Smith's Invisible Hand" and you've got your argument in a nutshell.

    You sort of just sailed past Ulmann-Margalit's article entirely and attacked Smith's “completely flawed” invisible hand metaphor instead. That's fine though, a post is a post. I'll bite.

    This argument is a pretty common among people who have a) never really read Smith, or b) prefer to regurgitate the same tired misrepresentations of Smith's work in lieu of independent critical thought or research. I'm gonna go ahead and put this post in the a) category.

    Usually the typical misunderstanding goes something like this:

    “I'm not an economist and I haven't really read much of what he wrote, but Adam Smith was a dogmatic free market fundamentalist with a boner for laissez faire. He didn't care about the poor. His "invisible hand" metaphor pretty much proves this. [out of context quote here]. Markets are the problem not the solution, [anecdotal evidence here] blah, blah, etc.”

    Well here's the whole passage that's been causing all the fuss these past 234 years. It's comes about 470 pages after the quote you use:

    "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. Nor is it ALWAYS the worse for the society that it was not 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." (Wealth of Nations, pg 485) [emphasis mine]

  2. Now a Careful reading should go something like this:

    “he intends only his own gain, and he is in this, as in MANY other cases, led by an invisible hand”

    Just listen to that capitalist-pig bastard...

    "Nor is it ALWAYS the worse for society"

    Mouth-frothing free market fundmentali... wait what?

    "he FREQUENTLY promotes that of the society more effectually than when he really intends"

    Not always? *Double take*

    Wait a minute, what's with all those modifiers? Is that a hint of subtlety I detect in his argument? Perhaps a dash thoughtful reserve? That doesn't sound like what I've heard about Smith. That sounds like maybe he recognized that self-interest COULD promote the interests of both individual and society, while acknowledging that in other circumstances it might not.

    Maybe, JUST MAYBE, the ideologues on both sides of the political spectrum have made a caricature of Smith's ideas in order to push their agendas? Maybe Smith wasn't quite the greedy proto-Objectivist douchebag leftist academics have made him out to be?

    *Reads more Smith*

    “How selfish soever 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 derives nothing from it except the pleasure of seeing it.” (Theory of Moral Sentiments, Sec I Ch 1)

    Hey and maybe he wasn't the gung-ho anarcho-capitalist that teabaggers try to portray him as.

    “The subjects of every state ought to contribute towards the SUPPORT of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.” (Wealth of Nations, 888) [emphasis mine]

    Progressive taxation? And he's cool with sensible government regulations too? Mind blown.


    That was pretty much me senior year of high school dude.

    Don't take my word for it though, read Smith for yourself. Then come back and tell me if you still think he was really suggesting that laissez faire, rational self-interest, and the free market fairy would solve all the world's problems 100% of the time.

  3. I think he was suggesting that taxation was theft, and love conquers all.