These days we would add "risk adjusted" to that but no matter. The foreign trade may well, probably will, provide him with higher profits. The background to this discussion is a merchant (nowadays we would say capitalist but that word had not been invented in 1776) will have certain choices as to where to invest his capital. In all of Smith's economics that is the only mention of "invisible hand." It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.Īnd that really is it. I have never known much good done by those who affected to trade for the public good. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. Nor is it always the worse for the society that it was no part of it. 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. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic 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. The central propositions of free-market economics boil down to these:īut the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. Take, for example, this, from a Professor of Humanities at Cooper Union over in the American Prospect: Which really, really, isn't the way that some people take it these days. The actual reference to invisible hand, if it has a modern meaning to us, is that however mobile capital may be then still some burden of corporate and capital taxation will fall upon that capital. Most of Wealth of Nations is discussions of when government might productively intervene in markets (say, the Navigation Acts, subsidy to basic schooling) and, perhaps more importantly, where it might not (creating monopolies, trying to hang on to the American colonies say). Which is, of course, not something that Smith ever intimated let alone stated openly. And the general caricature of what Smith meant the phrase to mean is that if we just leave markets to be free then she'll be right. It's only that last that need concern us here. One is in his writings on astronomy, one is in the Theory of Moral Sentiments and the third is in Wealth of Nations. There's three mentions of the phrase "invisible hand" in the million or so words of Smith that we have. So, just for the record, here is what it actually is. And perhaps more to the point Adam Smith's invisible hand really isn't what critics of free market economics seem to think it is either.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |