Sunday, October 23, 2016
FROM AN UNPUBLISHED PAPER OF MINE in 2008:
"At the 40th Annual Conference of the UK History of Economic Thought, held in Edinburgh in September 2008, when I presented a paper, “Adam Smith’s Invisible Hand: from metaphor to myth” (later, I re-wrote the paper, keeping the title), it was my first acquaintance with most of the international HET scholars in attendance. Most of those who contributed to the session’s discussion that followed were largely critical of my paper for several reasons.
However, Professor Mary Morgan (LSE) afterwards gave me some valuable advice privately on how to criticise widely accepted ideas to scholarly audiences, of which advice I took note.
My paper, she pointed out, did not open with a statement about the various ways in which modern economists use the invisible hand metaphor and, in consequence, it was not clear, she suggested, exactly to what I was objecting, other than my assertion that Adam Smith did not mean the invisible hand to be treated other than as a metaphor.
She asked if was I criticising the theory that an invisible hand guiding self-interested, even selfish, actions, whatever the intentions of the actors, produced benign outcomes? Or was I denying that the invisible hand was a mechanism that operated in markets, through prices and supply and demand? Making this clear, she advised, would guide listeners to the point I was making.
A theory, she added, can always be tested to decide if it corresponds to, or explains, experience. For example, the claim that Adam Smith believed that “self-interested” – even “selfish – behaviours” led to “public benefits” could be tested by specific instances where this was or was not evident in practice. It could also be contrasted with my claim that because Adam Smith refers in Books 1, 2, and 3 of Wealth Of Nations to over 80 instances where the selfish/self interested behaviours of individuals had malign consequences for those affected rather than leading to private, not public, benefits, as claimed for modern versions of the “invisible-hand”.2
On reflection later, I accepted Professor Morgan’s objective advice (she did not indicate whether she agreed or otherwise with me on the invisible hand).
However, since that conversation, I have tried to be wary of ignoring her advice. If readers were left in the dark about the significance of what I have been trying to say since 2005, I would merely be having conversations with myself."
I was looking through my files of my previous writings on the “invisible hand” and among them I noted the above paragraphs of a most relevant and interesting account of my response to Professor Mary Morgan’s (London School of Economics) advice.
It is a timely reminder as I commence writing my 3rd book on Adam Smith (details will be released in due course). I shall, of course, also apply Professor Morgan’s advice to my general writing on my Blog: - (www.adamsmithslostlegacy.blogspot.co.uk).
Looking through recent items, I sometimes descend to mockery of the writings on the “invisible hand’ in the public media, if only from my exasperation…
I shall try to do better.
VISIBLE PRICES ENABLE MARKETS TO WORK
Englewood Staff post (222 October) on Englewood Daily HERE
"Turbulent Week Ends, How Did This Stock Fare: Eastman Chemical Co. (NYSE:EMN)"
“Stock indexes closed mostly lower on Friday as the telecom sector bore the brunt of selling. The S&P 500 was also lower on the day, but pulled off a one point gain on the week, while the Nasdaq ended 0.6% higher for the week.
Globally, the FTSE fell 0.1%, the Nikkei gained 0.1% and the Shanghai Composite added 0.2%.
Eastman Chemical Co. (NYSE:EMN) closed at $66.87 after seeing 1385388 shares trade hands during the most recent session. This represents a change of 0.78% from the opening.
The closing price represents the final price that a stock is traded for on a trading day. It’s the most up-to-date valuation until trading begins again on the next day. However, most financial instruments are traded after hours, which means that the the closing price of a stock might not match the after-hours price. Regardless, closing prices are a useful tool that investors use to quantify changes in stock prices over time. The closing prices are compared day-by-day to look for trends and can measure market sentiment for any security over the course of a trading day.
Stock exchanges work according to the invisible hand of supply and demand, which determines the price where stocks are bought and sold. No trade can occur until someone is willing to sell a stock at a price that another is willing to buy it at. When there are more buyers than sellers, the stock price will rise because of the increased demand. Conversely, if more individuals are selling a stock, the price will decrease.”
A VERY CLEAR ARTICLE EXPLAINING AN ON-GOING MARKET PROCESS BY MEANS OF VISIBLE PRICES.
Every student from ECON 101 understands this. Every participant in a market knows this - they can look at current VISIBLE prices and can make a judgement: do they want to stick or twist (metaphor alert!).
Professional market watchers follow VISIBLE price trends and can follow their clients instructions or can act on their own judgements wthin their skill sets both within or outwith ‘office hours”. Newspapers and emails scan VISIBLE prices to which market investors can choose to act or get somebody else to act for them.
That is how markets work using the VISIBILITY or prices and their possible movements. Even computer programs that track VISIBLE prices and can initiate action or inaction to buy or sell in a market.
There is absolutely no role for the metaphor of “an invisible hand” and Adam Smith wrote nothing to say there was such a real entity at work.
He used the metaphor to help to describe how the motivated actions of a particular merchant (what today we would call his ‘risk aversion’) caused him to invest locally and in doing so he added his capital to ‘domestic revenue and employment’. This consequence of his intentional local investment happened unintentionally to benefit the public good.
Likewise, Smith noted on multiple occasions in his Wealth of Nations how the motivated intentional actions of other merchants could be a disbenefit to the public good, such as when merchants clamoured for the government to restrict imports - even ban them altogether - which intentionally restricted compertition and intentionally raised domestic prices and their profits. And, of course, lowered the profits of other merchants.
Friday, October 21, 2016
ONE STEP FORWARD, TWO STEPS BACK
Editorial in Daily Camera HERE
"Boulder should lead on sugary drinks"
"Sugar, rum, and tobacco are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation."
—Adam Smith, "The Wealth of Nations," 1776
We borrow the entry quote to today's editorial not only from Adam Smith's seminal economic treatise, but from a 2009 article in the New England Journal of Medicine entitled, "Ounces of Prevention - The Public Policy Case for Taxes on Sugared Beverages."
Adam Smith, of course, was the original free-market economist, the man who coined the expression "Invisible Hand" for the free-market forces created by the individual pursuit of self-interest. It is ironic, therefore, and possibly the latest indictment of our education system, that alleged conservatives today condemn the proposed excise tax on sugary drinks in Boulder as an improper intrusion by government on free choice.
Interesting editorial and link to Adam Smith on taxing sugary drinks.
It is spoiled by linking Adam Smith to a modern version of him ‘coining the expression’ of the ‘invisible hand’. He didn’t, of course. ‘coin’ the metaphor of an “invisble hand’. That metaphor/expression has a much longer history than Smith’s lifetime (for instance, such as by William Shakespeare in MacBeth, and scores of theological instances).
Moreover, individual self-interest could also create import prohibitions, and/or high tariffs, curbing “free-market forces”. Smith’s use more nuanced than the Daily Camera appears to realise - and Adam Smith said so in Wealth of Nations many times.
But congratulations to the Daily Camera editorial for drawing attention to the pontentional taxability of sugary drinks, as a health measure.
Thursday, October 20, 2016
LOONY TUNES no. 181
Jeffrey Snider posts (16 October) on Seeking Alpah HERE
In 1953, Milton Friedman wrote out what have been the guiding principles of modern, orthodox economics that were necessary should it wish to join the ranks of serious science. In his Methodology of Positive Economics, Friedman recognized economics unlike harder sciences proceeds from an enormous disadvantage, meaning that for the most part, all of it is unobservable. We know that an economy happens and that there are observable conditions that relate to the immense and complicated interactions that make up any economic system, but to figure out exactly how A becomes B is all but impossible. You and I may arrive at the same place, economically or financially speaking, but the way in which we did might be extremely different and that might be important.
This was, of course, Adam Smith's "invisible hand" of free market economies where social progress was a product of mutual interdependence. But economists of the post-Great Depression era were concerned that because so much was invisible, leaving it up to markets alone was too messy and far too often violent. Many, like Friedman, were actually concerned that without a more central role for someone (it was only human that economists saw themselves in that role) that free markets altogether would be subsumed by raw statism, as so many other places had already experienced. To them, to save it was to corrupt it.
Kathlen Hartnett White posts (18 October) in WRT Here
Kathleen Hartnett White, distinguished senior fellow-in-residence and director of the Armstrong Center for Energy & the Environment at the Texas Public Policy Foundation and former chairman of the Texas Commission on Environmental Quality. Also co-author of the new book Fueling Freedom: Exposing the Mad War on Energy (Regnery, 2016).
“Determined, free, creative, courageous men and women -- exemplified throughout the Midland community -- have achieved what seven presidents promised but failed to achieve: energy independence as an option. The shale revolution is a result of the Permian rock and the people making thousands of individual decisions in pursuit of profit within a competitive market. It looks like Adam Smith’s “invisible hand” -- the free market -- has also replaced the autocratic bullies of OPEC without so much as a single skirmish. “
Alt_driver (17 October) posts HERE
“It's like watching a giant invisible hand crush an empty soda can”
“Some economists point to Adam Smith’s long-held theory that the invisible hand of the global market place should allow labor and raw materials to move wherever they will be used to maximum benefit. In short, open borders and free trade. That’s the theory.
But in the United States, Smith’s invisible hand is smacking labor upside the head.”
I have a long standing commitment on Lost Legacy to only comment on the politics of the country I vote in (Scotland) and the above quote is from a political column in a USA newspaper. Nothing I assert may be taken as an endorsement or criticism of the politics of Betsy McCaughey or the New York Post. I am solely interested in the demonstrated economic illiteracy regarding Adam Smith’s legacy.
Maitreesh Ghatak posts (20 October) in The Business-Standard HERE
“Oliver Hart and Bengt Holmström, who won the Nobel Prize in Economics (or to be precise, The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) this year for their work on Contract Theory are part of an important line of research in microeconomics that has patiently tried to open up the black-box of how the economic institutions that underpin that grand abstraction called the “invisible hand of the market” actually works.”
Tuesday, October 18, 2016
LOONY TUNES no 180
Tadeusz Szuba, author of the model for the phenomenon of collective intelligence, (2001) posts (15 October) on Fifty State Banana HERE
‘Computational model of the Invisible hand phenomenon”
Tadeusz Szuba proposed a theory – that Adam Smith’s Invisible Hand metaphor is an occurring phenomenon that can be formalized, simulated and most probably used to propose all-new tools to analyze and predict markets in the future.
The proposed theory claims that the Invisible Hand is a symptom of the existence of another dimension of a market, which is of computational nature. A market and its agents are unaware of this, because only piece(s), or result(s) of this symptom can be observed. In this dimension, the nature of a market and agents creates a complete, programmable computer on the platform of brains of agents and the physical structure of the market. This computer is self-programming and since it exists and functions on the platform of market agents’ brains, results of computations are outputted via the brains of agents and represent themselves as the behavior of a market. These computations are chaotic, distributed, parallel, and non-continuous, with interleaving threads of different computations.
These computations are driven by:
1 abstract value assigned to objects and services
2 calculations and logic inferences.
What is fundamental for the emergence of this computational dimension, is that market agents are able to assign value to objects, services and actions, are able to build in consciously chains of inferences, and are able to convert conclusions into business actions.
According to this theory, the Invisible Hand is much more powerful and universal than Adam Smith and contemporary economists even expected. The Invisible Hand performs market control on several levels: in terms of production and consumption (equilibrium optimization); in terms of new discoveries (technical market optimization); in terms of social behavior (social market optimization), such as modifying and discovering new rules of market behavior. It is expected that this discovery may lead to the creation of all-new tools and models for market analysis and prediction, compared with today’s macroeconomic models.
A leap into ever more complex theory for a phenomenon that does not exists as it is based on a rhetorical metaphor from language, not
from physics or social relationships.
LOONY TUNES no. 179
Michael Tennant posts (14 October) on New American (‘that freedom shall not perish’) HERE
“The fact is that the ACA is both unconstitutional and unworkable. It cannot be successfully reformed because it attempts to substitute central planning for the invisible hand of the free market, as if a handful of politicians and bureaucrats in Washington could possibly micromanage the healthcare of 320 million people to everyone’s satisfaction. Now, as in 2010, the only genuine solution for it is repeal.”
Ben Chu posts (15 September) on The Independent HERE
“The Brexiteers’ Marmite conspiracy theories exposed their utter ignorance of how markets really work”
“Despite the deluge of headlines it generated, there was actually nothing unusual about the process of a supermarket haggling with its supplier over prices
“When we sort ourselves in this instinctive way, the average wait for everyone is lower and customers are processed as efficiently as possible. There’s no need for any complex calculations or centralised co-ordination. By doing what’s right for ourselves we help everyone. This is Adam Smith’s “invisible hand” in action.
And that is how we often conceptualise markets. As consumers we respond to changes in prices and supply responds to shifts in demand. It all happens naturally and fluidly, creating a kind of spontaneous order. Yet, while it is true that markets can sometimes work in that almost magical textbook way, more often than not they don’t.”
Islam Omran (posts 16 Ocftober) HERE
THE INVISIBLE HAND IN THE CLOUD
“The phrase “invisible hand” was coined by Adam Smith in the book ‘The Wealth of Nations’. The theory behind this very popular phrase is that there are unintended social benefits to individual actions. The invisible hand theory has evolved and was turned to public policy formulation as a strategic means for intending social benefit. Balancing control, promoting business interest and ultimately attaining social benefits have been at the forefront of National Development objectives.
The invisible hand, in predominantly the Cloud private sector, has unleashed new possibilities and innovative services, delivering social benefits, creating new markets or disrupting existing industries.”4
Dan Neil posts (17 October) in the Wall Street Journal
“How Aston Martin and Red Bull Racing Reinvented Car Design
But what if road cars were shaped differently? What if, rather than becoming draggy and unstable with speed, family sedans became more stable, the invisible hand of the air pressing them to the tarmac rather than prying them loose?”
LOONY TUNES no. 178
Admin posts (12 October) in INFO-EUROPA HERE
Univision Scolds Conservative Media For Their Conspiracy “Theories About Climate Change”
“In the eyes of some conservative commentators, the invisible hand of liberals operated behind the powerful Hurricane Matthew, a climate phenomenon that triggered a massive evacuation on the east coast of Florida as had not been experienced in over a decade.Limbaugh is right when stating all these, but he skipped one little detail: Hurricane Sandy.Some of Trump’s conservative supporters, though, couldn’t wait to wade in and proffer their “theories” on a devastating weather event they believe is a hoax.”
Barry Bridges posts (11 October) on Newport This Week HERE
“As with his previous run for council in 2014, Lavarre is seeking an overhaul of business regulations. “The key is to reduce limitations, regulations, excessive rules, and taxes. If you reduce the burden on merchants, you’ll have more who will thrive under the invisible hand of capitalism.”
Editorial posted (14 October) in Charleston Gazette-Mail HERE
"Government, after all, is supposed to be “the invisible hand,” not an overlord imposing burdensome regulations that prevent businesses from being successful. A competitive marketplace is nearly as important to free society as democracy itself. Just as we are vigilant in protecting our rights under the Constitution, we also must protect economic competition.
Friday, October 14, 2016
LOONY TUNES no. 178
Tyler Cowen, a Bloomberg View columnist, and professor of economics at George Mason University, posts and writes for the blog Marginal Revolution. His books include “Average Is Over: Powering America Beyond the Age of the Great Stagnation.” posts HERE
Puzzled About Republicans and Trump? Game Theory Helps”
“In “other words, the Republicans have been on the wrong side of game-theory logic twice, first in delaying their opposition and then later in enacting it. Those are hardly examples of getting Adam Smith’s “invisible hand” metaphor to work in their favor.”
THE COLLEGIATE STAFF of Grand Rapids College Student Newspaper posts (11 October) HERE
“Brewster’s, foodies, aspiring game designers, digital animators and chefs have been served by the partnership between FSU and GRCC for 25 years. What the next 25 will bring only the invisible hand of the market will reveal, hopefully no terminators, but if it terminates as well as Art and Bev’s makes a burger I am sure it will be a painless affair.”
Congratulations on your 25 years.
But forget what the “the invisible hand of the market will reveal”. It will reveal nothing. It doesn’t exist. Adam Smith never said it did. Modern economists, like Paul Samuelson, promoted the false idea from misreading Adam Smith from 1948 in the first edition of his highly successful textbook, Economics, and its following 19 editions.
What the market will bring over the bext 25 years is an account of markets based on their VISIBLE prices - no market can work without visible prices - that’s all we need.
Tim Winton posts (14 October) in The Guardian newwspaper
“Tim Winton on class and neoliberalism: 'We're not citizens but economic players”
“…The market doesn’t care about people, Winton argues, and neither is there any genius in it. “There’s no invisible hand,” he says. “And if there is one, it’s scratching its arse. …”
[Note: Tim is an Australian, a country well known for its often robust, if lyrical, use of language.]
Wednesday, October 12, 2016
ADAM SMITH DID NOT APPLY NEWTONIAN GRAVITY TO ECONOMICS
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 de-humanizing. 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.
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 expresses 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 market price of every particular commodity is in this manner continually gravitating, 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, inclusive 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 they 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 particular accidents, sometimes natural causes, and sometimes particular regulations of police, may, in many commodities, keep up the market price, for a long time together, a good deal above the natural price.”
SENSE AND SENSIBILITY no 1
Dara Barker posts (6 September) on biz edge (New Zealand) HERE
Secrets Behind Crowd funding”
... “In economics theory they talk about the power of the invisible hand that moves resources to places where they’re most sought after. On a crowdfunding platform, that invisible hand isn’t so invisible – it’s the hand of each member of the crowd as he or she moves his or her mouse to click on the ‘OK’ button to send money," he says.”
Those economists who talk about the “power of the invisible hand” are mistaken. It does not move resources anywhere. Only visible prices move anything, or leave it where it is.
John Robson posts (5 September) HERE
….”Maybe it’s time to rediscover Adam Smith, whose economics was not a branch of applied mathematics or, arguably, non-applied mathematics. Nor was it about large abstractions. It was about how individual humans respond to incentives.
…So why not economic modellers? Their failure should have us reconsidering the whole Enlightenment notion that mathematics is the language in which truth is written. When Galileo said it, he laid down an amazingly ambitious research and development program for Western civilization that has yielded remarkable results in “hard” sciences like physics and chemistry. But in the social sciences, it has yielded much counterproductive nonsense
So let me throw down the gauntlet. Mathematical technique has severe limits, including that you cannot model the economy. There are too many variables, whose interactions are too uncertain and whose feedback loops are too complex. In short, it is transcomputable.
Dara Barker is on the right track.
LOONY TUNES no.177
Mike Paulenoff posts (11 October) on Investing.com
“Only a sudden upside reversal (the invisible hand) the propels ES back above 2141 will begin to neutralize the potential damage of Tuesday's weakness.”
The Reddit Bureau of conomic Research HERE
Remind me again what Smith was talking about with the "invisible hand", wasn't he just talking about the natural ebb and flow of supply and demand?
He was using it to describe spontaneous order. Namely, that individuals acting in their own interests will produce desirable social outcomes without anyone consciously seeking or planning for those outcomes, and would more than likely do so better than if they were intending to.
internet denizen is correct; Grst is wrong. The modern version of the IH is a gross exaggeration.
Monday, October 10, 2016
NEW REGULAR COLUMN STARTED - NEEDS A TITLE
Avner Offer, emeritus professor of economic history at the University of Oxford, posts (10) 0ctober, Project Syndicate, HERE
“Nobel Economics Versus Social Democrcy”
“Standard economics assumes that society is driven by self-seeking individuals trading in markets, whose choices scale up to an efficient state via the “invisible hand.” But this doctrine is not well founded in either theory or practice: its premises are unrealistic, the models it supports are inconsistent, and the predictions it produces are often wrong.”
I believe that recent posts on the web show signs that the relentless modern tide of nonsense about Adam Smith’s metaphoric use of “an invisible hand” is being challenged by scholars and this is excellent news for Lost Legacy.
So I am starting a new column, title not yet decided, to counter balance my regular ‘Loony Tunes’ column.
Anybody with suggestions to its title is welcome to send it in.
A POT CALLS THE KETTLE BLACK
Shawn Otto posts (9 October) on Scientific American HERE
He described ( http://shawnotto.com) as the award-winning author of "The War on Science: Who's Waging It, Why It Matters, What We Can Do About It" (https://www.amazon.com/War-Science-Waging-Matters-About/dp/1571313532). He is cofounder and chair of ScienceDebate.org. Scientific American is media partner to the ScienceDebate project.“A Plan To Defend Against the War on Science”.
“The challenge of creating a public able to parse evidence-free “facts” rests with the press, educators and other thought leaders”
…”When Adam Smith first offered the libertarian idea of the self-regulating market’s “invisible hand,” the world was effectively unlimited and relying only on market forces to produce the highest good seemed reasonable because one was never concerned with waste that wouldn’t flow away or resources that wouldn’t replenish.
But the model becomes a problem when the world is limited, population has grown exponentially, we are swimming in waste and facing dwindling resources, and our cumulative exhaust is warming the planet. These are scientific facts, and facing them implies regulation of the free market. It’s no surprise, then, that the science has divided along political lines between those on the left, who favor personal morality and collective responsibility via regulation and those on the right who favor collective morality and personal responsibility through regulation’s removal.”
You would think that a scientist concerned with the anti-science denials of climate change would be circumspect in his reference to Adam Smit’hs use of the metaphor of ‘an invisible hand’, which categorically had nothing to do ”the libertarian idea of the self-regulating market’s “invisible hand.”See other entries on Lost Legacy on Smith’s use of the now famous misunderstandings - and outright fabrications - of Smith’s use of the metaphor.
AN INSPIRING EPISODE IN THE HISTORY OF ECONOMIC THOUGHT
David Sloan Wilson posts (October. 2016) on EVONOMICS
“The Woman Who Saved Economics from Disaster
Who is Elinor Ostrom?”
“Unbeknownst to her, Lin had stumbled upon a radically different configuration of ideas than the mathematical empire dominating economic theory. The mathematical empire was founded on the assumption that self-interest automatically leads to collective wellbeing. Lin’s work was founded upon a stubborn fact of life: self-interest often leads to the overexploitation of resources and other problems that make life worse for everyone, not better. When everyone was allowed to suck as much water out of the ground as they pleased, there was no invisible hand to rescue the situation.”
I had begun to think I was alone in Lost Legacy in my eleven year struggle to appraise the economics profession of the major misreading of Adam Smith on his use of the metaphor of “an invisble hand” and all that modern economists had constructed by treating people as if they behaved akin to the mathematics of particle physics.
I was wrong to be so pessimistic!
Step forward David Sloan Wilson and his account of the work of Elinor Ostrom, a Nobel Priz winner.
Please follow the link and read Elinor’s (“Lin’s”) story.
Mine is not so dramatic in the reaction of my colleagues. I attended several annual gartherings of historians of economic thought, was listened to in polite silence, and enjoined in intense conversations between the formal programme by several leading scholars, for which I was, and reman, grateful.
I retired in 2005 from Edinburgh Business School, Heriot-Watt University. In my last monnths at EBS, I completed my book, Adam Smith’s Lost Legacy (Palgrave), published shortly before my last day of paid work and I commenced my Adam Smith’s Lost Legacy Blog.
Lin, however, had a fight on her hands and she kept on it by producing detailed research that drew attention to what she discovered about economic behaviour. Eventually the Nobel committee spotted her work - the disgraceful and boorish attitude of several male colleagues shames them and their institutions of supposed higher education.
Historians of economic thought must be from a different part of the forest of ideas because I have not experienced such bad manners at any of the international conferences I have attended and delivered my albeit controversial papers. (Infirmity has kept me close to my home since 2010).
I urge readers to follow the link to EVONOMICS and read about
Elinor Ostrom. ‘Inspiring’ is one word that springs to mind.