Thursday, October 29, 2015


Days of Revolt: Neoliberalism as Utopianism

In this episode of teleSUR's Days of Revolt, Chris Hedges and author John Ralston Saul discuss neoliberalism as an ideology, the breakdown of that ideology, and what comes next. -   October 27, 2015

And I think that the fascinating thing is once you get rid of history, once you get rid of memory, which they've done with economics, you suddenly start presenting economics as something that it isn't, and you start saying, well, the market will lead. And these entirely theoretically sophisticated experts are quoting the invisible hand, which is, of course, an entirely low-level religious image--it's the invisible hand of God, right, running the universe. As soon as you hear that term and they say, oh, that's what Adam Smith said--but when you talk to them, they haven't read Adam Smith. Adam Smith isn't taught in the departments of economics. You get quotes from Adam Smith even when you're doing an MA or whatever. They don't know Adam Smith. They don't know that he actually was a great voice for fairness, incredibly distrustful of businessmen and powerful businessmen, and said never allow them to be alone in a room together or they'll combine and falsify the market and so on, so that what we've seen in the last half-century is this remarkable thing of big sophisticated societies allowing the marketplace to be pushed from, say, third or fourth spot of importance to number one and saying that the whole of society must be in a sense structured and judged and put together through the eyes of the marketplace and the rules of the marketplace. Nobody's ever done this before.
I came across this piece accidentally this morning. Its fairly long and I disagreed with several parts, but the above paragraph I believe worth noting and considering. 
The invisible hand was used by Smith as a metaphor and was not connected to theology. John Saul is partly right in that the IH was widely used before (and during) Smith’s time but it was definitely not a theological reference by him (see my papers: “Adam Smith on Religion” in Berry, Pagannelli and Smith, The Oxford Handbook on Adam Smith, Oxford University Press. 2014 and “The Hidden Adam Smith in his Theology”, Journal of the History of Economic Thought. no 3, 2012).
My main point of agreement with John Saul’s arguments is that Adam Smith is hardly, if ever, read by those who wildly quote him in pursuit of ideological propaganda (from both Leftist and Rightist wings.  Much of the economics profession itself have never read his books, beyond quotations torn from their context, while popular media writers simply make-it up from what they get from their ideologues.
Markets have existed for several millennia and they have many prime virtues but that they have ever been perfect, or near perfect, is not evidenced throughout history. That they generally function better than state-run monopolies is true for all of their history and present experience. 
Overall, societies with markets operate significantly better than societies that do not have markets - that is why individual and mass migrations always operate as one-way traffic from non-market economies towards poor market economies, and from poor market economies towards richer market economies (with all their blemishes). Rich residents in poor countries also migrate even if it they will to be poor in richer countries. Those overly critical of market economies, with all of their blemishes, should reflect on the evidence on their kind not migrating to poorer countries.
Leftist ideologues, like their Rightest counterparts, should reflect on Adam Smith’s frankness about the relative merits of markets amidst the history of the experiences of how “merchants and manufacturers”, the Rulers of States and their legislaters and legal acolytes, behave in practice. A little less pontification and a bit more history would be good for them.

Monday, October 26, 2015


“AZ Spot” posts 25 October

 “The results have been disastrous, in part because Lampert was ideologically committed to the metaphor of the invisible hand and the associated idea that people are purely selfish. Ideology is a lens – it makes some things more visible, others less so. Lampert’s ideology prevented him from seeing that he was destroying the invisible band – the bond that forms around groups that can trust each other and work together toward shared goals. Evolution is a different lens – one that we believe brings unparalleled focus and resolution when examining complex human systems. A brief look through the evolutionary lens would have made it obvious how dysfunctional Lampert’s reorganization was likely to be.”

At last something I can broadly agree with on the misuses of the “invisible hand” metaphor by related ideologies.

Its great to know that Lost Legacy is not alone….

Monday, October 12, 2015


Sigmund Ausfresser posts (10 October) HERE
My name is Sigmund and I’m a capitalist. I believe in the Invisible Hand and all the dictates of supply and demand in the realm of MTG finance. This means I embrace all the positives – and inevitable negatives – of such a system.”

Much of his article is behind a subscription process so I did not follow it further. It is a nonsense anyway. The “invisible hand” was a metaphor not an entity “hard at work”.

Thursday, October 08, 2015


It is asserted:
"Adam’s Smith’s “invisible hand” of the marketplace is perhaps the single most captivating metaphor in all of economics. The idea that all of society can be made better off by the self-interested behavior of its constituents was revolutionary for its time, and it undergirds free-market philosophy to this day.
But a growing chorus of economists are taking issue with the degree to which we put our faith in free markets, and just how far the invisible hand can take us as a society.
Nobel-prize winning economists, George Akerlof and Robert Shiller take up this mantle in their latest book, "Phishing for Phools: The Economics of Manipulation and Deception". The central argument of the book is that though free markets bring wonderful bounties to societies that embrace them, they also yield negative consequences that can be avoided with intelligent modifications. They write:
"We see the cornucopia that free markets have delivered. But just as every coin has two sides, so do free markets. The same human ingenuity that produces the cornucopia also goes into the art of the salesman. Free markets produce good-for-me/good-for-you’s; but they also produce good-for-me/bad-for-you’s. They do both, so long as profit can be made. The free market may be humans’ most powerful tool. But like all very powerful tools, it is also a two-edged sword.
The book offers powerful support for a skeptical view of free markets, but it’s also a helpful guide for consumers to avoid getting ripped off in the course of making important purchases." There are five dangerous scenarios Akerlof and Shiller present in their new book: “Phishing for Phools: The Economics of Manipulation and Deception”. Princeton University Press.
What a strange world we live in. First, the authors completely misrepresent what Adam Smith wrote about the “Invisible Hand” (it was not about how free markets work). His first use of the “captivating metaphor” was about the “pusilanimous superstition of Roman citizens” who believed that their stone image of “Jupiter” represented their credulous beliefs in their god firing thunder bolts from his "Invisible hand” at enemies of Rome, two thousand years ago (From Adam Smith’s posthumous “History of Astronomy”, published in 1795 — Smith died in 1790). 
Second, it referred to rich landlords in agricultural societies, feeding their slaves, serfs, and agricultural labourers from the produce that their landless servants were forced to produce by the landlords’ unsympathetic overseers, which had the unintended,overall consequence that such violent regimes promoted (unintentionally) the “propagation of the species”.
Thirdly, Smith referred to the unintentional consequences of some owners of capital investing said capital domestically rather than risk sending it abroad for overseas investnment. Said consequences included adding their capital to “domestic revenue and employment” (known today as domestic GDP).  Said unintentional consequences benefitted domestic revenue and employment, considered as public benefit.
It had nothing to do with “all of society can be made better off by the self-interested behavior of its constituents”, nor was it “revolutionary for its time”, even though it might “undergird free-market philosophy to this day”.  
Smith said nothing about its alleged contribution to “free-market philosophy”.  Indeed, it was a simple arithmetic consequence of the motivated actions of such owners of capital. It was not a general law of economics, free or otherwise.
Nobel-prize winning economists, George Akerlof and Robert Shiller’s latest book ”Phishing for Phools: The Economics of Manipulation and Deception” is based on a modern invented assertion that Smith claimed something that he didn’t.  Indeed, Smith in Books 1-4 of Wealth of Nations gives over 60 specific examples of owners of capital acting against “free markets”, the more famous being tariffs, prohibitions, and restrictions on imports, and even state-sponsored wars and the Navigation Acts, plus their conspiracies to restrict competitive markets.  He also warned that to believe that free trade would ever be established was to believe in “Utopia”, but urged steps towards them despite the machinations of selfish "merchants and manufacturers".

“Phishing for Fools” applies first to all those who preach that Smith had such a notion of a magical and miraculous “invisible hand”, as Akerlof and Shiller present it.   He didn’t.  He was very clear how "merchants and manufacturers" in his day manipulated the economy (now continued at all levels by many capitalists in our day)
The “invisible hand” was not about the wonders of markets in a utopian sense. It was a metaphor for the motives of those who intentionally acted and how their actions could lead to  unintentional consequences, some beneficial and many that were not (see Book 4 of WN to get a taste for Smith’s realistic assessments of the range of negative unintended consequences common in markets. George Akerlof and Robert Shiller should know these truths.  Most of the profession apparently do not. 
Calling it "phishing" is imaginative and will sell their book, but Smith wrote about it in detail in the 18th century. Misinterpreting Smith's use of the metaphor of an "invisible hand" is the real "phishing".