Thursday, 28 November 2013

Use of the metaphor of the "invisible hand" 2

In the comments to the post Use of the metaphor of the "invisible hand" Owen refers us to the blog - Adam's Lost Legacy - of Scottish economist and Adam Smith scholar Gavin Kennedy. For anyone with an interest in Smith, and who hasn't?, Gavin's blog is a must read.

Gavin's view on the interpretation of the "invisible hand" is a little different from the one I was arguing. Now I see that Gavin has picked up on my comments and has commented on them at his blog.

Gavin explains his view in the following way:
I agree with Paul broadly on his critique of the popular modern economist’s idea of the “invisible hand”. I regard Paul’s treatment as a step or two forward in this debate, and praise him for taking it. In his subsequent comment to “Owen”, Paul kindly refers “Owen” to citations of my published assessments on the IH metaphor from 2008-2011.

However, Paul makes a suggestion also made by my scholarly friend, Craig Smith, several times, including in his excellent book, Smith, C. 2006. “Adam Smith’s Political Philosophy: the invisible-hand and Spontaneous Order”, Oxford, Routledge. Craig is the Reviews Editor of the “Adam Smith Review” (International Adam Smith Society), and a co-editor (with Chris Berry and Maria Paganelli “Handbook on Adam Smith”, 2013, Oxford University Press. Neither Paul nor Craig fully agree with my interpretation of the significance to Adam Smith of his use of the “IH” metaphor, though they both are disturbed with modern interpretations of it to an extent.

Nevertheless, they present an alternative view to mine (argued on Lost Legacy since 2005). In their presentations they agree in effect: “The invisible hand idea … is a very convenient shorthand for Smith’s idea that human actions have unintended consequences; and that provided a few fundamental rules such as the principles of justice are followed, the self-serving actions of individuals can unintentionally produce a well-functioning and beneficial overall social order” (Paul) and: “generally the idea of social evolution through unintended consequences, which represents Smith’s chief legacy to the modern world” (Craig).

I am pleased to see that Paul and Craig both are further away from the post-Samuelson (1948) invention that conflates Smith’s use of self-interest as “selfishness” that “miraculousy” has the effect of creating a “public” benefit.

I can agree with Paul and Craig in so far as they reject the invention, which is a step forward. However, I do not think that they have shown that Smith used the IH metaphor “as Smith’s friend Adam Ferguson observed, the results of human action, not the product of human design”. The phrase was indeed used by Adam Ferguson, and in Smith’s case it is true that Smith also referred to ‘unintended consequences” in the (long) IH paragraph, but Smith's statement says: [The merchant who invests domestically] “generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By preferring the support of domestick 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. (WN IV.2.9: 456).

To argue from the above that the IH metaphor is about “unintended consequences I suggest misreads the sense of Smith’s paragraph. Smith Lectured on Rhetoric in Edinburgh and 1748 (privately sponsored public lectures) and at Glasgow University from 1751 to 1763 as a member of the Glasgow faculty and the Professor of Moral Philosophy). He was also fluent in Latin and Oxford English grammar. He was therefore most unlikely to make grammatical errors. He taught about the grammar of metaphors as figures of speech, for which we have student notes: Smith. [1762-3] 1983. “Lectures on Rhetoric and Belles Lettres”, Lectures 6, 7, 8 and 9. Oxford University Press.

Smith refers to the “objects” of metaphors, which in this case refers to the specified objects in each of the two cases in which he used the IH metaphor to “describe in a more striking and interesting manner” its “object”.

In the two (only) cases he mentioned, first in Moral Sentiments (the actions of the “proud and unfeeling Landlord” feeding his serfs, labourers, servants, and overseers, which was an absolute necessity – no food meant no labour!). It was that necessity that led the landlord to feed those employed on his estate – described by Smith that he was “led by an invisible hand”. In the second case, mentioned in Wealth Of Nations, the merchant who felt too insecure to send his capital abroad, hence he invested in “domestic revenue and employment”. It was the “merchant’s insecurity that led him to invest locally – described by Smith of him being “led by an invisible hand”.

In short, the IH metaphor refers to the motives of the landlord and merchant that LED them to act as they did. It was NOT the IH that separately intentionally led either of them to create the “unintentional consequences of their actions. The IH describes their actions. That is why the consequences of their actions were “unintentional”!

To argue otherwise makes no-sense of Smith’s use of the grammar of metaphors (still exactly the same as defined in today’s Oxford English Dictionary, 1983, as Smith described it in 1762-62).

Moreover, Paul and Craig imply a theological interpretation of his use of the IH metaphor – what, whomsoever, or whatever, leads an “IH” to cause the “unintentional outcomes”? (see Kennedy, “Adam Smith on Religion”, Handbook on Adam Smith, Oxford UP 2013, or shorter, earlier version, Kennedy, 2011. “The Hidden Adam Smith in his Alleged Theology” Journal of the History of Economics, no 3, 2011).

An action has motives which actions may have consequences, but unintended consequences do not have intentional motivated causes!
Perhaps the point I'm trying to get at is better said by James Otteson. When discussing Smith's essay on "Consideration Concerning the First Formation of Languages, and the Different Genius of Original and Compounded Languages" Otteson writes,
The reader, furthermore, would be correct to detect in this essay the early hints of an argument that Smith will later develop into perhaps his most powerful, what we will call the Invisible Hand Argument: individuals, when seeking to satisfy their own localized desires will tend to behave in ways that will also benefit other - even others they do not know and about whom they therefore have no particular concern, and without their intending to do so.
This Invisible Hand Argument would, I feel, be seen in Smith's work even if the actual references to the "invisible hand" were removed.

When Otteson goes on to talk about "What Smith Got Right" the first thing he mentions is Smith's model of spontaneous order. Otteson argues this is made up of several elements, one of which is "general welfare and the "invisible hand"". Otteson says,
Smith was under no illusion that people in their normal daily activities actually care about the general welfare. Luckily, however, people do not have to. The nature of the unintended system of order suggests that they will tend to conduce to the benefits of everyone concerned regardless - at least in the long run.
So I would argue that the "invisible hand" in a board sense, permeates Smith's works.


Owen said...

Lots of food for thought!! I see the point that the 'invisible hand' can be reinterpreted as unintended consequences, but I'm more convinced by Gavins point that was not the original intention. I also wonder if by using the invisible hand in this way misleads us into thinking that unintended consequences are generally positive, ignoring the very often negative consequences. I apologise for the flippant nature of my orignal remark, but the subsequent discussion has been great! Cheers.

Gavin Kennedy said...

Hi Paul (and "Owen")
Thank you for your posts and comments. I normally would notify you that I had responded but it was late at night and my wife was anxious that I did not work what she considers too late on medical grounds.
When I woke at 6 am this morning I read your response and thought it best that I responded before posting a message to you to that affect.
Hence, I am now working on taking seriously the issues you raise, but meanwhile I thank you sincerely for your scholarly treatment of our relatively small though crucial remaining differences. Readers may note the true scholarly manner in which we conduct our debate, which is model for the academy at variance with the bad-tempered noise we all usually experience from those who should know better. Attack a person's ideas by all means but do so with better ideas.
I thank you for your proper statement of your ideas and I have things to say about them for you and your and my readers' consideration on Lost Legacy.
Gavin Kennedy
PS, I learn just now I am about to be taken shopping for exercise! Back in an hour or two.