Monday, June 30, 2014


Wes Hazard, a Boston-based writer, stand up comic and radio DJ. (on twitter @weshazard and at ) posts onThe Missouri Review HERE 
“So You’re Picking Up Adam Smith from the Airport"
So, you’re picking up one of your favorite literary figures (poetry or prose, living or dead) from the airport before taking them to dinner and conducting an interview. You’re a huge fan and you’re super excited about the assignment, but also a bit nervous. Relax. The main thing you need to be concerned with is having a kickass playlist going on the tape deck when you roll up to the terminal and I’m here to help. I offer no guarantees, but with some deductive reasoning, digital crate digging, and intuition I think we can manage something that leaves everyone comfortable, happy, and bobbing their heads.
Below is a 12 track set that I think should get you from the airport and back again with some stops in between. You can play it in sequence, but it will work on mix-mode as well (this might even be better). The important thing is to have it already playing when you pick them up and to not discuss it at all unless they bring it up first. Basically, play it cool and act like you’ve been there before. I can in no way guarantee that they’ll actually dig this, but I have my hopes. Worst case scenario, just have NPR locked in as station preset 1 in case things get desperate. Best of luck!
Your passenger this week is none other than Adam Smith the Scottish philosopher and academic, widely recognized as the father of modern economics. Smith was a noted lecturer and considered himself primarily a moral philosopher but his name is indelibly linked to The Wealth of Nations, an econ text that’s been praised or dismissed (or both) by just about every school & faction of economics since it was written. Buckle up! Let’s talk about $$$$$$$.”
It is probably light-hearted but I am too busy just now to follow the links.  I like the idea though as entertainment and invite you to try the links to his list of programmes using the same themes.

Always happy to spread new ideas and themes that demonstrate innovation and new areas of market economies.  After all, that is what got humans from being just animals at the mercies of their environment to becoming socialy-linked in societies that eventually brought us to our current written history via our pre-histories.  True we still have a long-ways to go …


Garden Earth - Beyond sustainability” (A blog about the future of the planet. Ecology, Environment, Development and Economy are put together and looked at critically”. (31 May) HERE 
The Invisible Hand at Work - Gives and Takes
At the onset of World War I, Britain imported 60% of its food and roughly 80% of its grain for bread (basically wheat), as a result of its laissez-faire trade policies and the enclosures. Initially, the government thought the market could ensure food supplies, but quite soon it had to step in, even more so when Germany’s unrestricted submarine warfare commenced in January 1917. The government increasingly regulated both price and supply of bread, “whatever else was in short supply, the supply of breadstuffs had to be maintained”. It took over importation and in April 1917 it took also control over the mills from the private sector. In 1918 all staple foods were regulated in price and many were rationed. People were encouraged to produce their own food; herds of cattle and sheep were reduced. 
The policies worked so well that it is estimated that during the war the average provision of food was 3,500 calories, compared to 3,400 calories the years preceding the war (the quality of food didn’t necessarily improve, for instance fruit and vegetable consumption plummeted). 
Even more interesting is that the difference between the diets of rich and poor decreased in war time. This was a result of that the government intervened in the food distribution and access as the market is simply not geared towards equitable distribution. It is inherent, almost a definition, in an unregulated market that the distribution is inequitable as it is based on economic purchasing power and not needs. So this observation is not saying that the market doesn’t work. It does work as a market should, but that doesn’t equal that it produces a result society wants. The invisible hand doesn’t always do the right thing.”
Having been brought up as an infant during World War 2 with government controlled rationing of all foodstuffs, I experienced regulated rationing for 5 years.
Wartime austerity was real and poor families like my own received very basic shares of foodstuffs (less fruit and vegatables which presumably the rich could still buy). From observations of a very few better-off families than my own and overhearing conversations among adults, I recall phrases like  “the Black market”, “spivs” and “cheats”.  I had no idea what they meant, butr went around looking for these “Black markets” - I found plenty of drab shops and dirty barrows in the streets, but nothing “Black”.

Observation showed me that some neighbours had better shares of rations than my own. Years later, while rationing worked, I became aware that criminality worked to some families advantages, and stuff “falling off a lorry” also worked to make some fortunate families better off, though I never saw anything falling of lorries, despite my intense interest in watching lorries pass in the street. Moreover poor families worked the system too.

Nobody in our street owned a car, so we travelled when we (rarely) did by tram or bus.   The wartime blackout at night meant there was no street lighting and all windows in every house were covered by thick blinds to prevent enemy aircraft spotting something to bomb.  Moreover, we carried gas masks everywhere we went.

I remember from 1945 onwards the great happiness among neighbours like ourselves when rationing was gradually relaxed.  There may have been a more equitable distribution of necessities measured by statistics, but nobody was keen to stay on government-regulated rationing at all.  Everybody welcome the return to markets; I do not remember any neighbouring family complaing at the end of the rationing of necessities, or the concomitant absence of “luxuries” during wartime.

I observed as a young man that choice and rationing by price is preferred to rationing by regulated orders from distant governments. 

In my first-year economic lectures at Strathclyde, I used to offer an anecdote about the end of rationing in war-time when, as a young infant, we were told that chocolate was now off-ration at a nearby grocers.  As the news spread, kids ran round to a local shop, as I did, clutching pennies to buy this chocolate treat without needing a ration coupon. I had never tasted chocolate before, nor eaten a banana and eggs came as powder in large tins with the stars and stripes on it - thank you America!).  I remember paying my two-pence at the shop counter and receiving a small bar of ‘5 boy’s’ chocolate, and eating it before I left the shop.  I recounted to my 1st year 1970’s class my thoughts when I got outside the shop:  “If the shop owner has all these bars of chocolate, why is he selling them - why doesn’t he eat them?”
It seemed a good way to introduce marginal utility …


I was asked today if the “invisible hand” existed and, of course, offered the view below. I kept it short because I was not sure whether the recipient was an economist, an historian, or of school-age.
My answer
No it does not exist.  It was a metaphoric expression used by Adam Smith to, as he put it, “describe in a more striking and interesting manner”, the hidden motives of individuals whose self-interested actions have intended beneficial consequences for them, but such actions by individuals may also have unintended consequences, sometimes benign and sometimes malign, for others.  Examples include businesses producing consumables that customers want and enjoy that may make society better off. Businesss persuading governments to impose tariffs, say, may reduce competition and raise prices, making consumers worse off.  The metaphor of “an invisible hand’ is now widely applied without care to imply some mysterious entity, consciously acting in markets to bring about benefits to everybody. Whereas governments and businesses that ignore pollution, say, may make everybody worse off.

Note:  New Series:
Should readers have (short) Questions on any aspect of Adam Smith's Works, send them in and I shall give my brief answers.

Saturday, June 28, 2014


Wazambon writes (23 June)  HERE:
The Motley Fool” (‘to Educate, Amuse, & Enrich). 
"In fact, I believe that the theory of natural selection should be viewed as an extended analogy – whether conscious or unconscious on Darwin’s part I do not know – to the laissez faire economics of Adam Smith"
That was exactly the argument made during the Gilded Age to justify the exploitation of workers by the rich. It was nature's way, after all... survival of the fittest.”
Adam Smith did not mention the words ‘laissez-faire’ at all.  It was not part of his moral philosophy nor of his political economy. 

His epigones attributed ‘laissez-faire’ to Smith in the 19th century and still do so today, and it was popularised for political reasons by political agitators on behalf of Mill and Mine owners, often for causes that Smith was unlikely to have supported. 
Smith believed in Natural Liberty for all, and not just for the employers and government legislators.
Also Charles Darwin's theories of evolution are not best summarised as "survival of the fittest", including its implications for racial interpretations of the "fittest" and the lessons of human history. 


From Foucault’s commentary on Greek philosophy and the self-community link to human behaviour
Michel Foucault, The Hermeneutics of the Subject, Lectures at the College De France, 1981-2,  p. 196. ed. Frederic Gros, English series ed. Arnold I. Davidson. Trans. Graham Burchill, Palgrave Macmillan 2005
“Epictetus says, the order of the world is so organized that all living beings, whatever they are animals or men, it doesn’t matter, seeks their own good.   Zeus, God, the rationality of the world, etcetera, have determined that whenever one of these living beings, whatsoever it may be, seeks its own good, at the same time and by the same act, and without wishing to or seeking to, acts for the good of others. The this is is set out in discourse 19 of book 1: “Zeus has arranged the nature of the rational animal in such a way he can atttain no particular good without bringing  about the common utility.  Thus it is not anti-social (akonineton) to do everyhting for oneself” (panta hattou heneka poiein). So, doing everything for oneself is not asocial, it is not antisocial.  You will say that the text says that Zeus has constituted the nature of the rational animal’ […][However, more generally, Epictetus establishes the] natural [bond] between usefulness for others and the selfish pursuit of what is useful or indispensable to each. Second and on the other hand, this bond is transposed when it involves the rational being strictly speaking, the human being.  At this point the bond is established at a reflexive level.  As you know, according to Epictetus, though animals seek and obtain their own good, they do not obtain this by having to take care of themselves  in order to do what is good for them.  They have been endowed with a number of advantages like fur, for example, which frees them from having to weave their own clothes - these are old commonplaces on the advantages of animals over men.  Men, however, have not been endowed with the advantages that exempt them from taking care of themselves.  Zeus has entrusted men to themselves.  Zeus has determined that unlike animals, and this is one of the fundamental differences between the rational aanimal and nonrational animals, men are entrusted to themselves and have to take care of themselves. That is to say, in order to realize their nature as a rational being, in order to conform to his differences from animals, man must in fact take himself as the object of his care.
I came across this today.  Interesting.  Strip out the theological diversions (Zeus, etcetera) and compare with Adam Smith’s ‘intentional’ and ‘unintentional’ consequences of human motivated actions, and we can see the roots of his thinking when using the ‘invisible hand’ metaphor in TMS (1759) to “describe in a more striking and interesting manner” the “object” of the metaphor. ( in Smith’s Lectures on Rhetoric and Belles Lettres” (1962-3) p. 29. In this case the consequences of the actions of “proud and unfeeling landlords”.  The Landlords’ intentional actions as described in TMS - feeding their peasant labourers, motivated by enabling them to labour in their fields so that the landlord’s “greatness” remained possible, which had the unintentional consequence that the labourers also bred children to contribute to the “propagation of the species”. 
Smith’s later example in WN of merchants intentionally preferring to invest their capitals domestically, motivated by their insecurity if they let their capital out of their sight and control, and thereby risked losing it.  This action had a subsequent unintentional consequence that their capital added to their country’s domestic “revenues and employment” and thereby benefitted those living in the local economy.
Given alternative explanation of the “invisible hand” metaphor, ranging from unnecessary and wholly imaginary theological meanings, from Grecian Zeus via Roman Jupiter, through to Jewish, Christian, and Islamic versions of God, who mysteriously manipulates disparate human decisions in markets, Smith’s original and primary rhetorical explanation fully explains his use of the  IH metaphor to “describe in a more striking and interesting manner” the “object” of the metaphor.

Monday, June 23, 2014


Critque of "Michael Perelman on The Fraud of Adam Smith’s Pin Factory” (Part 1)

Yves Smith, a Lost Legacy reader, sent me copies of Michael Perelman’s paper for the 2014 Hustory of Economic Thought conference.  Michael is a professor of economics at California State University, Chico, with whom I have corresponded since we met and exchanged our different views on Adam Smith, without rancour, in 2009.  I disagree with Michael’s take on Adam Smith, but I respect his views.  He has looked into Adam Smith’s Works and has done so much more thoroughly than some mainstream historians currently writing in this field.  
Part 1 of my response presents more detail of Adam Smith’s work with a sketch of the context which he uses to present his report on the “Pin Factory” example and how it related to the historic division of labour. [Edited 24 June]
Part 1 of my response sketches out the context in which Adam Smith based his lectures and writings on the historic importance of the division of labour in what we regard today as the social evolution of humans, as the uniquely productive wealth-creating animal within Smith’s moral philosopy. I shall show that Michael Perelman’s analysis of Smith’s approach is far too narrow by focussing on the “pin factory” example, with his charges of “fraud” and other alleged misdemeanours. 
Smith, however, in his University lectures, built his analysis step-by-step, using an historical approach that his first biographer, Dugald Stewart, called “congectural history” (Stewart, 1793). Dugald was the son of Michael Stewart, Professor of Mathematics at Edinburgh University and, formerly, a student friend with Adam Smith at Glasgow University 1737-40 and afterwards.
Adam Smith’s lecture on Monday, 28 March, 1763, is an example of his philosophical history. Michael Perelman selectively uses isolated, short quotations to support his summary judgements of Adam Smith as an intellectual “fraud”.  He misses the significance of the whole of Smith’s carefully expressed context from which Michael constructs a misleading argument.
Adam Smith opened his 28th March,1763 lecture by describing the “regulation of government in general”, using examples of the principles then operating in 18th-century France and England in the matter of the “policy”, “politics“, “adminstration of justice”, “police”, and “defence”, broadly descriptive of then existing city governments, wihtout normative judgements.  
To avoid confusion with the modern meaning of the word “Police”, readers should note that its 18th-century distinctive meaning referred to the attention paid by governments in Paris and London, and etc., to the public cleanliness of the “roads and streets”, and to the public’s “security” by the “prevention of crimes and disturbances”. As developed countries improved sanitation and household refuse removal over time in the 19th century and into the 20th century, the modern narrower meaning of ‘police’ evolved into State monopoly obligations in crime prevention.
Adam Smith added to contemporary meanings of ‘Police’ the obligation to assure “the cheapness or plenty” of the means to meet people’s “necessities, conveniences, and amusements” (which people could sell and buy when they wished to exchange in ‘Bon Marche’), all of which were vulnerable to disturbance by ‘crimes and scarcities’. These passages on pp. 331-33 of LJ, 1763, help readers clarify Adam Smiths’ objective contents of his Lectures and the unhappy consequences of the non-fulfillment of these basic social requirements. This is seen today in the absence of the wider obligations of city governments in the poorest countries, or where crime and disorder predominates. 
Modern TV news is full of scenes of the breakdown of law and order from military invasions and civil wars, and the consequential interruptions in the supply of food, clean water, and general security, as shown in the awful plight of refugees caught up in such events.  Some years ago, for example a couple of hundred yards from a top hotel I stayed at in Turkey, the whole hillside below was piled high with household refuse dumped there by local residents because of the absense of refuse collection by the city council.
Smith compared murder rates in Paris and London and linked them to the number of retainers and dependents maintained under fuedal governments. He quoted David Hume, who observered that murders in Queen Elizabeth’s reign were at an all time high (p. 332), driven by numbers of feudal servants being abandoned by their feudal Lords and who, without skills for normal labour, turned to crime.  Smith favoured society having fewer “idle and luxurious” lives living “in idleness and plenty” (p. 323). He also considered that the expansion of commerce was the “great preventative” of idle “dependency” because “manufacturing gives the poorer sort better wages than any [feudal] master could afford.
For these reasons, Adam Smith saw “the object of police as the “proper means of introducing plenty and abundance into the country, by means of  the cheapess of goods of all sorts” and also, incidently, he introduces what amounts to what we know now as the ‘water-diamond paradox’ (p. 233).
From this long discussion, Smith moves to the vast array of products that “supply the wants of meat, drink, clothing, and lodging” which “almost the whole of arts and sciences have been invented and improved”. Agriculture “multiplies the materials” on “which the several artificers are imployed”, the “forest supplies us with trees and planks for building” and “from the plain we have wool, flax, cotton…silk for clothing, beside indigo, woad, madder and 100 other plants”.  He then elaborates over three pages on the complex interconnnections between the tens of thousands of artificers and labourers who produce in their different trades the vast arrays of specialised products commonly exchanged in European societies, including by the “ordinary day labourer”, supposedly living in the “most simple manner”, when in fact he has more of the “conveniences and luxuries of life than an Indian [North American] prince at the head of 1000 naked savages” (p. 338).  This much quoted famous passage illustrates the significance of the division of labour across society, riven as they are with distinctions of rank.  
Smith sets the context in which he develops his social assessments the division of labour that still sharply divides simpler “savage” societies across the world.  Incidentally, 18th-century language ought not to be judged by 21st-century sensitivities to racial, gender, religious and other stereotypes.  Smith summarises the consequential distinctions, ‘warts and all’, with no attempt to downplay their social contexts - Smith was an observer of the pre-modern realities of what were regarded then as “savage’ (i.e.) in the 18th-century society he lived in. He made honest, pragmatic assessments of what, for him and his cotnemporary readers, counted:
it may not indeed seem wonderful that the great man who has 1000 dependents and tenants and servants who are oppressed that he may live in luxury and affluence, that the moneyd man and man of rank, should be so very affluent, when the merchant, the poor, and the needy all give their assistance to his support.  It need not, I say, seem surprising these should far exceed the greatest man amongst a whole tribe of savages.  But that the poor day labourer or indigent farmers should be more at his own ease than the savage notwithstanding all oppression and tyranny, should be more at his own ease than the savage, does not appear so probable.  Amongst the savages there are no landlords nor userers, no tax gatherers, so that everyone has the full fruit of his labours, and should therefore injoy the greatest abundance, but the case is far otherwise” (LJ. vi.24: p. 339).

Smith writes with frank indifference to imposed modern ideologies that compare modern ideas about ‘equality, ‘injustice’, and ‘Leftist’ utopian possibilities, all worthy of considertion in their own right, but nowhere experienced in the deep history of humanity.  Given the commonalities of all histories (and prehistories) of human social changes, the philospher’s ambitions focussed on what happened and not upon what some modern reformers think should have or could have happened.  Adam Smith taught what happened in history without dressing facts up to conform with a modern ideology; Michael Perelman focus judges what he thinks should or could have happened and scours Smith’s texts for evidence that Smith’s often frank accounts of what happened somehow meant  Smith recommended them just by mentioning them without condemning them, because in someway it means he approved of them, which he clearly did not.  Philosophy is about understanding history, not merely condemning it against a set of controversial 19 to 21st century ideological standards.
In Part 2, I shall look closely at how Michael Perelman is led into ideological bias.

Sunday, June 22, 2014


Harrison Seales, a Master's economics student at George Mason University, Fairfax Virginia, MA Fellow at the Mercatus Center, and alumnus of the University of Massachusetts Amherst.  He describes himself as an “avid scribbler”.
(19 June) HERE “The Invisible Hand: An Idea Not So Modern”
For everybody is eager to acquire such things and to obtain property, provided that he will enjoy it when it has been acquired. It ths comes about that, in competition one with the other, men look both to their own advantage and to that of the public; so that it both respects wonderful progress is made. The contrary of this happens in countries which live in servitude; and the harder the servitude the more does the well-being which they are accustomed, dwindle.”
Adam Smith? David Hume? Nope, Niccolò Machiavelli. From The Discourses, II.2, translation by Leslie J. Walker, S.J. Like so many ideas, the invisible hand has been understood by more than we moderns.
Harrison’s Seales has done us all a service in quoting Machiavelli and his interesting idea, but with an unfortunate error in his comments on it. The problem, highlighted regularly on Lost Legacy is that “the invisible hand has [NOT] been understood by … we moderns”.  In fact, ‘we’ moderns in the main have completely misunderstood Adam Smith’s use of the metaphor of an “invisible hand” and in consequence have spread that myth to millions.
Among “moderns”, I would include my good friend, one of the best of modern Adam Smith scholars, Daniel Klein, also of George Mason University, with whom I debated the myth of the ‘invisible hand’ in Econ Journal Watch in 2009-10. At least Daniel Klein is a scholar with some careful original thoughts, compared to the thoughtless Smithian epigones who normally pontificate endlessly on the meaning of Smtih’s uses of “an invisible hand” (including some Nobel Prize winners).
In the above Machiavelli quotation, there is no mention of an “invisible hand” at work in: “men look both to their own advantage and to that of the public; so that it both respects wonderful progress is made.”  It appears the Machiavelli describes the process by which two persons arrive at a mediation of their self-interests, which is loosely demonstrated in Smith’s description in his “butcher, brewer, and baker” parable (WN. I.ii.2: pp. 26-7). 
Smith reference to the unintentional promotion of the public interest is not the intentional purpose of the “invisible hand” - that confusion is the source of the modern error - it is a metaphor for the unseen (by others) motives of an agent who intentionally acts in pursuit of such motives, which motivated actions have unintended consequences.  In the merchant’s case, he decides from his feelings of insecurity against sending his capital abroad and who therefore decides (“led by an invisible hand”, i.e., his hidden motive - we cannot see in the minds of others) to invest domestically instead. The unintended consequence of his motivated actions (his insecurity) is that without intending it he adds to “domestic employment and revenue”.  
In today’s language, we would refer to the unintentional consequence of his acting in pursuit of his hidden motive was that his intended actions added to Gross Domestic Product (GDP).  Such an unintended consequence of his intended actions became a public benefit; Smith correctly saw a rising GDP as socially beneficial. A stagnant and low GDP, which Smith saw as the cause of the relative poverty of the ‘richest’ ‘savage’ societies in North America and Africa, explained why a poor labourer in his hovel in Scotland was many times relatively more ‘affluent’ in material goods than even chiefs of the savage tribes (same chapter 2 in Wealth Of Nations).
Machiavelli’s reference to “men look both to their own advantage and to that of the public” is a stretch beyond Smith’s more limited point about arithmetically adding to GDP, which is not as extravagant a conclusion as believing that “an invisible hand” intentionally leading in some mystical manner to produce its intended consequences.  There is no mysterious “invisible hand” entity operating in modern markets.  It was a metaphor for the motives that intentionally caused actions, which actions, once taken, had unitended consequences.
Smith lectured on the role of metaphors throughout his academic career.  There is a student report of his “Lectures on Rhetoric and Belles Lettres” from the 1762-3 session at Galsgow University (published by Oxford University Press) in which he discusses metaphors as “describing in a more striking and interesting manner” their “object” (1983, p. 29).  
In this particular case the object that Smith’s use of a metaphor describes is the merchant’s motive (his insecurity - mentioned three times) for his intended actions (invest locally), which in turn had interesting unintended consequences (adding to national “revenue and employment, i.e., today’s GDP) which had unintended public benefits.

Thus, full circle: Harrison Searles uses a metaphor, “avid scribbler” to modestly self-describe himself “in a more striking and interesting manner” as a thoughtful and literate Blogger (which he is).

Friday, June 20, 2014


Jason Brennan is an assistant professor of economics and public policy at Georgetown University’s McDonough School of Business and author of Why Not Capitalism? He posted (19 June ) in Fortune, HERE  
“What the Mickey Mouse Club says about capitalism” 
“While a socialist utopia may be wonderful, a capitalist utopia is even better. Move over, Adam Smith. The new moral champion of capitalism is Mickey Mouse.
Thanks to the Great Recession, capitalism has another PR problem. Marx is back, according to Foreign Policy. College students are demanding new courses in socialist ideology. A ponderous economics treatise advocating confiscatory taxes is a national bestseller.
Such suspicion of capitalism comes and goes with every recession. Socialist economics rises from the dead only to die again. What remains alive, each time, is Marx’s moral critique of capitalism.
Even Adam Smith claims that capitalism is a compromise with selfishness: “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 interest.” Capitalism bribes us to work for the common good. Capitalism economizes on virtue; socialism needs more virtue than we can supply.”
Adam Smith was not a “champion of capitalism”.  He never knew nor used the word capitalism (a word first used in English in 1854 in a novel by Thackeray - Smith died in 1790).   Neither did Smith know about socialism, an ideal that had not yet been articulated in English, nor tried in Russian or Chinese - though when it was tried it failed miserably and with great suffering by tens of millions of people who switched back to some form on capitalism and state run markets.
Hence the views on which forms of organsiation of societies was better, if not best, remained untried until the 20th century in various forms. That US College students are demanding lessons on ‘socialist ideology’, instead of or supplementary to modern analyses of what we know today as ‘capitalism’ is not surprising given what passes for ‘capitalist’ ideology, as represented by neo-classical economics, especially when hypothesised  into mathematical theories of ‘rational expectations’, ‘utility maximisation’ and ‘general equilibrium’, which bear no resemblance to the real world.  Hence theories of socialism or capitalism do not correspond to the experiences of either ideologies supposedly driving their systems in the real world. 
The short quotation from Adam Smith refers to the famously misunderstood example of the “butcher, brewer, and baker” in Wealth Of Nations.  The quotation has nothing to do with selfishness, and given the real scarcity of the physical means to universal benevolence - if everybody depended on everybody else's benevolence, who would supply them with everything they need? Only an imaginary entity (God?) has unlimited resources to be  absolutely benevolent.  Humans are thereby self-interested in their exchange relationships. Absent the human capacity for exchange, the alternative is violence and submission to oppression.  I have demonstrated this many times on Lost Legacy.  
Smith's example is about how people try to co-operate by exchanging some of what they have for what some of they want since human societies and human language emerged naturally.  They do this co-operatively by mediating their self-interests in their behaviours by using ‘persuasion’ and ‘bargaining’ and by each addressing their potential partner’s self-interest, not just their own.  They try to show how it is in their partner’s interest to co-operate on acceptable terms that addresses sufficient of their partner’s self interests for them to conclude an acceptable bargain that meets some (maybe, not all) of their initial views on their self-interest (see Wealth Of Nations, Book 1, chapter 2, paragraph 2). It is in this manner that  people exchange things they have for other things they want - implicitly they transact in markets by offers and responses: 'IF you give me some of what I want that you have, THEN I shall give you in exchange, some of the things that you want, which I have'.  This is the self-interested bargainer's conditional proposition: 'If - Then'.
What light Mickey Mouse throws on these questions is anybody’s guess, though Mickey Mouse is a cartoon character controlled by his author’s and illustrator’s imaginations.
That Jason Brennan authors Smith's example as to do with selfishness is a tribute to Jason's imagination - and on this occasion, it is also a dis-service to Adam Smith’s quite different points in respect of the “butcher, brewer, and baker”.


Michael Perelman, a prolific writer on Adam Smith, has posted on “Econospeak (annals of the economically incorrect)” HERE  and HERE 
Michael writes: 
“The Ideological Fraud of Adam Smith, beginning with the pin factory.”
“I just posted the paper I will give tomorrow at the History of Economics meetings.  The Ideological Fraud of Adam Smith, beginning with the pin factory.  I hope you enjoy reading what a fraud he was.
Strong Stuff indeed.   I was immediately reminded of a simular sharp critique of Smith’s division of labour in Salim Rashid’sThe Myth of Adam Smith” 1998. Edwin Edgar: Cheltenham - see chapter  3 on the division of labour, pp. 13-29. 
Michael follows a similar critique of Smith personally (alleged deceitful, and with insufficient acknowledgment of his predecessors, etc.,), though Michael crosses the line to some speculative personal abuse that is unfortunate; such ad hominen language that alleges bad character for scholarly veracity, and bad moral character, may deter his readers and listeners at the HES annual meeting today from taking note of the constructive parts of his paper. (In the past meetings of HES that I attended from 2006 to 2009, I found the participants properly critical/sceptical but without any personal rancour evident between them).
For all the alleged roles of Smith as an 'ideologist' committed to the boss classes in Michael Perelman’s paper, Smith had very little to say favourable to ‘the rulers of mankind’ and was sharply critical of ‘merchants and manufacturers’ going about their business, so much so, I should think readers would be hard put to say that Smith ‘sang their praises’ in Wealth Of Nations, or earlier in Moral Sentiments, where his criticisms of the conduct of landlords, king’s men, government ministers, and politicians were often severe.
Also, given Michaels’ commiment to his own ideological positions, I think it somewhat weak to assert that Smith’s stance as a pragmatic  philosopher was compromised by describing what he observed in the times in which he wrote, where repressive laws were common and punishments for questioning them or being critical of them were far more severe than anything Michael could face today.
I shall comment on Michael’s paper later this weekend on its merits, without questioning Michael’s motives or his conduct.   He has a point of view, some of which I would agree with, but also much of which I do not agree.


Posted on 19 June HERE
“Who on earth is Adam Smith? He was an economist and he wrote, by far, the best book about economics, The Wealth of  Nations. A simple but focused book about the mechanisms and interrelations between money/wealth and people.
Incidentally we share the same birthday, just incidentally :).   [See may recent Lost Legacy post on Smith's date of birth]
I read economics books for the same pleasure that fairy tales give me..They are both realistic.
Fairy tales because the stories are the same with everyday life, you make a mistake, you pay and have to travel all over kingdoms to find the lost love of the prince (aren’t we all trying to find our love?)…or the prince gives a piece of his calf (part of the leg) as payment for the Ogre (Witch, Bird) to be crossed over to the other realm..we sacrifice a lot for our desires and we deeply yearn for the other “realm”and….. the simplest metaphor of love, if you kiss a frog it becomes a prince, your prince.
In economics there is a magic place where the Offer meets the Demand  which gives the price of it. “There is a price for everything”.
Adam Smith spoke of the Invisible Hand, metaphor or not, that is self regulation of the markets, without the intervention of the (sur)realistic State.
Utopian, but 90% realistic because we must admit we are but at a far cry (far away) from the first Utopia ever mention in fiction, the island of the Phaeacians (Ulysses).
Many Happy Returns of the Day, Adam Smith!”
This crossed my email screen and attracted my attention because of its amusing format.  At 300 Lei (?) a month it may be worthwhile for some English language students.  It may also amuse some readers of Lost Legacy with its folksy account of Adam Smith’s contribution to knowledge.  Also, if you cannot laugh (or at least smile) at yourself and your ideas from time to time,  you need a holiday …

Wednesday, June 18, 2014


Scot Galupo (18 June) in “The American ConservativeHERE lamblasts “David Brat’s Half-Cocked Theological-Economic Fusionism”. 
I agree with Scot Galupo on this occasion.
Sparked by outrage over the Wall Street bailouts, the original Tea Party was motivated by an opposition to Big Government. The motto of the Tea Party Patriots, one of the largest and most influential groups, was “fiscal responsibility, limited government, and free markets.” The Tea Party’s core issues were the skyrocketing national debt and opposition to Obamacare. …
… Along comes David Brat, professor of economics and slayer of the dragon Rep. Eric Cantor, to bring the argument into sharp relief. The parsing of Brat’s academic writings and theological-economic beliefs has become a cottage industry. The Washington Post called Brat’s primary election an indication of a “rise in the crossroads of religion and economics.” …
… Brat teases out a biblical influence on secular economic writing. As Kevin Roose writes:
In one unpublished paper from 2005, “Adam Smith’s God: The End of Economics,” [accessed through a Google Scholar search] Brat makes the case that even though Adam Smith (the father of modern economics and author of The Wealth of Nations) is thought of as one of the great figures of the Enlightenment, his “invisible hand” theory should properly be seen in the context of Christian moral philosophy.
“In fact, [Smith’s] system really retains most of the fundamental features of the Judeo-Christian system,” Brat writes. “On paper he places Stoic reason above Christian revelation. But on the other hand, he chooses the Christian God over the Stoic God. And in the end, his choice of virtues and ends take a decidedly Christian turn.”
In a sense, Brat’s brand of Protestant-ethic revivalism completes a circle: now, not only can Christians find Adam Smith in the Bible, they can find the Bible in Adam Smith too!
The question of Adam Smith’s philosophical views on Christianity and religion geneally has been raised among historians of economic thought since before Lisa Hill’s article, “The hidden theology of Adam Smith” in ‘The European Journal of the History of Economic Thought’ (EJHET,vol. 8. (1). pp. 1-29.  Here is Lisa's Abstract:
This paper contests late readings of Adam Smith's ‘invisible hand’ as an essentially secular device. It is argued that Smith's social and economic philosophy is inherently theological and that his entire model of social order is logically dependent on the notion of God's action in nature. It will be shown that far from being a purely secular, materialist or evolutionist approach Smith works from the argument from design to construct a model that is teleological and securely located in the chain of being tradition. His focus upon happiness as the Final Cause of nature renders improbable any claims for proto-evolutionism in his work while his arguments about the deliberate endowment of defects in the human frame make no sense without the supposition of design and purpose in nature.
Here are my considered views on the subject: 
Adam Smith on Religion” by Gavin Kennedy (2013) in ‘The Oxford Handbook of Adam Smith’, Editors: Christopher Berry, Maria Pia Paganelli and Craig Smith (Oxford University Press).  Here is my Abstract
This chapter discusses the relevance of Smith’s biography and his published writings, in Moral Sentiments, The Wealth Of Nations, and his posthumous History of Astronomy (1795), and discerns a hidden Adam Smith, contrary to his public religiosity. His early biographical details suggest that his theological ideas were moulded by his life-long strong relationship with his religious mother and with his moderate Calvinist upbringing, but these early views changed during his absences from his home at Glasgow (1737–40) and Oxford (1740–46). In the 6th edition (1789) of his The Theory of Moral Sentiments, he made considerable excisions and modifications of the outright religious statements in the first five editions (his mother died in 1784).”
Earlier, a much shorter article by me appeared in The Journal of the History of Economic Thought, vol. 33 (8), 2011. pp 385-40: “The Hidden Adsam Smith in his Alledged Theology” 
An original version of the JHET paper was presented as “The Hidden Adam Smith in his Alleged Religiosity” to the “Summer Institute, Richmond University”, Virginia, 2009. This original Richmond paper was a more direct response to Lisa Hill’s views, but without the usual polemical styles common in scholarly rebuttals.  

From the scanty material in today’s “American Conservative” I feel sure that I am unlikely to agree with David Bratt’s interpretation of Adam Smith’s views on theology, Christian or otherwise, nor of course of stoicism.


Humour, have a laugh!
Manus Chakravarty: in Hindustan Times HERE
  “Change the goal posts for the beautiful game in India”
Consider Adam Smith, the father of modern economics. He was the first to talk of an Invisible Hand that guided the game, so that while each individual player tried to do the best for himself, the result was goals for the team. That theory died an untimely death in the 1986 World Cup, when the invisible hand became the visible one of Diego Maradona.” - See more HERE
Invsible Hand set to MusIc!
Cyclotimia Voice mp 3 Stream Online HERE  and HERE 
(Anon) Investors Hub (17 June) Orfdino Gold (0RFG) HERE 2 
“what if the Invisible Hand of the market is Just The Ben Bernanke?” 
“It's the Invisible Hand of our free market at work IMO. $ORFG Lets hope that Hand eventually gives us the push in the right direction soon. One of the funny things about the market is that every time 
one person buys, another sells, and both think they are astute.” 

So today marks the 100th Loony Tunes Column on Lost Legacy Bloig! A small milestone in persistence and a sign of how the metaphor has become embedded in public consciousness across the spectrum of popular interest, way beyond, of course, the confines of Adam Smith’s original meaning when he used the metaphor only three times in all of his published works.

Maybe Loony Tunes will make it to the second 100 columns, though I doubt I will. Every long journey starts with a single step, so I await posting column no. 102 …

Monday, June 16, 2014


Posted by Danny Quah on 14 June HERE:  Adam Smith and little fingers
Adam Smith” taught modern economists that global governance is hard because, among much else, for most people, losing a little finger is worse than the deaths of hundreds of millions in places far away, like China.
Thing is, though, what happens when it’s China where the little fingers are – because China becomes the world’s economic centre – and “far away” is somewhere else, far away?
Danny Quah as a good sense of pithy humour that makes you think.  And very Chinese too.
However, we must return to 18th century Adam Smith when China was a large country with population to match which for Europeans then was indeed a longway away (and vice versa).  It took a British flagged ship over a year to sail to China and a year to get back, so visitors were away for nearly three years by the time they had completed whatever purpose they sailed there.  It also undermined appropriate supervision of their behaviour.
So, by the time the news arrived in Europe from China about the illustrative earthquake used by Adam Smith for a lesson in morality and an apropriate sense of moral balance, the news the ship brought was already a year old and the notional ‘100 millions’ were all gone and no doubt forgotten by their own brethren.
First, a mention of Smith’s teaching methods as a Professor instructing his young students aged from upwards in to adulthood? Smith used stories from life and illustrated them with spoken techniques that used statements and posed questions of scenarios with ‘obvious’ answers, and then attacked his first answers with more pointed comments presented in an extempore manner and with some excitement in their delivery.  I get the impression that Smith was no a monotonic, boring lecturer, for which he was also popular with his easily distracted young listeners. 
So what moral lesson was Adam Smith referring to in his “Moral Sentiments” statement?
First he sets the scene:
Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment. He would too, perhaps, if he was a man of speculation, enter into many reasonings concerning the effects which this disaster might produce upon the commerce of Europe, and the trade and business of the world in general. And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened.
[Smith’s students would relax and accept the scene as presented by Smith, who would introduce some more moral pressure by comparing this 'man of humanity’s' self-centred concerns:] 
The most frivolous disaster which could befal himself would occasion a more real disturbance. If he was to lose his little finger to–morrow, he would not sleep to–night; but, provided he never saw them, he will snore with the most profound security over the ruin of a hundred millions of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him, than this paltry misfortune of his own.” 
[Smith now sets the moral trap by asking a hypothetical question:]
To prevent, therefore, this paltry misfortune to himself, would a man of humanity be willing to sacrifice the lives of a hundred millions of his brethren, provided he had never seen them?
[Consider your own answer to Smith’s hypothetical  question and the balance between you “losing a little finger” and stopping a hundred million people in a far distant land from dying in an earthquake.  In the pause for contemplation of your answer, Smith moves to his directed peroration in the standard manner of a disgusted Calvinist Minister in the Sunday pulpit who could cause grown men and women to shake in their shoes at some real or imagined little sin of not much consequence that they may hav ceommitted during the week.  Smith writes:]
Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it. But what makes this difference? When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble? When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self–love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration. It is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self–love can be corrected only by the eye of this impartial spectator. It is he who shows us the propriety of generosity and the deformity of injustice; the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves. It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.
[Taken from Adam Smith, The Theory of Moral Sentiments, (1759) 1976, The Glasgow Edition, published by Oxford University Press, Oxford,. TMS III.3.5 pp. 136-7].
Can you see now what Smith was doing in this passage? Danny Quah read the passage and seems only to consider the first part in which Smith sets up his students for the real moral part, as if a loss of the finger is really more morally relevant than is made clear in the last sentence.
You can read this in Danny’s second paragraph in his implied revenge threat: “what happens when it’s China where the little fingers are – because China becomes the world’s economic centre – and “far away” is somewhere else, far away?” 
Danny’s thought is not a moral sentiment at all. Nor did Smith teach modern economists - the subject of ‘economics’ did not yet exist in 1776.  He was teaching moral sentiments, first to students and then to readers of his book: 
Adam Smith” taught modern economists that global governance is hard because, among much else, for most people, losing a little finger is worse than the deaths of hundreds of millions in places far away, like China.
Now news can be relayed in bits of a second to and from China and whenever natural calamities happen “far away”.   We should note how many individuals in far away places send either money or physical goods to those places in solidarity with the afflicted populations. I hope Danny Quah rethinks the real lessons of Smith on distant earthquakes and the universal moral imperatives of the appropriate international moral response to them.
[As always my thanks to Sandra Peart of Richmond University, Virginia for teaching me years ago the real moral purpose of Adam Smith's "little finger" example.]

Sunday, June 15, 2014


RICHARD EBELING, a professor of economics at Northwood University in Midland, Michigan. He posts in Heartland HERE 
“The Wisdom of Adam Smith for Our Own Times”
“Thus, as if by an “invisible hand,” each individual is led through pursuit of his own personal gain and betterment to simultaneously improve the conditions of others in society. Or as Adam Smith famously stated it:

“As every individual, therefore, endeavors as much as he can both to employ capital in support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can.
“He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it . . . 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.”
… “It is not that Adam Smith believed that people always knew enough to never make a mistake, or that their speculative judgments about an uncertain future would always be correct so disappoints or losses would never be suffered.
He reasoned that each man, in his own corner of society, has a better understanding of his own circumstances and opportunities in the context of his own wants, desires and goals. And that each individual has the strongest motive and incentive to try to make his decisions wisely since failures experienced fell upon him. He who bears the costs and reaps the potential benefits has the greatest incentive to minimize the former and maximize the latter.
The same does not apply, Smith argued, when those in political power make the decisions. The “statesman” in a faraway capital can never know and understand things the way each individual can evaluate and judge them in their own unique surroundings. No legislator bears the cost of the wrong decisions he imposes on others; after all, he continues to live off compulsory taxes collected from those upon whom he has imposed harm.”
In an article with which I mostly agree and thereby recommend to readers for its general coverage of Adam Smith and his works, I marked the above paragraphs for the usual reasons on Lost Legacy.
Here are my differences with Richard Eberling’s interpretation of Smith’s use of the famous metaphor of "an invisible hand":
Richard Ebeling: “each individual is led through pursuit of his own personal gain and betterment to simultaneously improve the conditions of others in society”. This overstates Smith’s more cautious connection between an individual’s oursuit of his own gain (self-interest).  Individuals can act in pursuit of their self-interest and actuall harm the self-interests of those other affected by such actions. Smith was clear on this distinction. For example, the mercantilist who proposes tariffs on imports thereby raises the prices of said imports, lowers other consumers access to them which does not “improve the conditions of otherS in society”, in fact worsens them!”  
If Richard Ebeling can quote the page chapter and page in Wealth Of Nations (Oxford University Press, edition, 1976), I would be fascinated to read it where he wrote the sentence he confidently quoted “hrough pursuit of his own personal gain and betterment to simultaneously improve the conditions of others in society” above. Richard’e second paragraph is a direct quote but does not state the claims of his first paragraph above.
Similarly with his paragraphs 3 and 4.  Much of people’s actoins are not mistakes, they are intentional (for example: trades meeting together conspiring to raise prices and so on).  Their decisions are intended to benefit themselves.That is why Richard’s market always making benign decisions is no way less fallible and malign than those of rent-seeking politicians in imposing “harm” on electors.
Smith had a very low opinion of politicians: “the science of a legislator, whose deliberations ought to be governed by general principles which are always the same, as the skill of that insiduous and crafty animal, vulgarily called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs” (WN IV.ii.19: p. 468).
He was no less dismissive of businessmen, indeed some  readers of Wealth Of Natioins have remarked how Smith seems to have low opinions of them and their self-seeking behaviours that they have wondered why Smith is seen today as an uncritical pro-business exponent?  Hence, balance is called for; Richard does not show such balance in his attributions to Smith. 

Smith had a more pragmatic view of the benefits of markets - warts an all - than many modern commentators credit to him, possibly from not reading his Works for themselves.


Latest from the Panmure House Project to restore Adam Smith’s Home in Edinburgh where he lived from 1778-1790 (Smith's only surviving residence from 1723-1790).
We are delighted to report that the work to restore this lasting symbol of one of Scotland’s greatest thinkers is moving forward and the careful building blocks needed to restore this historic building are now in place. The initial underpinning works have all been successfully completed and we have recently received tenders from four firms to undertake the next phase of work required to redevelop the building to the highest possible standard.
The contract for the conservation of the original building has now been awarded to Ashwood Scotland Ltd, a local company with expertise in the conservation of historic buildings. This phase of the project, which will start on site in July 2014, has attracted a grant of £150,000 from the Edinburgh World Heritage Trust.
On the right, you can see a digital representation of the house once the work is complete.
As a friend or supporter of the Panmure House campaign to restore and redevelop Adam Smith’s final home, we wanted to let you know about the exciting progress made to date on the project and our plans for the future.
We are extremely grateful for your support for the project and we hope you will become more involved in the campaign as it moves into its final and most important stage.

We have been very fortunate to have some enthusiastic volunteer leaders on the project who have reached out to their contacts to find potential donors for the campaign or who have organised fundraising events – many of which have yielded significant donations.
As the campaign progresses we are very keen to recruit further volunteer leaders, particularly in the United States, Europe and Asia, to help lead fundraising efforts and bring in new networks of contacts to take us over the finishing line with this worthwhile global project.

Below is a mock-up of how the new foyer created from the enlarged basement will look, welcoming visitors, describing Smith’s contribution to economics and moral philosophy, and displaying artifacts from his life and works.

We received a ringing endorsement for the project from Alex Salmond, First Minister of Scotland, who has appeared on promotional videos of Panmure House (which you can find on our website at
We have had further support from the Scottish Government through Fergus Ewing MSP, Minister for Energy, Enterprise and Tourism. After a successful tour of Panmure House, Mr Ewing indicated that the Scottish Parliament may wish to use Panmure House as a venue for official events.
The Minister responded to his tour with the following comments:
“Many thanks for taking the time to show me Panmure House and the exciting plans to restore it to its former grandeur, and thereby create an enduring attraction for Edinburgh and
I am sure that the restoration will receive worldwide attention and interest. The legacy of Adam Smith
and the fellow leaders of the Scottish Enlightenment will be enhanced. A new meeting place and site for learning and lectures will be created.
Panmure House will offer a prestigious meeting place for lectures, business groups, academic deputations and a host of other potential uses.”
Donors from around the world have been pledging their support for the restoration of Panmure House and the running costs associated with it.
We have received capital donations and pledges of £1.6 million towards the building works and have secured funding of £190,000 per year towards the programmes and running costs for the project, with letters of intent for further revenue income from the University of Edinburgh amongst others.
The capital campaign recently raised over £320,000 at a fundraising event in Hong Kong – a city closely linked to Adam Smith through the spread of his ideas. This is in addition to the £624,000 grant from the Global Philanthropic Trust made late last year.
We are extremely pleased with the level of support given to the project for running costs. This is highly unusual for a project of this size and with these important commitments in place it will ensure that the on-going costs associated with running the building will be covered for the foreseeable future.
With such success on the revenue side of the fundraising campaign, the campaign’s priority now is to raise the remaining capital needed – £2 million – to achieve the project costs of £3.6 million.
As a friend or supporter of the Panmure House campaign, we want to keep you fully informed as the campaign progresses into its final stage and we would be delighted to have you more involved.
We are keen to know if there are people in your network who we haven’t reached out to before, and who may have the capacity and the propensity to donate and get involved in the campaign.

Please contact Nicole Gray Conchar, Director of the Campaign’s Fundraising Team, on +44 207 207 1887 or via email at