Often times we have heard quoted from Adam Smith's "Wealth of Nations" the invisible hand concept of an economy guided by the interests of those who wish to profit. Those self interests in profiting and thereby creating a market serving society in the most efficient manner. Is there an argument to that point(s) or have I missed anything that has been touted by our fellow wannabe economists?

Question: how many times did Adam Smith use the phrase "Invisible Hand" and in what context?

Bottom Liners:

I ran across what I consider to be an interesting answer to both of those questions. It seems as if Adam was more of a leftist than a rightist. Here goes the post:

Tim Worstall

1) Smith did not describe laissez faire capitalism. Capitalism the word was not even created until 50 years after his death. He was describing a society in the death throes of feudalism, at the very beginning of the Industrial Revolution and one sadly afflicted with mercantilism.

2) In the million words of Smith's that we have he used the phrase "invisible hand" three times. And in none of those three times was it a reference to either markets or self interest.

3) He talked of enlightened self interest, not pure self interest.

4) His other book, the one no one reads, Theory of Moral Sentiments, is about what he calls sympathy, we today might call it empathy (slightly weirdly he seems at one point to predict the existence of mirror neurons). The two should really be read together to get the full flavour of his thoughts.

5) As above, he most certainly did not say that those who do the most good for society will become the richest (he was far too aware and critical of the landowning aristocracy to make that mistake). Rather, that by each striving towards his own enlightened self interest *society* would become richer than it would be without such striving toward self-interest. And yes, he was entirely aware of the problems with rent seekers, place seekers, free riders and all the rest.

6) He very much did argue for government interventions at times. Government financing and provision of basic education for example.

I should declare an interest here as I'm a Fellow at the Adam Smith Institute in London. We're often thought of as even crazier than CATO but we're well in touch with the fact that Smith was a much more left wing, even revolutionary, thinker than he's often given credit for. Don't get confused into thinking that the Chicago School's caricature of him is the real thing: he's a great deal more subtle than that. As an example of that, he's a strong defender of the idea of relative poverty and its importance rather than just the absolute poverty which "the right" nowadays likes to talk about.

If the full couple of thousand pages of 18th century prose is too much for you then I very strongly recommend James Buchan's recent book. Forgive me for linking to my own review of it:

<link>

Even though I did review it it's still an excellent little book. Very strongly recommended indeed.

Thursday, September 17, 2009, 1:22:08 PM

<link>

I thought you might like this . . .

I have often had cause to complain (vigorously!) about the caricatures of Adam Smith's thinking promulgated by the right-wing and by extreme libertarians. Yes, Adam Smith believed in tax-financed public education. Yes, he was well aware of the greed of businessmen and did NOT think that greed was 'good'. Yes, he actually argued for progressive taxation. Much of his book The Wealth of Nations is a long and sustained rant against the concentrated market power of the state-created monopolies of his time. And yes, his earlier book The Theory of Moral Sentiments, is unjustly neglected, and yes, you won't really understand Adam Smith unless you have read both books.

People who think that Adam Smith and Ayn Rand would have been ideological allies are simply out to lunch. I recently engaged in just such an argument over on the Politics Fray-site, with a person who was claiming that they were a disciple of both Adam Smith and Ayn Rand. [And of course they claimed that Obama was both a Communist and a Fascist---sheesh.] I told them that they needed to choose, that you cannot simultaneously be a 'disciple' of both Smith and Rand.

Leroy:

I have long neglected The Bottom Line and I thought I would post a series of articles from my wanderings over at Angry Bear, Economist's View, EconoSpeak, and Naked Capitalism. There is a series of them below this one. A few of my posts were featured at Angry Bear.

Just trying to get this place motivated a little more and attract some other posters as well. I do not have all of the answers; but, we can find some that fit.

Are you trying to tell us that Smith-Corona and Remington-Rand weren't both typewriters? Of course they have something in common!

It is worth noting that Smith was a professor of Moral Philosophy and he described his work as political economy.

This sort of ripping phrases out of context for some political agaenda happens all the time. I'm sure John Winthrop is rolling over in his grave over how Reagan misused his "City on a Hill" speech. Winthrop was very much a communitarian, as were all the early Puritans, and would abhor Reagan's right-wing view of 'freedom.'

revrick:

Here is another of his writings or book that would suit a Sunday Morning, worth a thought or two in a sermon - "Theory of Moral Sentiments" as does Winthrop, and fits along the lines of what you are talking about.

The journey is too long and we are losing it.