This idea usually takes on the meaning that those who act in their self-interest provide unintended consequences that betters society at large. If it wasn’t for Warren Samuel’s quote below reminding me how easily we are influenced through the “reiteration” and “invocation” of ideas, I would have forgotten how powerful a rhetorical device the “invisible hand” is for politicians and pundits.
The foundation of our society is not the predominance of falsity and pretense. The reiteration and invocation of terms like “free market” and “rule of law” as well as “invisible hand” distract attention from the key issues of policy and empower those with selective perception and selective specification. [12]
Social Control
The debate on the significance and meaning of the metaphor that Adam Smith uses in the Wealth of Nations reminds me of the battle in exegesis over the authors’ meaning in Genesis I and II. The answer is we can never be sure of the authors’ intentions unless we ask them, and we all use our own heuristics to evaluate and interpret text.
We may prefer a literal over a figurative interpretation or place an emphasis on how context shapes meaning but often forget that our motivations cause us to favor one over the other. It is predictable when fundamentalists interpret Genesis I and II in a way that serves their interests, and we should expect the same when evaluating “left” versus “right” economists on the “invisible hand”.
I don’t have a stake in an economic camp and put an equal amount of time into an unbiased selection of sources. And a surprising result was that most economists, right or left, fall in line with the idea that it’s a metaphor. The only difference is that those on the “right” use it as a rhetorical device to show the magic of markets and those on the “left” are quick to point out that it doesn’t exist.
This sums the “invisible hand” up to be nothing more than an obfuscation that acts as a rhetorical device for social control. Persuasion is not always a bad thing if the ideology is good, but my cost-benefit analysis of capitalism is still lightyears away.
Much invisible-hand reasoning assumes the invisible hand to be a definition of reality, as well as part of the social belief system operating as psychic balm and social control. The invisible hand projected by such reasoning is believed to be in part about the economy but is also of the economy, part of the process of working things out. The rhetoric or belief system of the invisible hand is a self-projection of western civilization and the modern economy – an aspect of culture that resonates with, reflects, and reinforces other aspects. [12]
References:
[1] Foster, Peter. Biting the Invisible Hand: An Interview with Peter Foster. FEE.org.
[2] Foster, Peter. Why We Bite the Invisible Hand: The Psychology of Anti-Capitalism . Pleasaunce Press.
[3] Friedman, Milton. Capitalism and Freedom . University of Chicago Press.
[4] Friedman, Milton. Free to Choose: A Personal Statement. HMH Books.
[5] Kennedy, Gavin. Adam Smith and the Invisible Hand: From Metaphor to Myth. Econ Journal Watch 6(2): 239–263.
[6] Kennedy, Gavin. “A Reply to Daniel Klein on Adam Smith and the Invisible Hand”. Econ Journal Watch 6(3): 374–388.
[7] Klein, Daniel B. In “Adam Smith’s Invisible Hands: Comment on Gavin Kennedy”. Econ Journal Watch 6(2): 264–279.
[8] Klein, Daniel B. Economists Misplaced Faith in the Invisible Hand. FEE.org.
[9] Lucas, Brandon, Klein, Daniel B. In a Word or Two, Placed in the Middle: the Invisible Hand in Smith’s Tomes. George Mason University Department of Economics Research Paper No. 09-02
[10] Meeropol, Micheal. Another Distortion of Adam Smith: The Case of the “Invisible Hand”. Research Gate.
[11] Optiz, Edman. Adam Smith and the Invisible Hand. FEE.org.
[12] Samuels, Warren J. Erasing the Invisible Hand . Cambridge University Press.
[13] Schlefer, Jonathan. There Is No Invisible Hand. Harvard Business Review.
[14] Schlefer, Jonathan. Today’s Most Mischievous Misquotation. Adam Smith did not mean what he is often made to say. The Atlantic.
[15] Skousen, Mark. Adam Smith Reveals His (Invisible) Hand. Foundation for Economic Education.
[16] Ullmann-Margalit, Edna. The Invisible Hand and the Cunning of Reason. The Johns Hopkins University Press.
Here is my take on it:
Species, companies, and cultures are all complex systems. Complex systems that are allowed to compete with one another over limited resources tend to become more efficient over time. (Darwin’s original idea, applied to non-biological systems by Dawkins.) That is the “invisible hand” in a nutshell — it is just Darwinism applied to economics.
The problem, as I think I noted in a previous comment, is that capitalism in its advanced stages tends to squash competition rather than encouraging it. As far as I know, Adam Smith did not fully address that failing.
I agree with you that we can view all of those things as complex systems, and economists do exactly that when they model economic behavior. There is also reason to believe that Darwin was influenced by Adam Smith’s ideas, but obviously not the other way around because Smith preceded Darwin. This of course doesn’t mean economists haven’t tried to equate the invisible hand with natural selection.
I am not, however, concerned with that particular claim as interesting as it may be, at least not yet. Based on my cursory research on it though, I see it as helpful to use in some sense but in another sense not so much. Ironically, I’m in the middle of reading “The Darwin Economy” by Robert H. Frank, which asks that very question. I’m excited to post my thoughts about that in the future.
But that’s getting away from my point. This piece was trying to establish the fact that the “invisible hand” is nothing more than a metaphor because it can’t be equated with all of the things that it has tried to be throughout its history, say like the:
Moreover, the “invisible hand” has not given us any new knowledge as models should:
And therefore the “invisible hand” truly is invisible as it has no effect.
But this doesn’t matter because it’s a metaphor, right?
But it does because the way it was taken from Adam Smith and used in our culture is exactly as this: those whom act in accordance with their self-interest provide unintended consequences that betters society at large.
This statement is hugely problematic and will explore how so in next post. But the main point I was making on this, besides the idea that there is no synergy effect that results from this and Smith didn’t mean it in that way anyhow, is that it’s used as a way to persuade others that maximizing their self-interest is always desirable. And in a sense this controls us because ideas eventually translate into attitudes, beliefs and behaviors.