Sunday, June 28, 2015
Robert W. Parenteau HERE
“Worshippers of the almighty Invisible Hand”
“Is #Neoliberalism religion? Robert W Parenteau looks at this modern #fundamentalist ideology, from the latest issue of NI.”
John Dickerson posts on Slate HERE
“The Man Blocking the Sidewalk So he can check his Phone and what to do about him”
“They halt as if an invisible hand is holding on to their belt loop”.
John Gaultier posts HERE
on “Ferocious Conservative Activist’s Bulletin”.
“THIS IS VALERIE JARRETT... THE INVISIBLE HAND AROUND OBAMA'S SCROTUM!”
CommentSurely a claim worthy of a Oak Leafed Gold Cluster with Double Bars for Lost Legacy's NONSENSE ON STILTS award.
Thursday, June 25, 2015
CLOSER BUT NOT YET RIGHT
Jason (PolicyAnalyst at Center for Educational Freedom) posts, 24 June, HERE on “CATO on Liberty”
‘Educational Choice: Getting It Right”
“Of course, there’s nothing “magic” about the “invisible hand” of the market – it’s just a metaphor Adam Smith used to describe the process of spontaneous order, by which the voluntary actions of disparate individuals organically form a system that is the result of human action, but not human design.”
Jason is close and getting there as he nears the true meaning of Smith’s use the “invisible” hand” metaphor.
What is missing is recognition that the “voluntary human actions of disparate individuals” that “organically form a system that is the result of human action, but not human design” are inclusive of both beneficial and non-beneficial consequences that may be intended or unintended by the human agents (example: ‘the road to Hell is paved with good intentions”).
Adam Smith clearly was aware of the implications inclusive of this distinction. He both praised and deprecated the motivated human actions of individuals. In his two examples of his use of the metaphoric ‘invisible hand” in TMS (1759) and WN (1776) he referred to beneficial consequences (the “propagation of the species” (TMS) and “adding to domestic revenue and employment” (WN).
Some motivated actions have detrimental consequences, such as in pollution, tariffs, prohibtions, sanctions, ‘tragedy of the commons’, dynastic and religious wars, and restrictive practices. He critiques some of the consequences of the behaviours of “merchants and manufacturers”, and of state governments and the “rulers of mankind”.
The “process of spontaneous order” should be used sparingly otherwise Jason Bedrick introduces what he correctly denies in his clear statement that “there’s nothing ‘magic’ about the ‘invisible hand’ of the market” by slipping into his assertion something that would indeed be “magic” if it was described as “spontaneous order”.
Moreover, the “invisible hand” metaphor was not solely about spontaneous order applied only to markets. Smith’s reference to the behaviours of “landlords” in TMS, described by “an invisisble hand” applied long before “markets” appeared and also, probably. long before the “proud and unfeeling landlord” appeared in pre-history.
Thursday, June 18, 2015
FROM THE ARCHIVES
David Warsh posts (10 August, 2014) HERE
“The Startling Story behind a Famous Footnote”
“Progress is a slippery word; but none can doubt that price theory, the preoccupation with markets that historically has at the heart of economics, has seen a great deal of elaboration in the least 75 years. Jerry Green, of Harvard University, gave a graphic illustration when he travelled to Middlebury Colllege last fall to give a lecture on the history of the discipline. He carried with him a series of graduate micro texts.
He held up Microeconomic Theory: A Mathematical Approach, by James Henderson and Richard Quandt, the slim book (291 pp.) with which he began his graduate education in the 1960s. H&Q had made waves when it first appeared in 1958, Green noted. Earlier texts – The Theory of Price, by George Stigler, say, or Economic Analysis, by Kenneth Boulding -- derived mainly from Alfred Marshall’s 1890 classic, Principles of Economics. These literary expositions bristled with diagrams, but there were no equations.
H&Q was just the beginning. In rapid order came Edmond Malinvaud’s Lectures in Microeconomic Theory (1972) and, in 1978, Hal Varian’s Microeconomic Analysis. In 1990 David Kreps introduced game theory and decision theory to the curriculum with A Course in Microeconomic Theory (850 pp.). The current best-seller, Microeconomic Theory, by Andreu Mas-Colell, Michael D. Whinston, and Harvard’s Green followed in 1995 (981 pp.). The first volume (584 pp) of Kreps’ magnum opus Microeconomic Foundations appeared in 2012, dealing mainly with choice and competitive markets. Kreps promises a second volume on game theory and strategy and a third treating various advanced topics of incentives.
Understand, this is not really about textbooks at all. The growth of knowledge has produced a series of correlative jobs in the world itself, not just teaching competition and cooperation in university departments and business schools, but practicing in government offices, law firms, courts, and consultancies around the world. If it is regulated – or deregulated, unregulated, or re-regulated – it is a matter of microeconomics.
What happened? The post-war mathematization of economics stems in general from two epochal works, Foundations of Economic Analysis (1947), by Paul Samuelson, and, with a lag, The Theory of Games and Economic Behavior (1944), by John von Neumann and Oskar Morgenstern. But books are advertisements for particular programs seeking concrete results. One mathematical adventure more than any other is said to underlay the expansion of microeconomics in the second half of the twentieth century: the proof, in 1952 or ’53 or ’54, of the existence of a competitive general equilibrium.
It had been intuitively obvious since Adam Smith that, in an economic system, everything depends on everything else, and thought possible, since Leon Walras, to calculate and measure such a system – in other words, to produce a blueprint to test against the world. But proving that such a coherence is possible in the first place in a world of many competing individuals was the necessary first step to describing it in detail. And, as Mas-Colell, of Pompeu Fabra Univesity, in Barcelona, has put it, the existence proof was “the door that opens into the house of analysis”
The mathematical proof of “General Equilibrium” operating in the real world required highly restrictive assumptions, acceptable to some economists, but not a proof of how GE could exist in the real world. If the assumptions do not or cannot exist in the real world the assertions remain tentative at best or irrelevant.
While rightly celebrated among mathematical economists GE receives scepticism from practical economists.
“It had been intuitively obvious since Adam Smith that, in an economic system, everything depends on everything else, and thought possible, since Leon Walras (1801-1866) to calculate and measure such a system” but when GE is tested “against the world” it “produces a blueprint” of an imaginary, fanstasy world an one we do not live in.
The assumptions to make models of General Equilibrium work are not characteristic of a “real world”. In the decades since Walras postulated the possibility of GE to model the real world, nobody has shown how GE represents the real world.
Reality is messy. Economies are untidy. Markets do not operating to the same schedules. Human organisations are open, not closed systems; the product cycles are not synchronised as second and third-hand (plus) markets demonstrate.
I believe Romer is realising these truths in economics - with more eloquence than I can muster - and so are particle physicists, the most mathematical of all who deal with models closer the reality than economics and with the advantage that particles do not depend on humans for their behaviours.
Long after the extinction of the last human on Earth, hopefully after many millennia to come, those known and as yet unknown particles of matter will continue doing what they have always done, as if we had never happened - and to be fair, our time since we evolved will be but a blink of an eye.
Wednesday, June 17, 2015
BY WAY OF AN EXPLANATION
Regular readers may have noticed recently a relative paucity of my usual regular posts, for which I apologise. I have many of my usual reminders on my desk-top of posts I wished to make each day, but cannot just now.
Domestic circumstances have necessitated that my attentions are directed elsewhere because of my wife’s treatment for a serious illness.
I therefore must post fewer comments on Lost Legacy than I have managed in the past in my normal schedule.
However, my latest essay is now more or less complete: “Adam Smith on the Invisible-Hand, Self Betterment, Intended and Unintended Consequences” but it requires serious editing, reference checks and such like.This currently takes up any spare time I have available.
I also have one other commitment to complete on Adam Smith in the context of a brilliant play performed in Edinburgh by academics at Bordeaux University in 2013: “Adam Smith Le Grand Tour: L’économie et la philosophie sur scène’ Projet d’ouvrage collectif autour de la pièce de théâtre, Adam Smith, Le Grand Tour”.
I shall regularly post when I can once again do so once my domestic obligations are better organised and of course, as I and the family hope and expect.
Monday, June 08, 2015
OBITUARY PROFESSOR IAN SIMPSON ROSS
Alasdair Steven writes (8 June) an obituary on Professor Ian Ross in The Scotsman newspaper, Edinburgh .HERE
Born: 9 August, 1930, in Dundee. Died: 21 May, 2015, in Vancouver, aged 84
Professor Ian Ross was for many years a distinguished academic at British Columbia University but is best known in Scotland as the author of the definitive biography of Adam Smith, published in 1995. Smith, – “Scotland’s father of modern economics” – was born in Kirkcaldy and wrote The Wealth of Nations, which is now considered the fundamental work on economics.
Ross’s biography was immediately hailed as bringing fresh insight to this mighty figure of the Scottish Enlightenment. It was the first full-scale biography of Adam Smith for 100 years and Ross placed the economist into a broad historical significance by examining his background, education and intellectual circle.
The latter included David Hume, whose correspondence with Smith Ross explored at length.
It was indeed a scrupulously researched and scholarly biography, rightly winning worldwide acclaim. In a lengthy review, The Economist wrote: “Ross’s achievement in this biography is to have revealed the intellectual sources for his work while reminding us of the practicality, modesty, generosity and essential kindness of this great man.”
Ian Simpson Ross’s father worked in the jute industry in Dundee. Conditions were hard in the city in the era prior to the Second World War and his mother was in service.
An early memory for Ross was the many dole queues around Dundee. He attended Blackness Primary and won a scholarship to Harris Academy. He became a voracious reader and a keen student of Scottish history and literature. In 1950 Ross won a scholarship to read English literature – specialising in Elizabethan writings – at St Andrews University and gained a first-class honours degree. His fascination with that period was furthered when he carried out research on the period at Merton College, Oxford.
He also explored the poetry written by the Scottish poets at the court of James V1 and 1. Ross was appointed Instructor at British Columbia University, where he rose to become head of the English department in 1982 and appointed Professor Emeritus of English in 1993.
Ross won a Fulbright Scholarship and wrote his PhD at Texas University on the leading figures in the Scottish Enlightenment, notably Adam Smith and David Hume. He built a considerable reputation as an enlightened lecturer and concentrated on writing the biography of Adam Smith. A second edition was published in 2010.
Other publications by Ross drew on his love of Scottish writings and its heritage. They included a biography on William Dunbar, the 15th-century makar poet, and Lord Kames, a leading figure in the Enlightenment who was a founder member of the Philosophical Society of Edinburgh. In 2008 in Studies In Scottish Literature Ross wrote an authoritative article on Dr Johnson’s Highland tour of 1773.
Ross often returned to Scotland – partly to carry out academic research but also to spend time with friends and revisit old haunts. His final visit to Scotland was with his wife Ingrid last year. They travelled from Canada for the Scottish independence referendum and, as enthusiastic supporters of the Yes side, left a touch disappointed.
In 2013 Ross donated a beautiful five-volume copy of the first edition of The Works of Adam Smith to the Panmure House Project, which is helping to restore Panmure House in Edinburgh where Smith lived. The essays were written, along with articles in the Edinburgh Review, by Smith for intellectual discussion but never published. The 1811 edition, which is of enormous importance to scholars, includes texts of the third edition (1784) of The Wealth of Nations. Smith had lived in Panmure House when he was employed as the city’s
Commissioner of Customs and Excise. Ross wrote that he “entertained figures of the
Scottish Enlightenment on Sundays in the spacious rooms”. More recent owners of Panmure House included The Scotsman and the Canongate Boys Club.
There is little doubt, amongst all his many academic achievements, that Ross will be remembered for his academic insight and research on the life of Adam Smith. The author and Smith authority, Gavin Kennedy, has written of that biography: “Ian was the doyen among Adam Smith’s modern scholarly biographers. His biography will never be surpassed.”
Ross was a brilliant, yet quietly modest, man of letters. He was a man of much humanity and charm who combined a wide academic knowledge with a delight and great personal sincerity. He is survived by his wife Ingrid and their five children.
ADAM SMITH’S METAPHORIC USE OF THE INVISIBLE HAND
[I was asked recently by a well-known and internationally respected Smithian scholar: ”to briefly state what you take Smith in fact to have meant by invoking the IH in the relevant passages in TMS and in WN”. What follows is a slightly edited response as my reply]:
Adam Smith’s metaphoric references to the “invisible hand” were made on two occasions only. In Moral Sentiments, (1759: Part IV. Chapter 1. paragraph 10): “unfeeling landlords” had a coincidence of self-interests with their field labourers. Landlords were dependent on their labourers because their social “greatness” and their “vain and “insatiable desires” depended on their succcessful management of their estates. Their labourers were absolutely dependent on their landlords for their families’ subsistence from the total produce of their labours. Smith said the landlords were “led by an invisible hand to make nearly the same distribution of the necessaries of life” as “would have been made had the earth been divided into equal portions”.
Landlords were motivated to feed their labourers because without their compliant labour (enforced, we should note, by the landlord’s overseers) there would be no social “greatness”. Their labourers were motivated to labour in their landlord’s fields because they received their share of subsistence for their compliant labour, without which they could not survive. Each party therefore was motivated intentionally to act to secure their desired outcomes. However, as a result of their conjoined actions there were also unintended consequences, specifically that “without intending it, without knowing it, [they] advance the interests of the society, and afford means to the multiplication of the species” (TMS IV.i.10: p. 184-5).
Smith’s second use of the “invisible hand” metaphor had a similar construction in Wealth of Nations (1776: Book IV. Chapter 2. paragraph 9: p. 456). A “wholesale merchant” naturally “prefers the home trade to the foreign trade” because “his capital is never never so long out of his sight” and he “knows better the laws of his own country and knows better the character” of the “persons whom he trusts”. By acting in this manner he “intends only his own gain, and he is led by an invisible hand to promote an end which was no part of his intention”. Specifically by acting in “such a manner” the country’s produce “may be of the greatest value”. Again, the private, hidden motivations of the merchant, in this case his aversion to the risks of foreign trade, cause him to act intentionally to protect his capital by investing it locally. And acting in this manner, he is led by “an invisible hand” unintentionally to add to the “annual revenue of the society” and thereby “promote the publick interest” (WN IV.ii.9: p. 456).
In both cases, Smith described the sequential process that begins with the motivations of human agents for the actions they take that led them to achieve their intended consequences and, in turn, their motivated actions may lead to the unintended consequences he describes. In using the “invisible hand” metaphorically to describe the same sequence in each case, and also noting that the same sequence could apply “in many other cases” (WN IV.ii. p 456), Smith made an important perspicuous contribution about the human proclivity for their motivations leading them to actions in pursuit of intended consequences that could also have unintended positive, or negative, consequences.
Schematically the sequence may be illustrated by:
Motives > Actions > Intended consequences > Unintended consequences.
The ‘invisible hand’ metaphorically describes this common process throughout all of human activity since our ancestor’s speciation as primates.
The “invisible hand” metaphor is neither benign nor malign; it is a metaphoric rhetorical description of human actions, some of which may add positively to market operations (rising GDP and per capita incomes) and some that may detract negatively from human welfare (environmental destruction, pollution, corruption, general illegalities, and such like).
In what follows (in my latest essay I am preparing for publication) I survey modern (post-1948), often ideological, misunderstandings among post mid-20th century economists about what Smith meant by innocently using the “invisible hand” metaphor to describe important aspects of human behaviour - though Smith applied his use of the metaphor to functioning societies long before modern markets came to dominate the more successful commercial economies in the modern world.
In short, Smith never said there was a “magical” or “miraculous” “invisible hand” uniquely located in modern market exchanges that benignly “led” markets, or supply and demand, to a supposed benign “equilibia”. His metaphoric meaning was more modest.
In post-1948 economics the misuse of the “invisible hand” with its imaginative fantasies, unsupported in anything Smith wrote (or taught) of his rhetorical use of the now famous metaphor that, remarkably, none of his contemporaries commented upon it. Moreover, only a very few of those who taught from his works in the 19th century, plus only a dozen or so scholars in the first half of 20th-century, referred to the “invisible hand”.
Smith states in his largely unread “Lectures on Rhetoric and Belles Lettres” (1762; 1983) that “in every metaphor there must be an allusion betwixt one object and an other” and that a metaphor cannot “have any beauty unless it be so adapted that it gives due strength of expression to the object described and at the same time does this in a more striking and interesting manner. When this is not the case they must either carry us to bombast on the one hand or into burlesque on the other” (LRBL, i.64-66: p.29).
I suggest “bombast and burlesque” is precisely what has happened to Smith’s innocent metaphoric use the “invisible hand” in the academy since Paul Samuelson’s, “Economics: an analytical introduction”, McGraw-Hill, 1948, became the world’s best selling ‘Economics 101’ textbook (over its 19 editions to 2010) with its flippant and fateful sentences on page 36. (See: Kennedy, G. 2010. “Paul Samuelson and the Invention of the Modern Economics of the Invisible Hand” History of Economic Ideas, xviii/2010/3. pp. 105-19).
Gavin Kennedy (6 June, 2015) Copyright 2015.
Friday, June 05, 2015
A DNNER IN HONOUR OF ADAM SMITH FORMER RESIDENT IN KIRKCALDY, SCOTLAND
Paul McCabe posts (4 June) in Fife Today HERE
“A dinner in honour of our Mr Smith …"
"A charity dinner held by the Adam Smith Global Foundation has been hailed a success, with many attendees already looking forward to the next one.
The fundraising event was held in the atrium of Fife College on St Brycedale Avenue to mark the birthday of Kirkcaldy’s most famous son and to swell the coffers of the Foundation, as it gets ready to open the new Adam Smith Visitor Centre in September.
Marilyn Livingstone, chief executive officer of the Foundation, said she was “delighted” with the evening’s events.
“From the point of view of the Foundation, it went really well,” she said.
“Although primarily a fundraiser for the Foundation, the evening was a celebration of the birth of Adam Smith with the focus on young people, which we focused on in two ways.
“Firstly, the food – which was excellent – was provided by Bryan McCabe and the students at the college, then there was the entertainment, which was organised by Janet Robertson at the Fife Cultural Trust and performed by the Fife Youth Arts Hub, and they were just fantastic.
“We also wanted to highlight the work the Foundation is carrying out, aiming at the social and economic regeneration of Kirkcaldy in conjunction with Kirkcaldy’s Ambitions, and getting people on board with that. And, of course, it was also a celebration of Adam Smith’s life.
“We don’t have his birthday, but we do know his baptismal date, which was June 5, 1723 at the Old Kirk, so we held the dinner the week before then.
“Since Friday, we’ve had a lot of positive feedback on Facebook and Twitter and I’ve had emails from people saying how much they enjoyed it and they would definitely come to the next one, which is great.”
Speaking at the dinner was former Kirkcaldy and Cowdenbeath MP Gordon Brown, who paid tribute to the Foundation while outlining its plans.
“In the last three years, the Adam Smith Foundation’s board has managed to attract £1 million investment in Kirkcaldy,” he said.
“The timetable means completion of the Adam Smith Visitor Centre by autumn 2015 and the completion of Adam Smith Close.”
The initiatives of the Adam Smith Global Foundation in Kirkcaldy, Fife, Scotland are encouraging. Much of the credit for these developments is down to the energetic influence of the former UK Prime Minster, Gordon Brown, who stood down as the local MP at the recent General Election and the enthusiastic hard work of the local team led by Marilyn Livingstone, chief executive officer of the Foundation.
I have attended several events organised in Kirkcaldy, where Adam Smith was born in 1723. They have proved to be excellent educationally and socially for the many international scholars who attended them.
Tuesday, June 02, 2015
OBITUARY OF IAN SIMPSON ROSS (1930-2015)
Harry McGrath writes in The (Glasgow) Herald (2 June) an obituary of Ian S. Ross, Adam Smith’s definitive biographer, who died 21 May, 2015.
"Ian Simpson Ross, Writer and biographer of Adam Smith."
"Born: August 9, 1930; Died May 21, 2015
Professor Ian Simpson Ross, who has died in Vancouver aged 84, was a Scots-born academic, lecturer and writer who became Professor Emeritus of English at the University of British Columbia. He was also the author of the much-lauded Life of Adam Smith, which was the first full-scale biography of Smith in a century when it was published in 1995.
His work on Smith was a one part of an extraordinary academic legacy. He received his M.A. in English Language and Literature from the University of St Andrews (1954), a B.Litt. from Oxford University (1956) and a Ph.D. from the University of Texas (1960).
On completing his Ph.D., he joined the University of British Columbia English Department as a lecturer. After his retirement, he was a community member of the Centre for Scottish Studies at Simon Fraser University. He helped organise the university's 40th anniversary Scottish lecture series involving historian Sir Tom Devine, art critic Duncan Macmillan, Dr Kirsteen McCue of Glasgow University and others. In 2005, the centre interviewed Professor Ross as part its Scottish Voices from the West oral history project.
Ian Ross was born in Ure Street, Dundee. He remembered it as a short narrow street of overcrowded tenements surrounded by jute mills and a foundry. His father John worked in the jute industry and his mother Agnes left school at 14 to go into service. One of his early memories was watching unemployed men lining up outside to collect dole money. His own family's material circumstances were often challenging, but his parents were determined that Ian and his brother Angus, later a founding English faculty member at the University of Sussex, would get an education.
Ian attended Blackness Primary and then received a bursary to Harris Academy where he supplemented his studies with visits to the local library in Dundee. His interest in Scottish history began at Harris and his love of Scottish literature was fostered by reading Angus's collection of Scottish books.
In 1950 he entered St Andrews University where he received a state grant in his first year and was then awarded a full scholarship. He studied for an MA in English Literature and graduated with first-class honours, specialising in Elizabethan and Jacobean Literature.
He was then offered the Tindal-Bruce Scholarship at Merton College Oxford and researched what happened to James VI's court poets when James moved the Scottish court down to London. His supervisor was David Nichol Smith, the brother of George Gregory Smith, author of the influential book Scottish Writing: Character and Influence (1919).
After graduating from Oxford, he applied for the Fulbright Scholarship and was accepted into the Ph.D program at the University of Texas. There he researched several figures of the Scottish Enlightenment under the supervision of Professor Ernest Mossner who was an expert on Smith and Hume.
Professor Ross was subsequently offered an instructorship at the University of British Columbia and taught his speciality of 18th century literature and managed to smuggle in some Scottish philosophy and literature. He wrote books on Lord Kames, William Dunbar, and Adam Smith. He became head of the English department in 1982.
He was a prime mover of the Arts One programme which proposed a less fragmented view of education for the university's first year students. Arts One was originally established as a three-year pilot project, but was so successful that it remains to this day as a small cohort learning and integrated inter-disciplinary curriculum.
At some juncture, University of Texas mentor Ernest Messner asked Professor Ross to continue his work. It was a request that, he said, defined the rest of his career and resulted in his much-lauded Life of Adam Smith, the first full-scale biography of Smith in a century when it was published in 1995. Professor Ross saw his subject as a man of letters as well as an economist, but he also wanted to reclaim Smith from misappropriation. A second edition of Life appeared in 2010 and the preface gives a strong indication of where Professor Ross stood. He wrote: "If Smith is one of the inventors of the modern world, what kind of nightmare did he bring upon us? Alternatively, if he did inquire successfully into the origin of wealth and how it is constituted, why is his message so badly misunderstood and misapplied? Well, the story of his life and books tells us he was very far from being an optimistic promoter of market fundamentalism."
Professor Ross was fond of visiting his homeland and I was fortunate to meet him in Scotland on several occasions. One abiding memory is a visit we made together to Kelvingrove Art Gallery and Museum shortly after its refurbishment. We watched a short video of a Glasgow taxi driver explaining the essentials of Adam Smith to a passenger in the back seat of his black cab. Professor Ross was delighted by this and said the taxi driver had Smith spot on. Professor Ross's final visit to Scotland was in the company of his wife Ingrid in September, 2014. They travelled from Canada for the Scottish independence referendum and, as enthusiastic supporters of the Yes side, left disappointed but not discouraged.
It may sound cliched, but Professor Ross really was a small man with a big heart and it is no coincidence that he opposed all attempts to deprive Adam Smith of his humanity. Those of us who delighted in his company will remember other things too: his kindness, tolerance, generosity, and concern for others.
Ian Ross is survived by his loving wife Ingrid, his brother Angus, his children Marion, Isla, Andrew, David and Betina, and his nieces Stephanie, Vicky and Anthia.
[Copyright: The Herald]
What a moving testament to the life and work of Ian Ross by Harry McGrath published in The Herald. It captures the humanity of Ian Ross that many of us knew and loved about him.
Ian’s scholarly biography of Adam Smith will never be surpassed. It is the definitive work on Adam Smith’s life, carefully researched, well balanced and thoughtful in its assertions about a much misunderstood figure in the Scottish Enlightenment.
Ian epitomised the quiet-spoken Scottish scholar who was unnecessarily modest amidst his brilliance and deserving of many more plaudits than he was awarded - though never sought.