Tuesday, July 25, 2017

NEW USE FOR AN OLD METAPHOR?

John Wenz posts (24 July) on Discovery Magazine HERE
A Closer Look at Rogue Planets in the Universe””
“The OGLE data showed enough events that were likely super-Earth sized worlds to build a picture of something like this: 25 percent gas giants, 75 percent rocky worlds or ice giants. And it all has to do with the invisible hand of gravity. In short, stars are more likely to hold onto gas giants because the gas giants have a stronger grip.”

Monday, July 24, 2017

GREED IS NOT GOOD

UTPAL KUMAR write in Daily O (23 June) HERE
“Dharma of business: The roots of commerce in India”
Donald R Davis Jr's book holds the key to moral economy, something the world has been eagerly looking for.
Morality has been another constant phenomenon. Here, Davis reminds that Adam Smith, whose "hidden hand" theory is often put forward to justify the greed-is-good argument, believed in moral economy and his initial juxtaposition on economy and morality has been distorted. …
… “There emerged a series of economists in the US in the 20th century who mystified the economy and believed that it was an autonomous entity. They said there was no need to worry about morality because the market magically converted greed into good,” he says. “I think Smith would have been shocked to see his idea being distorted so much.”
Also, unlike the Western model, all businesses in India are personal. “We are often told in the professional arena that it’s not personal. But the Dharmashastras tell us that the business will flourish more if there’s a personal touch and a sense of belonging involved.”
Davis blames the West for creating this sense of distrust among Indians for their indigenous way of doing business, and instead blindly aping the US. “My colonial predecessors inculcated a sense of stigma among Indians about their local laws, languages and customs. This also explains why Sanskrit finds so little support and patronage in the country of its birth.”
COMMENT
Another addition to the growing pile of daily evidence that the world is gradually waking-up to the wholly made-up, mid-20th century misreading, of Adam Smith’s singular usage of the “invisible hand” metaphor in Wealth of Nations. The great error was initiated by Paul Samuelson (1948) and promoted by Milton Friedman from the 1950s. They both carried immense prestige among economists with their Nobel Prizes. 

Whatever else they were justly respected for they were both wrong about ‘greed is good’ economics. It is time to call them out.
We owe it Adam Smith and his legacy.

Sunday, July 23, 2017

AN END TO 'GREED IS GOOD' ECONOMICS?

Donald R Davis Jr posts (23 July)  The Dharma of Business talks about the history of commerce in India. HERE
“This latest book throws light on the roots of business in India”
“Morality has been another constant phenomenon. Here, Davis reminds that Adam Smith, whose 'hidden hand' theory is often put forward to justify the greed-is good argument, believed in moral economy and his initial juxtaposition on economy and morality has been distorted. "There emerged a series of economists in the US in the 20th century who mystified the economy and believed that it was an autonomous entity. They said there was no need to worry about morality because the market magically converted greed into good," he says. "I think Smith would have been shocked to see his idea being distorted so much.”
COMMENT
At least David R Davis Jr exposes the modern distortion of Adam Smith’s use of the metaphor of the ‘hidden hand’/ invisible hand in modern economics. For that alone congratulations!
think (hope?) there is a slowy emerging trend to abandon Paul Samuelson’s/Friedman’s 1948/1950s distortion of the post-war that ‘Greed is good’ economics.

From such signs, I am increasingly optimistic that the modern distortion of Adam Smith’s ideas will largely be universally discredited before too long. (I am 77 …).

Saturday, July 22, 2017

MAKING IT UP AS YOU GO ALONG!

John T. Kennedy (NO RELATION!) posts (22 July) in STEELMIT HERE 
“The Invisible Hand of Spontaneous Corruption”
“In The Wealth of Nations, Adam Smith observed that markets spontaneously generate unintended order, as if an invisible hand were at work in the free market. He identified self-interest of the individual as the animating force of this invisible hand, "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it."
I submit that there is another invisible hand, one by which government spontaneously generates unintended disorder. The animating force of this invisible hand is the same; each individual participant in government is naturally motivated by self-interest. But while self-interest leads to beneficial cooperation in a free market, it quickly leads to corruption when the same individuals wield coercive control through government.”
COMMENT

A clear example of making it up as you go along. Wherever he got the above muddled ideas from it most certainly was not from Adam Smith, nor from his Wealth of Nations.

Friday, July 21, 2017

FAKE NEWS IN MODERN ECONOMICS

Sam Dumitriu writes (20 July) in the Adam Smith Institute Blog HERE
‘Fake News in The Guardian’
Democracy in Chains smears Nobel Laureate James Buchanan (amongst others) with deliberate misquotes and pernicious accusations of racism. It asserts that Buchanan sat at the centre of an elaborate academic conspiracy to undermine democracy and replace it with ‘a totalitarian capitalism’.
Of course, this isn’t the first time Monbiot’s been taken in by a BS Vendor who happens to share his political biases – he frequently cites Naomi Klein’s sloppy Shock Doctrine which proposed a similar right-wing academic conspiracy with Milton Friedman at the centre (thoroughly debunked by Johan Norberg at Cato).
Unlike Maclean herself, it’s not clear if Monbiot actually understands what public choice theory (the field where Buchanan made his name) is.
COMMENT
Read the whole article by following the link above.
I think it is important that when we read something of which we have some claim to understanding and with which we profoundly disagree with a contributor’s comments, that we are sufficiently confident of our case that we offer a corrective comment in the interests of scholarly clarity.
Clearly, Monbiot on this occasion falls far short of that minimal scholarly standard as shown by Sam Dumitriu.
This if not a new cause for my concern as the author of the LOST LEGACY BLOG. 
In fact, LOST LEGACY was founded to correct the FAKE NEWS that Adam Smith believed the modern post 1948, nonsense of ‘an invisible hand’ mysteriously guiding supply and demand in the market, causing economic equilibrium, and Pareto’s welfare theorems 1 and 2. 
Whereas for Adam Smith, it was a metaphor for the simplest of statements that by seeking personal gain from domestic investment and the employment of domestic labour, the inevitable consequence was that the merchant also, and necessarily, added to aggregate domestic investment and employment. That’s all!

[Disclosure: I am a (moderate) Fellow of the Adam Smith Institute]

Monday, July 17, 2017

NEWS OF NEW BOOK ON ADAM SMITH BY GAVIN KENNEDY

© 2017
An Authentic Account of Adam Smith
Gavin Kennedy

To be published by Palgrave-Macmillan, 1st September, 2017

This book is a textual criticism of modern ideas about the work of Adam Smith that offers a new perspective on many of his famous contributions to economic thought. Adam Smith is often hailed as a leading figure in the development of economic theories, but modern presentations of his works do not reflect Smith’s actual ideas or influence during his lifetime.
       Provides an informed survey of the existing corpus of Smithian studies, as well as a number of suggested original lines of further debate.
Though not written as a biography, it often draws on details of Smith's life in order to illustrate an authentic version of his works and the ideas that informed them
Makes extensive use of primary sources on Smith.

Gavin Kennedy believes that Smith’s name and legacy were often appropriated or made into myths in the 19th and 20th centuries, with many misconceptions persisting today. Offering new analysis of works on rhetoric, moral sentiments, jurisprudence, the invisible hand, The Wealth of Nations, and Smith’s very private views on religion, the book gives a new perspective on this important canonical thinker.

© 2017

Saturday, July 15, 2017

A TIMELY REMINDER THAT MARKETS CAN BE ENSLAVING OR LIBERATING

From an OP-ED in The News & Observer HERE
"Free markets, when idolized, demand sacrifice"
An idolatry is growing in the land and it could destroy our health. Idolatry is the worship of earthly things as though they were gods. In our case, the idol is the human idea of the sanctity of private markets. Evidence of this idolatry abounds in statements and images: “the invisible hand of the market”, “the magic of the market”, “the market is a bull”, “the market is nervous” or “exuberant” or “relieved.” Well-funded market missionaries use mass media, advertising, think tanks and, now, full-blown university programs to evangelize, to share their “faith in the market” and exhort us all to believe. The market’s high priests, the business news commentators, explain to us what the market is saying. We hang on their words because we are told that our well-being depends on it. This gleaming golden calf is compelling indeed.
But the “free” market is not a god to be worshipped. It is a tool which uses the supply-demand dynamic to allocate resources. It can be a useful tool. It has been used to accelerate economic growth and expand certain freedoms for many people. But it is only a tool. It must be harnessed and used in conjunction with other tools for the common good. Just as we need more than a power saw to build a house, we need more than private markets to uplift and strengthen our communities. Other essential tools include volunteerism, philanthropy, churches and other non-profits and democratic government. All are important. All involve human beings, so no tool is perfect. Yet, we are asked to believe that the market can do no wrong, that it is practically a sin to use the tool of our democratic government to regulate the market and provide health care for our community.”
[Read more here: http://www.newsobserver.com/opinion/op-ed/article161416873.html#storylink=cpy]
COMMENT

A contribution to balancing the exuberance of many public economists (including Milton Freidman, etc) when they idolise the “Market”, and their critics who denounce “Markets” as if they are the “Enemy”.