![]() It is un-Smithian and unimportant to his theory” and was nothing more than a “mildly ironic joke.”Ī fascinating discovery by Daniel Klein, professor of economics at George Mason University, may shed light on this debate. Rothschild, the Harvard University economic historian, even goes so far as to declare, “What I will suggest is that Smith did not especially esteem the invisible hand. On the other hand, economist Gavin Kennedy contended in earlier writings that the invisible hand is nothing more than an afterthought, a “casual metaphor” with limited value. without central direction.” Economist George Stigler calls it the “crown jewel” of The Wealth of Nations and “the most important substantive proposition in all of economics.” ![]() Clearly, it wasn’t until the twentieth century that the invisible hand became a popular symbol of laissez faire.Ĭould the detractors be correct in their assessment of Adam Smith’s sentiments? Is the metaphor central or marginal to his “system of natural liberty”?įriedman refers to Adam Smith’s symbol as a “key insight” into the cooperative, self-regulating “power of the market to produce our food, our clothing, our housing. It was finally added to the index in 1937 by Max Lerner for the Modern Library edition. ![]() Until well into the twentieth century, no subject index listed “invisible hand” as a separate entry. No notice was made of it during the celebrations of the centenary of The Wealth of Nations in 1876. The references are so sparse that commentators seldom mentioned the expression by name in the nineteenth century. What about the metaphor of the “invisible hand,” the famous Smithian idea that “by pursuing his own self-interest, frequently promotes that of the society”? Free-market economists from Ludwig von Mises to Milton Friedman have regarded it as a powerful symbol of unfettered market forces, what Adam Smith called his “system of natural liberty.” In rebuttal the new critics belittle Smith’s metaphor as a “passing, satirical” reference and suggest that he favored more of a “helping hand.” They emphasize that Smith used the phrase “invisible hand” only once in each of his two major works, The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776). These critics are quick to claim that Smith was no friend of rent-seeking landlords, monopolistic merchants, and conspiring businessmen, and that he advocated an active State authority in support of free education, large-scale public works, usury laws, progressive taxation, and even limits on free trade. According to Iain McLean, professor of politics at Oxford University, and Samuel Fleschaker, professor of philosophy at the University of Illinois at Chicago, the Scottish philosopher was a “radical egalitarian” who, while endorsing economic liberalism, had a lively appreciation of market failure and ultimately rejected “ruthless laissez-faire capitalism” in favor of “human equality” and “distributive justice.” “Adam Smith had one overwhelmingly important triumph: he put into the center of economics the systematic analysis of the behavior of individuals pursuing their self-interest under conditions of competition.”-George Stigler (emphasis added)Ĭritics of laissez faire-from Cambridge economic historian Emma Rothschild to British Labor Party leader Gordon Brown-have recently attempted to wrestle Adam Smith out of the hands of the free-market camp and into the camp of the social democrats.
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