Wednesday, August 24, 2016

LOONY TUNES no 164

1
Shankar Tharoor (India) posts (22 August) in The Good Men Project (‘the conversation no one else is having’)
Financial wealth and muscle power play a vital role today in how candidates are selected to represent the rest of us in Parliament. We seldom know who funds them, and so, we are unaware of the invisible hand that governs us.”
2
Wanga Gwede  posts (24 August) in NYASA TIMES (MALAWI)
HERE 
MCP deputy secretary-general Eisenhower Mkaka said the party received intelligence reports that there was a plot to petrol bomb its headquarters, saying political competitors are creating divisions and wants to attribute violence to internal squabbles.
He said within the rank and file of MCP, there was no problem but those being bribed to cause confusion.
“We know pretty well of  an external ‘invisible hand’ that is fuelling the squabbles in MCP,” said Mkaka.
3
LORETTA SORENSON posts in TODAYS PRODUCER (‘National Association of Wheat Growers’) HERE 
Former NAWG president sees wheat a key part of global diet
“Kansas was given the nickname “Wheat State” for good reason. The state’s wheat history goes back to 1839, which pre-dates their 1861 Statehood. For decades Kansas led the nation in annual wheat production.
But even with a projected 2016 harvest of 393.6 million bushels of wheat, Kansas wheat acres — like wheat acres in every other U.S. state — are on a downward trend.
John Thaemert, former National Association of Wheat Growers president, says low wheat prices and tight agricultural profit margins are pushing farmers toward greater corn and soybean production. While some farmers grow small amounts of wheat, it’s no longer a dominant Kansas crop.
“The invisible hand of capitalism works well,” Thaemert said. “Money goes where it’s treated best. Because of the current low wheat prices and lower returns per acre, demand for wheat acres isn’t as strong as it used to be. Record high global wheat supply has also put pressure on wheat prices.”
COMMENT
Yet another example of a description of a market where visible prices of different elements of the production process are described, summarised by a wholly redundant reference to the “invisible hand of capitalism”, the role of which remains obscure. Markets work by VISIBLE prices and do not/cannot work without them.
Loretta tells us that ”Record high global wheat supply has also put pressure on wheat prices”. What else does she expect - even ECON 101 covers that phenomenon before the "invisible hand" nonsense obscures it.
4
Notice from Berkeley (23 August) of a Coloquium Events  HERE
The Invisible Hand of Homophily” Colloquium on August 31Tolman Hall
Speaker: Drew Jacoby-Senghor, Assistant Professor, Haas School of Business. Event Contact: ipsr@berkeley.edu, 510-642-5050

Despite the best intentions of both individuals and institutions, homogeneity within social networks stubbornly persists, profoundly shaping individuals’ social realities, from the interactions one has to the opportunities one is afforded. I explore how unconscious intergroup biases act as an invisible hand perpetuating homogeneous networks that, in turn, threaten to reify these biases.”

Tuesday, August 23, 2016

ON THE RECIPE FOR RABBIT STEW

George Monibot posts (22 August) in Ecoside Alert HERE 
ECOCIDE: NEOLIBERALISM – THE IDEOLOGY AT THE ROOT OF ALL OUR PROBLEMS"
“The invisible doctrine of the invisible hand is promoted by invisible backers.”
“What the history of both Keynesianism and neoliberalism show is that it’s not enough to oppose a broken system. A coherent alternative has to be proposed. For Labour, the Democrats and the wider left, the central task should be to develop an economic Apollo programme, a conscious attempt to design a new system, tailored to the demands of the 21st century.”
George Monibot’s How Did We Get into This Mess? is published this month by Verso
His (long) article in Ecoside Alert surveys his thinking and it is worth reading because it puts a Leftist’s case against ‘neoliberalism’ and proposes an alternative strategy. Unfortunately, new systems of economics and politics while designable are not implementable in human societes - the designers don’t have (and cannot be trusted) with such power to impose their designs. 
Monibot’s critique of neo-liberalism, allegedly was introduced by a small group of people who invented ‘neo-liberalism’ that now run the world. Monibot is recommending that another small group of people should design an alternative system and, presumably, introduce it  into in the real world. 
Reminds me of the first line of the recipe for rabbit stew: first catch a rabbit…

Sunday, August 21, 2016

TIME TO RECONSIDER ECONOMICS AS TAUGHT TODAY?

Anna Silim posts (August) in Evonomics HERE http://evonomics.com/new-economic-thinking/
What is New Economic Thinking?
Three strands of heterodox economics that are leading the way
“Neoclassical economic theories describe a world in which rational agents act as optimal decision-makers. Guided by possession of a full set of information, self-interested agents maximise utility while firms maximise profits. As a result, the economy is said to behave in a static and linear manner and the system tends towards a state of equilibrium: supply equals demand and an optimal price is set. Macroeconomic patterns are simply the sum of microeconomic properties (Blanchard 2010).
In this model, economies are not necessarily always in equilibrium; exogenous shocks, such as the development of a new technology, can disrupt them. But these disruptions will be temporary and market mechanisms will work to push the economy back to equilibrium. From a neoclassical perspective, economic development occurs through cyclical patterns of equilibrium, shocks, destabilisation and restabilisation. In each cycle the content of the economy such as the goods and services it offers might change, but its very nature essentially remains the same.
This conventional model can be challenged on four fundamental fronts: the tendency to equilibrium, exogenous shocks, individual rationality and systemic consistency. In the real world, economies are not static and geared towards equilibrium; they are dynamic and in constant flux. This dynamism is endogenous; it originates within the system, not from exogenous shocks. Consumer preferences are not formed by individuals acting solely on their own but are the result of a complex process that includes observing and interacting with other consumers. Economic agents do not have a fixed set of preferences based on rational assessment; they are subject to whims and to mimicking the behaviour of other agents. As a result, the nature of the economic system transforms over time.
In reality, the economy is a complex ecology rather than a complicated machine. It does not respond in predictable ways. It is path-dependent, with each phase building on the previous one.”
COMMENT
This and similar articles in EVONOMICS (the next evolution of economics) are rich contributions to the debate. Worth subscribing to by all modern economists.

LOONY TUNES no. 163

1
Mark Fisher posts (August) VARIETY (US Edition) HERE
Edinburgh Theater Review: ‘Anything That Gives Off Light,’ Directed by Rachel Chavkin
“That in turn led to an exodus to the U.S. and, with it, some of the ideas that characterize the American mindset to this day. Slipping seamlessly from continent to continent and century to century in Chavkin’s fluid production (complete with country-folk interventions by the onstage band), the play suggests the spirit of free enterprise, exemplified by the “invisible hand” theory of Scottish economist Adam Smith, has led to desolation in the Scottish countryside and environmental ruin in the coalfields of West Virginia.”
Comment
Usual nonsense about Adam Smith’s use of the “invisible hand” metaphor. Compare with Bill Dunlop’s review of the same play in LOST LEGACY's Roll of Honour, no. 2.
2
Editorial (22 August) in Phillippine Daily Enquirer HERE 
And perhaps more importantly, the Philippines has been granted another round of good luck by the invisible hand of the global economic system in the form of low borrowing costs and ample liquidity that are expected to continue over the medium term.
COMMENT
"low borrowing costs and ample liquidity" are decided by the motivated actions of individuals not by a metaphoric "invisible hand" that does not exist. Metaphors describe their objects: see Adam Smith's Lectures in Rhetoric and Belles Lettres in a manuscript discovered in 1962, consisting of student notes taken down from Smith's Lectures in 1762-63, published by Oxford University Press in 1983. 
3
Editorial posted (21 August) in The Augusta Chronicle HERE 
Our Economy and Stake
 “Economist Adam Smith, who wrote the legendary book An Inquiry into the Nature and Causes of the Wealth of Nations – published, appropriately enough, the year this country was born – talked about the “invisible hand” of individual self-interest that drives free economies as the moon influences the tides.

It is, in short, human nature that directs the economy of a free people.
4
Kim Stanley posts (August) a Wall Paper HERE

The Invisible Hand Never Picks up the Check

ROLL OF HONOUR no. 2

1
From Bill Dunlop’s review (21 August) of a 2016 Edinburgh Festival play: Anything that Gives off light”
At one point, the 1745 Rising gets dragged in, along with a disconnected diatribe aimed at highlanders, despite some thirty per cent of Charles Stuart’s army being disgruntled lowland Episcopalians.
Adam Smith gets his ‘invisible hand’ flung in his face, although it’s clear that Smith’s frequently misinterpreted reference is to the propitious connections between Scots merchants in Holland, the Americas and his native Kirkcaldy.
COMMENT
Bill Dunlop raises an interesting possibility worthy of further research  Smith's use of the metaphor certainly appears in a chapter dealing with that trilateral trade. I shall think of that context and post later.

Saturday, August 20, 2016

ROLL OF HONOUR

NEW REGULAR COLUMN FOR LOST LEGACY

In recognition of the recent andwelcome trend of accurate references to Adam Smith’s meaning when he used the metaphor of “an invisible hand”, and correct presentations of his ideas, Lost Legacy will post such welcome recognition under the heading:
ROLL OF HONOUR, No. 1, and so on.
There were two such posts recently and their references are reproduced in the new column.
LOONY TUNES (spelt as such to avoid infringing the universally known copyright of the deservedly popular film and media enterprise) will continue as before, though I hope that entries in the new Roll of Honour column will increase in frequency.
ROLL OF HONOUR no. 1
1
Dan Byrnes responds to a question on QUORA . See Dan Byrnes at at: Dan Byrnes Word Factory [http://www.danbyrnes.com.au ]
QUORA asks: What are some criticisms of the invisible hand? HERE 
Dan Byrnes, answers:
“My criticism of “the invisible hand” is that it has become something mystical in US politics and right -wing ideologies, and allegedly is far more precise in operation than it was ever, as an idea, intended to suggest. It is after all, merely a metaphor. The idea behind remarks about the “invisible hand” is that markets do tend to be self-organizing, but it is sheer naivete to imagine that this tendency to self-organisation cannot be manipulated for good or ill by parties with various and other sorts of market-exploiting ideas in mind. Just one of the forces meant to distort or redirect “the invisible hand” is, and it is hardly surprising, is advertising.”
COMMENT
Dan Byrnes is absolutely right in his criticism of modern versions of the “invisible hand” and I commend his post to readers (please pass it on).
2
Andreas OrtmannDavid BaranowskiBenoit Walraevens, joint authors of “Schumpeter’s Assessment of Adam Smith and The Wealth of Nations: Why He Got It Wrong” (UNSW Business School Research Paper No. 2015 ECON 28).
This paper is a most interesting assessment of Schumpeter’s well known critique of Adam Smith’s Wealth of Nations and very personal criticism of Adam Smith. The authors are to be congratulated on their thorough assessment of Schumpeter’s assessment, which also informs readers of the distinctive role of Smith’s analysis of Rhetoric, for which he is less famous - even grossly neglected - Lectures on Rhetoric and Belles Lettres (1762-3) - as I have long suggested on Lost Legacy.
Schumpeter had not read LRBL because it was not available as a version witten down and compliled by two anonymous students who attended Smith’s Lectures delivered in Glasgow in 1762-3. Because Schumpeter was not aware of Smith’s interest in the role of rhetoric in the expostion of ideas he has an excuse for his otherwise ignorant criticism of Adam Smith.
Interestingly, Adam Smith taught rhetoric for longer than any other subject. He was commissioned by Lord Kames and James Oswald (MP) to deliver public lectures for fee-paying attendees, mainly from the general public and from students studying law or religious beliefs at the nearby Edinburgh university, as well as several professors from Scotland’s Universities (Glasgow, Edinburgh, St Andrews and the university college at Aberdeen). Smith’s reputation grew each winter from 1748-52. Reportedly, Smith earned £100 a winter series which was close to the salary of a university professor.
Ortman, Baranowski and Walraevens demonstrate how Smith’s passion for rhetoric as a teaching method was applied throughout Wealth of Nations and remembering that his focus was on persuading government ministers (politicians) and significant others by the perspecuity of his arguments about the dangers of mercantile policies associated with foreign trade - such as the Navigation Acts - that led to European wars, colonial revalries and the inhibition of foreign trade.
The paper is available from:
The Social Science Research Network Electronic Paper Collection:
I strongly advise readers to follow the link and read some truly original scholarship about Adam Smith.
3
At Last: a paper on the "invisible hand" and Adam Smith that I can agree with and I recommend it to all readers of LOST LEGACY. The paper includes a demolition of Robert Franks fantasies about Charles Darwin.
Drop the authors a line and ask (politely) for a copy.
To summarise it would not do it justice. Hence, I post its location. I recommend that readers follow the links and read it in full:
Smith’s Wedge: The Invisible Mishandling of Context in Robert Frank’s The Darwin Economy By Stephen T. Ziliak and Samuel Barbour, Department of Economics Roosevelt University 430 S. Michigan Ave Chicago, IL 60605 sziliak@roosevelt.edu sbarbour@mail.roosevelt.edu January 29, 2016 Forthcoming, Schmollers Jahrbuch
LINK
Try this link sent by the authors for a copy of their paper:
Abstract
In The Darwin Economy a distinguished behavioral economist, Robert Frank, promises to put Adam Smith’s “invisible hand narrative” into “context”. Neglecting history, empirical evidence, original sources, and a voluminous secondary literature, he fails to deliver. Frank predicts that one hundred years from now professional economists will name not Adam Smith but Charles Darwin as the intellectual founder of their discipline. The reason he gives is “Darwin’s wedge”—a term he coins to emphasize a divergence between individual and group interests which in turn causes wasteful competition and collective loss. He credits Darwin for the insight. We find the very same “wedge” and insight in a book wholly neglected by Frank and most economists after Stigler, namely, Smith’s The Theory of Moral Sentiments. Working with original sources we show that Frank’s view of the invisible hand—and thus of modern economics—is not sustainable. Contextual economics after Schmoller is of course voluminous but it is hardly known by Frank, who is wedded to the axiomatic approach and “no cash on the table” conjecture favored by most neoclassicals. We highlight the problem with evidence on the economics of labor-managed firms and with a revival of a once-famous study by Carleton Parker on large scale farming, unregulated migrant labor, and the Wheatland Hop Field riot of 1913.

Keywords: invisible hand, Schmoller, migrant labor, labor-managed firms, Wheatland JEL Classification: B3, N3, J6, B41, Q10.

Friday, August 19, 2016

LOONY TUNES no. 162

1
Gary Horton, a Santa Clarita resident, posts (16 August) on the Santa Clarita Signal  HERE http://www.signalscv.com/section/33/article/155619/
“Yes, we can allow the nearly magical “invisible hand of capitalism” to do its thing. Our problem, however, as indicated in the letter above, is that we don’t have an invisible hand of capitalism — we have a “manipulated hand” – with backroom deals distributing taxpayer funds to private industry, all hidden from general public view.”
2
The NEWS (17th August) reports HERE
“Naira dips further against dollar”
“Owoh said that the increase in the forex allocated to BDCs by the apex bank was in the right direction.
He said that the Central Bank of Nigeria’s (CBN) decision was “a futuristic comment targeted at stifling the invisible hand of currency speculators’’.
Comment
There is nothing ‘invisible’ about the activities of “currency speculators” because they offer VISIBLE prices upon which currency speculators can decide to buy or sell from which the consequences in changing prices will be VISIBLE. Markets work and can only work with VISIBLE prices.
3
Ravindra Upparl posts (19 August) in The Times of India HERE 
“Karnataka coach's invisible hand in Sakshi's success”
4
Peter Keough posts (19 July) on Boston Globe HERE
“Devoid of any voice-over, talking heads, or text, Roberto Minervini’s documentary about meth addicts and militiamen in the Louisiana bayou country immerses you unescorted, except by the invisible hand of the editing process, in an alien but strangely familiar part of America. Using techniques similar to those applied by Harvard’s Sensory Ethnography Lab in films like “Foreign Parts” and “Sweetgrass,” it opens up a part of America about which few have a clue and fewer care.”
5
Tristan Edis posts (19 July) on RENEW economy HERE 
Energy Ministers – there is no crisis and the market is working
So there is in fact quite a degree of flexibility in how renewable energy projects can be configured and located that allows developers to better align generation with when electricity is in greatest demand. So rather than causing black-outs and increased power prices the invisible hand is working to encourage renewable energy companies to do precisely the opposite.”
COMMENT
Apart from the misuse of the ‘invisible hand’ metaphor as above, this is an excellent exposition of the economics of what is happening in this renewable industry in Australia. The common resort to mystification of the affects of VISIBLE price changes, without which markets would not work, is a modern phenomenon for which there is no explanation. The title is totally sufficient in itself, supported by a well-written exposition. 
Pity about dragging in the modern myth of an IH…
6
John Authers posts (19 August) on Financial Times HERE 
Is Greed Good? No, it’s seriously bad fory our wealth”
“But there is also a noble intellectual tradition that holds that it is good for the economy. For the Scottish enlightenment thinker David Hume, it was “the spur of industry” — which helped to drive the “invisible hand” of the market as discovered by his fellow countryman Adam Smith.”
COMMENT
Adam Smith did not "discover" anything about an "invisible hand of the market".

Thursday, August 18, 2016

ANOTHER OUTSTANDING PAPER EXPOSING SCHUMPETER'S DIATRIBE AGAINST ADAM SMITH'S WEALTH of NATIONS

Andreas Ortmann, David Baranowski, Benoit Walraevens, joint authors of “Schumpeter’s Assessment of Adam Smith and The Wealth of Nations: Why He Got It Wrong” (UNSW Business School Research Paper No. 2015 ECON 28).
This paper is a most interesting assessment of Schumpeter’s well known critique of Adam Smith’s Wealth of Nations and very personal criticism of Adam Smith. The authors are to be congratulated on their thorough assessment of Schumpeter’s assessment, which also informs readers of the distinctive role of Smith’s analysis of Rhetoric, for which he is less famous - even grossly neglected - Lectures on Rhetoric and Belles Lettres (1762-3) - as I have long suggested on Lost Legacy.
Schumpeter had not read LRBL because it was not available as a version witten down and compliled by two anonymous students who attended Smith’s Lectures delivered in Glasgow in 1762-3. Because Schumpeter was not aware of Smith’s interest in the role of rhetoric in the expostion of ideas he has an excuse for his otherwise ignorant criticism of Adam Smith.
Interestingly, Adam Smith taught rhetoric for longer than any other subject. He was commissioned by Lord Kames and James Oswald (MP) to deliver public lectures for fee-paying attendees, mainly from the general public and from students studying law or religious beliefs at the nearby Edinburgh university, as well as several professors from Scotland’s Universities (Glasgow, Edinburgh, St Andrews and the university college at Aberdeen). Smith’s reputation grew each winter from 1748-52. Reportedly, Smith earned £100 a winter series which was close to the salary of a university professor.
Ortman, Baranowski and Walraevens demonstrate how Smith’s passion for rhetoric as a teaching method was applied throughout Wealth of Nations and remembering that his focus was on persuading government ministers (politicians) and significant others by the perspecuity of his arguments about the dangers of mercantile policies associated with foreign trade - such as the Navigation Acts - that led to European wars, colonial revalries and the inhibition of foreign trade.
The paper is available from:
The Social Science Research Network Electronic Paper Collection:

I strongly advise readers to follow the link and read some truly original scholarship about Adam Smith.
[See new regular LOST LEGACY Column: Roll of Honour)

Tuesday, August 16, 2016

STRONGLY RECOMMENDED TO ALL READERS

At Last: a paper on the "invisible hand" and Adam Smith that I can agree with and I recommend it to all readers of LOST LEGACY. The paper includes a demolition of Robert Franks fantasies about Charles Darwin.
Drop the authors a line and ask (politely) for a copy.
To summarise it would not do it justice. Hence, I post its location. I recommend that readers follow the links and read it in full:
Smith’s Wedge: The Invisible Mishandling of Context in Robert Frank’s The Darwin Economy By Stephen T. Ziliak and Samuel Barbour, Department of Economics Roosevelt University 430 S. Michigan Ave Chicago, IL 60605 sziliak@roosevelt.edu sbarbour@mail.roosevelt.edu January 29, 2016 Forthcoming, Schmollers Jahrbuch
NEWS:
LINK
Try this link sent by the authors for a copy of their paper:

http://ejournals.duncker-humblot.de/toc/schm/136/1

Abstract
In The Darwin Economy a distinguished behavioral economist, Robert Frank, promises to put Adam Smith’s “invisible hand narrative” into “context”. Neglecting history, empirical evidence, original sources, and a voluminous secondary literature, he fails to deliver. Frank predicts that one hundred years from now professional economists will name not Adam Smith but Charles Darwin as the intellectual founder of their discipline. The reason he gives is “Darwin’s wedge”—a term he coins to emphasize a divergence between individual and group interests which in turn causes wasteful competition and collective loss. He credits Darwin for the insight. We find the very same “wedge” and insight in a book wholly neglected by Frank and most economists after Stigler, namely, Smith’s The Theory of Moral Sentiments. Working with original sources we show that Frank’s view of the invisible hand—and thus of modern economics—is not sustainable. Contextual economics after Schmoller is of course voluminous but it is hardly known by Frank, who is wedded to the axiomatic approach and “no cash on the table” conjecture favored by most neoclassicals. We highlight the problem with evidence on the economics of labor-managed firms and with a revival of a once-famous study by Carleton Parker on large scale farming, unregulated migrant labor, and the Wheatland Hop Field riot of 1913.
Keywords: invisible hand, Schmoller, migrant labor, labor-managed firms, Wheatland JEL Classification: B3, N3, J6, B41, Q10.
[See new regular column: Roll of Honour - above]

LOONY TUNES NO. 161

1
Alan Duff’s Opinion postsed (16 August)  on New Zealand Herald HERE 
“Alan Duff: Cult of Kev, population ... himself”
The man destined to be Australia's Prime Minister proceeded to rip me apart, at least my arguments. To hell with that, if I didn't outdo him I may as well sit down in disgrace. Even with a displeased crowd against him, Rudd didn't blink as the words cascaded like some waterfall he'd designed to hit jutting rocks in a surprise spray, dive between stone contours like an invisible hand had briefly calmed the waters, then boom - you get the drift.
2
Public Affairs with Jeff Berkowitz posted (15 August) on CHICAGO NOW HERE 
“Does Adam Smith's invisible hand [competition] work to provide the optimal kind, quantity and price for services in the insurance and legal industries?
COMMENT
No! ADAM SMITH never said that Markets needed or used (metaphorically even) ‘invisible hands’. VISIBLE prices are all that is needed. In fact markets wuld not work without VISIBLE prices. Newspapers and journalists are supposed to check their facts …
3
“Staggers” posts (15 August) in New Statesman HERE 
What do neoliberals actually believe in?
“The liberal economic ideology underpinning neoliberalism can be traced back to the 18th century Scottish philosopher Adam Smith. In his seminal book The Wealth of Nations, he argued that while each individual labours for their own benefit, this together creates an “invisible hand” that drives markets and adds to the public good. In the 19th century, British imperialists embraced an extreme version of economic liberalism, known as laissez faire (French for "let go). The mantra of free trade was used to justify the Second Opium War with China, when Britain forced the legalisation of the opium trade and an end to trade tariffs.”
COMMENT
Traced back by whom? Modern journalists too lazy to check the facts by actually opening Smith’s Wealth of Nations and what he said exactly about “an invisible hand”! Much easier to copy somebody else’s error
4
Eyal Kaplan (a Venture Capitalist)  posts (27 July) on 8th Global Peter Drucker Forum HERE 
“How The invisible Hand of Society Funds Entrepreneurship, Innovation, And Growth” 
COMMENT

Nothing in the text about “The invisible Hand of Society”. Apparently it means the billion dollars of annual savings for investment in innovation businesses.