Friday, December 19, 2014

Eric De Groot, posts on his newsletter HERE

Comment
Oh Dear! Another commercial financial advisor mystifies market processes by calling on an invented illusory entity that the said advisor understands but potential clients do not. 
Hence they are willing to pay said advisor to share his claimed insights into said mysterious processes.
However, stock prices are VISIBLE
All prices are VISIBLE.
The so-called invisible hand is, well, invisible.  Moreover it does not exist.  
It was Adam Smith’s metaphor for how people’s SELF-INTERESTED motivations leads them to ACTIONS in pursuit of INTENDED CONSEQUENCES.
Sometimes such actions benefit others as well as themselves. Sometimes they don’t and sometimes its a bit of each. (Markets can be messy).
Moreover, and separately, following Cardinal du Retz (and Cromwell), people’s motivated actions also can have UNINTENDED CONSEQUENCES.

‘The road to hell is paved with good intentions’ (anon).

Thursday, December 18, 2014

EVOLUTIONARY SCIENCE FINDS THE 'INVISIBLE-HAND' DEFICIENT

David Sloan Wilson Departments of Biology and Anthropology, 
Binghamton University, Binghamton, NY, and John M. Gowdy,
Department of Science and Technology Studies, Rensselaer
Polytechnic Institute, Troy, NY, USA (December, 2014) post in the
Journal of Economics HERE
Human ultrasociality and the invisible hand: foundational developments in evolutionary science alter a foundational concept in economics”
Abstract
“Advances in the study of social behavior require a revision in the economic concept of the invisible hand, which states that self-interested behavior leads to well-functioning societies without individuals having the welfare of the society in mind. Evolutionary theory shows that self-interest does not robustly benefit the common good because behaviors that are “for the good of the group” seldom maximize relative fitness within the group. The evolution of group-level functional organization requires a process of group-level selection. Species that have become highly adaptive at the group level are called ultrasocial. The idea that an invisible hand leads to social harmony is valid primarily for ultrasocial species, where selection at the group level results in individual-level behaviors that produce group-beneficial outcomes. Individuals do not necessarily have the welfare of the group in mind, but neither do their behaviors or underlying proximate mechanisms resemble the economic concept of self-interest. Evolutionary science therefore provides a valid concept of the invisible hand, but one that is different from the received version, with far-reaching implications for economics, politics, and public policy.”
Comment
It is not just that the study of social behaviour that requires a revision “in the economic concept of the invisible hand”. It also requires a mandatory revision of the so-called economic concept of the so-called “invisible hand”, because as presented the above absolute statement is in error.  
If the so-called invisibe-hand theory has been challenged by the “study of social behaviour”, it suggests that both disciplines are now widely contaminated with a false at theory.
Self-interested behavior” does not always lead to “well-functioning societies without individuals having the welfare of the society in mind”.  Self-interested behaviour may or may not “lead to well-functioning societies”, which is an uncontestsble fact. Adam Smith is usually quoted confidently (and mistakenly, as it happens) as the author of the metaphor of “an invisible hand” because he used it twice only in two original statements in “Moral Sentiments” (1759) and “Wealth Of Nations” (1776) and once in his posthumous “History of Astronomy” (1795). A careless misreading of what he actually wrote, which he sharply qualified in many other statements throughout both of his main texts led to today's confusion on what he meant. Quite separately, false versions circulated among political economists in the 19th century, first in an oral tradition in  Cambridge (UK), and then in a few books by modern economists in the early 20th century. Then after 1948 Paul Samuelson gave the false theory ‘legs’, so to speak, in the USA, the false theory of the “invisible hand” in print took off across academe and across the media until by the 21st century the “invisible hand” theory was almost unanimous and widely believed.
I am encouraged by the Abstract by David Sloan and John Gowdy that appears to raise appropriate questions about the applicability of the “invisible hand” in evolutionary science.  Exectly the same questions should be asked about exponents of the false notion that it applies in economics.  Moreover, instead of reading short passages from Adam Smith (who remains the innocent victim of academic posterity in these matters), of the invisible hand read all ot his Works instead in which he introduces the metaphor twice only with his references to the “public good”.  Such reading also reveals over 50 cases where he discusses self-interested actions by people that led to what could only be described as “public bads”.  
Moreover, reading Book IV of Wealth Of Nations would do much to correct false notions about what he said on the “invisible hand”. He described Book IV as a “violent” attack on the entire “commercial system”, then operating in Britain in the 18th century and he was repeatedly uncomplimentary, to put it mildly, about “merchants and manufacturers”, and their private self-interested behaviours that were often at the expense of the public good.
That evolutionary science points to errors that challenge a so-called” foundational concept in economics” should surprise no economist who has read Adam Smith closely.  
Scroll down previous posts in ‘Adam Smith’s Lost Legacy’ for detailed discussions of the myths about Adam Smith’s alleged use of the ‘invisible-hand’ metaphor that allegedly states that “self-interested behavior leads to well-functioning societies without individuals having the welfare of the society in mind”.  It is not what Smith wrote or regarded as a general truth.

Tuesday, December 16, 2014

EXCHANGE BEHAVIOUR: THE UNIVERSAL HABIT OF THE HUMAN SPECIES IN GIFT GIVING AND MARKETS

Kevin Albertson, Reader in Economics at Manchester Metropolitan University posts on The Conversation (‘Academic Rigour, Journalistic Flair’) HERE 
 His post is about Christmas gifts being better value to the recipients than their 
purchases, net of a gift not perfectly matching a person’s preferences (measured
by what she would be inclined to purchase, under the usual neo-classical
assumptions, and the difference in happiness that she feels is more than made
up for from her personal joy at receiving a free gift from somebody she knows
cares about her):

“Priceless: the inefficient, but merry economics of Christmas”: “The value of affection”
“Casual observation indicates many of us appreciate gifts more than those items we require or buy for ourselves: consider the giving of birthday presents, flowers, and such like. This is despite the fact that, according to strict neo-classical economic theory, such giving is inefficient. Waldfogel makes this clear in Deadweight loss of Christmas.
According to Waldfogel, the inefficiency arises because when we give, we might not perfectly match the recipient’s preferences. He estimates that giving “destroys” between 10% and 30% of the value of a gift. However, it strikes me Waldfogel has not figured in how much value is added, even to a simple pair of socks, because of the affection with which it is given.
The extra value imbued in a gift is something with which many economists have difficulty. Adam Smith doesn’t mention it in the Wealth of Nations:
“It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self-interest.”

Comment
I agree with Conversation’s affirmation of ‘academic rigour and Journalistic flair’ and Kevin Albertson exhibits both.
However, I am struck by two things about Kevin Albertson’s arguments.
First, he does not mention until the very end Smith’s “Theory of Moral Sentiments” published in 1759 before he wrote “Wealth Of Nations”, published in 1776.  Both books were linked philosophically and are mutually supportive. (There is no Das Adam Smith Problem!). 
Much of what his readers might take from his piece would be undermined if they confine their reading solely to ‘Wealth Of Nations’ under the mantra of ‘academic rigour’.  Neo-clasical and Rational Utility Maximisation (MaxU) economics (despite their mathematical sophistication) describe an imaginary economy. 
Secondly, he quotes Smith’s exposition on “bargaining” without discussing it, other than by his implied dissatisfaction with it.
“It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self-interest” (WN I.ii.2p 26-7).
If the whole paragraph is examined more closely - and also Smith’s earlier statements to his class of students, as reported by a Student’s Notes of them in his ‘Lectures on Jurisprudence’ (1761-2), we find an accurate statement of Smith’s views on the positive role of how self-interest in people’s interactions with others in pursuit of their mutual feelings of ‘self-love’, which differs by a mile that by which neo-classical economists describe exchange behaviour (utility-maxisation and all that).
Two self-interested bargainers who pursue their self-interests as egoistic, utility-maximisers, would end up without the ingredients of their dinners or the money value of their exchange prices.
Smith showed they bargain using linked offers in the form: “Give me that which I want, and you shall have this which you want”, which “is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of the good offices which we stand in need of” (WN I.ii.2 p. 26).
Moreover, after the lines quoted by Kevin Albertson, Smith goes on to say, possibly the most important part of the partial paragraph that Kevin quotes:
We address ourselves, not to their humanity, but from their self-love, and never talk to them of our own necessities, but of their advantages”.
This changes the  context of seeking our self-interests from a competing set of mercenary demands into persuasive, exchanges of what one gives to another for what one gets in exchange. In TMS, he talks throughout about the moral elements of friendly persuasion, of ‘higgling’ and haggling, of exchanging ‘good offices’ and realising ‘mutual dependences’ and the need of every man to co-operate with those with whom he has contacts. 
The gift exchange, universally, is long and deep in human history (and pre-history) as anthropologists have shown, and sociologists confirm. The Gift exchange preceded the monetised exchange by many millennia, as did what we call Barter (goods for goods) and its other exchange forms of labour (including sexual exploitation) for goods (’Truck’). 
Kevin Albertson notes: “Many of the best things in life are not necessarily “free”, but neither can they be bought and sold: they arise from our relationships.”
I heartily agree, only adding that Smith was thinking of human relationships in deep history (though it was much deeper than he, or anybody else, at the time realised) when he wrote that exchange ‘was the necessary consequence of a certain propensity in human nature … the propensity to …exchange one thing for another …it is the faculties of reason and speech … and common to all men”
Kevin is right that many of our interpersonal transactions ‘arise from our relationships’ and they contribute to human welfare, even in the most trying of circumstances, such as natural disasters and personal setbacks, which is a personal and poignant experience I have had these past months with my health situation. That is another reason to recall the depth of meaning in Smith’s account of the longevity and multiple reminders of the human proclivity for exchange behaviours.

Hence, I am participating in the current ‘Beardember’ charity campaign by not shaving until December 31 and collecting sponsors and their cash for those experiencing colon cancer.

Monday, December 15, 2014

CALL FOR PAPERS No. 2

The Annual History of Economics Society Conference for 2015 will held at Michigan State University from June 26th to June 29th. Papers dealing with any aspect of the history of economic thought are welcome, including work related to any period or any school of economic thought. Also welcome are papers that situate economics in wider intellectual and cultural contexts or relate it to other disciplines, and work related to the history of closely cognate disciplines (e.g., statistics with economic applications or economic sociology). Essentially, any work that touches the history of economics as a discipline or that would be of interest to scholars working in such an area is encouraged.
Information about travel and accommodation options is now available on the Conference web site at http://econ.msu.edu/hes/index.php. On-line registration for the Conference will be available through the web site starting in early January. 

To propose a paper: 

Please send a title, a paper abstract (not longer than 200 words), and the name and contact information of the paper’s author(s) tohes2015@econ.msu.edu by March 1st , 2015.

To propose a session: 

I am interested in considering proposals for complete sessions, including sets of papers related to a focused theme, or panel discussions of a well-defined topic. If you would like to propose such a session, or some other type of session that you believe would be of interest to our membership, please include a title for the session, a brief description of the session’s unifying theme, and the names of at least two other scholars who will participate. If the proposed session is a set of papers, please include titles and abstracts of the papers. Submit session proposals to me athes2015@econ.msu.edu by March 1st .

Young Scholars

The HES provides special support for up to ten Warren J. and Sylvia J. Samuels Young Scholars to present papers at the conference, in the form of free registration, banquet and reception tickets, and a year's membership in the society. Five of the Young Scholars awardees will also receive a  grant of $500 to cover travel and accommodation costs. If you wish to have your paper considered for the Young Scholars program, please provide details of the date of your last degree (or your current graduate student status) when submitting your paper proposal tohes2015@econ.msu.edu, and indicate that you wish to be considered for the Samuels Young Scholars program. A Young Scholar must currently be a PhD candidate, or have been awarded a PhD in the 2 years preceding the conference. The deadline for application is March 1st .
Jeff Biddle
President-elect, History of Economics Society

Comment
This annual conference is highly recommended to those who can afford, or have time, to go to one one conference a year.  It is held in the USA at a different campus each year.

The presenter's of papers are usually of high quality, and also have strong credentials in their chose subject areas.  Several streams of subject areas run concurrently.  When I was able to travel to attend HES conferences I found them instructive and beneficial in my subject area, Adam Smith scholarship, and I made several friends and acquaintances across the International Academy, some with whom I still correspond.

It is particularly good at integrating your scholars into the HES community.

Thursday, December 11, 2014

CALL FOR PAPERS NO 1

International Academic Conference
Economics of Vices and Virtues
May 15–16, 2015

While accepting the assumption about the rationality of economic agents as a starting point of analysis, economists still cannot afford to ignore that rational choice in any case is made within a framework of specific beliefs, values and behavioral patterns. Some of these behavioral patterns are traditionally considered to represent virtues, and some — passions and vices, and in different cultures and subcultures the interpretation may vary. Is this kind of assessment relevant for economic science and economic policy? In order to understand this, we propose to discuss (from the point of view of economics and culture) such phenomena as addictions and habits in consumption of certain products, the specifics of policy — making in such cases, problems of interpretation of consumer addictions and habits in culture and social science, as well as the problem of prohibitions. This topic is supposed to come back to the discussion of the provocative thesis of Bernard de Mandeville in his “The Fable of the Bees” (1714) that the private vices tend to form the public benefit.

The Conference topics will include:
• Virtues and Vices: criteria and interpretations;
• Economy and culture of production and consumption of alcohol (beer, wine and strong spirits);
• Economics on Virtues and Vices;
• Formation of attachments and addictions, as a business strategy;
• Overcoming attachments and addictions, as a state policy target;
• Economics of prohibitions, Temperance movements and Public Policy;
• Economy and culture of smoking/ of gambling/ of Internet addiction;
• “Green lifestyle” — the Virtues or Vices?

The specific issues to be discussed will be the examination of the different aspects of the economics, historical facts and culture of alcohol production, consumption and regulation. We invite economists, sociologists, anthropologists, historians and the scholars from other spheres in the social sciences and humanities for the dialogue.
Conference languages: English and Russian
Center for the Study of Economic Culture
St. Petersburg State University, Russia
The deadline for the submission of an abstract of about 500 words is January 10, 2015.
The conference organizers welcome proposals of sessions with a description. Please send abstracts and proposals  to maidachenko09@gmail.com
Authors will be informed about acceptance or rejection of the paper for presentation by February 2.

Organizing Committee:
Aleksei Kudrin, St. Petersburg State University
Danila Raskov, St. Petersburg State University
Eline Poelmans, Leuven University and Beeronomics
Deirdre McCloskey, University of Illinois at Chicago
Denis Kadochnikov, St. Petersburg State University
Alexander Pogrebnyak, St. Petersburg State University
Viktor Rjazanov, St. Petersburg State University
Alexander Nemtzov, Moscow Research Institute of Psychiatry
Vladimir Ignatiev, Novosibirsk State Technical University
Alexander Skorobogatov, Higher School of Economics

LOONY TUNES NO. 104

1
Bryant McGill, best-selling author, speaker and activist in the fields of self-development, personal freedom and human rights, posts HERE 
There is an invisible hand at work in the making of beautiful lives”.
2
Donna Rachel Edmunds posts HERE 
“LEGO ROBOT WITH MIND OF A WORM OFFERS TANTALISING GLIMPSE INTO THE FUTURE” 
“Independent developers are actively encouraged to run simulations based upon the work already done by existing teams and participants and to make their own modifications, resulting in a situation in which a number of competing models are developed simultaneously. As a result, the best models are harvested to go into the finished product. It is Adam Smith’s invisible hand at work in the field of science.” 
3

In-A-Gist posts HERE  Adam Smith defined the invisible hand of the market as having "cool power flames," and "a snake tattoo, also made of fire, so I can see it"

Saturday, December 06, 2014

NEW COLLECTION OF ESSAYS ON ADAM SMITH ANNOUNCED

Propriety and Prosperity
New Studies on the Philosophy of Adam Smith
$115.00
ISBN 9781137320681
Publication Date December 2014
Palgrave Macmillan
This book is a collection of specially commissioned chapters from philosophers, economists and political scientists, focusing on Adam Smith's two main works Theory of Moral Sentiments and Wealth of Nations. It examines the duality which manifests itself as an apparent contradiction: that is, how does one reconcile the view of human nature expounded in Theory of Moral Sentiments (sympathy and benevolence) and the view of human nature expounded in Wealth of Nations (self-interest)? New work by philosophers has uncovered the complex and nuanced connections between Smith's account of economic and moral motivation. His economic theory has presented conceptual challenges: the famous 'invisible hand' has proved an elusive concept much in need of scrutiny.
'Prosperity' in the title captures the economic side of Smith's thought. 'Propriety' points to his ethics. In recent philosophical scholarship two major shifts have occurred. One is that the originality of Smith's moral theory has been rediscovered and recognised. His account of sympathy is significantly different from Hume's: his idea of the 'impartial spectator' is independent, rich and complex and he is alert to the phenomenon of self-deception. The second shift is that Smith's image as an economic liberal has been drastically revised, reclaiming him from current ideological use in defence of free markets and the minimal state. Smith links economics, politics and ethics through notions of justice and utility in subtle ways that make the labels 'economic liberal' and 'laissez-faire theorist' at best inadequate and at worst misleading.
This collection was put together with a view to bringing Smith to a mainstream philosophy audience while simultaneously informing Smith's traditional constituency (political economy) with philosophically finessed interpretations.
1. Introduction; David F. Hardwick and Leslie Marsh
PART I: CONTEXT
2. Adam Smith as a Scottish Philosopher; Gordon Graham
3. Friendship in Commercial Society Revisited: Adam Smith on Commercial Friendship; Spyridon Tegos
4. Adam Smith and French Political Economy: Parallels and Differences; Laurent Dobuzinskis
5. Adam Smith: 18th Century Polymath; Roger Frantz
PART II: PROPRIETY
6. Indulgent Sympathy and the Impartial Spectator; Joshua Rust
7. Adam Smith on Sensory Perception: A Sympathetic Account; Brian Glenney
8. Adam Smith on Sympathy: From Self-Interest to Empathy; Gloria Zúñiga y Postigo
9 . What My Dog Can Do: On the Effect of The Wealth of Nations I.ii.2; Jack Weinstein
PART III: PROSPERITY
10. Metaphor Made Manifest: Taking Seriously Smith's 'Invisible Hand'; Eugene Heath
11. The 'Invisible Hand' Phenomenon in Philosophy and Economics; Gavin Kennedy
12. Instincts and the Invisible Order: The Possibility of Progress; Jonathan B. Wight
13. The Spontaneous Order and the Family; Lauren K. Hall
14. Smith, Justice and the Scope of the Political; Craig Smith
Contributing Authors (In bold: scholars whom I know)
Laurent Dobuzinskis, Simon Fraser University, Canada
Roger Frantz, San Diego State University, USA
Brian Glenney, Gordon College, Massachusetts, USA
Gordon Graham, Princeton Theological Seminary, USA
Lauren K. Hall, Rochester Institute of Technology, USA
David F. Hardwick, The University of British Columbia, Canada
Eugene Heath, State University of New York at New Paltz, USA
Gavin Kennedy Heriot-Watt University, UK
Leslie Marsh, The University of British Columbia, Canada
Joshua Rust, Stetson University, USA
Craig Smith, University of Glasgow, UK
Vernon L. Smith
, Chapman University, USA
Spyridon Tegos, The University of Crete, Greece
Jack Weinstein, University of North Dakota, USA
Jonathan Wight, University of Richmond, USA
Gloria Zúñiga y Postigo, Ashford University, USA

Comment
This volume has been a long time in preparation. Palgrave-Macmillan is the publisher of my two books on Adam Smith:

‘Adam Smith’s Lost Legacy’ (2005) and Adam Smith: a moral philosopher and his political economy (2008, 2nd ed. 2010).

Friday, December 05, 2014

MR WONG INVERTS ADAM SMITH'S ADVICE FOR ADDRESSING ONE'S OWN SELF INTERESTS IN TRANSACTIONS WITH OTHER PEOPLE

Speaking at a plenary session at the Global Social Innovators Forum held at Institute of Technical Education College Centre, Mr Wong noted how the economy is built on economist Adam Smith’s principle, where maximising an individual’s interests and profits would see the marketplace work and function better.
“But if you use that principle to organise our society, and if we each go on our self-interests, there would (not be a) common ground to build a society and you will not have a strong and cohesive society,” said Mr Wong.
He added: “The society needs to operate on a different principle. It almost needs to operate on a reverse Adam Smith’s principle — that we need to look after the interests of others first.”
Comment
Mr Wong starts from a false premiss.  What motivates an individual to engage in actions is not the same as those actions succeeding in making society, either in the ‘market place’ or ‘the society’, ‘function better’.  Smith was well aware of the limitations of peoples’ motives and consequences of the actions that follow from them. 
Many references in Wealth Of Nations refer to the negative consequences of motivated actions that do not make society ‘function better’. The whole of Book IV is a ‘violent attack’ (Smith’s own phrase) on the motivated actions of ‘merchants and manufacturers that were in his mind, detremental to the the broader interests of society in general and to the individuals affected by them (tarrifs, prohibitions, restrictive legislative devices and government policies, monopolies, low-wage policies, and the ambitions of princes).
Moreover, “maximising an individual’s interests” neglects to consider that an individual can only serve his or her self-interests in concert with others in markets which can only be achieved by that person also serving the self-interests of the others they transact with.
‘Self-centred’ egotists would face a declining number of potential parties to their transactions, even supposing they could find partners willing to transact with them. 
This precept of Smith's appears in Paragraphs 2 and 3, Chapter 2, of Book 1, of Wealth Of Nations, where Smith describes the ‘bargaining process’ where he advises persons searching for their dinner from sellers of meat, beer, and bread to address the seller’s (not their own!) self-interests when in pursuit of their own self-interests.  
Mr Wong has missed Adam Smith’s central point, which may be understandable because Mr Wong merely repeats modern distortions of Adam Smith’s moral philosophy and political economy. 
I would render Adam Smith’s actual policy prescription as: The society needs to operate on the same principle by operating precisely on Adam Smith’s principle by realising that we best serve our own self-interests by serving the interests of others.”