Invisible Hand no 25
Mick Brooks, a Marxist, writes on intellectual property rights (“a modern day enclosure of the commons”) for Independent Media Centre of San Francisco, California (22 November).
In his trenchant piece (ignoring his slight tendency to rant) he tears into capitalism as the source of everything that’s ‘wrong’ with the world and sees it as a threat to the survival of the Earth itself as a habitable place for humans. This, of course, ignores the sad fact that the world’s worse polluters and environmental destroyers featured strongly in the former Soviet Union and in the current China, symbolized by the decaying Soviet nuclear fleet in the waters off Arctic Russia.
Sprinkled throughout his article there is a plethora of quotations from Marx’s Capital and from other contributors. It is, however, readable and racy, and I suggest you judge for yourself by visiting the site at: (http://sf.indymedia.org/news/2005/11/1722361.php)
However, among his appeal to authorities he writes:
“On the one hand Hardin uses his Malthusian perspective to refute the notion that rational (that is utility maximising) individuals will produce an optimal equilibrium. This is often called Adam Smith's invisible hand theorem and is the classical justification for laissez-faire capitalism.
Compared with Adam Smith's optimism about harmony and progress (under capitalism) though, for Hardin to adopt instead Malthus' pessimism about the eternal condition of humanity may be regarded as a step back. On the other side, the reason the invisible hand of the market doesn't work in the case of the commons according to Hardin, is because there is an incentive for greedy individuals to overgraze their animals, since the cost is borne by others. All suffer as a result.”
The errors in the above are not Mick Brooks’ fault. He was clearly educated in economics in or near to US academe, which has completely misrepresented Adam Smith's legacy. There is no such ‘invisible hand theorem’ in Adam Smith. A ‘theorem’ consists of more than a lonely metaphor, which was not even Smith’s – it belongs to Shakespeare (Macbeth 3:2).
That it might be a ‘classical justification for laissez-faire capitalism’ is arguable, provided Brooks defines what he means by ‘classical’, ‘laissez faire’ and ‘capitalism’, all sprung upon the profession in the mid-19th century not in the mid-18th century. For Smith ‘classical’ meant the products of the Greek and Roman languages two millennia earlier; he never used the words ‘laissez faire’ though some 18th century French economists did; and he did not know of the word ‘capitalism’, first used in English in 1854 (Thackery, Necomes II), nor the phenomenon, which is a back-projection of a modern name onto the distant past.
Smith was optimistic about the progress of opulence, especially for the labouring poor, through the growth of the net revenue of the commercial economy in conditions of Natural Liberty. What he might have written about the technological changes and the joint stock companies of the 19th century we can never know, as he didn't know anything about the future over the horizon.