ANOTHER DEMAND TO KILL OFF THE INVENTED INVISIBLE HAND BY MODERN ECONOMISTS
David Sloan Wilson posts (6 September) on EVONOMICS HERE
“Invisible Hand: Why the Narrow Pursuit of Self Interest Always Fails”
“Regulation comes naturally for small human groups but must be constructed for large human groups.
“I hope that our economy recovers, but the time has come to declare its guiding metaphor dead. This is the metaphor of the invisible hand, which makes it seem as if the narrow pursuit of self-interest miraculously results in a well-functioning society.
The invisible hand metaphor originates with Adam Smith in The Wealth of Nations(1776). Bernard Mandeville made a similar point with his Fable of the Bees (1705), which fancifully describes human society as a wondrously productive bee hive, even though each bee is as selfish as can be.
Smith was critical of Mandeville and presented a more nuanced view of human nature in his Theory of Moral Sentiments (1759), but modern economic and political discourse is not about nuance. Rational choice theory takes the invisible hand metaphor literally by trying to explain the length and breadth of human behavior on the basis of individual utility maximization, which is fancy talk for the narrow pursuit of self-interest. For the general public, unfettered competition has been turned into a moral virtue and “regulation” has become a sin. …
… New theories are not good enough, however. We also need to change the metaphors that guide behavior in everyday life to avoid the disastrous consequences of our current metaphor-guided behaviors. That is why the metaphor of the invisible hand should be declared dead. Let there be no more talk of unfettered competition as a moral virtue. Cooperative social life requires regulation. Regulation comes naturally for small human groups but must be constructed for large human groups. Some forms of regulation will work well and others will work poorly. We can argue at length about smart vs. dumb regulation but the concept of no regulation should be forever laid to rest.”
David Sloan Wilson is getting more and more interesting on the subject of the “invisible hand” metaphor in modern economics, as presented by most economists folllowing the gross misreading by Paul Samuelson in 1948 and its completely fictitious further developments in fantasy by subsequent economists from then to today, much of it documented on Lost Legacy since 2005.
Mandeville has largely been ignored for his satire about the bees. Smith was robbed because his metaphor was easily expanded to cover the wider, and significantly changing modern economy and much inventive elaborations to take account of these developments, including those flowing from the mathematisation of economics subject to imposed theories of human rationality.
The assertion that the economy’s ‘guiding metaphor is dead’ is a bit previous, as we used to say when I lived as a schoolboy in London (long story of my youth, dragged out of Scotland via Leeds by my mother).
Bring it on, I say. Lets kill the brazen misuse of Adam Smith’s use of a popular 17th-18th century metaphor.