THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Wednesday, April 22, 2020

Adam Smith’s “Invisible Hand”

One of the more acceptable ways to make a name for yourself in the more liberal areas of Academia is to go after the moral philosopher Adam Smith (1723-1790).  All you have to do is say the “right” things about Smith, thereby demonstrating you have the “right” attitude about capitalism and its purported high priest, and you will be accepted, or at least acceptable — assuming you don’t transgress any other unwritten law of the Groves of Academe.

Adam Smith
A particular fixation of modern economists and moral philosophers is Smith’s “invisible hand.”  This is odd, because neither Smith’s detractors nor his champions appear to know what Smith was talking about!  For example, “free” (the term should be understood in a rather limited, if not equivocal sense) market advocates have long cited the invisible hand as the justification for laissez faire, that is, unrestrained capitalism or similar economic programs.
Ironically, people who actually understand Smith come to a different conclusion about the invisible hand, even as they disagree with Smith’s individualistic emphasis.  As the solidarist sociologist Father Wilhelm Schwer noted,
Already in the circle of the physiocrats (led by Quesnay), the expression “laissez faire” opened the way for unchecked development and the use of individual inclinations and power, although the founder of economic liberalism (Adam Smith, d. 1790) did not wish it understood in the way of the later Manchester school. (Wilhelm Schwer, S.T.D., Catholic Social Theory.  St. Louis, Missouri: B. Herder Book Co., 1940, 157-158.)
There is, in fact, no evidence that Smith encouraged in any way the unbridled greed and rapacity that he is often credited — if that is the right word — with advocating or inspiring.
Heinrich Rommen
It is evident, then, that “laissez faire” is one of the many terms that were redefined as society shifted away from its fundamental basis in the lex ratio (reason) to the lex voluntas (will or faith).  As the solidarist jurist Dr. Heinrich A. Rommen noted in his book on the natural law, this established an intellectual atmosphere in which moral and legal positivism became the predominant social philosophy, and faith and reason became antagonists instead of partners.
To explain, Laissez faire originally meant nothing more than an economic system that recognized and protected individual initiative and sovereignty within a clear moral and juridical framework, such as Smith described in The Theory of Moral Sentiments (1759).  Under pressure from the spread of moral and legal positivism and the consequent confusion of the difference between absolute title but limited use, however, “leave alone” began to mean an unrestrained “do what you will” and “might makes right.”
The invisible hand is often cited as the basis for the neo-conservative “restoration” of Say’s Law and the underpinnings of “supply side” economics. (See Thomas Sowell, Say’s Law:  An Historical Analysis.  Princeton, New Jersey:  The Princeton University Press, 1972.)  Neo-conservatives, however, are often not quite sure as to what the invisible hand is and how it operates — or how it was supposed to operate.
See what we mean?
The invisible is not a mystic concept as both its supporters and critics maintain.  Contrary to popular belief, Smith never said that a metaphysical entity of some kind directs events as if human beings are some kind of pieces on a cosmic chessboard.
Rather, the invisible hand is a metaphor for the workings of a system, the “invisible structure” of organized activity.  Smith’s point was that if a system is set up properly, and if the institutions of that system are structured in a way that they conform to the end purpose of the system (that is, they do the job for which they were designed), then a system operates as if an invisible hand were leading things.
That is all.  No mystical beings, no cosmic force or forces directing human actions behind the scenes, eliminating free will and liberty.  No man behind the curtain.  Just people acting in accordance with certain principles and within the parameters of established “social habits” — institutions.
Many people, however, fall into the trap of thinking that Smith was referring to the hand of an actual supernatural being of some kind, and not using a metaphor for a system.  Paradoxically, at the same time, many of Smith’s critics admit that it is a metaphor, and then continue to analyze Smith as if he posited an actual manmade market deity.  Frankly, most liberals reveal that they are no clearer on the invisible hand concept in criticizing it, than the neo-conservatives and capitalists are in supporting it. 
No, Smith made other mistakes in his invisible hand argument, and we may eventually get around to taking a look at them.