Talk:Invisible hand/Archive 1

Archive 1

Archive 2

boring facts

Here is the text: as you can see, it's all about protectionism.

"But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce maybe of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security ; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.

What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can in his local situation judge much better than any statesman or lawgiver can do for him. The statesmn, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever. and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

To give the monopoly of the home market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must in almost all cases be either a useless or a hurtful regulation. If the produce of domestic can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful. It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or, what is the same thing, with the price of a part of it, whatever else they have occasion for.

What is prudence in the conduct of every private family, can scarce be folly In that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country being always in proportion to the capital which employs it, will not thereby be diminished, no more than that of the abovementioned artificers; but only left to find out the way in which it can be employed with the greatest advantage. It is certainly not employed to the greatest advantage, when it is thus directed towards an object which it can buy cheaper than it can make. The value of its annual produce is certainly more or less diminished, when it is thus turned away from producing commodities evidently of more value than the commodity which it is directed to produce. According to the supposition, that commodity could be purchased from foreign countries cheaper than it can be made at home ; it could therefore have been purchased with a part only of the commodities, or, what is the same thing, with a part only of the price of the commodities, which the industry employed by an equal capital would have produced at home, had it been left to follow its natural course. The industry of the country, therefore, is thus turned away from a more to a less advantageous employment ; and the exchangeable value of its annual produce, instead of being increased, according to the intention of the lawgiver, must necessarily be diminished by every such regulation."

Here's a modern, hypothetical example: Let's say the U.S. and South Korea both make steel. And a lot of American companies (auto, cutlery, buildings, etcetera) are buying some US steel and a lot of South Korean steel. Why? Becuase the South Koreans are better at making steel. If the American companies were forced to purchase only US steel, everything that they make would cost more and American consumers would either pay more for the steel based goods that they buy or they would buy imports. So now the Steel tarifs lead to tarifs on goods made with steel. Now the American citizen has a paycheck with the same number of dollars but those dollars don't buy as much and so the paycheck isn't worth what it was, it has been devalued. If his paycheck is from the steel mill, that's a moot point because a devalued paycheck is better than no paycheck. But for everyone else, it's an unfavorable situation. Enter politics, and not the enlightened nor positive kind. There would be all sorts of "experts" paid for by US steel factories, unions, etctera "proving" that US steel is the "right" choice, and that's just the tip of the political campagne that would be waged to protect US steel interests. Smith pointed out that people wouldn't buy foreign goods if they were not a better value than the domestic goods. And to force a consumer to buy a secondary choice compromises that buyer's buying power. That a system of tarrifs and other protections force inefficiency and laxity on the Nation as a whole. With such a system, - continuing with the example - the Steel mills are less motivated to do a better job. Investors are less motivated to invest in better performing industries. And the US economy has less room to breathe. Just as monopolies are bad, so is protectionism.

F267a7 07:05, 2 August 2005 (UTC)

wikipedia the questionable counter-example and forays into to philosophy

I strongly disagree that Wikipedia is a good counterexample. People derive several benefits from contributing, primarily in learning more about the topic as they write it, and also by encouraging others to contribute. Are people really contributing to Wikipedia out of obligation, even though they don't enjoy doing so? The theory doesn't require that the benefits must be monetary. Mbp 07:49, 20 Oct 2004 (UTC)

Removed text:

A counter-example is Wikipedia itself, including the article you are reading right now. None of the thousands of people who have contributed to the over 350,000 articles on Wikipedia have ever received any reward for their contributions. Thus, this entire encyclopedia was written by people who were presumably motivated by an altruistic desire of some sort. They were certainly not striving for any selfish reward. And the sheer size of Wikipedia (360140 articles at the time when these lines were written) proves that great benefits to humanity can be achieved through altruism alone.

If the benefits do not have to be monetary, then the theory becomes non-falsifiable, and therefore irrelevant. In other words, if the theory deals with benefits that cannot be measured, like a "good feeling", then there's no way to prove it true or false in any given situation, so it is worthless.

And besides, as long as the Invisible Hand is a theory regarding economics, it has to deal with economical benefits. You're trying to extend it into the realm of philosophy, which is not what it was designed for. -- Mihnea Tudoreanu 08:27, 23 Oct 2004 (UTC)

I strongly disagree that this is a theory about economics. At the time of Smith's writing the distinction between philosophy and economics had not been made -- Smith was considered a philosopher in his time. On the topic of benefit, Smith talks about "gain" and not money. Personal benefit can take many shapes, and material benefit is not the only reward for one's actions.

While I think that Wikipedia is an imperfect counter-example because its not truly altruistic (plenty of people fight hard on Wikipedia to make more edits than others have, or put their version of things forward), I think we can let it stand for now. I've edited the copy to attempt a compromise. -- Ilya 09:49, 23 Oct 2004 (UTC)

As I have said above, good feeling cannot be measured. Therefore, any claims about immaterial gain in the form of "good feeling" are impossible to prove or disprove. A theory that can be neither proven nor disproven is a worthless theory, because we can never tell whether it's true or false.

But as for your compromise, I generally agree with it. I'll make only a few more tweaks. -- Mihnea Tudoreanu 11:10, 23 Oct 2004 (UTC)

I have removed the following example because it misrepresents Smiths intentions:

A counter example could be Wikipedia itself, including the article you are reading right now. The observed benefit to society — this encyclopedia — is not associated with any material gain for any of the thousands of contributors. Thus, Wikipedia was written by people who were presumably motivated by an altruistic desire of some sort, or who were at least not motivated by any selfish desire for material reward.

Smith is drawing on the work of Manderville (Parable of the Bees), Shaftsberry, Butler, and Francis Hutcheson. These have no mention of financial rewards specificly. Smith and the rest of the "Enlightened self-interest school" are building on a very general psychological principle. If you read the quote at the top of the article you will see this. To limit the priniciple to the financial domain misstates it and does them a disservice. You will have to find some other way to make your point (which by-the-way I think is a valid point). See The Theory of Moral Sentiments for some background. mydogategodshat 16:01, 23 Oct 2004 (UTC)

Fine, fine! I will make it clear that it is only a counter-example to the application of Smith's theory in the financial domain. Adam Smith is best known as an economist, after all, and it would be absurd to refuse to include a valid point about Smith's economics just because it doesn't touch upon Smith's philosophy. -- Mihnea Tudoreanu 10:31, 24 Oct 2004 (UTC)

After looking over the rest of the article carefully, I'd like to draw your attention to the fact that nearly all of it deals with Smith's theory only in the financial domain. For example, right after the quote, you may find the following sentence: "The conclusion is that if people act to advance their material wealth in the marketplace, they will contribute to a system that advances the interests of others, and hence society's interests." So why do you oppose the insertion of a counter-example that addresses this specific concern? -- Mihnea Tudoreanu 10:46, 24 Oct 2004 (UTC)

It is ridiculous to say that all actions have a monetary motivation, or that only monetary motivations cause good outcomes. Neither of them was what Smith was trying to say. He said that self-interest gives public benefit. He did not say that all benefits come from self-interest, or that all self-interest is monetary. (I have just re-read that section of TWoN, and it's quite clear.)

Material motivations are the only ones that can be measured or detected. Pinning some effect on an immaterial motivation (i.e. on a cause that cannot be measured or detected) is like saying "the tooth fairy did it - and you can't contradict me, because the tooth fairy is invisible and intangible; you can't see it, but I know it's there". -- Mihnea Tudoreanu 19:33, 8 Nov 2004 (UTC)

Just because person A can't measure person B's benefit does not mean that person B cannot extract any benefit. To say that is to deny the fact that people can extract enjoyment from leisure -- a service that typically does not provide a material motivation yet is desired by people. Indeed, I believe that ultimately it is pointless to argue this -- an encyclopedia's job is to reflect generally-held belief. I think that what I'm suggesting is the commonly accepted understanding on Smith. -- Ilya 02:35, 10 Nov 2004 (UTC)

If person B says that he/she is extracting some benefit from the activity in question, then you are correct. But if person A says that person B is extracting some benefit from the activity in question, while person B denies it, then we have the following situation:

B: I am not gaining any benefit from this activity.

A: Yes you are. I can't detect it, measure it, or prove it in any way, but I know you are.

Do I have to explain why person A's statement is not scientific? -- Mihnea Tudoreanu 17:46, 13 Nov 2004 (UTC)

Wikipedia does not contradict Smith's theory. If you consider that people are self-interested in wanting to learn by participating in Wikipedia, then it supports it. (I think Smith might agree with this, given his comments on people's desire to improve their skills and education.) At any rate it is not a good, clear, counterexample.

You don't need to participate in Wikipedia in order to learn from it. You could just read the information provided by others without giving anything in return. -- Mihnea Tudoreanu 19:33, 8 Nov 2004 (UTC)

Anyhow: as Ilya says, there is an enormous difference between "non-monetary" and "altruistic". (A desire to be famous may be selfish or self-interested but not monetary.)

Yes, but you can't measure or otherwise detect that desire in any way. Thus, a theory based on this desire is a theory based on something that can't be measured or detected in any way - and therefore it's more of a belief than a scientific theory. -- Mihnea Tudoreanu 19:33, 8 Nov 2004 (UTC)

Questions of falsifiability are also beside the point, seeing as Smith wrote about 150 years before that term was coined.

That doesn't make it any less valid! Gravity was a real issue even before Newton first defined it. A non-falsifiable theory is not scientific, no matter when and where it was created. Thus, if Smith's theory allows for immaterial, non-measurable forms of "self-interest", then it is a worthless theory (something along the lines of the Invisible Pink Unicorn). -- Mihnea Tudoreanu 19:33, 8 Nov 2004 (UTC)

Is the whole of the subjective side of human nature an invisible pink unicorn, then? Or is it simply a fact? If it is a fact, then (however difficult it is to measure anything about this side) it has to be brought into the social sciences. --Christofurio 20:17, Nov 12, 2004 (UTC)

If it's a fact, then prove it. If you can't prove it (or detect it or measure it in any way), then yes, it most certainly is an invisible pink unicorn. Now don't get me wrong, I have nothing against your right to believe in invisible pink unicorns. Just don't pretend that your belief is "science". -- Mihnea Tudoreanu 17:46, 13 Nov 2004 (UTC)

Now you're sounding like B.F. Skinner. Here, allow me a moment to pinch myself. Ouch! There, I have felt pain. This pain is not something anyone but myself has observed. Accordingly, I have proven that there is a subjective side to human nature. Its conceivable I'm the only person to possess this subjective side, but that would be an extremely impractical assumption. --Christofurio 19:09, Nov 13, 2004 (UTC) As for the unicorn -- to call it both pink and invisible sounds like a contradiction in terms, which is a different sort of issue from that of falsifiability. --Christofurio 19:09, Nov 13, 2004 (UTC)

Why does the Weath of Nations have to be scientific? Utility theory is not falsifiabile but it is still used in economics, In the strict sense economics is always falsified since no theory every predicts reality perfectly. However perhaps you can see it more as a way of understanding human actions a paragim through which to see the world. Not science, but still useful. Surely this is still relevent as his view of the "financial domain" even if it is not falsifiable? Even if you belive it to be "worthless" theory it is still theory. (that belive in its worthlessness itself though is entirely subjective)

Happiness

I must admit that I didn't follow the reasoning behind the claim that good feeling cannot be measured. After all its presence or absence within individuals is easily established. Just ask them, "Are you happy at the moment ?" at regular intervals. Those who answer "yes" can generally be assumed to be happy at that moment. Those who answer "yes" the most often are very likely the happiest over the period of questioning. Voila -- measurement.

Personally I am very selfish in my editing of Wikipedia: I do not edit for altruistic reasons; I only do so because I like doing it; it makes me happy. So in my case, the Invisible hand metaphor is very apt. I find it difficult to believe that other people are editing for altruistic reasons even though it is causing them discomfort. -- Derek Ross | Talk 00:42, 2005 Jan 26 (UTC)

Yes, we can detect momentary happiness, but we cannot measure it on a precise numerical scale and compare my happiness in a meaningful way with yours. There are other problems with the very idea of happiness. For example, major depression is essentially a hallucination of unhappiness brought about by neurochemical imbalances, and the manic state is similarly a hallucination of happiness. What we call abuse of drugs is the creation of very temporary artificial happiness.

The real problem about this utility paradigm, is that it is a tautology. "radical" utilitist says, all we day depends on an utility to make this and that. When there is doing that hasnt an obvious utillity, they say, it must be because of raising internal satisfaction/happiness all the way. But look I can also explain that way, why a tree grows apples. Because it makes it happier. Does it? We don't know, neither by trees nor by humans. Other than that, editing wikipedia can bring someone quite angry, thus unhappy. Human actions are just that, much more complicated than utilirasimn thinks it is. --07:55, 25 March 2007 (UTC)

The Beautiful Painting is Also Ugly

Of course, someone once claimed to me that if I think a painting beautiful, I must "necessarily" think that anyone who finds it ugly is wrong! Can you believe anyone would say that? It suggests that there are some people who don't understand the subjective nature of aesthetic value, and of economic value in conditions of freedom. My willingness to pay $100 for a painting doesn't mean that your view that it is worthless is wrong. Likewise with the value of participating in wikipedia. --Christofurio 20:17, Nov 12, 2004 (UTC)

You have a most excellent memory, my friend. But not good enough, it seems, since I recall that the misunderstanding you mention was actually clarified by the person in question. Your willingness to pay $100 for a painting, that means you think the painting is beautiful. Which means you think it is not ugly. Which means you think that anyone who says the painting is ugly is wrong. Different people may have different opinions about a painting, but it is rather difficult for the same person to have two different opinions about the painting. -- Mihnea Tudoreanu 17:46, 13 Nov 2004 (UTC)

No. I don't necessarily believe that anyone who thinks the painting ugly is wrong. And yet I buy the painting and praise its beauty. What is supposedly illogical here? I believe that the painting is beautiful in some respects (i.e. pleasing to my own aesthetic sensibilities) and ugly in others (i.e. displeasing to yours). Those respects in which it is beautiful govern my behavior as a consumer, but in no way contradict the respects in which it is ugly. Why is that complicated, or even controversial? --Christofurio 19:09, Nov 13, 2004 (UTC)

Personally I think Wikipedia is an excellent example of the individual interests of many people producing a public benefit. By all means let's debate this, but not in this article, which should just clearly define Smith's term. — Mbp 02:30, 25 Oct 2004 (UTC)

Wikipedia is a gift economy and the best example of a working Anarcho-communist society in the whole of human history. Self-interest has nothing to do with it, since a self-interested individual would read and use the information contained in Wikipedia without making any effort to contribute. -- Mihnea Tudoreanu 19:33, 8 Nov 2004 (UTC)

You'll be happy to know I agree with this. I have no objection to anarcho-communist arrangements (and, as you have noticed, participate in at least one) so long as they arise voluntarily. After we have dissolved the myth of sovereignty, and governments have disappeares from the earth, then in my expetation both capitalist and communist ways of arranging one's affairs will exist in harmony, there being no politics to either. Just as people can enjoy different paintings and dislike each other's taste, but live in harmony. For reasons connected with the information value of prices, etc., I believe anarcho-cap arrangements will dominate. But that is a prediction, not something for the sake of which I will ever coerce anyone inclined to disagree. --Christofurio 19:17, Nov 13, 2004 (UTC)

Tobacco

I don't know if even tobacco is a good example here. I'm not saying tobacco is beneficial (yuk) but rather I don't think it contradicts his point.

Smith's point is that a free market tends to produce things that people want. Tobacco is pretty much something people want and (semi-) voluntarily choose to spend money on, even if you think it's not good for them.

You're using circular logic here. To be more exact, you're using the market success of tobacco to measure how much people want it, and then conclude that it is successful on the market because people want it. In other words, "tobacco is successful because people want it, and we know that people want it because it is successful". -- Mihnea Tudoreanu 19:33, 8 Nov 2004 (UTC)

Actually Mbp's logic is not circular. The point was not about tobacco's success on a market. Rather, it's saying "People want tobacco, hence other people decide to make tobacco, and because of the market about as much tobacco gets produced as was desired". -- Ilya 02:35, 10 Nov 2004 (UTC)

So how do you know how many people want tobacco, and how much tobacco they want? If you derive that knowledge from the market, then your logic is circular, because you're using the conclusion to prove the hypothesis (like I explained above, the reasoning goes along the lines of "we know that people want tobacco because the market produces it, and the market produces tobacco because the people want it"). -- Mihnea Tudoreanu 17:46, 13 Nov 2004 (UTC)

There's no circle there. It would be a circle only if it ran this way, "We know that people want tobacco because the market produces it, and we know that the market produces it because the people want it." But that second half is nonsense, which is of course why it isn't what you said. And worded the way you have worded it, there simply is no circle. We know what the market produces by simple observation. We know what people want because we can see them putting money on the store counter to buy it -- which is also a matter of observation. --Christofurio 19:12, Nov 13, 2004 (UTC)

There are also the complicating factors of public health care, pollution, passive smoking, etc.

Whether people should or can make their own decisions about what's good for them is a separate question.

Posssibly pollution, or the tragedy of the commons would be better counterexamples. But even then, Smith didn't claim it was a universal rule, merely a tendency. He did explicitly consider monopolies, cartels, externalities, etc. — Mbp 04:55, 25 Oct 2004 (UTC)

Thats funny, if Smith did explicitly meantion externalities, i am finding it very hard to see how his argument, that self interest is always good for society ever held firm. To me the whole thing is trying to have the cake and eating it too. I do admit however of seeing it though some idiosyncratic goggles. gathima 18:22, 18 Jun 2005 (UTC)

Very well then; we should explicitly mention Smith's disclaimers. -- Mihnea Tudoreanu 19:33, 8 Nov 2004 (UTC)

That should be part of The Wealth of Nations and not here — Smith made a number of points that relate to capitalism and free markets, and realistically not all of those should be discussed in Invisible Hand. -- Ilya 02:35, 10 Nov 2004 (UTC)

I trust that wikipedia is not joining the anti-tobacco crusade. I've tried to fix up the wording of what seemed to me a horribly POV example. There are benefits to smoking, and I've listed them in a parenthesis. It is not circular to say, "I enjoy smoking, so I get something for my money when I pay for it." It is a recognition of the fact that humans aren't merely objects, that we are also subjects, and that our valuations are accordingly subjective. --Christofurio 16:58, Nov 10, 2004 (UTC)

It's still irrelevant as written:

Moreover, a free market arguably provides numerous opportunities for maximizing one’s own profit at the expense (rather than for the benefit) of others. The tobacco industry is often cited as an example of this: the sale of cigarettes and other tobacco products certainly brings a very good revenue, but the industry’s critics deny that the social benefits (the pleasures associated with smoking, the camaraderie, the feeling of doing something “cool”) can possibly outbalance the social costs.

First of all, "the industry's critics deny" is weasel words. Second of all, whether "the social benefits outbalance the social costs" (does that actually even mean anything?) does not determine whether a thing is to the benefit of "others". Smokers smoke by choice, so by definition it is to their benefit that PM provides cigarettes for sale to them. Because those individuals have made a personal, subjective choice about their own utility, and in doing so have essentially asked for a product wish to be fulfilled. And it has been. The health effects of that provision do not enter into the argument. If a person wanted to drink poison, and bought Acme brand poison, and died, that would not be an example of "one maximizing one's own profit at the expense of others" on the part of Acme.

The passage is quite simply wrong and irrelevant.

Also, "tobacco is successful because people want it, and we know that people want it because it is successful" is not circular logic; it is a tautology. That means it's self-evidently true. --75.49.222.55 07:24, 10 October 2007 (UTC)

Really bad example

This is given as an example of a product available due to capitalism. I think its a horrible example and we should pull it down.

A contemporary example of such an effect could be the far-reaching social benefit realized via the proliferation of computers and software; goods which have been produced almost entirely by people trying to maximize their own economic gain. Presumably those producers didn't manufacture the computers and develop the software out of a love for humanity or an altruistic desire to promote society's collective fortune. Any social benefits that have accrued therefore, according to Smith's doctrine, are simply a by-product of their striving for selfish reward.

Computers and to be more precise transistors are a product that is there due to USA government research funds. The whole free market stuff didn't get into it until the late 70s.

IBM and other vendors were producing commercial computers in the 1950s, with a shift from vacuum tubes to transistors in the late 1950s and early 1960s. The late 70s was the period of Apple, Commodore, Atari, Microsoft, and Digital Research. Cherlin 05:56, 25 March 2007 (UTC)

Yes, but the governments were advancing computers in 40s. And the computer science was producing tons of research for free as part of academia, that is exactly 'paid by public for the public good', throughout 50s, 60s and 70s and up to this day. So I don't think this is a good example. 151.199.27.30 07:17, 14 September 2007 (UTC)

At that point, it was like any other widget. Let me give a hopefully better example. Vehicle. You should read the Mercedes-Benz article as i am not sure it was an individul work.

actually . . it's not such a bad example.

Actually actually, it's a terrible example. Not just because many of the people who created great advances in computing were not doing it to maximize anybody's profit, but because it was fun. The real reason is the Free Software/Open Source movement, where people mostly write software because they want to use it themselves, and then give it away rather than set out to maximize their financial profits on the proprietary software model. Cherlin 05:56, 25 March 2007 (UTC)

Yes, I removed it. See below. 151.199.27.30 07:40, 14 September 2007 (UTC)

Energy industy and invisible hand

The article below does a good job demonstrating problem with invisible hand. I couldn't help remembering I had introduced that idea on this article, but was quickly pulled out for being baised to the left. We have an interesting future in this sector. Back to the article, the author may be insenuating Kyoto treaty is not a bad idea.

Put another way, rather than reflecting any inherent economic wisdom, today's blasé oil attitudes may mask a dangerous split reality in the world of oil. Prices aren't yet high enough to curb demand in America, China or elsewhere, which means demand pressure will continue to build. Nor are prices high enough to spur the innovation needed to move away from oil. And yet, by the time prices do rise, which they will, and the market performs its inevitable "correction," the invisible hand will have moved too late to do anyone any good. [1]

Three different occurrences

I added the other two. Plus Tawney's interesting comments. --GwydionM 20:56, 21 February 2006 (UTC)

Move to Invisible hand?

How about moving this from Invisible Hand to Invisible hand? I don’t really see why “Hand” should be capitalized. — Daniel Brockman 05:55, 14 March 2006 (UTC)

I didn't create the article, but I'd say a concept should be 'Title Case'. Invisible hand is there as a redirect and that seems right.--GwydionM 18:29, 14 March 2006 (UTC)

I have a question about the Smith quote from the astronomy book. "nor was the invisible hand of Jupiter every apprehended" ... is this a typo on our part or on Smith's? Clearly it should be "ever apprehended...." --Christofurio 16:18, 16 March 2006 (UTC)

Encyclopedia, Anybody?

I think this is one of the worst pages on Wikipedia, ever.

LionKimbro

earlier use of phrase unimportant, misleading

I elided a small section called The History of Astronomy, containing this text:

The 1976 Glasgow Edition of Smith’s works points out a third occurrence of the phrase, in an early work called The History of Astronomy. This was written before Moral Sentiments and Wealth of Nations, though it was only published after his death, in a collection called Essays on Philosophical Subjects:

For it may be observed, that in all Polytheistic religions, among savages, as well as in the early ages of heathen antiquity, it is the irregular events of nature only that are ascribed to the agency and power of the gods. Fire burns, and water refreshes; heavy bodies descend, and lighter substances fly upwards, by the necessity of their own nature; nor was the invisible hand of Jupiter ever apprehended to be employed in those matters. (III.2, page 49 of the Glasgow Edition)

I took this out because it is unimportant and would be misleading to the reader. In Astronomy, "the invisible hand" means a very conscious, intentional hand, a deus ex machina, a supernatural explanation -- almost completely the opposite of the economic invisible hand. The fact that Smith once happened to use the phrase "invisible hand" in a very different sense is not worth mentioning and would help to derail the reader's understanding of Smith's economics. Smith was well aware of the mechanistic and mundane nature of the economic invisible hand and we should not imply that he thought it was something magical.

earlier use of phrase important and not misleading ;-)

First of all, invisible hand occurs three times in Smith's works, so it should be fair to report all of them. Moreover, as the quote from the Theory of Moral Sentiments states very well, even when Smith is talking about economic matters (the distribution of wealth!), his invisible hand is Providence ("When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition") i.e. - metaphorically - the invisible hand of Jupiter.

Please, read again the Wealth of Nations where Smith speaks of the invisible hand: "every individual naturally inclines to employ his capital in the manner in which it is likely to afford the greatest support to domestic industry, and to give revenue and employment to the greatest number of people of his own country."

In Smith the invisible hand is a natural inclination, an example of those "regular events of nature" that the heathen antiquity failed to assign to Jupiter/Providence, it is not a social mechanism. Smith is not yet Walras ;-)

leitfaden 9:29, 2006-08-24 (UTC)

I wish to thank Tayssir for his contribution. --Leitfaden 09:16, 28 August 2006 (UTC)

Clean Up

This article needs to have the far too lengthy quotes summarized, and possibly links to the source text. Hires an editor 15:59, 8 October 2006 (UTC)

Will do, I'm gonna be bold.--Connor K. 02:02, 9 October 2006 (UTC)

“the invisible hand” of the market?

Right in the introduction, Smith himself never said "invisible hand of the market". Actually he himself did not shine light on, what specifialy the invisible hand is. Neoclassic theorists claimed this must be the invisible hand "of the market", and thus intrepted this into Smiths writing. Most of you people learned about Smith in a neoclassic economy book, thus will also take that view. While as the article says correctly, Smith used that term also for other things, like the movement of jupiter, it would more suggest Smith actually thought about a universal principle directing this universe to its well-being, also beeing acting through people when they can act freely, as opposed to acting under duress, or in an suppressing regime (like still his country at his time). He never directly claimed it were the rules of market that made this wellfare! Especially as most of this rules like the market equilibrium that are common knowledge for us today weren't yet known in his time, and to him. Altough Smith was an important factor in getting there... --Jestix 20:11, 17 March 2007 (UTC)

Agree. The Invisible Hand metaphor is not that of a natural force for efficiency. Smith was NOT for slef interest.Cibwins 08:06, 12 July 2007 (UTC)

a few observations

1. Tobacco is a bad example as it contains an addictive substance and thus causes irrational behaviour. Also, the energy market is a bad example as it depends upon a single network which can be monopolised. Bad examples will come from markets with distorted (tilted) playing fields, ie, where the power of one or more market players is artificially constrained or inflated. These artificial constructs inhibit the movement of the invisible hand.

2. A good example will likely come from a market with a high degree of competitive intensity (eg. many competitors, low barriers to entry and exit, etc - see Porter's five forces). In these markets, the movement of the invisible hand is relatively uninhibited.

3. Mihnea Tudoreanu's objections above seem to arise from his/her attempt to quantify a process. The invisible hand cannot be quantified any more than climate change. Climate change cannot be seen or touched - only its outcomes can be measured. The process of resource allocation, eg. the invisible hand (see allocative efficiency), likewise cannot be seen or touched, and only its outcomes can be measured. This does not mean it does not exist, however. The page on self-organization describes numerous intangible, naturally-occurring processes (including economics).

-- Lsi 13:44, 16 June 2007 (UTC)

Lighten up!

Q: How many free market economists does it take to change a lightbulb?

A: Free market economists don't change lightbulbs, they prefer to write their papers in the darkness while waiting for Adam Smith's invisible hand to do it for them. 218.111.45.77 15:57, 19 June 2007 (UTC)

Picture

Can we please get a picture to improve this article? XM 16:06, 30 July 2007 (UTC)

It is not the sort of article than needs, or indeed lends itself to having a picture. We must not forget that WP is an encyclopaedia not a glossy magazine. -- Alan Liefting talk 20:19, 10 September 2007 (UTC)

Invisible elbow

Is this quotation worthwhile putting in under the "Criticism" section?

“So long as industrial societies persist on seeing the beneficent invisible hand rather than the destructive invisible elbow, they will find it hard to protect the environment.”

It is from Ch 4 of: Jacobs, Michael (1991) The Green Economy: Environment, Sustainable Development and the Politics of the Future. London: Pluto Press.

The author is not as notable as others currently listed in the "Criticism" section. -- Alan Liefting talk 20:25, 10 September 2007 (UTC)

–quick change– –can we change "greed" in the article to "personal incentive"? i feel greed is an innappropriate term in the context.–JTM08160 06:03, 14 September 2007 (UTC)

greed?

–can we change "greed" in the article to "personal incentive"? i feel greed is an innappropriate term in the context. i am just throwing that out there as a suggestion, if anyone has anything to say on the subject please feel free.–JTM08160 06:06, 14 September 2007 (UTC)

rm computer example

Well, I'm sure there are good examples for invisible hand. Computers are definitely not one of them and I don't see how to improve this example. I tried to modify it a bit ---

A contemporary example of such an effect could be the far-reaching social benefit realized via the proliferation of computers and commercial software; goods whose transition from 'geek culture' into 'consumer culture' was in certain period largely driven by people trying to maximize their own economic gain. Presumably those producers didn’t manufacture the computers and develop the software out of a love for humanity or an altruistic desire to promote society’s collective fortune. Any social benefits that have accrued therefore, according to Smith’s doctrine, are simply a by-product of their striving for selfish reward. (It must be noted, however, that other mechanisms -- namely volunteering and government support -- were instrumental for development of computers and their software; these factors continue to be noticeable even now).

but I don't think it will work. Computers/software/networks were developed by ---

• Philosophers and visionaries from 17th till 19th centuries, starting from Rene Descartes
• Mathematicians like von Neumann and Norbert Wiener who created the framework of computer science and cybernetics
• Research teams in military of US and Britain during WW2 and later (History of Internet)
• Academic universities and other CS researchers who developed algorithms and networks
• Big number of people who were writing programs for fun
• Starting from 50s, manufactures who were catering to big businesses largely responding to the fashion of 'cybernetics', but of course cutting costs as well
• Starting from 80s, software companies, who started selling programs and succeeded in bringing them to the average consumer (but are often accused of greed)

So, the pursuing of gain has allowed many benefits for the society in this picture and certainly people are buying computers because they benefit from this. But to say that it is the reason for the development of computers/software/networks would not be correct. 151.199.27.30 07:37, 14 September 2007 (UTC)

Change to intro

I have removed the following and replaced it with something in keeping with what Smith actually said, as quoted later.

In detail, a free competitive market ensures that those goods and services perceived as most beneficial, efficient, or of highest quality will naturally be those that are most profitable. Thus, self-interest striving for profit has the side-effect of benefiting everyone by increasing standards. Smith saw the mechanism for this as being the free price system..

Smith's argument is about maximum output, not quality. Nor does he in the quotation mention prices, rather he argues based on the profit motive. Finally, he talks in terms of revenue, not 'profitability' as such. Other people may argue this by extension, but it is wrong to put it into Smith's mouth.

Besides this, the first sentence is a serious misstatement. First, it hardly represents 'detail'. Second, it is easy to provide examples that refute the basic contention (the diamond-water paradox and the profitability of low-quality Chinese goods, for instance). Part of the problem is that it confuses price with profit.--Jack Upland 07:37, 30 September 2007 (UTC)

Removed para

I removed this from the 'Interpretation' section:

However Smith's message is in fact very different from the popular understanding of it; namely that greed — including the following of market price signals for the sole purpose of maximising individual profit — is best both for individuals and their communities. Rather, his message is that our social consciences lead us to re-evaluate our self-interest, without our being fully conscious of the process.

It was already fact-tagged, but it was misplaced and so at variance with the rest of the article it had to go. If the contributor can produce some kind of substantiation, then it can go back, though it still would need to be repositioned and rephrased to avoid the article being self-contradictory.--Jack Upland 07:52, 30 September 2007 (UTC)