Thursday, December 23, 2010

Adam Smith, mercantilism, 'invisible hand' and Deism

I've written an occasional post touching on the edges of what's at the heart of this one.

And, that is that Smith wasn't such a pure-blooded Platonic idealist capitalist, first.

Even more important, secondly, is how his economic theory, especially as connected to his moral-sense ideas, and economically culminating in his "invisible hand," were based on Enlightenment Deism, an optimistic version of that religion that is scientifically, philosophically and psychologically untenable today.

For defenders of Smith the simon-pure free trader? You're wrong on the mercantilism, Smith and the colonies (Google Docs link). I quote, from a book: "Smith likewise approved of the laws which authorized the payment of a bounty for the production of naval stores in the American colonies and prohibited their export from America to any country other than Great Britain. This typical mercantilist regulation was justified, in Smith’s view, because it would make England independent of Sweden and the other northern countries for the supply of military necessities and this contribute to the self-sufficiency of the empire"

Source? "Wealth of Nations," Book IV, pp. 545-546, 609-610, 484, note 39.

Now, naval stores isn't all colonial goods, but given that they related to national defense, albeit loosely, Smith had no problem bringing them under a mercantilist umbrella.

Elsewhere, Smith accepted government support for start-up industry, retaliatory tarrifs (albeit on a limited basis) and other things.

On whence Smith derived ideas of "an invisible hand" or "the invisible hand," no, I can't prove it's from the wind-up-the-universe God of Enlightenment Deism. Nonetheless, it sounds reasonable, and I know it can't be disproven either, that as a source. Per Wikipedia, referencing his obit as a source, he rejected Orthodox Christianity at Oxford and was generally understood to have become a Deist.

Beyond that, von Mises says in Wikipedia again that he thought Smith thought the invisible hand was God.

Beyond that, we know that Deism was a strong influence on Smith's theory of moral sentiments. (Google Docs link.)

It's arguable, and has been argued by some, that the "invisible hand" doesn't apply to the workings of the market. But, even if it's considered an "inner witness," and not directly linked to Deism, nonetheless, via Smith's theory of moral sentiments being Deist influenced, a denial of any connection at all is hard to maintain. Certainly, the ideas that an invisible hand will rationally maximize production to the ultimate benefit of all is pure Deism at its most optimistic and moonshiney.

And, of course, Deism was scientifically undercut in 1900 by Max Planck. Before that, indirectly, as Voltaire knew, such an optimistic Deism was shaken by the 1755 Lisbon tremblor. Since then, nuclear weapons, world wars and the Holocast have further shattered Smith's blithely optimistic Deism.

Speaking of science, James K. Galbraith argues Smith is non-scientific in another way - he's pre-Darwinian! Very interesting. And, Galbraith applies this thought to all Smithian descendants, namely those nutbar Strausians and related Chicago School economists.

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