Sunday, February 10, 2013

An Interest to Deceive

Thoughts on a post from Cafe Hayek: The economics that’s in demand, tagged for "Hubris and humility"...

I don't generally go to Cafe Hayek, so I could have this all wrong. But it looks to me like post author Russ Roberts has a thing for "spontaneous order". That's when you just leave the economy alone, and it works better because you left it alone, because it has spontaneous order.

Sort of like evolution, I guess, as opposed to intelligent design.

Roberts says

we get the economics we deserve, the economics that most everyday people want to hear. I’ve often wondered why my viewpoint (or Don’s or Pete’s or Adam Smith’s or Milton Friedman’s) has such limited traction in the marketplace for ideas.

So, according to Roberts, we get the economics that fools want, when what we should get is the spontaneous order embraced by wise men like Russ Roberts and Don Boudreaux and Pete Boettke and Adam Smith and Milton Friedman. "Interventionism, market failure, Keynesianism–they are all doing 'better' in the marketplace" than the spontaneous-order lot.

However, Adam Smith warned that "those who live by profit" are not to be trusted. He said they are "an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."

Smith did not "rely on invisible hand processes" as Roberts puts it. Smith cannot be lumped in with those others who oppose, or are claimed to oppose, "interventionist" economics.

Once again, there is trouble at the premise: Adam Smith was the "father" of economics, and Russ Roberts gets him wrong.

At Adam Smith's Lost Legacy, Gavin Kennedy writes

Smith in [The Wealth of Nations] noted how merchants secretly combined to resist employee wage demands while opposing the rights of employees to combine to pursue their collective interests.

Adam Smith’s advocacy of the philosophy of Natural Liberty was quite different from laissez-faire (words he never mentioned). Natural Liberty, as expressed by Smith, equalised the rights of all participants in commercial society, employers, labourers and consumers. This does not prevent modern economists from associating laissez-faire with Adam Smith’s name...

Again Gavin Kennedy, in comments:

Smith did not make a general statement that public benefit arose from self-interested actions by merchants and others. That opulence was a general benefit as an alternative to abject poverty was suggested to his readers. But self-interests could also work against public benefits. For example, in self-interested actions by merchants in favour of narrowing competition, protection and tariffs, monopolies, 'conspiring to raise prices'. Also when landowners used primogeniture laws and entails to control inheritances, when sovereigns raised taxes or borrowing to fight dynastic wars.

Gavin's is a site to visit often. Russ Roberts' place, perhaps not so much.

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