Friday, August 18, 2017


Jacob Heilbrunn post a review of a new Princeton University Press book (17 August) in The National Interest HERE
Dennis C. Rasmussen, The Infidel and the Professor: David Hume, Adam Smith, and the Friendship that Shaped Modern Thought (Princeton: Princeton University Press, 2017), 336 pp., $29.95. 
No one went to greater lengths to defend David Hume’s posthumous reputation than Smith. Always more prudent than Hume—who was known as “the Great Infidel” and deemed unfit for tutoring the young—Smith, a venerated professor of moral philosophy at the University of Glasgow, was guarded in conversation about his religious skepticism. But after Hume’s death, Smith shed his habitual caution and composed a highly controversial supplement to Hume’s brief memoir My Own Life. It was called a Letter to Strahan. In it, Smith described Hume’s final months, emphasizing his affability and serenity in the face of illness and impending death. He observed,Though Mr. Hume always talked of his approaching dissolution with great cheerfulness, he never affected to make any parade of his magnanimity. He never mentioned the subject but when the conversation naturally led to it, and never dwelt longer upon it than the course of the conversation happened to require…
…Boswell, who visited Hume on his deathbed and wrote a famous account of it, was astounded by Hume’s phlegmatic acceptance of his demise. Dr. Johnson was not.
…In The Infidel and the Professor, Dennis C. Rasmussen explores the bromance between David Hume and Adam Smith. They bolstered each other’s careers, belonged to the Select Society club in Edinburgh and corresponded regularly on a variety of topics, ranging from moral philosophy to history to economics. Both also lived for a time in France, where they were celebrities and where Hume briefly became friends with Jean-Jacques Rousseau. Rasmussen, a professor of political science at Tufts University, deftly examines not only Hume and Smith’s personal relationship, but also the indispensable part that they played in shaping the Scottish Enlightenment. The result is a valuable study of the rise of the liberal tradition.
On the face of it, Scotland was an unlikely candidate to spawn such intellectual titans. Hume himself said that Scotland had been “the rudest, perhaps, of all European Nations; the most necessitous, the most turbulent, and the most unsettled.” But Hume’s and Smith’s lifetimes coincided with a new era of economic prosperity and cultural glories. Edward Gibbon remarked in 1776—the year the first volume of his The Decline and Fall of the Roman Empire appeared, along with Smith’s The Wealth of Nations, not to mention Thomas Paine’s Common Sense—that he had “always looked up with the most sincere respect towards the northern part of our island, whither taste and philosophy seemed to have retired from the smoke and hurry of this immense capital.” Some of the leading luminaries included Adam Ferguson, William Robertson and Dugald Stewart. Most were employed by the university, the law, church or medicine. According to Rasmussen, this helps to explain why their “outlooks generally lacked the subversive edge that was so conspicuous among the Parisian philosophes, causing the more radical side of Smith’s and especially Hume’s thought to stand out in starker relief.”
Hume, who was born in 1711, entered Edinburgh University at the age of ten, where he studied Latin, Greek, logic, metaphysics and the natural sciences. Religious precepts infused his courses. Hume was unimpressed. He instructed a friend in 1735 that “there is nothing to be learnt from a Professor, which is not to be met with in Books.” Upon graduation, he devoted eight years to private study, then spent three years in France, where he wrote the first two volumes of A Treatise of Human Nature… 
…Hume’s luminous essays quickly earned him both applause and notoriety, not least his sallies against miracles. “A skeptic to the end,” writes Rasmussen,
Hume never claims that miracles are impossible; to insist on their impossibility would be nearly as dogmatic as to insist on their reality. Rather, he “merely” argues that it is never reasonable to believe a report of a miracle having occurred.

Looks worthy of reading. I  have ordered my copy, which I shall read and comment upon, if able, on LOST LEGACY

Friday, August 11, 2017


Roshan Thiran posts (11 August) on LeaderEconomics HERE
What Adam Smith Teaches Us About Becoming Happierarticle
“Never complain of that of which it is at all times in your power to rid yourself.” – Adam Smith
Over the past few years, I have written about great leaders like Gandhi, Ben Franklin, Steve Jobs and others who have shown great leadership. Recently, I have been reading about others who may not have led a nation or an organisation, but from whom we can nevertheless learn great leadership lessons.
Adam Smith, the Scottish philosopher and economist, the father of modern economics and the man who coined the term the “invisible hand of the market” is one of them.
Smith remains one of the most important thinkers in addressing a question that is still as pressing today as it ever was: How can human values and the needs of business work together to create prosperous and civilised societies?
…. For Smith, the reality was much less black-and-white. Corporations, he believed, don’t corrupt our world – they simply serve our appetites and supply whatever it is we demand. The answer to society’s problems does not lie in getting rid of capitalism, but instead in learning how to make better use of it.
Smith (1723-1790) was born in Kirkcaldy, an industrial town in Scotland. At the age of 14, he attended the University of Glasgow before going on to study at Oxford. In 1748, he taught at the University of Edinburgh, where he met and befriended the philosopher and economist David Hume.
In 1759, Smith published the first of his notable works, The Theory of Moral Sentiments, a book which examines how we can lead a good life.
In 1776, his best known work, An Inquiry into the Nature and Causes of the Wealth of Nations (known as The Wealth of Nations) was published, and is considered a seminal work that shaped modern economic thinking.
At the time, a nation’s economic wealth was determined by the amount of gold and silver it possessed, but Smith argued that the true wealth of a nation was measured in its production and commerce.
Today, we refer to this measurement as the gross domestic product.
Capitalism is Good?
In the age of consumerism, Smith believed that capitalism was ultimately a force for good in the world. The creation of wealth helped societies look after their weakest members through the provision of hospitals, welfare systems, and other means of support. But Smith also felt that capitalism fell somewhat short in its role of meeting demands and serving appetites.”
Adam Smith never “coined the term the “invisible hand of the market”. He used it as a metaphor for a consequence of a merchant's action in investing his capital in an economy. These claims are of recent vintage owing the wholly fabricated claims by Paul Samuelson from 1948 to 2010.
 Adam Smith never referred to “capitalism”. Nor did anybody else until well into the 19th century - the word ‘capitalism’ was first used in English in 1833 - 43 years after Smith died. It was also rarely used until the 1870s.
Adam Smith never taught at the University of Edinburgh. He delivered an annual series of public lectures on Rhetoric and Jurisprudence in the City of Edinburgh for private fees from 1748-51. This is a fact despite recent wholly erroneous claims made by some inventive Edinburgh students.
Adam Smith corresponded and met with David Hume privately and they remained life-long friends. David kept a room for Adam Smith in his Edinburgh home. They shared similar private views on religion and moral philosophy.

Adam Smith did not believe “that capitalism was ultimately a force for good in the world”. He supported free markets and thought that “merchants and manufacturers” were often tempted to reduce competition so that they could raise prices to the deteriment of consumers’ interests.

Wednesday, August 09, 2017


My Post on Paul Samuelson's Awesome Error has been picked up by other Blogs. Thank you very much.
If you notice any others, drop me a line ..... Thank you

Tuesday, August 08, 2017


Gregory Mason, an associate professor in the department of economics at the University of Manitoba, posts (8 August) in Winnipeg Free Press HERE
“Raising minimum wage won't fight poverty”
… “This is an example of a self-organizing mechanism, otherwise known in economics as a Nash equilibrium. John Nash, the subject of the movie A Beautiful Mind, won the Nobel Prize for realizing that our individual decisions must account for the decisions of everyone else driving or participating in the economy. A steady state, or sustainable equilibrium, occurs where each of us makes the best decision in the context of everyone else’s best decision.
The "invisible hand" is another possible way of describing a Nash equilibrium. Ascribed to Adam Smith, the popular understanding is that Smith viewed the economy guided as if by an invisible hand.
Further, coupled with his idea that each of us acting in our own self-interest will collectively produce the highest well-being for society, it is an easy leap to conclude that Smith defended a non-interventionist and laissez-faire economic policy.
In fact, part of this story is bunk. Adam Smith only mentions the invisible hand three times in his important books. Indeed, he seems not to have seen this as a useful or central idea. It was contemporary economists who linked the idea of a self-organizing market to the invisible hand, possibly to justify non-intervention in market processes.
Gregory Mason’s article is another piece of evidence that economists are slowly waking up to the major error in attributing to Adam Smith the false idea that he believed that there was a special role for his use of the “invisible hand” as other than as a rhetorical metaphor. 
The incorrect attribution to Adam Smith began in the late 19th century (from the 1870s) and later flowered after Paul Samuelson (1948) wrongly attributed false meaning to Smith’s reference to an “invisible hand” that supposedly had remarkable powers well beyond anything envisaged by Adam Smith.
Today, the error is unbiquitous across, and beyond economics.
Adam Smith never “viewed the economy guided as if by an invisible hand”. Such an assertion treats Adam Smith’s use “of an invisible hand” as a simile, not a metaphor. (See: Adam Smith. Lectures on Rhetoric and Belles Lettres, Oxford University). 
Moreover, Nash Equilibrium has nothing to do with anything Adam Smith wrote, as Gregory Mason correctly states. 
Moreover,  “It was contemporary economists who linked the idea of a self-organizing market to the invisible hand, possibly to justify non-intervention in market processes.”  

To which “contemporary economists” linked Nash Equilibrium idea of a “self-organinising market”? Certainly, none of Smith’s contemporaries mentioned Smith’s use of the invisible hand. Only in the mid-20th century was that assertion made and believed, thanks to Paul Samuelson’s awesome reputation legitimising his wholly invented error.


Rudolf E. Havenstein  posts (7 August) on ALTERNATIVE ECONOMICS HERE
"I believe in the invisible hand of capitalism." 
Leon Cooperman []
SAD. If its down too an oath swearing “I Believe” imposture its no longer economics, nor any form of science. 
Like the ’tooth fairy” at the bottom of the garden, it is for young children, not adults. 
Rudolph E. Haverstein should rename his blog: 
An Alternative to Economics ...

Friday, August 04, 2017


Sabal al-Binal posts (3 August) on The National (the middle-east explained) HERE
Why the firm underpins a modern economy
We need companies to exist in order to ensure efficient markets but they shouldn't get too big
“The idea of an efficient market was introduced by Adam Smith, the Scottish philosopher considered to be the father of modern economics. Smith used the phrase “invisible hand” to describe the theory that if each consumer is allowed to buy whatever they want and each producer is allowed to sell whatever they want then this would result in an optimal allocation of resources and setting of prices that would benefit the economy as a whole. This optimality is what is now known as Pareto optimal, ie any reallocation of resources that makes one market participant better off would necessarily make at least one other participant worse off.”
Adam Smith did not introduce the “idea of an efficient market”.
He did not use “the phrase “invisible hand” to describe the theory that if each consumer is allowed to buy whatever they want and each producer is allowed to sell whatever they want then this would result in an optimal allocation of resources and setting of prices that would benefit the economy as a whole.”
Adam Smith knew nothing of “Pareto optimal” (an idea formulated in the 20th century). Smith lived and died in the 18th century.

In short, Sabah al-Binali is making it up, also known as faking it.

Thursday, August 03, 2017


Matthew Paris posts (5 August) in The Spectator HERE
Why we need ideology in politics
Because some things might work in practice but not in theory
“What, after all, is religious faith but a grand, over-arching theory of what things mean, how to read the world, how to handle human motivation, and (sometimes) how (and why) to change the culture of a nation? Chris is a convinced Catholic, albeit not a dogmatic one. To search for God moving unseen beneath the surface of events — to surmise that there is more to human affairs than the apparent — is (I suggest) in the same category of outlook and explanation as to look for Adam Smith’s invisible hand as a way of making sense of man as an economic being. …
… For instance: as a mild but steady believer in the free market, I would tend to give weight to self–interest as a reliable motivator of human beings. I would see the role of state regulation as ideally to guide and inform and occasionally modify or restrain, rather than to force, block, ban or confound.”
Problem for the student debating approach to real issues is that it is clever for a debating performance - appaluse all round - but not so good for understanding.
Belief in a fairy story and act accordingly is unsafe as a guide to action.
Adam Smith’s invisible hand is a modern myth. 
It does not “work” in practice and never existed as his “theory”. It was a metaphor for what happened at the aggregate level in an economy - it described the sum of all the individual actions of merchants and manufacturers in an economy.
Each local investment in a economy summed to total domestic investment. A simple arithmetic  truism. Nothing more.
So obvious it attracted no comment from Adam Smith’s contemporaries while he was alive nor any comments well into the 19th Century and barely any from 1874 until mid-20th century (Paul Samuelson, 1948 onwards).
Matthew Paris, a big-name conteporary journalist, gets a column talking nonsense about Adam Smith and three-cheers all round (plus of course his big fee). 

Its a living I suppose, but it does Adam Smith’s reputation no favours.

Wednesday, August 02, 2017


BEN CLAIR posts (1 August) on BLOMBERG HERE 
The Secret Economic Lives of Animals
Wasps do it, baboons do it. Economics isn’t just a human activity.
“Economists study human behavior. “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog,” Adam Smith sniffed in The Wealth of Nations. The ability to “exchange one thing for another,” he declared, “is common to all men, and to be found in no other race of animals.” Later economists, inheriting Smith’s self-regard, rechristened man Homo economicus in the belief that rational self-interest defined the human species. Even John Maynard Keynes, the father of modern economics, attributed our irrational choices to “animal spirits.”
But an animal spirit can actually be entrepreneurial. Consider a January study about paper wasps from the journal Nature Communications. A female paper wasp will recruit “helper” wasps to her nest to raise her offspring, and these helpers can usually choose from several different nests in a given area. The wasps are essentially making a trade: The top female offers helpers membership in her nest in exchange for childcare, and she can kick out a helper who doesn’t pull its weight.
What’s remarkable is that the terms of the wasps’ trade are determined by supply and demand. When the paper’s authors increased the number of nests in the field, they found that females were willing to tolerate smaller contributions from their helpers. The paper wasps behaved like any rent-seeking landlord, just as an economist would predict. A greater overall supply of wasp nests lowers the price of entry into any single nest. “In order to predict the level of help provided by a subordinate, it is necessary to take into account the state of the surrounding market,” the authors wrote.
If Adam Smith had strapped on a bee suit—or a safari jacket, or a scuba mask—he could have discovered that the animal kingdom is, in fact, a chamber of commerce. “Biological markets are all over the place,” says Ronald Noë, a Dutch biologist at the University of Strasbourg who first proposed the concept of the biological market in 1994. Scientists have since described biological markets in the African savannah, Central American rainforests, and the Great Barrier Reef. Baboons and other social primates exchange grooming for sex. Some plants and insects reward ants for protection. Cleaner wrasses eat parasites off other fish and behave more gently when a “client” has the option of visiting a rival wrasse.
These discoveries have not just deflated economists’ anthropocentrism but have challenged biological dogmas as well. “We all learned not to treat animals in an anthropomorphic way, but a theory that was produced to explain human behavior nevertheless matters in biology,” says Peter Hammerstein, Noë’s co-author and a professor of theoretical biology at the Humboldt University in Berlin. “In fact, I believe some of it works better in biology than in humans.”
Noë began to think about economics in biology in 1981 as he worked on a post-doctorate degree in Kenya. “A big baboon gave me the idea,” he says. Baboons live in large hierarchal groups, and Noë was interested in when and how low-ranking males teamed up to challenge a more dominant male to mate with a female. Cooperation was common in nature—not just between animals of the same species but also between different species (for example, a plant and its pollinator). But the origins of cooperation were a mystery. How could two animals work together when Darwin’s theory of evolution taught about survival of the fittest? Shouldn’t natural selection always favor ruthless self-interest?”
That is all I can reproduce wiithout trespassing on BLOMBERG’s patience in defence of its copyrights. Readers are urged to follow the link to BLOMBERG’s long article and read the rest. 
The majority of the article, reports on the detailed field work of modern biologists, in parts of the world then inaccessible to Adam Smith in the 18th Century, let alone access to the modern equipmental and mathematical techniques that are now the ordinary tools of field-based research subjects in biology.
I found the reported descriptions of co-operation between animals both interesting and revealing. However, why BEN CLAIR takes a cheap swipe at Adam Smith in this context I cannot understand.
Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.” (Wealth of Nations, 1776).
In what way is that statement untrue? Why does Ben use the derogarity word “sniffed”? Did anybody in the 18th century observe two dogs behaving differently? Has anybody seen two dogs make a a “fair and deliberate exchange one thing for another”?
That animals can co-operate deliberately was known to Smith. Indeed, he discusses near exceptions to his statement in Wealth of Nations:
“When an animal wants to obtain something either of a man or of another animal, it has no other means of persuasion but to gain the favour of those whose service it requires. A puppy fawns upon its dam, and a spaniel endeavours by a thousand attractions to engage the attention of its master who is at dinner, when it wants to be fed by him. … In almost every other race of animals each individual, when it is grown up to maturity, is intirely independent, and in its natural state has occasion for the assistance of no other living creature. 
[See the two footnotes, 4 and 5:
[4 The example of the greyhounds occurs in LJ (B) 2x9, ed. Carman I69. LJ (A) vi.44 uses the example of 'hounds in a chace' and again at 57. Cf. LJ (B) e22, ed. Carman XTt: 'Sometimes, indeed, animals seem to act in concert, but there is never any thing like a bargain among them. Monkeys when they rob a garden throw the fruit from one to another till they deposit it in the hoard, but there is always a scramble about the divi- sion of the booty, and usually some of them are killed.' In LJ (A) vi.57 a similar example is based on the Cape of Good Hope.
[5 In EARLY DRAFT: 2.12  an additional sentence is added at this point: 'When any uncommon misfortune befals it, its piteous and doleful cries will sometimes engage its fellows, and sometimes prevail even upon man, to relieve it.' 
With this exception, and the first sentence of this paragraph, the whole of the preceding material follows ED 2.t2, very closely and in places verbatim. The remainder of the paragraph follows ED 2.I2 to its close.
The above shows the risks of merely reading Adam Smith from singular quotations and from not reading his Works in their full context.
In the most interesting reports of observed animal behaviour by biologists drawn to our attention by Ben Clair’s report we deepen our knowledge of animal and insect behaviours and that can only be a positive contribution.
’Tis a pity that Ben spoils his objectivity with quite silly and misleading semi-mocking of Adam Smith who writing in the 18th century. 

What were Ben Clair’s 18th-century ancestors doing and contributing to the sum total of human knowledge in the 1770s? Precious little I surmise! 

Tuesday, August 01, 2017


 jhadmin posts (31 July) on Just Helicopters for ROTORCRAFT PR HERE
“I’ve always felt the shapers of the American experiment from the late 1700s were not only exceptional, but brilliant thinkers. Their ideas and ideals still guide our success in the 21st century. Take Adam Smith for example and his theory of the “invisible hand.”

Investopedia says: Smith’s theory of the invisible hand constitutes the basis of his belief that large-scale government intervention and regulation of the economy is neither necessary nor beneficial. Smith put forth the notion of the invisible hand in arguing that free individuals operating in a free economy, making decisions, primarily focused on their own self-interest, logically take actions that result in benefiting society as a whole even though such beneficial results were not the specific focus or intent of those actions."
Adam Smith did not have a "theory" of "the invisible hand". It was a metaphor. If Jhadmine is curious of the difference between a "metaphor" and "theory" he could read Adam Smith's 'Lectures on Rhetoric and Belles Lettres', which he delivered from 1748 to 1763.
'Investopedia' is unreliable on Adam Smith. Its definition of Adam Smith's use of the 'invisible hand' is wildly incorrect and misleading.