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Adam Smith was right about that invisible hand, you know

But just not in the way you think

Just three mentions

There's actually three mentions of invisible hand in the million odd words of Smith that we have. One is in his book on astronomy and that the planets move as if guided by an invisible hand is an allowable metaphor (or is it a simile, and aren't I supposed to know these things?).

One we could imagine Newton or Laplace using. We can also leave that aside with any discussion of economics.

The second is in Theory of Moral Sentiments, which isn't really about economics at all. There's some very perceptive stuff in here and he pretty much defines mirror neurons before anyone knows what a neuron is in the first place.

He describes how we twist and turn when watching the acrobat upon the tightrope, as if watching him sway makes us do the same: which is pretty much what mirror neurons are. And then there's that mention of invisible hand:

The proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest ...

[Yet] the capacity of his stomach bears no proportion to the immensity of his desires ... the rest he will be obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets which are employed in the economy of greatness; all of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice ...

The rich ... are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society ...

OK, so that is economics but that's not the thrust of the major part of the book. However, it's also obviously correct. He's not saying that the rich don't have more, don't consume more, than everyone else, rather that by their purchase of things to consume they do spread that income, that wealth around.

You could, if you want to squint really hard, describe this as “trickle down” but that's not quite what he means either. He's not, as that much derided theory states, arguing that if the rich get richer then more will trickle down.

Only that if you're going to consume stuff then you've got to send out some of your income, some of your wealth, in order to persuade people to produce what you can consume.

The only wealthy people who do not do this are the Scrooge McDucks of the world who keep their cash so that they can surf down the pile in the vault.

Next page: Abramovich's yacht

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