Gavin Kennedy on the Myth of Adam Smith’s Invisible Hand

Gavin Kennedy is a retired professor of business history and the history of economics and a prolific blogger. His central topic is Adam Smith’s “lost legacy”, on which he has written two books. His blog has recently focused on misuses of the metaphor of “the invisible hand”. In particular, Kennedy argues that this metaphor took on a life of its own in the mid-20th century that had little to do with Adam Smith’s original meaning. Smith used the metaphor 3 times, and only once in Wealth of Nations, and never expressed anything like a “theory” of the invisible hand. In Wealth of Nations, Smith used the metaphor to refer to

… degrees of caution about the risks associated with distant trade with the British colonies in North America, which incentivised some, but not all, merchants to act circumspectly in their preference for domestic projects, thereby unintentionally benefiting the domestic economy.

A far cry from the almost mystical force it later acquired. The quote above is from a paper Kennedy just published in the fun journal, Econ Journal Watch. The paper is Adam Smith and the Invisible Hand: From Metaphor to Myth. In the same issue, Daniel Klein dissents and argues for continued attempts to understand the invisible hand here.

Advertisements