The New York Times article"Nobel-winning economist looks beyond the invisible hand," (Oct. 30, page 12) misunderstands Adam Smith, who did not have a "theory of the invisible hand." This is an invention of modern academe.
Smith's used the metaphor of the invisible hand only once in Wealth of Nations. It was never a "theory," but was an illustration of how human motivations could have unintended consequences, which, in the case he was discussing, were, happily, benign consequences. He never made it a general rule that the "individual pursuit of self-interest promotes the greatest good for all."
The pursuit of self-interest also promotes unintended malign consequences. Merchants and manufacturers, wrote Smith, tend to promote monopolies and reductions in supply to raise prices against the interests of consumers. Self-interest does not automatically promote "the greatest good for all." It all depends on the circumstances; hence, Smith did not make the metaphor into a theory.
Anyway, the metaphor was originally Shakespeare's from Macbeth ("thy bloody and invisible hand").
The author of the article distinguishes between absolute and relative performance in the game of hockey. "Absolute" here means what everybody might do (if they are compelled somehow, but otherwise do not), and "relative" means what some individuals might choose to do because they value one outcome (safety) over another (winning).
The distinction is precisely Smith's point precisely: if everybody pursued their own self interest without detriment to anybody else's (a big "if" and one that never escaped Smith's attention) then by doing so everybody would promote "the greatest good for all."
But humans do not play the game this way, neither in society nor in hockey. Smith knew that and never concluded that they would. It may be that this is "the standard presumption in [modern] economics," but it never was a presumption of Smith's Wealth of Nations. So whatever Schelling went "beyond," it was not a turn away from Smith. Schelling's work, more correctly, was a return to Smith's approach.
Gavin Kennedy
Edinburgh, Scotland
With escalating US-China competition and mutual distrust, the trend of supply chain “friend shoring” in the wake of the COVID-19 pandemic and the fragmentation of the world into rival geopolitical blocs, many analysts and policymakers worry the world is retreating into a new cold war — a world of trade bifurcation, protectionism and deglobalization. The world is in a new cold war, said Robin Niblett, former director of the London-based think tank Chatham House. Niblett said he sees the US and China slowly reaching a modus vivendi, but it might take time. The two great powers appear to be “reversing carefully
As China steps up a campaign to diplomatically isolate and squeeze Taiwan, it has become more imperative than ever that Taipei play a greater role internationally with the support of the democratic world. To help safeguard its autonomous status, Taiwan needs to go beyond bolstering its defenses with weapons like anti-ship and anti-aircraft missiles. With the help of its international backers, it must also expand its diplomatic footprint globally. But are Taiwan’s foreign friends willing to translate their rhetoric into action by helping Taipei carve out more international space for itself? Beating back China’s effort to turn Taiwan into an international pariah
Typhoon Krathon made landfall in southwestern Taiwan last week, bringing strong winds, heavy rain and flooding, cutting power to more than 170,000 homes and water supply to more than 400,000 homes, and leading to more than 600 injuries and four deaths. Due to the typhoon, schools and offices across the nation were ordered to close for two to four days, stirring up familiar controversies over whether local governments’ decisions to call typhoon days were appropriate. The typhoon’s center made landfall in Kaohsiung’s Siaogang District (小港) at noon on Thursday, but it weakened into a tropical depression early on Friday, and its structure
Since the end of the Cold War, the US-China espionage battle has arguably become the largest on Earth. Spying on China is vital for the US, as China’s growing military and technological capabilities pose direct challenges to its interests, especially in defending Taiwan and maintaining security in the Indo-Pacific. Intelligence gathering helps the US counter Chinese aggression, stay ahead of threats and safeguard not only its own security, but also the stability of global trade routes. Unchecked Chinese expansion could destabilize the region and have far-reaching global consequences. In recent years, spying on China has become increasingly difficult for the US
RSS