Surviving Libertarianism

I once asked a libertarian his thoughts on what we should do with those that are unable to be productive in our economic system, and he uttered, without hesitation, natural selection.  This response no doubt aroused anger in me, but I too have shared similar sentiments.  When we are thriving and committed to self-interest, then empathy is an empty word until we need it from others.

The libertarian’s comment, however, was a curious one since this system has not worked in his favor, and I would not say that he was thriving but rather surviving. I would like to explore the topic of how anyone, including myself, could be attracted to the ugly in libertarianism by looking at our personality differences and the logic that we use.  Here though I want to talk about social Darwinism.

Artificial Selection 

My understanding of evolutionary theory is that it is about change over time that results in life adapting to its environment.  The idea of “survival of the fittest” is a term coined not by Darwin but by a political theorist named Herbert Spencer.  When seeing how it has been metaphorized, however, I think there is little room to doubt that libertarians are using this because it fits their personality.

Darwinianism was misleadingly metaphorized in terms of “competition,” a competitive struggle for scarce resources in which only the strong and cunning emerge victorious, garnering the goods necessary for life and happiness. [6]

Libertarians, however, are conflating natural with artificial selection.  The mechanism that explains our adaptations is natural selection, which means that some individuals possessed traits that others didn’t that allowed them to reproduce and survive more successfully.  It is artificial selection when we construct our system based on self-interest at the exclusion of other adaptations.

For example, our moral emotions that involve sympathy and empathy evolved to assist with cooperation.  These have a tendency of being looked at as weaknesses within our system since this leads to dependency or even solidarity.  But if we disparage adaptations involved in cooperating, then it is no longer “natural” since we are being influenced by the social norms that we have created.

So-Called Experts

I took a random sample from a search on “capitalism and evolution” and had no difficulty in finding so-called experts on the idea that capitalism is a form of natural selection, but no serious evolutionary biologist believes this.  Below this individual claims that it is moral to weed out the weak and that laziness is a choice, where the former idea is callous and the latter one borders on absurd.

Having gov’t provided safety nets means that even the most destructive, racist, lazy people will receive help automatically. They should face the consequences of their life choices…It may seem harsh to want only the “fit” to survive. I think ignorance, laziness and various other irresponsible attributes/behaviours should die a painful death.

I don’t think that he is irrational because his logic works for his worldview, nor do I think that he is not smart but rather has personality characteristics and past experiences that make him attracted to the idea of “survival of the fittest”.  He seems uninformed on human nature and biology though and should probably stick with teaching Math at his highschool.

Evolution’s Direction

Just because we construct an economic system in which we have to compete to make a living, one in which self-interest triumphs and sympathy is akin to weakness, this does not mean that life is a competitive struggle for survival.  Evolution has no direction, and we have every right to use our moral emotions just as much as our self-interest.  That is, the following is not a law of nature.

The normative implication is that the social order, in every domain, is naturally and optimally governed by principles of competitive self-interest and that anything that interferes with that is unnatural and immoral.  [6]

On the other hand, if our guiding principle in our lives is based on maximizing self-efficacy and self-interest, then life will be a competitive struggle for survival.  If we put productivity and innovation on the higher moral ground at the cost of the well-being of those that can’t keep up, then we are seriously fooling ourselves into believing that we are building a better society.

That said, there are parallels between natural selection and our competitive behavior within free-markets; in fact, natural selection may track economic behavior better than the “invisible hand” [4].  But this explains it at the behavioral level, and we can’t assume that all behaviors are adaptive.  If we want to go further, then we must appeal to evolutionary psychology, in which I am on the fence.

References:

[1] Coyne, Jerry A.. Why Evolution Is True. Penguin Publishing Group.

[2] Frank, Robert H. The Darwin Economy. Princeton University Press.

[3] Frank, Robert H. The Darwin Economy – Why Smith’s Invisible Hand Breaks Down.  fs.com

[4] Frank, Robert H. The Invisible Hand, Trumped by Darwin? newyorktimes.com

[5] Gittins, Ross. Darwinian model of economics flawed for firms.  SMH.com

[6] Lakoff, George. Philosophy In The Flesh.

[7] Meyer, Christopher, and Kirby, Julia.  Runaway Capitalism.  Harvard Business Review.

[8] Ridley, Matt. What Charles Darwin Owes Adam Smith.  Learn Liberty.

[9] Vugt, Van Mark.  Why the Invisible Hand from Biology is Better Than the Invisible Hand from Economics. evonomics.com.

[10] Wilson, David Sloan. This View of Life. Knopf Doubleday Publishing Group.

Triabalism Is Rational

I started writing for freethought blogs because I thought that my use of reason made me special, and I identified with those that had disdain for God.  I wanted to share this by way of science, but I did not have a real purpose.  Were these the real reasons for binding?  After researching rationality and self-interest, I realized that my self-interest was behind it all, but I needed to justify it first.

I was reluctant to embrace all of the blog’s principles, namely “an appreciation of human diversity and equality” because I didn’t “get it” until I experienced subordination first-hand.  Christopher Boehm, an anthropologist who studies social hierarchies, articulates what this purpose may be.  I first reasoned that tribalism (i) was divisive and irrational, and I now reason that it is rational and just.

…egalitarianism is in effect a bizarre type of political hierarchy: the weak combine forces to actively dominate the strong.  My thesis is that they must continue such domination if they are to remain autonomous and equal. [2]

Reasons for Tribalism

I was self-righteous and naive because of rationality and so reason itself was a roadblock for me to want to be political.  Rationality, at least my rationality, was that if we are ideologues and don’t use critical thinking skills to look at each issue and stay clear of our biases and in-groups, then we will never build a juster society.  But I was mistaken, in a big way.

We are not rational, and passion guides our moral reasoning – that is, what we decide to be right or wrong is anchored in our feelings and directs us.  And morality evolved to suppress self-interest in one another to allow for cooperation to take place, see below.  That is its function, and this is not a philosophical position but rather a scientific fact.

Moral systems are interlocking sets of values, virtues, norms, practices, identities, institutions, and innate tedencies that work together to suppress or regulate self-interest and make cooperative societies possible. [5]

Our culture sets standards that must be met in order to advance in the hierarchy.  But some based on biology or bad luck will not be able to achieve the status they want and become subordinated.  So the anthropologist above is saying that biology justifies everything that liberals use to become more equal, e.g., economic equality, affirmative action, gender equality, and so forth.

The idea of people living morally as political equals is a beautiful one, but in an important sense it seems to go against human nature—a nature that leads, quite naturally, to interpersonal domination and to the formation of social dominance hierarchies, with alpha individuals presiding over them. [2]

We Were Egalitarian

But before twelve thousand years ago, humans basically were egalitarian (Knauft 1991). They lived in what might be called societies of equals, with minimal political centralization and no social classes. Everyone participated in group decisions, and outside the family there were no dominators. [2]

I don’t get the impression that all evolutionary biologists believe that we lived as egalitarian tribes for most (95%) of our existence since they have a Hobbesian view of what it means to be human – that is, morality is but a thin veneer that keeps our savage-like self-interest in line.  But anthropologists certainly have a lot of evidence and reasoning to show that we did.

Far from being admired as “clever opportunists,” selfish individuals looking to exploit the generosity of other foragers are viewed as pitiful and potentially dangerous, likely to be nudged off the nearest cliff. Such an individual would be lucky to survive for long in a real-world foraging society, much less flourish. [12]

But egalitarianism is not what we think it is.  Yes, it says that in some respects people are thought to be equal and should have equal opportunities (not outcomes).  But this is a normative statement and by no means is what we actually observe.  On the other hand, real egalitarianism is about domination and that is what freethought blogs does very effectively that I used to be against.

Equality Is a Fight

My thesis, however, is that egalitarianism does not result from the mere absence of hierarchy, as is commonly assumed. Rather, egalitarianism involves a very special type of hierarchy, a curious type that is based on antihierarchical feelings. [2]

This is a very intuitive thesis and is something that we all have experienced through the emotions of envy and resentment when we are not included in certain groups or are treated unfairly.  It is so obvious that we have to be reminded of its truth.  The problem is that conservatives and libertarians will immediately say that we are not playing fair.

The argument here is that egalitarian societies constitute a very special type of hierarchy, one in which the rank and file avoid being subordinated by vigilantly keeping alpha-type group members under their collective thumbs. [2]

We must keep power in check so that the “strong” won’t weed out the “weak” as this anonymous conservative says below.  This conservative’s reasoning embellishes the folk idea that life is a competitive struggle for survival, while conveniently – since well-positioned people have little use for empathy – ignoring the role of compassion and altruism because he can.

The least immoral path is to honor each man’s freedom, limit governmental intervention, and let each man bear the burden of responsibility for himself.   Combined with personal charity, awarded by the productive to those who they feel are worthy, such a scheme would produce society where everyone was committed to the success of our nation, and sloth was unrewarded, beyond a bare subsistence level of support to those who are worthy in some regard.

Notes:

(i) Tribalism is defined here as the antagonistic nature of inter-group behavior between the major ideologies of conservatism and liberalism.  Bi-partisanship is largely a myth because these two world-views don’t reason the same about morality and will always be in conflict.

References 

[1] Anonymous. The Evolutionary Psychology Behind Politics. Federalist Publications.

[2] Boehm, Christopher. Hierarchy in the Forest: The Evolution of Egalitarian Behavior. Harvard University

[3] Deaton, Angus. The Great Escape. Princeton University Press.

[4] Greene, Joshua. Moral Tribes. Penguin Publishing Group.

[5] Haidt, Jonathan. The Righteous Mind. Knopf Doubleday Publishing Group.

[6] Kling, Arnold. The Three Languages of Politics: Talking Across the Political Divides. Cato Institute.

[7] Lakoff, George. Moral Politics. University of Chicago Press.

[8] Lakoff, George. The ALL NEW Don’t Think of an Elephant! . Chelsea Green Publishing.

[9] Lakoff, George. Philosophy In The Flesh.

[10] Lakoff, George. The Political Mind. Penguin Publishing Group.

[11] Lakoff, George. Your Brain’s Politics. Societas.

[12] Ryan, Christopher. Civilized to Death: The Price of Progress. Avid Reader Press / Simon & Schuster.

[13] Tuschman, Avi. Our Political Nature. Prometheus.

[14] Waal, Frans de. The Age of Empathy. Random House LLC

[15] Westen, Drew. The Political Brain. PublicAffairs.

 

Reasoning with Homo Economicus

The worship of reason is itself an illustration of one of the most long-lived delusions in Western history: the rationalist delusion. It’s the idea that reasoning is our most noble attribute, one that makes us like the gods (for Plato) or that brings us beyond the “delusion” of believing in gods (for the New Atheists). [5, 9]

Beliefs exist because of a need to feel certain and to influence others [5]. The drive for truth can be there, but falling prey to self-righteousness is too easy.  From Plato to Descartes, rationalism promised a superior morality because reason was thought to be free of emotion, pure and transcendent, and separated us from animals.  But rationalists were wrong on all accounts.

Passion Drives Reason

Given Hume’s concerns on the limits of reasoning, he believed that philosophers who tried to reason their way to moral truth without looking at human nature were no better than theologians looking for moral truth in texts. [5]

David Hume knocked down the idol of rationalism with his insight that passion is the driving force behind reason.  In fact, it was insightful enough to get the attention of the rationalist philosopher Kant, who said “Hume woke me from my intellectual stupor”.  Hume was saying that our reasoning is a post hoc rationalization – that is, we make an intuition first and then we justify it.

We may, for example, feel compassion towards those who work for minimum wage but then justify our intuition with a reason such as it being exploitation.  But this flies right in the face of the rational actor model because if our reasoning is anchored in emotion that gives it its direction, then rationality, which is to be emotionless, is not a good description of what it is to be human.

 The rational actor model does not define real rationality. It does not characterize the way people really think, though it is sometimes used as an ideal for how people should think.  [7]

Morality of Self-Interest

Rationality almost always has a moral dimension.  The idea that human rationality is purely mechanical, disengaged, and separable from moral issues is a myth, a myth that is harmful when we live our lives according to it. [7]

The link between rationality and morality may not be obvious, but once we remember that morality is about what we see to be right or wrong and good or bad, all based on some standard, then it shows itself.  Morality, moreover, is usually present when we reason since we justify our reasoning with reasons, and justification itself is an act of determining what is right or wrong.

Think about how much of our reasoning is about morality: it’s better to be strong than to be weak, better to be in control than out of control or dominated by others [7].  What all moral reasoning has in common is that it is about our well-being.  But it is also about others’ well-being, and a consensus that says that we should avoid and prevent harm to others serves our interests too.

That is, morality evolved to put limits on self-interest, and its effects are felt when we realize that many will not have our best interests in mind.  But the folk theory of the “invisible hand” says that self-interest creates wealth for all, so let us equate wealth with well-being and, wallah, we have the pursuit of self-interest as being a moral act that would make us irrational to not follow.

For those who believe in the morality of self-interest, it can never be a moral criticism that one is trying to maximize one’s self-interest, as long as one is not interfering with anyone else’s self-interest.  [7]

Related Posts

“Conception of Homo Economicus“: rational man was conceived by way of deductive reasoning and a few “self-evident” truths.

“Destruction of Homo Economicus“: rationality from the Enlightenment leads to self-interest and there is no universal reason.

“Reasoning with Homo Economicus“: rationality is a form of self-righteousness and passions are what drives reason.

“Resurrection of Homo Economicus“: the “invisible hand” promises wealth creation but costs go beyond typical externalities.

References:

[1] Ariely, Dan. Predictably Irrational, Revised and Expanded Edition. HarperCollins e-books.

[2] Barrett, Lisa Feldman. How Emotions Are Made: The Secret Life of the Brain. HMH Books.

[3] Burton, Robert Alan. On Being Certain. St. Martin’s Publishing Group.

[4] Damasio, Antonio R.. Descartes’ Error. Penguin Publishing Group.

[5] Haidt, Jonathan. The Righteous Mind. Knopf Doubleday Publishing Group.

[6] Lakoff, George. Moral Politics. University of Chicago Press.

[7] Lakoff, George. Philosophy In The Flesh.

[8] Lakoff, George. The Political Mind. Penguin Publishing Group.

[9] Mercier, Hugo. The Enigma of Reason. Harvard University Press.

[10] Smith, Justin E. H.. Irrationality. Princeton University Press.

Reasons to Revere Reason

I came across this uplifting speech by Steven Pinker while researching the Enlightenment; however, I was really motivated to find evidence that “reason” was driven by passion and used to manipulate, deceive, justify self-interest, and help foster positive delusions about ourselves.  I found all of that but also found Pinker’s speech which shows that reason can be driven for good.

Pinker’s answer to the student’s question below will resonate if we have an appreciation for the beauty of life and a respect for human dignity.  Perhaps this can remind us of the importance of gratitude and empathy because self-righteousness and cynicism can be seductive.  Yes, I am aware of Steven Pinker’s controversial opinions, but let’s not throw the baby out with the bathwater.

The student asks Steven Pinker: “Why should I live?”

The student’s ingenious tone made it clear that she was neither suicidal nor sarcastic but genuinely curious about how to find meaning and purpose if traditional religious beliefs about an immortal soul are undermined by our best science.

In the very act of asking that question, you are seeking reasons for your convictions, and so you are committed to reason as the means to discover and justify what is important to you. And there are so many reasons to live!

As a sentient being, you have the potential to flourish. You can refine your faculty of reason itself by learning and debating. You can seek explanations of the natural world through science, and insight into the human condition through the arts and humanities. You can make the most of your capacity for pleasure and satisfaction, which allowed your ancestors to thrive and thereby allowed you to exist. You can appreciate the beauty and richness of the natural and cultural world. As the heir to billions of years of life perpetuating itself, you can perpetuate life in turn. You have been endowed with a sense of sympathy—the ability to like, love, respect, help, and show kindness—and you can enjoy the gift of mutual benevolence with friends, family, and colleagues.

And because reason tells you that none of this is particular to you, you have the responsibility to provide to others what you expect for yourself. You can foster the welfare of other sentient beings by enhancing life, health, knowledge, freedom, abundance, safety, beauty, and peace. History shows that when we sympathize with others and apply our ingenuity to improving the human condition, we can make progress in doing so, and you can help to continue that progress. [1]

References

[1] Pinker, Steven. Enlightenment Now. Penguin Publishing Group.

Destruction of Homo Economicus

Homo economicus is from rational choice theory (i) that says humans maximize their self-interest in a consistent and rational way, much like how software solves an optimization problem.  To be sure, this model does not map well to how a real mind works.  In fact, look at how a cognitive scientist discusses how reasoning does not resemble anything like that of an algorithm.

We’ve learned a centuries old theory of rationality that says that thought is conscious (when it is mostly unconscious), that it works by logic (it actually works by embodied primitives, frames, conceptual metaphor, and integration), that all people have the same logic (which is supposed to be what makes us rational animals). [7]

Here I would like to ridicule the idea of homo economicus being an accurate characterization of how we make decisions because it is not only wrong from a neuroscience point of view (ii), but it also elevates rationality.  And a worldview that embodies rationality, with roots going back to Descartes, leads to championing the idea of self-interest by way of logical necessity (iii).

It is often seen as natural for people to act so as to maximize their self-interest (or profit) and unnatural for them not to. Those who profit most are therefore seen as doing what comes naturally, and those who profit much less are seen as irrational, unnatural, lesser beings who don’t deserve much no matter how hard they work. [9]

Presumption of Reason 

The Enlightenment advocated reason and empiricism as a way to obtain objective truth about our world and gave us arguments to challenge any authority that used dogma to their advantage.  It also applied empiricism to achieve economic progress to improve upon our welfare as well as gave rise to humanism which is the idea that humans have value and agency not to be trodden upon.

The Enlightenment also thought that reason is what makes us human and rational, but they framed everything in terms of logic.  As a result, “reason” is thought of as a faculty that gives “truth” in accordance with the rules of logic.  There is, however, no universal reason or logic.  To be sure, the reason I mean here is the kind made from our minds that is unrelated to logic in a program.

The view on reason is that it is conscious, universal, logical, unemotional, and value-neutral.  But it is not any of those things, and believing so is irrational.  For example, when others argue against us, we think they must be either mistaken (in need of the facts), irrational (needing a lesson in logic), or immoral (need to feel how we do) [7].  Worldviews must have their own logic then (v).

 If the people are made aware of the facts and figures, they should naturally reason to the right conclusion. Voters should vote their interests; they should calculate which policies and programs are in their best interests, and vote for the candidates who advocate those policies and programs.  But people aren’t rational, so this doesn’t happen. [9]

Rationality of Self-Interest

Yet versions of the rational actor model (i) have contributed to the arms race (via game theory (iv) and Mutually Assured Destruction) and global warming (via the externalization of pollution costs). It is that form of “rationality” that has most threatened our ability to survive and thrive.

The rational actor model (i) is in line with the eighteenth-century-view of mind which saw reason as primarily serving to achieve personal goals. Therefore it was seen as irrational to be against your self-interest.  If our culture expects us to behave in ways that serve our interests, then how do we know how much of our selfish behavior is influenced by biology or from social norms?

From the selfish gene perspective, the rational actor of course makes sense.  But this mode of thought is so engrained – the narrative of the rational actor – that altruism was called reciprocal-altruism.  Whether or not evolutionists are correct (they probably are), is not the point but speculation as to how metaphors and language construct our realities and guide theory is.

Although there is considerable literature documenting biological altruism, the most popular evolutionary account of altruism as a form of self-interest is reciprocal altruism—the trading of favors: it is in my interest to serve your interests in a society where that is the norm.

The “invisible hand” made seeking a profit into a moral act since it maximizes the profit for all (vi).  We find this attractive – that is, making the proverbial pie bigger – because it reduces the guilt we feel from being selfish.  But this is a good thing because it says that we have empathy and that there is more to human nature than self-interest.

Notes:

i) Rational choice theory is synonymous with the rational actor model.

ii) Rational choice theory does find application to many optimizing problems.  But it has been used incorrectly by ideologues to explain how we make decisions and reason.

iii) If we adopt a worldview that uses the rational actor model, then we get trapped in narratives that place emphasis on self-interest.

iv) When there is more than one actor, limited resources, competition for benefits, and strategies for acting given the actions and strategies of others, then we are in the realm of game theory.

v) Disagreement happens because different worldviews have their own logic and rationality.  This means that objective truth has a frame of reference.

vi) It doesn’t matter what Adam Smith said only how it is remembered in simple and absolute terms and by way of metaphor.

Related Posts

“Conception of Homo Economicus“: rational man was conceived by way of deductive reasoning and a few “self-evident” truths.

“Destruction of Homo Economicus“: rationality from the Enlightenment leads to self-interest and there is no universal reason.

“Reasoning with Homo Economicus“: teaching the self-righteous human self-awareness and that passions drive reason.

“Resurrection of Homo Economicus“: the “invisible hand” promises wealth creation but costs go beyond typical externalities.

References:

[1] Ariely, Dan. Predictably Irrational, Revised and Expanded Edition. HarperCollins e-books.

[2] Barrett, Lisa Feldman. How Emotions Are Made: The Secret Life of the Brain. HMH Books.

[3] Damasio, Antonio R.. Descartes’ Error. Penguin Publishing Group.

[4] Foster, Peter. Why We Bite the Invisible Hand: The Psychology of Anti-Capitalism . Pleasaunce Press.

[5] Haidt, Jonathan. The Righteous Mind . Knopf Doubleday Publishing Group.

[6] Kennedy, Gavin. Adam Smith and the Invisible Hand: From Metaphor to Myth. Econ Journal Watch 6(2): 239–263.

[7] Lakoff, George. Moral Politics . University of Chicago Press.

[8] Lakoff, George. Philosophy In The Flesh.

[9] Lakoff, George. The Political Mind. Penguin Publishing Group.

[10] Madrick, Jeff. Seven Bad Ideas. Knopf Doubleday Publishing Group.

[11] Mercier, Hugo. The Enigma of Reason. Harvard University Press.

[12] Pinker, Steven. Enlightenment Now. Penguin Publishing Group.

[13] Smith, Justin E. H.. Irrationality. Princeton University Press.

[14] Wikipedia on Rational Choice Theory.

Conception of Homo Economicus

We need to look at how economics, as portrayed in political discourse by way of simple narratives (i), is a fairy tale much like religion is.  To be fair, the field of economics is a science (ii) – assumptions are stated and predictions are made – but once ideas become repackaged as absolutes for use as rhetoric, as the “invisible hand” (v), then we must put them in their place, right next to religion.

Admittedly there is an aesthetic to economics – in its coherence and logic  – and I get why many economists are attracted to it.  But after looking at how deductive and assumption-laden neoclassical economics is, especially when presented formally, it is indeed a miracle that homo economicus (iii) survives at all.  Here, we will look at how its axioms create the rational man.

Types of Reasoning

It will be helpful to review the different types of reasoning we engage in before going any further.  When we make observations from our natural world to form more general conclusions, then we are reasoning inductively, and when we base our conclusions on reasoning alone without observation, then we are reasoning deductively.

In other words, deductive reasoning is to a philosopher as inductive reasoning is to a scientist.  In reality, we use both types of reasoning (iv) but a distinction is that deduction can work with claims that are not true but still be valid, as illustrated below.

  • All people are rational. [premise]
  • Jon is a person. [premise]
  • Therefore Jon is rational. [conclusion]

People can be rational, but if we know Jon, who can be irrational, then this conclusion can’t be true.  But it is still logically valid – that is, the conclusion follows from the premises.  This is how neoclassical economics works because they start with assumptions and then deduce models from it.  In fact, its appeal was because it claimed to be “completely axiomatized” akin to mathematics (see comment #2).

Axioms of Economics

Below are the three assumptions that the entire field is built upon, often referred to as axioms.  The first assumption says that “we have rational preferences” which means we can assign value to specific items or services.  More specifically, rational choice theory says that we pick outcomes that provide us with the greatest benefits and satisfaction given the choices available.

  1. we have rational preferences
  2. we maximize our utility
  3. we all have perfect information

The second assumption is that we “maximize our utility” or self-interest, which equates to rational choice theory defined above.  Note that as long as we consistently rank what choices are important, then the goals, which are based on our preferences and desires, can be anything per rational choice theory.

“Perfect information” means everyone has access to the same information on pricing and that we know our utility.  In conclusion, we have explained how the model for a rational actor works, known as homo economicus, as it’s just a summary of the axioms.  To be succinct, it is a man that is consistently rational, self-interested, and who pursues his subjectively-defined ends optimally [6].

Notes:

i) I am referring to the simplified version used for political discourse purposes, which are a series of myths and narratives; for example, “government intervention is always bad” and the market is “infinitely wise”.

ii) If assumptions are explicit and neoclassical economics attempts to make predictions, then it at least deserves to be in the category of science.  The question should always be how well does it do its job and not framed in absolute terms.

iiI) Homo economicus is a model for how man makes decisions regarding his needs and wants.  The exact definition is a human agent who is consistently rational, narrowly self-interested, and who pursues their subjectively-defined ends optimally.  [6]

iv) Actually, we reason neither deductively nor inductively but through inference.  In fact, deduction and induction are human inventions that just so happen to have utility.  There is no such thing as “universal logic.”

v) I have argued that the “invisible hand” is more of a rhetorical device to promote neoliberalism policies than it is an economic insight.  I don’t want to, however, give the impression that it has no value because economists have given it utility.

It can refer to the increased or created utility for both the buyer and seller after a voluntary exchange of goods or services as well as driving competition amongst firms to meet our needs for lower prices, which results in commoditization [2].

References:

[1] Barrett, Lisa Feldman. How Emotions Are Made: The Secret Life of the Brain. HMH Books.

[2] Frank, Robert H.. The Darwin Economy (p. 27). Princeton University Press.

[3] Kennedy, Gavin. Adam Smith and the Invisible Hand: From Metaphor to Myth. Econ Journal Watch 6(2): 239–263.

[4] Lakoff, George. Moral Politics . University of Chicago Press.

[5] Lakoff, George. Philosophy In The Flesh.

[6] Lakoff, George. The Political Mind. Penguin Publishing Group.

[7] https://en.wikipedia.org/wiki/Rational_choice_theory

Redacting the “Invisible Hand”

For those that still have their doubts, I have provided the details on how Adam Smith’s idea of the “invisible hand” was redacted and used in Paul Samuelson’s book titled “Economics” which was the beginning of neoclassical economics.

Although Adam Smith did not say that those that act selfishly always benefit society, this does not mean the neoclassical interpretation doesn’t have some value, which we will explore in the next post.  As a preview, it’s insightful but not magical.

Paul Samuelson’s Concoction 

Adam Smith only mentions the “invisible hand” once within the “Wealth of Nations”, and it can be found below verbatim.  The non-blue, bold portion is what was cherry-picked and used by Paul Samuelson.

But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value, every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it. [Book IV, Chapter II, paragraph IX of The Wealth of Nations.]

The bold above in the original text was redacted to form the excerpt below and was inserted in the textbook “Economics” by Paul A. Samuelson – the book that made economics a science.  It appears that the role of self-interest was exalted but at the cost of excluding the sentiment of sympathy.

If we look at the italics in blue from the original, then we see what was omitted, namely the idea of domestic preference, or a “home bias”, which is an expression of compassion and camaraderie.  Smith claims that England’s sympathy towards domestic interests – home bias – would trump any losses from not investing abroad.

Every individual endeavors to employ his capital so that its produce may be of greatest value. He generally neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own security, only his own gain. And he is in this led by an invisible hand to promote an end which was no part of his intention.  By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it. [Economics by Paul Samuelson]

Now let’s read Paul Samuelson’s take on the “invisible hand” which can also be found in his textbook “Economics”.  This stands in stark contrast to what Adam Smith said and this could be what started the generalization that selfish behavior always leads to good outcomes and that government interference is always bad, or as Samuelson says “injurious”.

“The Wealth of Nations” (1776) , represents the beginning of modern economics or political economy-even he was so thrilled by the recognition of an order in the economic system that he proclaimed the mystical principle of the “invisible hand”: that each individual in pursuing his own selfish good was led, as if by an invisible hand, to achieve the best good of all, so that any interference with free competition by government was almost certain to be injurious. [Economics by Paul Samuelson]

References:

[1] Chomsky, Noam.  https://en.wikipedia.org/wiki/Invisible_hand

[2] Foster, Peter.  Biting the Invisible Hand: An Interview with Peter Foster.  FEE.org.

[3] Foster, Peter. Why We Bite the Invisible Hand: The Psychology of Anti-Capitalism . Pleasaunce Press.

[4] Frank, Robert H.. The Darwin Economy. Princeton University Press.

[5] Friedman, Milton. Capitalism and Freedom . University of Chicago Press.

[6] Friedman, Milton. Free to Choose: A Personal Statement. HMH Books.

[7] Goodwin. Harris. Nelson.  Microeconomics in Context.  Fourth Edition.

[8] Kennedy, Gavin. Adam Smith and the Invisible Hand: From Metaphor to Myth. Econ Journal Watch 6(2): 239–263.

[9] Kennedy, Gavin. “A Reply to Daniel Klein on Adam Smith and the Invisible Hand”. Econ Journal Watch 6(3): 374–388.

[10] Klein, Daniel B. In “Adam Smith’s Invisible Hands: Comment on Gavin Kennedy”. Econ Journal Watch 6(2): 264–279.

[11] Klein, Daniel B. Economists Misplaced Faith in the Invisible Hand.  FEE.org.

[12] Lucas, Brandon, Klein, Daniel B. In a Word or Two, Placed in the Middle: the Invisible Hand in Smith’s Tomes. George Mason University Department of Economics Research Paper No. 09-02

[13] Meeropol, Micheal. Another Distortion of Adam Smith: The Case of the “Invisible Hand”.  Research Gate.

[14] Optiz, Edman. Adam Smith and the Invisible Hand.  FEE.org.

[15] Samuels, Warren J. Erasing the Invisible Hand . Cambridge University Press.

[16] Schlefer, Jonathan.  There Is No Invisible Hand.  Harvard Business Review.

[17] Schlefer, Jonathan.  Today’s Most Mischievous Misquotation.  Adam Smith did not mean what he is often made to say.  The Atlantic.

[18] Skousen, Mark. Adam Smith Reveals His (Invisible) Hand.  Foundation for Economic Education.

[19] Ullmann-Margalit, Edna.  The Invisible Hand and the Cunning of Reason.  The Johns Hopkins University Press.

 

Adam Smith Means to Say

It is embarrassing that our culture still wants to believe that Adam Smith’s message was that markets always produce good outcomes for society when we maximize our self-interest.  Because he never said it and in fact argued against it.  It has become our folklore to our own demise, and our ignorance has been exploited by policymakers ever since its invention(i).

The historian Warren J Samuels helps here by giving us an appreciation for the sophistication of Adam Smith.  I underscore sophistication because either a selective reading of primary sources or a biased selection of secondary sources will result in a lopsided and shallow understanding of the very nuanced, and at times contradictory, arguments that Adam Smith presents (ii).

However much ideological filtration may have distorted and emasculated Smith’s analysis, his was a first-rate intelligence and his was a brilliant accomplishment – one that has been infrequently attempted and even more rarely achieved. [14]

What Economists Mean to Say

There are some distinctive qualities about Smith’s writings to admit to regardless of our political leanings.  Smith most certainly stood for self-interest, but not selfishness (iv), and free enterprise, as noted below, but that doesn’t mean his ideas didn’t come with caveats.
Let there be no mistake about acknowledging the obvious: Adam Smith most distinctively stood for private enterprise, private property, self-interest, voluntary exchange, the limited state, and the market. [14]

But economists generalized the original meaning based on their fancy for the concept of self-interest.  Gavin Kennedy, a historian of economics, explains how this generalized idea is not in line with what Adam Smith said.

It was a post-war invention that Smith’s “self-interested behavior by individuals leads them to the social good, almost as if orchestrated by an invisible hand”, especially that it is formulated by Kaushik Basu (and Samuelson, et al) as “selfish” behaviour , which is an idea antipathetic to Smith’s moral sentiments. [7]

Jonathan Schlefer, a political scientist, explains how the content of Adam Smith’s idea was redacted.  This was then presented in the text “Economics” by Paul Samuelson in 1950 and is known to be what made neoclassical economics a science.

Paul A. Samuelson and William D. Nordhaus concocted a typical variant of Smith’s actual remarks. They pulled them from the midst of a paragraph hundreds of pages into The Wealth of Nations, presumed to streamline the prose by chopping and splicing without using ellipses, and elevated the result into the theme of Smith’s entire thousand-page book. [16]

What Adam Smith Means to Say

If we don’t understand what Smith means to say, instead of what we mean to him to have said, then we repeat the narrow interpretation of neoclassical economics. The most common way we mean him to have said is that ” markets always harness individual self-interest to produce the greatest good for society as a whole.” [3]

He was far too savvy to make an absurd generalization like that. Whether any individual’s actions when “pursuing their own interests” would have beneficial outcomes for “society at large” would entirely depend on the consequences of their actions. [7]

When we look at what Adam Smith says in both “Wealth of Nations” and “Theory of Moral Sentiments” – where “invisible hand” is mentioned only once in each book – we see how he argued against self-interest for certain cases.

Whether actions motivated by greed (Mandeville, Ayn Rand, and others), were “beneficial” depends on circumstances. Indeed, Smith gives over 70 examples of non-beneficial outcomes for society from the actions of self-interested individuals in Books I, II, and III, of Wealth Of Nations and book IV is a detailed (and “violent”) polemic against the self-interest actions of “merchants and manufacturers’ that were decidedly non-beneficial for society at large. [7]

The metaphor specifically addresses the tension of his day felt amongst merchants when sending domestic capital abroad (iii).  But Adam Smith’s claim is nothing more than a statement about GNP, and it is neither synergistic nor magical.

Smith’s example of the “invisible hand” (in his case, the “insecurity” felt by traders for foreign trade) adds to what we call GNP – the whole is the sum of its parts, that’s all. [7]

Notes:

i) This was not a conspiracy on the part of neoclassical economics.  Economists redacted and simplified Smith’s arguments in a way that favored the role of self-interest, intentionally or unintentionally, is anyone’s guess.

A discipline was then built based on the axiomatic idea that man maximizes his utility (self-interest) – a half-truth theory on human behavior.  So self-interest gets centerstage and caveats are suppressed.

This is a problem because our culture understands the “invisible hand” in an all-encompassing way – as a law of nature and of markets – and policymakers take advantage of this.

ii) I did not “wrestle” with the primary sources because I have chosen an even distribution of both “left” and “right” leaning economists, historians, and political philosophers who have devoted their lives to this very topic.

iii) Most specifically, the benefits that Smith claims when he says “led by an invisible hand to promote an end which was no part of his intention” is the merchants’ unintentional “adding to domestic capital and employment”. [7]

These were the public benefits mentioned by Adam Smith as an unstated consequence of the simple quantitative rule that the “whole is the sum of its parts”. [7]

iv) “Smith never proclaimed in favor of ‘selfishness’, nor did he describe the actions of merchants as ‘selfish’; he always recognized ‘self-interest’, which he never confused with ‘selfishness’, an attribute of Bernard Mandeville’s philosophy (Mandeville 1988), which smith regarded as ‘licentious’ (TMS, 306-14).” [7]

References:

[1] Foster, Peter.  Biting the Invisible Hand: An Interview with Peter Foster.  FEE.org.

[2] Foster, Peter. Why We Bite the Invisible Hand: The Psychology of Anti-Capitalism . Pleasaunce Press.

[3] Frank, Robert H.. The Darwin Economy. Princeton University Press.

[4] Friedman, Milton. Capitalism and Freedom . University of Chicago Press.

[5] Friedman, Milton. Free to Choose: A Personal Statement. HMH Books.

[6] Goodwin. Harris. Nelson.  Microeconomics in Context.  Fourth Edition.

[7] Kennedy, Gavin. Adam Smith and the Invisible Hand: From Metaphor to Myth. Econ Journal Watch 6(2): 239–263.

[8] Kennedy, Gavin. “A Reply to Daniel Klein on Adam Smith and the Invisible Hand”. Econ Journal Watch 6(3): 374–388.

[9] Klein, Daniel B. In “Adam Smith’s Invisible Hands: Comment on Gavin Kennedy”. Econ Journal Watch 6(2): 264–279.

[10] Klein, Daniel B. Economists Misplaced Faith in the Invisible Hand.  FEE.org.

[11] Lucas, Brandon, Klein, Daniel B. In a Word or Two, Placed in the Middle: the Invisible Hand in Smith’s Tomes. George Mason University Department of Economics Research Paper No. 09-02

[12] Meeropol, Micheal. Another Distortion of Adam Smith: The Case of the “Invisible Hand”.  Research Gate.

[13] Optiz, Edman. Adam Smith and the Invisible Hand.  FEE.org.

[14] Samuels, Warren J. Erasing the Invisible Hand . Cambridge University Press.

[15] Schlefer, Jonathan.  There Is No Invisible Hand.  Harvard Business Review.

[16] Schlefer, Jonathan.  Today’s Most Mischievous Misquotation.  Adam Smith did not mean what he is often made to say.  The Atlantic.

[17] Skousen, Mark. Adam Smith Reveals His (Invisible) Hand.  Foundation for Economic Education.

[18] Ullmann-Margalit, Edna.  The Invisible Hand and the Cunning of Reason.  The Johns Hopkins University Press.

Sleight of the “Invisible Hand”

This idea usually takes on the meaning that those who act in their self-interest provide unintended consequences that betters society at large.  If it wasn’t for Warren Samuel’s quote below reminding me how easily we are influenced through the “reiteration” and “invocation” of ideas, I would have forgotten how powerful a rhetorical device the “invisible hand” is for politicians and pundits.

The foundation of our society is not the predominance of falsity and pretense. The reiteration and invocation of terms like “free market” and “rule of law” as well as “invisible hand” distract attention from the key issues of policy and empower those with selective perception and selective specification. [12]

Social Control

The debate on the significance and meaning of the metaphor that Adam Smith uses in the Wealth of Nations reminds me of the battle in exegesis over the authors’ meaning in Genesis I and II.  The answer is we can never be sure of the authors’ intentions unless we ask them, and we all use our own heuristics to evaluate and interpret text.

We may prefer a literal over a figurative interpretation or place an emphasis on how context shapes meaning but often forget that our motivations cause us to favor one over the other.  It is predictable when fundamentalists interpret Genesis I and II in a way that serves their interests, and we should expect the same when evaluating “left” versus “right” economists on the “invisible hand”.

I don’t have a stake in an economic camp and put an equal amount of time into an unbiased selection of sources.  And a surprising result was that most economists, right or left, fall in line with the idea that it’s a metaphor.  The only difference is that those on the “right” use it as a rhetorical device to show the magic of markets and those on the “left” are quick to point out that it doesn’t exist.

This sums the “invisible hand” up to be nothing more than an obfuscation that acts as a rhetorical device for social control.  Persuasion is not always a bad thing if the ideology is good, but my cost-benefit analysis of capitalism is still lightyears away.

Much invisible-hand reasoning assumes the invisible hand to be a definition of reality, as well as part of the social belief system operating as psychic balm and social control. The invisible hand projected by such reasoning is believed to be in part about the economy but is also of the economy, part of the process of working things out.  The rhetoric or belief system of the invisible hand is a self-projection of western civilization and the modern economy – an aspect of culture that resonates with, reflects, and reinforces other aspects. [12]

References:

[1] Foster, Peter.  Biting the Invisible Hand: An Interview with Peter Foster.  FEE.org.

[2] Foster, Peter. Why We Bite the Invisible Hand: The Psychology of Anti-Capitalism . Pleasaunce Press.

[3] Friedman, Milton. Capitalism and Freedom . University of Chicago Press.

[4] Friedman, Milton. Free to Choose: A Personal Statement. HMH Books.

[5] Kennedy, Gavin. Adam Smith and the Invisible Hand: From Metaphor to Myth. Econ Journal Watch 6(2): 239–263.

[6] Kennedy, Gavin. “A Reply to Daniel Klein on Adam Smith and the Invisible Hand”. Econ Journal Watch 6(3): 374–388.

[7] Klein, Daniel B. In “Adam Smith’s Invisible Hands: Comment on Gavin Kennedy”. Econ Journal Watch 6(2): 264–279.

[8] Klein, Daniel B. Economists Misplaced Faith in the Invisible Hand.  FEE.org.

[9] Lucas, Brandon, Klein, Daniel B. In a Word or Two, Placed in the Middle: the Invisible Hand in Smith’s Tomes. George Mason University Department of Economics Research Paper No. 09-02

[10] Meeropol, Micheal. Another Distortion of Adam Smith: The Case of the “Invisible Hand”.  Research Gate.

[11] Optiz, Edman. Adam Smith and the Invisible Hand.  FEE.org.

[12] Samuels, Warren J. Erasing the Invisible Hand . Cambridge University Press.

[13] Schlefer, Jonathan.  There Is No Invisible Hand.  Harvard Business Review.

[14] Schlefer, Jonathan.  Today’s Most Mischievous Misquotation.  Adam Smith did not mean what he is often made to say.  The Atlantic.

[15] Skousen, Mark. Adam Smith Reveals His (Invisible) Hand.  Foundation for Economic Education.

[16] Ullmann-Margalit, Edna.  The Invisible Hand and the Cunning of Reason.  The Johns Hopkins University Press.

Chomsky on Friedman’s Freedom

This is not an argument against libertarianism, so don’t jump to the conclusion that because the analysis is done on certain aspects of capitalism I must be making denunciations.  And for those that find themselves getting defensive over a critique, they should do a personal inventory on where they are investing their emotion because it’s that very deposit that causes divisiveness.

This post assumes you are familiar with Noam Chomsky’s perception of the world.

Friedman’s Freedom

If you read Milton Friedman and other apostles of libertarianism, they don’t call for democracy but freedom—a very restrictive concept of freedom.  It’s a freedom not of a working person to control their lives and work and so on, but it is their freedom to submit themselves to a higher authority. [2]

Chomsky is saying that libertarianism’s view on freedom has much irony because by submitting to a corporation, we are giving up some freedoms.  Admittedly I never thought of it like this, but he does point out the obvious quite well for those who may have missed it.

And for those that say people have a choice to not work for a company, then they are using an incorrect definition of free will for the sake of their argument.  The idea of free will has been distorted by libertarians to make their arguments work much like theologians do in their arguments for God.  People do make choices, but they are not made in the rational way they claim.

They are in favor of private tyranny—the worst kind of tyranny—tyranny by unaccountable private concentrations of wealth.  They mean—maybe they don’t understand it but if you think it through it’s pretty obvious—the kind of government interference they want to block is the kind that wouldn’t permit unconstrained tyranny on the part of totally unaccountable entities, which is what corporations are [2]

“They”, the modern libertarians, are for the tyrannical corporation of course.  I have mixed opinions on the corporation but do see much benefit to them.  Chomsky, on the other hand, apparently believes that the benefits don’t outweigh the costs.

Companies do have human features since they are often unaccountable, ignore externalities, are driven by self, and are legal entities with rights.  This does make them just as dangerous as we are but like not every human is destined to be a tyrant neither is a company.

References

[1] Chomsky, Noam. Requiem for the American Dream. Seven Stories Press.

[2] Chomsky, Noam. YouTube one.  Youtube two.

[3] Mele, Alfred R.. Free: Why Science Hasn’t Disproved Freewill. Oxford University Press.

[4] Miles, James B.. The Free Will Delusion: How We Settled for the Illusion of Morality. Matador.