Talk:Adam Smith

From Academic Kids

Fare: Adam Smith's "Wealth of Nation" was certainly not the first book in economics. See any site specialised in the History of Economic Thought about that.

Contents

1 "he relinquished his exhibition" 2 Brits for or against mercantilism? 3 Quotes 4 Theory of Moral Sentiments 5 NPOV ... what today is considered capitalism... 6 Problem with invisible hand

"he relinquished his exhibition"

Could someone please tell me what this means?

and he relinquished his exhibition in 1746.

Thanks. -- Viajero 18:09, 1 Aug 2003 (UTC)

It means that he gave up his scholarship at Oxford and left the university. I think that, technically, at Oxford, an "exhibition" is a somewhat less generous grant to a student than a "scholarship." But it's the same idea. -- User:Eb.Hoop 11:00, 20 Oct 2004 (UTC)

Brits for or against mercantilism?

This reads inconsistently:

When the book, which has become a classic manifesto against mercantilism, appeared in 1776, there was a strong sentiment for free trade in both Britain and America. This new feeling had been born out of the economic hardships and poverty caused by the war. However, at the time of publication, not everybody was convinced of the advantages of free trade right away: the British public and Parliament still clung to mercantilism for many years to come. [italics mine]

Wat the British public for or against mercantilism? -- Viajero 18:16, 1 Aug 2003 (UTC)

I think that the answer is "Both". The Public, American or British, are generally for free trade where they think it doesn't harm them, and for mercantilism, particularly its protectionist aspect where they think that it benefits them. For examples take a look at the historical UK Corn laws or the present day US/Canadian softwood lumber dispute, the US/Vietnamese catfish saga or the current debate about IT outsourcing to India, where the "Public" have been or are divided over the merits of free trade versus protectionism. -- Derek Ross | Talk

Quotes

I copied the quotes to Wikiquote. Perhaps we dont need the quote section here on Wikipedia now, or at least - not to that extent? --Piotr Konieczny aka Prokonsul Piotrus 11:12, 25 Jul 2004 (UTC)

Done. Of course, others may not agree with my choices, but oh well. Brutannica 01:39, 10 Sep 2004 (UTC)

Theory of Moral Sentiments

There is some material on this in the Biography section. Shouldn't it be moved down to the Works section? Brutannica 01:31, 10 Sep 2004 (UTC)

NPOV ... what today is considered capitalism...

The last edit by 146.151.30.214 doesn't seem to respect NPOV. I'm not sure whether everyone considers corporate structure, government run by business interests, and economic emphasis on business rather than on workers as today's capitalism. But there is some valid point (not rechecked by me, tough) in mentioning that Smith never used the term capitalism...

It also does make sense to show differences between Smiths thoughts and some of his followers. I guess this is what the editor did intend. But this doesn't belong to the very first paragraph.

Here's the bigger part of the change.

It is often cited by pro-capitalist ideologies as helping to create the modern academic discipline of economics and providing one of the best-known intellectual rationales for capitalism. However, Smith never used the term capitalism in any of his works as it did not exist in his time, and in fact opposed much of what today is considered capitalism, such as the corporate structure, government run by business interests, and economic emphasis on business rather than on workers.

Could someone with more Smith knowledge than me, make this into its own sub-section? I will revert this change in a few days if it is still there...

I deleted then statement that Marx agreed with the iron law of wages as this is incorrect. The Iron law of wages states workers wages will equal the physical subsistence, Marx on the other hand said wages would equal "social subsistence" - social subsistence can be considerably different than physical subsistence.

Problem with invisible hand

I will delete the following passage, recently added by Wk_muriithi:

Even if it was possible to impose the implicit moral contract discussed above, it is unlikely that Adam Smith theory would ever work. This is because invisible hand only work in a perfect market, a condation that has never occured and will never occur. Some of the problem that makes the market imperfect are:-

• Information asymmetry - Its impossible for example, for even sophisticated buyer to be all knowing even where there is reasonable competition. A good real life example of this is in microprocessor market. Corporations can be assumed to be sophisticated buyers and are the main consumers of microprocessors. Despite this, Intel has been able to sell its inferior microprocessors at a higher price than its competitor, AMD.
• Natural monopoly - Some business like telecommunication, utility (water and power) railway are natural monopoly. Markets tend to badly at it. Witness the electricity fisco in USA sometimes back.
• Externality - Business tend to produce too much negative externalities (eg pollution) and too little positive externalities (eg research). Adam Smith argument ignore this facts and his theory is therefore not sustainable.

Aside from problems with the grammar and the POV tone of the proposed addition, nowhere in WoN does Smith posit a perfect market. His work is largely descriptive, studying how markets had historically worked in Europe and elsewhere. The famous "invisible hand" in WoN refers primarily to the observation that there is an unplanned connection between specialization/trade and the creation of wealth. I suspect that the author of this passage has limited first-hand knowledge of what Smith actually says in his book. For a recent critique of the common, incorrect use of the term "invisible hand" by free-trade critics, see Vernon Smith, "Human Nature: An Economic Perspective," Daedalus, pp. 67-76, Fall 2004. - Eb.hoop 15 Jun 2005, 15:45 (UTC).

I concede that i am a tad too opinionated and my spelling leave a lot to be desired. I am however surprised that you seem to be asserting "invisible hand" has nothing to do with pricing. I quote from the article

One of the main points of The Wealth of Nations is that the free market, while appearing chaotic and unrestrained, is actually guided to produce the right amount and variety of goods by a so-called "invisible hand." If a product shortage occurs, for instance, its price rises, creating incentive for its production, and eventually curing the shortage. The increased competition among manufacturers and increased supply would also lower the price of the product to its production cost, the "natural price."

Boy, that sound to me like the supply - demand curves i see a lot in economics books. The curves attempt to demonstrate how market achieve optimal price. Are you for real when saying this has something to do with specialization? Would you be more specific on your understanding of what of what "invisible hand means? And if your assertion is true, don't you think the above paragraph is misleading and should be fixed? Can someone comment on this?

I agree that the paragraph from the article you quote is misleading. In WoN, the "invisible hand" refers generally to the fact that the people participating in a free market system achieve results for themselves and for society that are never part of their conscious motives. The price mechanism is one aspect of this general phenomenon, but it is not the only one, or even the most important in Smith's thinking. Smith's central point in WoN is that specialization and division of labor dramatically increase productivity and are the source of all wealth. Specialization is possible only if trade allows people to exchange what they specialize in making (e.g., pins) for everything else they need (e.g., food).

Here's the relevant quote from Vernon Smith's article: When Smith uses the metaphor of the invisible hand, he is referring to the essential insight that people in markets achieve ends that are not part of their intention; i.e., people achieve more efficient arrangements induced by the specialization-exchange nexus than is possible without that nexus. The more common, inappropiate, interpretation is illustrated in the following quotations from Joseph Stiglitz: "The argument of Adam Smith ... that free markets led to efficient outcomes, 'as if by an invisible hand,' has played a central role in these [information economics] debates ... The set of ideas that I will present here undermines Smith's theory and the view of government that rested on it. They have suggested that the reason that the hand may be invisible is that it is simply no there - or at least it is palsied."

Having read WoN, I agree with Smith that the common perception (repeated by Stiglitz) that the "invisible hand" refers simply to efficient pricing is quite wrong. Smith was arguing at a far more fundamental level that people like Stiglitz are today. We tend to forget that most of what Smith writes about in WoN is now received wisdom in economics and uncontroversial even to free-market skeptics like Stiglitz. I notice that the Wikipedia article on the invisible hand does a better job that this biography of explaining what Smith was talking about. - Eb.hoop 20:38 17 Jun 2005 (UTC).

Thanks for response. I think you are in better position to understand what invisible hand means as you seem to have read WoN. I was basing my argument wholly on the above paragraph, but since you say its wrong, then my argument is consequently weak. And yeah, my skeptism on the WoN thing is heavily influenced by Stiglitz. He seem to think its bull.