With good reason, most contemporary economists regard Adam Smith as the founder of their discipline. But I would instead accord that honor to Charles Darwin, the pioneering naturalist.....
Smith did not claim that markets always channel greed in socially productive ways. For him, the remarkable thing was that they often appeared to. Although his account of how that happens lacks the generality that many of his most enthusiastic modern disciples ascribe to it...
An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Friday, October 21, 2011
Charles Darwin the Economist
Article at LA Times by Robert H Frank here. Excerpt: Frank is perhaps implying that he believes that to Adam Smith, in reality it was often "form over substance" in the "free markets". It is an interesting short article that also touches on the tug of war between individual and group interests that we have discussed before here at MNE.
Excellent article - exactly what I outlined in my postings. Tom, I was under the impression you don't subscribe to the concepts portrayed in this article? Why the link?
ReplyDeleteI particularly like the deer and antlers example. When will mankind realize they would be better off cloning women and turning them into disposable commodities?
Red, Matt put up this post, not me.
ReplyDeleteFrank makes some good points about Darwin v. Smith, but they boil down the fallacy of composition which undermines the application of the invisible hand operative in competitive markets as an economic principle. It may have micro application, but it does not hold at the macro level. The invisible hand does not lead to equilibrium at an optimal state, as is erroneous assumed.
Red,
ReplyDeleteI thought it was interesting that Frank (an economist) who I assume has studied Adam Smith, is indicating here that Smith thought that competition just 'appeared' to provide better outcomes.
Many who ascribe benefit to the concept of 'the invisible hand' think it 'actually' provides better outcomes to the group overall.
Frank uses biology as an analogy (btw I dont know if wolves would prey upon a healthy bull moose in antler and rut).
But I think Tom has nailed it, it is basically pointing out 'the fallacy of composition': The fallacy of composition arises when one infers that something is true of the whole from the fact that it is true of some part of the whole.
Perhaps this economist and a biologist do not have Tom's skills/training in regard to logic, and they may not even know about the fallacy of composition. Tom has often made the point that as a rule economists (and perhaps here biologists) seem to lack inter-disciplinary training in related fields (accounting and logic come to mind immediately) ...
Resp,
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ReplyDeleteTom & Matt,
ReplyDeleteSuch fallacies and paradoxes e.g. paradox of thrift etc. exist in every system.
Equilibrium is a moot point because it can only ever be achieved across a limited spectrum of time (or a given point in time). There is no such thing as a perfect system and there never will be.
The most interesting take away for me in reading that article is that we are witnessing this sort of paradox in human advancement right now. There are strong indicators that human evolution at least in the US, if not across the world, has stalled or is regressing.
"Such fallacies and paradoxes e.g. paradox of thrift etc. exist in every system."
ReplyDeleteRight, Red, but some representations hod out that their system doesn't have these blemishes and that everything would be OK if we were just running them. You know who I am referring to.
"Equilibrium is a moot point because it can only ever be achieved across a limited spectrum of time (or a given point in time). There is no such thing as a perfect system and there never will be."
Most contemporary econometric models assume equilibrium.
"The most interesting take away for me in reading that article is that we are witnessing this sort of paradox in human advancement right now. There are strong indicators that human evolution at least in the US, if not across the world, has stalled or is regressing."
Evolution is not linear, and a lot of species go extinct. Life is an experiment. Judging from the expansion of the human population we are doing pretty good so far. But the future is uncertain, and you are right, sometimes I wonder.