News of New Book on Adam Smith by Gavin Kennedy

An Authentic Account of Adam Smith

Gavin Kennedy

To be published by Palgrave-Macmillan, 1st September, 2017

Busting the myth.

Adam Smith's Lost Legacy
News of New Book on Adam Smith by Gavin Kennedy
Gavin Kennedy | Professor Emeritus, Heriot Watt University

Gavin Kennedy — Adam Smith's Metaphoric "invisible hand" and the Mythical Invisible Hand of Modern Economists

There is no actual Adam Smith's invisible hand. 

The invisible hand of modern economics is Paul Samuelson's invisible hand of market forces guiding equilibrium and optimization. 

As Joseph Stiglitz famously said, "There is no invisible hand."

Adam Smith's Lost Legacy
Adam Smith's Metaphoric "invisible hand" and the Mythical Invisible Hand of Modern Economists
Gavin Kennedy | Professor Emeritus, Heriot Watt University

Gavin Kennedy — 'Mathiness' In Economics Is A Dead End

Adam Smith expert Gavin Kennedy on Justin Fox's post at Bloomberg on Paul Romer on "mathiness."

Many of us tend to put all the blame on the Chicago School that drove Keynes and the rest of heterodoxy out of the mainstream but it was MIT's Paul Samuelson probably more than anyone that drove economics in the direction of being a "science" and therefore math-based, which led to formalism over realism and absorption with model creation instead of causal explanation (which is what science is actually supposed to be about). 

There's plenty of blame to go around. No need to get bogged down in who is most to blame. 

Adam Smith's Lost Legacy
'Mathiness' In Economics Is A Dead End

Gavin Kennedy

Lars Syll — General equilibrium economics – a dead end

As long as we cannot show, except under exceedingly special assumptions, that there are convincing reasons to suppose there are forces which lead economies to equilibria – the value of general equilibrium theory is nil. As long as we cannot really demonstrate that there are forces operating – under reasonable, relevant and at least mildly realistic conditions – at moving markets to equilibria, there cannot really be any sustainable reason for anyone to pay any interest or attention to this theory.

Lars P. Syll's Blog
General equilibrium economics – a dead end
Lars P. Syll | Professor, Malmo University

Why did this quest turn out so poorly and why is it so difficult to give up? It's based on the myth of the invisible hand as the economic correlate of laws of nature in the hard sciences. This myth has been enshrined as neoliberal dogma, and it constitutes the supposed connection between Classical and Neoclassical economics (with Paul Samuelson introducing it into Keynesian analysis). This leads to the assumption that markets operate based on laws of nature as if guided by an invisible hand, so that there are natural rates that are determined and can be expressed mathematically as invariants. 

The explanations are meticulously crafted but the predictions have neither been uniformly accurate nor comprehensive. Global financial crisis? The model did not predict it. What path will the recovery take and when will it be over. The model doesn't predict that either. So now economists are toying with multiple equilibria, and shifting natural rates.

As Joe Stiglitz famously said recently, there is no "invisible hand." And as Adam Smith's biographer Gavin Kennedy (Adam Smith's Lost Legacy) observes, Smith never used the phrase "invisible hand" in the way that later neoclassical economists' interpreted it in light of 19th century physics. See Gavin Kennedy, Adam Smith and the Invisible Hand: From Metaphor to Myth Econ Journal Watch, Volume 6, Number 2, May 2009, pp 239-263.

"Adam Smith and the Myth of Laissez Faire"

Free, unregulated markets -- those absent government oversight of any kind -- are not the same as the ideal competitive markets found in textbooks, those that produce optimal outcomes. In a free market, producers are free to organize, for example, "in some contrivance to raise prices," and this takes us away from the optimal outcome free market enthusiasts are trying to defend. Government oversight and regulation are needed to stop producers from engaging in behavior that is harmful to consumers, excessive market power and the associated political power that come with it are both problematic, a point Smith's so-called disciples ought to take to heart.

And no, Adam Smith never used the phrase "laissez-faire," even though it knew of it. Gavin Kennedy shows that the narrative of Adam Smith embracing laissez-faire is myth whose origin is traceable to Jean-Baptiste Say and Fredric Bastiat. Kennedy is the authority on Adam Smith so let's put that myth to bed.

Read it at Economist's View
"Adam Smith and the Myth of Laissez Faire"

by Mark Thoma, with a long quote from Gavin Kennedy