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Continuing on the foundational text of economics. Is Smith's position the equivalent of "greed is good?" (No.) What's the deal with the "invisible hand?"
We talk about Smith's picture of the (sort of) self-regulating economy, and why he thinks we shouldn't have tariffs or guilds or other restrictions on the mobility of goods, workers, or capital. We rant a bit in ways that will hopefully be cleared up in ep. 177, when Russ Roberts from EconTalk joins us to discuss economics and Adam Smith further. Stay tuned!
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Jake Zielsdorf says
October 23, 2017 at 2:16 pmYou guys should all listen to the Econtalk episode with Bryan Caplan about signaling theory in education if you haven’t already. Caplan’s forthcoming book Against Education is going to argue precisely what you discuss. It really is a huge issue.
Jake Zielsdorf says
October 23, 2017 at 2:41 pmI have a question for you to ask Russ Roberts about in the upcoming episode, which I really look forward to as an avid Econtalk listener. Does Russ recognize that while the specialization of labor has created this immense wealth that we enjoy, it also leaves specialized laborers intensely vulnerable when their market is creatively destroyed. Many skills aren’t transferable to other sectors and that’s a big problem in modern capitalism.
dmf says
October 23, 2017 at 9:46 pmAdam Smith and more in our age of financialization:
http://www.ximalaya.com/89201165/sound/53199298/
“Today, we will talk about Rana’s new book, Makers and Takers: The Rise of Finance and the Fall of American Business.
In the book, Rana argues that Wall Street is no longer supporting Main Street businesses that create the jobs for the middle and working class. She draws on in-depth reporting and interviews at the highest rungs of business and government to show how the “financialization of America”—the phenomenon by which finance and its way of thinking have come to dominate every corner of business—is threatening the American Dream”
Stephen Williams says
October 24, 2017 at 1:58 amCool, I love it when you blokes veer into economics and how the world really works ( and how you think it should work), You lost me with some recent episodes but if you get Russ on I’ll join as a citizen instead of an occasional supporter.
Thanks.
Deron says
October 24, 2017 at 10:24 pmAn aspect of economics that I’d submit for your consideration in future episodes is a consideration of the amorality of markets, as a concern of economics.
I’ve struggled with the way people think of markets as having some moral force. To my mind, “markets” is a descriptive term for something that just is, ;almost the way Taoists might describe the Tao – it just is but it can’t be confined by description.
The issue I’ve seen is that there’s a desire to attache a moral value judgement to the flow of commerce that we describe as “markets”. Instead I’ve come to view markets as amoral and somewhat ineffable. There are winners who almost always see the market as moral, and losers who tend to see the market as evil. In reality markets are indifferent.
I hope it’s not an unreasonable request, but this is a critique, a line of thinking, that the team might consider in economic discussions in the future. I ask for this line of discussion only because I have had a hard time articulating my thoughts so maybe the group can help me develop or dustbin this concern..
As it relates to the reading, it’s been a long time since I read – parts of anyway – The Wealth of Nations. I have this recollection that Adam Smith was fairly unique among economists in simply describing what he saw. But, the value judgement is hard to keep out, and I think that Seth – I believe – is correct in noting the naivete that Smith has in the natural corrections markets make. That naivete, to my mind, is based on the idea that there is a natural good that markets tend towards which I doubt. The issue is that markets are as much a good, or bad, as water flowing down hill.
Evan Hadkins says
October 25, 2017 at 1:35 amPeople collaborate and communicate, and trade and exchange are part of this. That is markets aren’t ‘natural’ in the sense of occurring always the same, or without intentional intervention. They are natural if we mean that groups have always exchanged with other groups.
Jake Zielsdorf says
October 26, 2017 at 6:06 pmMarkets are moral in that they embody reciprocal altruism on a massive scale.
Evan Hadkins says
October 26, 2017 at 6:25 pmWell, they embody reciprocal relations, I’m not so sure about them being atruistic.
Jake Zielsdorf says
October 26, 2017 at 10:39 pmMutually beneficial relations. Markets are obviously moral on a utilitarian view because they increase the utility of buyer and seller.
Athena Sophia Speculi Ustorii says
October 27, 2017 at 6:37 pm…I’m not sure how helpful it is, but if we consider a Pareto improving exchange vis-a-vis a neo-classical economic perspective, then the claim is made that such an exchange is one that harms no one and helps at least one person.
I tend to agree with this claim, at least broadly speaking.
For example, if I buy a ticket to a movie and then go watch it, I may find that the movie was terrible and was a complete waste of my time. I certainly wasn’t harmed in any meaningful way from the exchange, but I also wouldn’t claim that my utility was increased from having watched a terrible movie and wasted my time. I also wouldn’t claim that the exchange had been mutually beneficial, as I received no benefit from the exchange. The other side of this is that one party’s utility was increased – that is the movie theater was at least helped by getting to keep my money.
…Or, sometimes you get ripped off and buy a bad car (or whatever)…you’re certainly not better off as the buyer because now you have less money and a broken car that will require more money to get running (…money that you don’t have and which you can no longer recoup by selling the car since it is now obvious how much the bad car is *actually* worth). In such a case, perhaps there was some kind of a decrease in the buyer’s overall utility. The seller on the other hand is doing quite well in the exchange…they have your money and they no longer have to worry about maintaining a bad car. In this situation, we also find that no one was harmed and at least one person was helped (i.e., the seller).
Lastly, imagine that a buyer buys a human slave from a seller (something that is still happening in our world right now). Such an exchange is disgusting and completely morally reprehensible; nonetheless, those market “exchanges” happen every day.
Hence, it is hard to see how *all* exchanges are *necessarily* mutually beneficial and/or *necessarily* increase the utility of all parties involved.
Markets certainly involve relations, but I don’t know that we can say too much about the moral status of markets.
I tend to think that markets are fairly amoral generally speaking. It would seem that their moral “aims” vary quite radically depending on the cultural/historical context that the markets appear. As much as markets incentivize exchange for the benefit of at least one party, it goes without saying that the incentive structure also encourages not only the mere non-harm of the other party, but also *actual* harm to those other people in some instances.
Evan Hadkins says
October 25, 2017 at 1:11 amI think uni’s becoming credential factories is a problem.
Theodore Zeldin, I think, asked professionals how long it would take someone to learn what they mostly do. The answer was generally around six months.
I don’t think people are usually much motivated by competition. People enjoy co-operation. I think the benefits of our civilisation have often been despite rather than because of Capitalism. I think people (esp. those in the US) ignore the distinction between Capitalism and the Liberal state.
Evan Hadkins says
October 25, 2017 at 1:14 amThe modern parlance for ‘unproductive labour’ is probably “bullsh*t jobs”.
Evan Hadkins says
October 25, 2017 at 1:38 amFor a critique of the kind of economics that resulted from Smith see Steve Keen’s Debunking Economics. He shows that the model is incoherent. He’s trying to come up with a macroeconomic model that doesn’t presume equilibrium.
qapla says
October 25, 2017 at 10:28 amI think it was Mark that said something about the norm … something has gone seriously wrong.
What came to mind is :
The founder of the world’s largest hedge fund just shared brutal analysis of the US economy
http://www.businessinsider.com/ray-dalio-warns-of-struggles-for-bottom-half-of-us-economy-2017-10
Our Biggest Economic, Social, and Political Issue The Two Economies: The Top 40% and the Bottom 60%
https://www.linkedin.com/pulse/our-biggest-economic-social-political-issue-two-economies-ray-dalio
William Hill says
December 19, 2017 at 1:34 pmJust wanted to recommend someone who might be a good follow up in this thread of episodes on economics, Kojin Karatani. He’s a contemporary Japanese philosopher who began as a modern literary critic before moving over to general philosophy. He’s basically a Marxist, but he has changed the emphasis from production to exchange allowing for a different understanding of how capital-nation-state are connected together. He is also very interested in aesthetics and talks about how the nation has been aesthesized. Some of his works include “Transcritique” (where he reads Kant through Marx and vice-versa) and “Nation and Aesthetics” which is a collection of essays dealing with some of his general ideas as well as his thoughts on people like Kant, Freud, Marx, etc.
Charles Crawford says
July 28, 2018 at 6:55 amAmused to hear Seth on the ‘confident naivete’ of Adam Smith’s view of markets etc, and all the other sundry disobliging remarks against capitalism.
How odd that the successive collectivist-Left socialist philosophers typically discussed in awed reverent terms on PEL never earn this damning observation despite the horrors they inflict as eg now in Venezuela.
Still, as PEL now advertises extra-soft undies, maybe the Invisible Hand is still busy!
Evan Hadkins says
July 28, 2018 at 7:03 am“the successive collectivist-Left socialist philosophers” Who are you thinking of Charles?
Wes Alwan says
July 30, 2018 at 1:13 pmCharles: Seth is one of four podcasters, and we had on a very pro-market guest. I’m a big fan of the “The Wealth of Nations,” and I thought that was clear in the podcast; but I happen to find something great about almost everything we read, and we choose our readings because we think they’re important and worthwhile. Yet that is not to say they can’t be critiqued in one way or another–it would surprising if none of us had something critical to say about any given text.
If you get the impression that we’re just a bunch of hard lefties grinding our axes, you’re wrong, and I suspect you’re jumping the gun because the climate of the times seems to have encourage people to assign each simplistically to one political extreme or another. I happen to be an ardent opponent of identity politics in its current forms; have libertarian leanings; and understand the value of capitalism; and understand and the historical evils that have come with state ownership of the means of production and socialism in its authoritarian incarnations. I happen also to be a lefty in ways that you would probably find objectionable. The politics of the other podcasters is also, as I’ve learned talking to them over the years, complex; and has changed with time.
Finally: even if we were all a bunch of extreme left caricatures, that’s hardly worth the bitterness you’re expressing here. The bulk of our project involves not critique — especially political critique — but on trying to understand texts and appreciate them for what they have to offer. You’ve focused on one rare eristic pea under a pile of didactic mattresses. In the end, your enjoyment of the podcast should have nothing to do with whether you think that we hold the same opinions as you, but whether we are open-minded and charitable enough to think about and appreciate what we read–whether capitalist, socialist, or anything otherwise or in between. If you want to show that we’ve misunderstood something, that would take a longer and more constructive approach than drawing hasty conclusions about our politics and pointing to the evils of socialism in Venezuala–as if any of us would disagree.