September 2022

Sun Mon Tue Wed Thu Fri Sat
        1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28 29 30  
Blog powered by Typepad

« Welfare for the Well-To-Do | Main | Wicksteed Reprinted -- eBook version thanks to Laissez Faire Books »


Feed You can follow this conversation by subscribing to the comment feed for this post.

The difference between "mainline" and "mainstream" can be more readily clarified by focusing on the difference between how Hayek & Smith cast the problem to be explained in economics and its causal solution versus now "mainstream" economists cast these problems and attempt to "solve" them.

Doing so also explains the institutional barriers to "mainline" economic explanations, and accounts for the selection for and rewarding of "mainstream" output in the journals, textbooks, and in Ph.D. dissertation and classwork production.

The difference between Hayek & Smith and the mainstream can be easily illustrated by pointing out the differences in how the "mainline" economists conceptualize the empirical problem of the division of knowledge and how "mainstream" economists envision that problem -- and the difference between how "mainline" economists account for the problem of economic order and how "mainstream" economists account for it.

The understanding of the problem of the division of knowledge in Hayek is one that can't be captured or eliminated using formal math constructs, and the causal elements of explanations for the observed overall order of the economy can't be captured in bits of math, but can be explained only via appeal to learning and changes in understanding in the context of changing local conditions and relative prices, and via appeal to the institutions of several property and moral rules and the institutions of law, things which can't be stuffed into bits of math.

By contrast, Kenneth Arrow believes that a bit of math, his mathematical GET construct, fully captures the causal process of Adam Smith's "invisible hand".

I may add more on this later.

The problem with this take on things, Greg, is that no one is proposing Adam Smith 1.0 because Kenneth Arrow is Adam Smith 2.0. People don't think about it in those terms. Adam Smith is essential (not a footnote) and Kenneth Arrow is an essential advance on that work. It's not that he's preferred because he is mathematical and Smith is literary. Preference isn't even the issue here. Arrow is celebrated because if you had to decide who continued Smith's research program in the 20th century - who moved it forward - Ken Arrow would be very high on that list.

It seems obvious that Hoover was Keynesian long before Keynes. Coolidge called Hoover a socialist. Where did those policies come from?

By 1930 much of the nation was in love with the new USSR. We had lost our "Bourgeois Values." Some it had to do with the importing of values from the German welfare state.

But most people weren't economists and knew little about economics. Still they had lost the bourgeois values. As Hayek wrote in Fatal Conceit, the job of maintaining those values among non-economists is religion.


Have you read Blaug on this point about Arrow-Hahn and Adam Smith? Very much challenges the interpretation you are suggesting.

So rather than Arrow, the "men who sit in the seat of Adam Smith" are more likely to be Hayek, Buchanan, and V. Smith.


I have read Blaug on Arrow.

I like to think the seat of Adam Smith is big enough for a lot of people. What I think distinguishes Arrow, Romer, and Krugman is that they were working in some very prominent and celebrated research areas of Smith and getting Smithian answers, that's all. Of course this is true of Hayek as much as it is for Arrow.

Daniel writes,

"No one is proposing Adam Smith 1.0 because Kenneth Arrow is Adam Smith 2.0. People don't think about it in those terms."

As Peter suggests, you aren't familiar with the literature on this. Blaug is merely the tip of the iceberg. There is extensive, overflowing evidence that Arrow doesn't agree with you either.

It's also noteworthy that Arrow finds it necessary to may the most brain-dead, straw-man, laugh-out-loud childish arguments against Hayek's explanatory use of several property and moral traditions in explaining the institutional foundations of market order.

Daniel writes,

"I have read Blaug on Arrow."

What Blaug?

Daniel, Blaug has written many books and papers that deal in very different ways with work by Arrow.

What Blaug on Arrow have you read?

You can go through the literature -- as I have -- and find repeated claims that the "invisible hand" just is the GET math construct, which is utter baloney.

And Arrow is first and foremost among those making the claim.

Others claim that the "invisible hand" just is the mathematics of "economic man" put into Samuelson's pseudo-scientific mathematical/'empirical' framework. More non-sense from 'neoclassical' math economists & the leftists who can't get enough of these fallacies.

(See Stanley Wong, Foundations of Paul Samuelson's Revealed Preference Theory: A Study by the Method of Rational Reconstruction on Samuelson's pseudo-scientific efforts.)

re: "what Blaug?"

I assumed he meant the JEP article because that comes at Arrow/Hahn pretty directly. If he meant something else, I'm sure the argument is essentially the same.

Greg -
The claim Arrow and Hahn made for themselves was that Smith argued (persuasively - persuasive enough that it was "the most important intellectual contribution" in economic thought) that individuals engaging in market exchange would generate outcomes that were socially efficient.

Smith was persuasive, but not particularly rigorous. Could it be demonstrated rigorously? There are lots of "socially efficient" definitions to choose from, of course. Given a narrow approach to the question, Arrow and Hahn supported the heart of Smith's argument.

If you can dig up some passage that you can construe as them saying that 20th century GET is Smith, I doubt they meant it as literally as you are trying to argue here. The conceptualizations of social efficiency, the formalizations of market exchange, etc. weren't even around in Smith's time. Arrow/Hahn is a representation of the argument using modern language for a narrowly defined case.

Blaug calls this a "travesty". Nonsense. Blaug is concerned that Arrow and Hahn didn't produce a work of history of thought - that they didn't reproduce Smith's exact argument.

So what? Science progresses by taking good arguments and making them broader, deeper, and stronger. Arrow/Hahn obviously didn't make it broader or deeper (perhaps Hayek could be said to have done this), but they did make it far stronger in the context of their somewhat narrower line of approach.

Daniel, what I'm familiar with is the repeated suggestion by Arrow and textbooks, etc that the math construct of the GET just *is* Smith's 'invisible hand'.

That's the flat out statement and language of Arrow and the textbook writers,

They weren't bluffing. There meaning is crystal clear.

It's an intellectual error as Blaug notes.

We can change the topic and discuss how focus on "Efficient" helped grease the skids toward this intellectual error, but the intellectual error remains even if we start talking about something else.

Well that's not the "flat out statement" that's your recollection of the statement.

I've quoted Arrow here and have some discussion of it:

He says nothing like what you're proposing.

Anyway, if anybody did say it *is* Smith's invisible hand I hardly think that proves that the claim carries the import you're attaching to it. Given the absence of modern efficiency criteria when Smith wrote and the absence of modern models of the market it's patent nonsense to say that that *is* the invisible hand in the literal way you're meaning.

In the less literal sense that it is the best modern formulation of the principles involved, it's fine to say that it is "is" Smith's invisible hand.

Let's remember - "Smith's invisible hand" as people think of it today has very little to do with anything Smith actually said about the invisible hand anyway! I'm sure I don't need to recount the details on that one to you.

The comments to this entry are closed.

Our Books