3/29/2023 0 Comments Adam smith invisible handI will attempt in vain to summarize the possible influences that formed three major concepts which exist in his later and final work, the Wealth of Nations, namely the appropriation of Self-Interest, Division of Labor, and the “The Invisible Hand”, thereby showing the linear deduction of each, and how that logic reflects in Adam Smith’s moral philosophy. Rather than walk you through a summary of his life, I instead wanted to treat you to three of his most popular ideas, the influences that helped him form them, and provide possible context for each. He is called the “father of modern economics” and “the creator of capitalism”. This season we have been covering individuals who have had a direct effect on history, in a positive or negative way. In lieu of the story from history this week, I want to give you some context for today’s episode. ― Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. That was why he was so effective in keeping alive, in the early days, and then spreading the basic idea that human freedom required private property, free competition, and severely limited government.“The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. Whatever the pressure, he stuck to his guns, refusing to compromise his principles. That was his basic credo and one that he stuck to consistently during his long period of service to the public-not public service in the sense of government service. He was simply trying to enhance individuals' understanding of themselves and of the system they live in. As in the rest of his work, he was not trying to tell people what to do or how to conduct themselves. “I, Pencil” is a typical Leonard Read product: imaginative, simple yet subtle, breathing the love of freedom that imbued everything Leonard wrote or did. How did it happen? Adam Smith gave us the answer two hundred years ago.” These people live in many lands, speak different languages, practice different religions, may even hate one another-yet none of these differences prevented them from cooperating to produce a pencil. No military police enforced the orders that were not given. No one sitting in a central office gave orders to these thousands of people. “It is even more astounding that the pencil was ever produced. Every time we go to the store and buy a pencil, we are exchanging a little bit of our services for the infinitesimal amount of services that each of the thousands contributed toward producing the pencil. Each saw his work as a way to get the goods and services he wanted-goods and services we produced in order to get the pencil we wanted. Some among them never saw a pencil and would not know what it is for. “None of the thousands of persons involved in producing the pencil performed his task because he wanted a pencil. We summarized the story and then went on to say: We used Leonard's story in our television show, “Free to Choose,” and in the accompanying book of the same title to illustrate “the power of the market” (the title of both the first segment of the TV show and of chapter one of the book). I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith's invisible hand-the possibility of cooperation without coercion-and Friedrich Hayek's emphasis on the importance of dispersed knowledge and the role of the price system in communicating information that “will make the individuals do the desirable things without anyone having to tell them what to do.” Leonard Read's delightful story, “I, Pencil,” has become a classic, and deservedly so. Reed (Irvington-on-Hudson, New York: Foundation for Economic Education, Inc., 1999). Source: From I Pencil: My Family Tree as told to Leonard E.
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