Wednesday, February 14, 2018




On Kennedy’s Literary Proof of the Impossibility that Smith had a ‘Theory of the Invisible Hand of markets’ in The Wealth of Nations, by Michael Emmett Brady, California State University, Dominguez Hills, Carson, California, 
Abstract- G. Kennedy carefully examined the conflict that Smith covered in The Wealth of Nations brought about by Upper Income citizens that Smith classified as “ Projectors, Imprudent risk takers, and Prodigals” . Their behavior led to very detrimental , negative outcomes in the macro economy as a whole.
Invisible Hand that turned the self interested, self serving interests of the Projectors, Imprudent risk takers, and Prodigals into benefits for society as a whole. Instead, there was massive bankruptcy , economic decline,and depression. Kennedy’s literary proof has been ignored, as has Smith’s extensive discussion of this problem in The Wealth of Nations
The reason for this may be that most modern economists have forgotten how the use of the English language can be applied to provide an effective economic analysis of an economic problem as demonstrated by Smith. A separate paper provides a purely mathematical treatment on this problem. It is available at SSRN. [Electronic copy available at:] 
That article translates Smith’s analysis of the impact of Projectors, Imprudent risk takers, and Prodigals on the macro economy into mathematics. 
Section 1.Introduction 
Adam Smith analyzed the impact in The Wealth of Nations(WN,1776) of a group of individuals he classified as Projectors, Imprudent risk takers, and Prodigals. Smith introduced the ”projectors “ on pages 114-115 of The Wealth of Nations (Modern Library(Cannan) Edition).He returned to them again on pp.279- 341.We will cover Smith’s neglected, but highly relevant analysis of the impact this particular group of individuals has on the economy as a whole.Section Three will cover Kennedy’s demonstration that no Invisible Hand could possibly be at work in any kind of situation where such a group is free to practice their own self interested actions. … 
,,, Section 3.Kennedy’s demonstration of the Impossibility that any such “Invisible Hand” Theorem can be ascribed to Smith 
Kennedy needs only one of the Adam Smith quotations from Section two above to make his point : 
“To restrain private people, it may be said, from receiving in payment the promissory notes of a banker for any sum, whether great or small, when they themselves are willing to receive them; or, to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty, which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respect a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as or the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty, exactly of the same kind with the regulations of the banking trade which are here proposed. .(Smith,1776,p. 308). 
Kennedy draws the following conclusions: 
A too liberal a lending policy, whether from fraud by borrowers(S & L-junk bonds scheme,Dot.Com scheme, Sub prime mortgage banked bonds scheme) or from the false beliefs of bankers,was ruinous of the general interest of society…”(Kennedy,2008,p.110) 15 
“The self- interests of these players worked directly against the best interests of everyone affected by their actions. His frankness about imprudent behavior shows awareness that private interests are not always conducive to the good of society. If this point were understood among modern economists, the consensus that Smith had a ‘theory of the invisible hand of the markets ’leading to harmony would be heard no more.”(Kennedy,2008,p.110). 
Section 4. Conclusions 
The claim that Adam Smith had an Invisible Hand Theorem that postulated that individual self interested,self serving decisions ,made at the microeconomic level, were transformed by market mechanisms into societal or social benefits for all at the macroeconomic level,is false .It is false because Smith’s sixty pages of discussions in the WN from pages 279-340,related to self interested,self serving decisions, made at the microeconomic level by projectors and prodigals ,shows that this kind of behavior DOES NOT lead to societal or social benefits for all at the macroeconomic level,but to depression and the destruction of the banks unless bailed out by tax payers. 
Kennedy is the only academic who has carefully sifted these pages of the WN.The only way that Kennedy’s literary proof,based directly on Smith’s own assessment of the Ayr bank’s collapse,as well as his great knowledge of other projectors ,such as the British East India Company’s ultimately failed projects in Africa,India, and the United States and John Law, is to, like West and Viner, try to sidestep the problem.
Naturally, I am obliged to Michael Emmett Brady for publishing his analyses of the modern misperceptions of Adam Smith’s reference to the ‘invisible hand’ metaphor that has acquired the unique status of a cult figure in modern economics since Paul Samuelson launched his erroneous theory on the world in 1948.
Readers can also sample Brady’s quality arguments on the invisible hand by following the link, and also read his thorough analyses of Keyne’s General Theory in a series of his papers ipublished in SSRN. [Electronic copy available at:]

I would add Michael Emmet Brady to the albeit slowly growing list of modern economists who are waking up to myths of the invisible hand within their subject as presented by the majority of their colleagues across the world.

Thursday, February 01, 2018


Allan Sleeman, Economics Department of Western Washington University, Bellingham, WA 98225, has written a draft paper that is very close to my own albeit somewhat muddled thinking on there being something wrong with traditional economic teachings on basic microeconomics, let alone Nobel Prize-winning maths constructs earning high incomes and prestige for their compilers. 
I used to deliver the S-D constructs to first-year students of economics long ago in the late1960s through for many years into the 1980s. 
I am not able to post  Alan Sleeman’s paper on Lost Legacy at the request of the author, but I recommend that teachers of economics contact Allan Sleeman to request a copy of it:
Yes, it is basic stuff but if there is something wrong with its ideas surely we should think about its wider implications?
I certainly have on and off in recent years, especially where the widespread use of mathematics is so prevalent, and worse, is taken so seriously by scholars and policy makers.

Perhaps I shall return to this subject in due course…

Monday, January 29, 2018


David Friedman’s comments on an old Lost Legacy Post (August 11, 2005):
Adam Smith:
"The expense of the institutions for education and religious instruction is likewise, no doubt, beneficial to the whole society, and may, therefore, without injustice, be defrayed by the general contribution of the whole society. This expense, however, might perhaps with equal propriety, and even with some advantage, be defrayed altogether by those who receive the immediate benefit of such education and instruction, or by the voluntary contribution of those who think they have occasion for either the one or the other."
“Or in other words, some public funding of schooling is not unjust but an entirely private system is also not unjust and might even be preferable.”
And this week, 2018) from David Friedman:
"Smith in Book V of “Wealth of Nations” favoured state investment in defence (the ‘first duty of government’); justice (without justice society would ‘crumble to atoms’); public works for projects beyond private finance (roads, canals, harbours and bridges); education of youth (a school in every village)" Except that Adam Smith did not "favour ... state investment in ... education of youth." He has a very long discussion of the arguments for and against government involvement in education, in the course of which he raises a number of possibilities, including a modest subsidy to local schools--one paying only a minority of their costs. By quoting from the arguments for government involvement one can make it look as though that was the position his supported. By quoting from the arguments against ("Those parts of education, it is to be observed, for the teaching of which there are no public institutions, are generally the best taught") one can create the reverse effect. But his final on There are Regulations and Regulations: some help, others hinder
Resurecting a debate about the education of 18th century youth that ignores context is more than a trifle disingenuous in the 21st Century.
At the time, most children (mainly the poor) in England did not go to school at all. Illiteracy was widespread. In contrast, in Scotland, most children did go to school following the reforms from the 16th-17th centuries that established ‘little schools’ in every village, mostly funded by local government and parents, enthusiastically supported by the (protestant) Church of Scotland. Also parents were encouraged (in Church sermons - then an active social media). - to send their boy children to school at least to read and write simple language until 8 years old. Adam Smith in the 18th century went to the village grammar school until he was 14 near to where he was brought up by his mother in Kirkcaldy. (The space where it was then situated is now small carpark).
But private education was largely unavailable except to the relatively well-off. That remains true over much of the world as it did until the 1880s in the UK. 

David Freidman takes a narrow focus. Has he ever been poor - I mean really poor? I have and I can report that even very modest wealth is much better. My route out of poverty was education, almost all of it provided by the UK state and my own inner drive. 

Sunday, January 28, 2018


Ursula Onions posts on “amaze UI’ that includes includes a copy of my paper HERE , “Adam Smith and the Invisible Hand; from Metaphor to Myth”, under the heading:
‘There is no invisible hand Adam Smith’
This is part of an increasing trend across BlogLand for mentions of my conference paper to be made and for which I am grateful, whether they are supportive or critical.

The metaphor of an ‘invisible hand’ is a misreading of Adam Smith bt moderm 20th century economists, particularly lead by Paul Samuelson in his popular textbook, Economics, McGraw-Hill (1948 in 19 editio and 5 millions sales to 2010).

Saturday, January 13, 2018


Alex Massie's and Mike Norman's reviews of the excellent long biographical essay by Dennis Rasmussen on the academic and friendly relationship between David Hume and Adam Smith : The Infidel and the Professor, Princeton University, 2017, continues to receive excellent reviews.
I urge readers to order their own copies and/or to influence  purchases by their departmental/university colleagues.


Gavin Kennedy — Lost Legacy’s Stance of the Invisible Hand Is Endorsed by Mike Norman HERE

Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

Wednesday, January 10, 2018


   An Authentic Account of Adam Smith by Gavin Kennedy
  Table of contents
  Introduction Pages 1-7 
  How Adam Smith Learned to Bargain Pages 9-34 
  Adam Smith on Rhetoric and Perspicuity Pages 35-55 
Smith’s Alleged Religiosity Pages 163-196


Jessie Norman, author ofEdmund Burke: The Visionary Who Invented Modern Politics new e-book: The First Economist HERE  
Somewhat bizarrely Norman’s ebook is not available in the UK (yet?).

Adam Smith (1723-1790) is one of the great philosophers of the modern age. Acclaimed as the "father of economics," he influenced heads of state from Napoleon to Ronald Reagan and thinkers as diverse as Karl Marx and Milton Friedman, and is regarded as the emblem of today's free market neoliberal capitalism. His book The Wealth of Nations and its ideas of free trade and "the invisible hand" have become the gospel of economists and businesspeople around the world.
But just who was Adam Smith-the father of economics, a prophet of modern capitalism or a market socialist who inspired Karl Marx? A plagiarist of French and Scottish Enlightenment thinkers, or a true original? A didactic moralist, or a value-free neoliberal in embryo? Or something rather different, and vastly more interesting?
In Adam Smith, Jesse Norman reveals that Smith was not the founder of economics, nor the progenitor of free market capitalism, nor an advocate of complete market deregulation. He did not think of himself as an economist, and he would have repudiated the self-interested ethos of the modern capital markets. Far from being the foundation of today's neoliberal orthodoxy, his thought offers a deep critique of that orthodoxy. He is in truth a profound analyst and critic of economic fragmentation and social decay.
Drawing on the full range of available sources-going far beyond The Theory of Moral Sentiments and Wealth of Nations-Norman shows that Smith's great project was nothing less than a "science of man." Smith deduced that human sociability is rooted not in reason but in the imagination: in the sympathy that allows us to identify and find common ground with others who may be utterly different from us.
Telling Smith's life and delving into Smith's thought, Norman disabuses readers of their false preconceptions, and argues that his actual ideas are of great relevance for us today. To Norman, Smith offers an ethical perspective on human affairs, a thoroughgoing critique of free markets and their governance, and a deep insight into the well-springs of human society and sociability. In short, Smith is not the cause of the Age of Inequality, but rather offers solution to it.”


Looks interesting. Makes a change from the dominant opinion of Adam Smith as the ‘founder of capitalism’ and the ‘theorist’ (sic) of the ‘invisible hand’, etc. 
I shall have to explore Norman’s ideas in greater detail before commenting further.

Friday, January 05, 2018


Door Jerome Crijins posts 3 Jnauary, 2018 on Linked In HERE
“Back in 1776, Adam Smith popularized the notion of an ‘invisible hand’ in the global economy. He was a liberalist avant-la-lettre­ and profoundly believed in the unintended social benefits stemming from a free market. This mechanism would naturally steer a country towards welfare maximization. In the age of Google and Amazon, an entirely different invisible hand seems at play.”
Adam Smith did not “popularise” the “notion of an invisible hand in the global economy in 1776”.
The words appeared ONCE only in his ‘Wealth of Nations’ published in London in 1776, and repeated in all five editions of his famous book up to 1789.
BUT! And it is a big ‘but’. 
Hardly anybody noticed Smith’s use of the now famous metaphor while he was alive, and nor for many years after he died until a few isolated mentions appeared in the 1870s. The absent non-mentions were evident even in the major volumes published by many of the leading political economists (Ricardo, Mill, etc.,) in the 19th century. 

Even after then, mentions of Adam Smith’s use of the now famous metaphor of ‘an invisible hand’ remained sparse, right through to the mid-20th century, when Paul Samuelson published his series of Econ 101 textbooks via McGraw-Hill from 1948 through to 2010, which included false claims about Adam Smith’s use of the now famous metaphor.