July 09, 2015
What Adam Smith Thought…

… the “Invisible Hand” actually did. From Adam Gopnik in The New Yorker of October 19, 2010:

Smith believes, in a way that few neoclassical economists seem to accept, that there is a “natural” price for goods — for goods — a price that takes in the cost of making them and a profits for the makers — and a “market” price, and that these two are not always the same. The market is susceptible to pressures from the masters and dealers to keep prices unnaturally high. Smith does not think that “government is the problem”; he thinks that the producers’ compact against the consumers is the problem, and that the producers, because they are concentrated and rich, are usually able to make the government take their side. It is the proper function of the state to prevent the dealers from ganging up on the customers. “Consumption is the sole end and purpose of all production, and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.” For Smith, the market moves towards monopoly; it is the job of the philosopher to define, and of the sovereign state to restore, fair play.

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Posted by Jerome Doolittle at July 09, 2015 07:57 PM
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