That Invisible Hand can bitch-slap you silly
A new book, Adam’s Fallacy: A guide to economic theology, explores the untested and counterfactual idea that was Adam Smith’s fallacy. From the NY Times review:
It is the idea that the economic sphere of life constitutes a separate realm “in which the pursuit of self-interest is guided by objective laws to a socially beneficent outcome,” Professor Foley wrote, a realm unlike all the rest of social life, “in which the pursuit of self-interest is morally problematic and has to be weighed against other ends.”
“This separation of an economic sphere,” he wrote, “with its presumed specific principles of organization, from the much messier, less determinate and morally more problematic issues of politics, social conflict and values, is the foundation of political economy and economics as an intellectual discipline.” …
He does not use the word “theology” with disdain, as many writers do when they want to disparage something as doctrinaire or irrational, although he has clearly chosen the word to provoke those who assume that economics is either strictly logical or empirical. On the other hand, he doesn’t use it to signal anything about God, either.
What he means, he wrote, is that “at its most abstract and interesting level, economics is a speculative philosophical discourse, not a deductive or inductive science.”
Historically, economics has not only shed light on how a capitalist market system works, it has also suggested what attitudes people should take about those workings and about the moral conflicts accompanying them.
“These are discussions, above all, of faith and belief, not of fact, and hence theological,” Professor Foley wrote.
“Economics functions in a theological role in our society,” he added in an interview in which he paraphrased Milton, “to justify the ways of the market to men.” Economists, moreover, are “becoming priestly figures, with arcane knowledge” and special powers, he said.
Economic laws are cast as universal and invariable. They are even presented as natural laws akin to those of mathematical physics or evolutionary biology.
From the bedrock belief that the pursuit of private self-interest will ultimately benefit the whole society stems a willingness to abide harsh economic measures and consequences, ranging from large-scale unemployment to the destruction of traditional cultures.
The danger of these “illusory comforts of Adam’s Fallacy,” Professor Foley writes, is that they obscure hard truths. Contemporary capitalism, in his view, is a successful, resilient and adaptive system for creating material wealth. But it is not a stable, self-regulating one. Left to its own devices, for example, it will not “solve the problems of poverty and inequality.”
By questioning an economic sphere of life ruled by its own laws and expertise, Professor Foley is implicitly proposing limits to the secularization that is an underlying characteristic of modernity. Secularization has meant that in a cultural transformation, major areas of human activity set themselves up as quasi-autonomous, with their own standards, authorities and guiding principles.
Economics, like science and politics, and then law, the arts and other fields, declared independence from rule by religion, custom, intuition or “speculative philosophical discourse,” he wrote.
The new independence or autonomy has never been recognized as total, however, at least not in matters directly touching upon human life. The claims of each sector’s ruling experts that each operates by its own laws and standards have always been challenged by competing claims from pundits, parsons, popes, politicians and secular moralists. Theology, in the broad sense Professor Foley gives it, is inescapable.
The next question, of course, is how to relate what Professor Foley recognizes as the rich resource of economic theory — as value-laden as it may unavoidably be — to the other sources of morality, whether religious or secular.
Some people argue that economics should employ its own allegedly value-free techniques to produce a menu of options, each with specified costs and benefits, that it submits to the rest of society for moral judgment.
Others argue that the relationship is invariably more dialectical. Other sources of morality have something to say about the technical concepts and methods of economics, and economic theory in turn may shed light on those other sources of morality.
These matters fall outside the reach of “Adam’s Fallacy.” Professor Foley has a more modest aim.
Economists, he wrote, often speak of the need to teach people to “think like economists.” But “thinking like an economist comes hard to many people,” he added, “and I personally am grateful for that fact.”
He wrote the book, he said, “to give people more confidence in their own moral judgments” about economic issues.
Very much on the other hand, read the lenthy (two-star) review of the book at Amazon. (scroll down at the link) OTTTH (On the third hand), as pointed out in the comments to the Amazon review, Foley is discussing how the ideas from Wealth of Nations specifically (not in Smith’s entire oeuvre) have been used in constructing the modern edifice of economics. In other words, the topic is really modern economic thought/theology, not Adam Smith. As one commenter says:
It seems that Mr Foley is arguing that economists have gotten Smith’s ideas on morality wrong in the same way that Mr. Stone [author of the Amazon review] has missed the point of Foley’s book. Foley himself says that he is not arguing against the free market as much as the modern fallacy that market actions can be divorced from ethical considerations and result in positive outcomes. A closer reading of both Adam Smith’s work and that of Duncan Foley would support the notion that this discussion is long overdue.