ADAM SMITH AND THE ROLE OF THE METAPHOR OF AN INVISIBLE HAND

Daniel Klein and Brandon Lucas's ‘In a Word or Two, Placed in the Middle: The Invisible Hand in Smith's Tomes’, following a vague hint by Peter Minowitz (2004) , offers original physical evidence that Smith ‘deliberately placed the phrase “led by an invisible hand”– at the physical centre of both his masterworks’. Further, it suggests that the invisible‐hand paragraphs are a response to Rousseau (1755 ); and that in ‘numerous and rich ways’, centrality holds ‘special and positive significance in Smith's thought’. This paper acknowledges the physical centrality of the invisible‐hand metaphor, but questions whether centrality alone gives weight to wider claims that the ‘invisible hand’ was Smith's ‘central idea’. It draws upon Smith's Rhetoric Lectures (1763), and argues that the invisible‐hand paragraphs in The Theory of Moral Sentiments and Wealth of Nations identify the actual objects of the invisible‐hand metaphor. This paper insists that Adam Smith is the most reliable source for revealing what he meant. In contrast, most modern attributions of special meaning to Adam Smith's use of the metaphor ignore Smith's teaching on the use of metaphors and, instead, make numerous, and often mutually exclusive, claims that Smith had a ‘doctrine’ of ‘an invisible‐hand’.     

Adam Smith's moral foundations of self-interest and ethical social order

This article draws on textual evidence from The Theory of Moral Sentiments and The Wealth of Nations to address mistaken interpretations of Adam Smith's fundamental concept of self-interest as greed that has been said to have had a corrosive influence on markets, commercial behaviour, and widening inequality. To the contrary, Smith's complex set of human motivations, including self-interest, his economic system that is based on free markets, and institutional frameworks governing productive property rights and the rule of law are argued to increase aggregate wealth, improve the position of those least well off, and maintain ethical social order.     

Smithian National Product and the Wealth of African Nations

Abstract . Given the contemporary interest in growth, conventional measures of economic growth (changes in real GDP or real GDP per capita) may be less preferable than a measure that is more plutological by design. The plutological measure presented in this paper is that of Adam Smith (1776 ). While Smith's work pre‐dated formal national income accounting, there was a macroeconomic accounting scheme implicit in his theorizing on economic growth. This study articulates Adam Smith's concept of national product (referred to as Smithian national product, or SNP). It uses current output data to compute SNP for a set of six African countries, and examines the growth experience of these countries when using SNP as opposed to the more conventional GDP measure.     

Classification performance of mathematical programming techniques in discriminant analysis: Results for small and medium sample sizes

The performance on small and medium-size samples of several techniques to solve the classification problem in discriminant analysis is investigated. The techniques considered are two widely used parametric statistical techniques (Fisher's linear discriminant function and Smith's quadratic function), and a class of recently proposed nonparametric estimation techniques based on mathematical programming (linear and mixed-integer programming). A simulation study is performed, analyzing the relative performance of the above techniques in the two-group case, for various small sample sizes, moderate group overlap and across six different data conditions. Training samples as well as validation samples are used to assess the classificatory performance of the techniques. The degree of group overlap and sample sizes selected for analysis in this paper are of interest in practice because they closely reflect conditions of many real data sets. The results of the experiment show that Smith's nonlinear quadratic function tends to be superior on the training samples and validation samples when the variances–covariances across groups are heterogeneous, while the mixed-integer technique performs best on the training samples when the variances–covariances are equal, and on validation samples with equal variances and discrete uniform independent variables. The mixed-integer technique and the quadratic discriminant function are also found to be more sensitive than the other techniques to the sample size, giving disproportionally inaccurate results on small samples.     

The Vanity of the Economist: A Comment on Peart and Levy's The “Vanity of the Philosopher”*

Abstract . In the Vanity of the Philosopher, Sandra Peart and David Levy reconsider “postclassical” economics from the vantage point of Adam Smith's “analytical” egalitarianism. Analytical egalitarianism is assumed, not proved; and Peart and Levy's criticisms of many 19^th‐ and early 20^th‐century economists, as well as eugenics in general, depend on equivocating between analytical and substantive egalitarianism. They fail to provide a non–question‐begging critique of eugenics.     

The evolution of the Swedish market model

Sweden historically pioneered many aspects of a modern market economy, hosting the first known share company, the first European credit notes, and the first central bank. Anders Chydenius's booklet Den nationella vinsten (The National Gain) was printed in 1765, 11 years before Adam Smith's The Wealth of Nations. Sweden was early in extending to women the rights to pursue professions and own businesses. Today, Sweden and its Nordic neighbours evince an unusual combination of high taxes and some of the freest economies in the world. Another characteristic feature is long-standing trust, which facilitates investment and cooperation. It also allows for decentralised decision-making, a characteristic feature of Nordic business management. Sweden's unusual high-trust culture significantly affects economic activity.     

Multiple motives behind single acts of co-operation

To understand co-operation in social dilemmas, we need to allow for individual variation along several motives and beliefs instead of declaring that co-operativeness is merely self-interested or is merely a consequence of one's culture or the situation. This paper describes three beliefs and eight motives for co-operation or non-co-operation based on research on social dilemmas from a number of disciplines. It also proposes a framework that describes how beliefs and various motives interact with a given situation leading to a specific behaviour.     

Adam Smith's and Douglass North's Multidisciplinary Approach to Economic Development

This article aims to point out Adam Smith's and Douglass North's multidisciplinary approach to economic development and history. Based on a philosophical link of methodological issues, Smith and North shared a conceptual framework and explanatory principles in common as well as similar historical illustrations. In terms of the use of comprehensive and integrated models of society, politics, and economy, they presented that economic development relies on how far congenial both institutional environments and sociocultural values of justice, liberty, security, and equality are to economic agents, allowing the interplay between economic performance and polity/culture. Meanwhile, these suggest a bridging role between old and new institutionalism, and, more importantly, a revival of Smithian moral philosophical tradition in the history of economics.     

Taxation: The Lost History

Regular, periodic taxation is a function of modern government, a practice that arose only because the rent of land and natural resources was transformed from the traditional source of public revenue in the Middle Ages to private property, starting in the 17th century. In the earlier era, taxes (special exactions on ordinary income and daily necessities) were imposed only under unusual circumstances, usually to fight wars. The French Physiocrats and their student, Adam Smith, proposed that the best form of modern taxation would be based on the same principle as the medieval system—a fee derived entirely from surpluses, not imposed as a burden on production. This was actually what Adam Smith meant by “ability to pay.” Smith's sophisticated understanding of economic rent was, however, simplified and distorted by numerous economists throughout the 19th century, who buried the concept under layers of obfuscation. In particular, the substitution of “Paretian rent” for “Ricardian rent” committed the fallacy of composition by shifting rent from a social concept to a private, unit‐level concept, which caused social surplus to simply “disappear.” Bringing this “lost history” to light permits us to re‐evaluate how modern societies might benefit from Smith's physiocratic concept of taxation. This work not only traces debates about rent—for example, whether rent arises from risk‐taking, or whether a tax on rent raises commodity prices—but also discusses the practical benefits of taxing it today.     

Co-operation and conflict in industrial relations: what are the implications for employees and trade unions?

This article explores the effects on employees of co-operation and conflict the workplace, outlining six workplace types. A survey of union representatives UK steel industry reveals evidence of co-operative industrial relations linked to superior terms and conditions, employee involvement and health and safety outcomes. However, it fails to find evidence that co-operative industrial relations are associated a broader HRM package of workplace restructuring, high performance work teams security provisions. Nor is any association revealed between co-operation and a greater role for trade unions. These findings suggest workplace co-operation in this industry remains part of a traditional gainsharing package and an 'alliance of insiders' than an HRM partnership or union incorporation. This raises broader questions the ability of co-operation to deliver important aspects of organizational competitive advantage.     

Bradford Smith: An Econometrician Decades Ahead of His Time*

This article attempts to rehabilitate Bradford Smith, who in 1926 published a short article in the Journal of the American Statistical Association in which he considered the implications of detrending time series by either deviations‐from‐trend or first‐differencing prior to regression. His discussion covers such topics as the permanent‐transitory innovation distinction inherent in difference and trend stationary processes, common factor restrictions and general‐to‐specific modelling. These have all become mainstays of modern time‐series econometrics, yet there does not appear to be even one reference to Smith's paper in all the years since its publication.     

THE RISE AND DECLINE OF ECONOMIC POLICY AS AN AUTONOMOUS DISCIPLINE: A CRITICAL SURVEY

After Adam Smith's statement of market virtues, the process of gestation of economic policy as a rational set of rules for public agenda has been rather slow. Until not so long ago, economic policy as a discipline was often confined to prescribing practical rules intended to explain technical procedures of government intervention. Economic policy– as a coherent and to some extent autonomous discipline–only emerged in the late 1950s in Scandinavia, the Netherlands and Italy, when solid foundations indicating not only microeconomic but also macroeconomic market failures and a theory about the conditions for policy effectiveness and design were consistently developed. This paper intends to explain the reasons for the emergence of the discipline, the circumstances that favoured its diffusion, the reasons for its apparent setback and some factors that could facilitate its diffusion in the next years     

Interview with Professor Adrian FM Smith

Adrian Smith joined The Alan Turing Institute as Institute Director and Chief Executive in September 2018. In May 2020, he was confirmed as President Elect of the Royal Society. He is also a member of the government's AI Council, which helps boost AI growth in the UK and promote its adoption and ethical use in businesses and organisations across the country. Professor Smith's previous role was Vice-Chancellor of the University of London where he was in post from 2012. He is a past President of the Royal Statistical Society and was elected a Fellow of the Royal Society in 2001 in recognition of his contribution to statistics. In 2003-04 Professor Smith undertook an inquiry into Post-14 Mathematics Education for the UK Secretary of State for Education and Skills and in 2017, on behalf of Her Majesty's Treasury and the Department for Education, published a 16-18 Maths Review. In 2006 he completed a report for the UK Home Secretary on the issue of public trust in Crime Statistics. He received a knighthood in the 2011 New Year Honours list. The following conversation took place at the Alan Turing Institute in London, on July 19 2019.     

Complementarity or competition: the development of human resources in a South-East Asian Growth Triangle: Indonesia,Malaysia and Singapore

Globalization has led to the emergence and strengthening of regional and subregional economic co-operation as a means of promoting economic growth. In East Asia, a new kind of sub-regional economic zone known as a 'Growth Triangle' is gaining increasing popularity. This article explains the concept of the Growth Triangle and traces its proliferation in East Asia. It examines the conditions for the success of Growth Triangles and the policies pursued by the various participating governments. It then argues that effective human resource development (HRD) policies are essential for the participating governments to enjoy the benefits of the Growth Triangles. Arguably, the HRD policies within the Growth Triangle should be complementary rather than competitive. But using the 'Indonesia-Malaysia-Singapore' Growth Triangle (IMS-GT) as an example, this research asserts that in reality co-operation and complementarity in the HRD arena will give way to competition as the Triangle develops.     

Types of innovation and inter-firm co-operation

The paper presents the results of an empirical study that aims to investigate the impact of interfirm co-operation over innovation on four different types of innovation: product, process, incremental and radical innovation. Drawing on the innovative milieu literature, the impact on the above four types of innovation was tested for both external and internal factors of innovation such as inter-firm co-operation over innovation, production networking, as well as R&D investment and R&D personnel. Four probit models were run by using a unique data set compiled as part of the Regional Innovation Strategy for the West Midlands (UK) Project. The main findings of the paper seem to provide substantial evidence that, for any of the four types of innovation considered, firms' capacity to innovate could greatly improve if they co-operated with other firms over innovation in addition to or instead of investing in R&D. Innovation policy should not overlook, therefore, the systemic component of innovation and ought to attempt to initiate and support inter-firm co-operation. This would mean a renewed and more focused analysis of firms' clusters as part of a multi-faceted approach to innovation policy.     

Social Circumstances and Rationality:

Abstract Upon the uniformity in individuals’ decision‐making mechanism rests a great deal of the legitimacy of natural liberty. As we are all equally sovereign (cognitive‐wise), we only strike deals that inevitably make us better off. We all gain from trade and thus, as everyone is better off, so must be the whole of society. But could it be that people are rational yet not equally sovereign? In this paper, we examine Smith's interpretation of rationality, and we find that it is fundamentally a social concept. As such, the manifestation of rationality in individual behavior depends on how sophisticated is individuals’ access to public opinion. Consequently, individuals who are equally self‐interested may face very different sets of options, which are determined by their social circumstances. This difference may suggest that, although all agents may be motivated by the same objective, they cannot be considered as equally sovereign.     

Henry George's Theory of State's Agenda: The Origins of His Ideas on Economic Policy in Adam Smith's Moral Theory

Abstract . The tension between Henry George's reformism and his laissezfaire liberalism was resolved through a system of natural liberty George derived from the relation between Adam Smith's ethics and economics. Crucial for George's nonutilitarian philosophy of government was the interdependence between the moral sense (sympathy) and the prevailing socioeconomic order. In the appropriate institutional environment, the role of the government was diminished since the pervasive moral sense insured justice by monitoring the individual's pursuit of economic self-interest. In contrast, a defective socio economic order required government intervention. For example, land monopoly and the maldistribution of income undermined the role of sympathy, promoted excessive self interest and the breakdown of the system of natural liberty. Government action through the single tax eliminated the “fear of want,” restored an operative moral sense and guaranteed justice in society. Under these conditions, government can provide additional services for a growing society without being susceptible to “corrupt and tyrannous” behavior.     

Asking and answering yes/no-questions in survey interviews: a conversational approach

The authors discuss the process of asking and answering yes/no-questions in personal survey interviews from a conversational perspective. They examine the process with regard to yes/no-questions as given in the questionnaire and with regard to the yes/no-questions that interviewers may pose in the subsequent stages of a sequence, when they are probing on the respondent's initial answer or are trying to solve other problems. Hypotheses are derived from the co-operation principle and the politeness principle of conversation, and then empirically evaluated for survey interview settings. In the relatively informal stages of the answering process (subsequences) the conversations appear to go quite well according to the conversation rules, but in the beginning formal stage to a much lesser degree. In particular it has been observed that interviewers strongly prefer to ask one-sided positive yes/no-questions in the subsequences, and, secondly, that respondents usually give agreeing answers to these yes/no-questions. It is argued that this “normal” conversation strategy may seriously affect the validity of the information obtained, and, more generally, that the practical demands from the conversation rules on the interviewer's behaviour set limits on the researcher's abstract demands on that behaviour.

     

Multifaceted effects of host country language proficiency in expatriate cross-cultural adjustments: a qualitative study in China

While expatriates often face language barriers in host countries, relatively little research has focused on the influence of host country language proficiency on cross-cultural adjustment. We drew on social identity theory and conducted an interview-based study with 70 expatriates and their host country national (HCN) colleagues to provide a contextual account of host country language proficiency's effects on work and non-work-related adjustment in China. Our findings suggest that expatriate host country language proficiency has multifaceted effects on expatriates' HCN interaction, social support, and network-related work and non-work adjustment.     

Political events and the foreign direct investment decision: An empirical examination

This study investigates the impact of political events on US manufacturing direct investment in Latin America. The relationship between foreign direct investment and political events (and economic factors) is examined through regression analysis of pooled time-series (21 years) and cross-sectional (8 countries) data. In contrast to previous studies using an econometric approach, this study finds that political events do affect direct investment decisions. Specifically, both intra-nation and inter-nation conflict and co-operation have an impact on US direct investment decisions concerning Latin American countries. In addition, the host country's market size and market growth affect these decisions by US multinational firms.