Monday, March 08, 2010

'Joe Stiglitz Slaps the Invisible Hand'

Tyler Durden quote Joseph Stiglitz in City Index (‘The next way to trade’)

“Joe Stiglitz Slaps The Invisible Hand”

"The theories that said that markets work perfectly were all based on very simplistic models of perfect competition and perfect information. My own work we show that the reason that when there is asymmetric information, the reason that the invisible hand often seemed invisible, was that it wasn't there. And I don't think today anybody would claim that the pursuit of self-interest by bankers, which is sometimes called greed [don't tell the screenplay writer for Wall Street] has led to the wellbeing of all of society. And yet this was the central notion taught in almost every graduate school in the country."

At last the myth of the ‘invisible hand’ is under challenge from a much wider range of sources than Lost Legacy, which since 2005 has been ploughing a lonely furrow.

The consequences of the invention of the modern role for the metaphor on ‘an invisible hand’ were not trivial.

As thousands of graduate economists acted on the belief of the
beneficial role of ‘an invisible hand’, no mater what the motives of the individuals – from a false sense of altruism through to pride in their greed – modern economists taught that it was all for the good of the community.

Pollution, protectionism, graft, fraud or exploitation of children are not necessary processes for a commercial society to thrive. It does matter when wrong ideas are invented and falsely justified by linking them to the name of Adam Smith who taught quite the opposite.

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Blogger Tom Hickey said...

Evolutionary biologist David Sloan Wilson gets it, too.

Economics and Evolution as Different Paradigms V: The Invisible Hand Meets Multilevel Selection

3:27 p.m.  
Blogger Gavin Kennedy said...


I had noted Wilson's article for comment earlier in the day - my juggling act required me to leave it until later.

It's a good piece.


8:55 a.m.  

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