Tag: Smith

Excerpt: Joseph Vogl, The Specter of Capital

Although Adam Smith was responsible for coining one of the most popular slogans for describing how a market economy operates, its semantics are determined by two further aspects. On the one hand, if we follow the tangled history of the “invisible hand” metaphor, we can see how through this metaphor theological and cosmological questions were deposited in the field of social ontology. A century before Adam Smith, for instance, the metaphor referred to something secretly at work in relations between natural things, a cosmological phenomenon that, like the mechanism of a clock, hides behind the clearly visible hands and dial: “For Nature works by an Invisible Hand in all things.” […] The manus gubernatoris of Scholastic philosophy, the guiding hand of God invisibly directing all Creation, returns as an influential theological metaphor for the Providence manifest in the natural order, the oeconomia naturae. And before the “invisible hand” appeared in Wealth of Nations as a topos for the law-governed activity that turns self-interest and the striving for gain to the general good, this expression occurred in Smith himself in an entirely different yet equally significant context.

In his History of Astronomy, probably written around 1758, not only did Smith attempt an apologia for the Newtonian world system, with its laws of gravity and inertia; he also casually remarked on the inability of polytheistic religions to trace irregular events in the natural world — events in which they saw the miraculous power of the ancient gods at work — back to regularly occurring patterns. While it is only natural that “fire burns and water refreshes,” or that “heavy bodies descend and lighter substances fly upward,” extraordinary phenomena such as lightning, thunder, or storms call for explanation — and for this the ancients would in the end simply turn to Jupiter’s “invisible hand.” […] Here too the invisible hand is treated as a cosmological fact; and just as an invisible hand will later bring the unpredictable inclinations of self-seeking subjects to order, so too here an invisible hand shows how irregular natural events manifest the workings of divinely ordained laws. As a result of such supernatural intervention, earthly matters are brought into conformity with Providence, irregularities are translated into order, and diffuse forces and movements [p.26] are made to bear witness to an invisible power linking them together. All this activity by invisible hands indicates that hidden manipulations — in the most literal sense — intervene both in the natural course of events and in the dynamics of social interaction.

On the other hand, it should not be forgotten that Smith presented another version of his concept of the “invisible hand” in the first volume of his 1759 essay on moral philosophy, The Theory of Moral Sentiments. And here homo economicus is defined by more than his failure to see the whole situation, his lack of a comprehensive overview. Economic beings can only function to the extent that they are always missing something even more fundamental. […] Despite or precisely because of their “natural selfishness and rapacity,” the rich share their wealth with the poor. In Smith’s words, this means that […] “they are led by an invisible hand to make nearly the same distributions of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants; and thus without intending, without knowing it, advance the interest of the society and afford the means for the multiplication of the species.”

Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), pp.25-26.

Advertisements

Excerpt: Joseph Vogl, The Specter of Capital

There may be little agreement about the actual status to be accorded this equilibrium in the nascent discipline of political economy (for example, about whether it should be understood as an optimum, a principle, or a reality), and Smith himself may never have set out exactly what he understood by equilibrium; nonetheless, equilibrium theory became a crucial element of economic knowledge and was passed on through Ricardo, Walras, Jevons, and Pareto to the doctrines of the twentieth century. […] Economic theory was born as a theory of equilibrium.

Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), p. 31.

Scratchpad: Labor & Value

Thomas Hobbes, Leviathan (1651):

[…] As for the Plenty of Matter, it is a thing Limited by Nature, to those commodities, which from (the two breasts of our common Mother) Land, and Sea, God usually either freely giveth, or for labour selleth to mankind […]

William Petty, Treatise of Taxes and Contribution (1662):

[…] All things ought to be valued by two natural Denominations, which is Land and Labour; that is, we ought to say, a Ship or garment is worth such a measure of Land, with such another measure of Labour; foras-much as both Ships and Garments were the creatures of Lands and mens Labours there upon; This being true, we should be glad to finde out a natural Par between Land and Labour, so as we might express the value by either of them alone as well or better then by both, and as we reduce pence into pounds […]

William Petty, Treatise of Taxes and Contribution (1662):

[…] Labour is the Father and active principle of Wealth, as Lands are the Mother […]

William Petty, Verbum Sapienti (1665):

[…] It seems reasonable, that what we call the Wealth, Stock, or Provision of the Nation, being the effect of the former or past labour, should not be conceived to differ from efficiencies in being, but should be rated alike, and contribute alike to the common necessities […]

William Petty, Political Anatomy of Ireland (1672):

[…] this brings me to the most important Consideration in Political Oeconomies, viz. how to make a Par and Equation between Lands and Labour, so as to express the Value of any thing by either || alone […]

William Petty, Political Anatomy of Ireland (1672):

[…] the days food an an adult Man, at a Medium, and not the days labour, is the common measure of Value, and seems to be as regular and constant as the value of fine Silver […]

William Petty, Political Anatomy of Ireland (1672):

[…] I valued an Irish Cabbin at the number of days food, which the Maker spent in building of it […]

William Petty, Political Anatomy of Ireland (1672):

[…] By the same way we must make a Par and Equation between Art and Simple Labour […]

John Locke, Two Treatises of Government (1690):

[…] I think it will be but a very modest Computation to say, that of the Products of the Earth useful to the Life of Man 9/10 are the effects of Labour: nay, if we will rightly estimate things as they come to our use, and cast up the several Expences about them, what in them is purely owing to Nature, and what to labour, we shall find, that in most of them 99/100 are wholly to be put on the account of labour. […]

Richard Cantillon, Essai sur la nature du commerce en général  (1755):

[…] The Land is the Source or Matter from whence all Wealth is produced. The Labour of man is the Form which produces it: and Wealth in itself is nothing but the Maintenance, Conveniencies, and Superfluities of Life. […]

Adam Smith, The Wealth of Nations (1776):

[…] That money or those goods indeed save us this toil. They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity. […]

Adam Smith, The Wealth of Nations (1776):

[…] a commodity which is itself continually varying in its own value, can never be an accurate measure of the value of other commodities. Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer […]

Adam Smith, The Wealth of Nations (1776):

[…] Wages, profit, and rent, are the three original sources of all revenue, as well as of all exchangeable value […]

Adam Smith, The Wealth of Nations (1776):

[…] The revenue of an individual may be spent, either in things which are consumed immediately, and in which one day’s expence can neither alleviate nor support that of another; or it may be spent on things more durable, which can therefore be accumulated, and in which every day’s expence may, as he chuses, either alleviate or support and heighten the effect of that of the following day […]

Karl Marx, Capital:

[…] The value of labour-power is determined, as in the case of every other commodity, by the labour-time necessary for the production, and consequently also the reproduction, of this special article. So far as it has value, it represents no more than a definite quantity of the average labour of society incorporated in it […]

Karl Marx, Capital:

[…] In contradistinction therefore to the case of other commodities, there enters into the determination of the value of labour-power a historical and moral element. Nevertheless, in a given country, at a given period, the average quantity of the means of subsistence necessary for the labourer is practically known […]

Karl Marx, Capital:

[…] In order to be able to extract value from the consumption of a commodity, our friend, Moneybags, must he so lucky as to find, within the sphere of circulation, in the market, a commodity, whose use-value possesses the peculiar property of being a source of value, whose actual consumption, The labour theory of value 170 therefore, is itself an embodiment of labour, and, consequently, a creation of value. The possessor of money does find on the market such a special commodity in capacity for labour or labour-power […]