Ask Lemmy

Damn, that means Atlas Shrugged is out too.

I assume you’re talking about how Smith is used by neoclassical economists to justify made up stuff.

For example, the idea of the invisible hand as a way of portraying perfect competition.

Or his depiction of capitalism as a way of coordinating production without central authority: this is often used to legitimize inequality and environmental irresponsibility.

But if we want to truly understand Smith, I think we have to look beyond that.

Unfortunately, Smith has been made a caricature. Who made him into a caricature? Neoclassical economists in the 19th century and neoliberal or neoconservative figures in the 20th and 21st century. These other economists wanted to make capitalism sweeter-sounding. They wanted to make economics a tool for indoctrination.

For example, his invisible hand idea comes up ONCE in Wealth of Nations. Yet this image was co-opted by people who do pro-capitalism indoctrination. When made a caricature, the invisible hand is an excellent rhetorical device to portray how supposedly perfect capitalism is.

Another example is how Adam Smith actually advocates for industrial policies to build a nation’s industrial capacity. But these parts of Smith’s work are conveniently ignored by those who want elites to extract and hoard wealth (instead of investing in a whole nation).

More broadly, Smith is the opposite of neoclassical economists in many ways. In my view, the most striking difference between both of them is curiosity. Smith looked at the world and tried to understand its mechanisms. On the other hand, neoclassical economists close their eyes and make up mechanisms.

An example of this is the concept of perfect competition. This concept is loved by capitalist indoctrinators. So much so that it is the fairy tale that is taught to economist toddlers. It’s a weird sort of utopia for neoclassical economists. There’s no friction, no time, no complexity.

You might think Smith is responsible for this absurd fairy tale, but I’d say he is decidedly not. For example, he discusses price dynamics not in terms of perfect equilibrium, but in terms of turbulent equalization. Another example is that he discusses competition not as a silly dance between capitalists, but as a battle to reduce costs (at all costs).

This is not to say that Smith nailed everything. For example, he missed something about the nature of profits. He did notice that profits are directly related to production costs, including labor. But he did not recognize that the profit-wage ratio was historically determined in the way that Marx did.

How could we interpret all of this?

The way I see it, Smith laid the groundwork for future economists. Smith was the shoulders that future economists —proper economists— stood on.

Unfortunately, he has also been co-opted by capitalist indoctrinators. But if these indoctrinators actually read Smith and the economists that he directly inspired, I’m sure economics would be much more of a science and less of a religion.