W. Grampp's 'What Did Smith Mean by the Invisible Hand?' Overlooks Smith's Analysis of Uncertainty-Ambiguity Aversion Based on His Definition of Uncertainty in the Wealth of Nations

Allegorical characters in Hawthorne's "The Birth-mark" function according to the logic of the market. Selves in this story are like territories that must continually be possessed and repossessed, and the birthmark becomes the site upon which characters fight one another for ownership, self-ownership, and identity. Aylmer views the circulations in Georgiana's bodily economy as signifying an independent self he wishes to control. The marked defines both the relations that characters have to each other and Hawthorne's own relation to his characters, especially Aylmer. Aylmer's desire to erase the birthmark figures his allegiance to the principles of the market economy, principles articulated in the famous invisible hand passage from Adam Smith's The Wealth of Nations. In contrast, the visibility of the birthmark functions as a sign of Hawthorne's literary labor and authorial identity. Hawthorne thus finds himself in the curious position of having created a character whose raison d'etre seems to be the erasure of Hawthorne's own identity. His competitive relation with Aylmer, however, is perfectly logical given that the competition of the market governs all relations in the story. Furthermore, the erasure of the birthmark needs to be read in the context of antebellum American aesthetic ideology. The literary taste that demanded the erasure of the signs of labor grew out of cultural anxieties about new forms of mechanized and specialized labor, and its perceived attack on individual agency. An aesthetic of invisible labor functioned to keep literature separate from the problematics of industrial labor and the developing market economy, and yet, in demanding that authorial agency remain absent, this aesthetic reproduced one of the most troublesome consequences of mechanized labor. Allegory in "The Birth-mark" is thus read as a site upon which authors and readers inscribe the changing relations between labor and identity.

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Adam Smith, The Wealth of Nations, and the “Invisible Hand”: A Metaphor For Ambiguity-Uncertainty Aversion by Decision Makers

Scholedge International Journal of Management & Development ISSN 2394-3378 ◽

10.19085/journal.sijmd030501 ◽

2016 ◽

Vol 3 (5) ◽

pp. 97 ◽

Cited By ~ 2

Author(s):

Michael Emmett Brady

Keyword(s):

Decision Theory ◽

Adam Smith ◽

Complete Information ◽

Invisible Hand ◽

Uncertainty Aversion ◽

Probability Calculus ◽

Probability Estimates ◽

Wealth Of Nations ◽

The Invisible

Smith’s use of the “Invisible Hand”, as pointed out by Gavin Kennedy, is a metaphor provided for the great percentage of readers of the Wealth of Nations whom Smith realized would not be able to grasp the nature of his argument ,which was about the ambiguity-uncertainty aversion of the majority of 18th century English business men. Gavin Kennedy has pointed out that the term,” Invisible Hand”, had nothing to do with Laissez Faire, free markets ,free trade, Natural liberty, etc. ,for Adam Smith. Smith’s argument is an application of his very advanced decision theory that regarded the standard mathematical laws of the probability calculus as a special case that had only limited applicability in the real world. In general, applications of the mathematical laws of the probability calculus required a complete information set that was rarely satisfied. Smith realized that probability ,nevertheless ,had to be taken into account. Smith advocated an interval valued approach to the use of probability under conditions of uncertainty/ambiguity. Smith made great use of the concept of uncertainty in the Wealth of Nations. Uncertainty for Smith dealt with the quality of the information base upon which the probabilities were being calculated. Smith generally defined risk in the Wealth of Nations as an inexact and/or indeterminate estimate not based on the mathematical laws of the probability calculus. Risk could be calculated exactly only in conditions where there was a very high quality of evidence over which there were no conflicts and/or disputes of assessment regarding the relevancy of the data. Smith’s major conclusion in Part IV of the Wealth of Nations is that businessmen are ambiguity and/or uncertainty averse. The quality of the information ,data ,or knowledge upon which the probabilities, which would be interval estimates, is a second factor that is completely independent of the probability estimates themselves. Only in the limiting case ,where the evidence is great , stable, and invariant over time, as in the case of deciding to become a shoemaker, would the probability estimates be point estimates. Smith completely rejects the ethics and decision theory of Jeremy Bentham, as well as all approaches built on it, such as the Subjectivist ( SEU-Subjective Expected Utility) approaches of Frank Ramsey, Bruno de Finetti, L J Savage , Milton Friedman .and modern Bayesians, such as Patrick Suppes, because these approaches require the decision maker to be able to specify precise, exact numerical probabilities. The specification of such exact probabilities means that there is no uncertainty about the future.

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Invisible Hand Arguments: Milton Friedman and Adam Smith

Journal of Scottish Philosophy ◽

10.3366/jsp.2007.5.2.103 ◽

2007 ◽

Vol 5 (2) ◽

pp. 103-117 ◽

Cited By ~ 3

Author(s):

Alistair M. Macleod

Keyword(s):

Public Interest ◽

Adam Smith ◽

Invisible Hand ◽

Moral Sentiments ◽

The Public ◽

Economic Motivation ◽

Milton Friedman ◽

Common Structure ◽

Wealth Of Nations ◽

The Invisible

The version of the invisible hand argument in Adam Smith's Theory of Moral Sentiments differs in important respects from the version in The Wealth of Nations. Both are different, in turn, from the version invoked by Milton Friedman in Free to Choose. However, all three have a common structure. Attention to this structure can help sharpen our sense of their essential thrust by highlighting the questions (about the nature of economic motivation, the structure of markets, and conceptions of the public interest) to which answers of certain kinds would have to be available for any of the versions to succeed.

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