Scholarly Comments on Academic Economics

Adam Smith’s Invisible Hands

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Abstract

William Grampp’s JPE article on Adam Smith is creative and provocative. It errs, however, by disparaging the invisible hand’s importance as a symbol of various economic processes that help societies prosper in ways that individuals neither intend nor comprehend. Four specific problems stand out. First, Grampp unsoundly tries to limit the relevance of the invisible hand within the Wealth of Nations to situations in which a merchant increases domestic capital and strengthens national defense. Second, Grampp presents an oversimplified account of WN’s treatment of international relations. Third he conspicuously misinterprets the trickle-down process of The Theory of Moral Sentiments, where Smith argues that an invisible hand promotes the welfare of the poor despite the greed of the rich. Fourth, by failing to plumb the connection between these two invisible hands—and by dismissing the relevance of a third invisible hand, which Smith elsewhere invokes to illustrate the superstitious outlook that pervades “primitive” societies—Grampp overlooks the complex interrelationships between Smith’s two books. Whereas WN presents the invisible hand in an atheistic context, the TMS version seems to be the hand of God; this religious contrast mirrors TMS’s more optimistic perspective on the poor and its more ambivalent evaluation of “riches and power.”
Grampp is wise to stress the inconsistencies, puzzles, and exaggerations that Smith bequeathed to his readers. But some of Grampp’s criticisms are glib, and he deserves blame for trivializing the invisible hand. The three invisible hands, I argue, not only illuminate the rhetorical strategies that helped Smith influence institutions and public policies; they also signal his commitment to promoting curiosity and inquiry.

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Volume (Issue)
Pages
381-412
Published
JEL classification
A12, A13, A31, B12, B31, Z12
Keywords
Adam Smith, invisible hand, Wealth of Nations, Theory of Moral Sentiments
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