The origins of the “as if” invisible hand error

In my previous post, I took the liberty of cutting-and-pasting the introduction of Sarah Skwire’s beautiful draft paper “As If: Clueless About the Invisible Hand.” In brief, Adam Smith’s invisible hand metaphor is probably the most well-known and popular idea in all of economics, and as Dr Skwire notes, most people often restate Smith’s famous metaphor in the following terms:

Each individual, in pursuing his own good, is led as if by an invisible hand to increase the welfare of others.”

The problem is that the great Adam Smith never used the words “as if” in the original formulation of his invisible hand metaphor! In fact, according to Dr Skwire, it was none other than Paul Samuelson who first put the words “as if” into Smith’s mouth, so to speak. Specifically, on page 36 of the original 1948 edition of his textbook (pictured below), Professor Samuelson (as quoted on page 2 of Skwire’s draft paper; emphasis added) formulates Smith’s invisible hand idea in the following terms:

“Even Adam Smith, the canny Scot whose monumental book, ‘The Wealth of Nations’ (1776), represents the beginning of modern economics or political economy — even he was so thrilled by the recognition of an order in the economic system that he proclaimed the mystical principle of the ‘invisible hand’: that each individual in pursuing his own selfish good was led, as if by an invisible hand, to achieve the best good of all, so that any interference with free competition by government was almost certain to be injurious.”

Samuelson’s popular textbook went through multiple editions — all of them with the words “as if” grafted onto Smith’s invisible hand metaphor — and was highly influential, for it was used to teach economics to several generations of Anglophone students. Okay, so what? Now that we have identified our main culprit, why is this misstatement of Smith’s invisible hand theorem such a problem? I will address this next question in my next blog post …

Economics: An Introductory Analysis: Samuelson, Paul A.: Books

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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