Malloy’s Adam Smith enigma

Alternative Title: Review of Chapter 11 of Law and the Invisible Hand

After Chapter 6, my second-favorite chapter in Robin Paul Malloy’s Law and the Invisible Hand is Chapter 11 (the next-to-last chapter), which is titled “Adam Smith in American Law.” Among other things, Professor Malloy tracked down the total number of citations to the works of Adam Smith in the published opinions of the federal courts of the United States. (What about the State courts?) In summary, the first federal case to cite Smith was decided in 1796; the most recent case citing Smith, in 2020. During this span of 225 years (inclusive), Prof Malloy was able to identify 204 federal case opinions with direct references to Adam Smith.

Malloy describes nine of these 204 cases in greater detail and makes two intriguing observations. One is that, of the 204 cases to cite Adm Smith, almost three-quarters of these case citations, 145 of 204 or 74%, have occurred since 1980. (See Malloy 2022, p. 122.) The other is that most, if not all, of the federal judges who cite Smith have a shallow understanding of Smith’s ideas. Specifically, Malloy concludes that “[m]ost of the time … [Smith] is invoked in a one-dimensional and iconic way, with a reference to his famous metaphor of the invisible hand.” (See Malloy 2022, p. 143. In fact, of the 204 federal cases to cite Adam Smith, 203 cite to Smith’s Wealth of Nations. See ibid., p. 122. The remaining citation is to Smith’s Theory of Moral Sentiments; none of these 204 cases cite Smith’s Lectures on Jurisprudence. Ibid.)

Ironically, Malloy falls into this trap himself, for his book is titled “Law and the Invisible Hand” and not “Law and the Impartial Spectator”. For Malloy, however, Smith’s “invisible hand” mechanism must always be seen through the eyes of Smith’s impartial spectator. (I would even argue that this conclusion is the main lesson of Malloy’s book.) But as I mentioned in my previous post, this observation poses an even deeper puzzle, what I call “Malloy’s enigma”. To the point, the puzzle/enigma is this: what, if anything, does the impartial spectator have to say about the invisible hand, and vice versa, what does the invisible hand teach us about the impartial spectator? In short, what is the relation between the invisible hand of the market and the impartial spectator of ethics and aesthetics?

Put another way, does Smith’s invisible hand really need an impartial spectator or imaginary referee in order to function properly? Think, for example, of other domains or scientific fields with invisible hand explanations of their own, such as Sir Isaac Newton’s laws of gravity and planetary motion or natural and sexual selection in Alfred Russel Wallace and Charles Darwin’s theories of evolution. As I mentioned in a previous post, however, Smith invoked the invisible hand metaphor in three different ways, and in none of these three ways does Smith even allude to his impartial spectator. Also, how are the various “invisible hands” in Smith’s work similar to or different from these other (e.g. Newtonian/Darwinian) invisible hand mechanisms? I will further explore these puzzles and wrap up my review in my next post.

Shakespeare's Invisible Hand in Economics - Big Think

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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