PRAGJYOTISH BHUYAN GOGOI similar to how conservatives appeal to the bible in the case of abortion and queer rights etc, but not when ot comes to slavery and mass murder
For Smith, economics was strictly related to ethics, and you couldn't have a theory of one without a related theory of the other. That's why his two immortal works are The Wealth of Nations AND The Theory of Moral Sentiments. But where has the second one gone? Completely forgotten, disappeared from schools' curricula, never cited by economists. And the first one has been cherry picked and distorted, to extract a couple of dogmas and dump the rest. What a disgrace for one of the most brilliant thinkers of all time in the fields of social sciences and applied philosophy. The people who nowadays worship Smith are in reality his enemies, perpetrating a systematic distortion, misinterpretation and obfuscation of his works to push forward a simplistic way of thinking to justify an agenda, just like the Nazis did with Nietzsche.
Couldn't agree more. I had a conversation with my libertarian friend pointing out that Adam Smith has been cherry picked, but it's hard to get people to see this.
Chomsky is such an important intellectual. He's not even an economist yet he knows more about Adam Smith than most economists. Such a good lesson to all of us, actually read and understand ideas from the source before we try to apply them to our thinking. I do so appreciate Chomsky...
This says this is from 8 years ago. Why is he referring to the command economy of Russia and Ukraine as if they're part of the soviet union? The soviet union fell 32 years ago, long before this came.
GOD save us all from "intellectuals" of the world. _“It is hard to imagine a more stupid or more dangerous way of making decisions than_ _by putting those decisions in the hands of people who pay no price for being wrong.”_ -- Thomas Sowell -- Simple question: *When has Chomsky **_ever_** paid **_any_** price for being wrong about something?* A: Never, because he's an intellectual, and wisdom -- learning from experience -- is outside of his experience, by definition.
Among the many lessons of Chomsky is the need to read the original sources and to study raw data while always presuming that those who are summarizing or quoting or using names like Smith or concepts like trade probably have no idea what they are talking about because they know most of us aren't going to challenge them. We all need to be our own version of Chomsky by doing our own reading and research by first ending the assumption that what others tell us is always right.
" The government of an exclusive company of merchants, is, perhaps, the worst of all governments for any country whatever" Adam Smith. Nobody quotes that much either..
@@RussellGeorge67 it means Crony Capitalism. When Corporations and Government(s) Are one and the same. Today in America that's called G.S.E. and N.G.O. ..s Under 8 YEARS OF Obama those two designations Expanded EXPONENTIALLY. BUT Republicans s NOW are IDENTICAL in using NGO's and GSE's to make themselves Insanely RICH Especially I.S.D.A. banking and investing "Insurance Casino" capitalism.
0:18 Adam Smith argued against what's now called neoliberalism 0:38 Adam Smith was concerned about free movement of capital 1:46 Exploiting Chinese workers is not what Adam Smith's economy advocated 2:08 Page 400 he said division of labor is monstrous because it turns workers into mindless machines 2:49 so-called conservatives 3:12 Classical liberals and traditional conservatives would not call NAFTA trade 4:09 internal (corporate) operations in a command economy
I learned a year or two ago never to bring up Wealth of Nations with most economists because they invariably haven't read it and feel super insecure whenever you mention anything specific in the book. And I'm a nice guy. :D
I always heard it was too old and outdated to be of much use. However I'm 80 pages in and I feel that I've learmed far more about econmics, and how and why everything works than I have from my college classes. But I am also still a student, so maybe I just haven't gotten far enough into everything yet.
I read it when I was 17 before I did any economics courses, but I really loved history. My advice is to make sure you read in its appropriate historical context, otherwise, modern interpretations will warp its contents.@@dracofromtheinternet1507
I really like that you added subtitles. Chomsky is wise but he isn't exactly young anymore so it can become difficult to understand certain words (especially for nonnatives) but with subtitles its a lot easier to understand everything and to grasp his words.
Google would have served Noam well, had it existed in his era. Here's Adam Smith's first use of the term in his earlier work, The Theory of Moral Sentiments. "The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own convenience, though the sole end which they propose from the labors of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements...They are led by an *invisible hand* to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species."
"In the progress of the division of labour, the employment of most of those who live by labour comes to be confined to a few very simple operations, often only one or two. Now, the understandings of most men are formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations-with effects that are always nearly the same-has no occasion to exert his understanding or to exercise his invention in devising ways to remove difficulties that never occur. So he naturally loses the habit of such exertion, and generally becomes as stupid and ignorant as a human creature can possibly become... But in every improved and civilised society this is the state into which the labouring poor-i.e. the great body of the people-must necessarily fall unless government works to prevent it." Adam Smith, socialist. :)
The invisible hand refers to the unintended consequences of pursuing self interest. For example the Act of Union stripped Scotland of its political independence but hastened its development as a commercial centre.
Extracts from 'Adam Smith: The Wealth of Nations.' Book I: The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed or applied, seem to have been the effects of the division of labor. ... To take an example therefore, from a very trifling manufacture ... the trade of the pin maker ... ten persons therefore, could make them upwards of forty-eight thousand pins in a day. ... Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. ... The division of labor, however, so far as it can be introduced, occasions, in every art, a proportional increase in the productive powers of labor. Book V: But the understandings of the greater part of men are necessarily formed by their ordinary employments. ... The man whose life is spent in forming a few simple operations ... He naturally loses, therefore ... and generally becomes as stupid and ignorant as it is possible for a human creature to become. ... The torpor of his mind ... [, t]he uniformity of his stationary life ... [h]is dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his ... social ... virtues. But in every improved and civilized society this is the state into which the laboring poor, that is, the great body of the people, must necessarily fall ... Notwithstanding the great abilities of [a] few, all the nobler parts of a human character may be, in a great measure, obliterated and extinguished in the great body of the people. ... People of some rank and fortune ... [have] ... that full time to acquire ... every accomplishment which can recommend them to the public esteem. ... [Their] employments, too, ... are not, like those of the common people, simple and uniform. They are almost all of them extremely complicated, and such as exercise the head more than the hands. [Their] understandings ... seldom grow torpid ... [and they] generally have a good deal of leisure. ... The employments of some people of rank and fortune, besides, are seldom such as harass them from morning to night. ... It is otherwise with the common people. They have little time ... their labor is both so constant and so severe ... that it leaves them little leisure and less inclination ... even to think of anything else. Research by: Gregory M. Sagegreene, Wednesday 9-15-2021.
And the government doesn't intervene to "prevent" the division of labor. It intervenes to provide societal enhancements so that the negative consequences of the division of labor are offset by more uplifting diversions.
Does anyone know the documentary these interviews were used in? I know it's by metanoia films the same folks who did human resources but it's not that one and I want to rewatch but cannot remember the name
That's not what smith said. He said that when the cost of shipping exceeds the money saved by manufacturing abroad, that imports would stop. Which is true.
Perhaps I misunderstood Noam, but what I got from this is that Noam believes Adam Smith was essentially correct and that conservatives today are misunderstanding Smith. In Wealth of Nations Smith said, I believe, that with great individual wealth came great obligation. Those who benefit the most from our economic system owe it to the rest to pay not just more in taxes for the general welfare but at a higher rate. This anticipated the subsequent federal income taxes enacted by Great Britain and the U.S., both of which adopted progressive tax structures. My understanding is that when conservatives say -- as many do -- that we need a flat tax (rate) they are shunning Adam Smith. That's a big thing to do considering the influence he had on America's economic system. I, for one, doubt the wisdom of straying so far off the proven path.
+Mooncut Basically the neo liberals appropriated and grossly misused Adam's Smith's most famous turn of phrase. Rather ironic, but then again think about how many people laud Randian ideology while ignoring conveniently how she was a stanch anti-theist.
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” - Adam Smith “The Wealth of Nations (circa 1776)
Awesome. What a treasure. One thing I've struggled to reconcile is the division of labour arguments. On the one hand they are obviously nuanced and I would go as far as to say spot on. On the other it is a bit difficult to see how one can progress a skill to a point where it is to a modern standard required in certain areas. E.g. I work in security engineering. This is highly specialized and a lot of effort needs to be expended just to reach a level of proficiency never mind something resembling excellence that could some day induce innovation (however small). I would spend about 8 to 10 hours a day just on this topic alone. This did make me ignorant and stupid in some ways like is predicted here (and in Smith's opus). I didn't know anything about geo politics in my twenties for example. Not until very late 20s in fact. I knew barely anything of philosophy until my mid 20s. Slowly I leveraged my interest in philosophy to dig my way out of this general ignorance and have expanded my mind. I think I was lucky though as I had some preconditions that worked in my favour. I was an accomplished and somewhat talented musician/composer from the age of about 6. I understood art and music (art to a lesser extent). Those things eventually matured and produced a realization that I had to broaden my horizons. I eventually learned about Zen and architecture. And little by little as I say I expanded my mind to include as many subject areas as would be deemed necessary on the path to enlightenment. Which is pretty much all subjects. But as I said I worked on security engineering for almost 10 hours a day for 10 to 15 years and midway through that journey, when I would finish work, I would work on these other subjects for another 6 or 8 hours a day sometimes. It was and is a monumental effort. Could I be as proficient in security engineering without heavily specializing in it? Probably not. So some division of labour was necessary for me just to survive (pay bills etc). I imagine other areas, e.g. medicine or dentistry, require enormous amounts of focus in just those areas just to be proficient at a high level. So how does one stave off ignorance ushered in by a seemingly necessary specialization path (referred to as division of labour herein)? Is specialization necessary to say repair someone's tooth or perform heart surgery and we agree it is necessary for these reasons how do we then avoid the downside of that approach?
Division of labor wasn't anything new even in the time of Smith. But the division of labor in societies has been considered a process of human advancement in pretty much every preceding era. The industrial revolution just allowed for finer subdivision of tasks. That subdivision of labor into tasks that you could teach to the average person in a short period of time allowed for the tremendous growth of the 20th century. The anti-industrialists of course demonized the division of labor by completely ignoring the benefits it has to everybody in the form of cheaper and better quality goods and claiming that the people performing relatively mindless tasks would otherwise be engaged in fulfilling jobs had the industrial revolution not forced them into this form of mindless work. Of course that completely ignores the reality of the early factory workers often came from these supposedly fulfilling jobs and had no interest in going back to working in the fields.
Adam Smith actually formulated the Labour Theory of Value, which us usually (deliberately) attributed to Karl Marx. He daid it is the amount of work that goes into producing diamonds that makes them expensive, not their scarcity.
Adam Smith tells of a man whose job it is to vent a steam engine so it doesn't blow up. This man, through observation invents a mechanism (Governor) that automatically does the job for him.
I have heard this argument on many occasions by Chomsky (and his impersonators). But the paragraph is as follows: "he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it." To flip his question, how does that support state orchestrated economy, or a mildly planned one? It was the same rationale Smith employed when discussing the state officials in Europe who had, in the past, pretended to lord over the individual financial decisions, and assuring their frugality by force. Smith states that government officials are often the biggest spendthrifts in society, and if their prodigality does not ruin the state economy, how can that of individuals who are limited already in their prodigality by their sympathetic (what would today be called empathetic) observations of the fact that their prodigality may soon be publicly known, and are thus dissuaded from being prodigal even in their private affairs. This, which was partly the base for his later work, The Theory of Moral Sentiments, was the basis of rationalization for Smith. And so, despite Chomsky's nuanced analyses and exceptional observation, he is very wrong on this matter. The left and the right, both, have attempted to claim Smith for themselves, and this is partly a good example of that. Smith is not as capitalist as many who adulate him (without reading him) are, but he is nowhere near as pro-central lording as many on the left believe.
Adam Smith, An Enquiry into the Nature and Causes of the Wealth of Nations (New York: Random House, 1937), pp. 734-5. "In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of people, comes to be confined to a few very simple operations, frequently one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects too are, perhaps, always the same, or very nearly the same, has no occasion to exert his understanding,or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become."
"in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless the government takes some pains to prevent it." Adam Smith suggested there, government should take "some pains" to prevent it. Not actions, PAIN. Adam Smith is okay with government planning or making rules to the greedy rich from turning poor labors into illiterate ignorant tools. Invisible hand and sympathy don't always work. Peace
Another short comment, Smith never heard of a thousandth of things that are relevant in modern society. Global warming, lobbyist, corporate bail out, globalization, big pharma, nuclear bomb etc He would've worded it different or wrote completely different things if he had knew what were to come of humanity
@@shengloongtan229 Very good points, and the sections you reference are very well known and often recited. But you have to note my original phrasing: "Not as pro-central lording [...]" which implies that there are instances in which Smith is willing to tolerate governmental action in economic affairs. If you read further, Smith discusses education of children and adults through public institutions (government-regulated) to combat this dullness in their understanding and comprehension (and physical ability as well). This would be an instance in which I would disagree with the mode Smith preferred this principle be realized: viz. public education, (I am a proponent of the voucher system). Pardon the digression, the point I was intending to make was that Chomsky's point that the "Invisible Hand" was a positive preclusion of free capital flow is just factually, contextually, and plainly wrong. Chomsky makes no intelligible deductions in this respect. By that I mean, he only looks for the literal account of the Invisible Hand, but does not look for similar instances that apply the same reasoning as the Invisible Hand. Additionally, if he were really interested, he could have seen its other appearance in his earlier (in the original message I mistakenly stated "later") work Theory of Moral Sentiments which uses the same concept. Lastly, I will readily concede that the Invisible Hand is not a perfect maxim to govern an entire economic infrastructure by. Just as collectivism is assuredly not. An equilibrium has to be reached between individual self-interests and the necessity of government intervention. If, by my last message, you understood me to say that the government has no place in economic action, I apologize for not stressing that point more. I was only trying to indicate that the greater part of Smith is dominated by the principle that government tends to do more harm than good when it invests itself a great amount into the economy.
@@connorbyers1872 He did quote the invisible hand from moral sentiments and related it to wealth of nations in this video, if I remember correctly in this video ua-cam.com/video/8mxp_wgFWQo/v-deo.html It doesn't matter, newton first law said chomsky is always right
The discussion of the invisible hand appears when he is criticizing the mercatilists, so in context the phrase refers to people getting to do their own things without the merchant capitalists telling the government that their laws should require people to act to increase exports and decrease imports. Hence discussing state capture as the problem, not the state getting involved in the economy. Smith definitely thinks there are markets that the state needs to be involved in (defense, law and order, and to provide education, roads etc), so the interptation that capture is the problem is consistent. Also, at the time there was very little difference between 'merchant elites' and the state. The mercantile system was a state created trading system that gave all of the benefits to merchants and none to consumers. Merchants were permitted to engage in discriminatory pricing on goods. It wasn't just that they could influence politics with their wealth, but that they were the politics.
There are plenty of people who work at "stupid jobs" full time and go to college at night. These are people who have to work but see light at the end of the tunnel. So, you can still read Aristotle and Adam Smith and work towards getting your degree. A large percentage of us are in the same boat. Thanks. Suzanne
Even by going to college the end goal for most is a job that still fits the division of labour. Just because it happens on a desk instead of the operation line of a machine doesn't make it any less of labour division.
Agree - hardly anyone reads Adam Smith. Just like Clausewitz, Hegel and Marx for example. But I also think most people will do better reading books about what these writers wrote.
Well, I think Mr Chomsky is being as self-serving in his interpretation of what Adam Smith meant by the "Invisible Hand" as the conservatives he charges with the same crime. (Although, I think Chomsky is on the mark when he discusses some of the drawbacks that Smith says attends the division of labour later in the Wealth of Nations) This is the quote: “By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an Invisible Hand to promote an end which was no part of his intention.” Chomsky was right about the context of the quote being importation and free trade, but the defining point of the Invisible Hand is the phrase "an end which was no part of his intention"; that there are diffuse advantages in a free market economy which can often go unseen because it is difficult to sum the seemingly disparate parts that make the whole. In this case the example is the benefit to local trade over foreign. However, Smith goes on to provide another example in the "humble" labourer's coat which keeps him warm and all the many multiples of manufacturing and transport labour (plus energy, capital, etc.) that went into its creation. "Without the assistance and co-operation of many thousands the very meanest person in a civilized country could not be provided... the easy and simple manner in which he is commonly accommodated," wrote Smith. Providing the labourer with an affordable coat is the "end which was no part of the intention" of the business owner who was, for example, only making buttons to put food on his own table or cover his costs - not to expressly make a coat to clothe the humble labourer. The wider benefits that flow from the inherent self-interest of free markets is what Smith was driving at. That's Smith's Invisible Hand: a metaphor for the mechanism behind this unforeseen consequence/benefit. To claim that Smith didn't mean this with his metaphor because he only used it once seems like a ridiculous and self-serving conceit, for it is contiguous with the greater contention of Smith's argument regarding the benefits of the division of labour and markets. What not-so-invisible hand was guiding Chomsky's attack on conservatives in this video? (His absolute distaste for capitalism of course)
This is the quote about the invisible hand. Slightly disingenuous from Chomsky, sure Smith mentions invisible hand in the context of employing capital domestically but the broader point being made is about how in many cases individuals acting in self interest also act in the public's interest without ever intending it. "As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."
I think it is both slightly disingenuous of chonpsky and of the schools who teach it would little prior context. Either way, smith was in many ways wrong about the “invisible hand”, ie tragedy of the commons
I think Chomsky's point still stands, and I'm sure he could go into much more detail if he felt it was necessary. In the scenario Smith is using it appears that he is making the assumption that the capitalists will view the preservation of the English economy as the highest priority, because their company may depend on a stable English economy, but that isn't always the situation. A company in that situation may very well be gain more by "dumping" the English economy and pursuing investments and allocating capital abroad. Which is exactly what happens/happened. The company acted in it's own interest which did *not* benefit the English economy. Which means it contradicts the premise of the Invisible Hand whereby individuals making rational choices in their own interest will benefit others as a whole. One could say that the company investing abroad "benefits the locals abroad" but we know that is complete and utter bullshit because colonialism raped the locals, murdered them, enslaved them, and exploited them beyond all recognition. That's my read on it. The invisible hand assumes a rational individuals actions of self interest will benefit society as a whole, which it sometimes does, but it often, very very very often does the exact opposite to a monstrous degree.
One part of Adam Smith's writing that, while extremely important, is largely ignored. This is his analysis of how the private ownership of nature (which political economists referred to as "land") effects the production and distribution of tangible wealth (as distinct from the financial claim on tangible wealth). Smith's analysis followed that of the French school of political economists, the physiocrats. The physiocrats offered an entry level analysis of land markets, an entry level analysis because they were writing during a period when commercial agriculture dominated the French economy. Thus, they spent no real time analyzing the same land market dynamics that existed in town and cities. Here is what they all understood to be the case. Every parcel or tract of land has some potential annual rental value as determined by demand (i.e., market forces) directed by whatever restriction on use are imposed by government. With regard to agricultural land, they described the process by which rental value is based on fertility and other factors that make it possible for the same input of labor and capital goods to produce greater output of agricultural commodities. The difference between output on the best land versus the next base land is defined by the political economists as "rent." Less and less rent arises as land quality falls. At some point, land cannot be worked to produce enough output to justify the required labor and capital goods. The land market has then reached its "margin of production". Later political economists began to apply the Smith-Physiocrat analysis to other land markets, to land that holds timber or subsurface mineral deposits. All sorts of locational advantages or disadvantages determine how much, if any, rent comes from locational advantage. Some, most prominently Henry George in the late 19th century, argued that as rent arises based on natural advantage or advantage created by privilege under law, rent rightfully belongs to society. George argued that rent should be publicly collected. And, once one turned over whatever rent was due, the individual (or business entity) had met any financial obligation to society. The taxation of earned income flows, of tangible assets and of commerce is by definition an unjust confiscation of private property.
At 1:02 Noam is saying the exact opposite of what Smith says in book IV chapter 2 of Wealth of Nations. He says restricting importation will, on the balance, harm GB or any nation of trade doing the same. So Noam is embellishing the gravity of his second point by alluding to Smith’s “concern” about free market trade diminishing GB interests.
"Free Capital Movement" is generally addressed by having better business policies than the places they might otherwise invest in. This includes Rule of Law, which is probably THE most critical aspect of making ANY economy work. Fewer useless, needless regulations generating paperwork no one will ever actually look at, less senseless money grabbing taxation (why is it "greedy" for businesses and investors to want to keep the money *they* _earned_, but not "greedy" for government to grab anything they can out of your pocket... that _*_you_*_ have _earned_ ?) It says more than enough that Chomsky's failure to grasp the massive array of Marxism's flaws says he's not economically astute or economically *competent* enough to be judging any OTHER economic system effectively.
On the division of labor topic. The government intervenes with education and the people must also pursue self-education. Well done not telling all of it. Education and self-education is a reoccuring theme.
Noam Chomsky is a very intelligent man, and he is right by saying that Adam Smiths arguments for free markets are rather balanced and nuanced, but unfortunately his assertions regarding how Adam Smith used the term “Invisible Hand” in “Wealth of Nations”, and how that relates to the modern use of the expression, are misleading at best, and plain wrong at worst. Since there seems to be a lot of confusion on the topic, I decided to write a short explanation on how Adam Smith used the metaphor of the “Invisible Hand” in “Wealth of Nations”, and why I think Chomsky’s claims are misleading. I will post some version of this text on multiple UA-cam videos in which Chomsky talks about this subject. In “Wealth of Nations”, the “Invisible Hand” is mentioned once in book IV, chapter 2. That chapter is concerned with restraints upon importation of goods that can be produced at home. Among many other things that are discussed in this chapter, Adam Smith mentions the phrase “Invisible Hand” somewhat offhandedly, in a discussion about investment behavior. Now let’s look at the full quote: “By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it.” With this sentence Adam Smith summarizes 2-3 previous pages in which he outlines his arguments. The quote has roughly four parts. We now look at each of them individually, and add in the context of the previous pages. 1. “By preferring the support of domestic to that of foreign industry, he intends only his own security; […]” This is the part that Chomsky mostly talks about. Adam Smith argues that upon equal or close to equal profits, merchants generally prefer to invest their capital in domestic rather than foreign industry. The reason for this is that the merchants like to have direct oversight over their business, and they are more accustomed to the people and the laws of their home country, which reduces the risk of doing business. Now, Chomsky is largely correct when he says that the “Invisible Hand” refers to this sort of “Home Bias”, but he fails to mention that according to Adam Smith, this is due to investors acting in their own self-interest. More importantly, he also fails to mention that this “Home Bias” is not the only thing to which the “Invisible Hand” is referring to. 2. “[…] and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain […]” This is a totally separate argument and has absolutely nothing to do with the “Home Bias” that was the subject of the first part. Smith argues, that when people invest their money, they look for the most profitable industry to do so. The most profitable industry in turn, is the industry which creates the most value. Since the annual revenue of a society is equal to the value added in production, the self-interest of investors, according to Smith, leads to the most beneficial investment of capital. This very much resembles how the expression “Invisible Hand” is used today, but Chomsky does not acknowledge or even mention this part at all. 3. ”[…] and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” Finally, we come to the part, where Adam Smith describes these mechanisms with the metaphor of the “Invisible Hand”. It generally refers to the fact that the self-interested actions of individuals can lead to outcomes which were not intended by the individuals. The important part here is “AS IN MANY OTHER CASES”, meaning that the metaphor is not limited to the aforementioned instances, but can be applied to many other cases as well. 4. “Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it.” This last part concludes by saying, that this mechanism of the “Invisible Hand” frequently leads to outcomes which are beneficial to society as a whole, which again is very much in line with the modern use of the expression. Arguments for other cases where the “Invisible Hand” leads to better societal outcomes, can be found all over the book. In summary, the “Invisible Hand” as it is used by Adam Smith in “Wealth of Nations”, refers to the fact, that individual self-interested actions can lead to unintended outcomes. Smith also states, that the unintended results of individual self-interested actions, frequently improve national welfare better, than actions which are consciously designed to do so. Smith mentions the metaphor while explaining two mechanisms (1. Self-interested investors prefer to invest at home compared to abroad; 2. Self-interested investors invest in industries, which are most beneficial to society), but he also clearly states, that this holds in many other cases as well. So, Chomsky is right in saying that Adam Smith uses the “Invisible Hand” in “Wealth of Nations” to explain some sort of “Home Bias”, but he is wrong in reducing the expression to this very specific instance. He acknowledges only the first part of the sentence, but ignores the second part, and even more importantly, he ignores the third part in which Adam Smith explicitly says that the two mentioned cases are just specific examples of a more general concept, which applies to many other cases as well. Chomsky seems to imply that the way the expression of the “Invisible Hand” is used and understood today, is somehow in contrast to what Adam Smith wrote, but this assertion is simply not correct. The modern use of the expression “Invisible Hand” is a completely legitimate interpretation, and exactly in line with how Adam Smith used it in “Wealth of Nations”. Chomsky’s reductive interpretation, which he has repeated many times over the years in many different places, is indicative of him being either disingenuous or misinformed. If we give him the benefit of the doubt by assuming that he is being genuine, then his line of argumentation reveals a very superficial reading on his part, and he would have been well-advised to read the passage a little bit more carefully.
I don’t think Chomsky understands why it is that Adam Smith is well-regarded. He isn’t well-regarded because his particular economic ideas were great, but because the analysis behind those ideas launched modern economic thought. It’s not that different from how Plato and Aristotle are well-regarded but almost no one actually remembers or agrees with what they wrote. Or how Chomsky is remembered as a “well regarded linguist” yet almost none of his worshippers know a single one of his ideas.
"no one actually remembers or agrees with what [Plato and Aristotle] wrote" Is this a joke? These philosophers formed the basis of Western thought and are still widely discussed in universities and elsewhere. Maybe you can't think of any of their ideas, but that reflects more on your lack of understanding than anyone else. Take better notes next time.
“Suppose GM assembles parts in Indiana and sends them to Illinois to assemble and then NY to sell. Is that ‘trade’? I don’t know, but it doesn’t do A Lot for global warming!
Who is he strawmaning? Free capital flows are routinely lumped in with free trade as an almost always good thing... So much so that it has turned a lot of folks against free trade. The net effects of capital flows are much more dependent on particulars and often a net negative while being fabulously positive for a handful of powerful entities.
not necessarily, at the time even though England united with Scotland in 1706, British wigs still held England's interest at heart, especially when discussing trade or politics. Take the Revolutionary War for example, The revolutionaries were not fighting against Scotland, they were fighting against English investors and rule of the king of England.
"the king of England" didn't exist by the time of the Revolutionary War, since England hadn't been a sovereign nation since the 1707 union with Scotland. England and Scotland have had the same monarch since 1603. At the time of the revolutionary war, George III was King of Great Britain and King of Ireland. Regarding the question, during most of the 18th,19th and early 20th centuries, Great Britain was often referred to as "England" (many ignorant non-Brits and arrogant English still do), a bit like referring to the Netherlands as "Holland". While this would have rankled with a lot of Scots at the time, it was less so for those in the upper classes who were less interested in Scottish patriotism. Especially as they were enjoying the fruits of Union and the Empire.
Look, I found a second time it was used. Disproving the lier “By] directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. (4.2.9)”
This characterization of Adam Smith seems (to me, at least) repeatedly and unabashedly deceptive in several places. For example: In the line: * "[Smith] points out that division of labor is monstrous because it turns people into creatures as stupid and ignorant as a person can possibly be - that person just becomes a machine, and that's a terrible attack on fundamental human rights, and therefore, he says, in any civilized society, the government's going to have to intervene to prevent the division of labor" I've searched and could find no place where Smith even mentioned fundamental human rights, much less condemned division of labor for violating them. Can someone confirm that Chomsky is interjecting his own values into his characterization of Smith? Assuming this is the case, this to me seems disingenuous to do so mid-sentence when going chapter-and-verse with Smith, as it is not at all obvious to the casual listener that this is not what Smith actually said. (I've seen Christian pastors use this same trick when trying to inject their own personal ethos into the teachings of Christ.) It seems then that this paragraph is one likely referenced: "He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become [...] But in every improved and civilised society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it." full context here: www.marxists.org/reference/archive/smith-adam/works/wealth-of-nations/book05/ch01c-2.htm From this context, Smith is endorsing some form of publicly funded education system (not necessarily like the one we have today) as a means of mitigating these downsides. It is NOT a call for the government to intervene to prevent division of labor (whatever that means). The list goes on. Chomsky implies the invisible hand was mentioned only once by Smith, when it was really only mentioned once in the Wealth of Nations, having also been mentioned in the Theory of Moral Sentiments. (Strictly speaking, Chomsky didn't lie here, but chose wording that would mislead the casual listener.)
The proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest ... [Yet] the capacity of his stomach bears no proportion to the immensity of his desires ... the rest he will be obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets which are employed in the economy of greatness; all of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice...The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own convenience, though the sole end which they propose from the labors of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements...(!!!) They are led by an invisible hand to make nearly the same distribution of the necessaries of life (!!!), which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition.
It seems to me that although Smith was speaking about the invisible hand in the context of foreign vs domestic trade, his primary use of the metaphor was to describe that an individual's personal interest was the public interest because his only means of gaining capital was to perform some work in the interest of others, for which they would pay him. Basically it's in your interest to help others. You can do what you want all damn day, but if you want to make a buck you have to do something useful for someone else. I recall nothing detracting said about division of labor, but who knows, it's a big ass book. Chomsky's interpretations seems a little disingenuous.
I think the use of the phrase in that chapter ('Restraints on Particular Imports') was to explain that an investor was making the most effective use of his capital where he was making the investment decision exclusively based on its potential return, rather than for some other motive (like patriotism). Like Chomsky I find it a pretty woolly and unconvincing chapter, long overtaken by technologies and international trade agreements. How it can be extracted from its context, and exploited as a defence of the free market, it is hard to see. I suspect the appeal to conservatives, neo-liberals and capitalists is that the phrase preserves some faint echo of the Deity, a figure close to their hearts, and one seen as foundational to their political and economic philosophy.
Every time I listen to Chomsky lately, I find something he's misrepresenting. Here I wonder if he perhaps also haven't read Smith, because he's totally misrepresenting Smith's argument and then misuses it for political purpose. Smith's argument isn't that people would somehow miraculously prefer home production. He makes a solid economic argument for it. Namely, that assuming equal or similar profits, domestic trade is preferable because the further the capital goes the higher are transactional costs and risks. In other words, if you can sell a product at home for $6, there's no reason to transport it to another city to sell it for same $6. Then the argument is made that domestic trade is also better for the nation and therefore incentives of the people and the society align 'as if guided by invisible hand'. Obviously the key point here is the 'assuming equal or similar profits'. If you can sell your goods for $6 in your home town and for $600 in the other town, clearly, it would be beneficial to sell it there.
In my economics class I was taught that capitalism is based off of selfish transactions, and that the invisible hand referred to taxes taken from those interactions.
Most of the economics teachers themselves haven't actually read the whole book... I know which page Chomksy talking about, you should read it yourself don't take his word for it.
Close to what? Understanding what Adam Smith meant when he used the phrase, or the ignorant way in which economics teachers use it? Seems your judgement isn't worth much if you misunderstood what was being said@@michaelanderson2881
1:24 : this is disappointing, as it is pretty clear from the text that Smith is expressing an optimism that individuals pursuing selfish interests will produce good for the many. And of course, history has not borne this out.
My greatest nightmare is of a Neofascist America ruled by Austrian / Chicago / Neoclassical Economists & bigotry. I fear the day it comes, but how would I be able to notice that it has has arrived? (NB: my ignorance is feigned for comedic effect)
"Internal to a huge command economy." THAT is communism! However, we in the U.S. love to use the gaslight false terms "free enterprise" or "capitalism." It is in actuality fascism as Mussolini and others defined it...the merging of interests and control of the economy by corporations and the state. We are so self-deluded and kept stupid by those who or control both information and education, corporations and the state respectively.
I’m not a bit surprised the brilliant economist and specialist in international trade,Chomsky,mis interpreted free markets and the in put of the invisible hand in directing trade and investment.Im sorry ,what was his brilliant solution for the advancement of civilization? Oh yes ,some idealistic,impractical and illogical form of socialism where everyone is happy,human nature and human frailties and treachery are suspended . The tendency of academics to assume expertise in one area,linguistics in this case,is an automatic imprimatur for legitimacy in any discipline regardless of complexity or experience.
The best part is when Noam Chomsky talks about the division of labor. Adam Smith was right about it [see Werner Sombart, The Jews And Modern Capitalism, Julius Evola, Revolt Against The Modern World, Part Two Genesis and Face of the Modern Worden, Chapter 35 The Regression of the Castes ; Julius Evola, Men Among The Ruins, Chapter 6. Work - The Demoniac of the Economy.
Very misleading of Chomsky: "The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species." The Theory Of Moral Sentiments, Part IV, Chapter I, pp.184-5, para. 10. "Every individual... neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." The Wealth Of Nations, Book IV, Chapter II, p. 456, para. 9.
I can't help thinking Chomsky is arguing with some implication that you can't be influenced by Smith or use some of his arguments without agreeing with every single thing that he said.
@Luke F yup, these are all points of a classical liberal. Its always the radical left that is arguing that classical liberalism is heartless and does not want any state intervention. While in reality classical liberalism is just awearness of the bad consequences state intervention may have, and very often actually has. Just like the state in Smiths days forbid the workers to strike for higher wages, but allowed the employers to make agreements for lower wage. Thus it was state intervention that kept the wages low.
@Luke F ah common. This is such abstract idiological talk. Even you use of the word "capitalists" betray you do not look at facts but just view the world through an a-priori marxist idiological eyes. Its just not interesting to argue against.
@Luke F yeah sorry, i have very little patience with talk like: "capitalism is the state". What on earth does this mean? Now you say you mean private property by capitalism. Ok, so you were saying the state is private property? Its so general and vague that you can always pretent that you right about something. If you want to start to think clearly just use concrete words and define carefully. It may help you.
@Luke F the state is centralised coersive autority.. well i will let that one slip for now. Anyway, politicians are not paid by the wealthy, they are elected. When it does happen that they are paid by the wealthy we call it bribary, and its a crime. Nevertheless it happens that sometimes wealthy people buy influence in some ways, and this is generally regarded as wrong by left and right and there is a lot of effort to combat it. Some states are more successful than others in this. Most northern European countries are quiete succesfull in this, and in these countries the wealthy pay almost all of the taxes. In the US its less succesfull, but even here its not as simple as: the politicians are paid by the wealthy. Second, in most of the European countries most of the capital is in the hands of pension funds providing pensions to normal people. So naturally you see a tendency to protect capital, because most of the big corporations are indirectly owned by the people, i.e. the pension funds. Now its true a lot of the capital is owned by a few rich as well, but I do not see much evidence that they are buying the politicians. Most of the time there are just the usual suggestive accusations without much evidence that are brought forward. What you do see is large corporations that are very much helped by politicians, but the reason for this is usually to get more employment in a country, not to help "the capitalists". Like I said, these corporations are also for a large part owned by pension funds or private equity firms indirectly owned by pension funds.
Hmm, interesting interpretation of the wealth of nations. It's 100% completely different from my understanding of Smith's writing in the context of his era. I read the book front to back too and I don't recall him ever mentioning democracy nor implying the notion of spreading democracy everywhere in his book. The main takeaway I got from the book was simply how a nation grows and where a nation's wealth comes from. The part about pro great Britain, that's completely false. He never said that lol. He was in fact, very critical of British imperialism and its inefficiencies. He never talked about the invisible as a method of one nation abusing it over another country. And he was also very supportive of the US colonies seperating from the empire because of their exploitation by Great Britain. Don't you just love it when people throw in and insert their own ideas into other people's writings to push a certain narrative and agenda lol.
Trade agreements mean that the investor class now has the right to the natural resources of all countries concerned with no consideration for the indigenous people in those countries. Nationalism is used when there is conflict among the investor class and they are trying to gain advantage in choice markets or materials rich areas. Indigenous people often feel that nationalism is about them, but it’s not.
The phrase "worshipped but not read" is true for Smith and even Chomsky himself. Many people seem unaware of Chomsky advocating for brutal dictatorships, as well as denying the existence of the Cambodian genocide, throughout the history of his career as an "activist". Those that are aware of his mistakes and still worship him are even worse. He never even admitted to being mistaken, instead opting to throw insults at people. He was a brilliant linguist, his work even impacted computing. Sadly as an activist he has a history of supporting genocidal regimes just for the sake of being against the US, including Russia in the modern day.
Chomsky cant be human lol no human can possess so much knowledge. Maybe he's an alien. That's why he cites the Martian/alien perspective on humanity so much 🤔
"England will be saved from the movement of capital out of the country by an invisible hand." If that's what Chomsky said, here's a bulletin: THAT'S NOT EVEN CLOSE. The Invisible Hand is the phenomenon that occurs when an individual employs CAPITAL and LABOR to pursue his own interests, and by doing so promotes the interests of society as a consequence. "Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."
If not for Division of labor Noam would not have a gig at all. Adam Smith was smart enough to understand that every thing he saw in economies of any kind has two sides. Anyone arguing against division of labor is a troglodyte.
He is one of the most important people of the 21. century, advanced multiple schools of science, is a politican activist and still answers e-mails and does political live-debates online while being 93(!) years old. I think it is pretty much consensus, that he does in fact NOT have an invisible brain.
I feel sorry for this guy he talks about someone who doesn’t like but thanks to him life of billions of people are doing well and believe in a system that was and still the main misery of humanity till now , it is like convincing someone with the bull shit that it tastes bad looks bad but healthy , good luck
free trade investment will go to the third country ... until then western world became a third country , then free trade investment will go back to western side ........ what is wrong about that ??
Well this is a load of bull. Wouldn’t expect more from a genocide denier. Here is the actual quote: “[The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.”
'Worshipped but not read' - such a relevant phrase for modern culture.
PRAGJYOTISH BHUYAN GOGOI
similar to how conservatives appeal to the bible in the case of abortion and queer rights etc, but not when ot comes to slavery and mass murder
*every culture in all of the history of mankind
Desacrated and unread would be more fitting for today's culture.
Aka MLK
Chomsky clearly did not read it, or else he forgot or he is lying.
For Smith, economics was strictly related to ethics, and you couldn't have a theory of one without a related theory of the other. That's why his two immortal works are The Wealth of Nations AND The Theory of Moral Sentiments. But where has the second one gone? Completely forgotten, disappeared from schools' curricula, never cited by economists. And the first one has been cherry picked and distorted, to extract a couple of dogmas and dump the rest. What a disgrace for one of the most brilliant thinkers of all time in the fields of social sciences and applied philosophy. The people who nowadays worship Smith are in reality his enemies, perpetrating a systematic distortion, misinterpretation and obfuscation of his works to push forward a simplistic way of thinking to justify an agenda, just like the Nazis did with Nietzsche.
Exactly so. Good comment.
Excellent comment
I haven't read either, but it sounds accurate.
Thanks bro
Couldn't agree more. I had a conversation with my libertarian friend pointing out that Adam Smith has been cherry picked, but it's hard to get people to see this.
I watched this video about two years ago and it inspired me to start reading the works of the classical liberalists. Thanks.
What works would you recommend the most?
@@jaxp8888 Wilhelm von Humboldt
Chomsky is such an important intellectual. He's not even an economist yet he knows more about Adam Smith than most economists. Such a good lesson to all of us, actually read and understand ideas from the source before we try to apply them to our thinking. I do so appreciate Chomsky...
This says this is from 8 years ago. Why is he referring to the command economy of Russia and Ukraine as if they're part of the soviet union? The soviet union fell 32 years ago, long before this came.
Academic sociopath on Marxism
Noam the Moron Chumpsky
@@yuki-sakurakawa it was uploaded 8 years ago to UA-cam, the exact date when it was shot isn't on description.
Actually,according to Chomsky,he knows more about Adam Smith than Adam Smith
GOD save us all from "intellectuals" of the world.
_“It is hard to imagine a more stupid or more dangerous way of making decisions than_
_by putting those decisions in the hands of people who pay no price for being wrong.”_
-- Thomas Sowell --
Simple question: *When has Chomsky **_ever_** paid **_any_** price for being wrong about something?*
A: Never, because he's an intellectual, and wisdom -- learning from experience -- is outside of his experience, by definition.
Among the many lessons of Chomsky is the need to read the original sources and to study raw data while always presuming that those who are summarizing or quoting or using names like Smith or concepts like trade probably have no idea what they are talking about because they know most of us aren't going to challenge them. We all need to be our own version of Chomsky by doing our own reading and research by first ending the assumption that what others tell us is always right.
" The government of an exclusive company of merchants, is, perhaps, the worst of all governments for any country whatever"
Adam Smith.
Nobody quotes that much either..
The definition of Marxism and Socialists.
@@lorenzomcnally6629 That's definitely a sentence. I have no idea what it means though.
@@RussellGeorge67
it means Crony Capitalism.
When Corporations and Government(s)
Are one and the same.
Today in America that's
called G.S.E. and N.G.O. ..s
Under 8 YEARS OF Obama those two designations
Expanded EXPONENTIALLY.
BUT
Republicans s NOW are IDENTICAL
in using NGO's and GSE's to make themselves
Insanely RICH
Especially I.S.D.A. banking and investing
"Insurance Casino" capitalism.
Well quoted.
0:18 Adam Smith argued against what's now called neoliberalism
0:38 Adam Smith was concerned about free movement of capital
1:46 Exploiting Chinese workers is not what Adam Smith's economy advocated
2:08 Page 400 he said division of labor is monstrous because it turns workers into mindless machines
2:49 so-called conservatives
3:12 Classical liberals and traditional conservatives would not call NAFTA trade
4:09 internal (corporate) operations in a command economy
I learned a year or two ago never to bring up Wealth of Nations with most economists because they invariably haven't read it and feel super insecure whenever you mention anything specific in the book. And I'm a nice guy. :D
I always heard it was too old and outdated to be of much use. However I'm 80 pages in and I feel that I've learmed far more about econmics, and how and why everything works than I have from my college classes.
But I am also still a student, so maybe I just haven't gotten far enough into everything yet.
I read it when I was 17 before I did any economics courses, but I really loved history. My advice is to make sure you read in its appropriate historical context, otherwise, modern interpretations will warp its contents.@@dracofromtheinternet1507
Every time I listen to a Chomsky interview I feel like my brain has been skewered by an electric cattle prod. But I keep coming back for more.
Bob Bowles - Addictive isn’t it? ⚡️🐂⚡️
you got a rebuttal
@@Hradbro On the contrary, it is the revelation of everything starting to make more sense.
I'm losing brain cells watching this shite.
Well describing those who worship him as "cattle" isn't far from accurate.
I really like that you added subtitles. Chomsky is wise but he isn't exactly young anymore so it can become difficult to understand certain words (especially for nonnatives) but with subtitles its a lot easier to understand everything and to grasp his words.
Just in case somebody’s confused (like I was) you have to push the CC button to get the captions.
Google would have served Noam well, had it existed in his era. Here's Adam Smith's first use of the term in his earlier work, The Theory of Moral Sentiments.
"The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own convenience, though the sole end which they propose from the labors of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements...They are led by an *invisible hand* to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species."
You will note that he does not cite specific text for a reason. He takes liberties in mischaracterization which is very common for Prof. Chomsky
Thank You Mr. Chomsky for your most relevant remarks and clarifications!
Every time. Every single time. This guy upends my understanding!
Every time I think I know shit, Noam Chomsky shows me otherwise.
"In the progress of the division of labour, the employment of most of those who live by labour comes to be confined to a few very simple operations, often only one or two. Now, the understandings of most men are formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations-with effects that are always nearly the same-has no occasion to exert his understanding or to exercise his invention in devising ways to remove difficulties that never occur. So he naturally loses the habit of such exertion, and generally becomes as stupid and ignorant as a human creature can possibly become... But in every improved and civilised society this is the state into which the labouring poor-i.e. the great body of the people-must necessarily fall unless government works to prevent it." Adam Smith, socialist. :)
It is indeed very funny to see how much the writings of Smith look like the writings of people like Proudhon and Marx.
Reading the wealth of nations right now
Two years later did you finish it? What did you think?
Was it worth the read? I'm about to read it just to kill some time.
It's rewarding if you're willing to put in the effort to think about what it says. If you're just trying to fill some time, I wouldn't recommend it.
if you want a further elaboration on adam smith look into economist michael Hudson.
Wich book of him is about that?
The invisible hand refers to the unintended consequences of pursuing self interest. For example the Act of Union stripped Scotland of its political independence but hastened its development as a commercial centre.
I so appreciate this as I too have accepted lousy doctrines
As was with Marx in Soviet Union, worshipped but not read
Smith with Conservatives, Marx with the Soviets, and Nietzsche. with the Nazis'. They took the rhetoric but missed completely missed the point
He overlooks the concept of competition.
Respectful thoughts.
can anyone give me the page where adam smith critiques division of labor? I wish I had the time to read the whole book now, but alas...
Extracts from
'Adam Smith: The Wealth of Nations.'
Book I:
The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed or applied, seem to have been the effects of the division of labor.
...
To take an example therefore, from a very trifling manufacture ... the trade of the pin maker ... ten persons therefore, could make them upwards of forty-eight thousand pins in a day. ... Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. ... The division of labor, however, so far as it can be introduced, occasions, in every art, a proportional increase in the productive powers of labor.
Book V:
But the understandings of the greater part of men are necessarily formed by their ordinary employments. ... The man whose life is spent in forming a few simple operations ... He naturally loses, therefore ... and generally becomes as stupid and ignorant as it is possible for a human creature to become. ... The torpor of his mind ... [, t]he uniformity of his stationary life ... [h]is dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his ... social ... virtues. But in every improved and civilized society this is the state into which the laboring poor, that is, the great body of the people, must necessarily fall
...
Notwithstanding the great abilities of [a] few, all the nobler parts of a human character may be, in a great measure, obliterated and extinguished in the great body of the people.
...
People of some rank and fortune ... [have] ... that full time to acquire ... every accomplishment which can recommend them to the public esteem. ... [Their] employments, too, ... are not, like those of the common people, simple and uniform. They are almost all of them extremely complicated, and such as exercise the head more than the hands. [Their] understandings ... seldom grow torpid ... [and they] generally have a good deal of leisure. ... The employments of some people of rank and fortune, besides, are seldom such as harass them from morning to night.
...
It is otherwise with the common people. They have little time ... their labor is both so constant and so severe ... that it leaves them little leisure and less inclination ... even to think of anything else.
Research by: Gregory M.
Sagegreene,
Wednesday
9-15-2021.
And the government doesn't intervene to "prevent" the division of labor. It intervenes to provide societal enhancements so that the negative consequences of the division of labor are offset by more uplifting diversions.
Few people actually read it... no kidding
the wealth of nations is a fucking huge book, it's actually 4 long books, no wonder no one read it.
Gad Yariv Its four pamphlets long. Penguin classics publishes it. Its not long compared to other books on economics or political economy.
Does anyone know the documentary these interviews were used in? I know it's by metanoia films the same folks who did human resources but it's not that one and I want to rewatch but cannot remember the name
That's not what smith said. He said that when the cost of shipping exceeds the money saved by manufacturing abroad, that imports would stop. Which is true.
Perhaps I misunderstood Noam, but what I got from this is that Noam believes Adam Smith was essentially correct and that conservatives today are misunderstanding Smith. In Wealth of Nations Smith said, I believe, that with great individual wealth came great obligation. Those who benefit the most from our economic system owe it to the rest to pay not just more in taxes for the general welfare but at a higher rate. This anticipated the subsequent federal income taxes enacted by Great Britain and the U.S., both of which adopted progressive tax structures. My understanding is that when conservatives say -- as many do -- that we need a flat tax (rate) they are shunning Adam Smith. That's a big thing to do considering the influence he had on America's economic system. I, for one, doubt the wisdom of straying so far off the proven path.
+Mooncut They never believed in Adam Smith. They just found it useful to quote mine him to support what they wanted to do.
+Mooncut Basically the neo liberals appropriated and grossly misused Adam's Smith's most famous turn of phrase.
Rather ironic, but then again think about how many people laud Randian ideology while ignoring conveniently how she was a stanch anti-theist.
Capitalist Adam nonetheless expressed a moral imperative in support of progressive taxation, which conservatives aren't free to dismiss.
He literally said Smith was making a poor argument.
@@GreenGretel How did Smith make a poor argument?
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” - Adam Smith “The Wealth of Nations (circa 1776)
Most "trade" is now transfer pricing hocus-pocus.
Awesome. What a treasure. One thing I've struggled to reconcile is the division of labour arguments. On the one hand they are obviously nuanced and I would go as far as to say spot on. On the other it is a bit difficult to see how one can progress a skill to a point where it is to a modern standard required in certain areas. E.g. I work in security engineering. This is highly specialized and a lot of effort needs to be expended just to reach a level of proficiency never mind something resembling excellence that could some day induce innovation (however small). I would spend about 8 to 10 hours a day just on this topic alone. This did make me ignorant and stupid in some ways like is predicted here (and in Smith's opus). I didn't know anything about geo politics in my twenties for example. Not until very late 20s in fact. I knew barely anything of philosophy until my mid 20s. Slowly I leveraged my interest in philosophy to dig my way out of this general ignorance and have expanded my mind. I think I was lucky though as I had some preconditions that worked in my favour. I was an accomplished and somewhat talented musician/composer from the age of about 6. I understood art and music (art to a lesser extent). Those things eventually matured and produced a realization that I had to broaden my horizons. I eventually learned about Zen and architecture. And little by little as I say I expanded my mind to include as many subject areas as would be deemed necessary on the path to enlightenment. Which is pretty much all subjects. But as I said I worked on security engineering for almost 10 hours a day for 10 to 15 years and midway through that journey, when I would finish work, I would work on these other subjects for another 6 or 8 hours a day sometimes. It was and is a monumental effort. Could I be as proficient in security engineering without heavily specializing in it? Probably not. So some division of labour was necessary for me just to survive (pay bills etc). I imagine other areas, e.g. medicine or dentistry, require enormous amounts of focus in just those areas just to be proficient at a high level. So how does one stave off ignorance ushered in by a seemingly necessary specialization path (referred to as division of labour herein)? Is specialization necessary to say repair someone's tooth or perform heart surgery and we agree it is necessary for these reasons how do we then avoid the downside of that approach?
Division of labor wasn't anything new even in the time of Smith. But the division of labor in societies has been considered a process of human advancement in pretty much every preceding era. The industrial revolution just allowed for finer subdivision of tasks. That subdivision of labor into tasks that you could teach to the average person in a short period of time allowed for the tremendous growth of the 20th century. The anti-industrialists of course demonized the division of labor by completely ignoring the benefits it has to everybody in the form of cheaper and better quality goods and claiming that the people performing relatively mindless tasks would otherwise be engaged in fulfilling jobs had the industrial revolution not forced them into this form of mindless work. Of course that completely ignores the reality of the early factory workers often came from these supposedly fulfilling jobs and had no interest in going back to working in the fields.
Guess we should just throw out Ricardo's competitive advantage theory then.
Adam Smith actually formulated the Labour Theory of Value, which us usually (deliberately) attributed to Karl Marx. He daid it is the amount of work that goes into producing diamonds that makes them expensive, not their scarcity.
Love this guy! Don't know if he's right, but always interesting!
Adam Smith tells of a man whose job it is to vent a steam engine
so it doesn't blow up. This man, through observation invents a
mechanism (Governor) that automatically does the job for him.
Always wearing that blue shirt!
…or he has a wardrobe full of them.
I have heard this argument on many occasions by Chomsky (and his impersonators). But the paragraph is as follows: "he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it." To flip his question, how does that support state orchestrated economy, or a mildly planned one? It was the same rationale Smith employed when discussing the state officials in Europe who had, in the past, pretended to lord over the individual financial decisions, and assuring their frugality by force. Smith states that government officials are often the biggest spendthrifts in society, and if their prodigality does not ruin the state economy, how can that of individuals who are limited already in their prodigality by their sympathetic (what would today be called empathetic) observations of the fact that their prodigality may soon be publicly known, and are thus dissuaded from being prodigal even in their private affairs. This, which was partly the base for his later work, The Theory of Moral Sentiments, was the basis of rationalization for Smith. And so, despite Chomsky's nuanced analyses and exceptional observation, he is very wrong on this matter. The left and the right, both, have attempted to claim Smith for themselves, and this is partly a good example of that. Smith is not as capitalist as many who adulate him (without reading him) are, but he is nowhere near as pro-central lording as many on the left believe.
Adam Smith, An Enquiry into the Nature and Causes of the Wealth of Nations (New York: Random House, 1937), pp. 734-5.
"In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of people, comes to be confined to a few very simple operations, frequently one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects too are, perhaps, always the same, or very nearly the same, has no occasion to exert his understanding,or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become."
"in every improved and civilized society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless the government takes some pains to prevent it."
Adam Smith suggested there, government should take "some pains" to prevent it. Not actions, PAIN. Adam Smith is okay with government planning or making rules to the greedy rich from turning poor labors into illiterate ignorant tools.
Invisible hand and sympathy don't always work. Peace
Another short comment, Smith never heard of a thousandth of things that are relevant in modern society.
Global warming, lobbyist, corporate bail out, globalization, big pharma, nuclear bomb etc
He would've worded it different or wrote completely different things if he had knew what were to come of humanity
@@shengloongtan229 Very good points, and the sections you reference are very well known and often recited. But you have to note my original phrasing: "Not as pro-central lording [...]" which implies that there are instances in which Smith is willing to tolerate governmental action in economic affairs. If you read further, Smith discusses education of children and adults through public institutions (government-regulated) to combat this dullness in their understanding and comprehension (and physical ability as well). This would be an instance in which I would disagree with the mode Smith preferred this principle be realized: viz. public education, (I am a proponent of the voucher system). Pardon the digression, the point I was intending to make was that Chomsky's point that the "Invisible Hand" was a positive preclusion of free capital flow is just factually, contextually, and plainly wrong. Chomsky makes no intelligible deductions in this respect. By that I mean, he only looks for the literal account of the Invisible Hand, but does not look for similar instances that apply the same reasoning as the Invisible Hand. Additionally, if he were really interested, he could have seen its other appearance in his earlier (in the original message I mistakenly stated "later") work Theory of Moral Sentiments which uses the same concept.
Lastly, I will readily concede that the Invisible Hand is not a perfect maxim to govern an entire economic infrastructure by. Just as collectivism is assuredly not. An equilibrium has to be reached between individual self-interests and the necessity of government intervention. If, by my last message, you understood me to say that the government has no place in economic action, I apologize for not stressing that point more. I was only trying to indicate that the greater part of Smith is dominated by the principle that government tends to do more harm than good when it invests itself a great amount into the economy.
@@connorbyers1872
He did quote the invisible hand from moral sentiments and related it to wealth of nations in this video, if I remember correctly in this video
ua-cam.com/video/8mxp_wgFWQo/v-deo.html
It doesn't matter, newton first law said chomsky is always right
The discussion of the invisible hand appears when he is criticizing the mercatilists, so in context the phrase refers to people getting to do their own things without the merchant capitalists telling the government that their laws should require people to act to increase exports and decrease imports. Hence discussing state capture as the problem, not the state getting involved in the economy.
Smith definitely thinks there are markets that the state needs to be involved in (defense, law and order, and to provide education, roads etc), so the interptation that capture is the problem is consistent.
Also, at the time there was very little difference between 'merchant elites' and the state. The mercantile system was a state created trading system that gave all of the benefits to merchants and none to consumers. Merchants were permitted to engage in discriminatory pricing on goods.
It wasn't just that they could influence politics with their wealth, but that they were the politics.
I'd say based on Chomsky's explanation of the invisible hand that he hasn't read Wealth of Nations either.
There are plenty of people who work at "stupid jobs" full time and go to college at night. These are people who have to work but see light at the end of the tunnel.
So, you can still read Aristotle and Adam Smith and work towards getting your degree. A large percentage of us are in the same boat. Thanks. Suzanne
Even by going to college the end goal for most is a job that still fits the division of labour. Just because it happens on a desk instead of the operation line of a machine doesn't make it any less of labour division.
The 2020's would see a time when Wealth of Nations is not only 'worshiped but not read' but mostly misquoted.
Agree - hardly anyone reads Adam Smith. Just like Clausewitz, Hegel and Marx for example. But I also think most people will do better reading books about what these writers wrote.
Well, I think Mr Chomsky is being as self-serving in his interpretation of what Adam Smith meant by the "Invisible Hand" as the conservatives he charges with the same crime.
(Although, I think Chomsky is on the mark when he discusses some of the drawbacks that Smith says attends the division of labour later in the Wealth of Nations)
This is the quote:
“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an Invisible Hand to promote an end which was no part of his intention.”
Chomsky was right about the context of the quote being importation and free trade, but the defining point of the Invisible Hand is the phrase "an end which was no part of his intention"; that there are diffuse advantages in a free market economy which can often go unseen because it is difficult to sum the seemingly disparate parts that make the whole. In this case the example is the benefit to local trade over foreign.
However, Smith goes on to provide another example in the "humble" labourer's coat which keeps him warm and all the many multiples of manufacturing and transport labour (plus energy, capital, etc.) that went into its creation.
"Without the assistance and co-operation of many thousands the very meanest person in a civilized country could not be provided... the easy and simple manner in which he is commonly accommodated," wrote Smith.
Providing the labourer with an affordable coat is the "end which was no part of the intention" of the business owner who was, for example, only making buttons to put food on his own table or cover his costs - not to expressly make a coat to clothe the humble labourer.
The wider benefits that flow from the inherent self-interest of free markets is what Smith was driving at. That's Smith's Invisible Hand: a metaphor for the mechanism behind this unforeseen consequence/benefit. To claim that Smith didn't mean this with his metaphor because he only used it once seems like a ridiculous and self-serving conceit, for it is contiguous with the greater contention of Smith's argument regarding the benefits of the division of labour and markets.
What not-so-invisible hand was guiding Chomsky's attack on conservatives in this video? (His absolute distaste for capitalism of course)
This is the quote about the invisible hand. Slightly disingenuous from Chomsky, sure Smith mentions invisible hand in the context of employing capital domestically but the broader point being made is about how in many cases individuals acting in self interest also act in the public's interest without ever intending it.
"As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."
Thanks, Jesus
I think it is both slightly disingenuous of chonpsky and of the schools who teach it would little prior context. Either way, smith was in many ways wrong about the “invisible hand”, ie tragedy of the commons
This is exactly right. I'm a little disappointed at way Prof Chomsky phrased that.
I think Chomsky's point still stands, and I'm sure he could go into much more detail if he felt it was necessary. In the scenario Smith is using it appears that he is making the assumption that the capitalists will view the preservation of the English economy as the highest priority, because their company may depend on a stable English economy, but that isn't always the situation. A company in that situation may very well be gain more by "dumping" the English economy and pursuing investments and allocating capital abroad. Which is exactly what happens/happened. The company acted in it's own interest which did *not* benefit the English economy. Which means it contradicts the premise of the Invisible Hand whereby individuals making rational choices in their own interest will benefit others as a whole. One could say that the company investing abroad "benefits the locals abroad" but we know that is complete and utter bullshit because colonialism raped the locals, murdered them, enslaved them, and exploited them beyond all recognition.
That's my read on it. The invisible hand assumes a rational individuals actions of self interest will benefit society as a whole, which it sometimes does, but it often, very very very often does the exact opposite to a monstrous degree.
Yeah, invisible hand was so wonderful for the society in 19th century, that government had to enact regulations.
One part of Adam Smith's writing that, while extremely important, is largely ignored. This is his analysis of how the private ownership of nature (which political economists referred to as "land") effects the production and distribution of tangible wealth (as distinct from the financial claim on tangible wealth). Smith's analysis followed that of the French school of political economists, the physiocrats. The physiocrats offered an entry level analysis of land markets, an entry level analysis because they were writing during a period when commercial agriculture dominated the French economy. Thus, they spent no real time analyzing the same land market dynamics that existed in town and cities.
Here is what they all understood to be the case. Every parcel or tract of land has some potential annual rental value as determined by demand (i.e., market forces) directed by whatever restriction on use are imposed by government. With regard to agricultural land, they described the process by which rental value is based on fertility and other factors that make it possible for the same input of labor and capital goods to produce greater output of agricultural commodities. The difference between output on the best land versus the next base land is defined by the political economists as "rent." Less and less rent arises as land quality falls. At some point, land cannot be worked to produce enough output to justify the required labor and capital goods. The land market has then reached its "margin of production".
Later political economists began to apply the Smith-Physiocrat analysis to other land markets, to land that holds timber or subsurface mineral deposits. All sorts of locational advantages or disadvantages determine how much, if any, rent comes from locational advantage. Some, most prominently Henry George in the late 19th century, argued that as rent arises based on natural advantage or advantage created by privilege under law, rent rightfully belongs to society. George argued that rent should be publicly collected. And, once one turned over whatever rent was due, the individual (or business entity) had met any financial obligation to society. The taxation of earned income flows, of tangible assets and of commerce is by definition an unjust confiscation of private property.
Adam Smith was a Scotsman not an Englishman
Did you know one of trumps picks, Puzder, belongs to the Adam Smith Society? Do you think he read the WHOLE book? 💚
Does this Puzder convincingly fulfil the role of the token socialist at the WH ?
where is the source for this video?
James Z. S read more than the first 100 pages of Smiths work
@@waswaswad I think he meant to ask what interview these clips are taken from.
At 1:02 Noam is saying the exact opposite of what Smith says in book IV chapter 2 of Wealth of Nations. He says restricting importation will, on the balance, harm GB or any nation of trade doing the same. So Noam is embellishing the gravity of his second point by alluding to Smith’s “concern” about free market trade diminishing GB interests.
Illusion and fantasy says it best .
"Free Capital Movement" is generally addressed by having better business policies than the places they might otherwise invest in. This includes Rule of Law, which is probably THE most critical aspect of making ANY economy work.
Fewer useless, needless regulations generating paperwork no one will ever actually look at, less senseless money grabbing taxation (why is it "greedy" for businesses and investors to want to keep the money *they* _earned_, but not "greedy" for government to grab anything they can out of your pocket... that _*_you_*_ have _earned_ ?)
It says more than enough that Chomsky's failure to grasp the massive array of Marxism's flaws says he's not economically astute or economically *competent* enough to be judging any OTHER economic system effectively.
A great article.
The free traders will always mention Frederick Hayek. But get his analysis wrong.
On the division of labor topic. The government intervenes with education and the people must also pursue self-education. Well done not telling all of it. Education and self-education is a reoccuring theme.
Same thing with psychology ,medicine , military and especially RELIGION
Noam Chomsky is a very intelligent man, and he is right by saying that Adam Smiths arguments for free markets are rather balanced and nuanced, but unfortunately his assertions regarding how Adam Smith used the term “Invisible Hand” in “Wealth of Nations”, and how that relates to the modern use of the expression, are misleading at best, and plain wrong at worst. Since there seems to be a lot of confusion on the topic, I decided to write a short explanation on how Adam Smith used the metaphor of the “Invisible Hand” in “Wealth of Nations”, and why I think Chomsky’s claims are misleading. I will post some version of this text on multiple UA-cam videos in which Chomsky talks about this subject.
In “Wealth of Nations”, the “Invisible Hand” is mentioned once in book IV, chapter 2. That chapter is concerned with restraints upon importation of goods that can be produced at home. Among many other things that are discussed in this chapter, Adam Smith mentions the phrase “Invisible Hand” somewhat offhandedly, in a discussion about investment behavior. Now let’s look at the full quote:
“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it.”
With this sentence Adam Smith summarizes 2-3 previous pages in which he outlines his arguments. The quote has roughly four parts. We now look at each of them individually, and add in the context of the previous pages.
1. “By preferring the support of domestic to that of foreign industry, he intends only his own security; […]”
This is the part that Chomsky mostly talks about. Adam Smith argues that upon equal or close to equal profits, merchants generally prefer to invest their capital in domestic rather than foreign industry. The reason for this is that the merchants like to have direct oversight over their business, and they are more accustomed to the people and the laws of their home country, which reduces the risk of doing business. Now, Chomsky is largely correct when he says that the “Invisible Hand” refers to this sort of “Home Bias”, but he fails to mention that according to Adam Smith, this is due to investors acting in their own self-interest. More importantly, he also fails to mention that this “Home Bias” is not the only thing to which the “Invisible Hand” is referring to.
2. “[…] and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain […]”
This is a totally separate argument and has absolutely nothing to do with the “Home Bias” that was the subject of the first part. Smith argues, that when people invest their money, they look for the most profitable industry to do so. The most profitable industry in turn, is the industry which creates the most value. Since the annual revenue of a society is equal to the value added in production, the self-interest of investors, according to Smith, leads to the most beneficial investment of capital. This very much resembles how the expression “Invisible Hand” is used today, but Chomsky does not acknowledge or even mention this part at all.
3. ”[…] and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
Finally, we come to the part, where Adam Smith describes these mechanisms with the metaphor of the “Invisible Hand”. It generally refers to the fact that the self-interested actions of individuals can lead to outcomes which were not intended by the individuals. The important part here is “AS IN MANY OTHER CASES”, meaning that the metaphor is not limited to the aforementioned instances, but can be applied to many other cases as well.
4. “Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it.”
This last part concludes by saying, that this mechanism of the “Invisible Hand” frequently leads to outcomes which are beneficial to society as a whole, which again is very much in line with the modern use of the expression. Arguments for other cases where the “Invisible Hand” leads to better societal outcomes, can be found all over the book.
In summary, the “Invisible Hand” as it is used by Adam Smith in “Wealth of Nations”, refers to the fact, that individual self-interested actions can lead to unintended outcomes. Smith also states, that the unintended results of individual self-interested actions, frequently improve national welfare better, than actions which are consciously designed to do so. Smith mentions the metaphor while explaining two mechanisms (1. Self-interested investors prefer to invest at home compared to abroad; 2. Self-interested investors invest in industries, which are most beneficial to society), but he also clearly states, that this holds in many other cases as well.
So, Chomsky is right in saying that Adam Smith uses the “Invisible Hand” in “Wealth of Nations” to explain some sort of “Home Bias”, but he is wrong in reducing the expression to this very specific instance. He acknowledges only the first part of the sentence, but ignores the second part, and even more importantly, he ignores the third part in which Adam Smith explicitly says that the two mentioned cases are just specific examples of a more general concept, which applies to many other cases as well. Chomsky seems to imply that the way the expression of the “Invisible Hand” is used and understood today, is somehow in contrast to what Adam Smith wrote, but this assertion is simply not correct. The modern use of the expression “Invisible Hand” is a completely legitimate interpretation, and exactly in line with how Adam Smith used it in “Wealth of Nations”. Chomsky’s reductive interpretation, which he has repeated many times over the years in many different places, is indicative of him being either disingenuous or misinformed. If we give him the benefit of the doubt by assuming that he is being genuine, then his line of argumentation reveals a very superficial reading on his part, and he would have been well-advised to read the passage a little bit more carefully.
So ... Adam Smith was right?
Xuan Vinh To Yes, his fear turns out to be real today
Yes and he knows it and hates it
Haha good one 😂
It’s irrelevant
All economies are "command" economies , the only diffetence is who does the commanding.
I feel like the antithesis of Adam Smith: widely read but certainly not worshipped.
I don’t think Chomsky understands why it is that Adam Smith is well-regarded. He isn’t well-regarded because his particular economic ideas were great, but because the analysis behind those ideas launched modern economic thought. It’s not that different from how Plato and Aristotle are well-regarded but almost no one actually remembers or agrees with what they wrote. Or how Chomsky is remembered as a “well regarded linguist” yet almost none of his worshippers know a single one of his ideas.
Most people agree with Plato whether they know it or not.
"no one actually remembers or agrees with what [Plato and Aristotle] wrote"
Is this a joke? These philosophers formed the basis of Western thought and are still widely discussed in universities and elsewhere. Maybe you can't think of any of their ideas, but that reflects more on your lack of understanding than anyone else. Take better notes next time.
“Suppose GM assembles parts in Indiana and sends them to Illinois to assemble and then NY to sell. Is that ‘trade’? I don’t know, but it doesn’t do A Lot for global warming!
I don’t think he understands Adam Smith. His takeaway is that England at that time should stay protectionist to prevent capital flows?
I never knew Chomsky relied so heavily on strawmaning
Who is he strawmaning?
Free capital flows are routinely lumped in with free trade as an almost always good thing... So much so that it has turned a lot of folks against free trade. The net effects of capital flows are much more dependent on particulars and often a net negative while being fabulously positive for a handful of powerful entities.
Like how few people have read Darwin's The Origin of the Species yet attribute Darwin with all sorts of thoughts he never expressed.
how is that not trade tho lol
Nobody has read adam smith but noam chompsky. Hes the only one. Everyone else is too dumb or lazy. Thank you noam.
"Worshipped but not read" I guess that's about Lenin and his suicidal teaching of eternal war #Leninism
As a Scotsman wouldn't Smith have said, the UK or Britain?
not necessarily, at the time even though England united with Scotland in 1706, British wigs still held England's interest at heart, especially when discussing trade or politics. Take the Revolutionary War for example, The revolutionaries were not fighting against Scotland, they were fighting against English investors and rule of the king of England.
"the king of England" didn't exist by the time of the Revolutionary War, since England hadn't been a sovereign nation since the 1707 union with Scotland. England and Scotland have had the same monarch since 1603. At the time of the revolutionary war, George III was King of Great Britain and King of Ireland.
Regarding the question, during most of the 18th,19th and early 20th centuries, Great Britain was often referred to as "England" (many ignorant non-Brits and arrogant English still do), a bit like referring to the Netherlands as "Holland". While this would have rankled with a lot of Scots at the time, it was less so for those in the upper classes who were less interested in Scottish patriotism. Especially as they were enjoying the fruits of Union and the Empire.
Good point.
Look, I found a second time it was used. Disproving the lier
“By] directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. (4.2.9)”
1:54
"He's worshiped, but not read..."
Like, I dunno, Karl Marx?
That’s not what I remember when I read the part about the invisible hand this guy isn’t telling the truth
Dictator is one who tells you when and what to write in my language !
Arbitrage, not trade
Imagine Biden giving this little explanation in a debate, haha, in my dreams!
Why would he?
This characterization of Adam Smith seems (to me, at least) repeatedly and unabashedly deceptive in several places. For example:
In the line:
* "[Smith] points out that division of labor is monstrous because it turns people into creatures as stupid and ignorant as a person can possibly be - that person just becomes a machine, and that's a terrible attack on fundamental human rights, and therefore, he says, in any civilized society, the government's going to have to intervene to prevent the division of labor"
I've searched and could find no place where Smith even mentioned fundamental human rights, much less condemned division of labor for violating them. Can someone confirm that Chomsky is interjecting his own values into his characterization of Smith? Assuming this is the case, this to me seems disingenuous to do so mid-sentence when going chapter-and-verse with Smith, as it is not at all obvious to the casual listener that this is not what Smith actually said. (I've seen Christian pastors use this same trick when trying to inject their own personal ethos into the teachings of Christ.)
It seems then that this paragraph is one likely referenced:
"He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become [...] But in every improved and civilised society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it."
full context here:
www.marxists.org/reference/archive/smith-adam/works/wealth-of-nations/book05/ch01c-2.htm
From this context, Smith is endorsing some form of publicly funded education system (not necessarily like the one we have today) as a means of mitigating these downsides. It is NOT a call for the government to intervene to prevent division of labor (whatever that means).
The list goes on. Chomsky implies the invisible hand was mentioned only once by Smith, when it was really only mentioned once in the Wealth of Nations, having also been mentioned in the Theory of Moral Sentiments. (Strictly speaking, Chomsky didn't lie here, but chose wording that would mislead the casual listener.)
The proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest ... [Yet] the capacity of his stomach bears no proportion to the immensity of his desires ... the rest he will be obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets which are employed in the economy of greatness; all of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice...The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own convenience, though the sole end which they propose from the labors of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements...(!!!) They are led by an invisible hand to make nearly the same distribution of the necessaries of life (!!!), which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition.
It seems to me that although Smith was speaking about the invisible hand in the context of foreign vs domestic trade, his primary use of the metaphor was to describe that an individual's personal interest was the public interest because his only means of gaining capital was to perform some work in the interest of others, for which they would pay him. Basically it's in your interest to help others. You can do what you want all damn day, but if you want to make a buck you have to do something useful for someone else.
I recall nothing detracting said about division of labor, but who knows, it's a big ass book.
Chomsky's interpretations seems a little disingenuous.
I think the use of the phrase in that chapter ('Restraints on Particular Imports') was to explain that an investor was making the most effective use of his capital where he was making the investment decision exclusively based on its potential return, rather than for some other motive (like patriotism). Like Chomsky I find it a pretty woolly and unconvincing chapter, long overtaken by technologies and international trade agreements. How it can be extracted from its context, and exploited as a defence of the free market, it is hard to see. I suspect the appeal to conservatives, neo-liberals and capitalists is that the phrase preserves some faint echo of the Deity, a figure close to their hearts, and one seen as foundational to their political and economic philosophy.
Every time I listen to Chomsky lately, I find something he's misrepresenting. Here I wonder if he perhaps also haven't read Smith, because he's totally misrepresenting Smith's argument and then misuses it for political purpose.
Smith's argument isn't that people would somehow miraculously prefer home production. He makes a solid economic argument for it. Namely, that assuming equal or similar profits, domestic trade is preferable because the further the capital goes the higher are transactional costs and risks. In other words, if you can sell a product at home for $6, there's no reason to transport it to another city to sell it for same $6. Then the argument is made that domestic trade is also better for the nation and therefore incentives of the people and the society align 'as if guided by invisible hand'.
Obviously the key point here is the 'assuming equal or similar profits'. If you can sell your goods for $6 in your home town and for $600 in the other town, clearly, it would be beneficial to sell it there.
In my economics class I was taught that capitalism is based off of selfish transactions, and that the invisible hand referred to taxes taken from those interactions.
You're closer than Chomsky.
Most of the economics teachers themselves haven't actually read the whole book... I know which page Chomksy talking about, you should read it yourself don't take his word for it.
@@michaelanderson2881 no
Close to what? Understanding what Adam Smith meant when he used the phrase, or the ignorant way in which economics teachers use it? Seems your judgement isn't worth much if you misunderstood what was being said@@michaelanderson2881
1:24 : this is disappointing, as it is pretty clear from the text that Smith is expressing an optimism that individuals pursuing selfish interests will produce good for the many. And of course, history has not borne this out.
My greatest nightmare is of a Neofascist America ruled by Austrian / Chicago / Neoclassical Economists & bigotry.
I fear the day it comes, but how would I be able to notice that it has has arrived?
(NB: my ignorance is feigned for comedic effect)
God damn... this guy's knowledge.
"Internal to a huge command economy." THAT is communism! However, we in the U.S. love to use the gaslight false terms "free enterprise" or "capitalism." It is in actuality fascism as Mussolini and others defined it...the merging of interests and control of the economy by corporations and the state. We are so self-deluded and kept stupid by those who or control both information and education, corporations and the state respectively.
Chomsky's true genius, outside of linguistics, was to never say anything anyone could pin him down on.
That is a 100% lie about the Invisible hand
I’m not a bit surprised the brilliant economist and specialist in international trade,Chomsky,mis interpreted free markets and the in put of the invisible hand in directing trade and investment.Im sorry ,what was his brilliant solution for the advancement of civilization? Oh yes ,some idealistic,impractical and illogical form of socialism where everyone is happy,human nature and human frailties and treachery are suspended .
The tendency of academics to assume expertise in one area,linguistics in this case,is an automatic imprimatur for legitimacy in any discipline regardless of complexity or experience.
"the invincible hand" Adam Smith was a nutty professor
Chris Faraday invisible*
The best part is when Noam Chomsky talks about the division of labor. Adam Smith was right about it [see Werner Sombart, The Jews And Modern Capitalism, Julius Evola, Revolt Against The Modern World, Part Two Genesis and Face of the Modern Worden, Chapter 35 The Regression of the Castes ; Julius Evola, Men Among The Ruins, Chapter 6. Work - The Demoniac of the Economy.
Very misleading of Chomsky: "The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species."
The Theory Of Moral Sentiments, Part IV, Chapter I, pp.184-5, para. 10.
"Every individual... neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."
The Wealth Of Nations, Book IV, Chapter II, p. 456, para. 9.
I can't help thinking Chomsky is arguing with some implication that you can't be influenced by Smith or use some of his arguments without agreeing with every single thing that he said.
@Luke F yup, these are all points of a classical liberal. Its always the radical left that is arguing that classical liberalism is heartless and does not want any state intervention. While in reality classical liberalism is just awearness of the bad consequences state intervention may have, and very often actually has. Just like the state in Smiths days forbid the workers to strike for higher wages, but allowed the employers to make agreements for lower wage. Thus it was state intervention that kept the wages low.
@Luke F ah common. This is such abstract idiological talk. Even you use of the word "capitalists" betray you do not look at facts but just view the world through an a-priori marxist idiological eyes. Its just not interesting to argue against.
@Luke F yeah sorry, i have very little patience with talk like: "capitalism is the state". What on earth does this mean? Now you say you mean private property by capitalism. Ok, so you were saying the state is private property? Its so general and vague that you can always pretent that you right about something. If you want to start to think clearly just use concrete words and define carefully. It may help you.
@Luke F the state is centralised coersive autority.. well i will let that one slip for now. Anyway, politicians are not paid by the wealthy, they are elected. When it does happen that they are paid by the wealthy we call it bribary, and its a crime. Nevertheless it happens that sometimes wealthy people buy influence in some ways, and this is generally regarded as wrong by left and right and there is a lot of effort to combat it. Some states are more successful than others in this. Most northern European countries are quiete succesfull in this, and in these countries the wealthy pay almost all of the taxes. In the US its less succesfull, but even here its not as simple as: the politicians are paid by the wealthy. Second, in most of the European countries most of the capital is in the hands of pension funds providing pensions to normal people. So naturally you see a tendency to protect capital, because most of the big corporations are indirectly owned by the people, i.e. the pension funds. Now its true a lot of the capital is owned by a few rich as well, but I do not see much evidence that they are buying the politicians. Most of the time there are just the usual suggestive accusations without much evidence that are brought forward. What you do see is large corporations that are very much helped by politicians, but the reason for this is usually to get more employment in a country, not to help "the capitalists". Like I said, these corporations are also for a large part owned by pension funds or private equity firms indirectly owned by pension funds.
Hmm, interesting interpretation of the wealth of nations. It's 100% completely different from my understanding of Smith's writing in the context of his era. I read the book front to back too and I don't recall him ever mentioning democracy nor implying the notion of spreading democracy everywhere in his book. The main takeaway I got from the book was simply how a nation grows and where a nation's wealth comes from. The part about pro great Britain, that's completely false. He never said that lol. He was in fact, very critical of British imperialism and its inefficiencies. He never talked about the invisible as a method of one nation abusing it over another country. And he was also very supportive of the US colonies seperating from the empire because of their exploitation by Great Britain. Don't you just love it when people throw in and insert their own ideas into other people's writings to push a certain narrative and agenda lol.
Trade agreements mean that the investor class now has the right to the natural resources of all countries concerned with no consideration for the indigenous people in those countries. Nationalism is used when there is conflict among the investor class and they are trying to gain advantage in choice markets or materials rich areas. Indigenous people often feel that nationalism is about them, but it’s not.
The phrase "worshipped but not read" is true for Smith and even Chomsky himself.
Many people seem unaware of Chomsky advocating for brutal dictatorships, as well as denying the existence of the Cambodian genocide, throughout the history of his career as an "activist". Those that are aware of his mistakes and still worship him are even worse.
He never even admitted to being mistaken, instead opting to throw insults at people.
He was a brilliant linguist, his work even impacted computing. Sadly as an activist he has a history of supporting genocidal regimes just for the sake of being against the US, including Russia in the modern day.
Chomsky is a fame hungry liar
Chomsky cant be human lol no human can possess so much knowledge. Maybe he's an alien. That's why he cites the Martian/alien perspective on humanity so much 🤔
"England will be saved from the movement of capital out of the country by an invisible hand."
If that's what Chomsky said, here's a bulletin: THAT'S NOT EVEN CLOSE.
The Invisible Hand is the phenomenon that occurs when an individual employs CAPITAL and LABOR to pursue his own interests, and by doing so promotes the interests of society as a consequence.
"Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."
IT's really hard to read because it's SO RACIST. (not that he was more racist than the rest of his generation)
If not for Division of labor Noam would not have a gig at all. Adam Smith was smart enough to understand that every thing he saw in economies of any kind has two sides. Anyone arguing against division of labor is a troglodyte.
Chomsky need to stick to language, I never could stand this guy.
Chomsky is a liar that's why you can't stand him
I think noam chomsky has an invisible brain.
He is one of the most important people of the 21. century, advanced multiple schools of science, is a politican activist and still answers e-mails and does political live-debates online while being 93(!) years old.
I think it is pretty much consensus, that he does in fact NOT have an invisible brain.
I feel sorry for this guy he talks about someone who doesn’t like but thanks to him life of billions of people are doing well and believe in a system that was and still the main misery of humanity till now , it is like convincing someone with the bull shit that it tastes bad looks bad but healthy , good luck
What the fuck is wrong with your grammar, I can’t even tell what you were trying to say.
free trade investment will go to the third country ...
until then western world became a third country , then free trade investment
will go back to western side ........ what is wrong about that ??
Well this is a load of bull. Wouldn’t expect more from a genocide denier.
Here is the actual quote:
“[The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.”