Charles Darwin vs. Adam Smith

James Galbraith is trying to debunk the idea of the "invisible hand."

More than a century later, economics has not escaped its pre-Darwinian rut. Economists still don't understand variation; instead they write maddeningly about "representative agents" and "rational economic man." They still teach the "marginal product theory of wages," which excuses every gross inequality faced by the laboring poor. Alan Greenspan even recently resurrected the idea of a "natural rate of interest" to justify raising rates, though that doctrine had been extinct for 70 years. Economists still ignore the diversity of actual economic and social life. They say little about forms of ownership and the distribution of power, and almost nothing about how pointless product differentiation and technical change now shape and drive the struggle for survival among firms.

Metaphysics still persists in economics. It takes the form of "competitive equilibrium"-the conditions under which selfish individuals and tiny small businesses in free competitive markets interact to produce the best results for social welfare. Competitive equilibrium is a state of perpetual economic stagnation, its study an exercise in mental stasis. This is because there is nothing to study: The idea dominates textbooks and journals but has never existed in real life.

Interesting. I've seen these kinds of theories before, but I confess that I don't know enough about economics to know if they are kooky or cutting-edge. Sure I had a few econ courses for my MBA but this stuff is digging in deep.

  • I’ve read this and reread this. All I get is he doesn’t like John Roberts (and pRobably Scalito), is self-satisfied and snide (maybe just passive aggressive), and painful to read – with no clear point or proof.

    Then I noticed the Mother Jones logo. Were you researching rolling papers?

  • Rob

    LOL! No, I just like to pop in ever once in awhile to see what they are up to.

  • I don’t think it’s deep; I think it’s just confused. Adam Smith’s economics is quite Darwinian, and I thought this was well-understood by those who study intellectual history. The “invisible hand” was simply an outcome of forces that created organization without a central organizing intelligence, precisely as Darwinian evolution posits for living creatures.

  • asg

    I didn’t read the Galbraith article, primarily because the snippet you posted leaves no doubt whatsoever that he hasn’t the slightest clue what he’s talking about.

  • Bill Wells

    I do not think it is that confused. The metaphysics, which all science rests upon, really is not working. The struggle to cut through and have a new foundation for understanding requires more than the emergence of a “cool house” for the invitation only crowd. We have got to understand, deeply understand how and why we are doing what we are doing.

  • Anonymous