Wen's visible hand

  

If no one listens to the wisdom of a half Chinese economic commentator when it comes to China - then who can you trust? Nice work again Ben. I do enjoy your columns (and I say that to no one else).

  

Thank you Jamie, now it's not only China that put a smile on my face.

  The only reason Adam Smith might be turning in his grave is because economists and others who write about economic issues don't bother to read his works and incorrectly credit him with ideas that are not his. The metaphor of the invisible hand is used exactly once in Wealth and is not used as a metaphor for the general operation of markets. Throughout Wealth there are numerous discussions of instances where unfettered self-interest can have negative consequences.

Here for example is Adam Smith on banking (WoN 2.2.94):

"To restrain private people, it may be said, from receiving in payment the promissory notes of a banker, for any sum whether great or small, when they themselves are willing to receive them, or to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respects a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments, of the most free as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed."