----------------- HES POSTING ----------------- Chas Anderson wrote >Sounds like what you're describing would today be called economic efficiency, the maximization of net social benefits, say. One problem, though, in the quote where Smith is detailing the actions which give rise to the invisible hand, he states "By preferring the support of domestic to that of foreign industry, he intends only his own security". Is this a lapse in judgment on the part of Smith or does he perceive the invisible hand as being something less than free of invisible bruises and blemishes? > I don't follow, Chas. My answer to your question is that this clause represents neither a lapse nor an exception to the "invisible hand" assertion. Here is the complete quote again. Sorry for the reposting, but you are raising a question of how this passage should be interpreted yet you only extract a piece of it. "But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. 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 maybe 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. 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. 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." Smith seemingly aims to make three points in the sentence about the invisible hand. The first is about security; the second is about what we would probably today call maximizing profit; the third, which also serves to introduce the rest of the paragraph, is about how maximizing profit promotes the "society's interest" or "the public interest." Again, I don't see your point. Perhaps you are thinking that he has slipped in an anti- free international trade argument (which, by the way, need not be related to the invisible hand assertion, although I suspect that in Smith's mind it was.) I doubt it, since other parts of this book make his views on free trade clear and since there is nothing in the context of the clause that you quoted to suggest that he was interested in international trade here. All he seems to be writing about in this clause is that a capital owner who uses his capital abroad, other things equal, encounters greater risk of loss, presumably because he is not a citizen of that other country, because he is not familiar with the norms and laws of the country, or because of communication and transportation costs. Pat Gunning ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]