“Modern professors of economics and ethics operate in disciplines which have been secularised to the point where the religious elements and implications which were once an integral part of them have been painstakingly eliminated … [scholars] either put on mental blinders which hide from their sight these aberrations of Smith’s thought, or they treat them as merely traditional and in Smith’s day fashionable ornaments to what is essentially naturalistic and rational analysis… I am obliged to insist that Adam Smith’s system of thought, including his economics, is not intelligible if one disregards the role he assigns in it to the teleological elements, to the ‘invisible hand’” Jacob Viner The Role of Providence in the Social Order (1972, pp. 81–82).
Abstract
The invisible hand image is at the centre of contemporary debates about capacities of markets, on which discussion of many other topics in business ethics rests. However, its meaning in Adam Smith’s writings remains obscure, particularly the religious associations that were obvious to early readers. He drew on Isaac Newton’s theories of divine action and providence, mediated through the moderate Calvinism of the eighteenth century Scottish circles in which he moved. I argue within the context of Smith’s general providential account of markets, the invisible hand operates restrain inequality and capital flight, thereby stabilizing the market system. Such an understanding of the invisible hand raises questions for contemporary religious and secular discussions of the capacities of markets in the wake of the global financial crisis.
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Notes
References to Smith’s works will be to the Bicentennial editions published by Oxford University Press during the 1970s (now Liberty Fund) which will be abbreviated as TMS and WN.
Various citation analyses of Smith’s work have been undertaken, utilizing the electronic search facilities of Google Scholar and JSTOR. The current upsurge of interest in Smith began in the 1970s, and references to the invisible hand in the early 1980s. This followed neglect of his work for most of the twentieth century after his initial rise to fame in the early nineteenth century.
Jacob Viner, after writing his classic paper for the Chicago celebration of the 150th anniversary of the Wealth of Nations, published little else on the topic. Two posthumously published works (Viner 1972, 1978) give some indication of Viner’s vast reading over subsequent decades as he pursued the question of the religious background of eighteenth century political economy. The Mudd Manuscript Library at Princeton contains many kilograms of evidence of his pursuit. Two scholars who took up Viner's questions were Bitterman (1940), whose work reinforced Viner’s conclusions and Coase (1976) who disagreed. Coase’s conclusion “it seems to me that Viner much exaggerates the extent to which Adam Smith was committed to a belief in a personal God” (1976, p. 554), if correct, is about Smith's personal faith rather than the influence of theology in forming Smith's ideas, which was the more important question that interested Viner. As Viner stated in correspondence November 3, 1965, responding to questions from Alec Macfie about Smith’s personal faith “I am not really interested in Smith’s views re religion except as items of intellectual history to be analysed if at all for their logical character and their relevance to his thought on other matters”.
Commentators have speculated about where Smith might have picked up the invisible hand language—ranging from straightforward associations with divine hands in the Bible to Emma Rothschild’s (1994) suggestion that it could be bloody and invisible hand of Shakespeare's Macbeth.
A recent thorough investigation of previous usage by the historian of science Peter Harrison (2011) shows that hidden and invisible hands were frequently discussed in sermons, devotional works and Biblical commentaries in the seventeenth century. The idea usually expressed is that God accomplishes his purposes in history in spite of the intentions of human agents. It is an expression of the Christian doctrine of divine providential care for humanity. Smith seems to be transferring the idea from history to the economy.
An intriguing discovery by Harrison is that the 1762 Glasgow edition of Calvin’s Institutes translates Calvin’s Latin in Book 1 84 as “But those things which appear to us to happen by chance, faith will acknowledge to have been owing to a secret impulse of God. I grant there doth not always appear the like reason, but doubtless we ought to believe, that whatsoever changes of things are seen in the world, are brought about by the direction and influence of God’s invisible hand”. Harrison suggests that Thomas Norton’s 1561 translation “the secret sturring of the hand of God” is truer to the original Latin and that the 1762 editor seems to have been influenced by the providential associations of the invisible hand phrase. It is reasonable to suppose Smith was similarly influenced by the common providential associations.
Another intriguing suggestion about the source of the invisible hand image was made by Gloria Vivenza (2008). She notes that Adam Smith at WN V.ii.h.3 (p. 859 of the standard edition) cites Dion Cassius on Roman inheritance law and mentions in a note the 1734 work of Burman de Vectigalibus. Examining this work, Vivenza found a discussion of the hidden activity of Jupiter interrupting the normal course of events that connects with Smith's use of the invisible hand image in his early essay History of Astronomy. As Vivenza points out, similar discussions in classical literature abound, and we cannot be sure this work was in fact Smith’s source.
Some historical and philosophical aspects of the relationship between economics and religion are dealt with in Oslington (2003, 2008) and the significance of religion for debates about markets by Friedman (2005) and McCloskey (2006). Bishop and Douglas (1995) notes the ubiquity of the currently dominant interpretation of invisible hand for the moral case for free markets and self-interest, examining its coherence in relation to issues in business ethics such as the exploitation of monopoly power, collusion, lobbying, etc.
I have no interest in constructing a pious Smith to comfort people of faith, or to advance certain religious agendas. The quotation above from Jacob Viner (himself secular, after an orthodox Jewish upbringing) and other material in the Mudd Manuscript Library at Princeton University questions the construction of a secular Smith by economists to suit mid-twentieth century American sensibilities. Recent views of Smith's personal faith range from Long’s (2009) portrait of Smith as an orthodox Christian believer, to Kennedy (2008) at the other extreme, who suggests Smith had a hostility to religion which he succeeded in hiding from his contemporaries.
The connections with Calvinism and natural theology are discussed further in Oslington (2011). Moderate Calvinism and the British tradition of scientific natural theology were not in conflict. The opening paragraphs of the Westminster Confession of Faith, the official statement of the Presbyterian faith in Smith's Scotland, which Smith signed, explains that the God the creator is known to us by the light of nature, though imperfectly.
The History of Astronomy essay was probably begun by Smith in the 1740s, polished in Edinburgh before reaching final form in the late 1750s. It was published in 1790 after Smith’s death, and was one of the few items he asked be spared when his unpublished papers were burned by his literary executors. Ross (1995, p. 99) discusses the dating.
Providence is one the core doctrines of Christianity, with a long history. It is distinguished from the doctrine of creation, God’s finished work, in that God’s providential care for the world continues. It also differs from creation in that the created order is good, while the present order under God’s care is not. Providence is also distinguished from the doctrine of redemption, God’s restorative activity through Christ, as providence has more modest maintenance role. Helm (2003) discusses the doctrine of providence more fully, along Calvinist lines.
In the literature the most important discussion of the History of Astronomy passage Macfie (1971), who finds the reference to the invisible hand in the History of Astronomy puzzling, especially the way irregular events are attributed to the gods, seemingly contradicting the other invisible hand passages which he believes are about providential activity in regular events. In the end Macfie suggests this early and somewhat ambiguous reference should not overshadow the later “classic” expressions of the invisible hand idea.
Some of the interpreters who see the hand as divine were mentioned in the introduction, notably Viner (1927). The literature specifically on the invisible hand passage in Theory of Moral Sentiments is not extensive, with the two substantial treatments being Macfie (1970) and Brewer (2009). Macfie called attention to the natural theological background of the passage, then concentrated on Stoic natural theologies, though he ended up puzzled by the inconsistencies with the other invisible hand passages, and called for further investigation of the natural theological background. Brewer’s contribution was to examine the passage against the background of eighteenth century debates about luxury, and argued the passage makes the point that while income and consumption may be unequal, the consumption of necessities such as food is equalised, and perhaps the rich are no happier in the end than the poor. Brewer's interpretation is compatible with mine. Considering the theological background allows us to see how the equality-maintaining invisible hand fits into Smith's larger conception of divine activity.
It is incredible how often the passage is quoted to include “as if” by an invisible hand. Stiglitz (2002) is one among many examples.
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Oslington, P. God and the Market: Adam Smith’s Invisible Hand. J Bus Ethics 108, 429–438 (2012). https://doi.org/10.1007/s10551-011-1099-z
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DOI: https://doi.org/10.1007/s10551-011-1099-z