What is the sound of an invisible hand playing a MIDI controller?

Yes, in the latest evidence that the Interwebs really are Douglas Adams’ imagined Infinite Improbability Drive, a conversation from CDM’s humble forums about the economics of Radio Shack and MIDI jacks has led to a blog response from a non-musician defending the true legacy of Adam Smith.

I’m serious. I’m not just, you know, dumbing down CDM and pandering to the economist audience to pick up cute economist girls.

The blogger also feels our forum poster say “dude” too much. Like, whatever. Don’t have a cow, man.

It started with a thread about the ridiculous price of electronics. (Personally, I wouldn’t try to extrapolate any kind of larger economic theory from a chain run as badly as Radio Shack has been under recent management, but our posters did, and I digress.)

UK economic blogger Gavin Kennedy fires back:

The myths about the invisible hand are widespread and deep. It has been switched from supporting an argument of Adam Smith about risk-avoiding merchants contemplating the risks of foreign trade into an all purpose guide to individuals in markets …

The real wonder about markets is that there is no central direction; there are no invisible hands, feet, or disembodied parts, guiding anybody. There does not need to be! The relative prices of whatever is exchanged are the only guides needed. It’s called the price system. That’s what Adam Smith actually said.

And he compares the myth of the invisible hand to the myth of Santa Clau– hey, stop crying, Suzie. I’m only joking. The invisible guiding direction of market economics is real, and it’s going to bring you a MicroKORG next Christmas, but that’s not until December and your birthday isn’t even until October.

Ahem.

Of course, Gavin is right.

Image credits: gravestone of Adam Smith, Duncan; gravestone of Radio Shack, Куртис Перри.

Here’s what Adam Smith actually said, without paraphrasing, via a Wikipedia article on invisible hands (which needs quality cleanup, if there are any Wikipedian economists out there … maybe you can add a disambiguation page for other forms of invisible hands, too).

But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual wasteman produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavors 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 labors 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 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.

If Adam Smith were alive today, I’m sure he’d also say, the individual consumer in a society acting in his own self-interest won’t direct the product of his industry at Rat Shack, because they cost way too much. But he is talking about merchants, not consumers, and not in any way that can explain why Radio Shack still thinks you want a cellphone when all you need is a set of batteries and a minijack-to-TRS 1/4″ adapter.

Then again, I’m not a real economist. So, seriously, if someone who does know both their MIDI jacks and economics theory wants to chime in, by all means, go for it.

On Midi Jacks and Adam Smith [Adam Smith's Lost Legacy Blog]

  • http://www.myspace.com/wilsontherocker Evan

    From Mr. Smith's above quote:

    "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it."

    Which is why the best music gear (instruments, hardware, software) comes from manufacturers who actually intend to use their product rather than groups of buisness people trying to predict what the market needs or wants. And it's why there's so much free software of excellent quality.

  • Keith Dendrich

    As someone from Adam Smith's neck of the woods, what I'm really wondering if why people continue to refer to his legacy as though it's something to be proud of. Just about every problem we see in the modern world can be traced back to his system of economics…I'd have thought by the 21st Century we'd have adopted something designed for humans and not the 'invisible' or rather the 'inhuman' hand of business and the free market.

  • http://www.createdigitalmusic.com Peter Kirn

    But, Keith, I think that's the point. The economic system we have is both far removed from his economic theory AND what he actually said AND the historical context in which he said it. The short passage above, for instance, is talking about domestic industry, it's talking about merchants acting as individuals — I live on Wall Street (literally), and this is NOT the NASDAQ he's describing. The reason some economists are trying to protect Smith's legacy is that we have an economic legacy that's really not his. Trying to figure out economics entirely on the basis of Smith would be like trying to understand your family solely on the basis of Sigmund Freud — but blaming Smith for today's economic woes would be roughly akin to claiming Freud's the reason you're depressed.

  • http://www.createdigitalmusic.com Peter Kirn

    Oh, and the fact that we're even blaming Smith for the fact that Radio Shack is overpriced is proof that his "legacy" gets wildly overstated.

  • David

    Don't forget his discussion on the division of labor. I'm thinking this is still around and is still highly indicative of our late capitalist world.

    Additionally, several philosophers and sociologists have rescued Smith's theory of moral sentiments, which is a far cry from his other famous book on the Wealth of Nations. Luc Boltanski has been hailed a hero in France for doing as such.

  • bliss

    <blockquote cite="http://adamsmithslostlegacy.com/2008/01/on-midi-jacks-and-adam-smith.html"&gt;

    Blogger bliss said…

    Hi Gavin,

    I just wanted to say that my argument over at CDN was intended to highlight the influence that corporate marketing and advertising has on the consumer. That corporations intend to influence markets to some extent by influencing the behavior of consumers through marketing and advertising campaigns.

    Will hundreds of millions of viewers tune in to watch the Super Bowl this coming Sunday? You bet. Will each of those viewers also be a fan of professional football? Most likely not. Many will only tune in so that they can feel as if they are taking part in the circus and show — they regard it as nothing more than 4th of July of the wintertime. For those and many others the Super Bowl is the only football game, amateur or pro, that they watch during any year. So, how many supermarkets and liquor stores, who have their own marketing and advertising campaigns, are also trying to cash in on the hype that the major TV sponsors of the Super Bowl have cooked, brewed, and are currently serving to the public?

    I'm not sure that I created the impression that Adam Smith's "invisible hand" is responsible for the behavior of consumers. What I intended to express and explain was that the behavior of consumers is often influenced by the invisible hand of hype that's delivered through the channels of corporate marketing and advertising campaigns. In response to Atomic_Afro, where I quoted a passage that referenced Adam Smith and his work "Wealth of Nations", it was with the intent of saying that people are a component of business. That ethical and moral considerations play a part regardless of the corporation's duty to its shareholders. I admit that I was not that explicit. Nevertheless, my intention was not to drag Adam Smith's legacy through the mud, so to speak.

    In other words, I was explaining a possible cause of consumer behavior in the marketplace. A cause other than price. Consumers form but one of several components of the marketplace. I was not necessarily explaining market behavior.

  • bliss

    Sorry, can you fix that <blockquote cite=""> link for me, Peter?

  • Adrian Anders

    Right, and I only brought up Smith as a place for people to start their study of economic theory. People who really know Smith as a thinker will realize that he's much more of a moral philosopher than an economist.

    His "The Theory of Moral Sentiments" is an essential read for anyone who studies moral philosophy.

    But aside from that, there are clearly others whose theories have much greater relevance today. However, because they build upon the basic economic theories outlined by people like Smith, David Ricardo, and John Stuart Mill they are a bit harder to grasp for those unfamiliar with the subject.

    Consequently, I'm at times influenced to some degree both by John Maynard Keynes and Friedrich Hayek. Don't be mistaken folks, I do believe occasionally in government intervention but only when there is something clearly broken about a specific part of the market.

    Overall I believe the market system works amazingly well. Consider the tremendous advancement in the American standard of living over the past century. If you honestly believe that a non-market system would produce better results I suggest you visit the former eastern block sometime.

    That said, the market isn't perfect. No economic system is. However the market is by far the absolute best method of managing the preferences of individuals on the macroeconomic level.

    Yes, I clearly studied this stuff in college. I honestly had many of the same feelings bliss had at one point in my life. However the intellectual argument for the free market (which includes mostly unrestrained legal corporate practices) is much stronger than any that advocates some sort of socialist or mixed economy. Reading up on the theories and comparing it to how the world really operates highlights this truth.

    But I digress. I think that people need to have a healthy level of doubt when it comes to their beliefs. There's social conservative aspects of Hayek and Milton Friedman's theories that I find particularly unpalatable. That's why it's always best to be knowledgeable about a wide range of topics, but be open enough to synthesize your own views.

    Laters.

  • http://www.deancollinsonline.com Dean

    Radio Shack charges what they do because the market allows it. If you don't want to pay that price, you are free to buy from someone else. That's the way a free market economy works.

    It's just plain woolly thinking to blame the free market economy for every problem we see in the modern world! Especially without also giving it credit for all the prosperity. Free markets are the most human of all economic systems because decisions are made at the personal level by the consumer. Designed systems stifle creativity and always fail.

  • Sizzurp Sippa

    "As someone from Adam Smith’s neck of the woods, what I’m really wondering if why people continue to refer to his legacy as though it’s something to be proud of. Just about every problem we see in the modern world can be traced back to his system of economics…I’d have thought by the 21st Century we’d have adopted something designed for humans and not the ‘invisible’ or rather the ‘inhuman’ hand of business and the free market."

    Actually, virtually all the problems you blame on "Capitalism" existed, to a far larger extent, in Socialist countries like the U.S.S.R, Maoist China, Cuba, North Korea, and the socialist eastern bloc countries.

    The main problem with free market is that there isn't a photogenic rock-star icon like Che Guavara for free markets… and it is far less sexy to run a company manufacturing synthesizers for example, than it is to kill the people who run the synthesizer company for being capitalist counter-revolutionary pigs. Violence is sexy, and so idiologies based on violent revolution are very attractive to young people.

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