On the Impossibility of Adam Smith Being an Advocate/Apologist of Laissez Faire and the Invisible Hand: Smith Recognized the Dangers of the Upper Income Class Prodigals, Imprudent Risk Takers, and Projectors and Their Connection to Financial Crises as Pointed Out by Gavin Kennedy
32 Pages Posted: 15 Nov 2019 Last revised: 13 Dec 2019
Date Written: November 7, 2019
Gavin Kennedy expended a great amount of energy and time over a period of many years trying to get economists to actually read what Smith had written in its entirety through his books ,academic articles and Blog, titled Adam Smith’s Lost Legacy. Kennedy’s reasoning is impeccable. If economists were to actually read what Smith had actually written in The Theory of Moral Sentiments (6th ed.,1790) and The Wealth of Nations (1776) completely, then they would no longer be misled by numerous works claiming that Adam Smith was an advocate of Laissez Faire and a believer in the Invisible Hand. These claims were based on small parts of both books, taken out of context, that ignored major parts of Smith’s analysis, such as Smith’s analysis of the negative impact on the macro economy of a segment of the Upper Income class Smith called “prodigals, imprudent risk takers, and projectors".
Kennedy would be greatly shocked to find a paper published by a M. Zafirovski ,appearing in the September,2019 issue of the Journal of Economic Issues, that, repeatedly, over and over again, claimed that Adam Smith was a fanatic believer in Laissez Faire and proponent of an Invisible Hand doctrine that claimed that microeconomics greed would be turned into macroeconomic benefits for everyone as long as there was no government interference.
Smith’s Wealth of Nations is a shockingly misread book because the vast majority of economists are trying to link Adam Smith’s analysis to Smith’s great intellectual enemy ,Jeremy Bentham, who is the real developer and propagator, if not the originator, of both Laissez Faire and the Invisible Hand, which he spent his entire life trying to advance as he worked to increase the international power of the British East India Company. Thus, D. Ricardo ,J.B. Say, J. Mill, J.S. Mill ,and Nassau Senior are the students and followers of Bentham, not Smith, since they opposed Smith’s interest rate control laws and bank loan constraints ,that would be imposed by a central bank in order to protect the “sober” people, practitioners of virtue ethics, from the prodigals, imprudent risk takers, and projectors, who are practitioners of utilitarianism.
There is no mention in Zafirovski’s article of Smith’s implicit recognition that the British East India Company had gained control of the English government, the influence of Jeremy Bentham on Ricardo, Say, J. Mill, J S Mill and N Senior, the worldwide power of the British East India Company, Smith’s warnings about the dangers for society as a whole of the behavior of the prodigals, imprudent risk takers, and projectors, Smith’s support of usury laws and credit restriction, and Smith’s acknowledgement that bank loans made to prodigals, imprudent risk takers, and projectors would be wasted and destroyed, hence endangering the economic well being of society, as occurred in Scotland in 1772 with the collapse of the Ayr bank after its extension of huge loans for land speculation to British East India Company connected borrowers led to a depression in Scotland and recession in Europe.
Keywords: Smith, Bentham, Invisible Hand, Laissez Faire, Gavin Kennedy, the Myth of the Invisible Hand
JEL Classification: B10, B12, B14, B16, B20, B22
Suggested Citation: Suggested Citation