Weekly Philo of Economics: Foucault and the Invisible Hand

After last week's post on Smith's treatment of Jupiter's Invisible Hand, I intended to post on Smith's great (and unfairly neglected) rival, James Steuart, but other obligations prevented me from composing that piece this week. So, this week I turn to Michel Foucault's treatment of Smith in The Birth of Biopolitics. While commenting on Smith's use of "invisible hand" in the Wealth of Nations (hereafter WN), Foucault insists that Smith is committed to the claim that

Everyone must be uncertain with regard to the collective outcome if this positive collective outcome is really to be expected. Being in the dark and the blindness of all the economic agents are absolutely necessary. The collective good must not be an objective... Invisibility is not just a fact arising from the imperfect nature of human intelligence which prevents people from realizing that there is a hand behind them which arranges or connects everything that each individual does on their own account. Invisibility is absolutely indispensable. It is an invisibility which means that no economic agent should or can pursue the collective good. (Foucault 2008: 279-80)

Foucault conflates here two features in Smith; Smith’s insistence in the Wealth of Nations that that “never… much good” is “done by those who affected to trade for the publick good” (WN 4.2.9, 455-56) does not require that individuals do not know that if by legally pursuing profits for their own enterprise (in competitive environment) they can indirectly promote the public interest. If that were right, then by Foucault’s logic, Smith should have never published. However, the reason why the merchant/employer does not know that he is contributing to national wealth by profit seeking activity is that s/he is laboring with a faulty ideology supplied by Mercantilists. Smith never claims that the profit-seeker can never know that his (her) activities may contribute to national wealth. In fact, it follows from Smith’s account that once one is familiar with a correct (that is, Smith’s) political economy, one can also intend to promote national wealth just in virtue of pursing one's economic interests. This is not to deny that according to Smith “generally” there need not be such intent, just that sometimes there could be.

Moreover, it also does not follow from Smith’s account that the collective or “public” good can never be pursued. As George Stigler (1971) famously noted (and bemoaned) Smith’s account of politics presupposes some public spiritedness, at least when it comes to institutional design and rule-setting. Arguably, WN is a contribution to promoting such public spiritedness in its readers. As Smith put it in The Theory of Moral Sentiments: “Nothing tends so much to promote public spirit as the study of politics, of the several systems of civil government, their advantages and disadvantages, of the constitution of our own country, its situation, and interest with regard to foreign nations, its commerce, its defence, the disadvantages it labours under, the dangers to which it may be exposed, how to remove the one, and how to guard against the other.” (TMS 4.1.11, 186)

Of course, Foucault is right that according to Smith no economic agent should by trading pursue the collective good. And Foucault is certainly right that according to Smith that “it is impossible for the sovereign to have a point of view on the economic mechanism which totalizes every element and enables them to be combined artificially or voluntarily.” (Foucault 2008: 280) As Smith puts it: “[T]he sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people and of directing it towards the employments most suitable to the interest of society.” (WN, 4.9.51, 687; quoted by Foucault 2008: 281) The claim that government cannot direct others in managing “the totality of the economic process” (Foucault 2008: 282) is compatible with the sovereign being able to run a particular business at a profit (not that Smith recommends this). So, first, Smith’s fundamental argument against trading on behalf of the public good is while certainly epistemic, too, ultimately moral: it involves assuming "an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it." (WN 4.2.9, 455-56) Second, Smith’s argument against the state’s ability to superintend and direct economic agents is epistemic.   

Despite my criticism of Foucault, I want to emphasize he draws an interesting implication from Smith’s account

Economics is an atheist discipline: economics is a discipline without God; economics is discipline without totality: economics is a discipline that begins to demonstrate not only the pointlessness, but also the impossibility of a sovereign point of view over the totality of the state that he has to govern….Liberalism acquired its modern shape precisely with the formation of this essential incompatibility between the non-totalizable multiplicity of economics subjects of interests and the totalizing unity of the juridical sovereign. (Foucault 2008: 282)

Of course, when he calls economics “an atheist discipline,” Foucault does not mean that economics can prove the non-existence of God (Foucault is certainly aware of the providential interpretation of the invisible hand (Foucault 2008: 278)). Rather he means that at the core of Smith’s science there is a commitment to a fundamental epistemic humility: The “totality” of economic activity is beyond our reach. But this claim is not made by Smith in the invisible hand passage. Rather it is made in Smith’s concluding paragraphs of WN’s Book 4, when he summarizes his fundamental criticism of mercantilism and physiocracy: “All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord.” (WN, 4.9.51, 687) The point of this is neatly captured by Foucault: “the disqualification of the very possibility of an economic sovereign, amounts to a challenge to the police state…it is the critique of this paradoxical idea of total economic freedom and absolute despotism which they physiocrats tried to maintain the theory of economic evidence” (Foucault 1978: 284 & 286).

Now, Smith's epistemic may be connected to what I have dubbed his anti-mathematics. But more important is that Smith's epistemic humility also [A] suppresses reflection on the economy's relation with the infinite within the intellectual division of labor, by claiming that the infinite remains indeterminate. (This idea is articulated in a manuscript by Mike Hill & Warren Montag recall my post here.) However, I also believe that Smith wanted to encourage the idea [B] that providence ruled over the unintended consequences that are foreseeable from the correct theory among agents.  (I'll post about the invisible hand in WN some other.) Yet, at the same time he adopts [C] a theoretical perspective that recognizes that this [B] is projection of scientific imagination (recall this post.)

If one follows Foucault's thought, one can say, then, that Ricardo (or Oskar Lange & Samuelson) made economics a theist discipline again.

PS I thank Ross Emmett, Jeff Bell, Barry Stocker, John Protevi, Andrew Corsa, and Mathieu Marion for discussion.