Adam Smith, The Wealth of Nations, and the “Invisible Hand”: A Metaphor For Ambiguity-Uncertainty Aversion by Decision Makers
Michael Emmett Brady
Lecturer
School of Business and Public Policy
Department of Operations Management
California State University ,
Dominguez Hills
Carson ,California
USA
Abstract:
Smith’s use of the “Invisible Hand”,as pointed out by Gavin Kennedy, is a metaphor provided for the great percentage of readers of the Wealth of Nations whom Smith realized would not be able to grasp the nature of his argument ,which was about the ambiguity-uncertainty aversion of the majority of 18th century English businessmen.Gavin Kennedy has pointed out that the term,”Invisible Hand”, had nothing to do with Laissez Faire, free …show more content…
This led to his interval estimate approach to probability:
“The probability that any particular person shall ever be qualified for the employment to which he is educated, is very different in different occupations. In the greatest part of mechanic trades success is almost certain; but very uncertain in the liberal professions. Put your son apprentice to a shoemaker, there is little doubt of his learning to make a pair of shoes; but send him to study the law, it is at least twenty to one if he ever makes such proficiency as will enable him to live by the business… The counsellor at law, who, perhaps, at near forty years of age, begins to make something by his profession, ought to receive the retribution, not only of his own so tedious and expensive education, but of that of more than twenty others, who are never likely to make any thing by it.” (Smith,1776,pp.106-107;underscore by author).
Only the shoemaker occupation problem can be analyzed using precise numerical probabilities. The uncertain lawyer problem requires the use of interval valued probabilities because of the insufficient amount of relevant evidence upon which to base the
Michael Emmett Brady
Lecturer
School of Business and Public Policy
Department of Operations Management
California State University ,
Dominguez Hills
Carson ,California
USA
Abstract:
Smith’s use of the “Invisible Hand”,as pointed out by Gavin Kennedy, is a metaphor provided for the great percentage of readers of the Wealth of Nations whom Smith realized would not be able to grasp the nature of his argument ,which was about the ambiguity-uncertainty aversion of the majority of 18th century English businessmen.Gavin Kennedy has pointed out that the term,”Invisible Hand”, had nothing to do with Laissez Faire, free …show more content…
This led to his interval estimate approach to probability:
“The probability that any particular person shall ever be qualified for the employment to which he is educated, is very different in different occupations. In the greatest part of mechanic trades success is almost certain; but very uncertain in the liberal professions. Put your son apprentice to a shoemaker, there is little doubt of his learning to make a pair of shoes; but send him to study the law, it is at least twenty to one if he ever makes such proficiency as will enable him to live by the business… The counsellor at law, who, perhaps, at near forty years of age, begins to make something by his profession, ought to receive the retribution, not only of his own so tedious and expensive education, but of that of more than twenty others, who are never likely to make any thing by it.” (Smith,1776,pp.106-107;underscore by author).
Only the shoemaker occupation problem can be analyzed using precise numerical probabilities. The uncertain lawyer problem requires the use of interval valued probabilities because of the insufficient amount of relevant evidence upon which to base the