Customer Reviews

Adam's Fallacy: A Guide to Economic Theology

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People who wrote negative reviews of this book could at least appreciate Foley's honesty: he unequivocally states it is his point of view and throughout the book he identifies himself as a political economist. He does not pretend he is some "positive scientist" like Milton Friedman did (the latter also used some of the most arbitrary and ridiculous assumptions in his work). This book presents an honest and well-argued opinion. Throwing the Soviet Union into the comments is a complete straw man and has no relevance whatsoever.

This book presents the ideas of classical political economists, Marx, marginalists, as well as 20th century economists like Keynes, Hayek and Schumpeter. Insights are abundant: Smith believed in limited laissez-faire (for example, he believed in the infant industry argument), Marx's vision looked quite similar to capitalism (as it included a surplus product), Keynes differentiated between risk and uncertainty, etc. It is not an easy read as some passages get somewhat dry and technical (e.g. when theories of value are being discussed). Utlimately, this book has a wealth of ideas. Foley includes a nice list for further reading for those interested and an appendix with certain concepts explained (I thought the graph with Ricardo's analysis of land and rents was very helpful).

My only complaint is that it could have been longer. For example, Foley discusses Smith's division of labor quite a bit, but forgets to include Smith's claim that without government intervention to provide education, division of labor could also render human beings "as stupid and ignorant as it possible for a human creature to become". The discussion of Schumpeter and Veblen are painfully short and leave one wanting more. Foley mentions neoclassical synthesis in passing and claims it proved "unstable ideologically". It would be great to see this shift discussed in detail, but Foley moves on. Of course, I might be too demanding. Nevertheless, "Adam's Fallacy" provides food for thought for anyone interested in the history of economic ideas.

Foley is correct that "Modern" economic theory(Monetarism,Rational Expectations,Real Business Cycle theory,New Classical Economics, Efficient Market Hypothesis,etc.),which is based on the false claim that all markets can be modeled either as being normally distributed, or " as if " they were normally distributed,assumes stability and a natural self adjusting,self correcting invisible hand mechanism that,operating through the process of labor specialization,division of labor,extension of the market,and economic growth, transforms private greed into a social optimum.These theories model the economy as if it were inherently stable and subject only to exogenous shocks.They assume away the inherent ,internal,endogenous shocks created internally by both technical(capital goods) and financial innovation ,as well as the speculative shocks caused by speculators leveraging their bets with huge infusions of bank loans leading to the inevitable bubble and collapse.
Adam Smith did not make this error or commit "Adam's Fallacy".On pp.734-735 of the WN,1776,Modern Library (Cannan)edition,he makes it clear that the economic growth process of the Invisible Hand ,self interest,and the division of labor creates major undepletable,negative externalities(social,intellectual,martial,political,and moral) that impact practically the entire work force.The only way to counteract this is through government action.Foley needs to completely change the title to David's(Ricardo),Jeremy's(Bentham),and James'(Mills)Fallacy.

This is a truly excellent book. As a long time student of the history of economic thought, this book, subtitled "A Guide to Economic Theology" offers a truly insightful perspective on Smith and other classical economists. It has always been my belief that there are a lot of people (some are pompous neo-cons) who quote Adam Smith and have never read him. The author quite effectively dismantles the argument inherent in "Adam's fallacy"; that is by acting in our own (avaricous)self interest, we are acting for the public good; that we must accept injustice in the present to allow for distributive justice over time. Markets for goods, services, and labor do not always produce efficient, let alone just outcomes.

The book should be required reading - not just in Economics Departments, but for elected officials as well. Three cheers for Duncan Foley!!

Foley has taught Economic History for many, many years and has a very nice summary of the thinkers in economics since Malthus. It is very readible and free of ideology - unusual for this topic.

He reviews the efforts economists have made since Smith to avoid the entanglement of the mechanisms of capitalism from the social and political results and judges they have all failed.

Good reading, and answered questions I've been pondering for a long time.

"Adam's Fallacy" tells the story of economics through the ideas of the "great" economists -- principally Smith, Malthus, Ricardo, Marx, Keynes, Schumpeter and Hayek. The author is refreshingly heterodox and devotes the longest chapter of the book to Marx. The writing is succinct and clear, though a few sections (such as the one on marginalism) are too compressed. The focus is on ideas and analysis, not biography or social history.

Inevitably, the book has been compared to Robert Heilbroner's "The Worldly Philosophers." Bottomline: "The Worldly Philosophers" is a FAR better introduction for students coming to economics for the first time. "Adam's Fallacy" can't be appreciated without a fair amount of background knowledge, as much of it is written to defend the relevance of Classical economics to current problems and to criticize neoclassical ways of thinking about economics. A neophyte wouldn't understand what the fuss is about.

I have recently read both Adam's Fallacy and R. Heilbronner's The Worldly Philosophers (as well as other introductions to economic thought). Adam's Fallacy compares favorably with Heilbronner in that it is a little less devoted to biographies of economists and a little more devoted to the content of their theories. Accordingly, it demands a little more effort from the reader. I didn't find it a quick or an easy read. Despite its title, it is a balanced approach to economics, giving Smith credit where due while attempting to provide "a critical and skeptical understanding of political economy." My advice is to read both Heilbronner's and Foley's books -- and not to stop there. The more you read on the topic of economics, the more nuanced your understanding will become.

"Adam's Fallacy" is a very enjoyable reading for anyone interested in political economy; a refreshing view at the history of economic thought from a critical perspective and in an accessible fashion. The reader will appreciate Foley's wisdom in political economy and the care he takes in remaining unbiased, even when expressing the author's personal preferences.

The book reads like a conversation between the great economists of the past, from early thoughts about capitalism by Smith, Ricardo, and Marx, to modern debates between Keynes, Hayek, and others. Foley does a good job in pulling out how each of the disparate authors deals with the same questions, depicting 200 years of writing as a single intellectual conversation. Not only that, but he keeps the conversation at a level that interests ordinary readers, staying away from arcane issues that no one outside academia cares about. As an intellectual historian, Foley does a wonderful job.

His makes an ambitious argument, though,'trying to undercut the whole discipline of economics'and it's worth thinking about that a bit more seriously. His basic argument is that Adam Smith sent economics down a dead-end road by separating homo economicus from homo publius. Humans do not, he argues, wall off the economic realm to make self-interested decisions in, while retaining their social sensibilities in other realms (like politics). Critics of the book point to Smith's Theory of Moral Sentiments as evidence that Smith didn't actually commit the fallacy that Foley accuses him of. They are both right--and irrelevant. Foley isn't really interested in tearing down Smith, he's interested in modern economists, who start from self-interested homo economicus and proceed from there.

The problem is that his target is a straw man. Economists already recognize that Adam Smith was wrong to say that the market necessarily makes society better off. John Nash proved that, and got a Nobel Prize for his trouble. Economists take this seriously (e.g. the principal-agent literature, the transaction cost literature, the public-good provision literature, the variety of market failure literatures, etc). They also know that while free trade may lead to a bigger pie, it does not necessarily make individual pieces bigger.

I'm not an economist, but if my students are any guide, most Americans still think Adam Smith was right about the butcher, baker, and candlestick maker. I'm not sure why they still think that way, but Foley may be barking up the wrong tree when he complains about economists, because many of his fellows are doing interesting work into the question of "okay, Smith was wrong--then what does actually happen." He would have done better to aim his arrows at the public, not the economics profession.

(review of ADAM'S FALLACY - A GUIDE TO ECONOMIC THEOLOGY by Duncan K. Foley, The Belknap Press of Harvard University Press, Cambridge Massachusetts, 2006 pp. xvi-265)

review by WALLACE F. SMITH, WALNUT CREEK, CA

Adam Smith (1723-90), a Scotsman, espoused liberty. He saw American colonists repudiate their king. He saw French commoners execute king and nobles in the name of "Liberty, Equality and Fraternity."

The book he published in 1776, THE WEALTH OF NATIONS, liberated human economic life around the globe. Trade became free.

Before that privileged classes dictated what was to be produced, precisely how, who was to benefit and at what prices. Workers were bound to their workplace, like galley slaves, and all their activities rigidly controlled. Progress was thwarted.

People raised arms against tyrants. Adam Smith gave revolution a gospel. The world changed forever.

Economic actvity can and will manage itself. Producers make what consumers are willing to buy; prices must meet the needs of factors of production (land, labor and capital). Collective enterprise is driven by profit and expands cumulatively.

Smith had faith in this sytem. Followers argued specifics and discovered flaws. David Ricardo demonstrated the efficiency of importing, tax free what a nation's own resources limit. Swiss mathematician Euler proved that paying every factor of production - land, labor and capital - their respective "marginal" worth - incremental effects on output - equitably distributes all income.

But land and capital are "property" meaning legal rights. A moral issue arises - what is "property"? For a thousand years polemicists asserted the right of "society" to enjoy what property earns. This is called "socialism." Propertied classes denounce socialism and use force against it.

Adam Smith had very brave insight but not logical discipline (math). Pseudo scholars such as Duncan Foley preach sermons about choice - left-wing socialism versus right-wing fascism. The tragedy of Russia shows that with the best of intentions modern economic life is too complex for command economics. Author Foley has published very muddle-headed rambling on the subject. To wit:"... there is no way to determine the contribution to production of any one input ..." p. 164. Duncan is unaware that Euler did just that; Samuelson's immensely popular textbook lays out the mysteries of production functions - Euler's theorem. The secret lies in partial derivatives.

Calculus is a prerequisite for any meaninful economics course.