Gavin Kennedy at Adam Smith's Lost Legacy has another excellent post on misconceptions about Adam Smith: Five Errors About Adam Smith and Classical Political Economy. He quotes an article that appeared in the Grand Island Independent by Lee Elliott and then shows five errors the author makes based on widely circulated myths. I don't know the political persuasion of the author, but his case is similar to the case I hear from many progressives as they critique Smith on the way to critiquing capitalism. Here is the pertinent part of the article:
“There has been a fascinating struggle going on within the field of economics since the 1970s.
Historically, economics has been known as the “dismal” science because of its ruthless belief that people are motivated solely by their financial interests. This came from Adam Smith’s notion that if all of us act selfishly, then an “invisible hand” will guide the creation of the best society possible.
There is a flaw. Smith recognized there was a feature of human character that just didn’t fit this idea. That feature is altruism.
He said we do things for others even though we derive nothing from it except for the pleasure of caring for others. It just doesn’t seem to fit classic economic theory. It also was almost impossible to measure. As a result, economists dropped the idea that we’re altruistic.
In fact, there is a second flaw. Classic economics assumes we are consistently rational. We’re not. In fact, it has been demonstrated that, at times, we are quite irrational but we are consistent in our irrationality.”
Kennedy goes into detail but in short A) the "dismal science" label came from Thomas Carlye in 1849, with his opposition to abolition of slavery promoted by economists who saw people as equal and deserving of liberty (read more here), B) Smith wrote positively about the importance of altruism but understood it alone to be insufficient for a sustainable economy, C) Smith used the "invisible hand" metaphor twice in the Wealth of Nations, neither time to refer to markets as a magically directing us to the best possible society, and D) the idea of homo economicus, the human being as nothing more than machines calculating utility, didn't emerge until a century after Smith's work. Read Kennedy's whole article.
My point is that whatever legitimate points Elliott has to make about modern economics (and I think he has valid points) he severely undermines his credibility by butchering the facts about the history of the position he critiques. Like so many others, he takes at face value the appropriation of Adam Smith by some modern conservatives to justify their positions. Critiquing the fiction as fact places the critic in the same camp as his or her targets. Both camps demonstrate that they are not serious about a historically rooted conversation, but rather use fiction to buttress ideological views they arrived at by other than historical analysis. A reliable critic would first unmask the false appropriations of Smith then target what they believe to be erroneous about modern economic conceptions. If critics of modern economics would actually read Smith, I think they would be quite surprised at how much of a neoclassical neoconservative he was not.