Unfolding the Allegory Behind Market Communication and Social Error and Correction

Abstract

Adam Smith’s moral theory considered a number of sources of moral approval and at each turn he invoked an accompanying spectator, however sketchy. In judging an action, at each turn we consult our sympathy with a spectator that is natural or proper to the occasion. In this paper I suggest that common economic talk of market communication, market error and correction, and policy error and correction similarly invokes such a spectatorial being and similarly appeals to our sympathy with such being. Behind such common economic talk, I suggest, are implicit allegories wherein an allegorical figure communicates knowledge, errs in its instructions, and corrects its instructions. The allegory behind such talk is vital and necessary because without it the talk of market communication, error, and correction cannot be sustained. Unfolding the allegory behind such theorizing helps to clarify the meaning, limitations, and value of such talk. Making what had been implicit explicit helps economists to avoid overstating their generalizations or making those generalizations sound more precise and accurate than they are. I explore the connections between the allegorical features and the doings of the economic agents. I suggest that the cogency of such economic theorizing depends on such correspondences, and that they are matters of culture, of both the context within which the theorizing is done and of the context theorized about. I suggest that there is a duality in Smith between the impartial spectator and the being with an invisible hand.

Keywords: Market communication, price system, error, correction, coordination, Adam Smith, Friedrich Hayek, impartial spectator, invisible hand

JEL Classification: A1, B1, B4