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Adam's Fallacy: A Guide to Economic Theology
This book could be called “The Intelligent Person’s Guide to Economics.” Like Robert Heilbroner’s The Worldly Philosophers , it attempts to explain the core ideas of the great economists, beginning with Adam Smith and ending with Joseph Schumpeter. In between are chapters on Thomas Malthus, David Ricardo, Karl Marx, the marginalists, John Maynard Keynes, Friedrich Hayek, and Thorstein Veblen. The title expresses Duncan Foley’s belief that economics at its most abstract and interesting level is a speculative philosophical discourse, not a deductive or inductive science. Adam’s fallacy is the attempt to separate the economic sphere of life, in which the pursuit of self-interest is led by the invisible hand of the market to a socially beneficial outcome, from the rest of social life, in which the pursuit of self-interest is morally problematic and has to be weighed against other ends. Smith and his successors argued that the market and the division of labor that is fostered by it result in tremendous gains in productivity, which lead to a higher standard of living. Yet the market does not address the problem of distribution—that is, how is the gain in wealth to be divided among the classes and members of society? Nor does it address such problems as the long-run well-being of the planet. Adam’s Fallacy is beautifully written and contains interesting observations and insights on almost every page. It will engage the reader’s thoughts and feelings on the deepest level.
288 pages, Hardcover
First published September 30, 2006
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321 people want to read
About the author
Duncan K. Foley
14 books12 followersDuncan K. Foley is an American economist. He is the Leo Model Professor of Economics at the New School for Social Research and an External Professor at the Santa Fe Institute. Previously, he was Associate Professor of Economics at MIT and Stanford, and Professor of Economics at Columbia University.
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May 16, 2024certainly not theology but an interesting account of the development of economic ideology over time
July 20, 2017
The underlying theme is that self-interest and social morals are rarely aligned. The impersonal mode of exchange and production takes away any moral ambiguity. For society to benefit, each individual should be in the pursuit of self-interest, is the fallacy that Foley explains the contradictions of using a variety of other economists.
This book is extreme well written and does a grand job at looking at each economist in different outlooks on productivity, money, population, living standards, and consumption. The history of economic thought is clearly witnessed. Smith, Malthus, Ricardo, Marx, Keynes, Hayek, Jevons, Schumpeter and a few other major economists are presented with their respective research. Going through the Classical, Neoclassical, Austrian, and Keynesian perspectives of the economy. Each time, questioning the capitalist system with society at large.
The explanations of the various economic theories are very descriptive in their particular nature which means that they provide more just the basic economic arguments. Each section contains parts on how a particular class exploits other’s, having Marx take central stage. The book is weighted toward Marx’s theories and how Marx criticized the capitalist system. How very social the modes of production are and the uses of commodities, are very similar to Adam Smith’s view on the class system of production as well. An explanation of why Marx’s theories are taken in an extreme form is provided and how Marx tried to propose a more practical solution to the privatization of means of production.
The problem of the book is the contradictory theme. The self-interest view expressed arises from a critique of the Neoclassical view of self-interest and not that of Adam Smith. The author did mention Smith's Theory of Moral Sentiments, but failed to mention that in Smith's view, self-interest is inclusive with helping society. The actions we seek to undertake are all in a social reality and actions we take are provided with social feedback. The social feedback mechanism makes Adam Smith’s self-interest supports society as society determined what self-interest is.
Another problem is that, although each economist views are given their due, the critiques of the views are uneven. After explaining Malthus theory of population and its, partial rather than complete, invalidity he goes on to claim that Ricardo’s theory of rent is based on Malthus theory. Foley seems to support Ricardo's theory creating a contradiction in the discussion, for criticizing the Malthus theory inevitably means Ricardo's theory is at least partly incorrect. There were a few sentences given to changes in the practical application of Ricardo's theory of rent, but taken from a different perspective should have been a huge critique of the theory. The arguments of Adam’s Smith are heavily criticized, but when Marx makes similar argument in different form, no criticism appears.
This book is extreme well written and does a grand job at looking at each economist in different outlooks on productivity, money, population, living standards, and consumption. The history of economic thought is clearly witnessed. Smith, Malthus, Ricardo, Marx, Keynes, Hayek, Jevons, Schumpeter and a few other major economists are presented with their respective research. Going through the Classical, Neoclassical, Austrian, and Keynesian perspectives of the economy. Each time, questioning the capitalist system with society at large.
The explanations of the various economic theories are very descriptive in their particular nature which means that they provide more just the basic economic arguments. Each section contains parts on how a particular class exploits other’s, having Marx take central stage. The book is weighted toward Marx’s theories and how Marx criticized the capitalist system. How very social the modes of production are and the uses of commodities, are very similar to Adam Smith’s view on the class system of production as well. An explanation of why Marx’s theories are taken in an extreme form is provided and how Marx tried to propose a more practical solution to the privatization of means of production.
The problem of the book is the contradictory theme. The self-interest view expressed arises from a critique of the Neoclassical view of self-interest and not that of Adam Smith. The author did mention Smith's Theory of Moral Sentiments, but failed to mention that in Smith's view, self-interest is inclusive with helping society. The actions we seek to undertake are all in a social reality and actions we take are provided with social feedback. The social feedback mechanism makes Adam Smith’s self-interest supports society as society determined what self-interest is.
Another problem is that, although each economist views are given their due, the critiques of the views are uneven. After explaining Malthus theory of population and its, partial rather than complete, invalidity he goes on to claim that Ricardo’s theory of rent is based on Malthus theory. Foley seems to support Ricardo's theory creating a contradiction in the discussion, for criticizing the Malthus theory inevitably means Ricardo's theory is at least partly incorrect. There were a few sentences given to changes in the practical application of Ricardo's theory of rent, but taken from a different perspective should have been a huge critique of the theory. The arguments of Adam’s Smith are heavily criticized, but when Marx makes similar argument in different form, no criticism appears.
November 27, 2023
Great History, Flawed Conclusions
The book is an outstanding collection of economic thought throughout history, but both the premise and conclusions show a statist/ Marxist bias.
The premise of Adam’s Fallacy, despite continuous insistence that a fallacy exists, never makes its case. The author makes the common statist mistake of conflating free market economics (capitalism) with corporatism and the remnants of feudalism, thus attaching the evils of political favoritism, cronyism and protectionism to free markets. The true culprit is heavy-handed or at least bumbling government.
His treatment of Hayek is typical. Rather than addressing the complex relationships between government intervention in economics and political tyranny raised by Hayek in his criticism of Keynes, the author takes the easy way out and, like Keynes, summarily dismisses Hayek rationalized by the incoherent ramblings of Piero Sraffa which nobody, including Sraffa himself, understands.
.
The conclusion seems to dream of a benevolent dictator who can magically equalize the perfectly natural Pareto 80/20 unequal distribution of wealth without wreaking havoc on the wealth creating power of free transactions. Nice dream, but this person does not exist.
Falsely merging poverty and inequality, the author ignores real improvements in standard of living produced by free markets and infers that economic growth is a zero-sum game; those gaining do so by impoverishing others. It doesn’t quite cut it.
The book is an outstanding collection of economic thought throughout history, but both the premise and conclusions show a statist/ Marxist bias.
The premise of Adam’s Fallacy, despite continuous insistence that a fallacy exists, never makes its case. The author makes the common statist mistake of conflating free market economics (capitalism) with corporatism and the remnants of feudalism, thus attaching the evils of political favoritism, cronyism and protectionism to free markets. The true culprit is heavy-handed or at least bumbling government.
His treatment of Hayek is typical. Rather than addressing the complex relationships between government intervention in economics and political tyranny raised by Hayek in his criticism of Keynes, the author takes the easy way out and, like Keynes, summarily dismisses Hayek rationalized by the incoherent ramblings of Piero Sraffa which nobody, including Sraffa himself, understands.
.
The conclusion seems to dream of a benevolent dictator who can magically equalize the perfectly natural Pareto 80/20 unequal distribution of wealth without wreaking havoc on the wealth creating power of free transactions. Nice dream, but this person does not exist.
Falsely merging poverty and inequality, the author ignores real improvements in standard of living produced by free markets and infers that economic growth is a zero-sum game; those gaining do so by impoverishing others. It doesn’t quite cut it.
September 29, 2017
Must read. Very concise, thoughtful and entertaining look at some of the most influential thinkers of a time (also Hayek a little bit), in a realm of crucial importance.
Not only important for understanding history of thought, but also approaching other economics books and the strange deviations that have occurred in the last century. Allinall should be manditory reading in every highschool school class.
Not only important for understanding history of thought, but also approaching other economics books and the strange deviations that have occurred in the last century. Allinall should be manditory reading in every highschool school class.
February 19, 2018
This is a nice book that delves into the history of economics for an interested amateur. The math and charts are even thrown at the back so that you're not overwhelmed with equations and are able to see the whole arc of history.
March 7, 2022
Superb piece of industry.Had occasion to listen to Prof Foley at Harvard simplifying complex theories and juxtaposing them to contemporary socio-economic issues.After reading his work,the reader will surely rethink Adam Smith's thesis of distribution.
May 14, 2012
This book was just okay. Foley starts with an interesting theory. He calls his theory Adam’s Fallacy, and he believes all economists that follow in Adam Smith’s footsteps, of believing that the market can be separated from other aspects of life, and that private interest pursuits in the market leads to a better life for all, are fallacious claims. I agree with him on both counts. However, he’s also writing a book that he says, in the introduction, is supposed to be an introduction to economics for all his students and friends over the years that have asked him for such a book. He admits that in creating this book he probably failed to do better than Robert Heilbroner’s The Worldly Philosophers. I also agree with Foley on this, Heilbroner’s book is more engaging, easier to read, less dry, and details both the thoughts and lives of the thinkers Foley covers. Foley covers only their ideas, and in doing so he doesn’t do the best job.
There are two fundamental problems with Foley’s presentation. He starts with a theory, but he doesn’t actually prove it. He’ll spend 45 pages discussing Adam Smith’s economics, find one flaw, and connect it to Adam’s Fallacy. Fine, maybe part of Smith’s theory is fallacious, but the other 43 pages don’t fall under that flaw, thus why are they being presented? There’s a constant tension in the book between trying to teach the reader economics, and trying to point out some grandiose historical fallacy, that simply doesn’t mix. If you’re producing an entire treatise of Political Economy, and only a small portion is fallacious, you’ve succeeded where almost everyone fails. Thus, this is a rather obtuse presentation for calling all these theorist fallacious (unless someone expected them to be infallible; we can reserve that title for Marx). He also claims all economists he covers in the book conduct this flaw, but he fails to demonstrate it for several of them, such as Marx, Schumpeter, and Veblen. Even when he’s trying to present the views of some authors in an introductory way, he presents it as if the reader already has an undergrad understanding of certain economic jargon, germane only to the student of economics.
If you want something that proves Adam’s famous logic wrong, just read the newspaper. If you want an economics introduction read Wage Labor and Capital, Robert Heilbroner’s Wordly Philosophers, or Capitalism for Beginners. I’m now going to read Foley’s “Capital,” I hope it’s better, but I expect it won’t be.
There are two fundamental problems with Foley’s presentation. He starts with a theory, but he doesn’t actually prove it. He’ll spend 45 pages discussing Adam Smith’s economics, find one flaw, and connect it to Adam’s Fallacy. Fine, maybe part of Smith’s theory is fallacious, but the other 43 pages don’t fall under that flaw, thus why are they being presented? There’s a constant tension in the book between trying to teach the reader economics, and trying to point out some grandiose historical fallacy, that simply doesn’t mix. If you’re producing an entire treatise of Political Economy, and only a small portion is fallacious, you’ve succeeded where almost everyone fails. Thus, this is a rather obtuse presentation for calling all these theorist fallacious (unless someone expected them to be infallible; we can reserve that title for Marx). He also claims all economists he covers in the book conduct this flaw, but he fails to demonstrate it for several of them, such as Marx, Schumpeter, and Veblen. Even when he’s trying to present the views of some authors in an introductory way, he presents it as if the reader already has an undergrad understanding of certain economic jargon, germane only to the student of economics.
If you want something that proves Adam’s famous logic wrong, just read the newspaper. If you want an economics introduction read Wage Labor and Capital, Robert Heilbroner’s Wordly Philosophers, or Capitalism for Beginners. I’m now going to read Foley’s “Capital,” I hope it’s better, but I expect it won’t be.
August 18, 2010
"Adam's Fallacy" is, for Foley, "the idea that it is possible to separate an economic sphere of life, in which the pursuit of self-interest is guided by objective laws to a socially beneficent outcome, from the rest of social life, in which the pursuit of self-interest is morally problematic and has to be weighed against other ends."
In Adam's Fallacy he presents a history of political economy which both avoids this mistake and critiques its manifestations.
Foley focuses on a few key figures. Chapters on Adam Smith, Thomas Malthus and David Ricardo, and Karl Marx take up the first two thirds of Adam's Fallacy. He touches briefly on some of the founders and ideas of marginalist or neoclassical economics, on Jevons, Menger, and Clark, on marginal utility and Pareto allocations. And he concludes with Keynes, Hayek, and the debates between them and their followers, notably over the assertion of Say's Law that a chronic oversupply of labour is impossible. A final chapter recapitulates this history from a broader perspective, in its moral and political context.
This history of political economy is necessarily idiosyncratic in its choice of material and limited in its scope, but it covers the most central ideas. (Mathematics is avoided completely, with a few simple equations and diagrams relegated to an appendix.) The result is a fine alternative or complement to books such as Robert Heilbroner's The Worldly Philosophers.
As a critique of claims by economists to truths that transcend ordinary science and morality, Adam's Fallacy is complicated by its historical approach. On the one hand, there are forms of modern economic theology it doesn't tackle at all. On the other hand, it continually runs the risk of anachronistic criticism, though Foley is careful when testing the ideas of earlier thinkers against subsequent history, and acknowledges the existence of "later versions of Adam's Fallacy, particularly the formulations of marginalist and neoclassical economics, of which there is no sign that Smith had the slightest inkling."
It is unlikely to convert ardent adherents of Austrian economics, but Adam's Fallacy may help newcomers to economics avoid a neoclassical indoctrination.
In Adam's Fallacy he presents a history of political economy which both avoids this mistake and critiques its manifestations.
Foley focuses on a few key figures. Chapters on Adam Smith, Thomas Malthus and David Ricardo, and Karl Marx take up the first two thirds of Adam's Fallacy. He touches briefly on some of the founders and ideas of marginalist or neoclassical economics, on Jevons, Menger, and Clark, on marginal utility and Pareto allocations. And he concludes with Keynes, Hayek, and the debates between them and their followers, notably over the assertion of Say's Law that a chronic oversupply of labour is impossible. A final chapter recapitulates this history from a broader perspective, in its moral and political context.
This history of political economy is necessarily idiosyncratic in its choice of material and limited in its scope, but it covers the most central ideas. (Mathematics is avoided completely, with a few simple equations and diagrams relegated to an appendix.) The result is a fine alternative or complement to books such as Robert Heilbroner's The Worldly Philosophers.
As a critique of claims by economists to truths that transcend ordinary science and morality, Adam's Fallacy is complicated by its historical approach. On the one hand, there are forms of modern economic theology it doesn't tackle at all. On the other hand, it continually runs the risk of anachronistic criticism, though Foley is careful when testing the ideas of earlier thinkers against subsequent history, and acknowledges the existence of "later versions of Adam's Fallacy, particularly the formulations of marginalist and neoclassical economics, of which there is no sign that Smith had the slightest inkling."
It is unlikely to convert ardent adherents of Austrian economics, but Adam's Fallacy may help newcomers to economics avoid a neoclassical indoctrination.
May 6, 2009
Although I literally fell asleep on several occasions while reading this book, it was an interesting read. Just kind of dry. Foley starts from the premise that the one idea that Adam Smith is most remembered for is based on a fallacy. "The logical fallacy is that neither Smith nor any of his successors has been able to demonstrate rigorously and robustly how private selfishness turns into public altruism." Foley covers the basics of the writings of Smith, Malthus, Ricardo, Marx, Veblen, Keynes, Hayek and others, and covers the strengths and weaknesses of each. The ideas that Foley wants the reader to take away from his book are that there are no "natural laws" that govern economics, that there are in fact moral decisions that must be made when making policy decisions, and that none of these economists have all the answers.
December 26, 2013
A couple of years ago there was an Atlantic article "The Market as God" which parodied the similarity between theological treatises and the comments about the movement of the bond market. And David Stockman once said that he wanted to come back as the bond market. Duncan Foley's book warns that economics is neither good nor bad. It just is. If there are value-laden decisions to be made, we must find other sources to make choices. Economics will not tell you.
May 28, 2015
I didn't really agree with Foley's reading of Adam Smith, but at least in reading this book I was motivated to read the whole thing of Smith's An Inquiry into the Nature and Causes of the Wealth of Nations to better understand Smith's arguments.
May 5, 2016
Es un buen texto de introducción a la economía política desde la perspectiva histórica. Los capítulos sobre la economía clásica (particularmente el que trata de Adam Smith y el que es sobre Carlos Marx) y la economía marxista son lo mejor del libro.
Displaying 1 - 12 of 12 reviews