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Studying the history of economics taught me a priceless lesson: there’s no substitute for the horse’s mouth.

Many thousands of people have been taught that economics was born in 1776 with the publication of “The Wealth of Nations,” the book in which Adam Smith expounded his theory that the free market always works, the theory he named the “invisible hand of the market.”

It’s a strange teaching.  For nowhere in “The Wealth of Nations” does Smith refer to any theory as the “invisible hand of the market.”  Nowhere in the book do the words “invisible hand of the market” even appear.  Only once in Smith’s tome of more than a thousand pages do the words “invisible hand” appear.  They appear as a metaphor, not for a market or any feature of markets, but for the desire to reduce risk in the specific case of a merchant deciding to employ his capital at home rather than abroad.

Smith was an exceptionally careful writer who lectured on rhetoric as a professor and wrote on the proper use of metaphor.  If Smith had wanted to advance a theory that he identified by “the invisible hand” metaphor, he would have said so clearly and explicitly, and more than once.  He didn’t.  Not once.

Nowhere in “The Wealth of Nations” does Smith argue anything comparable to “the free market always works.”  Smith argued that self-interested behavior in markets often, inadvertently, benefits society.  Smith also argued that self-interested behavior in markets often benefits society more than behavior intended to benefit society.

But Smith was anything but dogmatic.  The first three sections of “The Wealth of Nations” alone offer 70 examples of self-interested behavior that inadvertently harms society.

So, here we are.  Academics routinely teach that the invisible hand metaphor carried special meaning for Smith, though it didn’t, and that the special meaning was the free market always works, a view Smith never held.     

Who is responsible for this absurdity?

For starters, Paul Samuelson.

Paul Samuelson received the Nobel Prize in economics in 1970 for analyzing economic life with rigorous mathematical theorizing.  According to Samuelson’s rigorous mathematical theorizing, markets are efficient only under conditions that are impossible in real life.     

Samuelson was not the first to misrepresent Adam Smith.  But compared to Samuelson’s, earlier misrepresentations were bush league.  

Samuelson’s misrepresentation appeared first in 1948 in a textbook he wrote for a basic college economics course.  On page 36, we read: “…he (Adam Smith) was so thrilled by the recognition of order in the economic system that he proclaimed the mystical principle of the “invisible hand”: that each individual in pursuing his own selfish good was led, as if by an invisible hand, to achieve the best good of all, so that any interference with free competition by government was almost certain to be injurious.”

Samuelson’s textbook, still in print in its 19^th edition, has sold four million copies.  The bogus invisible hand story got more bogus with each edition. 

Why Samuelson misrepresented Smith is unclear.  His distorted Smith certainly served as a foil to advance Samuelson’s own position about markets, but speculating on motivation is best avoided.    

Over the years, most economists accepted Samuelson’s misrepresentation, and most still do today.  This is for two reasons.  One is Samuelson’s exalted standing in economics.  The other is, few economists have any interest in the history of their discipline.  For every economist who has read the Wealth of Nations, there are thousands who haven’t. Historians of economics have been calling out bogus invisible hand stories for decades.  The audiences have been very small.

Economists are quick to inform that modern economics was born in 1776 with the publication of Adam Smith’s tome, “An Inquiry into the Nature and Causes of the Wealth of Nations.”  Unfortunately, they neglect to tell the story of the long stream of ideas that prompted Smith to write his tome.  Let’s fix that.

Ideas about one aspect of economic life or another go back a few thousand years.  By far the most common has been the notion that anything done for profit is greed.  The notion has been asserted by all religions and legions of philosophers.

The story that leads to the Scotsman Adam Smith begins in 1651, with the publication of Leviathan by the Englishman Thomas Hobbes.

Hobbes wrote Leviathan troubled.  Since the beginning of the Protestant Reformation in 1517, Europe had been awash in wars – between powers, religions, or blends of both.  Hobbes knew the terror first hand.  In 1641, with anti-royalist sentiment surging, the royalist Hobbes fled to Paris in fear for his life.  The following year found England engulfed in civil war.

It seemed clear to Hobbes that we humans are a messed-up lot, dominated by passions we can’t control, quick to anger and prone to violence, especially when politics or religion are involved.  How, Hobbes asked, can a decent society be built from such material?

His answer: a decent society is only possible if our fear of violent death is stronger than our propensity for violence.  Otherwise, our lives are destined to be “solitary, poor, nasty, brutish and short.”  From that, Hobbes constructed his idea of a social contract.

Ideas can shake the world.  Leviathan shook the Western world.  Its message was so grim, so pessimistic that Western political philosophers spent the next 150 years trying to refute it.

Another idea catching hold in 17^th century Europe was the idea of interest – interest as in “to one’s advantage.”   Commerce, too, was on the rise in areas not plagued by political and religious violence.

In commerce, acting in one’s interest was still widely condemned as greed.  But some thinkers noticed that success in commerce requires planning and prudence.  It requires behavior that is not impulsive, erratic or violent.

These thinkers turned back to Hobbes and his idea of countervailing passions.  Could it be that the most effective way to restrain our violent passions is by unleashing our passion for money?

By the 1700s, many thought so.  In England, Samuel Johnson wrote: “There are few ways in which a man can be more innocently employed than in getting money.”  In France, Montesquieu wrote: “Wherever the ways of man are gentle, there is commerce; wherever there is commerce, the ways of man are gentle.”  In Scotland, Adam Smith’s best friend, David Hume, amplified further.

Which brings us to Smith.

Smith changed the subject.  Adam Smith was the first person to call attention to the reality that the vast mass of people in Europe and the world lived their lives in crushing poverty.

Smith doubted that our violent passions could be tamed, by commerce or anything else, and he was far from certain that commerce fostered civility.  But Smith’s travels left him no doubt that the only way to raise the living standards of the mass of people who toil each day for a living was through commerce and productive enterprise.

“It is the great multiplication of the productions of all the different arts, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people,” wrote Smith.

With Adam Smith providing the moral argument for what we now call economic growth, modern economics was born.

Wondering why Glynn employers are having trouble finding workers? These figures should help.

Glynn County’s labor force is currently 39,210. It was 39,156 in 2005. Though Glynn’s population has grown by 16.7 percent in the 17 years since 2005, its labor force has grown by a speck.

The disparity between population growth and labor force growth, though severe in Glynn, is not unique to Glynn. While Georgia’s population has increased by 21 percent since 2005, its labor force has increased by 13.1 percent. The nation’s population has grown by 12.3 percent since 2005; its labor force, by 8 percent.

What explains the disparity between population growth and labor force growth?

Boomers retiring.

Consider the life cycle of baby boomers, that wave of people born in the years 1946 through 1964. The first boomers, those born in 1946, began entering the labor force in discernible numbers around 1964. They turned 25 years old in 1971, and 55 years old in 2001.

The last boomers, those born in 1964, began entering the labor force in discernible numbers in 1982. They turned 25 in 1989, and 55 in 2019.

Why does it matter when they turned 25 and when they turned 55? Economists refer to workers aged 25 years to 54 years as “prime age” workers. Of all the people in the labor force, prime age workers have the highest rates of labor force participation.

Thus, boomers began entering the class of prime age workers in 1971, they finished entering the class in 1989, they began leaving the class in 2001, and were completely gone from the class by 2019.

Augmenting the effect of the boomer life cycle on the labor force was the women’s movement. The women’s movement dates back long before 1946, of course, but it was only after 1950 that women’s labor force participation began to rise and then surge. Boomer women provided the surge.

Here are the numbers. The labor force participation rate of prime age women workers rose from 36.8 percent in 1950 to 44.5 percent in 1964, to 64.6 percent in 1978, and to 74.6 percent in 1992. The rate then leveled off; it’s currently 76.4 percent.

The big picture, in waves, is this. The wave of women into the labor force began in 1950. That wave was amplified by the wave of boomers into the labor force, which began in 1964. The wave into the class of prime age workers began in 1971 and continued through 1989. It was a huge wave.

The wave of boomers into the class of prime age workers became a wave of boomers out of the class in 2001. By 2019, the wave out of the class was complete. Between 2001 and 2019, the wave of boomers into retirement began.

Here’s the big picture – the effect on U.S. labor force growth of the boomer life cycle, augmented by the rise in women’s labor force participation – in numbers. From 1950 to 1960, the U.S. labor force grew by 11.9 percent. From 1960 to 1970, it grew by 18.9 percent. From 1970 to 1980, 29.2 percent. From 1980 to 1990, 17.7 percent. From 1990 to 2000, 13.3 percent. From 2000 to 2010, 7.9 percent. And from 2010 to 2022 (2022 to avoid the 2020 pandemic anomaly), the U.S. labor force grew by 6.8 percent.

The demographics of Americans younger than 16 years suggest that U.S. labor force growth will continue to shrink in the years ahead. Welcome to the post-boomer labor market, where scarce labor is the new normal.

Wish we saw more young people and children in Glynn.

Contemplating one’s blessings is a good way to bring in a new year – or better, a new day, if you can swing it.

Our From the Murphy Center column in The Brunswick News is into its sixth year.  My Murphy Center colleagues – Drs. Heather Farley, Melissa Trussell, Roscoe Scarborough and Skip Mounts – and I are enormously grateful to Mr. Buff Leavy for granting us the column, Mr. Buddy Hughes for his patience with us, and the folks in Glynn and beyond who read us.

Being part of the community through this wonderful space every Wednesday is a privilege, and a ton of fun.  We do not take it for granted.

Our columns tend to be serious, but the history of the Murphy Center has some humorous twists. 

Dr. Skip Mounts became Dean of the College of Coastal Georgia’s School of Business and Public Administration in 2011.  Dr. Mounts is an exceptionally entrepreneurial Dean. 

A short time into his Deanship, Dr. Mounts came by my office and said, “The research you do on the local economy should have a home.  I am going to propose to the president that we create a center.  We’ll give it a name, and you’ll be the director.”

It sounded super to me, except for the director part. 

I have no personality, no leadership skills and no aptitude whatsoever for directing anything.  Should something arise that needs directing, I understand instinctively that I can best help the cause by hiding deep in some remote, forsaken area until the need for directing has passed.

“Who will I be directing?” I asked.

“Yourself,” he said.

Recognizing that such an arrangement would push my directing capacity to the breaking point, I hesitated, but then yielded to a rare spasm of daring-do.    

“Ok, deal,” I said.  “But if the center’s personnel roster gets any deeper, we’ll probably need to modify the managerial hierarchy.”  The Dean smiled.

Dr. Valerie Hepburn, another exceptionally entrepreneurial person I’m quite grateful for, was the college president at the time.  Dr. Hepburn liked the idea.  The three of us came up with a name for the center that was so long and awkward that I’ve forgotten it.

In the fall of 2012, Mr. Reg Murphy became the first Executive in Residence of our Business School.  He was still our Executive in Residence on October 8, 2015, when we changed the name of the center from whatever it was to the Reg Murphy Center for Economic and Policy Studies at a gathering in the College of Coastal Georgia’s Stembler Theater.

Mr. Murphy had an extraordinary career in journalism and business.  He had been a huge supporter of the College years before and after 2012.  But the Murphy Center bears his name for a different reason.

Reg Murphy is a person of great intellectual honesty, integrity and humility.  His name sets the standard for the research we do and the columns we write.

That means we do our homework.  We don’t twist or cherry-pick data.  We don’t misrepresent or caricature people or ideas.  We understand the danger of ivory tower hubris, so we stay off high horses.  We do careful, thoughtful, honest work.

Our personnel roster is now five deep.  Fortunately for me, the best way to direct thinkers of the caliber of Drs. Farley, Trussell, Scarborough and Mounts is not to direct them – to get out of their way, let each do their thing, then cheer each on to do more of their thing.

So, that’s how we operate.  “Explore what interests you, explore it full throttle and with Reg Murphy honesty, integrity and humility, then tell us about your exploration” is the crux of it.

Thanks again for reading our column.