Adam's Fallacy: A Guide to Economic Theology, by Duncan K. Foley. Cambridge: Harvard University Press. 2006. Hardcover: ISBN 0 674 02309 9, $25.95. 265 pages.
It is likely that few students make it through an economics course without an introduction to Adam Smith's "invisible hand"--the belief that self-interested individual behavior is guided to socially beneficent outcomes through competitive market forces. In Adam's Fallacy: A Guide to Economic Theology, Duncan K. Foley examines the consequences of this belief for the development of economic theory and policy, and for the contemporary relevance of economics in a globalizing world.
Foley begins the book with a Preface offering clear explanations of what he means by both "Adam's Fallacy" and "economic theology." He notes that there are many things in Adam Smith's masterpiece The Wealth of Nations that are not fallacious. Self-interest, for example, can be a very powerful motivating force and foster growth in material wealth. "Adam's Fallacy," he argues, is the dualism between the economy and the rest of society that Smith's notion of the "invisible hand" creates--"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" (p. xiii).
The recognition of "Adam's Fallacy" lays bare the ideological nature of economic inquiry and, as Foley argues, highlights the fundamental point that "at its most abstract and interesting level, economics is a speculative philosophical discourse, not a deductive or inductive science" (p. xv). According to Foley, the real significance of Smith's work is not so much in what it tells us about how a capitalist economy works, but in how it describes "how we should feel about capitalist economic life and what attitude it might be reasonable for us to take toward the complicated and contradictory experience it affords us. These are discussions above all of faith and belief, not of fact, and hence theological" (p. xv).
The Preface is followed by five chapters explaining the core ideas of selected major economists, emphasizing the role of "Adam's Fallacy" in the development of economic thought. Chapter 1 is devoted to Smith, and Foley develops the conceptual framework of "Adam's Fallacy" in more detail. In particular, he draws...