Adam Smith’s negative invisible hand*

Nota bene: I credit my colleague and friend John Alcorn with the phrase “negative invisible hand”. As I mentioned in my previous post, Addition #11 of Adam Smith’s 1784 pamphlet provides many reasons why the herring bounty is a scam. Reason #1. Opportunity cost. We saw this argument in my previous post. In brief, the true cost of the herring bounty not only includes the actual amount of the subsidy/payout; it must also include the cost of the tax revenue not collected from the duty-free salt provided to the herring fisheries. Reason #2. Goodhart’s law. In what has to be one of the most memorable passages in Smith’s entire corpus of writings, Smith writes (my emphasis): “Secondly, the bounty to the white-herring fishery is a tonnage bounty; and is proportioned to the burden of the ship, not to her diligence or success in the fishery; and it has, I am afraid, been too common for vessels to fit out for the sole purpose of catching, not the fish, but the bounty.” (Smith 1784, p. 19)…