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Dilemmas of the Invisible Hand

Adrian Vermeule

in The System of the Constitution

The specific aims of this chapter are twofold. The first is to identify general conditions under which an invisible-hand justification of a given legal or political institution will succeed, in the ... More

The specific aims of this chapter are twofold. The first is to identify general conditions under which an invisible-hand justification of a given legal or political institution will succeed, in the modest sense that the justification is internally coherent and plausible (whether or not true in fact). The second aim is to identify several theoretical puzzles about invisible-hand justifications that cut across the local contexts in which such justifications are offered. These puzzles are genuine and irreducible dilemmas, which arise from the systemic structure and nature of invisible-hand reasoning: dilemma of norms; dilemma of second best; and dilemma of verification.Less

The Intangible Hand in Profile

Geoffrey Brennan and Philip Pettit

in The Economy of Esteem: An Essay on Civil and Political Society

The economics of esteem can have a normative as well as a positive aspect, directing us to lessons in institutional design and policy-making. The case for this view is set out in these final chapters ... More

The economics of esteem can have a normative as well as a positive aspect, directing us to lessons in institutional design and policy-making. The case for this view is set out in these final chapters fairly abstractly, since the empirical groundwork for a more detailed program in institutional design is just not available. The economy of esteem, when it works for good, is an intangible hand that operates in parallel to the invisible hand of the market and the iron hand of the state. Intangible-hand regulation promises to be a particularly attractive and effective way for society to arrange its affairs. In particular, it promises to be more attractive and more effective in a number of respects than the more familiar alternatives.Less

Invisible-Hand Explanations

Edna Ullmann-Margalit

in Normal Rationality: Decisions and Social Order

Invisible-hand explanations suggest that many social practices are a product of human action, but not human design. In coming to terms with such explanations, it is essential to distinguish between ... More

Invisible-hand explanations suggest that many social practices are a product of human action, but not human design. In coming to terms with such explanations, it is essential to distinguish between explanations of the emergence of practices and explanations of the persistence of practices. The kind of invisible-hand explanation that accounts for the emergence of practices might turn out to be altogether different from the kind that accounts for their persistence. The emergence of practices is often best explained by aggregating explanations: Diverse and dispersed action by numerous people might produce some kind of pattern, even if they did not foresee it or intend to bring it about. By contrast, practices often persist because of evolutionary explanations. They survive some sort of competition. Survival value may have nothing to do with the emergence of a practice in the first place.Less

The Economics of Systems Integration: Towards an Evolutionary Interpretation

Giovanni Dosi, Mike Hobday, Luigi Marengo, and Andrea Prencipe

in The Business of Systems Integration

This chapter explores some theoretical elements of the economics of systems integration (and disintegration) by placing the idea of systems integration within the context of evolutionary economics. ... More

This chapter explores some theoretical elements of the economics of systems integration (and disintegration) by placing the idea of systems integration within the context of evolutionary economics. It argues that systems integrators (as firms) and systems integration (as a key capability within and across firms) perform a central function as the visible hand of much modern industrial activity, especially in complex products and systems. The latter includes a significant subset of capital goods, such as mobile communication systems, military systems, corporate information technology networks, train engines, aircraft, intelligent buildings, air traffic control systems, and tailored software packages.Less

The Laissez-Faire Revolution and Smithian Economics

Ernesto Screpanti and Stefano Zamagni

in An Outline of the History of Economic Thought

The contribution of the Physiocratic School and the Italian School (Milan and Naples) is analysed. This is followed by a thorough investigation of Smithian's theoretical system, at both the ... More

The contribution of the Physiocratic School and the Italian School (Milan and Naples) is analysed. This is followed by a thorough investigation of Smithian's theoretical system, at both the philosophical level and the economic one. The Smithian orthodoxy is compared to the utilitarianism of Jeremy Bentham.Less

The Invisible Hand and the Cunning of Reason

Edna Ullmann-Margalit

in Normal Rationality: Decisions and Social Order

The idea of the invisible hand has had an impact not only on the eighteenth and the nineteenth centuries but on the twentieth and twenty-first centuries as well, and it has had a curious ideological ... More

The idea of the invisible hand has had an impact not only on the eighteenth and the nineteenth centuries but on the twentieth and twenty-first centuries as well, and it has had a curious ideological career: in previous centuries it had been used to promote ideals of secular, enlightened progress, while in the twentieth and the twenty-first, it is used inversely to promote conservative reverence toward traditions. There are two main models for invisible-hand explanations, and the current, inverse, ideological use of the idea of the invisible hand by conservative circles as against liberals and social planners springs from not distinguishing between the two models.Less

POLITICAL RIGHTS

William Talbott

in Which Rights Should Be Universal?

In this chapter, Talbott considers the Hobbesian social contract defense of autocracy as necessary to solve its citizens’ collective action problems. He argues that human beings are able to form ... More

In this chapter, Talbott considers the Hobbesian social contract defense of autocracy as necessary to solve its citizens’ collective action problems. He argues that human beings are able to form stable rights-respecting democracies that solve their collective action problems, because while human beings are not angels (who always act from the moral standpoint), neither are they devils (who never act from the moral standpoint). He reviews Sen’s research on famines and psychological research on the ultimatum game and related games to show that most people are willing to incur at least small costs to promote fairness. Therefore, rights-respecting democracies (where rights are enforced by an independent judiciary) are able to solve the reliable feedback problem and the appropriate responsiveness problem to become more just over time. They are self-improving, self-regulating systems. Examples of movements of non-violent resistance (e.g., Gandhi and King) illustrate the process. The chapter concludes with a complete list of the basic human rights.Less

Divine Providence and the Course of History

Amos Funkenstein

in Theology and the Scientific Imagination

This chapter analyzes how, since the seventeenth century, versions of the invisible-hand explanation were employed to illuminate the course of history, the evolution of society. Giambattista Vico ... More

This chapter analyzes how, since the seventeenth century, versions of the invisible-hand explanation were employed to illuminate the course of history, the evolution of society. Giambattista Vico described at length the slow process by which man created his social nature out of his initial brutish existence, arguing that it was a spontaneous process. Vico named this process “providence” and stressed time and again the oblique nature of its operation—unintended by individuals and unknown to them. A strong sense of the absolute autonomy and spontaneity of human history is common to all historical constructions of the invisible hand. From Vico to Marx, they envision the subject of history as capable of generating all of its institutions, beliefs, and achievements of itself.Less

God and Nature

Athol Fitzgibbons

in Adam Smith's System of Liberty, Wealth, and Virtue: The Moral and Political Foundations of The Wealth of Nations

Describes Smith's methodology, and considers how he combined his Stoic view of the world with his commitment to Newtonian science. Smith's concept of Nature was supposed to reconcile the two.

The Tyranny of the Contemporary

Stephen M. Gardiner

in A Perfect Moral Storm: The Ethical Tragedy of Climate Change

This chapter argues that the distant future poses a severe moral problem, the nature and extent of which has not yet been adequately appreciated. It also claims (1) that the problem is the main ... More

This chapter argues that the distant future poses a severe moral problem, the nature and extent of which has not yet been adequately appreciated. It also claims (1) that the problem is the main concern of distinctively intergenerational ethics, and (2) that it occurs both in a pure, long-term form manifest across human history and global populations, and also in degenerate forms which apply to shorter time periods and to social institutions. The problem is compared with the traditional prisoner's dilemma analysis, and climate change is offered as a leading example. Three major objections are also considered: the invisible hand, future uncertainty, and the philosophical non-identity problem made popular by Derek ParfitLess

The Economics of Systems Integration: Towards an Evolutionary Interpretation

Giovanni Dosi, Mike Hobday, Luigi Marengo, and Andrea Prencipe

in The Business of Systems Integration

Explores some theoretical elements of the economics of systems integration (and disintegration) by placing the idea of systems integration within the context of evolutionary economics. The authors ... More

Explores some theoretical elements of the economics of systems integration (and disintegration) by placing the idea of systems integration within the context of evolutionary economics. The authors argue that systems integrators (as firms) and systems integration (as a key capability within and across firms) perform a central function as the visible hand of much modern industrial activity, especially in complex products and systems. The latter include a significant subset of capital goods such as mobile communication systems, military systems, corporate information technology networks, train engines, aircraft, intelligent buildings, air‐traffic control systems and tailored software packages.Less

Information and Incentives: The Economics of Carrots and Sticks

James A. Mirrlees

in Welfare, Incentives, and Taxation

This chapter mostly discusses ignorance, and begins with an excerpt from Adam Smith's most famous contribution to economics, which is stated in The Theory of Moral Sentiments. It also discusses the ... More

This chapter mostly discusses ignorance, and begins with an excerpt from Adam Smith's most famous contribution to economics, which is stated in The Theory of Moral Sentiments. It also discusses the concepts of economic equilibrium, the invisible hand, and taxation, among others.Less

The Secret Concatenation of Society

Jonathan Sheehan and Dror Wahrman

in Invisible Hands: Self-Organization in the Eighteenth Century

This chapter focuses on self-organization in human systems within economic and social thought. It begins by looking back at the variety of forms that self-organizing thinking took, through a sampling ... More

This chapter focuses on self-organization in human systems within economic and social thought. It begins by looking back at the variety of forms that self-organizing thinking took, through a sampling of texts from the 1750s. It then hones in on two clusters of the most sustained self-organizing thinking about economy and society in the eighteenth century: in France, in the circles of the Physiocrats, and especially in the writings of Anne-Robert-Jacques Turgot; and in Britain, in the Scottish Enlightenment, especially in the writings of David Hume, Adam Ferguson, and Adam Smith. The French and Scottish schools represented two different kinds of self-organizing narratives, diverging in their respective visions of the dynamic of the self-organizing system: one primarily an organic model of natural equilibrium, the other primarily an evolutionary model of human history. The chapter ends with a consideration of Adam Smith's “invisible hand” and with its literary afterlife.Less

Knowledge, the Firm, and the Market

Alan Burton-Jones

in Knowledge Capitalism: Business, Work, and Learning in the New Economy

Adam Smith's notion of the ‘invisible hand’ is countered with Chandler's notion of a ‘visible hand’ that replaces market mechanisms in coordination and allocation of resources. Firms continued to ... More

Adam Smith's notion of the ‘invisible hand’ is countered with Chandler's notion of a ‘visible hand’ that replaces market mechanisms in coordination and allocation of resources. Firms continued to grow through the internalization and centralization of their processes until developments in computing and communications offered opportunities for decentralization, cost cutting, and less administrative complexity. Soon after that, the application of IT allowed improved coordination and production. Firms continue to grow and shrink simultaneously. This chapter discusses the types of transactions a firm will make, trends in employment, patterns of ownership, and control in a knowledge economy.Less

Three Invisible Hands

Eric Schliesser

in Adam Smith: Systematic Philosopher and Public Thinker

This chapter discusses the three versions of the invisible hand mentioned by Adam Smith in light of each other. It offers detailed contextual analysis in order to argue that Smithian invisible hand ... More

This chapter discusses the three versions of the invisible hand mentioned by Adam Smith in light of each other. It offers detailed contextual analysis in order to argue that Smithian invisible hand processes are not identical to Smithian social explanations. Any given iteration of a Smithian invisible hand process is a relatively short-term process in which an agent produces unintended and, to him or her, unknown consequences. In invisible hand processes the consequences are, in principle, knowable to the right kind of observer (either theoretically informed or by accumulated common sense) at the time. By contrast, Smithian social explanations involve cases where the consequences are visible or knowable only after the fact. Generally they take place over much longer amounts of time than any given invisible hand process. Smithian social explanations can include invisible hand processes as sub-components (or mechanisms) but should not be conflated with these.Less

The Proper Context of Business

James R. Otteson

in Honorable Business: A Framework for Business in a Just and Humane Society

Chapter 2 investigates the explanation Adam Smith gave in his famous Wealth of Nations (1776) for why some places are wealthier than others, and what political, economic, and other social ... More

Chapter 2 investigates the explanation Adam Smith gave in his famous Wealth of Nations (1776) for why some places are wealthier than others, and what political, economic, and other social institutions are required for increasing prosperity. The chapter discusses the conception of “justice,” as opposed to “beneficence,” that Smith offered The Theory of Moral Sentiments (1759), as well as Smith’s economizer, local knowledge, and invisible hand arguments from his Wealth of Nations that form the basis of his political economy. We look at the duties of government implied by Smithian political economy, including both what he argues government should do and what it should not do. We also look at empirical evidence to answer the question of whether Smith’s predictions on behalf of his recommendations have come true in the intervening centuries.Less

Smith’s Construction of the Market: Nature’s Wise Contrivances

Lisa Herzog

in Inventing the Market: Smith, Hegel, and Political Theory

This chapter explores Adam Smith’s construction of the market, which is epitomized in the famous metaphor of the ‘invisible hand’. It argues that in order to understand it correctly, it needs to be ... More

This chapter explores Adam Smith’s construction of the market, which is epitomized in the famous metaphor of the ‘invisible hand’. It argues that in order to understand it correctly, it needs to be read against the background of Smith’s whole philosophical system and his deistic metaphysics. It discusses the way in which his moral philosophy and his economic theory hang together and analyses his complex notion of ‘naturalness’, which includes a role for human design. This also applies to markets, which Smith sees as functioning only against an institutional framework of property rights and, importantly, impartial laws. Under these conditions markets can lead to a situation in which all members of society flourish. Smith thus turns out to be not only an economist, but also a political thinker who reflects on the relation between market and society.Less

Civil Society

N. W. Barber

in The Principles of Constitutionalism

Civil society is the interface between the public and the private: the rules and dispositions that define the relationships between the state and other social institutions, shaping both the state and ... More

Civil society is the interface between the public and the private: the rules and dispositions that define the relationships between the state and other social institutions, shaping both the state and these private entities. The first part of this chapter considers the apparent tension between the public and the private. The chapter then argues that, in contrast, the state should see the private realm as a necessary and beneficial counterpart to the public. This section invokes the idea of ‘invisible hand’ systems. It is an argument from the invisible hand that allows us to reconcile the restricted concern that is characteristic of the economic and social realms with the broader concern of the state, showing these to be complementary rather than set in tension. The chapter concludes by examining the constitutional structures needed to facilitate success in the private realm.Less