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Retrospectives: Ethics and the Invisible Hand

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  • Jerry Evensky

Abstract

As modern economists, we use Adam Smith's "invisible hand" metaphor confident that we all know what it means in our discourse: it reflects our admiration for the elegant and smooth functioning of the market system as a coordinator of autonomous individual choices in an interdependent world. But in Adam Smith's moral philosophy, the invisible hand has a much broader responsibility: if individuals are to enjoy the fruits of a classical liberal society, the invisible hand must not only coordinate individuals' choices, it must shape the individuals into constructive social beings—ethical beings. I begin by presenting the philosophical basis for Smith's invisible hand, describing the sense in which the hand is invisible and whose hand it is. I then describe the story Smith tells of the invisible hand creating and maintaining a constructive classical liberal society and show how Smith's story evolved as his faith in the ability of the invisible hand to shape an appropriate ethical foundation waned. I conclude with some thoughts on the legacy of Adam Smith and of our predecessors in economic inquiry more generally.

Suggested Citation

  • Jerry Evensky, 1993. "Retrospectives: Ethics and the Invisible Hand," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 197-205, Spring.
    • Handle: RePEc:aea:jecper:v:7:y:1993:i:2:p:197-205
    Note: DOI: 10.1257/jep.7.2.197
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.7.2.197
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    References listed on IDEAS

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    1. Jerry Evensky, 1987. "The Two Voices of Adam Smith: Moral Philosopher and Social Critic," History of Political Economy, Duke University Press, vol. 19(3), pages 447-468, Fall.
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    Cited by:

    1. James, Harvey S., Jr., 2005. "For a Sustainable Agriculture, We Need More Adam Smith, Not Less," Working Papers 26047, University of Missouri Columbia, Department of Agricultural Economics.
    2. Alejandra Marin & Ronald Mitchell & Jae Lee, 2015. "The Vulnerability and Strength Duality in Ethnic Business: A Model of Stakeholder Salience and Social Capital," Journal of Business Ethics, Springer, vol. 130(2), pages 271-289, August.
    3. Jerry Evensky, 2001. "Adam Smith's Lost Legacy," Southern Economic Journal, John Wiley & Sons, vol. 67(3), pages 497-517, January.
    4. Dupont, Brandon & Durham, Yvonne, 2021. "Adam Smith and the not so invisible hand: A revision for the undergraduate classroom," International Review of Economics Education, Elsevier, vol. 36(C).
    5. Soldatos, Gerasimos T., 2015. "A Critical Overview of Islamic Economics from a Welfare-State Perspective," MPRA Paper 70066, University Library of Munich, Germany, revised 2016.
    6. Hugo E. A. da Gama Cerqueira, 2006. "Sobre A Filosofia Moral De Adam Smith," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 39, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. Charles Wilber, 2004. "Ethics, human behavior and the methodology of social economics," Forum for Social Economics, Springer;The Association for Social Economics, vol. 33(2), pages 19-50, March.
    8. Barrett, Christopher B., 1998. "Markets, Social Norms, And Governments In The Service Of Environmentally Sustainable Economic Development," Economics Research Institute, ERI Study Papers 28352, Utah State University, Economics Department.
    9. Jonathan Wight, 2006. "Adam Smith's Ethics and the “Noble Arts”," Review of Social Economy, Taylor & Francis Journals, vol. 64(2), pages 155-180.
    10. Steen Thomsen, 2001. "Business Ethics as Corporate Governance," European Journal of Law and Economics, Springer, vol. 11(2), pages 153-164, March.
    11. Abbas Mirakhor, 2014. "The Starry Heavens Above and the Moral Law Within: On the Flatness of Economics," Econ Journal Watch, Econ Journal Watch, vol. 11(2), pages 186-193, May.
    12. Nava Ashraf & Colin F. Camerer & George Loewenstein, 2005. "Adam Smith, Behavioral Economist," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 131-145, Summer.
    13. Jonathan B. Wight, 2005. "Adam Smith and Greed," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 21(Fall 2005), pages 46-58.
    14. Whittaker, Julie, 2011. "The evolution of environmentally responsible investment: An Adam Smith perspective," Ecological Economics, Elsevier, vol. 71(C), pages 33-41.
    15. Katharina Biely & Dries Maes & Steven Van Passel, 2018. "Market Power Extended: From Foucault to Meadows," Sustainability, MDPI, vol. 10(8), pages 1-23, August.

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    More about this item

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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