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Adam Smith and the Invisible Hand: From Metaphor to Myth

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  • Gavin Kennedy
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    Abstract

    Adam Smith and the ‘invisible hand’ are nearly synonymous in modern economic thinking. Adam Smith is strongly associated with the invisible hand, understood as a general rule that people in realising their self-interests unintentionally benefit the public good. The attribution to Smith is challengeable. Adam Smith’s use of the metaphor was much more modest; it was re-invented in the 1930s and 1940s onwards to bolster mathematical treatments of capitalism (Samuelson, Friedman) and to support innovative analysis by associating the metaphor with ‘spontaneous order’ (Hayek). The effect has been to ignore insightful explanations about how markets function as a process in favour of semi-mystical beliefs in imagined outcomes, wrapped in an isolated 18th-century literary metaphor, which does not explain anything.

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    Bibliographic Info

    Article provided by Econ Journal Watch in its journal Econ Journal Watch.

    Volume (Year): 6 (2009)
    Issue (Month): 2 (May)
    Pages: 239-263

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    Handle: RePEc:ejw:journl:v:6:y:2009:i:2:p:239-263

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    Keywords: Adam Smith; invisible hand; metaphor;

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    Cited by:
    1. Joseph E. Stiglitz, 2011. "Rethinking Macroeconomics: What Failed, And How To Repair It," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 9(4), pages 591-645, 08.
    2. Madarász, Aladár, 2014. "A láthatatlan kéz - szemelvények egy metafora történetéből
      [The invisible hand - extracts from the history of a metaphor]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 801-844.
    3. Andreia Tolciu, 2010. "The Economics of Social Interactions: An Interdisciplinary Ground for Social Scientists?," Forum for Social Economics, Springer, Springer, vol. 39(3), pages 223-242, October.
    4. Kakarot-Handtke, Egmont, 2011. "Matter matters: productivity, resources, and prices," MPRA Paper 34225, University Library of Munich, Germany.
    5. Kakarot-Handtke, Egmont, 2011. "The propensity function as formal passkey to economic action," MPRA Paper 34051, University Library of Munich, Germany.

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