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Adam Smith and the Invisible Hand: From Metaphor to Myth

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  • Gavin Kennedy

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.

Suggested Citation

  • Gavin Kennedy, 2009. "Adam Smith and the Invisible Hand: From Metaphor to Myth," Econ Journal Watch, Econ Journal Watch, vol. 6(2), pages 239-263, May.
  • Handle: RePEc:ejw:journl:v:6:y:2009:i:2:p:239-263
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    References listed on IDEAS

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    1. J. G. B., 1892. "Miner's Life in the German Harz," The Quarterly Journal of Economics, Oxford University Press, vol. 6(4), pages 474-478.
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    Cited by:

    1. Andreia Tolciu, 2010. "The Economics of Social Interactions: An Interdisciplinary Ground for Social Scientists?," Forum for Social Economics, Springer;The Association for Social Economics, vol. 39(3), pages 223-242, October.
    2. Asad Zaman, 2014. "Islam versus economics," Chapters,in: Handbook on Islam and Economic Life, chapter 3, pages iii-iii Edward Elgar Publishing.
    3. Gavin Kennedy, 2015. "Adam Smith's Use of the 'Gravitation' Metaphor," Economic Thought, World Economics Association, vol. 4(1), pages 67-79, March.
    4. Kakarot-Handtke, Egmont, 2011. "The propensity function as formal passkey to economic action," MPRA Paper 34051, University Library of Munich, Germany.
    5. Kakarot-Handtke, Egmont, 2011. "Matter matters: productivity, resources, and prices," MPRA Paper 34225, University Library of Munich, Germany.
    6. Bruce E. Kaufman, 2016. "Adam Smith’s Economics and the Modern Minimum Wage Debate:The Large Distance Separating Kirkcaldy from Chicago," Journal of Labor Research, Springer, vol. 37(1), pages 29-52, March.
    7. 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.
    8. Joseph E. Stiglitz, 2011. "Rethinking Macroeconomics: What Failed, And How To Repair It," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 591-645, August.
    9. 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.
    10. Emiel F.M. Wubben, 2011. "Do Rules and Regulations Bind or Boost Economic Growth?," Chapters,in: Institutions and Regulation for Economic Growth?, chapter 1 Edward Elgar Publishing.
    11. repec:kap:jbuset:v:147:y:2018:i:4:d:10.1007_s10551-017-3506-6 is not listed on IDEAS
    12. Andreia Tolciu, 2010. "The Economics of Social Interactions: An Interdisciplinary Ground for Social Scientists?," Forum for Social Economics, Taylor & Francis Journals, vol. 39(3), pages 223-242, January.
    13. David Bevan & Patricia Werhane, 2015. "The Inexorable Sociality of Commerce: The Individual and Others in Adam Smith," Journal of Business Ethics, Springer, vol. 127(2), pages 327-335, March.

    More about this item

    Keywords

    Adam Smith; invisible hand; metaphor;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • B0 - Schools of Economic Thought and Methodology - - General
    • B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925

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