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Equilibrium versus the Invisible Hand


  • Holcombe, Randall G


Twentieth century equilibrium modeling depicts an end state toward which an economy tends, whereas the invisible hand, as Adam Smith depicted it, suggests an economy continually progressing as an increased division of labor is produced by growing markets. Thus, there is an inherent tension between the concepts of an equilibrium outcome versus the invisible hand process. The paper discusses different concepts of equilibrium, and relates entrepreneurship to the invisible hand. The paper concludes that the invisible hand concept provides a more fruitful framework for economic analysis than the twentieth century equilibrium framework. Copyright 1999 by Kluwer Academic Publishers

Suggested Citation

  • Holcombe, Randall G, 1999. "Equilibrium versus the Invisible Hand," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 12(2), pages 227-243, November.
  • Handle: RePEc:kap:revaec:v:12:y:1999:i:2:p:227-43

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    References listed on IDEAS

    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    2. Amendola, Mario & Gaffard, Jean-Luc, 1998. "Out of Equilibrium," OUP Catalogue, Oxford University Press, number 9780198293804, June.
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    Cited by:

    1. François Facchini, 2007. "Entrepreneur et croissance économique : développements récents," Revue d'économie industrielle, De Boeck Université, vol. 0(3), pages 3-3.
    2. Göcen, Serdar, 2015. "F. A. Hayek'in Bilgisizlik Teorisi Çerçevesinde Piyasa, Denge ve Planlama
      [Market, Equilibrium, and Planning within the Framework of F.A. Hayek's Theory of Ignorance]
      ," MPRA Paper 66811, University Library of Munich, Germany.
    3. Randall G. Holcombe, 2011. "Cultivating Creativity: Market Creation of Agglomeration Economies," Chapters,in: Handbook of Creative Cities, chapter 19 Edward Elgar Publishing.
    4. Randall Holcombe, 2008. "Advancing economic analysis beyond the equilibrium framework," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 21(4), pages 225-249, December.
    5. Israel Kirzner, 2009. "The alert and creative entrepreneur: a clarification," Small Business Economics, Springer, vol. 32(2), pages 145-152, February.
    6. Randall Holcombe, 2006. "Does the invisible hand hold or lead? Market adjustment in an entrepreneurial economy," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 19(2), pages 189-201, June.

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