Beyond the Invisible Hand: Groundwork for a New Economics

Beyond the Invisible Hand: Groundwork for a New Economics

Beyond the Invisible Hand: Groundwork for a New Economics

Beyond the Invisible Hand: Groundwork for a New Economics

Synopsis

One of the central tenets of mainstream economics is Adam Smith's proposition that, given certain conditions, self-interested behavior by individuals leads them to the social good, almost as if orchestrated by an invisible hand. This deep insight has, over the past two centuries, been taken out of context, contorted, and used as the cornerstone of free-market orthodoxy. In Beyond the Invisible Hand, Kaushik Basu argues that mainstream economics and its conservative popularizers have misrepresented Smith's insight and hampered our understanding of how economies function, why some economies fail and some succeed, and what the nature and role of state intervention might be. Comparing this view of the invisible hand with the vision described by Kafka--in which individuals pursuing their atomistic interests, devoid of moral compunction, end up creating a world that is mean and miserable--Basu argues for collective action and the need to shift our focus from the efficient society to one that is also fair.


Using analytic tools from mainstream economics, the book challenges some of the precepts and propositions of mainstream economics. It maintains that, by ignoring the role of culture and custom, traditional economics promotes the view that the current system is the only viable one, thereby serving the interests of those who do well by this system. Beyond the Invisible Hand challenges readers to fundamentally rethink the assumptions underlying modern economic thought and proves that a more equitable society is both possible and sustainable, and hence worth striving for.


By scrutinizing Adam Smith's theory, this impassioned critique of contemporary mainstream economics debunks traditional beliefs regarding best economic practices, self-interest, and the social good.

Excerpt

In economics, there is a substantial literature that demonstrates how a free market has several attractive qualities. As an if-then proposition this is certainly valid. Free markets can serve socially useful functions, even though those social ends may not have been contemplated by the individuals who constitute society. Or as economists would put it, a free market equilibrium can be socially efficient even though it is a product of individuals each pursuing their narrow self-interest. There are theorems that establish this with precision and all the artillery of modern economic theory.

Where a large body of professionals—lobbyists, lawyers, politicians, and influential economic journalists—that draws on the old-fashioned economics literature errs is in its failure to recognize that while the textbook conceptualization of the free market may have all those qualities, such a free market does not and probably cannot exist in reality. Furthermore, one cannot make even the ‘limiting claim’ that approaching the extreme case of a fully free market will take us toward some kind of social ideal. the free market proposition is a powerful intellectual achievement and one of great aesthetic appeal, but its rampant misuse has had huge implications for the world—in particular, in the way we craft policy, think about globalization, and dismiss dissent.

This book is an attempt to give form to the dissenting voice. It is founded in the belief that while the dissent against globalization and corporatization that we hear on the streets and from unruly protesters may be inarticulate and even inconsistent, it is an expression of a genuine and plausible critique of contemporary economics along with its disproportionate influence on the world of policymaking.

I have written this book without the usual trappings and garden implements of contemporary economics—algebra, calculus, geometry, and in particularly unrepentant cases, topology. in so doing, my hope is to reach out to the uninitiated. At the same time, this is a monograph meant for professional economists, with the aim being to cause them some discomfiture. But being acquainted with the crust of unquestioning opinion that most experts tend to create around themselves, I am reconciled that my main hope of winning over people must rest largely in the camp of the uninitiated. This is not to deny that among contemporary economists, especially those on the front line, there . . .

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