Academic journal article Quarterly Journal of Austrian Economics

Cantillon and the Invisible Hand

Academic journal article Quarterly Journal of Austrian Economics

Cantillon and the Invisible Hand

Article excerpt

ABSTRACT: The invisible hand remains an important foundation of economic analysis, continues to be a source of new analytical and explanatory devices, and is the conceptual basis of a whole class of scientific models throughout the sciences. Indeed, Smith's famous concept has experienced a resurgence of interest as several new interpretations of the concept have been published in the leading general-interest economic journals and those that specialize in the history of economic thought.

Smith's three explicit references to the "invisible hand" do not add up to a unified notion. Maybe future research can unearth why Smith used the term in an inconsistent manner. Meanwhile, we can only work with the three texts, and these texts do not provide a uniform sense of the term. In any case, none of these references lends support to the modern understanding of the metaphor as (being) about the first law of welfare economics.

-(Khalil 2000, p. 54)1

The invisible hand remains an important foundation of economic analysis, continues to be a source of new analytical and explanatory devices, and is the conceptual basis of a whole class of scientific models throughout the sciences. Indeed, Smith's famous concept has experienced a resurgence of interest as several new interpretations of the concept have been published in the leading general-interest economic journals and those that specialize in the history of economic thought. In addition, there is an entire Palgrave (1989) volume devoted to the invisible hand. Most recently, what amounts to a textbook on the invisible hand has been published which places the invisible hand into the methodology of modern technical economics (Aydinonat 2008).

However, rather than establishing clarity or refining the specific mechanisms of the invisible hand, these new interpretations have placed the concept into an intellectual quagmire that threatens its scientific usefulness. The widespread effort to discover the "true" meaning of the invisible hand appears to have muddied the conceptual waters almost beyond recognition. There are now at least a dozen different versions of the invisible hand ranging from the more traditional interpretations to those which attach the phrase to such things as slavery and national defense. The existence of multiple, mutually exclusive interpretations of Smith's invisible hand threaten the phrase with what might be called a multiple-conception disorder. In addition to the problem of multiple definitions, there is also the problem of under-defining the concept, where the invisible hand remains clouded in mystery and belief rather than founded on a reliable scientific basis. Related to the problem of being illdefined, is the normative battle under which the invisible hand has long been under siege, where proponents offer nebulous invisible hand solutions which are scoffed at by opponents of the market economy. The combination of these three problems with the invisible hand calls out for either a clear resolution to its meaning or abandonment of the concept.

The majority of the blame for the invisible hand problem surely rests with modern economists and their failure to solve the meaning of the invisible hand. However, some of the responsibility also originates from Smith's writings. As noted in the opening quote, Smith used the phrase three times in three different ways. The solution to the meaning of the invisible hand should offer, as Khalil and others have suggested, some reasonable approach to understanding Smith's three different uses of the phase. Also, the phrase is an obvious reference to the supernatural powers of God and more than one modern interpretation follows that route. The obvious problem here is that the concept remains at least partly mystical and normative and therefore unreliable in a scientific sense. To be fair to Smith, many scholars, such as Hirschman (1977) have recognized that he invoked this terminology as a rhetorical device meant to convince readers of the merits of the market economy. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.