Scholarly Comments on Academic Economics

Adam Smith and the Invisible Hand: From Metaphor to Myth

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*Gavin Kennedy* is Emeritus Professor, Heriot-Watt University, with 33 years teaching experience in economics, defence economics, public finance, and business negotiation, at Brunel (1970-2), Strathclyde (1972-82), and Heriot-Watt (1982-2005) universities

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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Volume (Issue)
6(2)
Pages
239-263
Published
JEL classification
A13, B0, B1
Keywords
Adam Smith, invisible hand, metaphor
Article PDF Downloads
13642 (updated 31 Dec 2011)

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