The Invisible Hand. It is one of the most famous metaphors in the history of economic thought, introduced by the Scottish philosopher and economist Adam Smith (1723–1790).
In a previous lecture, I discussed the ideas of the Physiocrats, economic thinkers in France, who flourished between the 1750s and 1780s.
They were philosophers of society who offered a comprehensive vision of wealth, governance, and human flourishing derived from a deep belief in a harmonious natural system.
They were firmly convinced of natural law, the natural order, and this was reflected in their basic economic convictions.
Smith could relate to that idea and introduced his metaphor of the Invisible Hand. It is a metaphor, not an elaborated theory of economics.
But the basis stood: to some extent, a belief in harmonious natural laws that guided and controlled the economic processes in a society, as the Physiocrats claimed.
Smith's mechanism is more specifically about the systemic outcomes of human psychology, like self-interest and sympathy, and institutions like free markets and competition, not a pre-ordained natural harmony.
Smith used the phrase "invisible hand” only three times across all his published works:
In "The Theory of Moral Sentiments" (1759), he describes how the rich, in pursuing luxury, inadvertently distribute necessities to the poor as if by an “invisible hand.”
It may be me, but doesn't this sound similar to Ronald Reagan's belief in a trickle-down economy? There is a difference, however, and we'll get to that in the coming lectures.
Smith's "invisible hand" is a descriptive metaphor about systemic emergence, while "trickle-down economics" is a prescriptive and highly contested political theory about tax policy.
It was also a reaction against mercantilism with its state-controlled trade and protectionism. Smith argued for freer markets, division of labor, and thus more efficient production of goods, and limited government intervention.
You might say that this introduced the basic ingredients of capitalism and liberalism in politics. Smith saw unintended social benefits from individual actions.
He argued that when people pursue their own interests within a system of property rights, competition, and justice, they often benefit society without intending to do so.
On the one hand, self-interest became the guiding economic principle, which would work fine in a society, due to the alleged natural laws that guided everything as an Invisible Hand.
You don't need excessive government meddling in market exchanges, although Smith yet recognized necessary roles for the state, like in defence, justice, or public works.
Adam Smith’s “invisible hand” emerged from Enlightenment thinking about spontaneous order in society. It stood for a decentralized, emergent order in contrast with the visible hand of the Mercantilist state, which stood for centralized control.
It was a poetic way of describing how decentralized individual decisions can generate systemic social benefits, a core insight that later shaped classical and modern economics.
Thank you for your attention again...
Main Sources:
MacMillan The Encyclopedia of Philosophy, 2nd edition
of Economic Thought (2012)
TABLE OF CONTENT -----------------------------------------------------------------
1 - 100 Philosophers 9 May 2009 Start of
2 - 25+ Women Philosophers 10 May 2009 this blog
3 - 25 Adventures in Thinking 10 May 2009
4 - Modern Theories of Ethics 29 Oct 2009
5 - The Ideal State 24 Febr 2010 / 234
6 - The Mystery of the Brain 3 Sept 2010 / 266
7 - The Utopia of the Free Market 16 Febr 2012 / 383
8. - The Aftermath of Neo-liberalism 5 Sept 2012 / 413
9. - The Art Not to Be an Egoist 6 Nov 2012 / 426
10 - Non-Western Philosophy 29 May 2013 / 477
11 - Why Science is Right 2 Sept 2014 / 534
12 - A Philosopher looks at Atheism 1 Jan 2015 / 557
13 - EVIL, a philosophical investigation 17 Apr 2015 / 580
14 - Existentialism and Free Will 2 Sept 2015 / 586
15 - Spinoza 2 Sept 2016 / 615
16 - The Meaning of Life 13 Febr 2017 / 637
17 - In Search of my Self 6 Sept 2017 / 670
18 - The 20th Century Revisited 3 Apr 2018 / 706
19 - The Pessimist 11 Jan 2020 / 819
20 - The Optimist 9 Febr 2020 / 824
21 - Awakening from a Neoliberal Dream 8 Oct 2020 / 872
22 - A World Full of Patterns 1 Apr 2021 / 912
23 - The Concept of Freedom 8 Jan 2022 / 965
24 - Materialism 7 Sept 2022 / 1011
25 - Historical Materialism 5 Oct 2023 / 1088
26 - The Bonobo and the Atheist 9 Jan 2024 / 1102
27 - Artificial Intelligence 9 Feb 2024 / 1108
28 - Why Am I Here 6 Sept 2024 / 1139
The Discussion
[13:15] herman Bergson: It may sound a bit abstract, perhaps
[13:15] herman Bergson: but the core belief of Smith was in sympathy....
[13:15] Particle Physicist Bejiita (bejiita.imako): The invisible hand sounds like another false promise to justify everything, because THAT clearly didt work
[13:15] Max Chatnoir: Thanks, Herman. That might work if the production side includes higher salaries for workers.
[13:15] herman Bergson: He believed in a positive human being....man is good
[13:15] Particle Physicist Bejiita (bejiita.imako): the rich grab EVERYTHING
[13:16] herman Bergson: Yes, there is an imbalance these days
[13:16] James Argonaut: the invisible hand is certainly a poetic allegory for an emergent distributed control system.
[13:17] herman Bergson: His idea was that actions of individuals would also benefit society....
[13:17] Particle Physicist Bejiita (bejiita.imako): its just like with AI today. Microsifts CEO: "Stop call it AI Slop, lets call it a cogitive amplifier"
[13:17] Particle Physicist Bejiita (bejiita.imako): oo sure, Cognitive dumbifier maybee as we stop using our own brains and let AI do everything
[13:17] herman Bergson: For instance, when I buy a loaf at the bakery, the baker benefits from it and gets money to feed his children for instance
[13:18] Particle Physicist Bejiita (bejiita.imako): ah
[13:18] herman Bergson: And if you apply this effect on a national scale you can see what Smith meant
[13:19] herman Bergson: But it leans on the assumption that self-interest does not change into greed, I guess
[13:19] Particle Physicist Bejiita (bejiita.imako): yes
[13:19] Particle Physicist Bejiita (bejiita.imako): there must be so to say a win-win situation
[13:19] Particle Physicist Bejiita (bejiita.imako): fairness
[13:20] Particle Physicist Bejiita (bejiita.imako): for both customer ad producer
[13:20] Particle Physicist Bejiita (bejiita.imako): both
[13:20] herman Bergson: something like that, yes...
[13:20] herman Bergson: If this is the beginning of capitalism, then it started from rather positive ideas about human behavior
[13:21] Particle Physicist Bejiita (bejiita.imako): sell to many for a fair price and with good service, customers come back again and again and u get a good profit in the end
[13:21] James Argonaut: I think one of the most interesting things about the invisible hand, in terms of governance, is that, most prior systems were prescriptive; they laid into law their intention, and enforced it through active regulation.
The invisible hand theory actively built in a primary role for "emergent" behavior. Not behavior that is prescribed, but behavior that would naturally arise.
Strong consideration of emergent behavior is fundamental to a system maintaining its survival.
[13:22] Max Chatnoir: What kind of behavior is emergent?
[13:22] herman Bergson: Yes James
[13:23] herman Bergson: behavior that automatically emerges, occurs as a result of other processes and behavior
[13:23] Max Chatnoir: for example?
[13:23] herman Bergson: Like some say that our mind is an emergent phenomenon....it emerges from the biochemical and electric activity in the brain...
[13:24] herman Bergson: That does not answer the question, how this process works exactly...
[13:24] herman Bergson: but we can't deny the existence of the mind and its relation to the brain
[13:25] James Argonaut: Yes. I think a more concrete example is, you send kids to school in order to learn, and you create a set of rules to govern student interaction. But because you are putting so many kids in close proximity, some of whom might be frustrated by mundaneness, kids might start bullying each other, etc.
[13:25] James Argonaut: That is the emergent behavior of putting children in close proximity under stress. It is not an intention.
[13:25] herman Bergson: so when people are treated fairly and buy their groceries for reasonable prices.....friendly social behavior in the community might emerge
[13:26] Particle Physicist Bejiita (bejiita.imako): its what I would cause side effects, I guess
[13:26] Particle Physicist Bejiita (bejiita.imako): aaa indeed, that sounds probable for sure
[13:26] Particle Physicist Bejiita (bejiita.imako): everyone is happy
[13:27] herman Bergson: Like decent people suddenly become thieves
in Wallmarkt, due to low incomes and unfair prices
[13:27] herman Bergson: Smith believed in the positive side of this story
[13:28] Max Chatnoir: So what emergent behavior produces fair incomes and prices?
[13:28] herman Bergson: Satisfied and friendly citizens that are not inclined to steal for instance? :-)
[13:28] Particle Physicist Bejiita (bejiita.imako): Like how i support my local pizzerias because they all make really nice pizzas each one with their own distinct style, have fair prices and the oes working there are very nice and social
[13:28] James Argonaut: Well, it 'can' produce fair incomes and prices, it does not mean it will. It depends on the conditions and society under which the doctrine is imposed.
[13:28] Particle Physicist Bejiita (bejiita.imako): That's one example for me
[13:29] Particle Physicist Bejiita (bejiita.imako): and I then come back for more
[13:31] herman Bergson: Well, Bejiita, come back here too and we'll see how this positive attitude of Adam Smith will evolve...
[13:31] Max Chatnoir: Imposed?
[13:31] James Argonaut: i think an interesting thing to consider is, the fringe conditions of the invisible hand. Under which conditions does the optimization point of the invisible hand create a race to the bottom?
[13:31] Particle Physicist Bejiita (bejiita.imako): :)=
[13:31] herman Bergson: Like a government does with Executive Orders, for instance...:-)
[13:33] herman Bergson: Guess it is time for a nice weekend now... ㋡
[13:33] Particle Physicist Bejiita (bejiita.imako): aah
[13:33] herman Bergson: So, thank you all again....
[13:33] herman Bergson: Class dismissed...
[13:33] .: Beertje :. (beertje.beaumont): Thank you Herman it was very interesting again
[13:34] Particle Physicist Bejiita (bejiita.imako): aha
[13:34] Particle Physicist Bejiita (bejiita.imako): true
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