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Making Sense of Adam Smith's Invisible Hand: Beyond Pareto Optimality and Unintended Consequences

Published online by Cambridge University Press:  11 June 2009

Elias L. Khalil
Elias L. Khalil
Affiliation:
University of Chicago, USA. Contact: elkhalil@midway.uchicago.edu.
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Extract

Smith explicitly spells out the term “invisible hand” in only three texts, each in a different work. What is embarrassing to neoclassical welfare theory is that these explicit references have little to do with what came to be understood by the metaphor. In particular, the explicit reference to the invisible hand in The Wealth of Nations (WN) is not about the efficiency of the market in allocating resources. Rather, it is about, ironically, how impediments in the international capital market generate great benefits.

Type
Research Article
Information
Journal of the History of Economic Thought , Volume 22 , Issue 1 , March 2000 , pp. 49 - 63
Copyright
Copyright © The History of Economics Society 2000

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