The Invisible Hand - Adam Smith

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来自 Universiteit Leiden 的课程

Political Economy of Institutions and Development

114 个评分

Universiteit Leiden

Political Economy of Institutions and Development

114 个评分

This course is part of the SDG initiative <http://www.sdginitiative.org/> addressing the UN Sustainable Development Goals, specifically for the following SDGs [1, 8, 10 and 16]. We hope you will join in our efforts to reach the SDG’s in small but measurable and actionable ways, cooperating with Development Done Differently. Expand your impact. You can create a better world. In today’s world, politics and economics are interconnected, but what is the nature of this connectivity? What are the power relationships that shape the world economy today and create new challenges for international institutions facing globalization? What makes some countries wealthier than others? Do we face cultural diversity or fragmentation? Does the type of governance effect economic development and social change or is it the other way around? How do we measure it and how trustworthy is the data? These issues and many more will be examined in this course along with a wide library of sources and a biting criticism.

从本节课中

Extra Material

Not for the test - but very good for your general knowledge!

The Invisible Hand - Adam Smith4:12

Utilitarianism - Jeremy Bentham3:17

Relative Backwardness - Alexander Gerschenkron3:55

Classical Liberalism - Friedrich August von Hayek3:49

Keynesianism - John Maynard Keynes3:44

Critical Political Economy - Robert Cox4:08

The Take Off - Walt W. Rostow3:43

Marxism - Karl Marx4:20

Small States - Peter Katzenstein4:17

World Systems Theory - Immanuel Wallerstein3:52

New Institutional Economics- Ronald Coase3:46

Economic Structuralism- Raúl Prebisch3:41

与讲师见面

Richard Thomas Griffiths
Prof. dr.
Faculty of Humanities

Adam Smith was born in Kirkcaldy,

Scotland, in 1723, the son of a local lawyer.

He studied moral philosophy in Glasgow University and later

Oxford which he disliked because of disinterest of the Professors.

Return to Scotland in 1746 to teach first at

Edinburgh and later in Glasgow as Professor of Philosophy.

As befits a believer in the free market,

he let his students pay what they thought his lectures deserved.

The invisible hand refers to the forces that allow a system that is fueled by

personal satisfaction and the pursuit of profit

to produce results that are beneficial for society as a whole.

It is a competition between buyers and sellers,

each motivated by the maximalization of

their own satisfaction that serves to stimulate innovation and drive down costs.

Adam Smith saw it as a self-regulating system that didn't

require governments to direct it toward socially beneficial ends.

Ironically, Smith only used the term invisible hands three times in all of his writings.

And never directly linking it to the free market as obviously as I've suggested here.

In fact, he was using the term on the case of the decision to

sell at home or abroad in attack on mercantilism.

Mercantilism was where the state tried to direct

foreign trade to maximize a trade surplus.

But if Adam Smith didn't make this point,

there were plenty of others who did it for him.

And the metaphor of the invisible hand was too good to miss.

The mechanism through which it works is that customers choose freely

what they want to buy and producers choose freely what to sell and how to make it,

and the market then will decide the quantity that's bought and the price in

such a way as to maximize the preference of

both parties and therefore society as a whole.

Competition among producers will stimulate efficiency to maximize profits,

will prompt lower prices to beat competitors,

and will promote investment to draw income to businesses promising higher returns.

Free marketeers and hyper globalists would still largely adhere to

this analysis whether they use the metaphor of the invisible hand or not.

Now, far be it for me to criticize

such a mainstream ideology in the time available to me.

Every student of economics has drawn supply and demand diagrams that underpin this logic.

But we do need to stand still at the conditions that need to be met for it all to

work: Perfect knowledge between consumers and producers,

no entry barriers to markets,

no transport or other transaction costs.

Now, none of these conditions ever exist in practice.

Much business practice is designed to ensure that they won't exist in the future.

Since these imperfections are for the source of market segmentation,

collusion and cartels, and local protectionism.

The second observation is that this analysis is all blind to size and therefore to power.

Different players in the market: the buyers and the sellers are not opposites on a graph.

They also differ among themselves.

There are different degrees of dependence on

the market as well as different capacities to withstand change.

And then you have to consider those who fall beneath

the equilibrium point we all like to draw on the graph.

What about those whose consumption falls?

Perhaps falls all together as prices rise.

And what about those whose output drops away or is wiped

out because they can't compete in the so-called free market?

For them, possibly, a helping hand might not be misplaced.

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