Gold as an investment is reliable investment, especially during economic uncertainty . As a tangible asset it serves as a …
Abstract
Many interpretations (and misinterpretations) of Adam Smiths concept of The Invisible Hand have given rise to new economic thought tracts ranging from spiritualization to historicism of the meager social scientific theory of competition and market equilibrium. In my view Thornton (2009) provides the most logical conclusion making the fewest assumptions when he concludes that the meaning of this hand is closely related to Cantillons theory of the isolated estate, which, before Cantillons publishing of his landmark work Essai, Smith had to forgo his future inspiration. Put another way, through Cantillons affirmation of Smiths earlier use of the invisible hand idea, Smith was later confirmed through the reading of Essai, which helped to affirm traditional interpretations of the idea (as market equilibrium and competition) through the relationship with Cantillons theory of the isolated estate benefitting both the poor and elite classes, sometimes disproportionately so.
Does Political Interventionism Worsen Social Outcomes?: The Philosophical economist
Adam Smiths concept of the Invisible Hand is overlooked as it diminishes the role and the ability governing bodies have over their constituents when problems arise. Rather than trying to mend the economy the government could allow the free market to resolve the issue itself. In doing so, this would ensure that parties would act out of their own self-interest rather than a governmental incentive.
Interfering with this hand can have detrimental effects on economic distribution of resources. With the ongoing Strategic Petroleum Reserve (SPR) releases, the hand was not given the chance to absolve the problem, but simply averted. In doing so, this policy can create disastrous consequences for higher level producers ultimately being bore by the end consumer. With the disincentivization of increased productive capacity through the SPR and the looming threats of a Windfall Profits Tax, it is no wonder that domestic petroleum producers are increasing dividend payouts and thereby failing to invest in heightened levels of output.
If the hand were able to better act given the current circumstances, one can only assume that producers would want to capitalize on higher oil prices more expediently than their peer group, which would alleviate supply constraints which are the ultimate cause of this demand shock (in contrast to oils extreme natural inelasticity). Producers would be incentivized to invest in production quicker than their competitors because the further this investment was put off, the return-on-investment would have diminishing marginal returns, resulting in decreasing fiscal responsibility in taking those actions.
Phraseological Context and Interpretation
Underappreciated information is all around us. It is being championed by the outcast with utter disregard from onlookers. Most often, this information is either irrelevant or its methodologies are prone to bias and therefore , but occasionally, academia seems to glance over pivotal issues. Whether that is intentional or not is up to interpretation but the informations innate depth and weight speak for themselves.
The Invisible Hand in the context of economics is rarely talked about on an academic level and when it is, they brand its originator Adam Smith a crazed theologian given his interest in the intersection of philosophy and economics. The acting out of ones self interest in the Neo-Keynesian era is demonized as being against the movement towards populism and collectivist ideas. What these theorists forget is that ones self interests are aligned with that of their neighbor because it is most advantageous to serve anothers interests (through a product or service) in order to fulfill your own (wealth, comfort, stability). Because your own interest and that of your neighbor can be closely correlated, some say it is inherently wrong to dismantle the motivation of individual freedom and liberty (Thornton, 36).
Much of the academic disregard for this idea is due to Smith (1776) using this convention in multiple different contexts. On the whole, this has led to conjecture surrounding his authorial intent behind the use of this phrase. Since this is such a pivotal concept, its use and magnitude are dependent upon its determination of meaning. This is why perceived market equilibrium can be alleviated or exacerbated simply through the employment of a concept, which is why this subject is so heavily debated.
Thorntons (2009) evaluation of this phrase is directly linked to the works of Cantillon (evidenced by the title). He clearly points to the connection of Smith and Cantillon due to theformer mentioning Cantillon in his work The Wealth of Nations. Similarly, Smith and Cantillon shared viewpoints on the heavily contested Navigation Acts in the form of wage rate differentials. Because Smith was aware and drew insight from Cantillon, Thornton (2009) furthered his research into the intersection between the two renowned minds. Thornton (2009) seems to employ the Occams Razor test most accurately when he states:
Phraseological Context and Interpretation
Underappreciated information is all around us. It is being championed by the outcast with utter disregard from onlookers. Most often, this information is either irrelevant or its methodologies are prone to bias and therefore , but occasionally, academia seems to glance over pivotal issues. Whether that is intentional or not is up to interpretation but the informations innate depth and weight speak for themselves.
The Invisible Hand in the context of economics is rarely talked about on an academic level and when it is, they brand its originator Adam Smith a crazed theologian given his interest in the intersection of philosophy and economics. The acting out of ones self interest in the Neo-Keynesian era is demonized as being against the movement towards populism and collectivist ideas. What these theorists forget is that ones self interests are aligned with that of their neighbor because it is most advantageous to serve anothers interests (through a product or service) in order to fulfill your own (wealth, comfort, stability). Because your own interest and that of your neighbor can be closely correlated, some say it is inherently wrong to dismantle the motivation of individual freedom and liberty (Thornton, 36).
Much of the academic disregard for this idea is due to Smith (1776) using this convention in multiple different contexts. On the whole, this has led to conjecture surrounding his authorial intent behind the use of this phrase. Since this is such a pivotal concept, its use and magnitude are dependent upon its determination of meaning. This is why perceived market equilibrium can be alleviated or exacerbated simply through the employment of a concept, which is why this subject is so heavily debated.
Thorntons (2009) evaluation of this phrase is directly linked to the works of Cantillon (evidenced by the title). He clearly points to the connection of Smith and Cantillon due to theformer mentioning Cantillon in his work The Wealth of Nations. Similarly, Smith and Cantillon shared viewpoints on the heavily contested Navigation Acts in the form of wage rate differentials. Because Smith was aware and drew insight from Cantillon, Thornton (2009) furthered his research into the intersection between the two renowned minds. Thornton (2009) seems to employ the Occams Razor test most accurately when he states:
| The fact that both of Smiths economic applications of the invisible hand appear together in Cantillons model of the isolated estate and are explicitly driven by self interest makes Cantillon the most plausible source of Smiths concept of the invisible hand. With Cantillon as the inspiration of the invisible hand, the phrase can now be shown to have a specific meaning. This resolution solves the problem of multiple meanings by eliminating all the modern interpretations that have appeared in academic journalsTherefore this solution provides a reasonable resolution to the long standing question asked recently by Khalil as to why Smith used the term in such an inconsistent manner. Smith was simply unaware of Cantillons manuscript prior to its publication in 1755 and then found the invisible hand in Cantillons model of the isolated estate. With this plausible solution in hand, the invisible hand can remain a useful economic construct and analytic device. However, before turning to this solution, we briefly visit the problems now facing the invisible hand. (Thornton, 2009, 29-30) |
In alignment to what Thornton (2009) describes as modern interpretations [appearing] in academic journals, Hill (2001) aims to diminish the utility of Smiths idea by grouping it with theological and teleological ideals dependent upon Providentially endowed laws of motion (Hill, 2001, 2). This reductionist view is critiqued by Thornton when he writes Hill (2001), Waterman (2002), and Denis (2005) provide us with recent interpretations of the invisible hand with a spiritual glove (Thornton, 2009, 31).
The over-spiritualization of the phrase is likely incorrect as Harrison (2011) points out by concluding, The earliest reference that I have found occurs in a Greek liturgy which invokes Gods invisible right hand which is full of blessing.the expression is relatively rare in subsequent patristic and medieval writings (Harrison, 2011, 31-32). Seeing as the church empowered use of the phrase was rare at worst, Hills assertions of modern theological concepts seem out of place. Under Thorntons (2009) logical conclusion of Cantillons theory of the isolated estate being the basis for Smiths understanding of competition and natural pricing, the idea that It is the self interest of the estate owner that maximizes output and income for the populace (Thornton, 2009, 38) makes sense
Does Political Interventionism Worsen Social Outcomes ?: The Average College Age Individual
Did you know that the Strategic Petroleum Reserve (SPR) release will likely have the outcome of increasing the cost of energy for the public on the whole but disproportionately so for poorer communities? Adam Smith, a Scottish economist and philosopher coined the phrase of The Invisible Hand to help explain that the greatest social outcomes are brought about by individuals pursuing their own self-interests. Interventionist policies can often impede the acting of this hand by incentivizing and disincentivizing actions deemed appropriate or inappropriate by the State.
When one attacks the symptoms of a problem, rather than the problem itself, not only will it cause confusion, but it may even lead to societal mayhem like such events as the 1973 Oil Crisis. The importance of free market initiative helps to promote the best social outcome regardless of circumstance via the employment of self-interest driven initiatives. Whether those initiatives are creating new products and services, or relieving supply-chain disruptions that currently debilitate the domestic economy.
Smiths (1776) Invisible Hand solution to intervention is what I consider the building blocks of an economic skyscraper. If one builds off of ground that holds interventionist policies to be the only solution to market phenomena, in my view, the building is inherently flawed and prone to any unaccounted-for gust of wind. Long term price stability is best pursued when markets are allowed to act unimpeded by external influence (State control) that reorganizes what otherwise would have been an efficient use of resources. Without the government picking winners and losers in times of triumph and toil, individuals would be able to succeed based on merit, rather than artificially bolstered endorsement.
Annotated Bibliography
Thornton, Mark. Cantillon and the Invisible Hand. The Quarterly Journal of Austrian Economics 12, No. 2 (2009) 2746.
Hill, L. (2001). The hidden theology of Adam Smith. European Journal of the History of Economic Thought, 8(1), 129. https://doi-org.ezproxy.biola.edu/10.1080/713765225
Harrison, P. (2011). Adam Smith and the History of the Invisible Hand. Journal of the History of Ideas, 72(1), 2949.
