The Invisible Hand in Economics
How Economists Explain Unintended Social Consequences
Published February 14th 2008 by Routledge – 272 pages
This is a book about one of the most controversial concepts in economics: the invisible hand. The author explores the unintended social consequences implied by the invisible hand and discusses the mechanisms that bring about these consequences.
The book questions, examines and explicates the strengths and weaknesses of invisible-hand explanations concerning the emergence of institutions and macro-social structures, from a methodological and philosophical perspective. Aydinonat analyses paradigmatic examples of invisible-hand explanations such as Carl Menger’s ‘Origin of Money’ and Thomas Schelling’s famous checkerboard model of residential segregation in relation to contemporary models of emergence of money and segregation. Based on this analysis, he provides a fresh look at the philosophical literature on models and explanation and develops a philosophical framework for interpreting invisible-hand type of explanations in economics and elsewhere. Finally, the author applies this framework to recent game theoretic models of institutions and outlines the way in which they should be evaluated.
'This is a significant contribution to the philosophy of social science which will also engage the interest of reflective economic theorists'.
- Robert Sugden, University of East Anglia, UK
'The book is a candidate to become compulsory reading for methodologists and philosophers of science, as well as for those economists who take seriously the issue of their models’ epistemological foundations'.
- Nicola Giocoli, University of Pisa, Italy
'This is a book that cannot fail to provoke thoughtful reactions from its readers about the potentialities of explanation in economics'.
- Mark Blaug, Erasmus University, Erasmus Journal for Philosophy and Economics
'In many ways, this book represents philosophy of economics at its ?nest. It is impeccably informed on the present state of economics, sensitive to the history of the discipline and full of interesting and thoughtful philosophical analysis'.
- Economics and Philosophy Journal
'The book’s choice of the topic with which economists and philosophers could start engaging each other cannot be improved on. The notion of the invisible hand, and the type of explanations it gives rise to, of social patterns of behavior as unintended consequences of individual actions and interactions, are just right for the cross-fertilization between a variety of philosophical fields, prominently including the philosophy of science, on one side, and economic theory, prominently including game theory, on the other. Moreover, the experience of reading this book leaves the reader feeling that the choice of author for this undertaking can hardly be improved on either. Trained both in economics and in philosophy, Emrah Aydinonat has formal and technical skills as well as a historical sensibility and a keen intellectual curiosity, and he has the tenacity to go on digging for gem-stones where previous visitors to the same terrain seem content with surface pebbles. Setting himself the task of developing a framework capable of making sense of the marketplace of extant models, and then to use this framework to ‘gain new insights into the contemporary literature that characterizes institutions and macro-social structures as unintended consequences of human action’ (p. 7), he has produced a book that is pleasingly disciplined and well organized'.
- Edna Ullmann-Margalit; Journal of Economic Methodology, Vol. 17, No. 1, March 2010, 77–92
1. Introduction 2. Unintended Consequences 3. The Origin of Money 4. Segregation 5. The Invisible Hand 6. The Origin of Money Reconsidered 7. Models and Representation 8. Game Theory and Conventions. Conclusion
N. Emrah Aydinonat is Lecturer in philosophy of economics and economic growth at Ankara University, Turkey.