Major Contributors

Major Contributors

Adam Smith

..every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good Adam Smith, The Wealth of Nations

The invisible hand mechanism argues that members of a society do not coordinated their actions around achieving a pre-specified outcome. Their behavior is not guided by an explicit agreement and thus it is an “invisible hand” that works towards the achievement of a specific outcome. In The Wealth of Nations, Smith argues that it is impossible for a central regulator o possess the knowledge those “on the spot” have. Smith argues that the market is a self-rgulated mechanism a

Jean-Baptiste Say

Friedrich A. Hayek

Hayek argues that people interpret the events they experience through the light of a preexisting system of classification, which is built through a process of cultural evolution and individual learning. The experiences people pass through have a crucial influence in them building a “growth of knowledge” process, which will define their future responses to various situations they will be facing. It is thus misleading to believe that humans can simply design a set of rules and impose it upon their environment, as is it the environment in which they live that shapes their behavior. Hayek considers that humans did not adopt laws and institutions because they were able to foresee the benefits these would bring. Rather, their adoption was due to spontaneous order, as they evolved through a process of the logic of choice. People’s behavior follows patterns that have previously been accepted by their society; this allows them to not only pursue their own means but the means of others as well.

Hayek considers that the market is not simply a guide or a communication tool, but a complex mechanism which allows participants to spontaneously adopt their actions to circumstances and events they previously had no knowledge of. The market is not a social institution but a “value-free result of the Logic of Choice”, which not only makes use of the existing knowledge market participants have but continuously generates new knowledge. The market operates as a mode of coordination and information is being transmitted through a series of general mechanisms (i.e. the price mechanism).

Samuel Bowles

Et. Al.

General Overview | Major Contributors | Game Theory Models | Objections/Arguments