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Does the invisible hand hold or lead? Market adjustment in an entrepreneurial economy

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  • Randall Holcombe

Abstract

Adam Smith's “invisible hand” is one of the best-known phrases in economics, but its meaning is somewhat ambiguous. The invisible hand might be viewed as holding the economy close to equilibrium, yet Smith actually says that individuals are led by an invisible hand. Entrepreneurial forces lead an economy along a path that generates economic progress, and that path is determined by the disruptive forces of entrepreneurship. Rather than viewing an economy as tending toward an equilibrium, it is more accurate to view an economy as characterized by continuing progress, led by the invisible hand of entrepreneurial activity. Copyright Springer Science + Business Media, Inc. 2006

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  • Randall Holcombe, 2006. "Does the invisible hand hold or lead? Market adjustment in an entrepreneurial economy," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 19(2), pages 189-201, June.
    • Handle: RePEc:kap:revaec:v:19:y:2006:i:2:p:189-201
    DOI: 10.1007/s11138-006-7347-2
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    References listed on IDEAS

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    1. Meir Kohn, 2004. "Value and Exchange," Cato Journal, Cato Journal, Cato Institute, vol. 24(3), pages 303-339, Fall.
    2. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776.
    3. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
    4. Wagner, Alfred, 1891. "Marshall's Principles of Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 5, pages 319-338.
    5. Holcombe, Randall G, 1999. "Equilibrium versus the Invisible Hand," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 12(2), pages 227-243, November.
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    Cited by:

    1. Randall G. Holcombe, 2011. "Cultivating Creativity: Market Creation of Agglomeration Economies," Chapters, in: David Emanuel Andersson & Åke E. Andersson & Charlotta Mellander (ed.), Handbook of Creative Cities, chapter 19, Edward Elgar Publishing.
    2. Gabriel A. Giménez Roche & Didier Calcei, 2021. "The role of demand routines in entrepreneurial judgment," Small Business Economics, Springer, vol. 56(1), pages 209-235, January.

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