The invisible hand: The metaphysics in the theory of Adam Smith compared with modern economics

Joakim Kromann Rasmussen

Student thesis: Master thesis

Abstract

This thesis shows how the metaphysical foundation in Adam Smith’s theory is reflected in modern economic theories. It is shown that the question of order is the main economic prob-lem for Smith as well as the modern economists. With this question in focus, Smith’s philosophy is synthesized and rein-terpreted. Upon this reading of Smith, a comparison is made to two modern economic positions: general equilibrium theory (Kenneth J. Arrow, Frank Hahn, and Gerard Debreu) and theories on the self-organizing economy (Friedrich A. Hayek, Thomas Schelling, and Paul Krugman). In this regard, the thesis is a philosophical interpretation of Smith’s works emphasizing the idea of the invisible hand and the metaphysi-cal foundation in his theory: an interpretation juxtaposed with two stances in modern economic theory in order to unravel how the metaphysics in Smith’s works still finds an expression in modern economic thinking. The analysis falls into three parts. While the two first parts make up the interpretation of Smith, the third part makes up the comparative analysis. In the first part it is shown how Smith deals with the question of order in his works, as when he argues that humans qualifies epistemologi-cally by organizing the events they meet, that humans at a social level strive for the sympathy of others to stabilize the social life, and how the market organizes resources for the common good. While many Smith scholars have interpreted his theory secularly, within the last fifteen years there have been attempts to interpret his theory nonsecularly. Under the influence from this research, a nonsecularized interpretation of Smith finds its way in the second part of the thesis. This part shows that the secular elements in Smith’s theory stand forth more consistent in light of the theological subject of providence. In the third part, Smith’s basic assumptions are compared with assumptions set forth in the two economic positions. This part shows how the question of order has in-fluenced modern economic theory, and further, how the idea of the invisible hand, in a secularized form, still haunts mod-ern conceptions of economic theory

EducationsMSc in Philosophy, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2011
Number of pages106