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

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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.

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Authors and Affiliations

  1. Department of Economics, Florida State University, Tallahassee, Florida, 32306

    Randall G. Holcombe

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  1. Randall G. Holcombe
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Correspondence to Randall G. Holcombe.

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JEL Code B53, D21, E32, O31

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Holcombe, R.G. Does the invisible hand hold or lead? Market adjustment in an entrepreneurial economy. Rev Austrian Econ 19, 189–201 (2006). https://doi.org/10.1007/s11138-006-7347-2

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  • DOI: https://doi.org/10.1007/s11138-006-7347-2

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