The Invisible Hand in Economics: How Economists Explain Unintended Social Consequences (Routledge INEM Advances in Economic Methodology)

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 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 all 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 chequerboard 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 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." "Covering areas such as history, philosophy of economics and game theory, this book will appeal to philosophers of social science and historians of economic thought, as well as to practising economists."--BOOK JACKET Book Cover......Page 1 Title......Page 6 Copyright......Page 7 Dedication......Page 8 Contents......Page 10 Figures......Page 11 Tables......Page 12 Foreword......Page 14 Acknowledgements......Page 16 1 Introduction......Page 18 2 Unintended consequences......Page 28 3 The origin of money......Page 44 4 Segregation......Page 67 5 The invisible hand......Page 85 6 The origin of money reconsidered......Page 110 7 Models and representation......Page 136 8 Game theory and conventions......Page 163 9 Concluding remarks......Page 182 Appendix I: Smith, Jevons and Mises on money......Page 186 Appendix II: Models of emergence of money......Page 190 Appendix III: Explorations of the chequerboard world......Page 195 Appendix IV: Focal points and risk dominance......Page 199 Notes......Page 211 Bibliography......Page 233 Index......Page 260 Economics, Finance, Business & Industry Book Cover 1 Title 6 Copyright 7 Dedication 8 Contents 10 Figures 11 Tables 12 Foreword 14 Acknowledgements 16 1 Introduction 18 2 Unintended consequences 28 3 The origin of money 44 4 Segregation 67 5 The invisible hand 85 6 The origin of money reconsidered 110 7 Models and representation 136 8 Game theory and conventions 163 9 Concluding remarks 182 Appendix I: Smith, Jevons and Mises on money 186 Appendix II: Models of emergence of money 190 Appendix III: Explorations of the chequerboard world 195 Appendix IV: Focal points and risk dominance 199 Notes 211 Bibliography 233 Index 260 Addressing the€controversial concept of€the invisible hand, this book questions, examines and explicates the strengths and weaknesses of the concept by analyzing its paradigmatic examples such as Carl Menger's Origin of Money and Thomas Schelling's famous checkerboard model of residential segregation