The Invisible Hand in Economics: How Economists Explain Unintended Social Consequences
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 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 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.
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.
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2 Unintended consequences
3 The origin of money
5 The invisible hand
6 The origin of money reconsidered
7 Models and representation
8 Game theory and conventions
9 Concluding remarks
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abstract agents argues argument assume assumptions behaviour bring causal Chapter chequerboard model coincidence of wants commodity money concept concerning conjectures connecting principles consequence of human considered coordination game driving game economic emergence of money empirical examine example existence expectations explain particular explain the emergence explanandum explanatory explicate fact factors fiat money game theory human action idea individual level individual mechanisms institutions intentions interact invisible hand invisible-hand explanations isolation Kiyotaki and Wright Kiyotaki–Wright learning Mäki Marimon medium of exchange Menger Menger’s account Menger’s explanation meta-model mild discriminatory preferences mixed strategy model world Nash equilibrium origin of money Pareto dominance partial potential phenomenon philosophical plausible play players possible R-World rational real individuals real world relation replicator dynamics residential segregation risk dominance saleable Schelling Schelling’s model Schotter similar simulations Smith strategy suggests tion understanding unintended consequences unintended social consequences unintended social phenomena