![]() Just to use rough numbers here, for the UK unemployment is some 3 million or so (depends how you count it, what is disguised as too ill to work and so on, but we're right enough with this number for the purpose here). Which does mean of course that an attempt to model the economy as something either in or approaching equilibrium is really rather odd.įor example, we look at unemployment. For there must be changes in relative prices, in employment in sectors, as a result of the introductions of those new technologies. If there are no new ways of doing things being developed, if there is no increase in efficiency in certain sectors and so on.Īs soon as we do have changing technology then we cannot have an economy in equilibrium. The real reason is because technology.Īn economy can only be in equilibrium (whether we are talking about a market based one or a planned one, a communist one or a capitalist one) if technology is static. But again not because of invisible hands nor even because of markets or even not markets. However, as to the other part of the critique, that's there's no real reason to think that economies reach equilibrium, this part is true. Other than that there's not much we can gain from Smith's invocation of the invisible hand. In terms of modern day insights the major result of this is that while the incidence of corporation tax, upon the workers or upon the earnings to capital, depends upon the mobility of capital (more mobility, the more the incidence is upon the workers) even in a world of perfect capital mobility in theory we'll still see some stickiness, this domestic partiality, and thus some incidence of corporate taxation upon capital. ![]() ![]() ![]() In this case, our mistrust of sending our cash off to be looked after by Johnny Foreigner. That is, the invisible hand is a metaphor for a suboptimal outcome driven by non-economic considerations. He's remarking on the way in which even if you can make greater profits by taking part in the foreign trade people have a tendency to invest their capital in the domestic economy, thus led as if by an invisible hand to boost that domestic economy. ![]()
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