tag:blogger.com,1999:blog-5404820640426099135.post2965648064556320575..comments2023-10-31T00:46:35.316+13:00Comments on Anti-Dismal: The past and present of the invisible-hand propositionPaul Walkerhttp://www.blogger.com/profile/13731003529546075700noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-5404820640426099135.post-75665352695447823592012-06-29T01:18:29.751+12:002012-06-29T01:18:29.751+12:00"How much is gained and how much lost by the ..."How much is gained and how much lost by the axiomatic transformation of the invisible-hand proposition? "<br /><br />That sounds like a thermodynamic question, pointed at the second law - entropy.<br /><br />Adam Smith's invisible hand metaphor, as Gavin explained, is about insecurity, businessmen being insecure about investing abroad, hence they invested domestically, all led by an invisible hand.<br /><br />The investing domestically does established a sort of equilibrium by keeping jobs and innovation at home. But in present economics conditions investing only domestically is not that prudent an idea. Domestic returns on investment have not always been ideal since workforces in mature economies have grown stagnant, become overpaid and less productive. Under such conditions business investors would be foolish not to invest elsewhere, where costs are lower and returns on investment are better.<br /><br />So today's invisible hand has become bias in the other direction by also investing non-domestically, thus creating a disequilibrium for domestic economies. But there is a silver lining in that the investing abroad creates competition for domestic industries, thus motivating them to reinvent themselves by improving production and lowering costs.<br /><br />The invisible hand metaphor in the modern world explains the phenomena of roaming investment capital, fleeing entropy and disequilibrium in one place in search of security and equilibrium in another. It plays a revitalizing role by pitting markets against each other.<br /><br />Another thing the invisible hand has done, in its perverse movements, is integrate the world through capital flows and the expansion of capitalism. In this way it has united the world, made it more stable and thus less likely for nations to go to war with each other, all unintentionally.airth10https://www.blogger.com/profile/14169039975338089997noreply@blogger.com