Myth of the Invisible Hand, no 368

Gavin Kennedy continues to rightly find fault with peoples use of the Smith's invisible hand metaphor. But this time he writes "The elision of Adam Smith's metaphor in a theory of markets was a creation of modern neo-classical economists, centred on Chicago University, who found in the use of the metaphor some kind of justification of their mathematical theories of general equilibrium."

But I would not think of Chicago as the centre of "mathematical theories of general equilibrium". I would have seen Chicago as having more of an emphasis on basic price theory in its partial equilibrium form. General equilibrium followed from Walras's work and found its modern form in the works of McKenize, Arrow and Debreu etc. This is not, to my way of thinking, the Chicago tradition. Overtveldt (2007: 93-4) makes the point that "At the end of World War 11, the Cowles Commission for Research in Economics was installed at the University of Chicago. The fact that leading members of this Commission - such as Jacob Marschak, Trygve Haavelmo, Lawrence Klein, and Tjalling Koopmans - were heavily involved in the development of Walrasian general equilibrium economics and building sophisticated econometric models was a constant source of friction between them and the group around Friedman at the University of Chicago's department of economics." The Commission left and Friedman stayed.