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.
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1 Introduction 1
2 Unintended consequences 11
3 The origin of money 27
4 Segregation 50
5 The invisible hand 68
6 The origin of money reconsidered 93
7 Models and representation 119
8 Game theory and conventions 146
9 Concluding remarks 165
Appendix I Smith, Jevons and Mises on money 169
Appendix II Models of emergence of money 173
Appendix III Explorations of the chequerboard world 178
Appendix IV Focal points and risk dominance 182
Notes 194
Bibliography 216
Index 243
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