Beyond the Invisible Hand: Groundwork for a New Economics

by Kaushik Basu

One of the central tenets of economics is that, given certain conditions, self-interested behavior by individuals leads them to the social good, almost as if orchestrated by an invisible hand. However, over the past two centuries, this proposition first put forth by Adam Smith has been taken out of context, contorted, and used as the cornerstone of free-market orthodoxy. In Beyond the Invisible Hand , Kaushik Basu lays bare the implications of this gross misrepresentation of Smith's theory which, he argues, has resulted in hampering our understanding of how economies function, why some economies fail and some succeed, and what the nature and role of state intervention might be. Comparing this view of the invisible hand to the vision described by Kafka?in which individuals pursuing their atomistic interests, devoid of moral compunction, end up creating a world that is mean and miserable?Basu calls for collective action and the need to shift our focus from the efficient society to one that is also fair. As Basu pointedly reminds us, by ignoring the role of culture and custom, traditional economics promotes the view that the current system is the only viable one, thereby only serving the interests of those who do well by this system. Beyond the Invisible Hand challenges readers to fundamentally rethink the assumptions underlying modern economic thought and proves that a more equitable society is both possible and sustainable, and hence worth striving for.

Genres: Economics, Nonfiction, Politics

292 pages, Paperback

First published January 1, 2010

About the author

Kaushik Basu (born 9 January 1952) is an Indian economist who is currently the Chief Economic Adviser to the Government of India and is also the C. Marks Professor of International Studies and Professor of Economics and, till recently, he was Chairman of the Department of Economics and Director, Center for Analytic Economics at Cornell University.


He is Editor of Social Choice and Welfare, Associate Editor of Japanese Economic Review and is on the Board of Editors of the World Bank Economic Review. In 2008, the Government of India awarded him the Padma Bhushan, one of the country's highest civil honors.

Reviews

[Thomas Ray]

In English as Beyond the Invisible Hand: Groundwork for a New Economics, HB71 B37 2011, Memorial Library

[Praveen Kishore · Rating 5 out of 5]

Simply awesome! A deep, insightful and passionate book about a more human and realistic vision of economics, which can actually be used for making this world better for everyone! A Gem. A must for all economics students.

[Rahul Khanna · Rating 3 out of 5]

There is a very insightful line in this book:
Those people born poor have as many disadvantages in contemporary capitalist society as the 'twice' born have advantages in a caste based society.

[Siddhartha Das · Rating 4 out of 5]

Exceptional book, considering the recommendations that he comes up with and the rational he provides. The ideas about political globalization and the law of large numbers makes you think. Though could be tough for someone who has no experience of basic microeconomics as he uses a lot of its methodology in it's argument.

[Dom Greco]

Disappointing and appears contradictory. The author advocates that major economic decisions should be based upon intuition and emotion, rather than reason and learning. For example,

“… the distortion in their lenses caused by excessive learning…”;
“… the need for intuitive understanding…”;
“… requires a feel for things…”

The author frequently uses vague and undefined terms and phrases that appeal to emotions, rather than reason, such as: Unfair contracts, groups are outwitted, gullibility, selfishness, duped, exploitation, property grabbing, loopholes, plunder, equitable, and fleece.

It appears that the author believes that what the world needs is a benevolent dictator who will use their “intuitive understanding”, their emotion, their “feel for things”, and not be blinded by their learning, to decide how the world should be run, and which assets should be taken from which people and given to those that the benevolent dictator believes are more worthy.

But then, it is difficult to reconcile all of what the author has said, such as that set forth above, advocating significant changes in the world, with the author statement “I believe in determinism, which implies that the future that stretches in front of us is foretold, and as unalterable…”.

How is it logically consistent for someone to at the same time (X) believe that the future is “foretold, and as unalterable”, and (Y) advocate significant and drastic societal changes?

Perhaps a more knowledgeable person than me can explain and reconcile these views and contentions. If they can be explained and reconciled, then where can I find such explanation and reconciliation?

[Sanjay Banerjee · Rating 5 out of 5]

One of the central tenets of Economics is that, given certain conditions, self-interested behavior by individuals leads them to the social good as if orchestrated by an invisible hand. However, the author contends that this construct of Adam Smith has been taken out of context, contorted and used as cornerstone of free-market orthodoxy. The implications of this misrepresentation are highlighted by the author. Basu calls for collective action to set this right and the need to focus upon both efficiency and fairness in the society instead of efficiency alone.

[Nallasivan V. · Rating 4 out of 5]

Food For Thought: Is Capitalism only a sophisticated casteism?

[Venky · Rating 3 out of 5]

An insightful and original work dealing with the concept propounded by Adam Smith and beyond.

[Rohit Kumar · Rating 5 out of 5]

Great Book. Uses insights from sociology and psychology to create a more grounded understanding of economics!