Two optimistic traditions in the dismal science: rationalism and the "invisible hand"

Stellenbosch Working Paper Series No. WP07/2007
 
Publication date: 2007
 
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
 
Abstract:

This paper explores two traditions of optimism in economics. In one of these traditions optimism is based on the comprehension of a spontaneous (and often progressive) order in a decentralised (or market) economy – what I will call the optimism of the “invisible hand”. Against the optimism of the invisible hand stands another optimistic tradition in economics, whereby we might take courage from our ability to do right by society through instructing governments with the keen edge of our most enlightened plans. This tradition is called “constructivist rationalism” here. The paper explores the logic of each tradition and their historical development and applies both to a recent example of policy making in South Africa: government’s fundamental regulatory overhaul of the pharmaceutical industry based on the Medicines Act of 1997, specifically, the decision to implement price controls on medicines.

 
JEL Classification:

N10, N17, O40, O47, O49, O55

Keywords:

Spontaneous order, Modernism, Planning, Optimism, Information, Uncertainty, Price controls, Institutions, Constitutions, Law and Economics

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BER Weekly

22 February 2021
As is often the case, domestic financial markets largely ignored local developments, including a lower-than-expected January consumer inflation print, last week and were swept along by the intensification of the global reflation trade. Outside of the inflation release, the domestic data releases continued to show that there was still some recovery momentum...

Read the full issue