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

13 September 2021
It was a data-heavy week in SA, with the 2021Q2 real GDP data indicating that the economy had better-than-expected recovery momentum in the first half of the year. While growth remained solid in the second quarter, both the survey and actual data released last week revealed the significant impact that the range of shocks at the start of the third quarter...

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