The Global Crisis and the credit crunch

1. Green Economics Institute Reclaiming economics for people, the planet, non-human species and the biosphere The Global Crisis and the credit crunch Alicante January 2009

2. Miriam Kennet What is Economics? What is an economist ?

3. What is economics? • The original word for Economics was Oikonomia which meant ‘household management’ • In fact, true economics, Oikonomia, is about managing the needs of society,nature,non human species, the planet and the biosphere

4. What is economics?Scarcity • Managing scarce resources- • The more scarce a resource, the more value is created,Samuelson the father of Neo classical economics • Current economics values scarcity- • And so chopping down the rainforest creates scarcity and therefore value in the forest. • In fact the opposite is actually true in the life-world –we need abundant rainforests.

5. Mainstream economics: • Preferences Preference of homo economicus as expressed by his spending activities.

6. Growth • Mainstream models :- • Solow-Swan Growth Model • as increased stocks of capital goods • (means of production) showed the • relationship between labor-time, • capital goods, output, and investment. • , the role of technological change became crucial, • even more important than the • accumulation of capital. 1950s,.

7. Growth theories • Assumes that countries use their resources efficiently and that there are diminishing returns to capital and labor increases. • A)increasing capital relative to labor creates economic growth, since people can be more productive given more capital. • B) poor countries with less capital per person will grow faster because each investment in capital will produce a higher return than rich countries with ample capital. • C) because of diminishing returns to capital, economies will eventually reach a point at which no new increase in capital will create economic growth. This point is called a "steady state.“

8. Rostows stages of economic growth • Walt Rostow 1916 0 2003 wrote Stages of economic growth a non communist manifesto. 1960 He saw his work as a political mission and he worked with Gunnar Mydal and believed in economic take off. He argued that development policy could be a political instrument in the east west conflict. He formed the Charles River Clique working on President Kennedys campaign. He believed that economic growth would stop communism. • He distinguished 5 stages that countries have to pass through, • a)      the traditional society • b)      the preconditions for take off • c)      the take off • d)      the drive to maturity- (self sustained growth)‏ • the age of high mass consumption

9. GDP 1 GDP is an indicator of total volume of goods and services produced each year and the variations therein. Growth is based on GDP: - GDP is based on a)Market value of all the goods and services sold in a country per year measured in money b)The cost of producing non market services provided by government bodies , education, central and local government services, etc

10. Origins of economics? • Xenophon Oikonomikos 369 BCE Estate Management or household management and efficiency using administrative authority to interact with nature and agriculture

11. Origins of Economics? • Aristotle • 384 – 322 BCE • Nichomachean Ethics • 3 types of economics justice • Oikonomia the management of the household, • Wealth acquisition through exchange which should be limited and not at someon else's expense • The good life or eudaemonia • Happiness through virtuous activities.

12. History of economics • What is an economist? • Is it this or ?

13. Who contributes the most? History of economics • Or this ?

14. David Ricardo 1772-1823 Ricardo's most famous work is his Principles of Political Economy and Taxation. Ricardo opens the first chapter with a statement of the labour theory of value. Later in this chapter, he demonstrates that prices do not correspond to this value. He retained the theory, however, as an approximation. Ricardo continued to work on his value theory to the end of his life. This book introduces the theory of comparative advantage. According to Ricardo's theory, even if a country could produce everything more efficiently than another country, it would reap gains from specializing in what it was best at producing and trading with other nations. (Case & Fair, 1999: 812–818). Ricardo believed that wages should be left to free competition, so there should be no restrictions on the importation of agricultural products from abroad. The benefits of comparative advantage are both distributional and related to improved real income. Within Ricardo's theory distributional effects included that foreign trade could not directly affect profits because profits respond only in changes to the level of wages. The effects on income are always beneficial because foreign trade does not affect value. Comparative advantage forms the basis of modern trade theory, reformulated as the Heckscher-Ohlin theorem, which states that a country has a comparative advantage in the production of a product if the country is relatively well-endowed with inputs that are used intensively in producing the product. (Case & Fair, 1999: 822). Like Adam Smith, Ricardo was also an opponent of protectionism for national economies, especially for agriculture.

15. Scottish Enlightenment • Adam Smith the father of modern economics: • An enquiry into the causes of the wealth of nations 1776 • We could change from savages in the countryside to the market of laissez faire

16. John Stuart Mill • (20 May 1806 – 8 May 1873), British philosopher, political economist, civil servant and Member of Parliament, was an influential liberal thinker of the 19th century. He was a teacher of utilitarianism, an ethical theory developed by his godfather, different from Bentham's • Steady State economy.

17. Jeremy Bentham • advocacy of utilitarianism and his opposition to the concept of natural rights[1], with oft quoted statements to the effect that such rights were nonsense[2]. He influenced the development of welfarism[3], a concept espoused by modern American liberals. • Bentham was one of the most influential utilitarians, partially through his writings but particularly through his students all around the world. These included his secretary and collaborator on the utilitarian school of philosophy James Mill, James Mill's son John Stuart Mill, and several political leaders (and Robert Owen, who later became a founder of socialism).

18. Alfred Marshall Alfred Marshall's textbook, Principles of Economics (1890), was the dominant textbook in England a generation later. Marshall's influence extended elsewhere; Italians would compliment Maffeo Pantaleoni by calling him the "Marshall of Italy". Marshall thought classical economics attempted to explain prices by the cost of production. He asserted that the Neo- cassicals went too far in correcting this imbalance by over emphasizing utility and demand. Marshall thought the question of whether supply or demand was more important was analogous to the pointless question of which blade of a scissors did the cutting. Marshall explained prices by the intersection of supply and demand curves. The introduction of different market "periods" was an important innovation of Marshall's: * Market period. The goods produced for sale on the market are taken as given data, e.g. in a fish market. Prices quickly adjust to clear markets. * Short period. Industrial capacity is taken as given. The level of output, the level of employment, the inputs of raw materials, and prices fluctuate to equate marginal cost and marginal revenue, where profits are maximized. Economic rents exist in short period equilibrium for fixed factors, and the rate of profit is not equated across sectors. * Long period. The stock of capital goods, such as factories and machines, is not taken as given. Profit-maximizing equilibria determine both industrial capacity and the level at which it is operated. * Very long period. Technology, population trends, habits and customs are not taken as given, but allowed to vary in very long period models. Marshall took supply and demand as stable functions and extended supply and demand explanations of prices to all runs. He argued supply was easier to vary in longer runs, and thus became a more important determinate of price in the very long run.

19. Neo classical economics 1. People have rational preferences among outcomes that can be identified and associated with a value. 2. Individuals maximize utility and firms maximize profits. 3. People act independently on the basis of full and relevant information. From these three assumptions, neoclassical economists have built a structure to understand the allocation of scarce resources among alternative ends -- in fact understanding such allocation is often considered the definition of economics to neoclassical theorists. Here's how William Stanley Jevons presented "the problem of Economics". "Given, a certain population, with various needs and powers of production, in possession of certain lands and other sources of material: required, the mode of employing their labour which will maximize the utility of their produce."

20. Neo Classical Economics profit maximization lies behind the neoclassical theory of the firm, demand curves leads to an understanding of consumer goods, supply curve allows an analysis of the factors of production. Utility maximization for consumption, of demand curves for consumer goods, Market supply and demand are aggregated across firms and individuals. Their interactions determine equilibrium output and price. The market supply and demand for each factor of production is derived analogously to those for market final output to determine equilibrium income and the income distribution. Neoclassical economics emphasizes equilibria, where equilibria are the solutions of agent maximization problems. Eeconomic phenomena can be explained by aggregating over the behavior of agents. The emphasis is on microeconomics. Institutions, which might be considered as prior to and conditioning individual behavior, are de-emphasized.

21. Keynes • 1936 t the General Theory of Employment, Interest and Money, • t "the theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state [eines totalen Staates] than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire." • aggregate demand to explain variations in the overall level of economic activity, such as were observed in the Great Depression. • The total income in a society is defined by the sum of consumption and investment; and in a state of unemployment and unused production capacity, one can only enhance employment and total income by first increasing expenditures for either consumption or investment.

22. Keynes contribution The General Theory of Employment, Interest, and Money (1936), Keynes laid the foundation for the branch of economics termed "Macroeonomics" today. Based on the methods devised by Alfred Marshall, he argued that macroeconomic relationships differ from their microeconomic counterparts because the ceteris paribus clauses applicable to different levels of aggregation differ. The view of given prices and wages income determines demand (see IS-LM), pre-dates Keynes. His innovation is to take, in his core argument, prices and wages as perfectly flexible and establish that the interaction of "aggregate demand" (in his sense) and "aggregate supply" (in his sense) may lead to stable unemployment equilibria. His work on employment went against the idea that the market ultimately settles at a state of full employment - a central tenet of Classical economists. Instead he argued that there exists a continuum of equilibria, the full employment equilibrium position being just one of them.

23. Keynes Prevailing economic orthodoxy stuck to the old classical view that Markets will clear in the long run. At the height of the crisis, the fledgling Labour government was told by Treasury officials that the government must balance the budget to survive the depression. This effectively meant increasing taxes and cutting unemployment benefits. Keynes described this as economic madness and argued for the exact opposite. He argued in a recession of this magnitude, it was necessary for the government to intervene and actively stimulate the economy. Apart from a few half hearted attempts such as the new deal, Keynes' policies were largely ignored in the UK and US; and high levels of unemployment persisted until the start of the second world war.

24. Paul Samuelson:Neo classical economics Samuelson is considered one of the founders of modern neoclassical economics. International economics, where he influenced the development of two important international trade models: the Balassa-Samuelson effect, and the Heckscher-Ohlin model (with the Stolper-Samuelson theorem). Consumer theory, he pioneered the Revealed Preference Theory, which is a method by which it is possible to discern the best possible option, and thus define consumer's utility functions, by observing the consumer behaviour.

25. Critique of Samuelson “ Samuelson admits that utility is a construct that has no basis in psychology; although he uses the terms ‘consumer’ and ‘individual,’ his model is built around a fictional character that critics have dubbed Homo economicus. This economic man (yes, he is male) never had a childhood, never has children, has never depended upon a caregiver and does not have anyone he provides care for. He only experiences well-being by consuming. He is rational, selfish, a psychopath... he isn’t influenced by hundreds of billions of dollars in advertising or the purchases of his neighbors. If Homo economicus buys something, it gives him utility; his consumer sovereignty must be respected.

26. Rosa Luxemburg • Polish and moved to Germany • Marxist • Wrote a critique of capitalism: • The Accumulation of Capital • Was killed • Idea was that capitalism depended on non capitalist production areas with lower wages and that the poor had to be driven off rural land- so that they could become the labour power and their land given to elites who would also service capitalism for the ruling imperial power- eg in India and China. • Background – opium war and Indian peasantry observations

27. Joan Robinson a Marxist – Only significant woman to get acknowledgement in mainstream Robinson assisted with the support and exposition of Keynes' General Theory, writing especially on its employment implications in 1936 and 1937 (in the midst of the Great Depression it tried to explain). In 1933, in her book, The Economics of Imperfect Competition, Robinson coined the term, "Monopsony," which is used to describe the buyer converse of a seller monopoly. In 1942 Robinson's An Essay on Marxian Economics famously concentrated on Karl Marx as an economist, helping revive the debate on this aspect of his legacy. During the Second World War, Joan Robinson worked on a few different Committees for the wartime national government. During this time, she visited the Soviet Union as well as China. She developed an interest in underdeveloped and developing nations and contributed a lot that is now understood in this section of economics. In 1949, she was invited by Ragnar Frisch to become the vice president of the Econometric Society but declined because she couldn't be part of the editorial committee on a journal she couldn't read. In 1956, Joan Robinson published her magnum opus, The Accumulation of Capital, which extended Keynesianism into the long-run. Six years later, she published another book about growth theory, which talked about concepts of "Golden Age" growth paths. Afterwards, she developed the Cambridge growth theory with Nicholas Kaldor. Close to the end of her life she studied and concentrated on methodological problems in economics and tried to recover the original message of Keynes' General Theory. Between 1962 and 1980 she wrote many books to try and bring several economic theories to the general public. Robinson suggested developing an alternative to the revival of classical economics

28. Kenneth Arrow • He is considered one of the founders of modern (post World War II) neo-classical economics. • His most significant works are his contributions to social choice theory, notably "Arrow's impossibility theorem", and his work on general equilibrium analysis. He has also provided foundational work in many other areas of economics, including endogenous growth theory and the economics of information.

29. Social choice theory • Bentham : Persons maximize their choice for utility for themselves • Aggregated the utility is good for everyone. • Criticism: • However, if a rich person gets less utility from food for example -then they might not do whats best for fair distribution of food. • Arrow and Sen: • Proved that not everyone has the same background or requirements so this doesnt work

30. Paul Krugman 1953 • Economies and returns from scale • And New Economics Geography • Geographical concentration of population and activity • Consumption influenced by many others • Economies of scale • Where does activity take place • Why do countries near the Equator tend to be poorer • Fewer firms – less competition – more profits • Hecksher Olin Theory,markets are perfectly competitiive, trading nations identical, tastes identical,economies all fully employed- constant economies of scale prevail in production, firms increase all output by a proportion output increases by that proportion • Krugman found therefore that -if firms increase all inputs by the economies of scale then , output increases by economies of scale. This will lead to fewer and larger firms and competition becomes imperfect within that industry • Critical of Bush Administration

31. It looks as if the economy is falling off a cliff • Depression economics • When you have depression economics the usual rules dont apply and virtue becomes vice and • Caution is risky • Prudence is folly

32. Simon Kuznet • National Income and Its Composition, 1919–1938. Published in 1941, it contains a historically significant work on Gross National Product. His work on the business cycle and disequilibrium aspects of economic growth helped launch development economics. He also studied inequality over time, and his results formed the Kuznets Curve. Another important development was Kuznets' empirical examination of Keynes' 1936 Absolute Income Hypothesis. The hypothesis gave birth to what would become the first formal consumption function.underdeveloped countries of today possess characteristics different from those that industrialized countries faced before they developed, helped put an end to the simplistic view that all countries went through the same "linear stages" in their history and launched the separate field of development economics -

33. Kuznet curve • U shaped relationship between income inequality and economic growth • During economic development growth measured by GDP will be unequal at first will stabilize gradually and then become equal. Therefore inequality had to rise first before being solved. • This meant at first need to support those on very low incomes • Then shift to those on middle incomes savings improved , industraliisation of agriculture and towards manufacturing, causing initially a relative inequality, • Decrese in population of upper income, inheritance taxes, • Developing countries should only focus on growth, not be concerned with income distribution • For more info on Environmental Kuznet Curve: :See Lawn P. in International Journal of Green Economics, and some work by Ekins.P.

34. Robert Costanza:Ecological Economics Dr. Costanza's research has focused on the interface between ecological and economic systems, particularly at larger temporal and spatial scales. This includes landscape level spatial simulation modeling; analysis of energy and material flows through economic and ecological systems; valuation of ecosystem services, biodiversity, and natural capital; and analysis of dysfunctional incentive systems and ways to correct them.

35. Kenneth Boulding – The coming of spaceship earth Complex system. It is easy to have too simple a view of it, and it is easy to do harm and to make things worse under the impulse to do good and make things better. : "Anything that exists is possible." "Theories without facts may be barren, but facts without theories are meaningless." "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist." "Mathematics brought rigor to Economics. Unfortunately, it also brought mortis." "Economists are like computers. They need to have facts punched into them." "We make our tools, and then they shape us." "Nothing fails like success because we don't learn from it. We learn only from failure." "There is no such thing as economics, only social science applied to economic problems."

36. Georgescu Roegen • Father of ecological or bio economics • 1906 • Entropy law • Thermodynamics • 1971 The Entropy Law and The Economic Process • The economic process is entropic: it neither creates nor consumes matter or energy, but only transforms low into high entropy(That is irrevocable waste).1966 • Demand side moderates consumption and avoiding waste • Humans should see themselves as an evolving organism and protect future generations

37. Herman Daly • Daly's books include Towards a Steady-State Economy (1973); Steady-State Economics (1977); Economics, Ecology, Ethics (1980); Valuing the Earth: Economics, Ecology, Ethics (co-edited with K. Townsend); For the Common Good: Redirecting the Economy Toward Community, the Environment and a Sustainable Future (with John Cobb, 1989); Population, Technology and Lifestyle (co-edited with R. Goodland and S. El Serafy, 1992); Beyond Growth: The Economics of Sustainable Development (1996). He has also published over 100 articles in scholarly journals and magazines. • In 1989, Daly was one of the key figures in the foundation of the International Society for Ecological Economics (ISEE), and serves as Associate Editor of its journal Ecological Economics. ISEE is the major forum that links economists and ecologists, and academics and environmental activists.

38. Amartya Sen • Sen's seminal papers in the late sixties and early seventies helped develop the theory of social choice, which first came to prominence in the work by the American economist Kenneth Arrow, • who, while working in the fifties at the RAND • Corporation, famously proved that all voting rules, • be they majority voting or two thirds-majority or status quo • , must inevitably conflict with some basic democratic norm. • Sen's contribution to the literature • as to show under what conditions Arrow's Impossibility • Theorem would indeed come to pass as well as to extend and • enrich the theory of social choice, informed by his • interests in history of • economic thought and philosophy. • In 1981, Sen published Poverty and Famines: • An Essay on Entitlement and Deprivation, • a book in which he demonstrated that famie • e occurs not only from a lack of food, • but from inequalities built into mechanisms for distributing food. Sen's interest in famine stemmed from personal experience. As a nine-year-old boy, he witnessed the Bengal famine of 1943, in which three million people perished. This staggering loss of life was unnecessary

39. Capabilities approach he Capability Approach is a conceptual framework developed by Amartya Sen and Martha Nussbaum for evaluating social states in terms of human well-being (welfare). It emphasizes functional capabilities ("substantial freedoms", such as the ability to live to old age, engage in economic transactions, or participate in political activities); these are construed in terms of the substantive freedoms people have reason to value, instead of utility (happiness, desire-fulfilment or choice) or access to resources (income, commodities, assets). Poverty is understood as capability-deprivation. It is noteworthy that the emphasis is not only on how human beings actually function but on their having the capability, which is a practical choice, to function in important ways if they so wish. Someone could be deprived of such capabilities in many ways, e.g. by ignorance, government oppression, lack of financial resources, or false consciousness. ‏

40. Sen and Choice theories This approach to human well-being emphasises the importance of freedom of choice, individual heterogeneity and the multi-dimensional nature of welfare. In significant respects, the approach is consistent with the handling of choice within conventional micro-economics consumer theory although its conceptual foundations enable it to acknowledge the existence of claims, like rights, which lexicographically dominate utility based claims (see Sen (1979))‏

41. Ten Capabilities influences 1-4 HDI Human Development Index 1. Life. Being able to live to the end of a human life of normal length; not dying prematurely, or before one's life is so reduced as to be not worth living. 2. Bodily Health. Being able to have good health, including reproductive health; to be adequately nourished; to have adequate shelter. 3. Bodily Integrity. Being able to move freely from place to place; to be secure against violent assault, including sexual assault and domestic violence; having opportunities for sexual satisfaction and for choice in matters of reproduction. 4. Senses, Imagination, and Thought Being able to use the senses, to imagine, think, and reason-- and to do these things in a "truly human" way, a way informed and cultivated by an adequate education, including, but by no means limited to, literacy and basic mathematical and scientific training. Being able to use imagination and thought in connection with experiencing and producing works and events of one's own choice, religious, literary, musical, and so forth. Being able to use one's mind in ways protected by guarantees of freedom of expression/ political and artistic speech, and freedom of religious exercise. Being able to have pleasurable experiences and to avoid non-beneficial pain.

42. Ten capabilities 5-10 5. Emotions. Being able to have attachments to things and people outside ourselves; to love those who love and care for us, to grieve at their absence; in general, to love, to grieve, to experience longing, gratitude, and justified anger. Not having one's emotional development blighted by fear and anxiety. (Supporting this capability means supporting forms of human association that can be shown to be crucial in their development.)‏ 6. Practical Reason Being able to form a conception of the good and to engage in critical reflection about the planning of one's life. (This entails protection for the liberty of conscience and religious observance.)‏ 7. Affiliation. 1. Being able to live with and toward others, to recognize and show concern for other human beings, to engage in various forms of social interaction; to be able to imagine the situation of another. (Protecting this capability means protecting institutions that constitute and nourish such forms of affiliation, and also protecting the freedom of assembly and political speech.)‏ 2. Having the social bases of self-respect and non-humiliation; being able to be treated as a dignified being whose worth is equal to that of others. This entails provisions of non-discrimination on the basis of race, sex, sexual orientation, ethnicity, caste, religion, national origin. 8. Other Species. Being able to live with concern for and in relation to animals, plants, and the world of nature. 9. Play. Being able to laugh, to play, to enjoy recreational activities. 10. Control over one's Environment. 1. Political. Being able to participated effectively in political choices that govern one's life; having the right of political participation, protections of free speech and association. 2. Material. Being able to hold property (both land and movable goods), and having property rights on an equal basis with others; having the right to seek employment on an equal basis with others; having the freedom from unwarranted search and seizure. In work, being able to work as a human being, exercising practical reason and entering into meaningful relationships of mutual recognition with other workers.

43. Sens arguments • Sen argues that neo classical economists have preference theory backwards • People dont adapt their preferences to maximize utility, eg they dont NOT learn to read out of choice but rather they lack the capability- due to lack of resources. • Learning to read make them more capable • He also distinguishes between economic growth and economic development • Book- Development as Freedom

44. Marilyn Waring Marilyn Waring (born 1952) is a New Zealand feminist, an activist for "female human rights", an author and an academic. She holds a Ph.D. in political economy She has outspokenly criticised the concept of GDP, the economic measure that became a foundation of the United Nations System of National Accounts (UNSNA) following World War II. She ridicules a system which 'counts oil spills and wars as contributors to economic growth, while child-rearing and housekeeping are deemed valueless'.[

45. Limits to environmental resource are imposed by nature Origin, interactions and reproductive capacity are governed by nature Most of these resources have no readily available markets Issues to consider • Normative issues such as intergenerational fairness come into discussions- and distributive issues between rich and poor nations are important • Uncertainties can take several forms such as price,irreversible environmental damage • Unexpected or sudden species extinction

46. Hussen's environmental economics issues 1 • Causes of environmental degradation, • Need to establish disciplinary ties between ecology and economics • Ownerships rights are difficult to establish for the environment • Trade off between environmental degradation and economics goods and services • Ineffectiveness of the market in allocating environmental resources • Assessing monetary value of environmental damage • Public policy instruments that can be used to slow halt and reverse the deterioration of environmental resources, and overexploitation of resources which might be non renewable

47. Hussen's environmental economics issues 2 • Macroeconomics effects of environmental regulation and other resource conservation policies • Technology and the extent to which it can be used to ameliorate the environmental degradation or resource scarcity • Environmental problems that transcend national boundaries • Limits to economic growth • The extent to which past experience can be used to predict future events of ecological and economics and technological uncertainty • Ethical and moral imperatives for environmental resource conservation • Concern for the welfare of future generations • The interrelationships among poverty, population and environmental degradation • In developing countries • The necessity and viability of sustainable development

48. Neo classical economics 1 • In the neo classical world view • The human economy is composed of people, flows of comodities and human institutions • The most important flow is the generation of utility- satisfaction for humans • Resources are fungible -that is one kind of resource can substitute for another • Environmental resources have no intrinsic value and exist only to provide utility for humans and the economy • In this worldview freedom of choice and private ownership are important • In a centrally planned economy the production and distribution of goods are dictated by bureaucratic choices with resource ownership retained by the state • Market economy- is composed of economic entities,households or firms • scarcity

49. Neo classical economics 2 • Commodities, markets, non market public and private institutions, with private ownership enforced and competition • Product markets is where goods and services are exchanged • The factor markets is where there is buying and selling of basic resources such as labour capital and natural resources • Higher prices are a feature of emerging scarcity – therefore desirable • Opportunity cost – costs not realised – of the next best option e.g. If I choose to conserve an expensive tiger rather than a slightly more common species, then thats an opportunity cost, • The market is an provider of information on resource scarcity

50. Ideas of Neo Classical EconomicsThe perfect market structure and the Invisible Hand • Adam Smith • Individuals working in their self interest will promote the welfare of the whole of society- • The effectiveness of an economy is judged by how well it satisfies the material needs of its citizens- the consumers • Maximum output from resources is aim- efficiency of exploitation is good, • Requirements: • 1, freedom of choice based on self interest • 2, competition • 3,.perfect information • 4 mobility of resources • 5. Ownership rights • Perfectly competitive markets, • Adam Smith Father of modern economics the Invisible Hand will guide each individual to do not only what is in his self interest but also that of society at large