Does the invisible hand hold or lead? Market adjustment in an entrepreneurial economy

Adam Smith's “invisible hand” is one of the best-known phrases in economics, but its meaning is somewhat ambiguous. The invisible hand might be viewed as holding the economy close to equilibrium, yet Smith actually says that individuals are led by an invisible hand. Entrepreneurial forces lead an economy along a path that generates economic progress, and that path is determined by the disruptive forces of entrepreneurship. Rather than viewing an economy as tending toward an equilibrium, it is more accurate to view an economy as characterized by continuing progress, led by the invisible hand of entrepreneurial activity. JEL Code B53, D21, E32, O31     

Vibert's vision: Constitutional theory in search of a constitution

Frank Vibert's book, Europe: A Constitution for the Millennium, draws on constitutional economics to describe how a European constitution should be developed to govern a European political union. Vibert's theoretical constitutional framework is solid, but his analysis has two shortcomings. First, he discusses constitutional theory but never presents any specific constitutional provisions that would be based on that theory. This makes the feasibility of drawing up an acceptable constitution appear more straightforward than it actually is. Second, he assumes that Europe will eventually be politically unified in much the same manner as the United States, and does not consider alternatives. Rather than having a single European government, as Vibert suggests, a better alternative would be to have European nations united through a variety of treaties, agreements, and multinational organizations.     

Political incentives for rent creation

Rent-seeking is often depicted as a contest in which rent-seekers compete for a prize—the rent. In the process of rent-seeking, much or perhaps all of the rent is dissipated through the costs the contestants incur to compete. Rent dissipation is inconsistent with the incentives of both the rent-seekers and those who create the rents. Policymakers have an incentive to create rents only if they gain from the process, and their gain comes from sharing any surplus that goes to those who obtain the rents. A surplus can be created through a barrier to entry into rent-seeking. When institutions that generate barriers to entry into rent-seeking break down, rent-seeking competitions can occur in which all rents are dissipated, but this should be a special case rather than the general rule in rent-seeking.     

Tackling landslide risk: Helping land use policy to reflect unplanned housing realities in the Eastern Caribbean

Landslide risk reduction in developing countries is preferable to disaster remediation and recovery, in both social and economic terms. The implementation of landslide preventative measures is closely related to the development of ‘good practice’ in land use management, at government and community levels, especially in the face of rapid and unplanned urbanisation. These areas of poverty and vulnerability to ‘natural’ hazards present a challenging environment for which to develop realistic land use policies and practices. There is little evidence of on-the-ground delivery of landslide risk reduction. However, scientifically based landslide risk reduction strategies can be effective. In the Eastern Caribbean construction of drainage networks in communities afforded an improvement in slope stability – after a 1 in 100-year rainfall event there were no landslides on previously unstable slopes in densely populated urban communities. This has been recognised in policy terms in the first ever Caribbean-wide, 5-year risk reduction programme. Such evidence represents an important first step in developing realistic land use policies for landslide-prone areas occupied by those migrating to urban centres in the Eastern Caribbean.     

Echoes of Henry George in Modern Analysis

A bstract .   These comments were prepared in response to the session "Echoes of Henry George in Modern Analysis" presented at the 2002 meetings of the Southern Economic Association. Professor Holcombe prepared his comments at this journal's request at a later time.     

Advancing economic analysis beyond the equilibrium framework

Twentieth century economics was dominated by the development and refinement of the concept of economic equilibrium. While it is worthwhile to understand the properties of economic equilibrium, equilibrium concepts have dominated economic thought to the point that they have obscured some of the more important issues economists have always strived to understand. At least since Adam Smith’s time, economists have tried to understand the causes of prosperity, and how economic welfare can be enhanced, but these issues are best understood outside the equilibrium framework. The foundations provided by the Austrian school point toward ways that economic analysis can expand beyond the equilibrium framework.