Adam Smith


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source : Jack Ruitenbeek and Cynthia Cartier

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Adam Smith

  1. 1. THE INVISIBLE WAND Adaptive Co-Management as an Emergent Strategy in Complex Bio-Economic Systems A Paper written by Jack Ruitenbeek and Cynthia Cartier Centre for International Forestry Research (CIFOR) Occasional Paper No. 34, October 2001 Presentation by Rowan B. Martin  History: From Invisible Hand to Invisible Wand illustrated with Ren é Magritte’s paintings
  2. 2. History: From Invisible Hand to Invisible Wand  Thomas Carlyle (1795-1881) observed that “economics is the dismal science” In the 19th century, economists predicted that the world population would grow faster than food production Since humans appeared to have no self-control in limiting numbers, a bleak future loomed Adam Smith had a different viewpoint Thomas Carlyle regarded Adam Smith as an optimist
  3. 3. In the 18th century, Newton and other scientists viewed the world as a harmoniously ordered mechanism When Adam Smith wrote the Wealth of Nations in 1776, he was seeking the harmony of nature in social systems He conceived “ the invisible hand” – . . . the myopic pursuit of individual economic self-interest turns out to be of economic benefit to society as a whole  History: From Invisible Hand to Invisible Wand
  4. 4. Wanting to better their condition, self-interested individuals unwittingly and collectively cause the emergence of the common good . . . and hence the wealth of nations However, this could only happen if individuals were free to pursue their self-interest, unfettered by governments Adam Smith believed that –  History: From Invisible Hand to Invisible Wand
  5. 5. This concept of Homo economicus can be cast in terms of complex adaptive systems Individuals follow economic strategies based on available information and resources They adjust or abandon strategies throughout their economic lives as they adapt to the myriad of interactions in panarchical complex systems They grow in abilities and capacity, accumulating information and resources along the way  History: From Invisible Hand to Invisible Wand
  6. 6. The Moral Factor Smith believed that ethical behaviour was innate in humans . . . we give sympathy in order to be worthy of the same Later Smith became less convinced that mankind would unfailingly act decently and was scathingly critical of corrupt governments and unethical commerce However he never waivered in promoting the laissez-faire strategy. . . for the common good , believing that it was better than the alternative – feudal servitude Feudal servitude Laissez-faire In complex systems, the common good is an emergent property of the panarchy  History: From Invisible Hand to Invisible Wand
  7. 7. Since Hardin articulated ‘the tragedy of the commons’, the best strategies for common pool resources have been seen as state or private management BUT Because the complex panarchical system of resource management was not understood, successful adaptation to system-wide changes was not achieved After innumerable government failures to implement management plans, policy analysts are back at the village level   History: From Invisible Hand to Invisible Wand
  8. 8. The strategy emerging now is one of collective management by users – it is believed that they are best equipped to adapt to system changes through adaptive management  History: From Invisible Hand to Invisible Wand
  9. 9. however, this presupposes Homo economicus . . . rational economic man There is much evidence to show that economic man is not so rational and that social factors are vital in decisions It would seem in the best economic interest of villagers to manage their resources wisely –  History: From Invisible Hand to Invisible Wand
  10. 10. People in traditional societies are almost certainly not Homo economicus . . . but H. economicus is a narrow description of what humans are The individual best suited for achieving sustainability is Homo sustinens who is endowed with social, emotional and nature-related skills H. sustinens is not ruled solely by economic reason but is known to act altruistically – pursuing the common good  History: From Invisible Hand to Invisible Wand
  11. 11. The Invisible Wand – Altruistic Common Interest and recognising there is more to human behaviour than the narrow concept of H. economicus . . . We can imagine an invisible wand analogous to the invisible hand Unfettered by government in matters of management, the altruistic pursuit of the common interest leads to the emergence of the common good In this case the common good is sustainability – as opposed to efficient prices  History: From Invisible Hand to Invisible Wand Combining a move towards laissez-faire management . . . Laissez-faire
  12. 12. If laissez-faire is applied to adaptive management , there are likely to be scenarios where the emergence of common good is thwarted because of management and institutional barriers The r ô le of government will be to remove these barriers – ● improper design of institutions ● policies which ignore moral & social dimensions of humans ● plans insensitive to the social capital of the people involved ● over-ambitious time frames for programme objectives  History: From Invisible Hand to Invisible Wand
  13. 13. Earlier we complained that if ACM was emergent, there would be no r ô le for policy Here we have tried to draw some parallels between the invisible hand and the invisible wand There is a r ô le for policy – to protect the conditions for emergence  History: From Invisible Hand to Invisible Wand